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Earned Value Management It Is Not Optional Any More! January 23, 2008 Charles Talley, PMP PM, Enterprise Communications Initiative.

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Presentation on theme: "Earned Value Management It Is Not Optional Any More! January 23, 2008 Charles Talley, PMP PM, Enterprise Communications Initiative."— Presentation transcript:

1 Earned Value Management It Is Not Optional Any More! January 23, 2008 Charles Talley, PMP PM, Enterprise Communications Initiative

2 U. S. Department of Labor 2 I.Introduction II.History of EVM in the Government III.Recent Developments IV.Effects of EVM on the Project Acquisition and Management Process V.Winning Projects Under the New EVM Rules VI.Managing Successful Projects using EVM VII.How the Government will use your EVM Reports VIII.Questions Agenda

3 U. S. Department of Labor 3 Why This Presentation Government Computer News, 07/05/06 Acquisition councils finalize EVM rule By Rob ThormeyerRob Thormeyer the Civilian Agency Acquisition and the Defense Acquisition Regulations councils said the rule was not altered significantly from its April 2005 draft... “Small businesses may avoid all EVMS costs by Federal acquisition officials finalized a rule, effective today, that details how agencies should implement an earned-value management system for managing major acquisitions. choosing not to participate in EVMS solicitations, or may offset such costs to implement a compliant EVM system through cost reimbursement on resulting government contracts,” the rule said.

4 U. S. Department of Labor 4 Why EVM? 70% of projects are: over budget or behind schedule 52% of all projects finish at 189% of their initial budget Source: The Standish Group

5 U. S. Department of Labor 5 Developments That Moved the Government Toward EVM 1950’s: The Department of Defense recognizes that its increasingly complex weapon systems development contracts demand more sophisticated management techniques than were generally used in industry. 1960’s: DoD mandates a uniform DoD procedure for compliance by industry called Cost/Schedule Control Systems Criteria (C/SCSC) which evolves into EVM. 1970’s and 1980’s: DoD continues to push an EVM standard as the way to track and report progress on weapons systems contracts.

6 U. S. Department of Labor 6 Recent Developments 1990’s: Several pieces of legislation and guidance make EVM the standard for all agencies to measure and manage project performance, including: – Government Performance Results Act (1993) – Federal Acquisition Streamlining Act (1994) – Clinger-Cohen Act (1996) – ANSI/EIA Std 748 (1998) 2000’s: OMB continues to establish requirements for adequate performance measurement and reporting, including: – OMB Circular A-11, Part 7, Section 300 – OMB Memorandum M-04-24 (Expanded E-Gov) – OMB Memorandum M-05-23 (Improving IT Project Planning and Execution) – FAR EVM Clause Implemented

7 U. S. Department of Labor 7 The Clinger-Cohen Act: Federal IT Projects Are Managed to Specific Standards First and foremost, laws governing federal IT Capital Planning requiring: IT baseline assessment analysis Monitoring and evaluation methods and techniques Techniques for defining and selecting effective performance measures Examples of and criteria for performance evaluation Project time/cost/performance management Creation of the OCIO Learn More: PS: Your firewall may require you to select “Continue to this website (not recommended)”. It is OK;, these are all government websites.

8 U. S. Department of Labor 8 The President's Management Agenda, announced in the summer of 2001, is an aggressive strategy for improving the management of the Federal government. It focuses on five areas of management weakness across the government where improvements and the most progress can be made. Source: President’s Management Agenda (PMA)

9 U. S. Department of Labor 9 “Agencies must use a performance-based acquisition management system, based on the ANSI/EIA Standard 748, to obtain timely information regarding the progress of capital investments. The system must also measure progress towards milestones in an independently verifiable basis, in terms of cost, capability of the investment to meet specified requirements, timeliness, and quality.” Source: OMB Circular A-11/Exhibit 300

10 U. S. Department of Labor 10 “…to achieve a “green” level of performance for this initiative, your agency’s actual performance cannot vary from its cost, schedule and performance goals by more than 10 percent. To achieve a “yellow” level of performance, your agency’s cost, schedule and performance overruns and shortfalls for all major information technology (IT) projects must average less than 30 percent.” Source: and OPM PMA OMB Memo M-04-24

11 U. S. Department of Labor 11 Executive Branch Management Scorecard

12 U. S. Department of Labor 12 Full implementation of EVMS for IT projects includes five key components: 1. Comprehensive agency policies; 2. EVMS requirements in contracts or agency in-house project charters; 3. Compliance reviews of agency and contractor EVM Systems; 4. Periodic system surveillance reviews to ensure the EVMS continues to meet the guidelines in ANSI/EIA-STD-748; and 5. Integrated Baseline Reviews to finalize the cost, schedule and performance goals. Source: OMB Memo M-05-23

13 U. S. Department of Labor 13 The FAR Mandates for EVM “This final rule amends the Federal Acquisition Regulation to implement Earned Value Management System (EVMS) policy in accordance with OMB Circular A–11, Part 7 and the supplement to Part 7, the Capital Planning Guide. The FAR will require the use of an EVM System that complies with the guidelines of ANSI/EIA Standard - 748, in major acquisitions for development, and in other acquisitions in accordance with agency procedures. Federal Acquisition Regulations Federal Register / Vol. 71, No. 128 / Wednesday, July 5, 2006 / Rules and Regulations An agency shall conduct an Integrated Baseline Review (IBR) when EVMS is required.”

14 U. S. Department of Labor 14 SUMMARY: The Civilian Agency Acquisition Council and the Defense Acquisition regulations Council (Councils) amended the Federal Acquisition Regulation (FAR) to implement earned value management system (EVMS) policy. FAR coverage is essential to help standardize the use of EVMS across the Government. The proposed rule specifically impacts contracting officers, program managers, and contractors with earned value management systems. The FAR Rule

15 U. S. Department of Labor 15 What the FAR Says About EVM 7.105 Contents of written acquisition plans. Discuss, as appropriate, what management system will be used by the Government to monitor the contractor’s effort. In addition, discuss how the offeror’s/contractor’s EVMS will be verified for compliance with the American National Standards Institute/Electronics Industries Alliance (ANSI/EIA) Standard-748, Earned Value Management Systems. 34.202 Integrated Baseline Reviews. (a) When an EVMS is required, the Government will conduct an Integrated Baseline Review (IBR). (b) The purpose of the IBR is to verify the technical content and the realism of the related performance budgets, resources, and schedules. It should provide a mutual understanding of the inherent risks in offerors’/ contractors’ performance plans and the underlying management control systems, and it should formulate a plan to handle these risks. 34.201 Policy. An Earned Value Management System (EVMS) is required for major acquisitions for development, in accordance with OMB Circular A-11. The Government may also require an EVMS for other acquisitions, in accordance with agency procedures.

16 U. S. Department of Labor 16 32 Guidelines/Criteria of the ANSI/ISO 748-A Provides basic guidelines for companies to use in establishing and applying an integrated Earned Value Management System (EVMS). These guidelines are expressed in fundamental terms and provide flexibility for each company to optimize its system and be fully accountable for the effectiveness of its usage. 2.1 Organization of the Project 5 Criteria 2.2 Planning, Scheduling, and Budgeting 10 Criteria 2.3 Accounting Considerations 6 Criteria 2.4 Analysis and Management Reports 6 Criteria 2.5 Revision and Data Maintenance 5 Criteria

17 U. S. Department of Labor 17 Role of the NDIA EVM Acceptance Guide Working Release (2006) EVM Surveillance Guide (2004) EVM Application Guide Working Release March 2007 EVM Intent Guide (2006) Program Manager’s Guide to the Integrated Baseline Review (2003) Integrating Risk Management with EVM (2005) © Permission to copy and distribute this document is hereby granted provided that this notice is retained on all copies, that the copies are not altered and that NDIA PMSC is credited when the material is used to form other copyrighted documents Serves as Subject Matter Experts to the Federal Government for ANSI/EIA 748-A

18 U. S. Department of Labor 18 The DOL EVMS Policy Projects required to participate – Level 3 (Major) Initiatives (> $5M Total Investment) – <60% of Development, Modernization & Enhancement (DME) complete – >$1M annual expenditure in DME – Others as decided by management Interoperable among Agencies High Management Visibility Infrastructure Related Involving Financial Systems or Data These projects submit earned value updates to the OCIO monthly for review – Updates come in a MS Project plan file – Quarterly updates are forwarded to OMB – If the 10% thresholds are breeched a corrective action plan is required – Documentation of changes in scope/schedule/budget

19 U. S. Department of Labor 19 Why EVM? Because You Gotta ! OMB! (Circular A-11, Part 7) "Agencies must use a performance based acquisition management system, based on ANSI/EIA Standard 748, to measure achievement of the cost, schedule, and performance goals."

20 U. S. Department of Labor 20 EVM Statistics Once a project is 10% complete, the overrun at completion will not be less than the current overrun. Once a project is 20% complete, the CPI does not vary from its current value by more than 10%. The CPI and SPI are statistically accurate indicators of final cost results. Source: Defense Acquisition University

21 U. S. Department of Labor 21 Now that I have made Bruce feel like he is carrying the same load as this poor donkey, I will give him an opportunity to respond.

22 U. S. Department of Labor 22 How are You Going to Use EVM? Meet the requirements we have talked about? Manage your contractors? Manage your internal efforts? Manage the development process?

23 U. S. Department of Labor 23 Meet the requirements This is tooooooooo confusing! I don’t want to look at all of those figures! Just get me by the audit! Make sure no questions are asked! It costs toooooo much!

24 U. S. Department of Labor 24 Manage contractors Establishes – Expectations – Goals – Milestones – Measurements Provides a methodology for reviewing contractor performance

25 U. S. Department of Labor 25 Manage internal efforts Establishes – Expectations – Goals – Milestones – Measurements Provides a methodology for reviewing employee performance

26 U. S. Department of Labor 26 Manage the development process Good management data Increased probability of success People know how they are being measured. Establishes a methodology to have all parties playing from the same game plan.

27 U. S. Department of Labor 27 How the Contractor will use EVM Make the Government Super Stars!!! Manage the process Find problems in the execution, plans and processes. Make the contractor look Good!!!

28 U. S. Department of Labor 28 Providing EVM Information Dash Board Periodic (Monthly) Reports Graphics Microsoft Project Data Bases

29 U. S. Department of Labor 29 Additional Costs EVM Personnel EVM Training for all managers EVM Software Links to Accounting Certification

30 U. S. Department of Labor 30 EVM Certification YOU WANT ME TO DO WHAT!!!!!!! Only Agency authorized to certify is DCASMA Must be sponsored by another agency Must pass all 32 areas of ANSI/EIA Standard 748-98A Takes about one year to complete

31 U. S. Department of Labor 31 Short Falls Things to Look Out For!!! Total Reliance on the Contractor Development of Appropriate WBS Being Able to Audit

32 U. S. Department of Labor 32 Become a Partner with Your Contractor!

33 U. S. Department of Labor 33 Our Donkeys may not be Pretty, but they can handle the load!

34 U. S. Department of Labor 34 By this time we are all feeling like this, but in reality the EVM requirements are very doable.

35 U. S. Department of Labor 35 EVM and the Exhibit 300 OMB Circular A-11, Part 7, Section 300 - a tool to plan, budget and manage capital assets Known as Exhibit 300, also the OMB 300 Report Demonstrates to Management and OMB: – There is a good business case for the project – Good PM discipline is being employed – Identify poorly performing assets (behind schedule, over cost, lacking in capability)

36 U. S. Department of Labor 36 How will OMB use the exhibit 300s 300.8 How will OMB use the exhibit 300s? 1.To make both quantitative decisions about budgetary resources consistent with the Administration’s program priorities, and qualitative assessments about whether the agency’s programming processes are consistent with OMB policy and guidance. 2.All information necessary to complete an exhibit 300 should already exist as part of the agency's overall Information Resources Management activities and within project specific documentation. 3.The materials used to produce the exhibit 300 should be readily available to OMB upon request. 4.If additional supporting information is necessary, OMB will request from agencies the supporting evidence used to produce the exhibit 300.

37 U. S. Department of Labor 37 Exhibit 300 – EVM Information Section A: Overview 10. Did the Project Manager review this Exhibit? Yes/No 11. Contact information of Project Manager? Name, Phone Number & E-mail Section C: Acquisition/Contract Strategy (All Capital Assets) 2. If earned value is not required or will not be a contract requirement for any of the contracts or task orders above, explain why:_________ (Sarbanes-Oxley for PMs) (I ask OMB if “Because it is too hard” would be an acceptable answer here)

38 U. S. Department of Labor 38 Their response was not what I had hoped.

39 U. S. Department of Labor 39 Exhibit 300 – EVM Information Section C: Cost and Schedule Performance (All Capital Assets) 1. Does the earned value management system meet the criteria in ANSI/EIA Standard – 748? Yes / No 2. Is the CV% or SV% greater than ± 10%? (CV%= CV/EV x 100; SV%= SV/PV x 100) Yes / No a. If “yes,” was it the? CV, SV or Both b. If “yes,” explain the causes of the variance: c. If “yes,” describe the corrective actions: 3. Has the investment re-baselined during the past fiscal year? Yes / No a. If “yes,” when was it approved by the agency head?

40 U. S. Department of Labor 40 1.Actual Start is past the Planned Start 2.Actual Finish is past the Planned Finnish 3.AC does not equal Actual Dollars Spent 4.No AC and Actual Dollars Spent > $0 5.100% Complete with Negative SV 6.No EV with AC 7.No AC with EV 8.Negative Fixed Cost 9.Milestones with Actual or Baseline Cost 10.No WBS number 11.Summary Task with Costs/Resources 12.Tasks Not Saved to Baseline 13.Lowest Level Tasks Deal w/Tasks with cost/work past the status date Final Integrity Checks to Accurate EVMS Processing MS Project Filters that DOL Currently Uses Potential High EVM Impact Issues Helping MS Project Help You

41 U. S. Department of Labor 41 “As a result, government managers and auditors should find in the Cost Guide guiding principles for use as they assess (1) the credibility of a program’s cost estimate for budget and decision making purposes and (2) the program’s status using EVM.” Government Accountability Office (GAO) Cost Assessment Guide EVM Drivers in the Public Sector GAO Cost Assessment Guide has 21 Chapters and 4 cover the use of EVM as it relates to the auditing of government contracts.

42 U. S. Department of Labor 42 What it means if you are not doing EVM now! Maybe the bullet has not hit you yet, but what about the next one?

43 U. S. Department of Labor 43 Questions We have covered a lot of material and now we would like to answer any questions you might have.

44 U. S. Department of Labor 44 List of EVM References 1. Office of Management and Budget 2. Defense Acquisition University 3. National Defense Industrial Association (NDIA) entID=1109 entID=1109 4. Defense Contract Management Agency 5. Federal Acquisition Regulation at Acquisition Central 6. National Aeronautics and Space Administration 7. PMI College of Performance Management 8. Office of the Under Secretary of Defense (Acquisition, Technology & Logistics) 9. Association for the Advancement of Cost Engineering

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