Earned Value Management Expectations Presentation to the NDIA/ICPM November 18, 2008 David G. Ahern Director, Portfolio Systems Acquisition Deputy Under Secretary of Defense (A&T)

Improving Contract Performance Program & Integrated Project Management EVM Roles & Responsibilities EVM Issues Data-Related Concerns Current/Future Initiatives Agenda

How are DoD Contracts Performing? Notional Data: For illustrative Purposes only

BRIEF DATE: August 12, 2008 CONFIG. MGR: Steven Corum, AIR-4.2.3, (301) FILE NAME: ahern_ndia_brief_ ppt Improving Program Performance INFORMATION VISIBILITY EXECUTION PLANNING lessons learned Burning Platform Cockpit Chart PARTNERING WITH INDUSTRY Improvement Activity “Lean Six Sigma” Cost Risk Assessment PROGRAM BASELINE Technical Risk Assessment REQUIREMENTS DEFINITION Solid Understanding of RequirementsRealistic Baseline Transform Data into InformationContinuous Improvement Collaborative Process Leading Indicators Schedule Risk Assessment Technical Underpinnings

BRIEF DATE: August 12, 2008 CONFIG. MGR: Steven Corum, AIR-4.2.3, (301) FILE NAME: ahern_ndia_brief_ ppt DoD Program Management Acquisition Planning APB Source Selection Plan Award Fee SAR/DAES Project Status/CPI & SPI Estimate at Completion Staffing Tasks Completed Management Processes Risk Mitigation Technical Reviews TWO DISTINCT BUT RELATED AREAS OF FOCUS Acquisition Program Management Integrated Project Management (IPM) CostSchedule Technical IPM IPM/EVM Is Not Just CPI & SPI

BRIEF DATE: August 12, 2008 CONFIG. MGR: Steven Corum, AIR-4.2.3, (301) FILE NAME: ahern_ndia_brief_ ppt Integrated Project Management Earned Value Management CostScheduleTechnical IPM Contract Requirements Source Selections Award Fee Criteria Program Item Descriptions (PID) Management System Assessments (MSAs) Integrated Baseline Reviews (IBRs) Integrated Master Schedule (IMS) Cost Analysis Requirements Description (CARD) Risk Identification Key Performance Indicators (KPPs) Resource Forecasts PLANNING Technical Reviews (PDR, CDR, etc.) Management System Assessments (MSA) Integrated Baseline Reviews (IBRs) Award Fee Determination Schedule Risk Assessments (SRAs) Program Management Baseline (PMB) Estimates at Completion (EACs) Risk Mitigation Program Performance Measurement Burn Rate Trends Management Reserve Usage Staffing Plans Baseline Execution Evaluations EXECUTION IPM = Cost, Schedule And Technical Integration “The Application of Basic Project Management Principles” IPM = Cost, Schedule And Technical Integration “The Application of Basic Project Management Principles”

Program Offices –Get the correct EVM requirements on contract –Use the EVM information to manage –Take action based on EVM information –Hold suppliers accountable for providing good information Defense Contract Management Agency (DCMA) –Review EVMS plans; verify initial and continuing system compliance Conduct EVMS reviews Conduct ongoing EVMS surveillance –Work with government program offices and suppliers Suppliers –Use EVM as a management tool –Implement and maintain a compliant EVMS –Provide good EVM information to the government –Ensure proper flow down to subcontractors EVM Roles and Responsibilities EVM roles and responsibilities clearly delineate authority and accountability for monitoring use of EVM EVM roles and responsibilities clearly delineate authority and accountability for monitoring use of EVM

Issue: EVM requirements incorrectly placed on contract –EVM not being used as management tool; perception EVM is just a financial report –Failure to include applicable EVM requirements –Inappropriately modifying EVM requirements; incorrectly tailoring DIDs for CPR and IMS –Specifying contract requirements not consistent with EVM policy and EVMS guidelines –Use of EVM not considered in contract type selection decisions –Disallowing use of contractor’s EVMS on contracts not requiring reporting Action: Ensure EVM requirements are identified and incorporated into solicitations and contracts, and are then properly executed –Work closely with program manager and EVM community throughout acquisition process –Involve EVM subject matter experts in establishing and implementing contract requirements (statement of work (SOW), request for proposals (RFP), CDRLs) –Consider EVM implications when selecting contract type –Discuss requirements in pre- and post-award conferences or similar forums –Include EVM on agenda at contracting meetings and conferences –Ensure the “right” EVM training is provided to contracting community EVM Requirements It’s important to get the EVM requirements right up front – fixing problems later is more painful … and costly It’s important to get the EVM requirements right up front – fixing problems later is more painful … and costly

Issue: Contract incentives that counter EVM’s objectives –Contracting policies can work at cross purpose with EVM –Use of award fee incentives that drive undesired behavior – incentivizing achievement of good numbers rather than good performance –Result is PMs are denied objective performance information on their programs Action: Find better ways to incentivize contractors (better use of fees) –Avoid use of cost and schedule indices (CPI and SPI) as only EVM- related award fee criteria –Work with EVM community to devise objective, yet effective, contract incentives –Consult EVMIG for ideas on appropriate EVM-related incentives (e.g., realistic and current cost and schedule forecasts) Contract Incentives Paying contractors to maintain cost and schedule indices within predetermined boundaries encourages undesirable behavior Paying contractors to maintain cost and schedule indices within predetermined boundaries encourages undesirable behavior

Issue: Deficiencies in contractor EVM systems –Lack of knowledge by control account managers –Span of control issues –Inadequate schedules –Data integration and integrity problems –Undisciplined work authorization and change control processes –Poor variance analyses –No formal corrective action processes –Inadequate estimate at completion procedures –EVM used to report data, not to manage Action: Contact DCMA for help with contractor EVMS problems –Work with local DCMA EVM specialist and/or the EVM Center –Implement appropriate remedial actions for EVMS non-compliance Contractor EVM Systems Based on findings from recent DCMA EVMS compliance reviews

Issue: Lack of timely, realistic, and executable Performance Measurement Baseline (PMB) –Conduct of IBRs impacted by delays in defining work scope –Contractual direction to defer baseline planning until definitization –Incongruities between SOW and PMB (e.g., undefinitized contract actions) –Lag time in incorporating changes into baseline Action: Know, understand, and implement ways to improve timeliness and quality of baseline planning and execution –Ensure IBRs are conducted within 180 days after contract award, and after exercise of significant options or major modifications –Stop direction to delay baseline planning until after contract definitization –Incorporate authorized unpriced work into PMB – detail plan near-term effort –Work with EVM community to ensure integrity of work scope and PMB – achievable contract schedule and proposal estimate Baseline Planning/Execution Establishing an executable baseline is a critical prerequisite to the successful implementation of EVM Establishing an executable baseline is a critical prerequisite to the successful implementation of EVM

Things To Watch Out For Direction in SOW or H-clauses that contradict policy (DFARS) or conflict with supplier’s validated system (EVMS guidelines) Contract changes by individuals other than warranted contracting officers Use of EVM cost and schedule indices as fee incentives Retroactive changes to baseline except to correct errors Single point adjustments to baseline that eliminate cost and/or schedule variances Improper contract direction on use of management reserve Reallocation of budgets to mask overruns Failure to apply EVM to “discrete” work on LOE contracts Contracting officers can help improve EVM compliance

BRIEF DATE: August 12, 2008 CONFIG. MGR: Steven Corum, AIR-4.2.3, (301) FILE NAME: ahern_ndia_brief_ ppt Leading Indicators – Contractor Staffing And Task Completion Skills Staffing And Task Completion Inextricably Linked INITIAL RESULTS INDICATE FEW CONTRACTORS HAVE THE CAPABILITY TO DEVELOP AND MAINTAIN A HEALTHY INTEGRATED MASTER SCHEDULE. PRIMES WHO SUBCONTRACT LARGE PORTIONS OF WORK EXPERIENCE GREATER SCHEDULE DEVELOPMENT & MAINTENANCE DIFFICULTY, PARTICULARLY IF WORK IS SUBBED USING FFP. PRIMES ARE EXPERIENCING SKILLS SHORTAGES AND OVERAGES – MOST ARE INCAPABLE OF ACCURATELY PREDICTING OR FULFILLING SKILLS DEMANDS FOR +1 MONTH. SUBCONTRACTED WORK IS INCREASING; UP TO 7-FOLD INCREASES IN BUY DECISIONS OVER PRIOR EFFORTS, UP TO 3-FOLD INCREASES IN SKILLS SUBCONTRACTING FOR DESIGN EFFORTS. LAUNCHED THREE ANALYSIS ACTIVITIES –SCHEDULE CAPABILITY –SKILLS STAFFING ENVIRONMENT –SUBCONTRACTING ENVIRONMENT INCOMPLETE WORK STAFFING SHORTFALL MICRO ANALYSISMACRO ANALYSIS UNDERSTAFFED * equivalent of 3 man-months per person INCOMPLETE WORK * >40% of delinquent tasks not yet started

Enterprise Data Quality Dimensions

EV / Funding Data Quality EVM Data Quality: Unacceptable for Critical Measurements and Decision-making Funding Data Quality: Acceptable for Critical Measurements and Decision-making

EVM Data Integrity

Current/Future Initiatives Outreach to contracting and program management communities Contractor EVMS reviews; new DCMA EVMS surveillance process EVM “trip wire” metrics; other data analysis efforts Implementation of EVM Central Repository on all major programs Assessments of program compliance with EVM reporting requirements Review of EVM training across the curriculum New program start-up workshops/expanded post-award conferences Review of EVM policy and practices Over Target Baseline/Over Target Schedule Handbook Many initiatives are ongoing to address the issues and challenges, but we need your help Many initiatives are ongoing to address the issues and challenges, but we need your help