1. Roberta Tomasini Defense Acquisition University DSN 655-3764 703-805-3764 roberta.tomasini@dau.mil Earned Value and the Acquisition Program

2. 2 What is Earned Value Management? Definition EV Concept and Terms EV Policy Update (March 2005) EV in Program Execution (Reporting, Analysis, EACs, TCPI) Things to Look At (Analysis Tips) DCMA Tripwires (effective Oct 06) Possible Actions for EVM Reporting Issues Possible Actions for Issues Highlighted by EVM

3. 3 Earned Value Management (EVM) Definition The use of an integrated management system that coordinates work scope, schedule, & cost goals & objectively measures progress toward these goals.

4. 4 A Management Technique Emphases Disciplined Integration of Technical Performance to Associated Co$t & Schedule Objectively Measures Work Progress States Value of Work Completed in $s Provides Objective Cost & Schedule Metrics Enables Trend Analysis & CAIV Trades Industry Standard ANSI/EIA-748-2007 A Management Technique Emphases Disciplined Integration of Technical Performance to Associated Co$t & Schedule Objectively Measures Work Progress States Value of Work Completed in $s Provides Objective Cost & Schedule Metrics Enables Trend Analysis & CAIV Trades Industry Standard ANSI/EIA-748-2007 Performance Schedule Cost Earned Value Management EARNED VALUE CONCEPT DoD & Industry embrace EARNED VALUE as a Risk Management Tool

5. 5 Earned Value Terminology AcronymTermMeaning BCWS BCWP ACWP BAC EAC SV CV VAC Budget Cost of Work Scheduled Budget Cost of Work Performed Actual Cost of Work Performed Budget At Completion Estimate At Completion Schedule Variance Cost Variance Variance At Completion Plan - Baseline - PMB Earned Value Actuals Planned Cost Forecasted Cost Accomplishment Variance EV vs Actual Cost Forecasted Overrun / Underrun

6. 6 0 2 4 6 8 10 12 14 16 18 20 22 02468101214161820 The Time-Phased Spend Plan NEGOTIATED CONTRACT COST = Target Cost Cumulative Budgeted Cost of Work Scheduled Budget at Completion Management Reserve } $ Months Completion Point Performance Measurement Baseline BCWS PMB BAC

7. 7 Earned Value Management Guidance New Policy Established in March 2005 Cost Reimbursement & Incentive Contracts ( EVM on FFP, LOE & T&M Contracts Discouraged ) 0 Contract Type Contract Value (FY TBD Constant $M) EVM System Requirements EVM Data Requirements Acquisition Funding No Mandatory Requirements 20 50 Conformance with ANSI / EIA 748 Formal EVMS validation not required Contract Performance Report (DI-MGMT-81466) (Tailored) Dollar thresholds are the same for all budget appropriation categories. Color of money is no longer an EVM discriminator. Integrated Master Schedule (DI-MGMT-81650) (Tailored) Conformance with ANSI / EIA 748 Formal EVMS validation required Contract Performance Report (DI-MGMT-81466) (5 formats) Integrated Master Schedule (DI-MGMT- 81650) Risk Based Decision

8. 8 EV in Program Execution Data Reporting Data Analysis –Variances –Performance Indices –Trends Estimates at Completion (EACs) To Complete Performance Index (TCPI)

9. 9 Earned Value Within the Acquisition Process GOVERNMENT PROVIDER ACQUISITION STRATEGY DEVELOP RFP PROPOSAL MGT VOLUME TECH VOLUME COST VOLUME DEVELOP NEGOTIATION SOURCE SELECTION AWARD PROJECT ASSIGN BUDGETS ASSESS RISK DEVELOP MR ESTABLISH Perf Meas. BASELINE Program Execution & Performance Measurement STATUS REPORTS

10. 10 Contract/Cost Performance Report (CPR) Format 1: WBS Format 2: Organizational Categories Format 3: Baseline Format 4: Staffing Format 5: Explanations and Problem Analysis

11. 11 CPR Format 1: WBS BCWSBCWS BCWSBCWS BCWPBCWP BCWPBCWP ACWPACWP ACWPACWP SVSV SVSV CVCV CVCV BACBAC EACEAC VACVAC

12. 12 Basic Performance Data Analysis Objectives Determine current status -- Where are we today? Identify trends -- Where are we headed? -- Any cost, schedule surprises ? Forecast the future -- What is the estimated cost at completion? Indicate areas for management action -- What should we do now?

13. 13 Variances Cost and schedule Current month and cumulative Performance indices Cost Performance Index (CPI) Schedule Performance Index (SPI) Percent complete Percent spent To Complete Performance Index (TCPI) TRENDS RELATIONSHIPS Earned Value Metrics

14. 14 The Earned Value Current Status Imposed On The Spend Plan NEGOTIATED CONTRACT COST BCWS Management Reserve Budget at Completion (BAC) } $ Months Time Now Completion Point BCWP ACWP } CV } SV

15. 15 Cumulative Dollar Variance Cost and Schedule Trends $ in Millions (4.0) (3.0) (2.0) (1.0) 0 1.0 CV SV

16. 16 Performance Metrics Cost Variance = BCWP - ACWP = 10-13 = -3M Schedule Variance = BCWP - BCWS = 10 - 14 = -4M Cost Performance Index = BCWP/ACWP = 10/13 =.77 Percent Complete = BCWP/BAC = 10/20 = 50% Percent Spent = ACWP/BAC = 13/20 = 65% Schedule Performance Index = BCWP/BCWS = 10/14 =.71 Estimate at Completion BAC/CPI = 20/.77 = $26M

17. 17 EVM Home Page = https://acc.dau.mil/evm eMail Address: EVM.dau@dau.milEVM.dau@dau.mil DAU POC: (703) 805-5259 (DSN 655) Revised January 2009 TERMINOLOGY NCC Negotiated Contract CostContract price less profit / fee(s) AUW Authorized Unpriced WorkWork contractually approved, but not yet negotiated / definitized CBB Contract Budget BaseSum of NCC and AUW OTB Over Target BaselineSum of CBB and recognized overrun TAB Total Allocated BudgetSum of all budgets for work on contract = NCC, CBB, or OTB BAC Budget At CompletionTotal budget for total contract thru any given level PMB Performance Measurement BaselineContract time-phased budget plan MR Management ReserveBudget withheld by Ktr PM for unknowns / risk management UB Undistributed BudgetBroadly defined activities not yet distributed to CAs CA Control AccountLowest CWBS element assigned to a single focal point to plan & control scope / schedule / budget WP Work PackageNear-term, detail-planned activities within a CA PP Planning PackageFar-term CA activities not yet defined into WPs BCWS Budgeted Cost for Work ScheduledValue of work planned to be accomplished= PLANNED VALUE BCWP Budgeted Cost for Work PerformedValue of work accomplished = EARNED VALUE ACWP Actual Cost of Work PerformedCost of work accomplished = ACTUAL COST EAC Estimate At CompletionEstimate of total cost for total contract thru any given level; may be generated by Ktr, PMO, DCMA, etc. = EAC Ktr / PMO / DCMA LRE Latest Revised EstimateKtr’s EAC or EAC Ktr SLPP Summary Level Planning PackageFar-term activities not yet defined into CAs TCPI To Complete Performance IndexEfficiency needed from ‘time now’ to achieve an EAC EVM POLICY: DoDI 5000.02, Table E4.T5. EVMS in accordance with ANSI/EIA-748 is required for cost or incentive contracts, subcontracts, intra-government work agreements, & other agreements valued > $20M (Then-Yr $). EVMS contracts > $50M (TY $) require that the EVM system be formally validated by the cognizant contracting officer. Additional Guidance in Defense Acquisition Guidebook and the Earned Value Management Implementation Guide (EVMIG). EVMS is discouraged on Firm-Fixed Price, Level of Effort, & Time & Material efforts regardless of cost. EVM CONTRACTING REQUIREMENTS: Non-DoD FAR Clauses – Solicitation – 52.234-2 (Pre-Award IBR) or 52.234-3 (Post Award IBR) Solicitation & Contract – 52.234-4 DoD( ≥ $20M) DFAR Clauses - 252.234-7001 for solicitations and 252.234-7002 for solicitations & contracts Contract Performance Report – DI-MGMT-81466A * 5 Formats (WBS, Organization, Baseline, Staffing & Explanation) Integrated Master Schedule – DI-MGMT-81650 * (Mandatory for DoD EVMS contracts) Integrated Baseline Review (IBR) - Mandatory for all EVMS contracts * See the EVMIG for CPR and IMS tailoring guidance. Management Reserve Work PackagesPlanning Packages OVERRUN AUW Control Accounts NCC Undistributed Budget OTB CBB TAB Profit / Fees PMB Summary Level Planning Packages Contract Price DoD TRIPWIRE METRICS Favorable is > 1.0, Unfavorable is < 1.0 Cost Efficiency CPI = BCWP / ACWP Schedule Efficiency SPI = BCWP / BCWS VARIANCES Favorable is Positive, Unfavorable is Negative Cost Variance CV= BCWP – ACWPCV % = (CV / BCWP) * 100 Schedule Variance SV= BCWP – BCWSSV % = (SV / BCWS) * 100 Variance at CompletionVAC= BAC – EAC OVERALL STATUS % Schedule = (BCWS CUM / BAC) * 100 % Complete= (BCWP CUM / BAC) * 100 % Spent= (ACWP CUM / BAC) * 100 BASELINE EXECUTION INDEX (BEI) (Schedule Metric) BEI = # of Baseline Tasks Actually Completed / # of Baseline Tasks Scheduled for Completion CPLI = (Critical Path Duration + Float Duration (to baseline finish) ) / Critical Path Duration CRITICAL PATH LENGTH INDEX (CPLI) (Schedule Metric) TO COMPLETE PERFORMANCE INDEX (TCPI) # § TCPI EAC = Work Remaining / Cost Remaining = (BAC – BCWP CUM ) / (EAC – ACWP CUM ) ESTIMATE AT COMPLETION # EAC= Actuals to Date+ [(Remaining Work) / (Efficiency Factor)] EAC CPI = ACWP CUM + [(BAC – BCWP CUM ) / CPI CUM ] = BAC / CPI CUM EAC Composite = ACWP CUM + [(BAC – BCWP CUM ) / (CPI CUM * SPI CUM )] # To Determine a Contract Level TCPI or EAC; You May Replace BAC with TAB § To Determine the TCPI BAC,LRE Replace EAC with either BAC or LRE Earned Value Management ‘Gold Card’ Management Reserve Cost Variance Schedule Variance ACWP BCWP BCWS $ EAC Time Now Completion Date PMB TAB BAC time

18. 18 Estimate at Completion (EAC) EAC = Actual Costs accumulated to date + Estimated Cost of the Work Remaining ACWP = $13M BCWS = $14M (Planned to date) Budget at Completion = $20M BCWP = $10M (EV) Work Remaining

19. 19 EAC = ACWP + Estimate to Complete Note: This EAC assumes that future performance will be the same as that represented by CPIc. EAC = ACWP + Work Remaining Performance Factor EAC = ACWP + (BAC - BCWP ) CPI c EAC = BAC CPI c EAC Concept

20. 20 METHODFORMULA 1. Cumulative CPI ACWP C + 2. CompositeACWP C + 3. 3-MonthCPIACWP C + 4. WeightedACWP C + BAC - BCWP C CPI C X SPI C BAC - BCWP C (BCWP) (ACWP) 3 MO BAC - BCWP C.8 CPI C +.2SPI C Note: c Indicates cumulative data EAC Methods BAC - BCWP C CPI C

21. 21 TCPI EAC = Work Remaining Budget Required for EAC (or cost remaining) = BAC-Cumulative BCWP EAC- Cumulative ACWP The CPI from today until contract completion required to achieve the EAC. Or, The level of efficiency required from today to completion to achieve the EAC. Note: Compare TCPI EAC to cum CPI for “believability” check To Complete Performance Index (TCPI)

22. 22 Things to Look At (Analysis Tips) Look at CPI in latest CPR - What is CPI cum now? Look at CPI trend - Rate of change? CPI cum drop of 1% per month, not green Look at SPI trend – Rate of change? Chasing schedule? Compare CV and use of Management Reserve – MR vs Work Remaining? Compare govt EAC to ktr LRE – Which is higher? Calculate TCPI for each (govt Most Likely EAC and ktr ML LRE) Compare percent complete to percent spent – greater than 10%, not green Look at trend charts for rebaselinings – How many? When was last one? Look at trend charts relative to +/- 10% (OSD) and +/- 5% (DCMA tripwires) Take govt EAC to price and compare to budget (contract total on the R-3) When was the last IBR? How did it go? – How many findings? CARs?

23. 23 EVM Center Contractor EVMS confidence rating –Corrective Action Requests (CAR Levels 1-4) –EVM System maturity levels Primary Trip Wires Integrated Baseline Review (IBR) –Initial review conducted within 180 days –Ongoing reviews triggered by Mods and/or OTBs –Outcome of the review Cost Schedule TechnicalBaseline Risk Resources Processes

24. 24 Baseline Execution Index (BEI) – IMS –Cum index less than.95 Schedule Performance Index (SPI) – CPR –Cum index less than.95 Critical Path Length Index (CPLI) – IMS –Cum index less than.95 Cost Performance Index (CPI) – CPR –Cum index less than.95 To Complete Performance Index (TCPI) – CPR –CPI to TCPI delta of 10% Contract Mods – ACO, PCO –Contract Mods to Original Base value of 10% PMB Revisions – CPR, CFSR –Changes to Monthly Time-Phased PMB value of 5% Secondary: Trip Wire Metrics

25. 25 Possible Actions for EVM Reporting Issues PMO discussions with contractor PMO engages DCMA for assistance Discussions with contractor at levels above PM PCO letter Award fee impact CPAR input CARs (Correction Action Request)-Levels 1-4 –DCMA initiated Conduct an IBR Conduct a compliance review Pull contractor’s EVM validation

26. 26 Possible Actions for Issues Highlighted by EVM Question: What do you do? Answer: 1. Find the root cause…..talk to the contractor -Does it relate to a KPP or KSA? -If yes… -Is there any trade space? -Discuss options with the contractor -Discuss options with the user -If no… -Discuss options with the contractor -Discuss options within Acquisition community 2. Take action to help resolve/mitigate the problem

27. 27 BACKUP CHARTS for the Integrated Baseline Review (IBR)

28. 28 Integrated Baseline Review (IBR) Goal Joint PM mutual understanding of the PMB content and the risk

29. 29 IBR – PMB Evaluation Assess the following: –Technical scope of work is captured –Work flow and scope ties to contract schedule key milestones –Resources (budgets, facilities, personnel, skills, etc.) are adequate –Performance data will reflect project progress –Work measurement is objectively planned –Assumptions underlying the plan are reasonable SO WHAT DOES THIS MEAN?

30. 30 Performance Measurement Baseline - Temporary Holding - Work Authorized but no detailed Budget or Schedule Undistributed Budget - Integrated Scope, Schedule & Budget - No Detailed Plans Planning Packages - Integrated Scope, Schedule & Budget - Detailed Plans Work Packages Control Accounts Summary Level Planning Packages - Specific Scope @ higher WBS level - Time-phased budget - Strict Controls - Withheld for Unknowns - No Scope or Schedule Management Reserve PMB Budget Allocation Top - Down Version 3 Contract Price Fee/Profit Total Allocated Budget OTB Overrun NCC CBB AUW

31. 31 Developing the PMB Negotiated Contract Cost MR PMB $ Time 2. Schedule 3. Budget 100 40 60 1. Scope 1. Decompose SOW 2. Extend WBS to control account work package 1. Arrange work packages in order 2. Sequence over time 1. Budget the work packages 2. Classify the work and select an EV technique 3. Calculate cumulative BCWS Reports

32. 32 CONTROL ACCOUNT CONTROL ACCOUNT CONTROL ACCOUNT CONTROL ACCOUNT Work Packages COMPANYCOMPANY TESTTEST ENGENG MFGMFG D E SI G N MECHANICAL DESIGN ANALYTICAL DESIGN DRAFTING/ CHECKING DATADATA WORK BREAKDOWN STRUCTURE SYSTEM ENGINE TRAINING FAN COMPRESSOR FAN ASSEMBLY FULL SCALE RIG STATOR ASSY ROTOR ASSY CASE ASSY LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5 Work Packages 40 100 60 Control Account A Key Management Control Point

33. 33 BCWP CALCULATION METHOD LENGTH 30 0 0 / 100 %1 Mth 15 50 / 50 %2-3 Mths 35% % CompleteVaries 51510 Variant Milestone 3 or More Mths 5%WP3 Apportioned Effort Varies 10 Level of EffortVaries EARNED VALUE TECHNIQUES

34. 34 BACKUP CHARTS

35. 35 wInsight Current Period Entries in Black are Input data Entries in Red are Calculated

36. 36 wInsight Cumulative

37. 37 wInsight At Completion

38. 38 wInsight EAC Forecasts

39. 39 OSD Position on EACs: When a contract is more than complete: –1. The overrun at completion will be than the overrun incurred to date –2. The percent overrun at completion will be than percent overrun incurred to date Based on OSD database of more than 500 major DOD contracts since 1977 20% more greater