EVMS

Keeping the EVM Love Alive In Your Organization

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Keeping the EVM loveAdmittedly, operating an Earned Value Management System (EVMS) in an organization can sometimes be like getting your kids to the dentist.  They know they have to do it, and they will even concede that it may be good for them, but it does not mean they have to like it.

Earned Value provides a framework for integrating the cost, schedule, and technical scope of your project, and is an exceptionally valuable tool for management and project status.  There are, however, a few strategies that can be employed in order to maintain a healthy system by motivating those who operate within the system to do so with a sense of ownership.

Keeping the EVM love alive can follow the simple formula of Push, Pull and Inform.

1)   Push:  Senior Management Must Use the Data and Demand Quality

Having those up the food chain demanding accurate and timely information can be a powerful “push” that maintains interest and focuses efforts on system health and quality.  Organizations where EVM is nothing more than a reporting requirement and is not used for decision making or conveyance of project status, will have a difficult time maintaining a healthy system.  Sometimes negative attitudes towards Earned Value can even start with the customer and flow down to the contractor.

The alternative is in companies in which it is apparent that EVM is deeply embedded in the projects’ culture.  In a multitude of forums, the language of Earned Value is used to describe the status and issues of the project.  In these companies you probably will not see only the obligatory EVM charts in project reviews, but instead see the concepts and outputs of the system used throughout project management.  If poor variance analyses, inaccurate Estimates at Completions (EAC), incomplete baselines, or lack of corrective actions are challenged by the entire chain of management, then chances are those problems will stop being problems and the organizations can begin relying on the information to manage effectively.

2)    Pull:  Keep the System Useful to the Users

A great deal of resources may be invested in an EVMS, and in organizations with a healthy and useful system the return on this investment can be substantial.   Organizations that employ toolsets with timely and accessible reporting of project information help combat the belief that EVM is just a one-way reporting process.  A common interface for data is an “EVM Cockpit”, or some other tool set or reports that make the information easy to access for day-to-day management purposes.  The flip side of this are systems that make data accessibility difficult, or the problems of the system cause the data to be unreliable for prompt decision making purposes.  For example, one of the more important processes in an EVMS is variance analysis; however, when a great deal of time and effort is spent explaining variances that are not related to project performance, it becomes a significant drain on the attitude towards the system.

It is also important that the critical processes of the system are easy to use and understand.  These processes include project baselining, updates to the Estimate to Complete (ETC), statusing the Integrated Master Schedule (IMS), incorporation of changes, preparing variance analyses, and tracking of corrective actions.  Decisions regarding the architecture of the toolsets supporting these processes can significantly impact the attitudes of system users.  In addition, developing tool sets that eliminate the redundancy of data inputs between the cost and scheduling systems can dramatically improve the quality of the Earned Value data.

3)   Inform:  Regular Communication and Continuous Education to the Project Teams are Critical

Like any important management system in an organization, it is important to continually inform and support those who operate within the EVM system.  There is an endless source of special topics and project notifications that can provide useful information to project teams, which will help maintain EVM knowledge and a healthy system.  Some topics, such as preparing quality variance analysis, thorough corrective actions, and valid ETCs, need routine refreshment.

Below are a few suggestions on ways to communicate within the organization:

  • Monthly Internal Newsletter: An excellent mechanism to convey important updates to EV processes or changes that pertain to the business and the industry. This gives employees a chance to keep up with the latest news and developments.
  • EV Blog:  By blogging regularly, an organization can develop themes that are specific to business issues the organization is experiencing. If there are many of the same questions repeated again and again, the blog can be used to answer those questions. This way, people can just refer to the blog if they have questions that are common.
  • Lunch & Learn Sessions: These sessions are an excellent way for all participants to gain further knowledge on a specific topic and ask questions in real time.  This becomes more advantageous as all participants benefit from the group discussion.
  • Quarterly Webinar: This is particularly beneficial for organizations that may have multiple facilities located throughout the country. Specific subjects would be applicable to all sites. All participants, regardless of location, can attend and benefit.
  • Annual Quiz: This is a great way to gauge how well employees are grasping and using EVM. Questions would be centered on topics relating to events that occurred during the year. The quiz could be recurring and mandatory in the same manner as ethics and sexual harassment training.

For more information about keeping the EVM love alive in your organization give us a call at Humphreys & Associates, Inc. We are happy to answer questions.

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EVM for Biotech and Pharma – Part I Implementation and Training

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Updated December 13, 2017

 

EVM for Biotech and PharmaAs you know, the Earned Value Management System (EVMS) is a management process with characteristics that are absolutely logical to manage projects whether there is an external customer or not. The EVMS is also required by the Federal Government on DOD, DOE, FAA, NSA, DOT, DOJ, NASA, etc. contracts over $20M.

With the phasing in of the Affordable Health Care Act and recent funding for research and preparation in the event of bio-terrorism, other branches of the Government, such as Health and Human Services (HHS) and Biomedical Advanced Research and Development Authority (BARDA), are becoming more involved in the healthcare sector. Implementing and using EVMS is a baseline requirement for biotech and pharmaceutical firms awarded large contracts by the Federal Government.

This will require companies and universities that receive funding to understand and implement Earned Value Management and that key project personnel, including management and executives, will require high quality Earned Value Training.

Why EVM and Government Contracts

Earned Value Management has been used since the 1960’s and has become the standard by which the Government measures and evaluates the management and reporting processes on projects awarded to contractors. Initially, it was implemented on projects; such as the development of satellites, long-range missiles, fighter aircraft, etc., but has become the US Government’s gold standard to manage the technical, schedule and cost progress of projects and to identify and manage risk and opportunities.

In order for defense contractors to be eligible for large contracts, they are required to follow the 32 Guidelines of the EIA-748-C which can entail system design and development and a substantial learning curve. Earned Value Management company-wide training and proper implementation becomes critical for project efficiency, future funding and to meet Government requirements.

Integral to EVM are the uses of the Integrated Master Plan (IMP)/Integrated Master Schedule (IMS) and risk and opportunity management.  The Integrated Master Schedule is the basis for developing the Performance Measurement Baseline (PMB) which in turn, is the basis for measuring performance on a project.   Measurement of progress against the baseline provides early identification of problems and helps to identify and mitigate costs and risks, while also identifying opportunities, by implementation of appropriate corrective actions.

Earned Value Management Systems for Project Management

The basic concept of the Earned Value Management System is more than a unique project management technique.  The EIA-748-C contains 32 Guidelines that define a set of requirements that a contractor’s management system must meet. The objectives of an EVMS are:

  •  Relate time phased budgets to specific contract tasks and/or statements of work
  • Relate technical, schedule and cost performance information
  • Furnish valid, timely and auditable data/information for proactive management action and decision making
  • Provide the basis to capture work progress assessments against the baseline plan to facilitate realistic project costs and completion dates
  • Supply managers with a practical level of summarization for effective decision making

Once a contractor’s EVM System is designed and implemented, there are significant benefits to the contractor and to the customer:

  • Contractor benefits include increased visibility and control to quickly and proactively respond to issues which makes it easier to meet project technical, schedule, and cost objectives
  • Customer benefits include confidence in the contractor’s ability to manage the project, early problem identification, and objective rather than subjective contract cost and schedule status

Earned Value Management Training

Experienced project managers will tell you that understanding the scope, schedule and costs of a project is essential to its success. The primary objective of the EVMS is to ensure that all elements of a project are planned, authorized, managed, and controlled in a consistent and cost-effective manner.  There is an increasing demand for training for organizations beyond the traditional aerospace and defense related construction, software, research and development, and production environment to now include non-defense companies to implement and use the Earned Value Management System.

EVM for Biotech and Pharma

Biotech and Pharma companies are not strangers to dealing with government regulations and requirements. Most have gone through rigorous Food and Drug Administration (FDA) processes to receive approval of compounds and/or devices. Nonetheless, learning how to design and use an EVM system can take a considerable investment of time and money, but is an essential requirement for initial and ongoing funding.

In addition to the EIA-748-C, there are numerous documents that give direction regarding the implementation and use of an EVM system.  Some of these are the National Defense Industrial Association (NDIA) Integrated Program Management Division (IPMD) EIA-748 Intent Guide, Cost Accounting Standards (CAS), Data Item Descriptions (DID), Military Standards (MIL-STD) such as MIL-STD-881, the Earned Value Management System Interpretation Guide (EVMSIG), and many others.  We have helped many organizations to ensure that they do not overkill or underkill based on their desired management system characteristics.  H&A personnel understand the requirements and are able to “size” those requirements to meet company and customer requirements.

Although Biotech and Pharma are relatively recent industries to use EVM, Humphreys & Associates (H&A) has been providing Earned Value Management training and implementation services for over 35 years. H&A provides self-paced online, classroom and private training courses, and can assist in all aspects of Earned Value Management Implementation.

For more information about EVM training or support, or with questions about your company’s requirements, please contact the Humphreys & Associates corporate office.

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Aligning ACWP with BCWP for Proper EVM | Earned Value Management

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ACWP and BCWP by DAU

What is estimated Actual Cost of Work Performed (ACWP)?

Estimated ACWP is an adjustment to the Actual Cost of Work Performed (ACWP) in the earned value “engine” to align ACWP with Budgeted Cost for Work Performed (BCWP).  Estimated ACWP is synonymous with “estimated actuals.”

Why is Estimated ACWP necessary?

Without Estimated ACWP, timing mismatches between ACWP and Budgeted Cost for Work Performed (BCWP) cause false cost variances to appear in the Integrated Program Management Data Analysis Report (IPMDAR) information reported to the customer.  Typically these variances are favorable and can mask other unfavorable variances.  Additionally, if these variances exceed reporting thresholds, the explanations clutter Format 5 of the IPMDAR with variance explanations that discuss timing problems of the accounting system rather than actual performance issues.

To what types of cost does Estimated ACWP apply?

Estimated ACWP is most typically required for material costs.  When BCWP is claimed upon receipt of the material, the actual cost accrual typically occurs one or more months following material receipt, which creates the timing mismatch between BCWP and ACWP.  Other cost element types that may require Estimated ACWP include subcontracts and Other Direct Costs (ODC).  Examples of ODCs that may require Estimated ACWP include consultants, purchased labor, and travel.

How does Estimated ACWP function?

Receipt-type material:

  1. First, a determination must be made whether Estimated ACWP is necessary.  For some categories of material, when a material item is received, the BCWP is claimed.  If actual costs for the materials do not enter the accounting system in the same period that the BCWP was claimed, Estimated ACWP is necessary to ensure ACWP occurs when BCWP occurs.
  2. Second, the Estimated ACWP adjustment is entered into the Earned Value engine as a current period transaction.  The amount of the Estimated ACWP is based on the best information available for the material item using the invoice, purchase order, or receiving report.
  3. Third, the Estimated ACWP adjustment transaction is reversed in the EV engine prior to the next month’s update.  If actual costs were to come in that month and the transactions were not reversed, the ACWP would be double-counted when the actual cost data from the accounting system gets transferred to the EV engine.
  4. Finally, remember that if the actual data does not occur as expected in the month following material receipt, the Estimated ACWP is re-entered and the reversal process must continue every month until the accounting system receives the cost of the material item.  Also, Estimated ACWP transactions should be recorded in a log to maintain traceability.

Production-type (inventory) material:

The transactions described above were for material categories for which Earned Value is claimed at receipt of the material item.  For production type materials, or materials that are common to many control accounts or even contracts, that go into inventory, Earned Value is claimed upon issuance from inventory, sometimes several months after receipt of the material and after the incurrence of actual costs in the accounting system.  In this case, the opposite condition would exist.  The accounting actuals occur before earned value is claimed for material, but EVM rules in Guideline 21 (and common sense) state that ACWP is not to occur until BCWP takes place.  Therefore, the accounting actual costs have to be “suppressed” from entering the EVM engine until material Earned Value occurs. Since some companies say they cannot suppress actual costs, they let the actual costs enter the system, but make an off-setting “Negative Estimated ACWP” entry in the EVM system until the material is issued and BCWP can be claimed for the material.

Do you need to implement an Estimated ACWP process in your Earned Value Management System?  Humphreys & Associates has the earned value training experts to assess your material management processes and implement the appropriate procedures. Contact us today.

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Rolling Wave Planning for Earned Value Management Systems

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If someone were to ask you: “Can you please give me a detailed explanation of what you will be doing on this date three years from now?” you would probably look at that person as though he or she were crazy.  It would probably be difficult to provide a detailed schedule of events for a date one week from now – although that might be more likely since you know a lot more about what might be taking place next week than what might be happening three years out.

In the early days of earned value management, contractors were expected to detail plan the entire length of a program to establish a “good performance measurement baseline.”  For a year-long development program this expectation might be okay, but for a 10 to 12 year shipbuilding program it might be unreasonable and probably a monumental waste of time.  The program will no doubt change several times before its completion – maybe several times in the first year alone.  With industry’s “help” the government soon realized requiring detail plans on lengthy programs was not always possible – or even meaningful – especially when program requirements are often fluid.

The government and industry agreed that contractors could provide an overall (general, straight-line, “average”, etc.) plan for accomplishing a program very much like what is already done in preparing a proposal, and then provide more details on an incremental basis as more became known about the work to be performed.  The government is not keen on having contractors do detail planning whenever they felt the urge, so they sought to put reasonable rigor into the incremental planning process.  All the work that existed beyond the detail planned work was considered by the government to be general “planning packages”, although contractors were still permitted to detail plan as much of the future work as they wanted.

The government also expected the contractors to identify the planning increments and frequency of planning to ensure there was not a time when the detail planned work was completed and there was no more future work detail planned.  The expectation soon became that contractors were to expand a detail plan from those planning packages into detail planned work packages with enough frequency to ensure there was always a minimum number of months of detail plans in place when the next detail planning event took place.   It also became evident that more months of detail (often called a “planning horizon”) could be provided on production or manufacturing type work vs. for development type effort.

As this “straight-line” plan was converted into detailed work package plans, the straight line became more curved (such as bell curve or skewed bell curves), with more “waves” rolling in as it became time to detail plan.  This type of planning became known as “rolling wave planning”.  Some companies call their process “incremental”, “accordion”, or “inchworm” planning process – the name does not matter, so long as the application of the process results in a minimum amount of detail planned work packages always being in place on a program.

A production program might have, for example, a 9 month planning horizon with a quarterly frequency.  In this scenario, the program starts with 9 months of detail planning in place.  Three months later, the Control Account Manager (CAM) is to look at the next 9 months (6 already detail planned and 3 new months) to make sure the existing detail planning is still good and to plan out in detail those new tasks that should be starting in the new three months of the planning horizon.

A development program however, is likely to use a different planning horizon.  Because of program volatility, it often has a shorter horizon and a higher frequency, such as 4 months of detail planning in place, with a one or two month frequency.

An example for a production program is illustrated below.  The program manager determines production can do detail planning for nine months and then every quarter review the next nine months for:

  • New work scheduled to commence in the next three months of the planning horizon and
  • Five of the six months already detail planned in the prior incremental assessment (depending on the company’s “freeze period”) – WP No. 3 and beyond can be re-plannedRolling Wave Planning

3 Months later: Rolling Wave Planning

Rolling Wave Planning for long term projects is a common area where control account project managers need help.  Humphreys & Associates earned value management experts can provide the guidance you need for your unique production or development project.  Contact us for more information.

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Authorized Unpriced Work (AUW) and Earned Value Management Systems

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Authorized Unpriced Work (AUW)

Authorized unpriced work (AUW) is an area that can cause contractors difficulties and when not handled properly, can result in a DCMA EVMS review team writing up a Corrective Action Request (CAR) as we have discussed in previous blogs.

At times, contractors can find themselves in a position where projects are not following commonly used and recommended practices that are described in the EIA-748 Standard for EVMS guidelines as well other guidance such as the NDIA Integrated Program Management Division (IPMD) EIA-748 Intent Guide and the DoD Earned Value Management System Interpretation Guide (EVMSIG).

It is always better to be proactive to ensure project personnel have the proper direction they need. H&A suggests that you review your EVM System Description as well as any related procedures to ensure that they:

  1. Reflect the EIA-748 guidelines (for AUW in particular, see Guidelines 8 and 28) as well as related industry and government implementation guidance.
  2. Are clear and specific on how project personnel are to handle authorized unpriced work.

Humphreys & Associates suggest verifying the following items are discussed in your EVM System Description.

  1. How and when work scope and budget are distributed from undistributed budget (UB) to control accounts and subordinate work packages or planning packages. This includes:
    • Describing what controls are placed on the use of UB.
    • Stipulating a specific period of time that work scope and budget can be held in UB for fully negotiated work.
    • Describing how and when UB is distributed to control accounts when the work scope has not been defined (i.e., the work scope represents AUW).
    • The interim budgeting procedure used during the definitization process to distribute the work scope and budget from UB to the work package level for the near term effort (such as three to six months). This interim budgeting procedure should be followed until the AUW scope of work held in UB is definitized and distributed to control account work packages or planning packages.
  2. Incorporating authorized changes in a timely manner. The EVM System Description will need to describe what:
    • Constitutes an authorized change.
    • Indicates authorized changes have been incorporated.
    • Constitutes “timely” incorporation.
  3. The process for establishing internal budgets for authorized but unpriced changes should be based on a resource plan for accomplishing the work. Project managers should have a detailed plan in place for the near term work using cost estimates and resource plans with appropriate direction to notify the customer when spending approaches any not to exceed (NTE) spending limits. It is critical that traceability through all steps of the process can be demonstrated.

For a more in-depth discussion on how to handle authorized unpriced work (AUW), see the article posted on the Humphreys & Associates EVMS Education Center, EVMS Practitioner section.

Humphreys & Associates is available for consulting and information on this topic. Give us a call!

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Earned Value Management System Success – 7 Steps

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An Earned Value Management System is a common contractual requirement on US federal government agency projects and on some foreign government agency projects. Earned Value Management is an effective tool to provide more visibility into project performance for government customers and for internal management.

As with any new concept or tool, success is dependent on how the system is implemented. Upfront planning can mean the difference between success and failure. Based on more than three decades of experience helping hundreds of companies implement an Earned Value Management System, Humphreys & Associates is well versed in what it requires to create a compliant, effective Earned Value Management System (EVMS).

The seven steps below can help to expedite and manage the implementation of a compliant EVM System. Successful implementation can greatly enhance productivity and the bottom line.

Earned Value Management System Success – 7 Steps

Step 1 – Management Team Commitment

Commitment and support from the management team is essential to the success of the EVMS implementation. Without it, the process will fail. Establishing an implementation team responsible for developing the strategic plan and schedule is a critical initial step. Read more…

Step 2 – Pre-Implementation Assessment & Gap Analysis

Before implementing an EVMS, it important to have a clear understanding of the state of the current project control system. This is essential for determining the full scope of the implementation effort. Comparing the current processes and procedures to the 32 guidelines in the EIA-748 Standard for Earned Value Management Systems is part of the process.

Internal EVM experts or an independent third party commonly conduct this assessment, sometimes referred to as a requirements analysis or gap analysis.

The intent is to produce fact-based information useful for creating a realistic implementation plan. What are the processes, tools, and training that need to be enhanced or implemented? Based on this knowledge, an implementation plan and schedule can be produced that defines the specific tasks and milestones to accomplish the end objectives.  Read more….

Step 3 – System Structure and Integration

At the beginning of the system enhancement or design stage, it is useful to focus on each of the subsystems that support the nine EVMS process areas and how they integrate with each other. When the customer’s reviewing agency reviews the company’s EVMS, it will look at each of the following process areas:

  • Work Organization
  • Planning and Scheduling
  • Work/Budget Authorization
  • Accounting
  • Indirect Management
  • Management Reporting and Analysis
  • Revision sand Data Maintenance
  • Material Management
  • Subcontract Management

The EIA-748 32 guidelines are the foundation for determining if an EVMS meets the requirements for a compliant system. Developing flow diagrams and storyboards are useful tools at the beginning of the design phase to note what needs to be added or enhanced to create a fully integrated EVMS as well as to satisfy the EIA-748 guidelines. Read more…

Step 4 – The System Description Document

The primary document for describing the system and how it satisfies the EVMS guidelines is the EVM System Description. Internal formal procedures support this document. The system description and related procedures are meant to be the all-inclusive explanation of the EVMS characteristics and how the system is used to manage a project from inception to completion.

The EVMS storyboard and system description are complementary work efforts. An excellent starting point for the system description is to develop an outline that describes the subsystems for each of the nine process areas. Read more…

Step 5 – Training

Training is an important part of the implementation process. This includes upper level management, project managers, functional managers, control account managers (CAMs), and analysts. The training should reflect the EVM System Description, as the government reviewing agency’s team will assess whether or not a project is following the company’s EVM System Description. The development and execution of the training plan as part of the overall implementation plan helps to ensure the various end-users complete the training they need. Read more…

Step 6 – System Implementation

System implementation on a pilot project requires dedicated teamwork and is the most time consuming of the seven steps. An easier approach is to implement the EVMS on a new project so that all project artifacts reflect the system description at the onset.

Projects that run effectively and efficiently often translate into higher profit margins and result in more company business. Read more….

Step 7 – Operation and Use Verification

Once in place, periodic internal reviews, sometimes called self-surveillance, can be done to ensure that the EVMS implementations on the various projects continue to comply with the company’s EVM System Description. This helps to prevent the system from atrophying over time. It also provides an opportunity to address additional training needs, resolve common implementation issues, and enhance the system.

Independent third parties can also assist with the self-surveillance process. This provides an added benefit by using experienced outside consultants who regularly perform mock compliance or certification and other types of reviews. The outside consultant team can also update a company on the latest issues the government agency review teams are focusing on, provide a fresh look at how an EVMS is used on a project, or bring new ideas to the table that can improve the company’s EVM System.

Similar to the implementation and use of the EVMS, it is important to establish a repeatable process for self-surveillance, capture the results, identify the problem areas, identify actions to address the root cause of the problems, and track them to closure. Read more….

For a full-length copy of this article, see our EVMS Educational Center.

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