Earned Value Management Keeps Projects in Line
Earned Value Management (EVM) is a tool for ensuring that the customer’s requirements are satisfied. In the case of a government program, it is a discipline that helps ensure the taxpayers are getting value for their money.
The federal government has long recognized the value of EVM in large, complex projects, and especially in information technology (IT) projects. For example, in Office of Management and Budget (OMB) Memorandum M-05-23 (OMB M-05-23) to Chief Information Officers, “Improving Information Technology (IT) Project Planning and Execution,” by Karen S. Evans, Administrator of E-government and Information Technology for OMB, states that an EVM System (EVMS) is required for all new major IT projects, ongoing major IT developmental projects, and high-risk projects. More generally, the Acquisition Regulation Federal Acquisition Circular 2006-11 requires use of an American National Standards Institute/Electronics Industries Alliance (ANSI/EIA)-748-compliant EVMS in major acquisitions or other acquisitions in accordance with agency procedures. Every federal agency overseeing projects that meet these criteria has established contract value thresholds above which contractors must use EVM in order to be considered for the award.
However, for some reason EVM has acquired the reputation of being a forbidding discipline, and this despite the prevalence of government interest in EVM as a tool for ensuring that citizens receive good value for their taxes.
Contractors are accustomed to reading in solicitations that “evidence of an approved earned value management system will be evaluated more favorably.” The intent is clear. But EVM is a management practice more honored in the breach than in the observance. This need not be so.
Four Myths About EVM
Many program managers may shy away from using EVM for several reasons, all of them understandable, but none of them particularly compelling.
First, EVM can appear to be a forbiddingly quantitative discipline. Some program managers find themselves intimidated by the mathematical apparatus that often surrounds presentations of EVM.
Second, EVM often is interpreted as a highly demanding discipline whose exacting requirements must be followed to the letter. Since most programs are fraught with uncertainties of various kinds, EVM can begin to appear at best a burden, at worst a way of setting oneself up for catastrophic failure as soon as one encounters the setbacks and obstacles common to all projects.
Third, EVM impresses some managers as a time-consuming, labor-intensive process. It might be nice to follow, but really, who actually can fit it in? Everyone has enough to do as it is.
Fourth, and perhaps most seriously, many agencies and programs evolve alternative forms of benchmarking, reporting, and tracking. Since these are almost never cast in terms of EVM, and since these are the instruments that a program manager’s many bosses monitor, it is natural to concentrate on these at the expense of using an EVM system. Thus managers generate data calls for weekly, monthly, and quarterly updates (the less frequent the update, the more onerous the data call), devise various PowerPoint charts to display the health of their programs, complete the annual OMB audit forms as required, and respond with ad hoc reports to such calls for information as they receive them.
Since commitment, obligation, and expenditure of funds are relatively easy to track (and since the repercussions of impropriety are severe), even the best-intentioned, most conscientious managers find themselves tugged in the direction of reducing their program metrics to these minimums. It is possible for surprisingly large and sophisticated agencies to operate for years without seriously tracking a program’s health beyond its financials.
Of these four reasons not to use EVM, the first three are easily dispelled myths. And the fourth reason is one that any savvy program or project manager can not only resist, but actually turn to his or her advantage. The keys to doing so are these: coming to a basic understanding of what EVM is; getting comfortable with the EVM metrics the contractors are almost surely obliged to provide anyway; and learning how to use EVM to answer the calls for status reports and other updates one receives throughout the life of the program.
How EVM Works
When applied to a task, the process of EVM will:
1. Establish and evaluate the Statement of Work.
2. Plan work to completion.
3. Develop an integrated Performance Measurement Baseline (PMB). The EVM system is in place; managers will measure, analyze, and report on key earned value metrics for the task order. These include:
Performance. Capture the performance standards of the product or service being managed.
Schedule. Review schedule variance against baseline to assess work completed and pending. Review schedule performance index to analyze current and near-term trends in work accomplishment and detect issues. Review critical path to perform long-range analysis of task order execution.
Costs. Review cost variance against baseline to assess performance relative to budget. Review the cost performance index to analyze current and near-term spending trends.
Task order completion. Review budget-at-completion to identify total task order budget. Review estimate-at-completion to verify that task order progress is fully aligned with its PMB considering historical performance. Review variance-at-completion to determine projected variance from the PMB.
Risks associated with all of these metrics.
4. Integrate change control.
5. Assess accomplishments against the PMB.
6. Analyze variance from the plan.
7. Report progress.
Benefits of EVM Metrics
EVM helps establish and maintain internal processes and controls. It enables agencies to measure a program or project’s health accurately and objectively throughout its life cycle through metrics that reveal performance trends early, and that highlight variances, issues, and problems. If conscientiously applied, EVM accurately assesses project status and detects issues early. This generally allows managers and performers enough time to mitigate or correct problems that might otherwise jeopardize a whole program.
A good set of EVM tools provides a robust task order planning, execution, and assessment capability. Performers should be expected to capture information from financial and accounting systems, purchasing, human resources and staffing, facilities and security—any business function that affects cost, schedule, performance, and risk. They should be able to manage task order costs, comprehensively assess status, measure earned value, analyze budgets (both forecasts and actuals), plan and implement change control, and produce reports.
Since EVM is an repetitive process with change management mechanisms, it provides feedback from metrics that can indicate any need to replan elements of task order performance. Results of regular earned value analysis should be used to
prepare contract- and task order-level progress reports that are extremely useful not only to program managers but also to performers, senior agency leaders, executive branch oversight offices like the OMB, and, of course, members of Congress and interested citizens.
EVM requires an organization to examine and determine performance metrics for its programs and projects. It adds a discipline by which those metrics are regularly examined. If requirements have not been well thought out, it can be difficult to develop those metrics. Everyone who has worked in or around a mission agency has probably seen “requirements creep,” in which projects and programs without a disciplined system of well-planned metrics and clear change management protocols tend to drift in ways that are ultimately subjective. EVM can prevent this.
The Project Manager’s Role
A sound EVM process can work for program managers, provided they are aware of and comfortable with the process. Program managers usually are in the happy position of expecting their performers to provide the EVM process for them. Thus the program manager should use EVM early in a task order—and, if possible, while forming a Statement of Work—to apply a disciplined system for monitoring and controlling performance against the approved requirements, cost, schedule, and quality baseline.
But once the Statement of Work is done, the program manager typically can become a consumer rather than a producer of EVM outputs. Some of the results of EVM that can be readily adapted to meet most program management and reporting needs are:
Comprehensive Upfront Planning—The task order’s Work Breakdown Structure should be planned from start to finish based on the Statement of Work. Costs and an integrated schedule should be assigned to each element, which creates a project plan aligned with contractual requirements and terms.
Proactive Risk Management—A risk management plan identifies, assesses, and controls factors that might jeopardize meeting technical, schedule, cost, or quality objectives.
Integrated PMB—The program manager should approve and baseline the project plan. This yields an implementation plan for day-to-day execution and management of work under the task order.
Disciplined Change Management—Once the PMB is set, performers should enter the task order into a disciplined change management system to ensure that all requested changes undergo comprehensive impact assessment, prioritization, approval, and tracking before they’re accepted.
Intensive Assessment of Progress Against Relevant Metrics—This is one of the most valuable results of the EVM process. If throughout the task order life cycle the program manager regularly tracks accomplishments and progress, then answering the regular or ad hoc requests for status becomes much simpler than creating a new report in response to the new (but foreseeable) demand. Automated earned value analysis tools can be extremely helpful, and a number of such tools are available. Contractors should be expected to offer one that is compliant with the industry standard—ANSI/EIA-748. These tools also help performers analyze any variances from the plan to forecast their impact upon successful task order completion, and replan the task order if necessary.
Detailed progress reporting—Regular progress reports should include current task order accomplishments and costs, budgeted and actual value of work completed, performance trends, reasons for any variances from plan, and risks.
In summary, EVM is nothing any agency or performer should fear. It represents a sound and well-founded management approach. There are many tools out there to help one take advantage of EVM, and, if someone needs help doing it, there are many potential partners who can work with him or her.
Since the agency is probably already paying for EVM, why not use it?
About the Authors
Karen Hicks is group manager of program management with ITS Corp. (ITS), a subsidiary corporation of QinetiQ North America, and a national provider of information, program management, and engineering solutions to the federal marketplace. Her principal areas of expertise include product development and management, business operations, and business process engineering.
John Gregorits is a vice president and program manager with ITS. Based in the Arlington, VA, offices of ITS, he has 22 years of experience in public-sector business development, program management, and contract management.