PM TOOLS SESSION

1. PM TOOLS SESSION Earned Value Management Presented By Paul R. Aaron, PMP October 19, 2004 Washington DC Chapter Project Management Institute

2. Overview Background EIA-748 Criteria Analysis and Management Reports Cost Performance Report EVMS Validation Process Integrated Baseline Review Summary

3. Background

4. OMB EVM Policy Policy Guidance Purpose • Unified guidance to support OMB reporting to Congress (inc. Info Technology) • Circular A-11 Policy • Capital Programming Guide • Agencies must establish cost, schedule and performance goals for major acquisitions and then achieve, on average, 90% of those goals • Requires use of earned value “or similar performance based management system OMB Circular A-11 Part 7 Capital Programming Guide

5. OMB EVM Policy Exhibit 300 Reporting EIA-748 GuidanceThe information required by this section will be provided by your earned value management system (EVMS) and the EVMS software program you use that meets the ANSI/EIA Standard 748 (see section 300.4(earned value management)). Information on earned value management systems is available at http://www.acq.osd.mil/pm.

6. OMB EVM Policy Exhibit 300 Reporting EIA-748 Guidance ContinuedName the software program that meets ANSI/EIA Standard 748 that you will use, or are using, to monitor and manage contract and project performance. If the project is operational (steady state), define the operational analysis system that will be used. If this is a mixed life-cycle project with both operational and development/modernization/ enhancement (DME) system improvement aspects, EVMS must be used on the system improvement aspects of the contract and operational analysis on the operations aspects. Using information consistent with the work breakdown structure (WBS), provide the information requested in all parts of this section.

7. EIA-748 Criteria

8. EIA-748-A Criteria Five Categories and 32 Guidelines 1. Organization (5) 2. Planning and Budgeting (10) 3. Accounting Considerations (6) 4. Analysis and Management Reports (6) 5.Revisions and Maintenance (5) Electronic Industries Alliance

9. EIA-748-A Criteria Analysis and Management Reports 1. Identify monthly, at the Control Account level, variances among Budget, Earned Value and Actual Costs. 2. Identify monthly, differences between planned and actual schedule accomplishment. 3. Identify monthly, variances between budget and actual indirect costs. 4. Summarize all data by WBS and OBS. 5. Identify managerial actions taken to correct problems. 6. Update the Estimate of Cost at Completion.

10. EIA-748-A Criteria Earned Value Terminology • PV (Planned Value) - Approved cost estimate planned to be spent on the activity during a given period. (PV) a.k.a (BCWS) • AC (Actual Cost) - Total costs incurred on the activity during a given period. (AC) a.k.a (ACWP) • EV (Earned Value) - The value of the work actually completed. (EV) a.k.a (BCWP)

11. EIA-748-A Criteria Earned Value Terminology

12. EIA-748-A Criteria Earned Value Terminology

13. EIA-748-A Criteria EVM Terminology

14. EIA-748-A Criteria EV Terminology Total Project Cost (TPC) Contract Price Undistributed Portion of TPC CBB (TAB) Profit / Fee Management Reserve PMB Undistributed Budget Control Accounts Planning Packages Work Packages

15. Decision Support System Top Management (sponsor) Control Account Manager PM

16. Analysis and Management Reports

17. Analysis and Management Reports 1. Identify monthly, at the Control Account level, variances among Budget, Earned Value and Actual Costs. Management Value Performance data allows reconciliation to the accounting system and provides management controls. Project manager can focus on areas of need. Consequences and Implications Without schedule and cost variance data, root causes are not visible early in the project, which could result in a negative impact to the project later.

18. Analysis and Management Reports 2. Identify monthly, differences between planned and actual schedule accomplishment. Management Value All levels of management has the rapid and effective ability to implement corrective actions when both schedule and cost deviations are noted. Cost Variance is predictive if the future performance does not change. Consequences and Implications If schedule variance analysis are not address, corrective actions are implemented in a time manner which could affect the completion of the project

19. Analysis and Management Reports 3. Identify monthly, variances between budget and actual indirect costs. Management Value Indirect cost analysis provides the ability to implement corrective actions to prevent indirect cost overruns. Consequences and Implications If indirect costs are not analyze then corrective actions are implemented in a timely manner which could affect the cost of the project or profit to the performing organization.

20. Analysis and Management Reports 4. Summarize all data by WBS and OBS. Management Value Allows project manager to allocate available resources to mitigate project risk. Problem areas from all levels of organization can be identified from the same data. Consequences and Implications Without the data for WBS and OBS internal and external reports performance reports may have reporting discrepancies.

21. Analysis and Management Reports 5. Identify managerial actions taken to correct problems. Management Value Allows management early insight into identifying problems. Consequences and Implications Without the data being available on a timely basis, effective management decisions would not be made to mitigate project impacts and correct problems in a timely manner.

22. Analysis and Management Reports 6. Update the Estimate of Cost at Completion. Management Value Allows project manager to increase the probability that the project will be executed within the reported EAC.. Reduces the element of surprise. Consequences and Implications Without the CAM evaluating the performance data a valid EAC would not be achieved.

23. Cost Performance Reports

24. Cost Performance Reports Format 1 Format 2 Format 3 Format 4 Format 5

25. Cost Performance Reports Format 1 Format 1 provides summary level data to measure cost and schedule performance using a Work Breakdown Structure (WBS) layout.

26. Cost Performance Reports Thresholds determines the color

27. Cost Performance Reports Format 5 Format 5 is a narrative report used to explain significant cost and schedule variances and other identified contract problems and topics. Below is print out of the type of data reported in a Format 5. Research has indicated that two thirds of the costs associated with EVMS can de attributed to variance analysis reporting Quantitative or Qualitative Report?

28. EVMS Validation Process

29. EVMS Validation Process The EVMS Certification Process Requirement in request for proposal Requirement in contract Progress Assistance Visit Validation and System Acceptance Letter

30. Integrated Baseline Review

31. Integrated Baseline Review The government program manager and technical staff conducts this review after the contract award to verify the technical content of the performance measurement baseline To make sure that the scope, schedule and cost baselines are established. Required by law

32. Summary Background EIA-748 Criteria Analysis and Management Reports Cost Performance Report EVMS Validation Process Integrated Baseline Review

33. Works Cited EIA-748-A ($60.00) Global Engineering Documents 15 Inverness Way East Englewood, CO 80112-5704 1-800-854-7179 National Defense Industrial Association NDIA ANSI EIA 748 Intent Guide Kemps, Robert R., “Fundamentals of Project Performance Measurement”, Humphrey's and Associates, 2004

34. Discussion and Questions?