1. Earned Value Management (EVM) Fundamentals
Lunch & Learn
Jan 14, 2015
TECHNICAL
Scope &
Performance Goals
Integrating Tool
EVM
SCHEDULE
Constraints
& Milestones
COST
Goals
& Projections
Presented by:
Defense Acquisition University
Joel Little

2. The EVM Process - Integrated Program Management -
An Integrated Plan Is Established (PMB)
Work Is Defined, Scheduled, and Resources Are Allocated to Lowest Level for Execution
Risks Are Identified (the IBR Process)
Risk Management Plan Established
Budgets Are “Earned” As Work Is Completed (Earned Value)
Actuals Are Accumulated (ACWP)
Status Provided Against Baseline (PMB)
Variances Are Isolated (Cost/Schedule Drivers)
Early Warning
Management Actions
Corrective Action Identified & Implemented
Changes Are Implemented & Controlled
Final Estimated Cost & Schedule are Forecast
Planning
Executing
Controlling
Internal & External Changes
Pre-award Requirements Definition. Post Award Planning: Define Contract Effort to WBS Elements. Extend to Control Account/Work Package Level. Assign Responsibility. Schedule Work Packages and Allocate Budgets. Validate the Baseline (IBR) – Is the Plan Executable?
Look at WBS Milestones; Weekly Schedule Status; and Assess Progress. Validate Monthly Performance Using the Earned Value (EV) Metrics - Obtain Earlier EV Data (Flash Report)
Internal Process for Using EV Data:
-Monthly Discussions of Cost &
Schedule Performance With
Contractor Counterparts
-Participate in Mgmt Decisions &
Corrective Action Planning
Manage the Estimate At Completion (EAC)

3. DoDI 5000.02 EVM Policy Guidance
Contracts ≥ $50M TY
Compliance with 32 EVMS Guidelines
Formal EVM system validation
Contract Performance Report*
Integrated Master Schedule*
Baseline Reviews
Ongoing surveillance
Contracts < $20M TY
EVM optional (risk-based decision)
Cost-benefit analysis required
Contracts ≥ $20M but < $50M TY
No Formal EVM system validation
Contract Performance Report (tailored)*
Integrated Master Schedule (tailored)*
Integrated Baseline Reviews
Contracts -- Cost/Incentive contracts, subcontracts, intra-government work agreements. EVM Discouraged on FFP.
EVMIG also discourages EVM when nature of work is LOE or Time & Material.
* Integrated Program Management Report replaces CPR and IMS on RFPs issued after 1 July 2012 (AT&L Memo, Jun )
This slide reflects Dec 2008 version of DoDI EVM requirements. This policy grew out of a March 2005 policy that requires EVMS on cost or incentive contracts, subcontracts, and intra-government work agreements ≥ $20M TY. Efforts > $50M TY, the earned value management system must be formally validated and accepted by the contracting officer. EVMS is discouraged for DoD Firm Fixed Price; EVMIG also includes discussion on discouraging use on LOE and T&M work. Implementation of EVM on contracts < $20M is a risk-based decision at the discretion of the program manager and requires completion of a cost benefit analysis. Policy also requires use of common work breakdown structure in accordance with the DoD MIL-STD-881, completion of an IBR, use of the CPR, data item number DI-MGMT and use of the IMS, data item number DI-MGMT-81650, whenever EVM is required
Instructor Note in DoDI Earned Value Management is moved to Table E4.T5. contains EVM implementation policy. The Defense Acquisition Guidebook (reference (d)) and DoD Earned Value Management Implementation Guide (reference (bf)) contain supporting information.
NOTE: DI-MGMT Supersedes CPR and IMS DiDs for contracts awarded based on Solicitations or RFPs issued on or after 1 July (next slide has details)
EVMIG Non-Schedule-Based Contracts exclude LOE activity and T&M and EVM threshold tables
EVMIG Exclusions for Firm Fixed Price (FFP) Contract Type discouraged and says to reevaluate contract type if you decide to use this waiver.
EVMIG Contracts Less than $20M.
Must get a CPR and IMS if you invoke the EVM requirement
Even if you tailor the CPR, you must always get formats 1 and 5 when < $50M.

4. Section I - General Provisions
FAR Clauses – July 2006
FAR – Notice of EVMS – Pre-Award IBR
FAR – Notice of EVMS – Post Award IBR
FAR – EVMS – The Gov will conduct an IBR if a pre-award IBR has not been conducted.
DFARS Section – Solicitation provisions & contract clause (Dec 2011)
Use the provision at DFARS , Notice of Earned Value Management System, instead of the provisions at FAR and FAR in the solicitation
Use the clause at DFARS , Earned Value Management System, instead of the clause at FAR in the solicitation and contract.
Use DFARS , Contractor Business Systems, to allow for withholding payments due to non-compliant EVMS issue
Includes links to procedures on performing cost benefit analyses and waivers
Revised EVM Policy / Guidance: DFARS Clauses –
In July 2006 three new EVMS FAR clauses were published. FAR is a solicitation clause requiring an IBR be completed before contract award. FAR is a solicitation clause allowing an IBR after contract award. The new FAR is an EVMS contract clause and complements either of the solicitation clauses. They are very generic and are used by the other federal agencies to implement EVM.
EVMS Defense Federal Acquisition Regulation Supplement clauses were created to address the revised March 2005 earned value management policy. For contracts ≥ $50M, these clauses should be applied directly.
To avoid potential confusion regard the selection of FAR or DFARS clauses, it is DoD Policy that the EVM DFARS clauses are equivalent to the EVM FAR clauses and only the EVM DFARS clauses will be used on DoD contracts.
Non-compliance issues with regard to earned value management should be handled in the same manner as any other contractual problem. End of narration.
NOTE: While the DFARS clauses do not have a provision for Pre-Award IBRs, some programs do it by including tasks to perform and IBR as an exit criteria to existing work to allow for exercise of follow-on options on a contract. Some down-select based acquisitions have it as an exit criteria prior to the next option exercise or contract award. There are two issues with Pre-award IBRs:
IBRs take at least a week per offerer, just like they would if we were doing this post-award and most programs do not have that much time available to devote to this activity once they enter source selection. If you can’t get details or don’t have time to review them all, and IBR is a waste of time.
Losing contractors cannot include the cost of lost contract bids in the overhead rates of government contracts so there is no way for contractors to recoup the additional proposal cost of developing a more detail plan or of participating in the IBR.
DoD Contracts will NOT use FAR Clauses for EVM

5. Section J - Exhibits/Attachments
Work Breakdown Structure - MIL-STD-881 mandatory common WBS for CPR, IMS, IPMR & CCDRs through WBS Level 3
EVM Related Data Item Descriptions (DIDs)
Contract Performance Report DI-MGMT-81466A
Integrated Master Schedule DI-MGMT-81650
Integrated Program Management Report DI-MGMT-81861
(Supersedes CPR & IMS DIDs effective July 1, 2012)
FM & Cost Related Data Item Descriptions (DIDs)
Contract Work Breakdown Structure DI-MGMT-81334D
Contract Funds Status Report DI-MGMT-81468A
Cost and Software Data Reports DI-FNCL-81565C thru 81567C
Contract Data Requirements List (CDRL) places CPR & IMS on contract
EVM CDRLs can and should be tailored within bounds of policy
Tailoring options are limited for contracts > $50M
Most aspects are tailorable for contracts < $50M
Consider all risk factors when tailoring EVM DIDs
Type of contract (determined by cost risk)
Technology
Schedule
Past contractor performance
The Contract Performance Report and an Integrated Master Schedule are required whenever earned value management is required, that is for cost or incentive contracts ≥$20M. The Contract Performance Report and the Integrated Master Schedule are put on contract using the Contract Data Requirements Lists. ANSI/EIA-748 leaves it to the government to determine the level of detail to be reported and the level of analysis required.
These details are prescribed in the data item descriptions or DIDs. DI-MGMT-81466A is used to obtain the Contract Performance Report; DI-MGMT is used to obtain the Integrated Master Schedule. The data item descriptions have been updated to improve the timeliness and quality of the information and to enable use of modern software tools.
IPMR -- AT&L Jun Memo -- DI-MGMT Supersedes CPR & IMS DIDs for contracts awarded based on Solicitations or RFPs issued on or after July 1, Formats 1-7 of the DID are required for contracts where DFARS applies.
Format 6 applies to all development, major modification, & low rate initial production efforts whether or not DFARS is applicable.
The contracting officer and contractor should negotiate the appropriate reporting provisions in the contract. Requiring more information in the Contract Data Requirements Lists than is prescribed in the data item description is contrary to DoD policy. Both the Contract Performance Report and the Integrated Master Schedule are tailorable. The program manager is expected to tailor the reports to reflect how the project is being managed on a daily basis and to require the minimum data necessary for effective management control. There is a lot of flexibility for tailoring on contracts valued at less than $50 million. For example, reporting frequency, submission dates, and level of detail can be negotiated. While tailoring is possible on contracts ≥ $50M, the options are more limited.
All relevant risk factors should be considered when determining the appropriate degree of tailoring. Detailed guidance on tailoring EVM DIDs is included in the DoD Earned Value Management Implementation Guide. The bottom line is do what makes sense within the bounds of the policy. End of narration.

6. EVM Key Elements QUESTION ANSWER ACRONYM
How Much Work Should Budgeted Cost For BCWS
Be Done? Work Scheduled
The Plan
How Much Work Is Done? Budgeted Cost For BCWP
Work Performed Or
Earned Value
How Much Did The Actual Cost Of ACWP
Completed Work Cost? Work Performed
What Was The Total Job Budget At Completion BAC
Supposed To Cost?
What Do We Now Expect The Estimate At Completion EAC
Total Job To Cost?

7. Where does it all start?

8. Earned Value Management within the Contracting Process
GOVERNMENT
NEGOTIATION
SOURCE SELECTION
ACQUISITION
AWARD PROJECT
STRATEGY
STATUS
DEVELOP
REPORTS
RFP
PROVIDER
ESTABLISH
PROJECT
FROM EVMIG
Contractor Plan. DFARS Clause , Notice of Earned Value Management System, requires that the contractor be prepared to demonstrate that the contractor's EVMS meets the guidelines. The contractor should prepare a plan to achieve validation and submit the plan as part of the proposal.
To set the stage in the contracting process. EVM planning begins early in the acquisition strategy. Ensuring the proper requirements are placed in the RFP is critical. Contractors need to know the management expectations up front prior to development of the baseline. Placing the proper requirements, i.e. contract clauses, SOW, and deliverables. Sections L and M are in the RFP to tell contractors how to submit their proposal and how we will evaluate their proposal and should include evaluation criteria to assess system validation status.
Emphasize implementation of EVMS requires proper clauses be included in the RFP as well as contract award.
In the source selection process under the management criteria, past performance in the area of EVM is a factor used to evaluate company’s management practices.
DEVELOP
PROJECT
EXECUTION &
PROPOSAL
BASELINE
PERFORMANCE
MEASUREMENT
MGT VOLUME
ASSESS RISK
DEVELOP MR
TECH VOLUME
ASSIGN BUDGETS
COST VOLUME

9. PMB Development Steps Step 1. Define the Work Scope
Identify the scope of work
Plan the work at the control account / work package level
Step 2. Schedule the Work
Arrange the work packages in order
Schedule work packages
Step 3. Allocate Budgets
to Schedule
100 40 50
Classify the work and select an EV technique
Budget the work packages
Spread the budget over time
Calculate cumulative BCWS

10. The Control Account
All earned value is accomplished at the control account
BCWS is established
BCWP is determined
ACWP is collected
Variances are assessed
Estimates are revised
Workaround plans are devised
In IPT organization structures, the control account may be tied to an IMP Significant Accomplishment or Accomplishment Criteria.
ANSI Definition - A management control point at which budgets (resource plans) and actual costs are accumulated and compared to earned value for management purposes. A control account is a natural management point for planning and control since it represents the work assigned to one responsible organizational element on one program work breakdown structure element.

11. Schedule Integration MASTER SCHEDULE INTERMEDIATE LEVEL SCHEDULE
Horizontal Integration
MASTER SCHEDULE
Single Top Program Level Schedule
Schedules IMP Program Elements
Schedules Program and Contract Milestones
Horizontally Integrated – Depicts task relationships among IMP Program Elements and Milestones 1
Time 10 20 24
INTERMEDIATE LEVEL SCHEDULE
Vertical Integration
Subordinate to Master Schedule scheduling a single or a limited number of Program Elements
Schedules Associated EVMS Control Accounts
Schedules IMP Significant Accomplishment Milestones
Horizontally Integrated – Depicts task relationships among control accounts & significant accomplishments
Vertically Integrated – All schedule elements completed in time allocated to associated program level element
ITEM 11 12 13 14 15 16 17
CONTROL ACCT 14
CONTROL ACCT 15
CONTROL ACCT 16
CONTROL ACCT 17
CONTROL ACCT 18
CONTROL ACCT 19
Horizontal Integration
Vertical Integration
DETAIL LEVEL SCHEDULE 12 13
Control Account Schedule
Schedules IMP Accomplishment Criteria Milestones
Horizontally Integrated – Depicts task relationships among Work Packages & Accomplishment Criteria
Vertically Integrated – All detailed schedule work packages completed in time allocated to control account
Control Acct 16
Horizontal Integration

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

13. Timephased BAC = PMB = BCWSCUM
Result: Time Phased PMB
Total Allocated Budget
Management Reserve
BAC $
Timephased BAC = PMB = BCWSCUM
Completion
Date
Time

14. Example -- Without Earned Value
Contract: 4 Miles of Railroad Track in 4 Mos for $4K
Status: After 3 Mos Only $2K Spent of $3K Planned
Question: How are You Doing and How Do You Know?
Planned Work $3K
Actual Costs $2K
Labor
$1K
Month $1K
Material$1K
Month $1K
Month $1K

15. Example -- With Earned Value
Contract: 4 Miles of Railroad Track in 4 Mos for $4K
Status: After 3 Mos Only 1 Mile of Track is
Complete yet $2M Spent
Question: What Would You Tell the PM?
Schedule Variance
$1K-$3K = ($2K)
66% Behind
Cost Variance
$1K-$2K=($1K)
100% Overrun
BCWS
BCWP
ACWP
Planned Work $3K
Earned Value $1K
Actual Costs $2K
Labor
$1K
Material$1K

16. Program at a Glance EAC Total Allocated Budget Management Reserve P R
Over
Budget
EAC
Total Allocated Budget
Management Reserve P R O J E C T D S L I A G
BAC
PMB
Schedule Variance
Cost Variance $
BCWS
(Plan)
BCWP
(Earned
Value)
ACWP
(Spent)
Time
Now
Completion
Date

17. General EVM Report Tailoring
IPMR Tailoring Guidance
Format 1 & 2 Reporting Levels
Reporting Frequency
Submission Dates
Date of first and last reports
Format 5 variance reporting thresholds
Fixed Number of Variances
Percentage or Dollar Thresholds
Specific Variances
Contractor format
Electronic data interchange format
IMS Tailoring Guidance
Degree of networking
Reporting Frequency
Submission Dates
Date of first and last reports
Frequency of schedule risk analysis
Electronic data interchange format
The Contract Performance Report provides contract cost and schedule performance data used to identify problems early and to forecast future contract performance. The Contract Performance Report should be the primary means of communication between the contractor and the program manager to report cost and schedule trends and to assess of their effect on future performance. The program manager should tailor the Contract Performance Report to the minimum data necessary for effective management control. The EVMIG identifies the contract work breakdown structure, frequency and selection of CPR formats, level of CPR reporting, submission dates, format five variance analysis and thresholds, and contractor format and electronic data interchange format as things than to be considered when tailoring the Contract Performance Report.
Tailoring the IMS - The Integrated Master Schedule is a precedence diagram network documenting the detailed tasks necessary to ensure successful project execution. The Integrated Master Schedule is traceable to the integrated master plan, the contract work breakdown structure, and the statement of work. The Integrated Master Schedule is used to verify attainability of contract objectives, to evaluate progress toward meeting program objectives, and to integrate the program schedule activities with all related components. The program manager should tailor the Integrated Master Schedule to the minimum data necessary for effective management control. The EVMIG identifies the degree of networking, reporting frequency, the number and timing of schedule contracted schedule risk analysis and the use of contractor format and electronic data interchange formats as areas to be considered when tailoring the Integrated Master Schedule.
Same tailoring would be used to related formats of the IPMR
Formats 1-5 are CPR
Format 6 is IMS
Format 7 is monthly historical breakout of historical S, P, A and ETC. Monthly forecasts will just show S and ETC into the future.

18. Integrated Program Management Report (IPMR)
Format 1 – Work Breakdown Structure (WBS)
Format 2 – Organizational Breakdown Structure (OBS)
Format 3 – Baseline Data
Format 4 – Manpower Data
Format 5 – Variance Analyses
Format 6 – Integrated Master Schedule
Format 7 – Historical Data (BCWS, BCWP, ACWP, BAC, EAC, etc)
EVM provides an Objective means by which to Evaluate Contract Performance and predict the Future based on risk

19. Sample IPMR – Format 1 Pop I Smith Key Contract & Contractor Data
Boxes 1 - 4
Box 5
New OTB/OTS Box
Budget and EAC Data
Box 6
Pop I Smith
Box 7
Box 8
BCWS
BCWP
ACWP SV CV
BCWS
BCWP
ACWP SV CV
BAC
EAC
VAC
Format 1 provides summary level data to measure cost and schedule performance using a Work Breakdown Structure (WBS) layout. Format 1 is required for all contracts requiring EVM. All CPR data is at cost (except Format 1 Box 5 Price Data)

20. Sample IPMR – Format 2 Key Contract & Contractor Data
Boxes 1 - 4
Box 5
BCWS
BCWP
ACWP SV CV
BCWS
BCWP
ACWP SV CV
BAC
EAC
VAC
Format 2 provides data to measure cost and schedule performance data by the contractor's organization or IPT structure. It includes EVM data for material accounts and major subcontracts. Format 2 is option for contracts < $50M. All Format 2 CPR data is at cost data (no fee or profit added).

21. Sample IPMR – Format 3 Key Contract & Contractor Data
Boxes 1 - 4
Budget and Key Dates
Box 5
Box 6
The EV performance measurement baseline at beginning of the period
Format 3 provides the budget baseline plan against which performance is measured. Format 3 is option for contracts < $50M. Unlike format 1 and 2 which each report historical performance, Format 3 forecasts the plan for the next six months and other selected intervals.
The updated EV performance measurement baseline at end of period reflecting accomplishments and replanned activities—THE NEW PMB
BCWS
Management Reserve
Box 7
Total
Box 8

22. Sample IPMR – Format 4 Key Contract & Contractor Data
Boxes 1 - 4
Format 2 Organizational Reporting Structure
Format 3 Forecast Periods
Box 5
Format 4 provides staffing forecasts for correlation with the budget plans, cost and schedule estimates. It includes EVM data for material accounts and major subcontracts. Format 4 is option for contracts < $50M. Format 4 is reported by staff months rather than dollars or hours.
Box 6

23. Sample IPMR – Format 5 Key Contract & Contractor Data
Boxes 1 - 4
Box 5
Discussion should include but is not limited to:
Summary Analysis
Summary of Overall Contract Variances
Changes in Management Reserve
Changes in Undistributed Budget
Differences between EAC's (Blocks 6.a, 6.b, 6.c, or Block 8.15) (Format 1)
Significant timephasing shifts in Baseline (BCWS) (Format 3)
Significant timephasing shifts or Overall Changes in Forecasted Staffing (Format 4)
Discussion of Over Target Baseline and/or Over Target Schedule incorporation
Analysis of Significant Variances: (identify and describe each)
Type and Magnitude of Variance
Explanation of Significant Reasons
Effect on Immediate Task
Effect on Total Contract
Corrective Actions Taken or Planned
Format 5 is a narrative report used to explain significant cost and schedule variances and other identified contract problems and topics. It is mandatory for all EVMS contracts. Research has indicated that two thirds of the costs associated with EVMS can de attributed to variance analysis reporting.

24. Sample IPMR – Format 6 What scheduling tool?
Does Govt have license for software?

25. Sample IPMR – Format 7
TRN or XML/UNCFACT Format containing:
Historical data (BCWS, BCWP, ACWP, BAC, etc…
Future data (ETC, EAC, etc…

26. Performance Data Analysis Objectives
Determine Current Status (Top Drivers)
Where Are We Today?
Identify Trends
Where Are We Headed?
Any Cost, Schedule Surprises?
Forecast The Future (EAC Realism)
What Is The EAC (Cost & Price)?
What Is The Impact On The Budget?
Indicate Areas For Management Action
What Should We Do Now?
Challenge – Turning Data Into Meaningful
Information for Decision Makers

27. Estimate at Completion (EAC) - What Will Be The Final Cost? -
Definition: Actual Cost To Date + Estimated Cost Of Work Remaining (ACWP + ETC = EAC)
Contractor Develops Comprehensive EAC At Least Annually (“Grass Roots Method” – ACWP + ETC = EAC)
Should Examine On Monthly Basis
EAC Considerations:
Performance To Date
Impact Of Approved Corrective Action Plans
Known/Anticipated Problems
Best Estimate Of Cost To Complete Remaining Work
Statistical Formulae Method - Three Elements:
Budgeted Cost Of Work Remaining (BAC-BCWP)
Projected Performance Efficiency
Actual Cost Of Work Performed (ACWP) – Sunk costs

28. EAC Realism If TCPI > CPI by .05, Then Question EAC
Common Performance Factor Methods
TCPI = To Complete Performance Index Efficiency Necessary To Complete – Either On Budget (BAC) Or On The (EAC).
TCPI (BAC) = Work Remaining / Cost Remaining
TCPI (BAC) = ($4k - $1K) / ($4k - $2K) = $3K / $2K = 150%
Compare CPI & TCPI to Assess Realism Of Future Performance – “Reality Check”
TCPI = 150% while CPI = 50%
They are earning $0.50 on the dollar spent, and their performance will have to improve to earning $1.50 per dollar spent for the remainder of the contract.
TCPI (BAC) = Work Remaining = BAC – BCWP
Cost Remaining BAC - ACWP
If TCPI > CPI by .05, Then Question EAC
If TCPI >or< CPI by .10 Then OSD TW tripped

29. Summary
Earned Value Management is required by Law, OMB Circular A-11 policy guidance, and DoDI
EVM is the most comprehensive program management tool
Senior DOD and Congressional Leaders use it to make program decisions
Management involvement ensures EVM data is used in a proactive manner to manage programs and make timely corrective action decisions
EVM helps you identify risk, ask the right questions and make sound decisions to Keep Programs on Track.

30. Questions?