WHAT IS EARNED VALUE MANAGEMENT (EVM)?
“Earned Value Management (EVM) is a project management technique that proactively integrates a project’s cost, technical scope and schedule to allow for the objective measurement of the project’s performance. EVM allows visibility into the final costs of completion of a project or a program using mathematical forecasting techniques. Lastly EVM as an early warning system, identifies problems that show up as significant variances (schedule, cost or technical) which pose a threat to timely project/program completion. As a result of this early warning system, solutions are made and decisive actions taken to fix these problems and place the project back on track” – Adapted from ‘The Kwaku Akyeampong Approach to Earned Value Management Excellence®’
WHAT IS EARNED VALUE MANAGEMENT (EVM)?
“Earned Value Management in its various forms is a commonly used method of performance measurement. It integrates project scope, cost and schedule measures to help the project management team assess and measure project performance and progress. It is a project management technique that requires the formation of an integrated baseline against which performance can be measured for the duration of the project. The principles of EVM can be applied to all projects, in any industry. EVM develops and monitors three key dimensions for each work package and control account: Planned Value, Earned Value and Actual Cost”
Adapted from Project Management Body Of Knowledge® PMBOK®, 4th Edition, Page 181, 182
WHAT IS EARNED VALUE MANAGEMENT (EVM)?
“Earned Value Management is a project control process based on a structured approach to planning, cost collection and performance measurement. It facilitates the integration of project scope, time and cost objectives and the establishment of a baseline plan for performance measurement” – Adapted from Association for Project Management (2006) APM Body of Knowledge, 5th Edition
EIA-748-C Standard for Earned Value Management Systems (EVMS) Industry Standard
(ABRIDGED VERSION) is extracted from Section 2 of the NDIA INTENT GUIDE, June 2009 Edition):
1. Define the authorized work elements for the program. A work breakdown structure (WBS), tailored for effective internal management control, is commonly used in this process.
2. Identify the program organizational structure including the major subcontractors responsible for accomplishing the authorized work, and define the organizational elements in which work will be planned and controlled
3. Provide for the integration of the company’s planning, scheduling, budgeting, work authorization and cost accumulation processes with each other, and as appropriate, the program work breakdown structure and the program organizational structure.
4. Identify the company organization or function responsible for controlling overhead (indirect costs).
5. Provide for integration of the program work breakdown structure and the program organizational structure in a manner that permits cost and schedule performance measurement by elements of either or both structures as needed.
Planning and Budgeting
6. Schedule the authorized work in a manner which describes the sequence of work and identifies significant task interdependencies required to meet the requirements of the program.
7. Identify physical products, milestones, technical performance goals, or other indicators that will be used to measure progress
8. Establish and maintain a time-phased budget baseline, at the control account level, against which program performance can be measured. Budget for far-term efforts may be held in higher-level accounts until an appropriate time for allocation at the control account level. Initial budgets established for performance measurement will be based on either internal management goals or the external customer negotiated target cost including estimates for authorized but undefinitized work. On government contracts, if an over target baseline is used for performance measurement reporting purposes, prior notification must be provided to the customer.
9. Establish budgets for authorized work with identification of significant cost elements (labor, material, etc.) as needed for internal management and for control of subcontractors.
10. To the extent it is practical to identify the authorized work in discrete work packages, establish budgets for this work in terms of dollars, hours, or other measurable units. Where the entire control account is not subdivided into work packages, identify the far term effort in larger planning packages for budget and scheduling purposes.
11. Provide that the sum of all work package budgets plus planning package budgets within a control account equals the control account budget.
12. Identify and control level of effort activity by time-phased budgets established for this purpose. Only that effort which is unmeasurable or which measurement is impractical may be classified as level of effort
13. Establish overhead budgets for each significant organizational component of the company for expenses which will become indirect costs. Reflect in the program budgets, at the appropriate level, the amounts in overhead pools that are planned to be allocated to the program as indirect costs.
14. Identify management reserves and undistributed budget.
15. Provide that the program target cost goal is reconciled with the sum of all internal program budgets and management reserves.
16. Record direct costs in a manner consistent with the budgets in a formal system controlled by the general books of account.
17. When a work breakdown structure is used, summarize direct costs from control accounts into the work breakdown structure without allocation of a single control account to two or more work breakdown structure elements.
18. Summarize direct costs from the control accounts into the contractor’s organizational elements without allocation of a single control account to two or more organizational elements.
19. Record all indirect costs which will be allocated to the contract.
20. Identify unit costs, equivalent units costs, or lot costs when needed.
21. For EVMS, the material accounting system will provide for:
(1) Accurate cost accumulation and assignment of costs to control accounts in a manner consistent with the budgets using recognized, acceptable, costing techniques.
(2) Cost performance measurement at the point in time most suitable for the category of material involved, but no earlier than the time of progress payments or actual receipt of material.
(3) Full accountability of all material purchased for the program including the residual inventory
Analysis and Management Reports
22. At least on a monthly basis, generate the following information at the control account and other levels as necessary for management control using actual cost data from, or reconcilable with, the accounting system:
(1) Comparison of the amount of planned budget and the amount of budget earned for work accomplished. This comparison provides the schedule variance.
(2) Comparison of the amount of the budget earned the actual (applied where appropriate) direct costs for the same work. This comparison provides the cost variance.
23. Identify, at least monthly, the significant differences between both planned and actual schedule performance and planned and actual cost performance, and provide the reasons for the variances in the detail needed by program management.
24. Identify budgeted and applied (or actual) indirect costs at the level and frequency needed by management for effective control, along with the reasons for any significant variances.
25. Summarize the data elements and associated variances through the program organization and/or work breakdown structure to support management needs and any customer reporting specified in the contract.
26. Implement managerial actions taken as the result of earned value information.
27. Develop revised estimates of cost at completion based on performance to date, commitment values for material, and estimates of future conditions. Compare this information with the performance measurement baseline to identify variances at completion important to company management and any applicable customer reporting requirements including statements of funding requirements.
Revisions and Data Maintenance
28. Incorporate authorized changes in a timely manner, recording the effects of such changes in budgets and schedules. In the directed effort prior to negotiation of a change, base such revisions on the amount estimated and budgeted to the program organizations.
29. Reconcile current budgets to prior budgets in terms of changes to the authorized work and internal re-planning in the detail needed by management for effective control.
30. Control retroactive changes to records pertaining to work performed that would change previously reported amounts for actual costs, earned value, or budgets. Adjustments should be made only for correction of errors, routine accounting adjustments, effects of customer or management directed changes, or to improve the baseline integrity and accuracy of performance measurement data.
31. Prevent revisions to the program budget except for authorized changes.
32. Document changes to the performance measurement baseline.
|Defense Acquisition Guidebook (DAG)
Dated: 28 June 2013
|The Defense Acquisition Guidebook (DAG) is the main guide that details the overall DoD acquisition process. Large File = 17 Megabytes|
|Website: Defense Acquisition Guide||The Defense Acquisition University (DAU) Defense Acquisition Guidebook (DAG) official website. Look here for the most up-to-date information regarding the DAG and other policies.|
|DoDD 5000.01: The Defense Acquisition System
Dated: 20 Nov 2007
|The main DoD Directive that governs the defense acquisition system.|
|DoDI 5000.02: Operation of the Defense Acquisition System
Dated: 7 Jan 2015
|The main DoD Instruction that establishes a flexible management framework for translating capability needs and technology opportunities, based on approved capability needs, into stable, affordable, and well-managed acquisition programs that include weapon systems, services, and automated information systems (AIS).|
|CJCS Instruction 3170.01i: Joint Capabilities Integration and Development System
Dated: 23 Jan 2015
|This instruction establishes the Joint Capabilities Integration and Development System (JCIDS) as the process used by the Joint Requirements Oversight Council (JROC) to fulfill its advisory responsibilities to the Chairman of the Joint Chiefs of Staff in identifying, assessing, validating, and prioritizing joint military capability requirements|
|JCIDS Operations Manual
Dated: 12 Feb 2015
|This manual provides guidance on how to conduct JCIDS analyses, the development of Key Performance Parameters (KPP), requirements oversight and management for information technology systems, the JCIDS staffing process, and the roles and responsibilities of organizations.|
|Program Management||DAU Program Managers Toolkit
Dated: 16th edition – Jan 2011
|The Defense Acquisition University (DAU) Program Managers Toolkit is a comprehensive tool for program managers and acquisition professionals focused around DoD Acquisitions. Large File = 15 Megabyte’s|
|DoD Document Database|
|DoD Directives and US DoD ASSIST||Database for DoD Directives|
|DoD Instructions and US DoD ASSIST||Database for DoD Instructions|
|Mil-Standards||EverySpec.com and US DoD ASSIST||Database of Military Standards|
|Key Guides and Handbooks|
|DAU Systems Engineering Fundamentals Guide|
|Guide to Specifications Writing|
|Contracts||Contract Management Process Guide||A compilation of streamlines contract guidance for the planning, solicitation, evaluation, award and post award of contracts in support of systems acquisitions.|
|Test and Evaluation Management Guide|
|Cost Estimating||GAO Cost Estimating Guide||Because federal guidelines are limited on processes, procedures, and practices for ensuring credible cost estimates, the Cost Guide is intended to fill that gap.|
|Logistics||Draft Naval Aviation Systems Team Acquisition Logistics Support Plan Guide||This guide is a tool to be used for the development of minimum logistics planning and Acquisition Logistics Support Plan (ALSP) content for all systems. This guidebook does not present a “template” to developing the ALSP.|
|Information Assurance||Navy DoD Information Assurance Certification and Accreditation Process Handbook||This handbook details the baseline DoN approach to the DIACAP and the procedures necessary to obtain an accreditation decision for DoN ISs undergoing the C&A actions as required under federal law, DoD and DoN regulations and directives.|