Weitere ähnliche Inhalte Ähnlich wie Simon.dekker.vance kotrla (20) Kürzlich hochgeladen (20) Simon.dekker.vance kotrla1. Accepted Standards and Emerging
Trends in Over Target Baseline (OTB)
Contracts
• Presenter: Simon Dekker
• 2012 NASA PM Challenge
• February 22-23, 2012
• Orlando, Florida
3. OTB: The Essentials
Project or program that has run significantly
over budget
Requires “formal reprogramming”
• Complete re-planning
• Must be re-baselined at a cost exceeding the original
contract price, without affecting scope
• Established, well documented process in Earned
Value Management (EVM) practice
Ramifications
• For the customer (agency)
• For the contractor
© 2011 Dekker, Ltd. 3
5. OTB History
Highly publicized cost overruns on major Defense
programs in the late 1980s
Contract termination vs. Reprogramming
• Navy A-12 terminated by Secretary of Defense in 1991
• Air Force C-17 allowed to continue under strict
conditions to solve cost/schedule overruns
Boeing (McDonnell Douglas) C-17 Globemaster III
© 2011 Dekker, Ltd. 5
6. OTB History (cont.)
OTB process began to take shape
• Perform cost/benefit analysis
• Quantify remaining work under original scope
Over Target Baseline and Over Target
Schedule (OTB/OTS) codified in DoD/DCMA,
Defense Acquisition University (DAU), and
other EVM documentation
© 2011 Dekker, Ltd. 6
7. OTB Definitions
Terminology and Acronyms
Total Allocated Budget TAB Contract cost. At the beginning of a project, Total Allocated
Budget is equal to the negotiated contract cost and contract
budget baseline.
Negotiated Contract Costs NCC Contract price less profit/fees
Authorized Unpriced Work AUW Work contractually approved, but not yet negotiated/defined
Contract Budget Base CBB Sum of NCC and AUW
Over Target Baseline OTB Sum of CBB and recognized overrun
Profit/Fees Fixed price contracts include a profit, whereas cost
reimbursement contracts include a fee
Performance Measurement Baseline PMB Contract time-phased budget plan
Management Reserve MR Budget withheld by PM for unknowns/risk management
Undistributed Budget UB Broadly defined activities not yet distributed to CAs
Control Account CA Lowest WBS element assigned to a single focal point to
plan and control scope / schedule / budget
Summary Level Planning Package SLPP Far-term activities not yet defined into CAs
Work Package WP Near-term, detail-planned activities within a CA
Planning Package PP Far-term CA activities not yet defined into WPs
Table 1. Source: Defense Acquisition University EVM Gold Card
© 2011 Dekker, Ltd. 7
9. When is an OTB Recommended?
The standard rule-of-thumb is that an OTB is
appropriate on a contract that has exceeded 15%
in terms of Projected Cost Growth
𝐸𝐴𝐶 − 𝐴𝐶𝑊𝑃 − 𝐵𝐴𝐶 − 𝐵𝐶𝑊𝑃
= % 𝑃𝑟𝑜𝑗𝑒𝑐𝑡𝑒𝑑 𝐺𝑟𝑜𝑤𝑡ℎ
𝐵𝐴𝐶 − 𝐵𝐶𝑊𝑃
Customer and contractor must both agree
remaining budget is “decidedly insufficient”
(DCMA, 2006) to complete remaining work
© 2011 Dekker, Ltd. 9
10. OTB Process
Formal process documentation written largely
from the contractor’s perspective
10-step process (Bembers, et. al., 2003)
• Begins with the contractor’s decision to pursue
formal reprogramming, because –
• Purpose of OTB is to help contractor regain control
over ongoing work
• Customer must then be notified immediately
Provides an opportunity to address areas
where the original contract may have been
unclear or deficient
© 2011 Dekker, Ltd. 10
12. Adding the Customer Perspective
Very little has been written about the
customer’s role in the OTB process
Customer must take active role in deciding if an
OTB is warranted
• It’s about more than previous contractor
performance
• Customer must undertake its own audits or reviews
of contract performance and risk items
Granting an OTB should not be considered a
“given”
© 2011 Dekker, Ltd. 12
13. The Customer Perspective
Three questions loom large over OTB process
• Once requested by the contractor, should an OTB be
granted?
• Should the customer consider other sources?
• Should the program or project in fact be terminated?
© 2011 Dekker, Ltd. 13
14. Informing Customer Concerns (DAU)
Is the project outcome still aligned to the
critical, strategic goals of the organization?
Does the program still offer the competitive
advantage it did when the contract was
awarded?
Has senior management’s buy-in to the project
or capability significantly eroded?
Are there sufficient resources available to re-
fund the revised Estimate at Complete?
What internal and external risks are inherent to
OTB?
© 2011 Dekker, Ltd. 14
15. Customer Assessment of the Contractor
DAU recommends independently assessing
• Contractor performance-to-date
• “System discipline to maintain baseline integrity”
(Bembers, et al., 2003)
• EVM system and compliance
System discipline is perhaps most crucial
consideration
• What indicators suggest past failures to control cost
will be corrected?
• If faith in the contractor is not there, contract can be
canceled or re-bid
© 2011 Dekker, Ltd. 15
16. Recent OTB Studies
Three recent studies from the Air Force Institute
of Technology
• Analysis of predictive growth models for Estimates at
Complete (EAC)
• OTB’s effect on EVM’s Cost Performance Index
(CPI)
• Trying to predict which contracts will need OTBs
Findings have universally called into question
the value of OTBs
© 2011 Dekker, Ltd. 16
17. Recent OTB Findings: EAC
Establishing a new EAC (Trahan, 2009)
• Predicting EAC for contracts in need of OTB
reprogramming
• Compares “nonlinear growth modeling” to traditional
EVM Cost Performance Index (CPI)
• Actual Cost predicted more accurately in 63%-79%
of contracts examined using growth modeling
• Not an effective early warning indicator, though
Conclusion: non-traditional calculations can
help better predict ultimate OTB costs
© 2011 Dekker, Ltd. 17
18. Recent OTB Findings: Benefits
Theoretical benefits of OTBs rarely realized in
practice (Thickstun, 2010)(Jack, 2010)
• Formal OTB reprogramming in DoD contracts
undertaken fairly randomly
• Using CPI as an indicator, contracts experience no
statistically significant performance improvement
after formal OTBs
Conclusion: Given the costs incurred by the
OTB process, the customer receives little if any
tangible benefit
Recommendation: Barring significant changes
to the process, formal OTBs be disallowed
© 2011 Dekker, Ltd. 18
19. Conclusion
The OTB process is an accepted part of EVM
practice
OTBs should not be granted by rote – the
customer must take an active role in
determining if an OTB should take place
Complete audit and cost/benefit analysis are
necessary, but often overlooked
Significant changes must be implemented to
ensure future performance will improve
© 2011 Dekker, Ltd. 19
21. Bibliography
Bembers, I., Boord, M., Byrnes, T. A., Finefield, T., Gran, W., Haupt, E., et al. (2003). Over Target Baseline and Over
Target Schedule Handbook. Fort Belvoir: Defense Acquisition University.
Defense Acquisition University (DAU). (2010, September). DAU EVM 'Gold Card'.
Defense Contract Management Agency (DCMA). (2006). Earned Value Management Implementation Guide.
Evans, D. (1993, March 29). Pentagon to Air Force: C-17 Flunks. Chicago Tribune .
Jack, D. E. (2010). Contract Over Target Baseline (OTB) Effect on Earned Value Management's Cost Performance
Index (CPI). Wright-Patterson AFB, Ohio: Graduate School of Engineering and Management, Air Force Institute
of Technology (AU).
Mahnken, T. G. (2008). Technology and the American Way of War. New York: Columbia University Press.
Thickstun, K. E. (2010, March). Predicting Over Target Baseline (OTB) Acquisition Contracts. Wright-Patterson AFB,
Ohio: Graduate School of Engineering and Management, Air Force Institute of Technolgoy (AU).
Trahan, E. (2009, March). An Evaluation of Growth Models as Predictive Tools for Estimates at Completion (EAC).
Wright-Patterson AFB, Ohio: Graduate School of Engineering and Management, Air Force institute of
Technology (AU).
© 2011 Dekker, Ltd. 21
Hinweis der Redaktion Secy of Defense at the time was Dick Cheney