1. FASTER DECISIONS. BETTER DECISIONS.  PRICE S YSTEMS LLC Earned Value Concepts Course

2. FASTER DECISIONS. BETTER DECISIONS.  INTRODUCTION WHO ARE WE? WHY ARE WE HERE? WHAT ARE WE GOING TO DO? CONTENTS OF COURSE BOOK AND REFERENCE GUIDE MODULE OVERVIEW

3. FASTER DECISIONS. BETTER DECISIONS.  WHO ARE WE? BILL MATHIS Work (703) 351-5258 Cell (202) 997-3128 PRICE Systems L.L.C. Washington, D.C. Office Phone (703) 351-5255 Fax (703) 351-5265 PRICE Systems L.L.C. 1655 Ft. Myer Drive, Suite 700 Arlington, VA 22209

4. FASTER DECISIONS. BETTER DECISIONS.  BILL’S BIO

5. FASTER DECISIONS. BETTER DECISIONS.  WHY ARE WE HERE? TO TEACH YOU THE BASIC CONCEPTS OF COST/SCHEDULE MANAGEMENT USING EARNED VALUE (EV) TECHNIQUES. -WE WILL REFER THROUGHOUT THE COURSE TO THIS AS EARNED VALUE MANAGEMENT (EVM). TO PREPARE YOU TO USE EVM INFORMATION ON WORK CONTENT WITHIN YOUR PROJECT.

6. FASTER DECISIONS. BETTER DECISIONS.  WHAT ARE WE GOING TO DO? FIRST PROVIDE A TWO-DAY TRAINING CLASS ON EARNED VALUE MANAGEMENT AND ITS VALUE TO PROGRAMS

7. FASTER DECISIONS. BETTER DECISIONS.  COURSE CONTENT DAY 1 INTRODUCTION Section I – EVM Overview: 3 Modules Exercise – Program Management and EVM Section II – EVM Program Structures: 3 Modules Exercise – Planning Structures and Control Accounts Section III – Performance Measurement Baseline: 2 Modules Day 1 Adjourn Informal Q&A

8. FASTER DECISIONS. BETTER DECISIONS.  COURSE CONTENT DAY 2 DAY 1 Revision / Questions / Quiz? Section III cont – Managing Execution and Change: 2 Modules Exercise – Earned Value Planning and Collection Mechanics Section IV – Performance Reporting and Analysis: 4 Modules Exercise – Performance Reports and Variance Analysis Section V – Current Trends and Wrap-up Evaluation Collection & Course Adjourn

9. FASTER DECISIONS. BETTER DECISIONS.  Getting to Earned Value CHANGING ENVIRONMENT DOD AND OMB POLICY EVM IMPLEMENTATION PROGRAM MANAGEMENT MODULE OVERVIEW

10. FASTER DECISIONS. BETTER DECISIONS.  CHANGING ENVIRONMENT EVERYTHING CHANGING AND ALL AT THE SAME TIME! PROGRAM ACQUISITION REFORM WORKFORCE CHANGES DOD - ARMY RELATIONSHIPS PROGRAM CHANGES EV MANAGEMENT BRAC BUDGET CHANGES PRIVITIZATION

11. FASTER DECISIONS. BETTER DECISIONS.  EARNED VALUE MANAGEMENT USE PROVIDES: -Common Framework for the Communication of Cost, Schedule, and Technical Issues. -Emphasis on Accurate Cost to Complete. -Efficiency in Managing Cost and Schedule Performance. PROVIDES PRODUCT-FOCUSED LIFE-CYCLE MANAGEMENT AND INFORMATION TO MANAGE TOTAL PROGRAM COST. PROVIDES BOTH IPT LEADER AND ON-SITE PROJECT LEADERS’ INCREASED VISIBILITY INTO PROGRAM PLANNING AND EXECUTION TO BETTER MANAGE RESOURCES.

12. FASTER DECISIONS. BETTER DECISIONS.  DEFINE THE WORK EXTERNAL CHANGES PLAN WORK (SCHEDULE AND RESOURCES) EXECUTE THE WORK PLAN MEASURE PERFORMANCE ANALYZE DEVIATIONS TAKE MANAGEMENT ACTION CHANGE CONTROL THE EARNED VALUE MANAGEMENT PROCESS

13. FASTER DECISIONS. BETTER DECISIONS.  PERFORMANCE TRACKING ABILITY (AT ALL LEVELS) Data Items èPlanned èAccomplished èActual Costs èBudget at Completion èEstimate at Completion

14. FASTER DECISIONS. BETTER DECISIONS.  EVM MUST ADDRESS “THE ABIDING CULTURAL PROBLEM” FROM THE A-12 REPORT BEACH REPORT: “EXISTING CONTROL MECHANISMS, PROPERLY OPERATED WOULD HAVE BEEN SUFFICIENT TO IDENTIFY THE NATURE AND EXTENT OF THE PROBLEMS.” TOO OFTEN, EARNED VALUE REMAINS THE SOLE PROVINCE OF THE SUPPORTING PROGRAM CONTROL STAFF OF BOTH CONTRACTORS AND THE GOVERNMENT -EARNED VALUE MUST BE AN INTEGRAL PART OF PERFORMING DESIGN AND MANUFACTURING ORGANIZATIONS -ONLY WHEN PROGRAM TECHNICAL STAFFS ARE HELD ACCOUNTABLE FOR EARNED VALUE ANALYSIS, WILL THEY BEGIN TO UNDERSTAND ITS IMPLICATIONS

15. FASTER DECISIONS. BETTER DECISIONS.  GETTING TO EVM INTERNAL FACTORS –Program may need reorganization –EVM Process within Program can affected: »Organization »Work Assignment Process »Resource Allocation »Use of Performance Measurement Techniques »Use of Integrated Baseline Reviews »Relationships with Field Activities

16. FASTER DECISIONS. BETTER DECISIONS.  CONCEPT OF COST MANAGEMENT TRADITIONAL CONCEPT DoD HISTORY/EXPERIENCES DoD COST RISKS EARNED VALUE MANAGEMENT (EVM) CONCEPT/ADVANTAGE MODULE OVERVIEW

17. FASTER DECISIONS. BETTER DECISIONS.  DoD PROGRAM MANAGER’S TASKS PRODUCE/MODIFY A SUCCESSFULLY PERFORMING WEAPON SYSTEM OR COMPONENT OBTAIN IT AT REASONABLE COST DELIVER IT IN TIME TO MEET THE THREAT

18. FASTER DECISIONS. BETTER DECISIONS.  PROGRAM MANAGER/IPT TEAM LEADER* LEADS A MULTI-DISCIPLINED TEAM THAT ATTEMPTS TO BALANCE AND INTEGRATE: -Technical Performance (Quality) -Schedule (Time) -Cost (Resources) -Risk (Acceptable Level) The term “PROGRAM MANAGER” is used throughout the course and is equivalent to “IPT LEADER”.

19. TRADITIONAL COST MANAGEMENT

20. FASTER DECISIONS. BETTER DECISIONS.  THE PROGRAM MANAGER/IPT LEADER MUST DETERMINE HOW MUCH WAS PLANNED? HOW MUCH WAS SPENT AND FOR WHAT? HOW MUCH WAS ACCOMPLISHED? HOW WELL WAS IT ACCOMPLISHED? WILL THE PROGRAM BE COMPLETE ON TIME AND AT TARGET COST?

21. EARNED VALUE MANAGEMENT CONCEPT 0 20 40 60 80 100 120 JFMAMJJASONDJFMAMJJASOND TIME DOLLARS Planned (38) Actual (34) We added "Performance" or Earned Value (29) Time Now

22. FASTER DECISIONS. BETTER DECISIONS.  DoD HISTORY/EXPERIENCES PAST PROBLEMS WITH PERFORMANCE MEASUREMENT: COST AND WORK ACCOMPLISHMENT DID NOT CORRELATE -Costs Budgeted Compared with Costs Expended -No Indicator of Performance Progress RESULTS OF GOVERNMENT IMPOSED SYSTEMS ON CONTRACTORS -Turmoil -Multitude of Systems -Excessive Data Requirements -Contractor Maintained Two or More Systems

23. FASTER DECISIONS. BETTER DECISIONS.  DoD HISTORY/EXPERIENCES PERT/COST -USAF F-111 -Integrated Cost and Schedule COST/SCHEDULE PLANNING AND CONTROL SPECIFICATIONS (C/SPCS) -USAF Implemented Performance Measurement DoDI 7000.2 -C/SCSC Policy -Similar to (C/SPCS) Approach -Air Force Lead for Implementation Guide 1962 CHRONOLOGY: 1967 1963-67

24. FASTER DECISIONS. BETTER DECISIONS.  DoD HISTORY/EXPERIENCES FIRST VALIDATION BY USAF OF GENERAL ELECTRIC VALIDATIONS, MAINLY ON USAF CONTRACTS TRI-SERVICE (DoD) VALIDATIONS IMPLEMENTED OSD OVERSIGHT MOVED FROM COMPTROLLER TO ACQUISITION COMMUNITY DoDI 5000.2 ISSUED, DoDI 7000.2 CANCELED DoD 5000.2-R ISSUED INDUSTRY EVMS GUIDELINES ADOPTED BY DoD 1969 1969-72 1972 1991 CHRONOLOGY (Continued): 1989 1996

25. FASTER DECISIONS. BETTER DECISIONS.  DoD HISTORY/EXPERIENCES WITH C/SCSC PROBLEMSDoD POLICY RESPONSE PROLIFERATION OF SYSTEMS AND REPORTS INADEQUATE COST/SCHEDULE CONTROL SYSTEM INADEQUATE CONTRACT STATUS INFORMATION CONTROL OF FUNDS INEFFECTIVE IN CONTROLLING COST REDUCE STANDARDIZED REQUIREMENTS AVOID IMPOSING METHODS AND TECHNIQUES MAXIMUM USE OF CONTRACTOR SYSTEMS REVIEW CONTRACTOR SYSTEMS FOR ADEQUACY TAILOR REPORTING REQUIREMENTS OBTAIN SUMMARY LEVEL DATA DETERMINE PROGRESS ON VALUE OF WORK ACCOMPLISHED

26. FASTER DECISIONS. BETTER DECISIONS.  EVM CONCEPT/ADVANTAGE EVM OBJECTIVES EVM CONCEPTS DoD 5000.2-R DoD POLICY - THRESHOLDS FOR EVM GUIDELINES APPLICATION EVM GUIDELINES SUMMARY

27. FASTER DECISIONS. BETTER DECISIONS.  DoD COST RISKS HIGH TECHNOLOGY/PERFORMANCE SPECS CRITICAL SCHEDULE HIGH COST PROGRAMS HIGH RISK PROGRAMS VERY LARGE CUSTOMER ACQUISITION WITH PUBLIC FUNDS REQUIRES “STEWARDSHIP” DoD IS A UNIQUE CUSTOMER:

28. FASTER DECISIONS. BETTER DECISIONS.  CONTRACT TYPES DELIVER PRODUCTS AND SERVICES -On Time -To Specifications PROVIDE A BEST EFFORT TO TRY TO DELIVER PRODUCTS AND SERVICES -Government Promises to Pay All Costs (Allowable, Allocable and Reasonable) FIXED PRICE COST REIMBURSEMENT CONTRACTUAL PROMISETYPE

29. FASTER DECISIONS. BETTER DECISIONS.  WHAT KIND OF “CONTRACTS” ARE USED BY THE IPT? FIXED PRICE CONTRACTS COST PLUS -CONTRACTS -TASK ORDERS -PROJECT ORDERS -MILITARY INTERSERVICE PURCHASE REQUESTS

30. FASTER DECISIONS. BETTER DECISIONS.  EVM GUIDELINES OBJECTIVES ALLOWS BOTH GOVERNMENT AND CONTRACT PROGRAM MANAGERS TO HAVE VISIBILITY INTO TECHNICAL, COST, AND SCHEDULE PROGRESS ON THEIR CONTRACTS. ENSURES THAT COST, SCHEDULE AND TECHNICAL ASPECTS OF THE CONTRACT ARE TRULY INTEGRATED.

31. FASTER DECISIONS. BETTER DECISIONS.  EVM CONCEPTS PLAN THE ENTIRE CONTRACTUAL EFFORT DETERMINE ACCOMPLISHMENT AT LEVEL WHERE WORK IS DONE MEASURE ACCOMPLISHMENT OBJECTIVELY SUMMARIZE DATA FOR HIGHER LEVELS ANALYZE VARIANCES AND IMPACTS DEVELOP ESTIMATES OF FINAL COSTS

32. FASTER DECISIONS. BETTER DECISIONS.  DoD POLICY THRESHOLDS FOR EVM GUIDELINES APPLICATION CONTRACT DOLLAR VALUE -RDT&E > $70m* -Procurement > $300M* CONTRACT TYPE -Only Required for Flexibility Priced (Cost and Incentive Type) Contracts NATURE OF CONTRACT WORK -Not required on Firm Fixed Price (FFP), Time-and-Materials (T&M) and Level of Effort (LOE) Contracts * In FY 1996 Constant Dollars

33. FASTER DECISIONS. BETTER DECISIONS.  DoD 5000.2-R, PART 3 REQUIREMENTS INDICATES WORK PROGRESS PROPERLY RELATES COST, SCHEDULE, AND TECHNICAL ACCOMPLISHMENT ARE VALID, TIMELY, AND AUDITABLE SUPPLY MANAGERS WITH INFORMATION AT A PRACTICAL LEVEL OF SUMMARIZATION ENSURES THE PROGRAM MANAGER WILL RECEIVE DATA WHICH PROVIDES AN ADEQUATE BASIS FOR RESPONSIBLE DECISION MAKING, BY REQUIRING THAT CONTRACTOR’S INTERNAL MANAGEMENT CONTROL SYSTEMS PRODUCE DATA THAT:

34. FASTER DECISIONS. BETTER DECISIONS.  EVM GUIDELINES AREAS ORGANIZATION PLANNING, BUDGETING AND SCHEDULING ACCOUNTING CONSIDERATIONS ANALYSIS AND MANAGEMENT REPORTING REVISIONS AND DATA MAINTENANCE

35. FASTER DECISIONS. BETTER DECISIONS.  SUMMARY THE EVM GUIDELINES ARE A PROGRAM MANAGEMENT TOOL THAT HELPS ACHIEVE BALANCE AMONG THE TRIPLE PROGRAMMATIC CONSTRAINTS OF TECHNICAL PERFORMANCE, COST, AND SCHEDULE THE ASSOCIATED PERFORMANCE REPORT PROVIDES A METHOD THAT COMMUNICATES TIMELY, RELIABLE, AND AUDITABLE PERFORMANCE INFORMATION FOR BOTH CONTRACTOR AND GOVERNMENT PROGRAM MANAGERS

36. FASTER DECISIONS. BETTER DECISIONS. 

37. EARNED VALUE MANAGEMENT GUIDELINES EVM GUIDELINE AREAS 1. Organization 2. Planning, Budgeting and Scheduling 3. Accounting Considerations 4. Analysis and Management Reporting 5. Revisions and Data Maintenance MODULE OVERVIEW

38. FASTER DECISIONS. BETTER DECISIONS.  ORGANIZATION DEFINE ALL WORK AND RESOURCES REQUIRED IDENTIFY RESPONSIBLE ORGANIZATION IDENTIFY OVERHEAD CONTROL POINTS INTEGRATE MANAGEMENT SYSTEMS, CWBS, AND ORGANIZATION PERMIT PERFORMANCE MEASUREMENT BY CWBS AND ORGANIZATION

39. FASTER DECISIONS. BETTER DECISIONS.  ORGANIZATION IDENTIFY RESPONSIBILITIES AND INTEGRATE FUNCTIONAL OBS WITH WBS WBS CONTRACT ENGINETRAINING FANCOMPRESSOR FAN ASSEMBLYFUL SCALE RIG ROTOR ASSYSTATOR ASSYCASE ASSY MECHANICAL DESIGN ANALYTICAL DESIGN DRAFTING CHECKING COST ACCOUNT LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 COMPANYCOMPANY TESTTEST ENGENG MFGMFG DESIGNDESIGN FUNCTIONAL OBS

40. FASTER DECISIONS. BETTER DECISIONS.  PLANNING, BUDGETING AND SCHEDULING TIME-PHASE ALL WORK AND BUDGET SELECT A WORK MEASUREMENT TECHNIQUE MAINTAIN A TIME-PHASED BUDGET BASELINE AT THE CONTROL ACCOUNT AND WORK PACKAGE LEVEL MINIMIZE LEVEL OF EFFORT ESTABLISH OVERHEAD BUDGETS FOR EACH SIGNIFICANT ORGANIZATIONAL ELEMENT IDENTIFY AND CONTROL MANAGEMENT RESERVE AND UNDISTRIBUTED BUDGET

41. FASTER DECISIONS. BETTER DECISIONS.  PLANNING, BUDGETING AND SCHEDULING ESTABLISH THE BASELINE - AN ITERATIVE 3-STEP PROCESS

42. FASTER DECISIONS. BETTER DECISIONS.  PERFORMANCE MEASUREMENT BASELINE CONTRACT PRICE COSTFEE / PROFIT PERFORMANCE MEASUREMENT BASELINE (PMB) MANAGEMENT RESERVE (MR) DISTRIBUTED (CONTROL ACCOUNTS) UNDISTRIBUTED BUDGET (UB) DISCRETE BCWS APPORTIONED BCWS LOE BCWS WITHHELD FOR UNKNOWNS WITHIN SCOPE WITHHELD FOR KNOWN EFFORT TO BE DISTRIBUTED AS SOON AS POSSIBLE WORK PACKAGES PLANNING PACKAGES

43. FASTER DECISIONS. BETTER DECISIONS.  PLANNING, BUDGETING AND SCHEDULING MASTER SCHEDULE INTERMEDIATE LEVELS ORGANIZATION SCHEDULES WORK PACKAGE SCHEDULES

44. FASTER DECISIONS. BETTER DECISIONS.  THE CONTROL ACCOUNT CONTROL ACCOUNT HAS RESPONSIBILITY FOR: -Specific Functional Activity and WBS Product -Work Planning and Assignment (BCWS) -Performance Measurement (BCWP) -Cost Collection (ACWP) -Variance Analysis (schedule and cost) -Estimate at Completion (EAC) Forecast -Corrective Action CONTROL ACCOUNT IS THE BASIS OF OBS/WBS SUMMARIZATION OF PERFORMANCE DATA

45. FASTER DECISIONS. BETTER DECISIONS.  ACCOUNTING CONSIDERATIONS RECORD ALL COSTS IAW DCAA AND CAS SUM DIRECT COSTS FROM COST ACCOUNTS INTO THE WBS OR OBS WITHOUT ALLOCATION TO TWO OR MORE ELEMENTS PROVIDE FOR ACCURATE MEASUREMENT OF MATERIAL ACCOUNTING AND PERFORMANCE PROVIDE VISIBILITY OF MATERIAL COST AND USAGE VARIANCES, AND INVENTORY

46. FASTER DECISIONS. BETTER DECISIONS.  ACCOUNTING CONSIDERATIONS (CONTINUED) MATERIAL COSTS MILESTONE EVENTS –MATERIAL ORDERED –MATERIAL RECEIVED –INVOICES PAID –WITHDRAWN FROM STORES –MATERIAL CONSUMED SELECTED METHODS MUST FACILITATE PERFORMANCE MEASUREMENT AND UNIT/LOT COST DETERMINATION BY PROVIDING: – PRICE VARIANCES – USAGE VARIANCES – ACCURATE COST ACCUMULATION CONSISTENT WITH BUDGETS – MATERIAL ACCOUNTABILITY Time

47. FASTER DECISIONS. BETTER DECISIONS.  ESTIMATED ACTUAL COSTS FOR WORK PERFORMED WHO USES ESTIMATED ACTUALS? -The Control Account Manager (CAM) WHAT ARE ESTIMATED ACTUALS? -Substitute Costs Estimated by the CAM for Use in Performance Measurement in Circumstances If They Are Not Available From the Accounting System WHEN ARE ESTIMATED ACTUALS USED? -Whenever ACWP Data Are Not Available From the Accounting System to Support Periodic (Monthly) Performance Measurement Analysis WHERE ARE ESTIMATED ACTUALS USED? -At Cost Account or Work Package Levels As Appropriate HOW ARE ESTIMATED ACTUALS CALCULATED? -Methods Vary by Resource Element of Cost

48. FASTER DECISIONS. BETTER DECISIONS.  ANALYSIS AND MANAGEMENT REPORTING IDENTIFY BCWS, BCWP, ACWP, CV, AND SV AT CONTROL ACCOUNT LEVEL IDENTIFY INDIRECT COSTS AND VARIANCES IN SUFFICIENT DETAIL TO MANAGE EXPLAIN SIGNIFICANT VARIANCES AND IDENTIFY CORRECTIVE ACTIONS PROVIDE SUMMARY COSTS AND VARIANCES THROUGH OBS AND WBS FOR MANAGEMENT ACTION DEVELOP LATEST REVISED ESTIMATE (LRE) AT THE CONTROL ACCOUNT LEVEL

49. FASTER DECISIONS. BETTER DECISIONS.  ANALYSIS VARIANCE ANALYSIS

50. FASTER DECISIONS. BETTER DECISIONS.  REVISIONS AND DATA MAINTENANCE INCORPORATE CONTRACT CHANGES INTO THE PMB IN A TIMELY MANNER CONTROL INTERNAL REPLANNING DOCUMENT AND REPORT ALL CHANGES REQUEST FORMAL REPROGRAMMING, IF NEEDED

51. FASTER DECISIONS. BETTER DECISIONS.  REASONS FOR BASELINE CHANGES CONTRACT CHANGES -Authorized and Definitized -Authorized but not yet Definitized INTERNAL REPLANNING -Original Schedule or Individual Tasks Changed -Effort Has Been Time-Phased Differently -Total Scope Remains Same FORMAL REPROGRAMMING -Remaining Budget/Schedule Unrealistic -PMB Will Exceed Contract Target Cost (CTC) -Government Approval Required

52. FASTER DECISIONS. BETTER DECISIONS.  REASONS/RULES FOR REPLANNING REPLAN REMAINING EFFORT WITHIN ALLOCATED BUDGET NORMALLY REPLAN WORK AND PLANNING PACKAGE BEYOND NEAR-TERM (2 PERIODS) COMPLETED PACKAGES SHOULD NOT BE REOPENED BUDGET FOR FUTURE WORK SHOULD NOT BE APPLIED TO NEAR-TEAM REQUIREMENTS OPEN OR NEAR-TERM PACKAGES MAY BE REPLANNED DUE TO CONTRACTUAL CHANGES

53. FASTER DECISIONS. BETTER DECISIONS.  INTERNAL REPLANNING CONTRACTOR MAY: USE MANAGEMENT RESERVE TO CHANGE COST ACCOUNT BUDGETS REPLAN UNOPENED WORK PACKAGES WITHIN COST ACCOUNT BUDGETS TRANSFER WORK AND ASSOCIATED BUDGET BETWEEN COST ACCOUNTS PERFORM OTHER REPLAN ACTIONS WITH COGNIZANCE OF PMO REPLAN AND REBUILD IN-PROCESS AND NEAR-TERM WORK PACKAGES; MAINTAIN AUDIT TRAIL FOR GOVERNMENT CONTRACTOR MAY NOT: MAKE RETROACTIVE CHANGES TO BUDGET OR COST OF COMPLETED WORK REOPEN CLOSED WORK PACKAGES TRANSFER WORK OR BUDGET INDEPENDENTLY

54. FASTER DECISIONS. BETTER DECISIONS.  …end Section 1 Next – Baseline Planning