EVMS Training Archives - Humphreys & Associates

Comprehensive Guide to EVMS Training

By Humphreys & Associates / February 1, 2024 / Earned Value Consulting, EVM Certification, EVMS Training

Section 1: Understanding the Basics of EVMS

Earned Value Management Systems are a critical component in the project management landscape. At its core, an Earned Value Management System (EVMS) offers a systematic approach to integrating scope, schedule, and cost. Implementing an EVMS enables project managers to measure project performance and progress in an objective manner that increases management visibility and control.

Key Principles and Terminology

To grasp the fundamentals of Earned Value Management, one must become familiar with its primary principles and associated terminology. Some of these key terms include Planned Value (PV), Earned Value (EV), and Actual Cost (AC), which form the basis for evaluating project performance and predicting future outcomes. Understanding these concepts is essential for anyone seeking to implement an EVMS.

The Role of EVM in Project Management

Effective project management hinges on the ability to forecast potential issues and measure ongoing performance against the project plan. An EVMS provides a structured framework for this purpose, allowing managers to identify variances in cost and schedule before they become critical. By integrating scope, schedule, and cost, an EVMS serves as a compass for project managers, guiding them through the complexities of project execution.

The Benefits of Implementing an EVMS

Implementing an EVMS reaps several benefits, including enhanced visibility into the health of a project and the ability to make data-driven decisions. An EVMS enables stakeholders to objectively assess project performance against the baseline, ensure alignment with strategic objectives, and encourage accountability among team members. Moreover, with an EVMS in place, organizations are better equipped to meet contractual requirements, especially for government contracts which oftentimes mandate the use of such systems.

By grasping the basic principles of EVM and the role it plays in project management, professionals can start their journey toward effective project control and successfully implementing an EVMS. With a comprehensive understanding of the basics, they can build a solid foundation for further exploration of the practices and principles that will lead to mastery of Earned Value Management.

Section 2: Steps to Obtain a Professional EVM Certification

Eligibility Criteria for a Professional EVM Certification

Before embarking on the journey to obtain a Professional EVM Certification, it is important to clarify the prerequisites. Typically, these may include a certain level of experience in project management, understanding basic accounting principles, and familiarity with the EIA-748 Standard for EVMS Guidelines. Professionals who wish to get a professional certification should review the specific eligibility requirements as dictated by the certifying body to ensure they qualify to undergo the certification process.

Detailed Step-by-Step Guide to the Professional Certification Process

Research and Select a Certifying Organization: Begin by identifying an organization that offers an EVM Certification.
Undergo Formal EVM Training: Enroll in and complete a formal training program that covers the core components of Earned Value Management. This step is pivotal, as it lays the groundwork for the practical application and understanding of EVM. Humphreys & Associates provides online EVM Training for employees of contractors that do business with the DOD, DOE, NASA, and other U.S. government agencies such as the FAA.
Study the Standards and Guidelines: Gain a comprehensive understanding of industry standards, such as the EIA-748 Guidelines. Knowledge of these standards is fundamental, as they will inform the set-up and management of an EVMS.
Prepare for the Examination: Most certifications will require passing an exam to demonstrate your proficiency. This will involve rigorous study and attending review courses to prepare.
Apply for the Certification Exam: Submit your application along with any necessary documentation and fees to the chosen certifying body. Ensure all prerequisites have been met before applying.
Take the Certification Exam: Schedule and sit for the certification exam. This will typically cover a range of topics, from the basic principles of EVM to more advanced concepts.
Receive Certification: Upon successful completion of the exam, you will receive your EVM Certification, which endorses your knowledge and understanding of EVM.

Essential Documentation and Preparation Tips

To ensure a smooth certification process, maintain an organized file of all coursework, training certificates, and professional references. Consider using study guides, practice exams, and other preparatory materials to fully equip yourself for the certification exam.

How to Maintain and Renew EVM Certification

An EVM Certification is not a one-time event but requires ongoing professional development to maintain. Stay abreast of any Continuing Education Units (CEUs) or Professional Development Units (PDUs) required to keep your certification active. Engage with the community of practice, attend EVMS workshops, and continue learning to stay current in Earned Value Management best practices.

Section 3: EVM Consulting and Expert Guidance

The Need for Expert Consultancy in the Professional EVM Certification Process

As professionals navigate the path towards EVM certification, expert consultancy can play a pivotal role. These consultants have extensive experience with EVM principles and the process for implementing an EIA-748 compliant EVMS. They can offer personalized guidance, which is often critical to ensuring a smooth and successful journey to compliance with EIA-748 Standard for EVMS.

How to Choose the Right EVM Consultant

When selecting an EVM consultant, consider the following criteria to ensure you make an informed decision:

Experience and Credentials: Look for consultants with a proven record of accomplishment in EVMS implementations and a robust portfolio of successful client engagements. Certified consultants, particularly those with additional qualifications in project management, bring a wealth of knowledge.
Industry Reputation: Investigate the consultant’s standing within the industry through testimonials, case studies, and peer recommendations. A reputable consultant will have positive feedback and be recognized as an authority in the field.
Approach to Training and Consulting: Evaluate the consultant’s methodology. The right consultant should offer a tailored approach, adapting their expertise to your organization’s specific needs and challenges.
Compatibility with Organizational Culture: Ensure the consultant’s style and communication align with your organization’s culture. A collaborative and adaptable consultant can integrate more seamlessly into your team.
Maintenance and Support: It is not just about successfully completing a Cognizant Federal Agency (CFA) EVMS Compliance Review, it is also about sustaining the EVMS and how project personnel implement it on their project. Check whether the consultant offers support and guidance to ensure ongoing compliance and effectiveness.

The Role of Consultants in Ensuring Compliance and Efficient System Implementation

An EVM consultant’s role extends beyond just advice on CFA compliance reviews—it involves hands-on assistance in setting up an EVMS that complies with industry standards, training staff to understand and use the system effectively, and preparing the organization for the rigorous CFA compliance review process. Furthermore, consultants can help identify any gaps in current practices and tailor the EVMS to best fit the organization’s unique environment.

By providing insights into best practices, drawing from a wide range of experiences with different clients, and offering objective assessments of current systems, consultants can ensure that an organization’s EVMS is both compliant and optimized for performance.

Earned Value Consulting provides valuable expertise that can streamline the CFA compliance process, facilitate the successful adoption of EVM, and ensure long-term compliance. By leveraging the knowledge and experience of a seasoned EVM consultant, organizations can overcome obstacles more efficiently and optimize their project management practices for greater success. Thus, engaging the right consultant is a strategic investment that can lead to significant dividends in project execution and management.

Section 4: EVM Training Course List

To enhance your skills in this area, H&A offers a comprehensive list of EVM Training Courses tailored to meet the needs of various stakeholders, from project managers to government contractors. Whether you’re preparing for a customer Integrated Baseline Review (IBR), seeking to improve your EVM proficiency, or aiming to pass professional certification exams, these courses offer valuable insights and practical experience. Delivered in an online format, these courses provide the flexibility to learn at your own pace while ensuring a deep understanding of EVM principles and their application in real-world scenarios.

CAM Discussion: The CAM Discussion serves as an essential component of the preparation process for a customer Integrated Baseline Review (IBR), compliance review, or surveillance review. This simulation offers a practical experience of a CAM documentation review and interview session, illustrating how a proficient CAM conducts an interview with a government customer. Additionally, it provides a useful recap emphasizing key technical points along with suggestions for follow-up action items.

CAM Essentials_DOD: CAM Essentials provides comprehensive training to improve EVM proficiency and understanding of the basics. This online training bundle features the EVMS Virtual Learning Lab (DOD), Scheduling Virtual Learning Lab, and CAM Discussion courses, all available separately.

CAM Essentials_DOE: CAM Essentials offers comprehensive tools for improving EVM skills and understanding the fundamentals. This online training bundle includes the EVMS Virtual Learning Lab (DOE), Scheduling Virtual Learning Lab, and CAM Discussion courses, each available separately.

CAM Essentials_NASA: CAM Essentials provides comprehensive training to improve EVM proficiency and understanding of the basics. The online training bundle includes the EVMS Virtual Learning Lab (NASA), Scheduling Virtual Learning Lab, and CAM Discussion courses, which are also available individually.

CPR/IPMR/CFSR Completion and Reconciliation: The Integrated Program Management Report (IPMR) and Contract Funds Status Report (CFSR) are crucial communication tools between contractors and their customers. This online course provides valuable insights into the proper completion of these reports and their reconciliation.

EVMS Certification and Preparation Quiz: This online course comprises 120 questions in four separate quizzes, covering the nine EVMS process groups, the Integrated Program Manager Report (IPMR), earned value data analysis, Integrated Baseline Review (IBR), and compliance reviews. It serves as an excellent study and preparation resource for the AACE International Earned Value Professional (EVP) or the PMI Project Management Professional (PMP) certification exams.

EVMS DOD Virtual Learning Lab: The EVMS Virtual Learning Lab offers a comprehensive 21-hour instruction program. This online training delivers Humphreys & Associates’ acclaimed three-day EVMS workshop in an interactive, multimedia format. The video content includes all workshop coursework, quizzes, and case studies, allowing students to assess their understanding and receive prompt feedback through scored quizzes and exams.

EVMS DOE Virtual Learning Lab: The EVMS Virtual Learning Lab offers a comprehensive 21-hour online training program. This interactive multimedia format is based on Humphreys & Associates’ acclaimed three-day EVMS workshop, delivering all course content, quizzes, and case studies in a video format. Students can assess their understanding through scored quizzes and exams.

The course can be used for project personnel to enhance their EVM proficiency or for someone who wants to learn the basics of earned value management at their own pace.

EVMS NASA Virtual Learning Lab: An intensive 21-hour online training program that offers a complete presentation of Humphreys & Associates’ three-day EVMS workshop. The course has been adapted into an interactive multimedia format, including all quizzes and case studies from the original workshop. Students can test their knowledge and receive immediate feedback through scored quizzes and exams.

The course can be used for project personnel to enhance their EVM proficiency or for someone who wants to learn the basics of earned value management at their own pace.

IBR – Online Video: The Integrated Baseline Review (IBR) course is designed to provide a comprehensive understanding of the IBR process. It is a fast-paced presentation that is essential for ensuring a clear grasp of the technical requirements of a project and establishing accurate schedule and cost goals. This course offers a detailed explanation of the review process and can be tailored to provide training for specific needs and timings. The approximate duration of the course is 2 hours.

OTB/OTS Implementation – Online Video: Learn about Over Target Baseline (OTB) and Over Target Schedule (OTS) Implementations in this approximately 1 hour and 30-minute video.

A formal re-programming action, known as an OTB and/or an OTS, may occur during risky major acquisitions. Understanding the rationale for and the various methods used to implement an OTB/OTS, as well as correctly completing the IPMR formats in accordance with the Data Item Description (DID) instructions, is not a simple process. Our video provides clarity on this complex process.

The video includes completed IPMR Formats 1, 2, and 3, showcasing four OTB methods, along with before and after Baseline graphs for each method. It also contains examples and Baseline graphs for Over Target Schedule, Format 3.

Scheduling Virtual Learning Lab: The Scheduling Virtual Learning Lab offers an intensive 21 hours of instruction covering critical path fundamentals, schedule baseline, float, network logic development, risk assessment, changes, and scheduling in an EVMS environment. The content is based on the well-regarded three-day Project Scheduling Workshop by Humphreys & Associates, adapted to a video format and featuring quizzes and case studies for immediate knowledge testing and feedback.

The course is designed for project personnel looking to enhance their project scheduling skills and for individuals who want to learn the fundamentals of project scheduling at their own pace.

A student who completes the Scheduling course will earn 21 Professional Development Units (PDUs) or 2.1 Continuing Education Units (CEUs).

Evaluating the Effectiveness of Your EVM Training

To ensure that the EVM training investment yields the expected results, it is important to monitor and evaluate its effectiveness. This can be done through various means, such as feedback surveys, performance assessments, and observing improvements in project management practices post-training. Metrics like increased efficiency, reduced project variances, and improved forecasting accuracy can indicate the success of the training program.

Additionally, incorporating a continuous improvement process for training—where feedback is used to refine and enhance the training offerings—can help ensure that the organization continues to improve on your EVMS over time.

Properly tailored EVM training programs are not the only key to successful professional certifications and EVMS implementation—they empower organizations to achieve strategic objectives and enhance overall project management proficiency. With the right training program, professionals and teams can develop the expertise needed to leverage EVM capabilities fully, leading to improved project outcomes and sustained success.

The journey through the complexities of building an Earned Value Management System (EVMS) underscores its pivotal role in effective project management. By committing to understanding the basic principles of an EVMS and striving for formal certification, professionals elevate their ability to forecast, monitor, and steer complex projects toward success.

EVM training equips project teams with the tools and strategies necessary to implement and manage robust project control systems. This, in turn, fosters informed decision-making, enhanced accountability, and improved alignment between project objectives and outcomes. Professional certification recognizes proficiency that benefits the individual and the organization by establishing credibility and assurance in project management capabilities.

Having traversed this guide, the next steps involve consolidating your newfound knowledge and venturing into tailored training programs that suit your or your organization’s specific requirements. From here, it is essential to consistently apply, adapt, and refine the skills gained through training to real-world scenarios.

Encourage yourself and your peers to persist in your journey towards EVM mastery. Continued learning, networking with other EVM professionals, and staying abreast of evolving practices will ensure that your expertise remains current and beneficial. May this guide serve as both a foundation and steppingstone on your path to excelling in the discipline of Earned Value Management.

For information on Corporate or Quantity Discount pricing, please contact us at products@humphreys-assoc.com or call us at (714) 685-1730.

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Creating a Scalable Earned Value Management System (EVMS)

By Humphreys & Associates / December 1, 2022 / EVMS Training, Scalable EVMS

EVMS Training, Scalable EVMS

Creating a scalable Earned Value Management System (EVMS) is a topic H&A earned value consultants frequently encounter while assisting clients implementing an EVMS. These clients are often responding to a contractual EVMS requirement and are using it as the impetus to improve their project control system. A common theme is they would like to leverage the EVMS to win more contracts as well as increase project visibility and control to prevent cost growth surprises that impact their profit margins. They consider having an EVMS in place to be a competitive advantage.

Depending on the company size and their line of business, they typically have some project controls in place. They also realize they have gaps and processes are ad-hoc. They lack a standard repeatable process project personnel can follow. And that’s where H&A earned value consultants play a role – to help the client focus on the basics and simplify the process of implementing an EVMS that can be scaled for all types of projects.

What is a scalable EVMS?

A scalable EVMS is a flexible project control system that incorporates earned value management (EVM) practices for all projects. The level of data detail, range, and rigor reflect the type or scope of work, size, duration, complexity, risk, or contractual requirements. This is illustrated in Figure 1.

Scalable Earned Value Management System Infographic - the image shows how the size of a project relates to the level of detail, amount of EVM practices and rigor we are recommending. — Figure 1 – The type of project determines the level of data detail, range, and rigor of EVM practices.

Establishing a Common Base for All Projects

The foundation for a scalable EVMS is to establish a common project control system that incorporates EVM practices. Identify which practices apply to all projects and which practices apply based on the scope of work and risk as well as the level of data detail needed for management visibility and control. Identify and quantify project attributes so it is clear what is expected.

Use this information to create guidance for project personnel so they know what is required for their project. Include this guidance in the EVM System Description.

What are the steps to create a scalable EVMS?

Step 1 – Determine the project categories.

These will be specific to your business environment. The goal is to establish a small set of clearly defined project categories as illustrated in Figure 1. Identify measurable project attributes so a project manager can easily determine their project category. An example is illustrated below.

Project Attribute	Small, low risk projects	In-between projects	Large, high-risk projects
Scope of work	Routine, repeatable tasks. Well defined.	Mix of known and unknowns. Some requirements are well defined, others likely to evolve.	High percentage of unknowns. Near term requirements are defined. TBD requirements are progressively defined.
Size (contract value is a typical measure)	< $20M	= or > $20M and < $50M	= or > $50M
Duration	< 18 months	> 18 months	> 18 months
Overall risk assessment, threat of schedule slip, cost growth or lower profit margin	Low	Moderate	High
Resource availability, skill set requirements	In-house resources are available, able to match demand	In-house resources are available, manageable number of specialized resources that may require out-sourcing.	Some in-house resources available. Must hire additional resources with specialized skill sets or out-source.
Percentage (or value range) of subcontract work effort	< 30%	= or > 30% and < 50%	= or > 50%
EVMS FAR or DFARS clause on contract, reporting DID	None	Potential for IPMR or IPMDAR DID deliverable	Included in contract, IPMR or IPMDAR DID deliverable

Some contractors rank or apply a weight to the attributes useful for determining the level of data detail, range, and rigor of EVMS practices required. For example, the overall risk assessment and the scope of work may rank higher than other attributes. Step 2 builds on the project categories identified in Step 1.

Step 2 – Identify the level of data detail and EVM practices that apply.

This will be specific to your EVMS, EVM System Description, and how the content is organized. Include use notes to identify practices that may not apply or what can be scaled for the project category. A simple example is illustrated below. This example assumes core EVM practices are followed for all projects such as using a work breakdown structure (WBS) to decompose the scope of work.

EVMS Components	Small, low risk projects	In-between projects	Large, high-risk projects
WBS, WBS Dictionary, project organization, control account level	High level. Control accounts are larger and longer duration.	Scale to match scope of work and risk	Lower level of detail. Depth dependent on scope of work and risk.
Work authorization	Simple workflow form and process with one or two approval levels.		Detailed element of cost workflow form, additional process steps, approval levels.
Summary level planning packages	Usually not applicable.		Used when appropriate for scope of work.
Work packages	Larger and longer duration. Fewer milestones, more percent complete earned value techniques (EVTs).		Shorter duration. Majority of discrete EVTs use milestones and quantifiable backup data (QBDs) to objectively measure work completed.
Planning packages	Optional use.		Routinely used.
Rolling wave planning	Usually not applicable.		Routinely used.
Network schedules	High level.		Detailed.
Schedule risk assessment (SRA)	Usually not necessary.		Required. Routinely performed.
Variance thresholds	High level or simple.		Reflect contract or project manager requirements, scope of work, or risk level.
Baseline change requests (BCRs)	High level, simple log.		Formal workflow process, forms, and logs to document changes and rationale. Approval levels depend on scope of the change.
Change control board (CCB)	Not used. Project manager approves all changes.		Required.
Risk and opportunity (R&O) management	High level assessment. May use simple R&O log.		Formal process to assess, R&O register maintained.
Annual EVMS self-surveillance	Not applicable.		Required when EVMS on contract.

Step 3 – Establish scalable templates or artifacts.

To complement the EVM System Description, provide a set of scaled templates or artifacts for project personnel. For example, a project manager for a small low risk project would select a simple work authorization or BCR form and workflow process, report templates, and logs to implement on their project. Provide a separate set of templates and artifacts for large high-risk projects that require additional procedures, data detail, workflow approval levels, forms, reports, and change tracking that can support an EVMS compliance or surveillance review.

Provide training on how to use the templates and artifacts. This helps to establish a standard repeatable process with a base set of artifacts. It also promotes a more disciplined process regardless of the type of project as personnel have a better understanding of what is required.

Another best practice is to use project directives to document the level of data detail, range, and rigor of the EVM practices implemented on a project. These provide clear direction for all project personnel on how to implement the EVMS. Project managers are often responsible for producing these. Create a template for each project category so they can easily document and communicate their management approach.

What are the benefits of establishing a scalable EVMS?

Establishing a common repeatable process along with a standard framework for organizing project scope of work, schedule, budget, and performance data enables project portfolio analysis to assess profitability. It also provides the basis to capture historical data a proposal team can use to substantiate their cost estimates. A common process eliminates the need to maintain different project control systems. It also makes it easier to move personnel between projects and increase the project control maturity level as everyone is following the same core processes – just the level of data detail or rigor of EVM practices may be different.

H&A earned value consultants have worked with numerous clients to design, implement, and maintain an EVMS. Scalability is a feature that can be designed into an EVMS and EVM System Description whether new or existing. Call us today at (714) 685-1730 to get started.

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EVMS Guidelines 2 – Five Sections of Organizational Guidelines

By Humphreys & Associates / March 1, 2022 / earned value training, EVM Training, EVMS Guidelines, EVMS Training

earned value training, EVM Training, EVMS Guidelines, EVMS Training

Video Contents

The EVMS Guidelines are Grouped in five major categories which address these five sections:

0:12 – Organization
0:32 – Planning, Scheduling, and Budgeting
0:46 – Accounting Considerations
0:56 – Analysis and Management Reports
1:15 – Revisions and Data Maintenance

More EVMS Training

If you liked this video you can purchase the entire course below. This video is an excerpt from the Department of Defense (DOD) version of this eLearning module. We also offer the same course customized for the Department of Energy’s (DOE) specific Earned Value Management (EVM) implementation/requirements, as well as a version of the course customized for NASA’s EVM implementation/requirements.

— Purchase This Course —
EVMS DOD Virtual Learning Lab

— Purchase the DOE Version of this Course —
EVMS DOE Virtual Learning Lab

— Purchase the NASA Version of this Course —
EVMS NASA Virtual Learning Lab

EVMS Document Matrix

Not sure what the different requirements are between the DOE and NASA? Can’t remember if Cost and Software Data Reporting (CSDR) is required for an NSA contract? Check out our easy to read Earned Value Management Systems Document Matrix

All Online Courses

All Online Courses Available from Humphreys & Associates

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Determining Responsibility for Indirect Cost Variance Analysis – Part 3

By Humphreys & Associates / January 5, 2022 / Cost Variance, Earned Value Consulting, EVMS Training, Indirect Cost Rates

Cost Variance, Earned Value Consulting, EVMS Training, Indirect Cost Rates

Indirect Cost Variance Analysis Process

The debate that has continued since the inception of the earned value concepts in the 1960’s has been: “Who should report on and analyze the cost variances attributable to indirect costs?”

This blog is the third in the series of blogs to help answer this question. The first blog covered a few fundamentals about how indirect cost rates are established to set the stage. The second blog discussed how indirect rates are applied and how project personnel display indirect costs for internal or performance reporting. This blog concludes the discussion on the indirect cost variance analysis process. It covers what the EIA-748 Standard for Earned Value Management Systems (EVMS) and related government agency guides have to say on the subject as well as discussing the best option for determining who is responsible for indirect cost variance analysis.

Throughout a project’s execution phase, project managers and control account managers (CAMs) conduct their respective performance analysis at varying levels of detail to identify significant cost and schedule variances as well as variances at completion (VAC). They use variance thresholds to focus on the work elements where challenges or problems are occurring. As needed, they identify the root cause of the variance and determine the best path forward to mitigate or otherwise reduce the impact of an unfavorable variance.

This effort includes performing additional analysis not just by the direct elements of cost (labor, material, subcontract, or other direct costs (ODCs)), but also by the indirect costs applied to those direct cost elements to identify the root cause. For example, the CAMs check for labor variances (rate or efficiency/volume) and material variances (price or usage) to identify any potential issues. As a side note, remember the rates used to calculate earned value are the same rates used for budget values. Likewise, actual costs are collected into the same direct cost elements of cost and indirect cost pools as the budget plan elements of cost. Those actual rates may vary from the budget/earned value rates.

At the total project level, a project manager performs indirect element of cost analysis. They need to assess whether indirect costs are contributing to the project’s cost variances and quantify the impact. Since indirect costs are directly related to the base time phased direct costs, it follows the variances for the element of cost categories are similarly skewed. Figure 1 shows an example (produced from Encore Analytics Empower) of a contract with the variances attributable to the elements of cost (see previous 3-part blog: Planning and Managing EVM by Elements of Cost (EOC)). The indirect cost variances tend to vary with the changes in the direct costs base and/or indirect elements of cost over time at a pool level. While not common, these could be different from month to month (the lightest blue shaded boxes in Figure 1) when annual, semi-annual, or quarterly rate adjustments occur (the project manager would be notified when these occur).

Figure 1: Example Cumulative Variance Analysis by Elements of Cost

The project manager and CAMs are also responsible for completing their variance analysis reports. These include the Integrated Program Management Report (IPMR) Format 5 (Explanation and Problem Analysis) or Integrated Program Management Data and Analysis Report (IPMDAR) Performance Narrative Report. As part of this analysis, they need to discuss whether rate changes are impacting the project’s current and cumulative cost and schedule variances, as well as the calculated EAC (cumulative to date actual costs plus ETC).

Customers often require additional indirect cost detail on the formal performance reports when thresholds are exceeded. The narrative reports are used to address those indirect cost pool base versus rate variances. Project managers and CAMs (when indirect costs are displayed as part of their budgets), need base versus rate variance analysis from finance or accounting. Finance or accounting is responsible for establishing the indirect cost rates to date and forecasting what the indirect rates will be for future fiscal years.

Who is responsible for the indirect cost variance analysis?

Back to our original question: “Who should report on and analyze the cost variances attributable to indirect costs?” Can the EIA-748 Standard for Earned Value Management Systems (EVMS) 32 guidelines provide any guidance? There are also various government agencies that place EVMS requirements on contracts. Do their policies, compliance business practices, or standard operating procedures provide any guidance?

The fact is, the EIA-748 Guidelines, dating back to the Cost/Schedule Control Systems Criteria (C/SCSC) in the 1960s, have never specified the level where the management and analysis of indirect costs must occur. The founders of the earned value concept realized there are several levels of management where indirect rates are applied versus the level at which they are displayed for management.

The EIA-748 Standard for EVMS (Rev D) Guidelines say the following:

4. Identify the organization or function responsible for controlling overhead (indirect costs).

13. Establish overhead budgets for each significant organizational component of the company for expenses, which will become indirect costs. Reflect in the program budgets, at the appropriate level, the amounts in overhead pools that are planned to be allocated to the program as indirect costs.

19. Record all indirect costs which will be allocated to the program consistent with the overhead budgets.

24. Identify budgeted and applied (or actual) indirect costs at the level and frequency needed by management for effective control, along with the reasons for any significant variances.

The Defense Contract Management Agency (DCMA) Cross Reference Checklist (CRC) sub-questions for these guidelines do not specify any particular level where these actions must occur, and do not even mention the control account level. For example, for the Guideline 4 sub-questions, they reference “the management position” assigned the responsibility and authority for controlling indirect costs. For one of the Guideline 24 sub-questions, they ask: “Are the variances between budgeted and actual indirect costs identified and analyzed at the level of assigned responsibility for their control (indirect pool, department, etc.)?”

Likewise, the Department of Energy’s (DOE) detailed Compliance Review Checklist is equally non-specific on the level of management where these actions occur. Below are excerpts from that DOE document with text highlighted for reference.

E.1	E.1 – Indirect Account Organization Structure
E.1.1	Indirect procedures must clearly identify managers who are assigned responsibility and authority for establishing budgets and controlling indirect costs and who have the authority to approve expenditure of resources.
E.1.3	The management process for establishing and controlling indirect cost rates should be documented to ensure responsibility is clear.
E.2	E.2 – Indirect Budget Management
E.2.2	The contractor must establish indirect (i.e., overhead, burden, cost of money, and G&A expense) budgets at the appropriate organizational level for each pool and cost sub‐ element.
E.2.3	Contractor recurring DOE rate performance reviews should be conducted on a regular basis (i.e. monthly, quarterly, etc.) to ensure effective control and management of the indirect expenses and indirect budgets.
E.3	E.3 – Record/Allocate Indirect Costs
E.3.2	Periodically, reviews must be made to assure that indirect costs are being charged to the appropriate indirect pools and by the appropriate incurring organization.
E.3.3	If incurred indirect costs vary significantly from budgets, periodic adjustments must be made to prevent the need for a significant year‐end adjustment.
E.4	E.4 – Indirect Variance Analysis
E.4.1	This guideline requires a monthly documented indirect cost analysis to be performed by those assigned responsibility, comparing indirect budgets to indirect actual costs and explaining the cause of resultant variance(s).
E.4.4	The contractor should define thresholds for each budget category and a process for management by exception for indirect performance and analysis.

It is not by accident the Guidelines and supporting questions/attributes do not specify any one way all contractors have to manage, analyze, and report on indirect cost variances. Indirect costs can be handled in a number of different ways. The Guidelines have always been designed to give contractors the flexibility to manage their projects within the bounds of those Guidelines.

So, what is a best answer?

While contractors may choose other viable options, a best practice is for the corporate entity responsible for controlling those indirect costs to do the indirect cost variance analysis at the pool levels. They control the rates, know the reason for variances, and can forecast what the rates will be over time. As the first blog in this series pointed out, finance or accounting is responsible for establishing and maintaining the direct and indirect rates based on the contractor’s firm and potential direct business base (or volume).

The designated higher level management entity should also be responsible for providing the necessary indirect cost variance analysis, rate impacts and narrative details to the project managers. The project managers need to be aware of corporate actions and potential indirect rate revisions that impact the range of EACs they need to prepare for the IPMR or IMPDAR submittals. This communication is essential so they have the data and narrative text necessary for managing their project, as well as for producing their performance reports explaining the source and impact of indirect cost variances on the project’s EAC to their customer.

While not a hard requirement, many contractors elect to include both direct and indirect costs in the CAM control account work authorizations. This does not make the CAMs responsible for these indirect costs since they have little to no control over the indirect rates – they simply apply the current or forecast rates that accounting provides. But this format does provide for the necessary visibility CAMs must have regardless in order to conduct the expected variance analysis, inclusive of an assessment of all cost elements (direct and indirect) and price/usage analysis, in order to explain impacts on performance and on their EACs. (See previous blog: EVMS Variance Analysis — EVMS Analysis and Management Reports.) They then forward these to higher level management to incorporate and to provide the rationale for the variances and to determine any corrective action to mitigate the problems.

Another important advantage of providing CAMs fully burdened budgets, earned value, and actual cost data broken out by the direct and indirect cost elements includes but is not limited to facilitating “make to buy” and “buy to make” decisions because a CAM has an apples-to-apples cost comparison as noted in the second blog.

Need help sorting out the best levels for reporting and managing your direct and indirect costs? Call us today at (714) 685-1730.

Humphreys & Associates approved by PMI as an Authorized Training Partner

By Humphreys & Associates / January 5, 2021 / EVMS Training, project management institute

EVMS Training, project management institute

EVMS Training Partner

Humphreys & Associates, Inc. (H&A) is excited to announce that PMI has approved us as an Authorized Training Partner specializing in Earned Value Management System (EVMS) training. Authorized Training Partners must meet rigorous standards thru PMI for quality and effectiveness. Effective January 1^st, 2021, the Project Management Institute (PMI) Registered Educational Provider (REP) program will be retired and replaced with the new Authorized Training Partner (ATP) program. This new program is designed to ensure the training you receive is of the highest quality.

For years, H&A has been a recognized leader in project performance measurement training for PMI. Our professional instructors have extensive experience in evaluating EVMS training requirements, designing comprehensive training plans, developing client-specific instructional material, and presenting training workshops. Training such as Basic and Advanced EVM techniques, Project Scheduling, Variance Analysis Reports (VAR), subcontractor integration and Integrated Baseline Review preparation are just a few of the topics that H&A has developed and enhanced over the last 40 years. As an Authorized Training Partner, all courses are eligible for PMIs Professional Development Units (PDU).

Humphreys & Associates approved by PMI as an Authorized Training Partner Read Post »

EVMS Training