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EVM: cutting the cost of earned value management.

Sixth in a series of articles

The Civilian Agencies and Industry Working Group (CAIWG) on Earned Value Management (EVM) recently released its guidance on Earned Value Management System (EVMS) reciprocity and EVM scalability. Both initiatives resulted in products that can be used to help lower the burden and cost of implementing EVM. The initiatives can be found at http://caiwg.mycpm.org.

In today's competitive environment, it is imperative that both government and industry seek ways to reduce costs and gain efficiencies. There is continuing discussion about the cost of implementing EVM, a disciplined process that identifies cost and schedule variances primarily based on comparisons between planned work and performed work. To date, numerous studies have offered insight into the real costs of using EVM. An article in the January-February 2017 issue of Defense AT&L ("EVM System's [EVMS] High Cost--Fact or Fiction?") concluded that EVM can be done in an efficient manner at a low cost if implemented correctly.

The CAIWG was created to bring civilian agencies together to share best practices for implementing EVM and to promote consistent integrated project management across agencies. Though not a formal member, the Department of Defense (DoD) participates in this group to help ensure consistency in the application of project management principles and EVM requirements across the government and industry.

Reciprocity Agreement

The intent of EVMS reciprocity is to create an established, universally applicable set of standards for use in conducting reviews across the government. The desire is to find a standard generic enough to address the requirements and objectives of any agency, yet specific enough to ensure that uniform rules are applied. This approach provides added value when EVM review reports are shared between agencies and departments and used to reduce the need for duplicative reviews.

The Office of Management and Budget (OMB) supported this reciprocity initiative. A presidential memo was issued on Oct. 23, 2015, to address reducing the burden of certifying Earned Value Management Systems. It stated:

... agencies are encouraged to enter into reciprocal agreements with
other agencies and to post their EVM processes and procedures on their
public websites. Sharing information should help identify redundancy
in the certification processes. If an agency determines that its
certification process is substantially similar to the certification
process of another agency, the agency should consider whether it is
feasible to enter into an agreement with the other agency for the
mutual recognition of the EVMS certification.


On this topic, the OMB released a statement in 2016 by Anne Rung, former administrator for the Office of Federal Procurement Policy, which stated:

We're committed to reducing the burden on both government agencies and
contractors, and our October 2015 guidance encouraging the use of
these reciprocity agreements for EVM system certifications is a
significant step in that direction. If agencies recognize each other's
certifications, we can avoid costly, duplicative compliance reviews.
NASA [National Aeronautics and Space Administration] and the FAA
[Federal Aviation Administration] are leaders in this area--having
been the first to sign an agreement recognizing each other's EVM system
certifications earlier [in 2016]--and we encourage other agencies to
consider a similar arrangement.


This memorandum of understanding (MOU) is intended to serve as an umbrella agreement that provides for the sharing of EVMS compliance reports between federal agencies. Agencies retain the right to make their own determination of system compliance in accordance with each organization's policies and procedures. It is also anticipated that agencies would enter into supplemental agreements providing more specific details tailored to the unique requirements of future projects and partnerships.

The first EVM reciprocity MOU was established by NASA and the FAA in March 2016. That MOU states that recognition of another agency's certification, as appropriate, eliminates duplicative compliance reviews and results in cost savings for both the contractor and the taxpayer. Both agencies agree that the other participant will recognize the supplier's EVMS as EIA-748 (EVMS Standard) compliant and will ensure that the system is continuously maintained. This MOU could result in significant savings to the government and contractors, given that an EVMS review can cost $1 million to $2 million and can take a few years to complete.

In December 2016, DoD also issued an umbrella EVMS reciprocity MOU, which established the sharing of EVMS review information with the aim of increasing the efficiency with which agencies determine a supplier's EIA-748 compliance. The MOU further recognizes that collaboration between agencies will help improve that efficiency. Under this reciprocity MOU, the FAA currently accepts EVMS certifications for industry by the Administrative Contracting Officer of the DoD's Defense Contract Management Agency. In addition, NASA has a standing MOU with DCMA to delegate EVMS reviews and surveillance activities among companies for which DoD already does this type of work.

The key to progress in EVM reciprocity is for those government agencies that are heavily involved with EVM--including DoD, NASA, FAA, the National Reconnaissance Office (NRO) and the Department of Energy--to establish a government-level standard for recognizing an EVMS. In the future, OMB and the CAIWG expect to see multiple agencies implement EVM reciprocity agreements and, over the long term, employ a single, government-wide reciprocity agreement.

Scalability Guide

In addition, the CAIWG developed an EVMS Scalability Guide that outlines how EVM implementation can be scaled to meet varying project needs. The Guide was developed specifically for organizations that typically don't have contracts that require EVM, or those lacking the large infrastructure typically supporting a fully compliant EVMS. This Guide was jointly developed with industry and is now part of the National Defense Industry Association (NDIA) document library.

Historically, EVM has been used on large development and production contracts, so prior to the EVMS Scalability Guide little guidance existed for smaller projects. The Guide enables EVM scalability based on project size, cost, risks, complexity and other factors. As the size and complexity of the project increases, so does the project controls requirement, as indicated in Figure 1 (which initially appeared in the NDIA's Earned Value Management System Guideline Scalability Guide, issued in November 2016).

Figure 2, also drawn from the NDIA Scalability Guide, is an example of a responsibility assignment matrix for a small project with a limited number of control accounts. As the project grows in size and complexity, the application of earned value management techniques also will increase.

The Scalability Guide also is intended for suppliers that may not have a contractual requirement in place for EVM but would like to benefit from implementing EVM practices. The Guide is intended for industry and government personnel within:

* Entities such as universities, laboratories, small businesses and suppliers with small to midsize projects

* Large organizations with small projects that issue contracts to small businesses or other suppliers that may not have an existing EVMS in place

* Any government agency with small contracts and an EVM requirement

Although this document is primarily targeted at contractors, there is a requirement within government agencies and organizations to follow the process outlined in the OMB Circular A-11, Capital Planning Guide for government in-house projects with development work. The EVM Scalability Guide can provide government project teams with information on optimizing their EVM implementation based on each project's characteristics.

The Scalability Guide is intended to provide guidance for setting up and establishing fundamental project management processes rather than focusing on EVM-specific information. The Guide's initial chapters cover planning and organizing the work, such as establishing a Work Breakdown Structure (WBS) and assigning responsibility. Subsequent topics include scheduling work and establishing budgets. The Guide then transitions into the execution phase of the project: managing a baseline, controlling changes, managing subcontracts and material, controlling costs and analyzing data that can be used to make project management decisions.

The Scalability Guide has received a positive response both from industry and government partners, largely because the Guide effectively takes into consideration all 32 guidelines from the EIA-748 EVMS Standard. It further provides tips and suggestions for each guideline and identifies ways they can be scaled, thus gaining the full value of EVM while reducing the burden of implementing a compliant EVMS.

Small organizations without the full benefit of a corporate EVMS also should realize a significant benefit from the Guide. For example, a university's accounting system may be limited to collecting labor costs at the top WBS level of a project. The guide offers options for establishing budgets and collecting costs when an organization's accounting system is under constraints. It also discusses workaround plans to address other limitations within other business systems that support EVM.

In summary, discussion of the cost and burden of EVM is not likely to decrease any time soon. The civilian agencies have taken the initiative, however, to reduce the burden and costs associated with EVM by developing EVMS reciprocity agreements and the EVM Scalability Guide, which respectively can reduce duplicative future EVMS reviews and provide guidance for small projects to customize EVM for optimal project management.

For more information on the CAIWG activities, visit the website at http://caiwg.mycpm.org.

Kerby is NASA's Earned Value Management (EVM) Program Executive and chairman of the Working Group that supports EVM implementation and development of NASA's EVM policy and handbooks. He also is responsible for providing both classroom and hands-on EVM and data analysis training to the project management community at NASA and the Marshall Space Flight Center in Alabama. He has a bachelor of science degree from Alabama's Athens State University and a master of science degree from the Florida Institute of Technology. Forbes is the Federal Aviation Administration (FAA) EVM Focal Point. She is an active member of the Civilian Agency Industry Working Group and ensures the EVM implementation on FAA programs. Terrell is a program analyst with more than 8 years of industry and government experience on all matters related to scheduling and EVM.

Th e authors can be contacted at jerald.g.kerby@nasa.gov; matoka. forbes @faa.gov andstefanie.m.terrell@nasa.gov.
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Title Annotation:EARNED VALUE MANAGEMENT
Author:Kerby, Jerald; Forbes, Matoka; Terrell, Stefanie
Publication:Defense AT & L
Date:May 1, 2017
Words:1647
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