Program at a Glance
Total Allocated Budget
Management Reserve
Raleigh
Distribution
P
R
O
J
E
C
T
E
D
PMB
$
BCWSC
Over EAC
Budget
BCWPC
ACWPC
Time
Now
S
L
I
P
P
A
G
E
Earned Value
and
the Acquisition
Program
Completion
Date
Roberta Tomasini
Defense Acquisition University
DSN 655-3764
703-805-3764
roberta.tomasini@dau.mil
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)
• Possible Actions for EVM Reporting Issues
• Possible Actions for Issues Highlighted by EVM
2
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.
3
EARNED VALUE CONCEPT
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
Performance
Schedule
Earned
Value
Management
Enables Trend Analysis &
CAIV Trades
Industry Standard ANSI/EIA-748-2007
Cost
DoD & Industry embrace EARNED VALUE as a
Risk Management Tool
4
Earned Value Terminology
Acronym
Term
Meaning
BCWS
Budget Cost of Work Scheduled Plan - Baseline - PMB
BCWP
Budget Cost of Work Performed
Earned Value
ACWP
Actual Cost of Work Performed
Actuals
BAC
Budget At Completion
Planned Cost
EAC
Estimate At Completion
Forecasted Cost
SV
Schedule Variance
CV
Cost Variance
VAC
Variance At Completion
Accomplishment
Variance
EV vs Actual
Cost
Forecasted
Overrun / Underrun
5
The Time-Phased Spend Plan
$
22
20
18
16
14
12
10
8
6
4
2
0
NEGOTIATED CONTRACT COST = Target Cost
}
Cumulative
Budgeted
Cost of Work
Scheduled
Management
Reserve
Budget at
Completion
Performance
Measurement
Baseline
BAC
PMB
BCWS
0
2
Months
4
6
8
10
12
14
16
18
20
Completion
6
Point
Earned Value Management Guidance
New Policy Established in March 2005
Risk
Based
Decision
Contract Type
(EVM on FFP, LOE & T&M Contracts Discouraged)
No Mandatory Requirements
Acquisition
Funding
Cost Reimbursement & Incentive Contracts
EVM System
Requirements
EVM Data
Requirements
Dollar thresholds are the same for all budget appropriation
categories. Color of money is no longer an EVM discriminator.
Contract Value
(TY $M)
0
20
Conformance with
ANSI / EIA 748
Conformance with
ANSI / EIA 748
Formal EVMS
validation not required
Formal EVMS
validation required
Contract Performance Report
(DI-MGMT-81466) (Tailored)
Contract Performance Report
(DI-MGMT-81466) (5 formats)
Integrated Master Schedule
(DI-MGMT-81650) (Tailored)
Integrated Master Schedule
(DI-MGMT- 81650)
50
7
EV in Program Execution
• Data Reporting
• Data Analysis
– Variances
– Performance Indices
– Trends
• Estimates at Completion (EACs)
• To Complete Performance Index (TCPI)
8
Earned Value
Within the Acquisition Process
GOVERNMENT
NEGOTIATION
SOURCE SELECTION
AWARD PROJECT
ACQUISITION
STRATEGY
DEVELOP
Program Execution
& Performance
Measurement
RFP
PROVIDER
DEVELOP
PROPOSAL
STATUS
REPORTS
ESTABLISH
Perf Meas.
BASELINE
MGT VOLUME
ASSESS RISK
TECH VOLUME
DEVELOP MR
COST VOLUME
ASSIGN BUDGETS
9
Contract/Cost Performance Report (CPR)
• Format 1: WBS
• Format 2: Organizational Categories
• Format 3: Baseline
• Format 4: Staffing
• Format 5: Explanations and Problem Analysis
NOTE: CPR DID, Jul 2005, DI-MGMT-81466A
new IPMR DID, 20 Jun 2012, DI-MGMT-81861
10
CPR Format 1: WBS
CLASSIFICATION (When filled in)
CONTRACT PERFORMANCE REPORT
FORMAT 1 - WORK BREAKDOWN STRUCTURE
1. CONTRACTOR
a. NAME
2. CONTRACT
a. NAME
b. LOCATION (Address and ZIP Code)
b. NUMBER
DOLLARS IN
3. PROGRAM
a. NAME
PROGRAM
4. REPORT PERIOD
a. FROM (YYMMDD)
b. TO (YYMMDD)
c. TYPE
5. CONTRACT DATA
a. QUANTITY b. NEGOTIATED
COST
d. SHARE RATIO
c. EST. COST AUTHOR- d. TARGET PROFIT/
IZED UNPRICED WORK FEE
6. ESTIMATED COST AT COMPLETION
MANAGEMENT ESTIMATE
AT COMPLETION
(1)
a.
b.
c.
8.
CONTRACT BUDGET
BASE
(2)
e. TARGET PRICE
a. WORK BREAKDOWN
STRUCTURE ELEMENT
f. ESTIMATED
PRICE
g. CONTRACT
CEILING
c. SIGNATURE
B
C
W
P
b.
c.
d.
e.
COST OF MONEY
GENERAL & ADMINISTRATIVE
UNDISTRIBUTED BUDGET
SUBTOTAL (Performance
Measurement Baseline)
f.
g.
9.
a.
b.
MANAGEMENT RESERVE
TOTAL
RECONCILIATION TO CONTRACT BUDGET BASE
VARIANCE ADJUSTMENT
TOTAL CONTRACT VARIANCE
A
C
W
P
S
V
d. DATE SIGNED
(YYMMDD)
CUMULATIVE TO DATE
ACTUAL
VARIANCE
COST WORK
WORK
WORK
SCHEDULED PERFORMED PERFORMED SCHEDULE COST
(2)
(3)
(5)
(6)
(4)
BUDGETED COST
B
C
W
S
h. ESTIMATED CONTRACT
CEILING
(3)
CURRENT PERIOD
(1)
PRODUCTION
7. AUTHORIZED CONTRACTOR REPRESENTATIVE
a. NAME (Last, First, Middle Initial)
b. TITLE
VARIANCE
BEST CASE
WORST CASE
MOST LIKELY
PERFORMANCE DATA
ITEM
b. PHASE (X one)
RDT&E
PHASE
C
V
BUDGETED COST
ACTUAL
VARIANCE
COST WORK
WORK
WORK
SCHEDULED PERFORMED PERFORMED SCHEDULE COST
(7)
(8)
(10)
(11)
(9)
B
C
W
S
B
C
W
P
A
C
W
P
S
V
C
V
REPROGRAMMING
ADJUSTMENTS
COST
VARIANCE
S
(12)
AT COMPLETION
BUDGETED ESTIMATED VARIANCE
BUDGET
(13)
D (14)
(15)
(16)
B
A
C
E
A
C
V
A
C
11
CLASSIFICATION (When filled in)
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?
12
Earned Value Metrics
 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)
13
The Earned Value Current Status
Imposed On The Spend Plan
NEGOTIATED CONTRACT COST
$
22
20
18
16
14
12
10
8
6
4
2
0
}
Management
Reserve
BCWS
ACWP
}CV
Budget at
Completion
(BAC)
}
SV
BCWP
0
2
Months
4
6
8
10
12
Time
Now
14
16
18
20
Completion
Point
14
Cumulative Dollar Variance
Cost and Schedule Trends
$ in Millions
1.0
0
(1.0)
(2.0)
CV
(3.0)
(4.0)
SV
15
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
16
Gold Card
17
Estimate at Completion
(EAC)
EAC = Actual Costs accumulated to date + Estimated
Cost of the Work Remaining
Budget at Completion = $20M
BCWS = $14M (Planned to date)
ACWP = $13M
BCWP = $10M (EV)
Work Remaining
18
EAC Concept
EAC = ACWP + Estimate to Complete
EAC = ACWP +
Work Remaining
Performance Factor
EAC = ACWP +
(BAC - BCWP )
CPIc
EAC = BAC
CPIc
Note: This EAC assumes that future performance will be
the same as that represented by CPIc.
19
EAC Methods
METHOD
FORMULA
1. Cumulative CPI
BAC - BCWPC
ACWPC +
CPIC
2. Composite
BAC - BCWPC
ACWPC + CPI X SPI
C
C
3. 3-Month CPI
BAC - BCWPC
ACWPC + (BCWP)
(ACWP) 3 MO
4. Weighted
BAC - BCWPC
ACWPC + .8 CPI + .2SPI
C
C
Note:
data
c
Indicates cumulative
20
To Complete Performance
Index (TCPI)
TCPIEAC = 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
21
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)
22
•
When was the last IBR? How did it go? – How many findings? CARs?
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/Incentive fee impact
CPAR input
CARs (Correction Action Request)-Levels 1-4
– DCMA initiated
Conduct an IBR
Conduct a compliance review
Withhold payment up to 5%
Pull contractor’s EVM validation
23
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
24
Any Questions?
25
BACKUP CHARTS
for the
Integrated Baseline Review (IBR)
26
Integrated Baseline Review (IBR) Goal
Joint PM mutual understanding of the PMB
content and the risk
27
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?
28
PMB Budget Allocation Top Down Version 3
Contract Price
Total Allocated Budget
Fee/Profit
NCC
AUW
CBB
Overrun
Performance Measurement Baseline
OTB
Management Reserve
- Withheld for Unknowns
- No Scope or Schedule
Summary Level
Planning Packages
- Specific Scope @
higher WBS level
- Time-phased budget
- Strict Controls
Control Accounts
Work
Packages
Planning
Packages
Undistributed Budget
- Temporary Holding
- Work Authorized but no
detailed Budget or
Schedule
- Integrated Scope, - Integrated Scope,
Schedule & Budget Schedule & Budget
- No Detailed Plans
- Detailed Plans
29
Developing the PMB
1. Scope
2. Schedule
3. Budget
100
40
60
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
Negotiated Contract Cost
MR
$
PMB
Time
30
Control Account
A Key Management Control Point
WORK BREAKDOWN STRUCTURE
SYSTEM
LEVEL 1
ENGINE
LEVEL 2
C
O
M
P
A
N
Y
T
E
S
T
E
N
G
M
F
G
D
A
T
A
LEVEL 3
FAN
LEVEL 4
FAN ASSEMBLY
LEVEL 5
MECHANICAL
DESIGN
D
E
SI
G
N
CASE ASSY
COMPRESSOR
ROTOR ASSY
FULL SCALE RIG
STATOR ASSY
CONTROL
ACCOUNT
CONTROL
ACCOUNT
ANALYTICAL
DESIGN
DRAFTING/
CHECKING
TRAINING
40
100
CONTROL
ACCOUNT
CONTROL
ACCOUNT
60
Work Packages
Work
Packages
31
EARNED VALUE TECHNIQUES
METHOD
LENGTH
0 / 100 %
1 Mth
50 / 50 %
2-3 Mths
% Complete
Varies
Variant
Milestone
3 or More Mths
Level of Effort
Varies
Apportioned
Effort
Varies
BCWP CALCULATION
30
0
15
15
35%
5
10
15
10
10
10
5%WP3
5%WP3
32
BACKUP CHARTS
33
How to Tailor the CPR
• Can tailor content and/or frequency
• Format 1: WBS
– Default WBS level 3
– Consider Level 4/5 for high risk/dollar areas
– No more than 2 pages
• Format 2: Organizational Categories
– This should be useful for your program
– Consider aligning to IPTs
• Format 3: Baseline
• Format 4: Staffing
– This will be in the same breakout as Format 2
• Format 5: Explanations and Problem Analysis
– Thresholds for variance analysis reporting should support
management by exception concept
– Review thresholds periodically
NOTE: Smaller programs may only need Formats 1 or 342
and Format 5
Primary Trip Wires
• EVM Center Contractor EVMS confidence rating
– Corrective Action Requests (CAR Levels 1-4)
– EVM System maturity levels
• Integrated Baseline Review (IBR)
– Initial review conducted within 180 days
– Ongoing reviews triggered by Mods and/or OTBs
– Outcome of the review
•Cost
•Schedule
•Technical
•Resources
•Processes
Baseline Risk
35
Secondary: Trip Wire Metrics
• 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%
36
wInsight
Current Period
Date
Jul 09
Aug 09
BCWS
BCWP
ACWP
SCH VAR $
SCH VAR %
SPI
COST VAR $
COST VAR %
CPI
11,245
10,425
11,772
-820
-7%
0.93
-1,347
-13%
0.89
9,898
9,371
10,659
-527
-5%
0.95
-1,288
-14%
0.88
Sep 09
Current
9,898
9,605
10,601
-293
-3%
0.97
-996
-10%
0.91
Oct 09
Nov 09
Dec 09
6,325
6,208
7,028
-117
-2%
0.98
-820
-13%
0.88
5,974
6,032
6,560
59
1%
1.01
-527
-9%
0.92
4,568
4,744
5,388
176
4%
1.04
-644
-14%
0.88
Entries in Black are Input data
Entries in Red are Calculated
37
wInsight
Cumulative
Date
Jul 09
Aug 09
BCWS
BCWP
ACWP
SCH VAR $
SCH VAR %
SPI
COST VAR $
COST VAR %
CPI
3 MONTH CPI
6 MONTH CPI
66,649
63,276
68,945
-3,373
-5%
0.95
-5,669
-9%
0.92
0.90
0.92
76,547
72,647
79,604
-3,901
-5%
0.95
-6,958
-10%
0.91
0.89
0.91
Sep 09
Cumulative
86,445
82,252
90,205
-4,193
-5%
0.95
-7,953
-10%
0.91
0.88
0.90
Oct 09
Nov 09
Dec 09
92,770
88,460
97,233
-4,311
-5%
0.95
-8,773
-10%
0.91
0.89
0.89
98,744
94,492
103,793
-4,252
-4%
0.96
-9,300
-10%
0.91
0.89
0.89
103,312
99,236
109,181
-4,076
-4%
0.96
-9,945
-10%
0.91
0.90
0.89
38
wInsight
At Completion
TCPI - BAC
1.09
1.14
TCPI - EAC
1.34
1.42
CBB / TAB
130,149 130,149
EAC (Kr)
119,000 120,000
VAC $
11,149
10,149
VAC %
8.6%
7.8%
% SCHED - BAC
51%
59%
% COMP - BAC
49%
56%
% SPENT - BAC
53%
61%
SLIP IN WEEKS
-
At Completion
1.20
1.27
1.35
1.47
1.61
1.83
2.07
2.62
130,149 130,149 130,149 130,149
120,000 120,000 121,000 121,000
10,149
10,149
9,149
9,149
7.8%
7.8%
7.0%
7.0%
66%
71%
76%
79%
63%
68%
73%
76%
69%
75%
80%
84%
-
39
wInsight
EAC Forecasts
Date
3 MO AVG
6 MO AVG
CUM CPI
CUR CPI
CPI*SPI
Jul 09
140,646
138,815
141,810
146,966
145,695
Aug 09
141,735
139,871
142,614
148,045
145,997
Sep 09
Oct 09
EAC Forecasts
142,385 142,802
140,871 141,716
142,734 143,057
143,640 147,339
145,412 145,290
Nov 09
142,917
142,324
142,959
141,521
144,722
Dec 09
143,069
142,726
143,192
147,824
144,589
40
OSD Position on EACs:
• When a contract is more than 20% complete:
– 1. The overrun at completion will be more than
the overrun incurred to date
– 2. The percent overrun at completion will
be greater than percent overrun incurred to
date
• Based on OSD database of more than 500 major
DOD contracts since 1977
41