Understanding Earned Value Management

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Understanding Earned Value Management Analysis
Federal Acquisition Conference
Exposition Washington, DC June 19-20, 2007
Wayne Abba [phone] abbaconsulting_at_cox.net

• Abba Consulting

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Understanding Earned Value Management

• EVM Resource Management
• Resources are labor, material and other direct
  and indirect costs required to execute the
  program
• FAA applies EVM at Program level to include prime
  and sub contractors, government FTEs and support
  contractors
• Managed in dollars, hours, or any measurable unit
• Government accounting systems may not support
  EVM-based program/project management

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Ensuring Planned Resources are AdequateUsing an
Integrated Baseline Review (IBR)
400
300
200
100
Program/Contract IBR is critical planning process
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EVM and Baseline Discipline

• Effective performance management requires
  disciplined baseline management
• Initial baseline reflects go-ahead decision
• Scope, schedule, resources, risk
• Approve program/contract baseline changes to
• Revise work scope (increase or decrease)
• Restore meaningful performance management
• Manage funding reductions (salami slices or
  prioritized cuts?)
• Balance scope, schedule, cost, risk assumptions
• Do not approve baseline changes to
• Get to Green
• Eliminate cost and schedule variances

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Understanding Earned Value Analysis

• Earned Value Analysis Understanding the
  relationships among the EVM data elements
• EVM discipline provides confidence that
• Contractor and PM management systems are adequate
  to provide effective monitoring and control
• Data are summarized from the Control Account
  level, where technical/schedule/cost integration
  occurs
• When data are used for management and oversight
• Data quality becomes self-policing
• Allows Management to ask questions and be
  informed, critical consumers

EVM data should inform decisions but cannot
make decisions
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Cumulative Trend Analysis
Time Now
Prog Budget
Management Reserve
ACWP (Actual Cost)
Resources
BCWS (Planned Value)
Cost Variance
400
Schedule Variance
BCWP (Earned Value)
300
200
100
Time
?
M
F
Approx. Time Variance
Standard graphics for all programs
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Cost/Schedule Variance Trend Analysis
ManagementReserveConsumption
Favorable
Schedule Variance at Completion
0
Unfavorable
Cost Variance at Completion
Time
Schedule Slip
Cost Variance ---
Schedule Variance
8
Evaluating Future Performance
Time Now
Favorable
0
PM Varianceat Completion
Unfavorable
Time
Cost Variance -----

• When/how will performance improve?
• Review at appropriate time
• Tie PM evaluation to predictability

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EVA and Funds Management
Time Now
Prog Budget
BCWS (Planned Value)
Resources
400
ACWP (Actual Cost)
Approved/Planned Funding
300
200
BCWP (Earned Value)
100
Time
D
M
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EVA and Profitability Analysis on Flexibly Priced
Contracts
Time Now
Cost Variance levels cf
Favorable
Min/MaxFee
0
Cost Sharing
Unfavorable
Contractor Loss
Time
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EVA and Profitability Analysis on Flexibly Priced
Contracts
Cost Variance levels cf
Time Now
Favorable
Min/MaxFee
0
Cost Sharing
Unfavorable
Contractor Loss
Time
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EVM/A and Effective Contracting

• Program and Contract WBS
• Essential to get it right this is Job 1
• Contract type
• Do I have to do EVM on FFP? is the wrong
  question
• Evaluate risk and complexity EVM is scalable
• Purpose of EVM/A
• Excellent management
• Objective, timely reporting Early Warning to
  inform decisions
• Linking incentives to reported Cost/Schedule
  Performance Indices (CPI/SPI) can cause
  undesirable behavior
• If used link to observable outcomes such as
  Preliminary/ Critical Design Review and Contract
  completion

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Summary

• Understand EVM/A and Resource Management
• From a single database, use EVM to
• Manage the program
• Measure program performance
• Take appropriate management actions
• Report to senior management and to customers
• Fix the problem, not the blame
• Encourage timely problem identification and
  objective reporting
• Incentivize desirable behavior, not undesirable
  behavior
• Dont necessarily equate program and PM
  performance
• Develop organizational history and IQ
• Resources
• FAA Bob Rovinsky/Keith Kratzert
• Project Management Institutes College of
  Performance Management EVM Community of
  Interest (CoEye)
• National Defense Industrial Associations Program
  Management Systems Committee