Roberta Tomasini Defense Acquisition University

DSN 655-3764703-805-3764

roberta.tomasini@dau.mil

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)

• 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 (TY $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

NOTE: CPR DID, Jul 2005, DI-MGMT-81466A new IPMR DID, 20 Jun 2012, DI-MGMT-81861

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

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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

17

Gold Card

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

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

24

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

25

Any Questions?

26

BACKUP CHARTSfor the

Integrated Baseline Review (IBR)

27

Integrated Baseline Review (IBR) Goal

Joint PM mutual understanding of the PMB content and the risk

28

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?

29

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

30

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

31

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

32

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

33

BACKUP CHARTS

34

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 2 and Format 5

35

• 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

36

• 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

37

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

38

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

39

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 - - - - - -

40

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

41

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