Earned Value Management Essentials

Glen Alleman
Glen AllemanAgile Program, Planning, and Controls um Niwot Ridge, LLC
+ 
Earned Value Management Essentials 
Earned Value Management is more than people, processes, and tools. 
It is an integrated service that provides actionable information to the 
decision makers
+ The Six Business Systems Needed 
for Project Success 
2 
Accounting 
Material 
Management Estimating 
Property 
Management 
Earned Value 
Management 
Procurement
+ The Core Systems Needed for 
Earned Value Management 
3 
Accounting 
Material 
Management Estimating 
Property 
Management 
Earned Value 
Management 
Procurement
+ 
44 Data Elements of a Baseline 
Earned Value Management System 
1. Contract scope 
2. Contract Modifications 
3. WBS and CWBS Dictionary 
4. Work Authorization 
5. Summary Level Planning Packages 
6. Control Account Performance Reports 
7. RESERVED 
8. Integrated Master Plan 
9. Organization Charts 
10. Organizational Breakdown Structure 
11. Responsibility Assignment Matrix 
12. Integrated Master Schedule 
13. Intermediate Schedule 
14. Detailed Schedule(s) 
15. Proposal Basis of Estimates 
16. Schedule Update Forms 
17. Resource Plan 
18. EAC Updates 
19. EV Update Form 
20. Subcontractor 21. Material Schedules 
Z 
/ Vendor IMS 
22. Staffing performance Reports 
23. Material Labor 
24. Baseline Change Report 
25. Bill of Materials 
26. OBS / WBS Performance Report 
27. Material Status 
28. Material Data 
29. Subcontractor Data 
30. Estimated Actuals 
31. Indirect Performance Reports 
32. Accounting System Data 
33. Summary Performance Reports 
34. Earned Value Metrics 
35. Variance Reports 
36. External Performance Reports 
37. RESERVED 
38. Corrective Action Plans 
39. Risk Management Reports 
40. Technical Performance Reports 
41. Baseline Change Request 
42. Contract Change Requests 
43. Change Logs 
44. Budget Logs 
4
+ Activities That Use This Data 
5 
§ Define 
the 
work 
§ Assign 
responsibili3es 
§ Define 
indirect 
procedures 
§ Establish 
proper 
management 
controls 
§ Schedule 
all 
work 
§ Authorize 
all 
work 
§ Time-­‐phase 
the 
work 
§ Develop 
cost 
accounts 
§ Understand 
contract 
status 
§ Use 
data 
for 
§ Material 
costs 
§ Unit/lot 
costs 
§ Cost 
summariza3on 
Assignments 
made 
to 
decision-­‐making 
responsible 
organiza3ons 
Maintenance 
of 
budget, 
work, 
and 
schedule 
rela3onships 
Do 
not 
modify 
past 
budget 
or 
actuals 
(w/ 
o 
permission) 
Revisions 
All 
documents 
properly 
maintained 
Planning 
Scheduling 
and 
Budge3ng 
Organiza3on 
Analysis 
and 
Management 
Reports 
Accoun3ng 
Considera3ons
+ 11 of the 32 EIA-748-C Guidelines 
Critical to Program Success 
6 
1. Define a Work 
Breakdown Structure 
2. Identify the 
Organizations 
doing the work 
5. Integrate WBS 
and OBS into a RAM 
6. Schedule all 
Planned Work 
7. Identify Products 
and Milestones 
8. Time Phase the 
Budget 
16. Record all 
Direct Costs 
23. Determine all 
Variances 
25. Sum These 
Variances 
26. Manage Action 
Plans 
28. Incorporate Changes
+ Performance Indicators Derived 
from EVMS Data and Processes 
7
8 
+ These Indicators … 
… must reveal root causes of performance shortfall. 
Unrealistic Performance 
Expectations missing Measures of 
Effectiveness and Performance 
Unrealistic Cost and Schedule 
estimates based on inadequate risk 
adjusted growth models 
Inadequate assessment of risk and 
unmitigated exposure to these risks 
without proper handling plans 
Unanticipated Technical issues 
without alternative plans and 
solutions to maintain effectiveness 
Cost and 
Schedule 
Impacts 
Performance Indicators 
The Lens of the 
“Borrowed” from Gary Bliss, 
Director, Performance Assessments 
and Root Cause Analyses (PARCA), 
Office of Assistant Secretary of 
Defense for Acquisition.
+ 10 Critical Success Factors for 
Deploying an EVMS 
9 
1. If a project has a scope, schedule 
and budget, EVM can be an 
effective project management 
tool. 
2. EVM's principles are reliable 
predictors of project success. 
3. Expert planning is required to use 
EVM effectively. 
– This expertise can be learned 
through coaching, mentoring, and 
external advice 
4. EVM works best in collaborative 
organizations where teamwork 
and frequent communications are 
present. 
5. EVM complements other project 
management techniques. 
6. VM metrics are reliable, 
consistent, and trustworthy. 
7. Contract type doesn't influence 
EVM's benefit. 
8. Retrofitting EVM after a project 
is under way is a bad idea. 
– This is exactly what happens, so 
we’ll just have to deal with it 
9. EVM's mechanics can be 
emphasized individually for 
maximum benefit. 
10. Active, top-down support is 
required to increase EVM 
acceptance.
+ The Integrated Program 
Management System … 
… must address each principal of success with 
data, processes and actionable information 
n Budget processes – assign, authorize, and record 
n Fully Integrated cost and schedule – all work has 
budget 
n Status reporting – expenditures of time and budget 
with resulting technical progress 
n Change management – to maintain the integrity of the 
baseline 
n Earned Value performance techniques – that 
Objectively assesses accomplishments at the work 
performance level. 
10
+ 
Connecting the Dots 
Between Cost, Schedule and 
Objective Assessment of 
Technical Performance 
The role of the Earned Value Management System (EVMS) is to 
connect the dots between budget (BCWS), performance (BCWP) – 
informed by technical performance, schedule, risk reduction 
activities, and estimates to complete 
11
+ Sources of Objective Technical 
Measures of Technical Performance 
Risk 
Cost 
SOW 
IMP/IMS 
WBS 
TPM 
PMB 
GA 
12
+ The Dots and Their Connections 
Each data element and its connection increases the visibility 
to the program’s performance assessment 
13 
WBS 
TPMs 
EVM 
ETC 
EAC 
Irreducible 
uncertainty 
in 
reference 
classes 
Reducible 
uncertainty 
held 
in 
Risk 
Register 
Schedule 
Margin 
in 
DI-­‐MGMT-­‐81861 
Cost 
Con3ngency 
† 
Risk 
re3rement 
in 
PMB 
Management 
Reserve 
covers 
unmi3gated 
risk 
MOE 
MOP 
Physical 
% 
Complete 
PE 
SA 
AC 
JROC 
KPP 
IMP 
IMS 
WP 
KPPs
+ Technical Performance Informs 
Earned Value 
Critical Success of Program Management means connecting 
the dots of Cost, Schedule, and Technical Performance 
Integrate 
cost 
and 
schedule 
performance 
with 
objec7ve 
technical 
measures 
of 
performance 
= 
Objec3ve 
Technical 
Measures 
+ 
Cost 
Performance 
Schedule 
Performance 
Conven3onal 
Earned 
Value 
Cost 
Basis 
of 
Es3mate 
developed 
from 
scope 
of 
work 
and 
historical 
performance, 
and 
risk 
adjusted 
for 
all 
classes 
of 
cost, 
to 
produce 
a 
resource 
loaded 
PMB 
with 
MR 
established 
in 
the 
EVMS. 
The 
ETC 
and 
EAC 
updated 
as 
the 
program 
progresses 
using 
objec3ve 
technical 
measures 
of 
performance. 
Objec3ve 
Technical 
Measures 
Measures 
of 
Effec3veness 
(MOE), 
Measures 
of 
Performance 
(MOP), 
Technical 
Performance 
Measures 
(TPM), 
Key 
Performance 
Parameters 
(KPP), 
and, 
other 
…ili7es 
of 
the 
technical 
aspects 
of 
the 
program 
performance 
inform 
the 
Physical 
Percent 
Complete 
used 
to 
Inform 
BCWP. 
Schedule 
Determinis3c 
IMS 
derived 
from 
the 
IMP 
/ 
Statement 
of 
Work 
(SOW), 
showing 
how 
all 
deliverables 
defined 
in 
the 
WBS 
will 
be 
produced 
and 
reducible 
risks 
mi3gated 
with 
Re7rement 
Plans, 
and 
Irreducible 
risks 
mi3gated 
with 
schedule 
margin 
and 
Management 
Reserve, 
to 
establish 
the 
Credible 
PMB. 
GA 
14
+Assembly the moving parts 
into a successful EVMS 
People, processes, and tools are the start. For real 
sustainable success more is needed 
15
+To be successful in this assembly … 
16 
We need the ability to install, 
train, mentor, coach, surveil, 
operate, and sustain a program’s 
Program Planning and Controls 
functions to provide actionable 
information to the decision 
makers
+Tools 
n Ready for market DOD, DOE, NASA, OMB Circular 
A-11, Part 7 compliant Earned Value Management 
System 
n All IPMR formats 
n Integrated risk management for Schedule Risk Analysis and 
Technical Risk Management 
n Cost Accounting integration for PMB management 
n EVM in a Box notion 
n Ready to use version 
n Requires only WBS, Control Account, and Work Package 
structures 
n Charge Numbers 
n Contains data elements associated with EVM 
17
+Processes 
n Earned Value Management System Description 
n EVMS Guidelines tailored to program need 
n Work Instructions for baseline processes 
n Tailored sections for integrated systems 
n Control Account Manager resources 
n Training 
n Coaching 
n Check list cards 
n Forms 
n Program Manager resources 
n Reports 
n Forecasting tools 
n Variance analysis tools 
18
+People 
n Subject Matter Experts – in EVMS, Program Planning 
and Controls, Risk Management and Integrated 
Master Planning and Scheduling. 
n System Integration people and processes – capable 
of connecting data and process between the six 
business systems. 
n DCMA / DCAA validation experience and processes 
– based on DAU 262 and DCMA training and 
processes. 
n Broad federal government agency and commercial 
experience in EVMS and Program Performance 
Management. 
19
20
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Earned Value Management Essentials

  • 1. + Earned Value Management Essentials Earned Value Management is more than people, processes, and tools. It is an integrated service that provides actionable information to the decision makers
  • 2. + The Six Business Systems Needed for Project Success 2 Accounting Material Management Estimating Property Management Earned Value Management Procurement
  • 3. + The Core Systems Needed for Earned Value Management 3 Accounting Material Management Estimating Property Management Earned Value Management Procurement
  • 4. + 44 Data Elements of a Baseline Earned Value Management System 1. Contract scope 2. Contract Modifications 3. WBS and CWBS Dictionary 4. Work Authorization 5. Summary Level Planning Packages 6. Control Account Performance Reports 7. RESERVED 8. Integrated Master Plan 9. Organization Charts 10. Organizational Breakdown Structure 11. Responsibility Assignment Matrix 12. Integrated Master Schedule 13. Intermediate Schedule 14. Detailed Schedule(s) 15. Proposal Basis of Estimates 16. Schedule Update Forms 17. Resource Plan 18. EAC Updates 19. EV Update Form 20. Subcontractor 21. Material Schedules Z / Vendor IMS 22. Staffing performance Reports 23. Material Labor 24. Baseline Change Report 25. Bill of Materials 26. OBS / WBS Performance Report 27. Material Status 28. Material Data 29. Subcontractor Data 30. Estimated Actuals 31. Indirect Performance Reports 32. Accounting System Data 33. Summary Performance Reports 34. Earned Value Metrics 35. Variance Reports 36. External Performance Reports 37. RESERVED 38. Corrective Action Plans 39. Risk Management Reports 40. Technical Performance Reports 41. Baseline Change Request 42. Contract Change Requests 43. Change Logs 44. Budget Logs 4
  • 5. + Activities That Use This Data 5 § Define the work § Assign responsibili3es § Define indirect procedures § Establish proper management controls § Schedule all work § Authorize all work § Time-­‐phase the work § Develop cost accounts § Understand contract status § Use data for § Material costs § Unit/lot costs § Cost summariza3on Assignments made to decision-­‐making responsible organiza3ons Maintenance of budget, work, and schedule rela3onships Do not modify past budget or actuals (w/ o permission) Revisions All documents properly maintained Planning Scheduling and Budge3ng Organiza3on Analysis and Management Reports Accoun3ng Considera3ons
  • 6. + 11 of the 32 EIA-748-C Guidelines Critical to Program Success 6 1. Define a Work Breakdown Structure 2. Identify the Organizations doing the work 5. Integrate WBS and OBS into a RAM 6. Schedule all Planned Work 7. Identify Products and Milestones 8. Time Phase the Budget 16. Record all Direct Costs 23. Determine all Variances 25. Sum These Variances 26. Manage Action Plans 28. Incorporate Changes
  • 7. + Performance Indicators Derived from EVMS Data and Processes 7
  • 8. 8 + These Indicators … … must reveal root causes of performance shortfall. Unrealistic Performance Expectations missing Measures of Effectiveness and Performance Unrealistic Cost and Schedule estimates based on inadequate risk adjusted growth models Inadequate assessment of risk and unmitigated exposure to these risks without proper handling plans Unanticipated Technical issues without alternative plans and solutions to maintain effectiveness Cost and Schedule Impacts Performance Indicators The Lens of the “Borrowed” from Gary Bliss, Director, Performance Assessments and Root Cause Analyses (PARCA), Office of Assistant Secretary of Defense for Acquisition.
  • 9. + 10 Critical Success Factors for Deploying an EVMS 9 1. If a project has a scope, schedule and budget, EVM can be an effective project management tool. 2. EVM's principles are reliable predictors of project success. 3. Expert planning is required to use EVM effectively. – This expertise can be learned through coaching, mentoring, and external advice 4. EVM works best in collaborative organizations where teamwork and frequent communications are present. 5. EVM complements other project management techniques. 6. VM metrics are reliable, consistent, and trustworthy. 7. Contract type doesn't influence EVM's benefit. 8. Retrofitting EVM after a project is under way is a bad idea. – This is exactly what happens, so we’ll just have to deal with it 9. EVM's mechanics can be emphasized individually for maximum benefit. 10. Active, top-down support is required to increase EVM acceptance.
  • 10. + The Integrated Program Management System … … must address each principal of success with data, processes and actionable information n Budget processes – assign, authorize, and record n Fully Integrated cost and schedule – all work has budget n Status reporting – expenditures of time and budget with resulting technical progress n Change management – to maintain the integrity of the baseline n Earned Value performance techniques – that Objectively assesses accomplishments at the work performance level. 10
  • 11. + Connecting the Dots Between Cost, Schedule and Objective Assessment of Technical Performance The role of the Earned Value Management System (EVMS) is to connect the dots between budget (BCWS), performance (BCWP) – informed by technical performance, schedule, risk reduction activities, and estimates to complete 11
  • 12. + Sources of Objective Technical Measures of Technical Performance Risk Cost SOW IMP/IMS WBS TPM PMB GA 12
  • 13. + The Dots and Their Connections Each data element and its connection increases the visibility to the program’s performance assessment 13 WBS TPMs EVM ETC EAC Irreducible uncertainty in reference classes Reducible uncertainty held in Risk Register Schedule Margin in DI-­‐MGMT-­‐81861 Cost Con3ngency † Risk re3rement in PMB Management Reserve covers unmi3gated risk MOE MOP Physical % Complete PE SA AC JROC KPP IMP IMS WP KPPs
  • 14. + Technical Performance Informs Earned Value Critical Success of Program Management means connecting the dots of Cost, Schedule, and Technical Performance Integrate cost and schedule performance with objec7ve technical measures of performance = Objec3ve Technical Measures + Cost Performance Schedule Performance Conven3onal Earned Value Cost Basis of Es3mate developed from scope of work and historical performance, and risk adjusted for all classes of cost, to produce a resource loaded PMB with MR established in the EVMS. The ETC and EAC updated as the program progresses using objec3ve technical measures of performance. Objec3ve Technical Measures Measures of Effec3veness (MOE), Measures of Performance (MOP), Technical Performance Measures (TPM), Key Performance Parameters (KPP), and, other …ili7es of the technical aspects of the program performance inform the Physical Percent Complete used to Inform BCWP. Schedule Determinis3c IMS derived from the IMP / Statement of Work (SOW), showing how all deliverables defined in the WBS will be produced and reducible risks mi3gated with Re7rement Plans, and Irreducible risks mi3gated with schedule margin and Management Reserve, to establish the Credible PMB. GA 14
  • 15. +Assembly the moving parts into a successful EVMS People, processes, and tools are the start. For real sustainable success more is needed 15
  • 16. +To be successful in this assembly … 16 We need the ability to install, train, mentor, coach, surveil, operate, and sustain a program’s Program Planning and Controls functions to provide actionable information to the decision makers
  • 17. +Tools n Ready for market DOD, DOE, NASA, OMB Circular A-11, Part 7 compliant Earned Value Management System n All IPMR formats n Integrated risk management for Schedule Risk Analysis and Technical Risk Management n Cost Accounting integration for PMB management n EVM in a Box notion n Ready to use version n Requires only WBS, Control Account, and Work Package structures n Charge Numbers n Contains data elements associated with EVM 17
  • 18. +Processes n Earned Value Management System Description n EVMS Guidelines tailored to program need n Work Instructions for baseline processes n Tailored sections for integrated systems n Control Account Manager resources n Training n Coaching n Check list cards n Forms n Program Manager resources n Reports n Forecasting tools n Variance analysis tools 18
  • 19. +People n Subject Matter Experts – in EVMS, Program Planning and Controls, Risk Management and Integrated Master Planning and Scheduling. n System Integration people and processes – capable of connecting data and process between the six business systems. n DCMA / DCAA validation experience and processes – based on DAU 262 and DCMA training and processes. n Broad federal government agency and commercial experience in EVMS and Program Performance Management. 19
  • 20. 20