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Roberta Tomasini Defense Acquisition University
DSN 655-3764703-805-3764
Earned Valueand
the Acquisition Program
Management Reserve
Total Allocated Budget
ACWPC
$
TimeNow
BCWSC
CompletionDate
PROJECTED
SLIPPAGE
OverBudget
EACProgram at a Glance
BCWPC
PMBRaleigh
Distribution
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
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
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 CONCEPTEARNED VALUE CONCEPT
DoD & Industry embrace EARNED VALUE as a Risk Management Tool
5
Earned Value TerminologyAcronym Term Meaning
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
02468
10121416182022
0 2 4 6 8 10 12 14 16 18 20
The Time-Phased Spend Plan
NEGOTIATED CONTRACT COST = Target Cost
CumulativeBudgetedCost of WorkScheduled
Budget atCompletion
ManagementReserve}
$
MonthsCompletion Point
PerformanceMeasurement
Baseline
BCWS
PMB
BAC
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
Man
dat
ory
Req
uir
emen
ts
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
EV in Program Execution
• Data Reporting
• Data Analysis– Variances– Performance Indices– Trends
• Estimates at Completion (EACs)
• To Complete Performance Index (TCPI)
9
Earned ValueWithin the Acquisition Process
GOVERNMENT
PROVIDER
ACQUISITIONSTRATEGY
DEVELOPRFP
PROPOSAL
MGT VOLUME
TECH VOLUME
COST VOLUME
DEVELOP
NEGOTIATIONSOURCE SELECTION
AWARD PROJECT
ASSIGN BUDGETS
ASSESS RISK
DEVELOP MR
ESTABLISH Perf Meas. BASELINE
Program Execution& PerformanceMeasurement
STATUSREPORTS
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
CONTRACT PERFORMANCE REPORT FORMAT 1 - WORK BREAKDOWN STRUCTURE
b. COST OF MONEY c. GENERAL & ADMINISTRATIVE d. UNDISTRIBUTED BUDGET e. SUBTOTAL (Performance
1. CONTRACTOR a. NAME
b. PHASE
PHASE
(X one) RDT&E PRODUCTION
b. LOCATION (Address and ZIP Code)
2. CONTRACT a. NAME
b. NUMBER
3. PROGRAM
PROGRAM a. NAME
4. REPORT PERIOD a. FROM (YYMMDD)
b. TO (YYMMDD)
7. AUTHORIZED CONTRACTOR REPRESENTATIVE
c. SIGNATURE d. DATE SIGNED (YYMMDD)
a. NAME (Last, First, Middle Initial)
8. PERFORMANCE DATA
ITEM
(1)
CURRENT PERIOD AT COMPLETION
BUDGETED
D (14)
ESTIMATED
(15)
VARIANCE
(16)
BUDGETED COST WORK
SCHEDULED (2)
WORK PERFORMED
(3)
CLASSIFICATION (When filled in)
CLASSIFICATION (When filled in)
c. TYPE
a. BEST CASE b. WORST CASE c. MOST LIKELY
CONTRACT BUDGET BASE (2)
VARIANCE (3)
MANAGEMENT ESTIMATE AT COMPLETION
(1)
a. VARIANCE ADJ USTMENT b. TOTAL CONTRACT VARIANCE
9. RECONCILIATION TO CONTRACT BUDGET BASE
ACTUAL COST WORK PERFORMED
(4)
VARIANCE
SCHEDULE (5)
COST (6)
CUMULATIVE TO DATE BUDGETED COST
WORK SCHEDULED
(7) WORK
PERFORMED (8)
ACTUAL COST WORK PERFORMED
(9)
VARIANCE
SCHEDULE (10)
COST (11)
REPROGRAMMING ADJ USTMENTS
S COST
VARIANCE (12)
BUDGET (13)
6. ESTIMATED COST AT COMPLETION
a. QUANTITY b. NEGOTIATED COST
c. EST. COST AUTHOR- IZED UNPRICED WORK
d. TARGET PROFIT/ FEE
e. TARGET PRICE f. ESTIMATED PRICE
g. CONTRACT CEILING
h. ESTIMATED CONTRACT CEILING
a. WORK BREAKDOWN STRUCTURE ELEMENT
5. CONTRACT DATA
d. SHARE RATIO
b. TITLE
f. MANAGEMENT RESERVE g. TOTAL
Measurement Baseline)
DOLLARS IN
CPR Format 1: WBS
BCWS
BCWS
BCWP
BCWP
ACWP
ACWP
SV
SV
CV
CV
BAC
EAC
VAC
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
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
02468
10121416182022
0 2 4 6 8 10 12 14 16 18 20
The Earned Value Current Status Imposed On The Spend Plan
NEGOTIATED CONTRACT COST
BCWS
ManagementReserve
Budget atCompletion
(BAC)
}
$
Months TimeNow
Completion Point
BCWP
ACWP}CV }SV
15
Cumulative Dollar VarianceCost and Schedule Trends
$ in Millions
(4.0)
(3.0)
(2.0)
(1.0)
0
1.0
CV
SV
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 CompletionEstimate at CompletionBAC/CPIBAC/CPI = 20/.77 = = 20/.77 = $26M$26M
17EVM Home Page = https://acc.dau.mil/evm eMail Address: [email protected]
DAU POC: (703) 805-5259 (DSN 655)Revised January 2009
TERMINOLOGYNCC Negotiated Contract Cost Contract price less profit / fee(s)AUW Authorized Unpriced Work Work contractually approved, but not yet negotiated / definitizedCBB Contract Budget Base Sum of NCC and AUWOTB Over Target Baseline Sum of CBB and recognized overrun TAB Total Allocated Budget Sum of all budgets for work on contract = NCC, CBB, or OTB BAC Budget At Completion Total budget for total contract thru any given levelPMB Performance Measurement Baseline Contract time-phased budget planMR Management Reserve Budget withheld by Ktr PM for unknowns / risk managementUB Undistributed Budget Broadly defined activities not yet distributed to CAs CA Control Account Lowest CWBS element assigned to a single focal point to plan & control
scope / schedule / budgetWP Work Package Near-term, detail-planned activities within a CA PP Planning Package Far-term CA activities not yet defined into WPsBCWS Budgeted Cost for Work Scheduled Value of work planned to be accomplished = PLANNED VALUEBCWP Budgeted Cost for Work Performed Value of work accomplished = EARNED VALUEACWP Actual Cost of Work Performed Cost of work accomplished = ACTUAL COSTEAC Estimate At Completion Estimate of total cost for total contract thru any given level;
may be generated by Ktr, PMO, DCMA, etc. = EACKtr / PMO / DCMA
LRE Latest Revised Estimate Ktr’s EAC or EACKtr
SLPP Summary Level Planning Package Far-term activities not yet defined into CAs TCPI To Complete Performance Index Efficiency 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 Packages Planning Packages
OVERRUN AUW
Control Accounts
NCC
UndistributedBudget
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 / ACWPSchedule Efficiency SPI = BCWP / BCWS
VARIANCES Favorable is Positive, Unfavorable is Negative
Cost Variance CV = BCWP – ACWP CV % = (CV / BCWP) *100
Schedule Variance SV = BCWP – BCWS SV % = (SV / BCWS) * 100
Variance at Completion VAC = BAC – EACOVERALL STATUS
% Schedule = (BCWSCUM / BAC) * 100
% Complete = (BCWPCUM / BAC) * 100
% Spent = (ACWPCUM / 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 DurationCRITICAL PATH LENGTH INDEX (CPLI) (Schedule Metric)
TO COMPLETE PERFORMANCE INDEX (TCPI) # §TCPIEAC = Work Remaining / Cost Remaining = (BAC – BCWPCUM) / (EAC – ACWPCUM)
ESTIMATE AT COMPLETION #
EAC = Actuals to Date + [(Remaining Work) / (Efficiency Factor)]EACCPI = ACWPCUM + [(BAC – BCWPCUM) / CPICUM ] = BAC / CPICUM
EACComposite = ACWPCUM + [(BAC – BCWPCUM) / (CPICUM * SPICUM)]
# 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’Gold Card’
Management Reserve
Cost Variance
Schedule Variance
ACWP
BCWP
BCWS
$
EAC
TimeNow
Completion Date
PMB
TAB
BAC
time
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 RemainingWork Remaining
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 ) CPIc
EAC = BAC CPIc
EAC Concept
20
METHOD FORMULA
1. Cumulative CPI ACWPC +
2. Composite ACWPC +
3. 3-Month CPI ACWPC +
4. Weighted ACWPC +
BAC - BCWPC
CPIC X SPIC
BAC - BCWPC (BCWP) (ACWP) 3 MO
BAC - BCWPC
.8 CPIC + .2SPIC
Note: c Indicates cumulative data
EAC Methods
BAC - BCWPC
CPIC
21
TCPIEAC = Work RemainingBudget 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
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
• 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•Technical Baseline Risk•Resources•Processes
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
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
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
community2. Take action to help resolve/mitigate the problem
27
BACKUP CHARTSfor the
Integrated Baseline Review (IBR)
28
Integrated Baseline Review (IBR) Goal
Joint PM mutual understanding of the PMB content and the risk
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
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 AccountsSummary 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
OTBOverrun
NCC CBBAUW
31
Developing the PMB
Negotiated Contract CostMR
PMB
$
Time
2. Schedule
3. Budget
100 40
60
1. Scope 1. Decompose SOW 2. Extend WBS to
control accountwork package
1. Arrange work packages in order
2. Sequence over time
1. Budget the work packages2. Classify the work and select
an EV technique3. Calculate cumulative BCWS
Reports
32
CONTROLACCOUNT
CONTROLACCOUNT
CONTROLACCOUNT
CONTROLACCOUNT
Work Packages
COMPANY
TEST
ENG
MFG
DESIGN
MECHANICALDESIGN
ANALYTICAL DESIGN
DRAFTING/CHECKING
DATA
WORK BREAKDOWN STRUCTURE
SYSTEM
ENGINE TRAINING
FAN COMPRESSOR
FAN ASSEMBLY FULL SCALE RIG
STATOR ASSYROTOR ASSYCASE ASSY
LEVEL 1
LEVEL 2
LEVEL 3
LEVEL 4
LEVEL 5
Work Packages
40
100
60
Control AccountA Key Management Control Point
Control AccountA Key Management Control Point
33
BCWP CALCULATIONMETHOD LENGTH
3000 / 100 % 1 Mth
15 1550 / 50 % 2-3 Mths
35%% Complete Varies
5 15 10Variant
Milestone3 or More Mths
5%WP3 5%WP3Apportioned
EffortVaries
10 10 10Level of Effort Varies
EARNED VALUE TECHNIQUESEARNED VALUE TECHNIQUES
34
BACKUP CHARTS
35
wInsight Current Period
Date Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09Current
BCWS 11,245 9,898 9,898 6,325 5,974 4,568BCWP 10,425 9,371 9,605 6,208 6,032 4,744ACWP 11,772 10,659 10,601 7,028 6,560 5,388SCH VAR $ -820 -527 -293 -117 59 176SCH VAR % -7% -5% -3% -2% 1% 4%SPI 0.93 0.95 0.97 0.98 1.01 1.04COST VAR $ -1,347 -1,288 -996 -820 -527 -644COST VAR % -13% -14% -10% -13% -9% -14%CPI 0.89 0.88 0.91 0.88 0.92 0.88
Entries in Black are Input dataEntries in Black are Input dataEntries in Red are CalculatedEntries in Red are Calculated
36
wInsight Cumulative
Date Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09Cumulative
BCWS 66,649 76,547 86,445 92,770 98,744 103,312BCWP 63,276 72,647 82,252 88,460 94,492 99,236ACWP 68,945 79,604 90,205 97,233 103,793 109,181SCH VAR $ -3,373 -3,901 -4,193 -4,311 -4,252 -4,076SCH VAR % -5% -5% -5% -5% -4% -4%SPI 0.95 0.95 0.95 0.95 0.96 0.96COST VAR $ -5,669 -6,958 -7,953 -8,773 -9,300 -9,945COST VAR % -9% -10% -10% -10% -10% -10%CPI 0.92 0.91 0.91 0.91 0.91 0.913 MONTH CPI 0.90 0.89 0.88 0.89 0.89 0.90 6 MONTH CPI 0.92 0.91 0.90 0.89 0.89 0.89
37
wInsight At Completion
At CompletionTCPI - BAC 1.09 1.14 1.20 1.27 1.35 1.47 TCPI - EAC 1.34 1.42 1.61 1.83 2.07 2.62 CBB / TAB 130,149 130,149 130,149 130,149 130,149 130,149 EAC (Kr) 119,000 120,000 120,000 120,000 121,000 121,000 VAC $ 11,149 10,149 10,149 10,149 9,149 9,149VAC % 8.6% 7.8% 7.8% 7.8% 7.0% 7.0%% SCHED - BAC 51% 59% 66% 71% 76% 79%% COMP - BAC 49% 56% 63% 68% 73% 76%% SPENT - BAC 53% 61% 69% 75% 80% 84%SLIP IN WEEKS - - - - - -
38
wInsight EAC Forecasts
Date Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09EAC Forecasts
3 MO AVG 140,646 141,735 142,385 142,802 142,917 143,069 6 MO AVG 138,815 139,871 140,871 141,716 142,324 142,726 CUM CPI 141,810 142,614 142,734 143,057 142,959 143,192 CUR CPI 146,966 148,045 143,640 147,339 141,521 147,824 CPI*SPI 145,695 145,997 145,412 145,290 144,722 144,589
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
