Statement of Work (SoW) Archives - Humphreys & Associates

Preventing a Communications Failure

By Humphreys & Associates / June 4, 2018 / Communications Plan, Contract Data Requirements List (CDRL), Statement of Work (SoW), System Engineering Management Plan (SEMP)

Communications Plan, Contract Data Requirements List (CDRL), Statement of Work (SoW), System Engineering Management Plan (SEMP)

“What we’ve got here is failure to communicate.”

From the movie “Cool Hand Luke”, you would probably remember the famous line, “What we’ve got here is failure to communicate. Some men you just can’t reach. So you get what we had here last week….”

Ask people who work on programs and projects, “From your experience, what are the top 10 reasons that projects fail?” You will nearly always find, at the top of the list, the cause as being one of poor communications. That’s right, failure to communicate, pure and simple. But maybe not so pure and not so simple.

Establish a Communications Plan

There are so many dimensions to communication that it is advisable, even necessary, to establish a communications plan. Think about all the topics we need to communicate; the list is mighty: goals, schedules, budgets, product requirements, status, problems, successes, forecasts, roadblocks, directions, and so on. So, it makes sense that we should take time to define the communications process and actions in our communications plan.

Assuming we are about to undertake a new project rather than inject ourselves into an ongoing one, we should consider the most natural first step in preventing a communications failure. Just as we must define the product requirements, we should also define the requirements for communications through an analysis. That analysis should be rigorous and should cover all apparent aspects of communications.

What do we need to communicate?
Who are the providers and the receivers of various communications?
What are the form and format for the communication?
What are the frequencies required for these communications?

Such a requirements analysis could result in a communications compliance matrix that lists the requirement and provides the method by which the requirement will be satisfied.

Formal and Informal Communication

Two major subsets of communications could be the formal and the informal. To start considering the formal we could go to the contract the Contract Data Requirements List (CDRL) and the many requirements for plans, reports, and other deliverables that are forms of communications. The contract could be the root of a large tree that grows level-by-level. For example, the contract might have the Statement-of-Work (S0W) that tells us to use the systems engineering approach and a CDRL item to provide a System Engineering Management Plan (SEMP) in which another level of communication is revealed. On major contracts the SEMP is but one of several plans that are often required and should be extremely useful in defining the communications plan. The totality of these plans is comprehensive and very detailed.

EVMS Structure

Of interest to us here in this blog is the requirement to manage the program using Earned Value Management Systems (EVMS). A properly implemented EVMS can be the key to avoiding many of the problems of communications that are rolled up into the generic problem of “poor communications.” EVMS is one for the formal requirements that can embody wide ranging forms of communications. In the EVMS we will communicate:

Goals for scope, schedule, and budget. These are in various artifacts within the EVMS and provided to the stakeholders. Goals are the topic of the Integrated Baseline Review (IBR) to the extent that the probability of meeting the goals is assessed. Goals are clear when you have an Earned Value Management System.
Structure for the project work, people, and resources. EVMS requires a Work Breakdown Structure (WBS) to formally define and decompose the work. That means it is open and clear to all on the project what must be done top to bottom and by whom it will be done.

Integrated Master Schedule

Timing for work is established in the comprehensive Integrated Master Schedule (IMS). The IMS, when properly built and coded, provides deep insight into the time plans for the project and the relationships among the players. Topics such as “external dependencies” might have once been an obscure bit of knowledge but in the IMS these are clearly defined, and the logic shows what is dependent on these external inputs to the project.

The IMS communicates the milestones that are to be achieved. Vertical integration from the work tasks to the milestones provides the links that communicate the contributors to any major event. We know what and when we must reach a certain capability, and, with the IMS, we know how we will get there and who will carry us to that goal.

Work Authorization Document

The control account Work Authorization Document (WAD) provides a formal documentation of the baseline agreement on scope, schedule, and budget for the managerial subsets of the total project work. Carving out these manageable sections of work and making formal communication of the goals and responsibilities provides a detailed communication and acceptance for the project goals and the responsibility for their accomplishment. It would be nearly impossible to get lost in the well documented baseline of an EVMS managed project.

Measuring Progress

The status of our project is known by measuring our progress and reporting it formally; these are cornerstones of the EVMS.

What should we be doing?
What are we doing?
Are we meeting our scope, schedule, and spending goals?
Where are the problems?
What are the root causes of the problems? The impacts?

Communicating all of these up and down the hierarchies and even to the customer provides what should be open and clear communication. The generic complaint of “poor communication” often means “I was surprised.” There should be no surprises in a well run EVMS program.

Future Outcomes

Perhaps the most important thing to communicate is the future outcome. Based on our plans and our status, we are always making projections for the potential outcomes of our project from within our EVMS. The forecast for timing is contained within the IMS. The forecast for spending is contained within the Estimate to Complete (ETC). Each period we update out view of the future and analyze what that means. We use the analysis to undertake corrective action plans that have the intended effect of getting us back on track.

Summary

So, in summary, you should see that poor communications of the items that are within the purview of the program management system (EVMS) should not happen. The EVMS should be one the main pillars of communications plans and processes to prevent a communications failure. The outcome of the program might still be less than desired, but the outcome should have been foreseen and discussed many times within the communications engendered by the EVM System. We should know what we need to do, how we are doing, and where we will end up; and those are all things we need to communicate.

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Incorporating Stop Work Orders Part 1 – Deleting the Work

By Humphreys & Associates / September 26, 2014 / Statement of Work (SoW), Stop Work Order, SWO

Statement of Work (SoW), Stop Work Order, SWO

Updated December, 2020

Are you confronted with a Stop Work Order and wondering what to do? Stop Work Orders (SWOs), in addition to disrupting contract execution, create much administrative confusion and affect the Performance Measurement Baseline (PMB) in the Earned Value Management System (EVMS).

Stop Work Order (SWO)

A SWO is a temporary suspension of work enabling the customer to re-evaluate the contracted work. The customer has a number of reasons to issue a Stop Work Order:

A change in mission requirements eliminating the need for some or all of the contract scope,
A need to complete some or all the work scope within funding limitations.
Advancement in the state-of-the-art that alters the contract requirements.
Production or engineering breakthroughs that change the current contractual approach.
Realignment of programs that changes the emphasis on the current contract.

A Stop Work Order could affect the entire contract or could be focused on a specific deliverable item, component, or function. A key concept about Stop Work Orders is that they are temporary. The Federal Acquisition Regulations envision that Stop Work Orders are resolved within 90 days, but allow that the timeframe can be different subject to customer and contractor agreement. The resolution of a Stop Work Order will result in a new contractual direction (a new contractual work order) to:

Resume the contract (restart the stopped work unchanged);
Resume the contract with a revised work approach (technical, schedule, and/or cost);
Delete a portion of the currently stopped work scope (Delete Work Order); or possibly
Canceling the entire contract (contract termination order).

Stop Work Orders typically result in one or more actions:

deleting work and its budget from the Contract,
proposing/negotiating the new course of action,
implementing the revised approach in the PMB,
proposing/negotiating a Request for Equitable Adjustment, and or
preparing a framework for making a Claim against the customer.

Deleting the Work

This article addresses the first of these actions: deleting the work.

Issue Direction

The first step after receiving any Stop Work Order is to issue directions to all affected parties to cease work immediately. Affected parties include Control Account Managers (CAMs), major subcontractors, other team members, and vendors. Your direction should be issued in writing. For CAMs, documents described in the EVM System Description should be used. Typically these documents are revised Work Authorization Documents (WADs) or program directives. For other parties where a subcontract or purchase order exists, the contractor’s authorized representative should issue a formal Stop Work Order (SWO) for the purchase order or subcontract. The SWO process should also provide instructions for the collection of costs related to the stoppage/ delay of work.

Status the Schedule and Earned Value

Inherent in the stoppage of the work is the statusing the schedule and earned value as of the effective date specified in the Stop Work Order. Statusing the schedule and earned value at the Stop Work Order effective date provides the basis for all subsequent actions. If the fiscal period ends within a few days of the Stop Work effective date, it may be reasonable to wait until that date to perform the status exercise (subject to customer approval).

Close the charge number associated with the Work designated by the SWO and Transfer Budgets

The next step is to close the charge number associated with the work designated by the SWO and transfer associated budgets to Undistributed Budget. Following the company EVMS procedures, Baseline Change Requests (BCRs) must be executed to transfer all Budgeted Cost of Work Remaining (BCWR). Unopened control accounts affected by the Stop Work Order are easy; just transfer the entire amount of the control account budget and its associated Statement of Work (SOW).

Difficulties arise for open control accounts (i.e. work-in-process) or control accounts that are partially affected by the Stop Work Order. Work-in-process control accounts should be closed at the cumulative earned value as of the Stop Work Order date determined in the previous step. [NOTE: In extreme cases where the customer is considering deleting an entire scope of work, the SWO may direct all budget associated with that work scope be transferred to UB for possible subsequent deletion from the contract. In this case, the contractor should include in the Claim framework the capturing of costs for any work already accomplished.]

In other words, in order to close any account under normal SWO actions, the Budget at Completion (BAC) and the cumulative Budgeted Cost For Work Scheduled (BCWS) are set equal to the cumulative Budgeted Cost for Work Performed (BCWP). The remaining budget (the BAC prior to closing the control account less the BCWP) should then be transferred to Undistributed Budget. It is important to close the control accounts at the cumulative BCWP value and retain the Cost Variance for the work that is closed.

If the control account were to be closed by setting BAC and cumulative BCWP to either the cumulative Budgeted Cost For Work Scheduled (BCWS) or to the cumulative Actual Cost of Work Performed (ACWP) where cost variances exist, the BCWR transferred to Undistributed Budget would not be representative of the original work left to be done (understated if an overrun existed; overstated if an underrun existed). Consequently, if the SWO decision were to be “restart the work with no changes”, the budget for distribution to complete the remaining work would also be incorrect, because the close-out was not set to the work that was completed (cumulative BCWP).

Partially Affected Accounts

Control accounts that are partially affected by the Stop Work Order can be handled in one of two ways:

The first is to close the control account to UB entirely by following the process described above and then issue the remaining scope and budget for the work unaffected by the Stop Work Order to a new control account.
The second method is to process Baseline Change Requests to remove the BCWR for specific work packages and/or planning packages and leave the control account open for the unaffected work scope. [Unless, of course, the entire contract must stop work until the SWO decision is made.]

Any Summary Level Planning Packages (SLPP) affected by the Stop Work Order should also be closed with scope of work (SOW) and its budget transferred to Undistributed Budget (UB).

All the above work closure actions are to help ensure that no further work is performed on the stopped work (or on the contract, as appropriate).

SWO does not Eliminate Cost Variance

Implementing a Stop Work Order is not an opportunity to wipe out existing cost variances. Contractors and customer program offices often believe that a Stop Work Order presents a great opportunity to wipe the slate clean and start over. In implementing this desire, they set BCWS and BCWP equal to ACWP which erases all cumulative variances. As indicated above, this approach also understates or overstates (i.e., a two-way street) the Budgeted Cost of Work Remaining by the amount of the cost variance that exists at the time. When the time comes to replan the remaining work after the SWO is resolved, there might be too much or too little budget remaining to cover the work because the work was not closed out at the true amount of work accomplished (cumulative BCWP).

The proper approach to deal with the cost variance at the point of the Stop Work Order is to show the variances at the time of the close out of the work, and as necessary, handle the variance issue in the negotiations of the contract modification for the revised work scope or the Request for Equitable Adjustment. Naturally, the contractor wants to erase any unfavorable variances and have the amount added to the Contract Target Cost (CTC)/Negotiated Contract Cost (NCC). Too often the customer succumbs to the contractor’s pleading. The cost variance, however, should continue to exist, and the Contract Target Cost should not be changed for the work scope completed up to the Stop Work Order.

Deleting the Work from the Contract

All the above simply sets the stage for the SWO decision – simply moving the remaining work to UB does NOT delete any work. This article assumes the SWO decision is to delete stopped work, so the customer will typically issue a Delete Work Order (contractual direction of some sort) with instructions to the contractor about what is to be deleted. This could be:

Delete the remaining work that was not already accomplished;
Delete ALL the specified scope of work – even if some portion of the work is already done;
Delete the entire contract (contract termination)

To complete the deletion of work, the contractor would reduce the PMB, UB, and the CBB by the amount specified, thus reducing the Contract Target Cost (CTC) by that amount. The contract itself would be reduced by this CTC amount and the associated profit/ fee for that work.

It is important to follow the customer direction exactly! For example, say the customer is deleting an entire scope of work worth $5Million, but since you already accomplished $2Million worth of that effort, you only put $3Million in UB. When the customer removes the entire scope of work and reduces the CTC (and so the CBB, PMB, and UB) by $5Million, you could end up in a $2Million “Negative UB” condition – which is not allowed under EVMS rules. The proper way to handle this is through the legal Claims process for you to be reimbursed the costs for the work you accomplished (which includes costs for subcontractors and vendors , etc. who will likely be filing Claims against your company). [NOTE: Remember also that under the original contract, you were probably already paid for some portion, if not all, of the accomplished work.] You would also have to store and eventually dispose of items already produced for the customer – that they no longer want. All these should be included in your establishment of a Claims framework.

[NOTE: A Request for Equitable Adjustment (REA) is typically not appropriate for deleted work. This is because the work and budget are no longer on the contract, so there is no budget or schedule to “equitably adjust.” REAs are appropriate for work resumption decisions that will be discussed in Part 2 of this article.]

In summary, make sure you follow these steps to Delete Work when responding to a Stop Work Order:

Stop the existing work by issuing official written documents.
Status the schedule and earned value as of the Stop Work Order effective date.
Execute EVMS procedures to move the scope and the associated Budgeted Cost of Work Remaining (BCWR) from control accounts to Undistributed Budget.
When the Delete Work Order is received, remove the scope and budget specified by the customer from UB, PMB, CBB, and the CTC as the customer deletes the scope from the contract itself (including associated fee/ profit).

If you have questions on this topic, feel free to contact Humphreys & Associates.

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Reviewing Authority Data Call – Not Just a Wish List

By Humphreys & Associates / June 20, 2014 / Statement of Work (SoW)

Statement of Work (SoW)

Data Call

One of the most important items needed to prepare for an Earned Value Management System (EVMS) review is the data call. This is not just a list of random data; the reviewing authorities have a defined set of data items they want to review so they can evaluate the EVMS implementation and compliance.

Required Artifacts

Over the years the reviewing authorities have fine-tuned the review process and created a very specific list of required artifacts. They use these items to pre-determine the review focus areas so they are prepared to get right to the soft spots in the system and processes.

Formal Review Notification

The process begins when the contractor receives a notification from the reviewing authority that they will conduct a formal review of a project. This could be a Compliance Review (CR); an Integrated Baseline Review (IBR); standard Surveillance; or one of many other reviews conducted to determine the implementation or continued compliance of the EVMS processes and reports. Regardless of the type of review, one of the key items is the data call request. The data call is used to request project information, and could consist of 12 reporting periods, or more, of data. This will vary by agency, type of program, and type of review. In most cases, a minimum of three months of project data will be required; typically, however, 6 to 12 months of data would be requested.

Basic Reports

Some of the basic reports requested are the Contract Performance Reports (CPRs), Integrated Program Management Reports (IPMRs), or similar time phased project performance reports produced from the earned value (EV) cost tool database. The data call request includes the detail source data from the EV cost tool as well as the Integrated Master Schedule (IMS) from the beginning of the program. This source data is often delivered electronically to a customer following the IPMR or Integrated Program Management Data and Analysis Report (IPMDAR) Data Item Description (DID) prescribed data formats. The Baseline Logs are often also requested.

Quality Data

It is essential to provide quality data in response to the Review Authority data call. The entire review process can be derailed when data call items are incomplete or inaccurate. Some of the things to consider are:

Make sure the list of requested items is fully understood (some nomenclature issues could cause an issue).
The data should be available in the format required in the call.
Determine the best way to support the data call delivery if it is not specified in the request. The data can be provided using electronic media such as thumb drive, as attachments to emails (the size of the files may prohibit this), or possibly establishing a secure access cloud server to store the data for the reviewing authority to retrieve.
Contact the requesting reviewing authority to establish a meeting to discuss the data call. This meeting should be used to resolve or clarify any issues regarding the requested information, negotiate potential equivalents of the project data if it does not exactly match the requested information, and establish a method to transmit all data files.
Develop an internal plan to monitor the progress of data collection. Be sure to have non-project personnel review the data for accuracy and compliance with the specifics in the data call.
Submit the data call to the requesting authority, follow-up with a phone call or meeting to verify the reviewing authority received the data, can open all the files, and agrees the complete set of data has been provided.
Follow-up with another call a few weeks before the review to check if the reviewing authority has any issues or problems in evaluating and understanding the data call information. Be willing to work with them until the authority is comfortable with the data.

[NOTE: The number of items on the list depends on (1) the agency conducting the review and on (2) the type of review being conducted. The number of items requested could vary from around 30 to 100 or more.]

Typical Data Call

Some of the basic items typically requested in the data call are:

Earned Value Management System Description including the matrix of the System Description and related system documentation mapped to the 32 guidelines in the EIA-748 Standard for Earned Value Management Systems as well as to the current version of the reviewing agency’s EVMS Cross Reference Checklist.
EVMS related policies, processes, procedures, and desktop instructions. Examples include organizing the work, scheduling, budgeting, work authorization, details about earned value techniques and how each is applied, change control, material planning and control, subcontract management, and risk/opportunity management.
Organization charts down to the Control Account Manager (CAM) level.
Accounting calendar.
Project directives including the Statement of Work (SOW) pertaining to Program Management or Statement of Objectives (SOO), EVM clauses, and EVM Contract Data Requirements List (CDRLs) or Subcontract Data Requirements List (SDRLs).
Work Breakdown Structure (WBS) Index and Dictionary.
Responsibility Assignment Matrix (RAM) including budget detail at the CAM level.
Project and internal work authorization documents.
Integrated Master Plan (IMP) or milestone dictionary.
Contract Budget Base Log, Management Reserve Log, and Undistributed Budget Log.
Risk/opportunity identification and assessments, risk/opportunity management plan.
Cost performance reports (all applicable formats) or datasets. Provide the reports or dataset in the format provided to the customer such as PDF, Excel, UN/CEFACT XML, or JSON encoded data per the DID on contract such as the CPR, IPMR, or IPMDAR.
Integrated Master Schedule (IMS) submissions and related native schedule file. This includes the IMS summary report if required.
IMS Data Dictionary.
Most recent Contract Funds Status Report (CFSR) or equivalent funding status report.
Variance Analysis Reports (VARs) or equivalent progress narrative reports as well as the internal and external variance thresholds.
List of subcontractors including value and type (such as cost reimbursable, firm fixed price, time and materials) including the applicable purchase orders. When EVM requirements are flowed down to the subcontractors, provide a copy of subcontractor EVM related contractual requirements (CDRLs and DIDs).
Major subcontractor CPRs, IPMRs, or equivalent cost performance reports (all applicable formats) or IPMDAR datasets.
Major subcontractor IMS submissions.
Previous audit or surveillance findings, resulting reports, corrective action plans, and resolution and tracking Logs.
List of specific software toolsets used for accounting, scheduling, cost management, resource management, risk/opportunity management, or performance analysis.
EVMS Storyboard and flowcharts.
Chart of accounts, including cost element definition.
Staffing plans or weekly/monthly labor reports.
List or copy of contract modifications.
Cost Accounting Standards (CAS) disclosure statement or equivalent internal corporate procedures.
Baseline Change Requests.
Any other data previously provided to the customer as part of a data call.
Basis of Estimates (BOE) or historical data/productivity rates and efficiency factors.
Estimate to Complete (ETC) and Estimate at Completion (EAC) documentation.
Budget reports or control account plans by element of cost (labor hours and dollars, material dollars, and other direct cost dollars) and associated burdens or overhead costs.
Actual cost reports.
Open commitment reports.
Bill of material including cost detail.
Quantifiable Backup Data for percent complete work packages including MRP/ERP Reports for production work packages.

Reacquaint Yourself

The list includes items that are used frequently, as well as items that are used only at specific times during the project, and will probably be less familiar to the review team. As the collection of the data call items progresses, be sure to establish quick refresher sessions on the less frequently used documents and any other items where the review team might be having difficulty. As part of the process of gathering the data call items, be sure internal reviews are conducted to verify accuracy and traceability, verify the users of the data are familiar with the data content so they can be prepared to answer questions, and current data are available to the review team.

NOTE: This Data Call List is intended for general guidance in preparation for any agency review (e.g., DCMA, DOE, FAA, etc.). For example, in the past, the DCMA Compliance Review Data Call item list contained 102 specific items, but this number varies from review to review and has changed over the years. The number is not as important as the quality of the data items that are delivered to the review authority.

First Impressions

The data call items will provide the first look at the project’s EVM data and process for many of the review team members. The review team members will have the data several weeks prior to the on-site review. They will be performing multiple validation checks using various analytical software tools as well as hands-on analysis of the information. If the data is incomplete, contains errors, and does not trace well, the review team will form a more negative opinion of the EVMS application.

Double Check the Data Call

The data analysis results will be a basis for where attention is focused during the on-site review, as it emphasizes areas that contain anomalies or indicates a lack of system integrity. Significant emphasis should be devoted to the data call items to ensure accuracy and compliance with the review authority’s requests, as it is a very positive way to begin the data call review.

A Humphreys & Associates EVM specialist is always available to answer questions. Give us a call or send an email.

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Common Problems Found in EVM Systems and Recommended Corrective Actions – Part 4

By Humphreys & Associates / May 23, 2014 / Statement of Work (SoW)

Statement of Work (SoW)

This is the fourth part of a five part series regarding common problems found in EVM Systems and the recommended corrective actions to help mitigate those findings. The previous three articles discussed:

The topics anticipated for part five are: Inappropriate use of PERT and LOE; Misuse of Management Reserve: Administrative CAMs.

1) Misalignment between BCWP and ACWP

The Earned Value Management System Description Document (EVM SDD) should include a statement that requires Actual Cost of Work Performed (ACWP) to be reported within the same accounting period as Budgeted Cost for Work Performed (BCWP) is earned; which is most applicable for material. Both ACWP and BCWP contain the term “Work Performed”. The ACWP is not a measure of how much has been spent but rather reflects how much it cost to accomplish the scope of work reflected in the BCWP.

Accounting systems generally record actual costs for material when invoices are paid; this may or may not align with when earned value is claimed for that material. If material earned value is claimed at point of usage, it may be necessary to collect actual costs in a holding account and then delay recording ACWP in the earned value system until the material is used.

When material earned value is taken at the point of receipt, invoice payments may be delayed for 45 days (or more). The actual costs associated with this material will be recorded in the accounting system after the earned value credit is taken. In this case, recording ACWP in the earned value system must be accelerated. The process of delaying or accelerating the recording of ACWP in the earned value system is often called using “Estimated Actuals” or, more appropriately, “Estimated ACWP”.

There are two obvious examples of this process being done incorrectly. The first is in the data where BCWP is claimed without corresponding ACWP in the current period, or vice versa. This may be below the threshold level for variance explanation and is often attributable to Level of Effort (LOE) control accounts, but it creates a situation that attentive customers will need to understand. The second example is more direct, and occurs when contractors simply explain the situation in Variance Analysis Reports that are subsequently summarized in the Contract Performance Report (CPR) or Integrated Program Management Report (IPMR) Format 5. The Control Account Manager (CAM) will use words such as “billing lag,” “accrual delay,” or “late invoicing” in the explanation of a cost variance. Consequently, any time that financial billing terms are used to explain a cost variance, it raises a flag regarding a potential misalignment between BCWP and ACWP.

One issue with ACWP and BCWP misalignment is that it invalidates the use of the earned value data for predictive purposes. Unless both data elements are recorded within the same accounting period, using indices such as the CPI, TCPI, or IEAC (Independent Estimate at Completion) will deliver erroneous results. The time and effort of the CAMs in the variance analysis process should be spent on managing the physical progress and efficiencies of the work, not having to explain payment or accounting system irregularities.

Most Common Corrective Action Plans

When this issue is reported, the best response is to develop a disciplined Estimated ACWP process, including logs and a monthly trace from the Accounting General Ledger to the EVM ACWP. It is also important to train the CAMs and support staff on how to record and subsequently retire those entries in an Estimated ACWP log book. Reviewers of the Variance Analysis Reports should be trained to screen for entries that indicate an inappropriate alignment between BCWP and ACWP. In addition, as indicated in the blog discussion on Data Integrity (Part 2 of this series), situations where there is BCWP without corresponding ACWP, or vice versa, at the control account level, should be flagged and justified by the CAM prior to submittal of the CPR/IPMR to the customer.

2) Freeze Period Violations

“Freeze Period” refers to future accounting periods, including the current accounting period, in which baseline changes should be strictly controlled. This is also sometimes called the “Change Control Period”. The definition of this period should be in the company’s EVM SDD, but will usually have a time-frame such as “current accounting period plus the next accounting period”. The SDD should specify what kinds of changes are allowed within this period, how they are to be documented in the CPR/IPMR, and any necessary customer notification or approval requirements when these changes are incorporated. The SDD should require that customer approval is necessary for changes to open work packages that affect BCWS or BCWP in the current or prior accounting periods, and any changes to LOE data in prior periods or in the current period if the LOE account has incurred charges (ACWP).

There is an additional requirement specific to retroactive adjustments which includes the current period. The EIA-748-C Guideline 30 specifically stipulates the requirement that these types of changes be controlled, and that adjustments should be made only for “correction of errors, routine account adjustments, effects of customer or management directed changes, or to improve the baseline integrity and accuracy of performance measurement data”. Again, the reasons allowed for the changes should be specified in the EVM SDD. However, regardless of the reason, it is a requirement that all retroactive changes be reflected in the current period data in the CPR/IPMR Formats 1 and 3, and that Format 5 include the related explanations (National Defense Industrial Association (NDIA), Integrated Program Management Division (IPMD), Earned Value Management Systems Intent Guide, August 2012).

Some projects have a great deal of volatility. The incorporation of subcontractor data (especially if that data lags the prime contractor reporting period) and accounting system adjustments often create retroactive (including current period) adjustments. The operation of change boards may also result in changes, both internal and external, which require immediate implementation. EVM compliance in this environment is a matter of disciplined incorporation of changes, including visibility and communication to the customer (and sometimes prior approval) of any impacts to the baseline.

Most Common Corrective Action Plans

When discrepancies are found with freeze period noncompliances, the first action should be to ensure that procedures are in place that are compliant with the EIA-748. The discipline required by these procedures must be communicated to the program team so that a consistent change control processes is maintained. Key to compliance is visibility and communication of freeze period changes via CPR/IPMR Formats 3 and 5.

H&A has seen a loose interpretation of the guideline allowance for adjustments to “improve the baseline integrity and accuracy of performance measurement data”. Care must be taken that adjustments falling under this category are not made to avoid variances.

3) Failed Data Traces

The reviews associated with EVM surveillance and compliance have become increasingly data centric for the past several years. One of the first steps in a review is submittal to the customer of a complete set of EVM data so analysis can be conducted against predefined success criteria prior to conducting an on-site review. When there is an on-site review, the data trace portion of that review can be a major component at the company, project, and Control Account Manager levels.

The primary purpose of the data traces is to evaluate the Earned Value Management System. Is the EVMS operating as a single integrated system that can be counted on for reliable and valid information? The data traces performed generally follow three separate threads: Scope, Schedule, and Budget. There are a variety of documents and reports that contain this information, but the reviewers will look for a single thread of data to flow and be traceable throughout the system.

All systems are different, but a common strategy for data traces might be as follows:

Scope: WAD → WBS Dictionary → Contract Statement of Work.
Schedule: WAD → IMS → CAP.
Cost (Budget): RAM → WAD → IMS → CAP → CPR/IPMR Format 1 → CPR/IPMR Format 5.
Cost (ACWP): CAP → Internal Reports → CPR/IPMR (Formats 1 & 2) → General Ledger.

If there are also supplemental sources of data that flow into the EVMS, such as subcontractor, manufacturing, or engineering reports, then these should also be a part of the data trace.

The key to this process is the concept of “traceability”. The easiest path to prove traceability is if the data are an exact match; however, this is not always possible. Prime contractors often have to make adjustments to subcontractor data, use of estimated ACWP often will not allow a match with the accounting ledger, and supplemental schedules often “support” the IMS while not matching exactly. These are normal and explainable disconnects in the data. When submitting data for review, it is important to know where the data does not match and to pass that information on to the reviewers. If preparing for an on-site review, the CAMs and others who may be scheduled for discussions should perform a thorough scrub of the data and have quick explanations available when a trace is not evident in that data.

Most Common Corrective Action Plans

It is important that any special circumstances that cause traceability issues be relayed to the review team with the data submittal. The people who conduct the analysis often operate independently until they are on-site for the review, and it is possible to avoid misunderstandings by identifying any issues with the submitted data set. This type of communication has the potential to eliminate unnecessary findings.

A short term response to a data trace issue is to establish a process to screen the EVM data before submission to the customer. Starting with the accounting month end, the statusing and close-out process requires a comparative analysis of the various databases containing the same information. Because of the volume of data contained in most systems, this should be automated. There should be time in the monthly business rhythm to allow for corrections and data reloads to improve the accuracy across the various data locations.

The best approach to improved data traces is to design a system that minimizes the number of entries for a single set of data. For example, H&A found one contractor with over 10 different databases where the CAM’s name was hand entered which resulted in a configuration control nightmare for that data element. The process of system design should include a complete listing of common data elements that are included in the storyboarding of the process flow.

The topics anticipated for Part 5 are: Inappropriate use of PERT and LOE; Misuse of Management Reserve: Administrative CAMs.

To read previous installments:

Part 1 – EAC Alignment Issues, Poor Variance Analysis, Lack of Effective Subcontract Management
Part 2 – Poor use of Percent Complete; Data Integrity Issues; Poor Scope Language
Part 3 – IMS Health Problems; Data Item Non-Compliance; Planning Package Misuse

Common Problems Found in EVM Systems and Recommended Corrective Actions – Part 4 Read Post »