OSD Earned Value
Management Activities
Update
Larry L. Axtell
Senior Program Analyst
Office of the Under Secretary of Defense
(Acquisition, Technology and Logistics)
Acquisition Resources and Analysis
February 8, 2005
Agenda
 Revised Earned Value Management
(EVM) Policy/Guidance
 Work Breakdown Structure (WBS)
Handbook Update
 Government/Industry EVM Working
Group
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Revised Earned Value Management
(EVM) Policy/Guidance
Revised EVM Policy/Guidance:
Summary of Changes
 New dollar thresholds for cost/incentive contracts
(no differentiation between development and
procurement)
 Revise Cost Performance Report (CPR) Data
Item Description (DID) - rename “Contract”
Performance Report
 Eliminate Cost/Schedule Status Report (C/SSR)
and CPR-No Criteria
 Expand application of Integrated Master
Schedule (IMS) and link to CPR
 Integrated Baseline Reviews (IBRs) required
when EVM required
 EVM on Firm-Fixed Price (FFP) contracts is riskbased decision
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Revised EVM Policy/Guidance:
Status Overview
 Actions Completed:
 Released policy changes for government and
industry comment
 Adjudicated comments; modified policy documents
accordingly
 Conducted business case analysis
 Formally coordinated revised policy within DoD
 Finalized the CPR and IMS DIDs
 Actions in Progress:
 Revising DFARS clauses
 Updating EVMIG (adding tailoring guidance and
focusing on how to contract for EVM)
 Updating Work Breakdown Structure (WBS)
Handbook
 Updating the DoDI 5000.2 and Defense Acquisition
Guidebook
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Revised EVM Policy/Guidance:
Status Overview
 Next Steps:

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Obtain USD(AT&L) approval of revised policy
Release interim policy memorandum
Publish revised DIDs (CPR and IMS)
Publish changes to DoDI 5000.2
Publish changes to Defense Acquisition Guidebook
Publish updated EVMIG
Publish updated WBS Handbook
Publish revised DFARS clauses (consider EVMS
FAR clause)
 Changes not retroactive, apply to contracts
awarded in response to solicitations or RFPs
issued on or after 30 days from the date of
the signed policy memorandum
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Work Breakdown Structure (WBS)
Handbook Update
Neil Albert
MCR, LLC
Update MIL-HDBK 881 - Requirements
 Update for DoD 5000 changes
 Identify how the WBS can support each acquisition
phases and the actions necessary to enter and exit
successfully
 Reflect changes to new and improved approaches to
product development (i.e., spiral/evolutionary)
 Show how WBS is developed and maintained
throughout the life cycle to meet program
management goals as well as cost, schedule, and
technical objectives
 Show how the WBS is the common link which will
unify the planning, scheduling, estimating, budgeting,
configuration management, and performance
reporting disciplines
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Task 1: Add/Improve upon WBS Definitions
 Update definitions to reflect advancement of technology
in design, development and manufacturing
 Heavier reliance on software
 Commercial-off-the-shelf items (Status: Completed)
 Establish a Working Group consisting of Government
and Industry to review at least the following appendices
and provide comments and potential revisions
 Aircraft – specifically UAVs (Status: Will be separate Appendix.
Draft being coordinated in UAV Working Group)
 Space – Multiple definitions – NASA, NRO, DoD, etc. (Status:
Final draft in coordination with Space Systems Working Group)
 Ships – Waived for CSDR – no longer (Status: Final draft in
coordination with Ship Systems Working Group)
 Other Appendices modified (Status):
•
•
•
•
•
Aircraft to include Crew Station and Human Systems Integration
Ordnance to include multiple stage frame
Ground UV – consistent with Ground Vehicle Appendix
Sea UV – To be determined
Common Elements to include specific definitions for Aircraft,
Space, Ships common elements unique to those systems
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Task 2: Clarify how WBS is used with
newer terms and processes
 System of Systems/Family of Systems
 Clarify terminology and highlight examples of how the WBS is
created given the requirement for system interaction and
interoperability
 Show example of System of Systems WBS
(Status: Working with OSD Systems Engineering staff to finalize
definitions)
 Spiral/Evolutionary Development (Hardware/Software)
 Each spiral provides new functionality which could be considered
product oriented, but better definition is required
 Will define terminology and provide examples of how the WBS is
created given an evolutionary requirement. (Process is already
defined in the software WBS description --- most software engineers
used spiral development to create software in the early 1990’s)
(Status: Working with OSD Systems Engineering staff to finalize
definitions)
 Risk Analysis
 Description of risk analysis use with WBS
 System Engineering use to trade cost, schedule and technical risk of
the system to meet end-item requirements
(Status: Working with OSD Systems Engineering and PMI Risk SIG to
to include appropriate definitions)
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Task 3: Ensure the WBS is characterized
as an Acquisition tool
 To decrease the use of multiple WBSs used by different
functional areas, define the WBS for all practical uses:





Cost Estimating
EVM
Database
Scheduling
Requirements planning, etc.
 Establish group of system engineers, cost analysts,
logisticians, earned value management technicians,
program managers and contracts personnel to agree
and commit to one approach defining and using the
WBS for program support
 Maintain a product oriented WBS reporting at level 3 (except for
high cost, high risk or technology driving elements)
 Communicate result by follow on training
(Status: Coordinating with appropriate functions/associations and
Government Reps)
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Task 4: Support Budget, Cost, Schedule, Technical,
Contractual and Performance Management
 Identify DoD 5000 has mandated certain reporting
functions that rely on the WBS
 Contract Funds Status Report
 Contractor Cost Data Reporting
 Earned Value Management
(Status: Implementing into Draft documentation)
 Use example
 Demonstrate how acquisition reports will track to each other if
a single WBS is used
 Show relationship to
• CLIN
• SOW
• Requirements
• IMP/IMS
(Status: Finalizing flow diagram to show relationships)
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Task 5: Integrates with PM and SE
Documents, Contracts and Cost Estimating
 Re-enforce the use of the WBS via example
 Show that without the WBS, the IMP/IMS relationship
to other acquisition artifacts would not be possible
(Status: Implementing into Draft documentation
considering new DID requirements)
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Other Activities
 Effort being extended to account for full DoD
coordination effort
 Required MIL-STD coordination
 Expectation of completion – April 30, 2005
 Briefing major organizations on changes
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ASC/Industry Workshop
NDIA Program Management Subcommittee
CSDR Focus Group
SCEA
PMI – College of Performance Management
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Government/Industry EVM Working
Group
Government/Industry EVM
Working Group
 Established in response to DAEC tasking
 Working-level forum to “assess EVM and broader program
management issues and concerns by sharing
improvement ideas and recommending solutions,
capitalizing on existing industry practices”
 Standing body that meets at least quarterly or as required
 Membership includes representatives from OSD, military
services, defense and intelligence agencies, National
Defense Industrial Association, and large defense
contractors
 Meetings held in July, August, and November:
 Discussed main concerns regarding policy changes
 Developed draft action plan to address overarching DoD and
industry issues
 Next meeting scheduled for February 10, 2005
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Government/Industry EVM
Working Group
 Major Issues Identified by Government/Industry EVM
Working Group:
1.
2.
3.
4.
5.
6.
7.
Policy, Validation, and Surveillance
Contract Requirements
Training
Contract Definitization
Management Acceptance
Process Integrity
Subcontractor Management
 Working Group developing plan to define issues and
strategies for implementing corrective actions
 Revisions to EVM policy/guidance respond to Issue 1
 EVM Functional Integrated Product Team activity underway
to address Issue 3—will have ancillary benefits in other
areas
 NDIA Program Management Systems Committee teams
actively working related initiatives from industry perspective
 Working Group is a standing body that will continue to
dialogue on concerns, share improvement ideas, and
recommend and implement solutions
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Government/Industry EVM
Working Group
 Next Steps:
 Complete action plan
 Seek appropriate approvals of near-term
improvement actions
 Assist in implementing improvement actions
 Assess progress and update plan
 Continue to dialogue on concerns, share
improvement ideas, and recommend
solutions
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Back-Up Slides
Background
 Contemporary EVM is the product of a technique formalized by
DoD in the 1960’s
 Criteria-based approach to management (Cost/Schedule Control
Systems Criteria) was used for more than 35 years
 1996 was a year of change…
 Transitioned from C/SCSC (35 government criteria) to EVM (32
industry guidelines)
 Compliance responsibility transferred from military services to DCMA
 DoD recognized industry’s “ownership” of EVM
 In 2003 problems came to light…
 Industry concerns communicated in letter to USD(AT&L) (April 2003)
 DoD concerns discussed at executive-level meeting (July 2003)
 Concerns presented to Defense Acquisition Excellence Council
(DAEC); action resulted to establish team to work the issues and
provide periodic status to DAEC (October 2003)
 OSD actions in response to concerns:
 Established Government/Industry EVM Working Group
 Developed proposed revised DoD EVM policy
 Status update presented to DAEC on November 9, 2004
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Revised EVM Policy/Guidance:
New Application Thresholds
Contracts Thresholds
Cost or
Incentive
Equal to
Or Above
Threshold
> $50M
Cost or
Incentive
Equal to
Or Above
Threshold
> $20M
Cost or
Incentive
Less Than
Threshold
Plus All
FFP
Requirements
- Compliance with industry EVM standard
- Formal validation of contractor’s EVM
system
- Contract Performance Report
- Integrated Master Schedule
- Integrated Baseline Review
- Ongoing surveillance
- Compliance with industry EVM standard
- Formal system validation not required
- Contract Performance Report (tailored)
- Integrated Master Schedule (tailored)
- Integrated Baseline Review (scope tailored)
- Ongoing surveillance
- EVM optional (risk-based decision)
- Ongoing surveillance
< $20M
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Revised EVM Policy/Guidance:
Tailoring Guidance
 Guidance for tailoring CPR and IMS for cost or incentive
contracts <$50M but >$20M
 Considerations when making a risk-based decision to
require EVM on cost or incentive contracts <$20M;
guidance for tailoring reporting
 Considerations when making a risk-based decision to
require EVM on FFP contracts; guidance for tailoring
reporting
 Will reside in Defense Acquisition Guidebook and Earned
Value Management Implementation Guide (EVMIG)
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Revised EVM Policy/Guidance:
Business Case Analysis
 Used contracts data supplied by DoD and industry; applied
proposed new EVM application thresholds
 Increase in lower threshold from $6.3M to $20M results in
decrease in number of contracts requiring EVM (DoD data =
2,156; industry data = 1,297)
 Decrease in upper threshold from $315M/$73M to $50M
results in increase in number of contracts requiring a CPR
and validated EVM system (DoD data = 535; industry data =
261)
 Used incremental cost algorithm to establish equivalency
between difference in level of effort for CPR, Tailored CPR
(replacement for C/SSR), and C/SSR (C/SSR = 0.33 CPR;
TCPR = 1.1 C/SSR)
 DoD data – eliminate CPRs on 326 contracts
 Industry data – eliminate CPRs on 235 contracts
 Conclusion:
 Policy changes will result in relatively significant cost
avoidance; cost of eliminating C/SSRs more than offsets cost
of additional CPRs
 Few, if any, additional system validations will be required
under the revised policy
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Government/Industry EVM
Collaboration Framework
DAEC
- Discussion forum
- Oversees/promotes process
DoD
Executive
Management
Industry
Executive
Management
- Inputs to decisions
- Implements solutions
- Inputs to decisions
- Approves/implements solutions
OUSD(AT&L)
- Prioritizes problems
- Approves solutions
NDIA
- Represents industry
- Prioritizes problems
- Develops solutions
Government/Industry
Working Group
- Identifies/defines problems
- Recommends solutions
- Assists in implementing solutions
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