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Roberta Tomasini Defense Acquisition University DSN 655-3764 703-805-3764 roberta.tomasini@dau.mil

Earned Value and the Acquisition Program. 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)

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Roberta Tomasini Defense Acquisition University DSN 655-3764 703-805-3764 roberta.tomasini@dau.mil

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  1. Earned Valueandthe Acquisition Program Roberta Tomasini Defense Acquisition University DSN 655-3764 703-805-3764 roberta.tomasini@dau.mil

  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. Performance Schedule Earned Value Management Cost 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 Enables Trend Analysis & CAIV Trades Industry Standard ANSI/EIA-748-2007 DoD & Industry embrace EARNED VALUE as a Risk Management Tool

  5. Earned Value Terminology Acronym Term Meaning BCWS Plan - Baseline - PMB Budget Cost of Work Scheduled 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 Accomplishment Variance SV Schedule Variance EV vs Actual Cost CV Cost Variance Forecasted Overrun / Underrun VAC Variance At Completion

  6. 22 } Management Reserve 20 18 16 14 Budget at Completion Performance Measurement Baseline 12 10 Cumulative Budgeted Cost of Work Scheduled 8 6 4 2 0 0 2 4 6 8 10 12 14 16 18 20 The Time-Phased Spend Plan NEGOTIATED CONTRACT COST = Target Cost $ BAC PMB BCWS Completion Point Months

  7. Earned Value Management GuidanceNew Policy Established in March 2005 Risk Based Decision Cost Reimbursement & Incentive Contracts (EVM on FFP, LOE & T&M Contracts Discouraged) Contract Type Acquisition Funding Dollar thresholds are the same for all budget appropriation categories. Color of money is no longer an EVM discriminator. Conformance with ANSI / EIA 748 Formal EVMS validation required Conformance with ANSI / EIA 748 Formal EVMS validation not required EVM System Requirements No Mandatory Requirements Contract Performance Report (DI-MGMT-81466) (5 formats) Contract Performance Report (DI-MGMT-81466) (Tailored) EVM Data Requirements Integrated Master Schedule (DI-MGMT- 81650) Integrated Master Schedule (DI-MGMT-81650) (Tailored) Contract Value (FY TBD Constant $M) 50 0 20

  8. EV in Program Execution • Data Reporting • Data Analysis • Variances • Performance Indices • Trends • Estimates at Completion (EACs) • To Complete Performance Index (TCPI)

  9. NEGOTIATION SOURCE SELECTION ACQUISITION AWARD PROJECT STRATEGY DEVELOP RFP STATUS Program Execution& Performance Measurement REPORTS ESTABLISH Perf Meas. BASELINE DEVELOP PROPOSAL MGT VOLUME ASSESS RISK TECH VOLUME DEVELOP MR ASSIGN BUDGETS COST VOLUME Earned ValueWithin the Acquisition Process GOVERNMENT PROVIDER

  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. CPR Format 1: WBS BCWS BCWP ACWP BCWS BCWP ACWP SV CV SV 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. 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) TRENDS RELATIONSHIPS

  14. BCWP The Earned Value Current Status Imposed On The Spend Plan NEGOTIATED CONTRACT COST } Management Reserve BCWS }SV Budget at Completion (BAC) ACWP }CV $ Completion Point Months Time Now

  15. CV SV Cumulative Dollar VarianceCost and Schedule Trends $ in Millions 1.0 0 (1.0) (2.0) (3.0) (4.0)

  16. Performance Metrics Percent Complete • = BCWP/BAC • = 10/20 = 50% Percent Spent • = ACWP/BAC • = 13/20 = 65% Schedule Performance Index • = BCWP/BCWS • = 10/14 = .71 • Cost Variance = BCWP - ACWP = 10-13 = -3M • Schedule Variance = BCWP - BCWS = 10 - 14 = -4M • Cost Performance Index = BCWP/ACWP = 10/13 = .77 Estimate at Completion BAC/CPI = 20/.77 = $26M

  17. Contract Price Profit / Fees TAB NCC CBB OTB AUW OVERRUN EAC PMB Management Reserve TAB Management Reserve Undistributed Budget Control Accounts Summary Level Planning Packages BAC PMB Work Packages Planning Packages Schedule Variance TERMINOLOGY NCC Negotiated Contract Cost Contract price less profit / fee(s) AUW Authorized Unpriced WorkWork contractually approved, but not yet negotiated / definitized CBB Contract Budget BaseSum of NCC and AUW OTB Over Target BaselineSum of CBB and recognized overrun TAB Total Allocated BudgetSum of all budgets for work on contract = NCC, CBB, or OTB BAC Budget At Completion Total budget for total contract thru any given level PMB Performance Measurement Baseline Contract time-phased budget plan MR Management Reserve Budget withheld by Ktr PM for unknowns / risk management UB Undistributed Budget Broadly defined activities not yet distributed to CAs CA Control Account Lowest CWBS element assigned to a single focalpoint to plan & control scope / schedule / budget WP Work Package Near-term, detail-planned activities within a CA PP Planning Package Far-term CA activities not yet defined into WPs BCWS Budgeted Cost for Work ScheduledValue of work planned to be accomplished = PLANNED VALUE BCWP Budgeted Cost for Work PerformedValue of work accomplished = EARNED VALUE ACWP Actual Cost of Work PerformedCost of work accomplished = ACTUAL COST EAC 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-DoDFAR 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. Cost Variance $ ACWP BCWS BCWP time Time Now Completion Date BASELINE EXECUTION INDEX (BEI) (Schedule Metric) BEI = # of Baseline Tasks Actually Completed / # of Baseline Tasks Scheduled for Completion EVM Home Page = https://acc.dau.mil/evm eMail Address: EVM.dau@dau.mil DAU POC: (703) 805-5259 (DSN 655) Revised January 2009 Earned Value Management ‘Gold Card’ VARIANCESFavorable is Positive, Unfavorable is Negative Cost VarianceCV = BCWP – ACWP CV % = (CV / BCWP) *100 Schedule Variance SV = BCWP – BCWS SV % = (SV / BCWS) * 100 Variance at Completion VAC = BAC – EAC OVERALL STATUS % Schedule = (BCWSCUM / BAC) * 100 % Complete = (BCWPCUM / BAC) * 100 % Spent = (ACWPCUM / BAC) * 100 DoD TRIPWIRE METRICSFavorable is > 1.0, Unfavorable is < 1.0 Cost Efficiency CPI = BCWP / ACWP Schedule Efficiency SPI = BCWP / BCWS CRITICAL PATH LENGTH INDEX (CPLI) (Schedule Metric) CPLI = (Critical Path Duration + Float Duration (to baseline finish)) / Critical Path Duration 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

  18. Budget at Completion = $20M BCWS = $14M (Planned to date) ACWP = $13M Work Remaining BCWP = $10M (EV) Estimate at Completion(EAC) EAC = Actual Costs accumulated to date + Estimated Cost of the Work Remaining

  19. EAC = ACWP + Work Remaining • Performance Factor • EAC = ACWP + (BAC - BCWP ) • CPIc • EAC = BAC • CPIc EAC Concept EAC = ACWP + Estimate to Complete Note: This EAC assumes that future performance will be the same as that represented by CPIc.

  20. BAC - BCWPC (BCWP) (ACWP) 3 MO BAC - BCWPC .8 CPIC + .2SPIC EAC Methods METHODFORMULA 1. Cumulative CPI ACWPC + 2. Composite ACWPC + 3. 3-Month CPI ACWPC + 4. Weighted ACWPC + BAC - BCWPC CPIC BAC - BCWPC CPIC X SPIC Note: c Indicates cumulative data

  21. 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 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. 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 Primary Trip Wires • EVM Center Contractor EVMS confidence rating • Corrective Action Requests (CAR Levels 1-4) • EVM System maturity levels

  24. 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%

  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 community 2. 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. Contract Price Total Allocated Budget CBB NCC Fee/Profit OTB AUW Performance Measurement Baseline Management Reserve - Withheld for Unknowns - No Scope or Schedule Undistributed Budget Control Accounts Summary Level Planning Packages - Temporary Holding - Work Authorized but no detailed Budget or Schedule - Specific Scope @ higher WBS level - Time-phased budget - Strict Controls Work Packages Planning Packages - Integrated Scope, Schedule & Budget - No Detailed Plans - Integrated Scope, Schedule & Budget - Detailed Plans PMB Budget Allocation Top - Down Version 3 Overrun

  31. 1. Scope Negotiated Contract Cost MR $ PMB 2. Schedule 3. Budget 100 Time 40 60 Developing the PMB Reports 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

  32. WORK BREAKDOWN STRUCTURE LEVEL 1 SYSTEM LEVEL 2 ENGINE TRAINING LEVEL 3 FAN COMPRESSOR LEVEL 4 FAN ASSEMBLY FULL SCALE RIG TEST LEVEL 5 STATOR ASSY ROTOR ASSY CASE ASSY DATA COMPANY ENG 40 MECHANICAL DESIGN CONTROL ACCOUNT 100 DESIGN CONTROL ACCOUNT ANALYTICAL DESIGN 60 MFG Work Packages DRAFTING/ CHECKING CONTROL ACCOUNT CONTROL ACCOUNT Control AccountA Key Management Control Point Work Packages

  33. 0 / 100 % 1 Mth 30 0 50 / 50 % 2-3 Mths 15 15 % Complete Varies 35% Variant Milestone 3 or More Mths 5 15 10 Level of Effort Varies 10 10 10 5%WP3 5%WP3 Apportioned Effort Varies EARNED VALUE TECHNIQUES LENGTH METHOD BCWP CALCULATION

  34. BACKUP CHARTS

  35. wInsight Current Period Entries in Black are Input data Entries in Red are Calculated

  36. wInsight Cumulative

  37. wInsight At Completion

  38. wInsight EAC Forecasts

  39. OSD Position on EACs: 20% • 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 more greater

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