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This Earned Value Management System (EVMS) background and requirement snippet is sponsored by the United States Department of Energy's Office of Project Management. In this snippet, we learn about the history of EVMS and provide an understanding of the current regulatory framework, departmental requirements, and contractual requirements for capital asset projects requiring EVMS.
The genesis of earned value occurred in industrial manufacturing at the turn of the 20th century, based largely on the principle of earned time popularized by Frank and Lillian Gilbreth. But the concept took root in the United States Department of Defense in 1959. The original concept was called Program Evaluation and Review Technique, or PERT. While around 1962, it was expanded to include resources to manage both time and cost. The name became purchased without computer software. It was considered overly burdensome by contractors whom were mandated to use it.
A new methodology called Cost Schedule Planning and Control Specification, and generally pronounced as C/Spec, was tested in 1965 and 1966 on the Minuteman program. The advantage of C/Spec / PERT or / Cost was that C/Spec had change control in place for the baseline, while for PERT and PERKIS, the baseline was adjusted monthly to reflect the actual costs and earned value, concealing the overruns until the funding was gone.
By December 1967, the Air Force's C/Spec became a DoD-wide requirement via the issuance of a Department of Defense Instruction. The instruction changed the name to Cost Schedule Control Systems Criteria and did not contain the criteria specifications or checklists. Those were later provided via a joint services team who adjusted the criteria to 35 and issued the CSCSC Joint Implementation Guide in January 1972.
CSCSC was cited in 1975 by the US Energy Research and Development Administration when they shifted from using their Management Control Systems, or MCS, to implementing CSCS. The Department of Energy was established on August 4th, 1977. DOE Order 2250.1 directed the usage of CSCSC on major system acquisitions in 1979. In 1989, CSCSC leadership was elevated to the Undersecretary of Defense for Acquisition, thus making earned value management an element of program management and procurement.
In 1991, Secretary of Defense Dick Cheney canceled the Navy A-12 Avenger II program because of performance problems detected by EVM. This demonstrated conclusively that EVM mattered to secretary-level leadership. In the 1990s, however, many US government regulations were eliminated or streamlined. CSCSC not only survived the acquisition reform movement but became strongly associated with the acquisition reform movement itself. Most notably, from 1995 to 1999, ownership of CSCSC 35 criteria was transferred to industry and renamed Earned Value Management Systems, or EVMS, with 32 guidelines and adoption of the ANSI/EIA-748 standard. The construction industry was an early commercial adopter of EVM.
Closer integration of EVM with the practice of project management accelerated in the 1990s. Beginning in 1997, the United States Office of Management and Budget, or OMB, began to mandate the use of EVM across all government agencies and for the first time for certain internally managed projects. OMB Circular A-11, Part 7, Capital Programming Guide, prescribed the use of cost and schedule performance goals for project and acquisition management. In 2000, DOE Order 413.3 was issued directing use of EVMS on capital asset projects.
Today, EVMS remains a standard for managing projects not only in the US government but is also used in Europe, Canada, Australia, China, and Japan. An earned value management system is a project management tool comprised of processes, systems, and people, which are integrated into a system of systems. Documented management processes explain how the requirements of the EVMS are executed. These include the ten fundamental processes of EVMS, including organization, planning and scheduling, budgeting and work authorization, material management, subcontractor management, analysis and managerial reporting, change control, accounting considerations, indirect cost management, and risk management.
An EVMS is also comprised of management information systems. Some software system examples include scheduling applications such as P6, cost processing programs such as Cobra, accounting systems such as PeopleSoft, and performance reporting such as Empower. And lastly, an essential part of the EVMS is the company's people. The leadership sets the tone from the top and promotes a culture of EVMS compliance and objective, fact-based decision-making as the expected project management methodology. They ensure their project personnel know their roles and responsibilities and their importance in applying the EVMS processes. Training is vital to ensure all new or transferred employees understand the EVMS and their responsibilities. Experienced project personnel include program and/or project managers, control account managers, integrated project teams, functional managers, project control analysts, and schedulers, and many more who contribute to ensuring the EVMS is running smoothly through procedural instruction, integration of systems, implementation on the project, and ensuring the data generated is used to manage the project.
EVMS is an integrated system of scope, schedule, and budget used to track performance in terms of earned value and actual costs of performance. EVMS is a widely accepted industry best practice for program and project management's that is used across the federal government and agency. EVMS is a key component of project management execution on capital asset projects. The EVMS must produce current, accurate, complete, repeatable, auditable, and compliant data which identified the current status, provide credible estimates in terms of cost and time to complete the program or project, and enable management to take action on problems. The data is used to support not only project performance management's but more importantly as a decision-making tool for management to take immediate steps to minimize current risks, prevent future risks, and make possible trade-off adjustments to scope, schedule, and budget targets.
The Electronic Industries Alliance EIA-748 consists of 32 EVMS guidelines. DOE groups these in six different areas: Organization, Planning, Scheduling and Budgeting, Accounting Considerations, Analysis and Management Reports, Revisions and Data Maintenance, and Indirect Consideration. The guideline numbers are listed under each of the areas with a brief identification of the purpose of the guideline. For example, in the area of Organization, Guideline 1 relates to the definition of the scope in a Work Breakdown Structure. For further details about each of the guidelines, refer to the PM Compliance Assessment Guidance contained in the PM EVMS Compliance Review Standard Operating Procedure, Appendix A.
The Electronic Industries Alliance EIA-748 contains a set of 32 guidelines defining an EVMS. This standard is used across government and industry around the world to manage high dollar value, costs type programs and projects considered capital assets and major weapon systems. DOE Order 413.3B requires, except for firm fixed price contracts, that contractors employ an EIA-748 compliant EVMS prior to Critical Decision-2, or CD-2, for projects with an Epc greater than $50 million dollars. For contractors where there are applicable projects having a TPC of $100 million dollars or greater, PM conducts the certification review process and certify the contractor's EVMS compliance with EIA-748 prior to CD-3. Therefore, efforts need to be made to plan and execute the certification process on a schedule that can meet this requirement.
Requirements for certification and surveillance of a contractor's EVMS are contained in DOE Order 413.3B. The Contracting Officer applies EVMS as a contractual requirement pursuant to DOE Order 413.3B, Attachment 1, Contractor Requirements Documents. The Contracting Officer also includes the DOE H202.4 clause, Notice of Earned Value Management System. Some highlights of the DOE H202.4 include that the contractor will establish, maintain, and use an integrated performance management system called EVMS, compliant with EIA-748, and include a system description. The EVMS shall be linked to and supported by the contractor's various management systems, including work definition, planning and scheduling, work authorization and budgeting, performance measurement and analysis, change control, materials and subcontract management, cost estimating, accounting, and risk management.
The contractor will maintain an integrated project management report, or IPMR, and an integrated master plan, or IMP, that logically networks all project activities, reflecting the National Defense Industrial Association, or NDIA, Planning and Scheduling Excellence Guide and the GAO Schedule Assessment Guide. The contractor will develop and submit a Contract Fund Status Report, or CFSR, and must reconcile the CFSR with the IPMR on a quarterly basis. The contractor will submit the IPMR and CFSR data by uploading the data into Project Assessment and Reporting System, or PARS, in accordance with the Contractor Project Performance Upload Requirements Document maintained by DOE PM. The contractor will submit notification of all proposed changes to the EVMS procedures and the impact of those changes to the Contracting Officer. The contractor will provide access to all pertinent records and data requested by the Contracting Officer or duly authorized representative to permit surveillance to ensure that the EVMS remains compliant. Refer to DOE H202.4 for a complete list.
In the Department of Energy, an order is a mandatory policy unless a waiver is granted. Through the years, DOE Order 413.3 has required EVMS, subject to thresholds, to provide program and project management direction for the acquisition of capital assets. Capital assets are land, structures, equipment, and intellectual property which are used by the federal government and have an estimated useful life of two years or more. Pursuant to Order 413.3B, EVMS applies to capital asset acquisition contractors with one or more projects where the total project cost is greater than or equal to $50 million dollars.
The DOE Order 413.3B EVMS requirements are tied to critical decision milestones. CD-2 is the point where the project's performance baseline is established. Although prior to this milestone, the contractor must begin using an EVMS compliant with EIA-748 for all projects with a TPC greater than or equal to $50 million dollars, and then begin reporting EVMS data into PARS upon CD-2 approval. If the contractor's EVMS has not been previously certified as compliant with EIA-748, the certification process must be completed prior to CD-3. Earned value reporting ends when all the activities in the PMB have been completed and the costs reported. This occurs after CD-4, which denotes start of operations or project completion.
This is the integrated EVM and project management acquisition lifecycle. The critical decisions in DOE Order 413.3B require the implementation of EVMS compliance with EIA-748 requirements on capital asset projects with a total project cost, TPC, greater than or equal to $50 million dollars. The areas highlighted in light blue backgrounds refer to EVMS. On the top, you can see the block that states "Begin Using Compliant EVMS," and it starts prior to CD-2, sometime after the project definition is determined and the selected alternative is identified. Certification of the EVMS as compliant to EIA-748 occurs prior to CD-3. The start of project construction or execution. Projects greater than $50 million dollars from CD-2 through CD-4 report EVMS data monthly into PARS.
The Contractor Requirements Document, or CRD, Attachment 1 to the order, is incorporated into all DOE Order 413.3B applicable contracts. Shown here are the CRD's EVMS-related requirements. Contractors must comply with all the requirements of the CRD. The prime contractor shall flow down requirements to a subcontractor when the total project cost to the prime contractor is greater than $50 million dollars. These requirements extend only cost and schedule reporting for incorporation into the prime contractor's EVM or requirements for a fully compliant EVMS implementation by the subcontractor. The contractor is required to conduct annual self-surveillance of their EVM system to ensure the system remains compliant. The CRD is where the requirement stems from the contractor reporting EVMS data monthly into PARS. The contractor must also report the results of their technical performance analysis and their corrective action plans for variances against the project baseline objectives. Lastly, the contractor must develop and maintain a schedule that is resource-loaded and identifies the critical path. As a minimum, a resource-loaded IMS must contain labor, material, and equipment costs to include unit prices and quantities.
The Project Assessment and Reporting System is the DOE's central repository for capital asset project performance data and information. In accordance with Order 413.3B, DOE contractors are required to begin submitting monthly EVMS data and information at the start of Critical Decision-2 for projects having a total project cost greater than or equal to $50 million dollars. Pursuant to DOE Order 413.3B, this includes uploading data into PARS in accordance with the Contractor Project Performance Upload Requirements Document. This document is maintained by DOE PM.
As we reach the conclusion of this training, the next three slides provide references. Here, we show a list of Department of Energy policy guidance and procedural information that relate, at least in part, to EVM. First is the DOE Order 413.3B. Next are four guides that cover risk management, EVMS, change control management, and cost estimating. The next four are standard operating procedures pertaining to the PM organization. The EVMS Compliance Review SOP covers the PM process for conducting the different types of EVM compliance reviews, including certification, surveillance, implementation, and lastly, the review for cause. The EVMS and Project Analysis SOP covers project performance analysis using PARS and Empower reports. The External Independent Review, Independent Cost Review, and Independent Cost Estimate SOPs address some processes that are also part of the EVM system. PM has modified the Department of Defense's Data Item Description for the Integrated Program Management Reports and the Contract Fund Status Reports. The IPMR and CFSR are listed in the DOE H202.4 clause as a contractor monthly deliverable.
The Internet is a great source of reference materials, and those listed are among the most commonly used references from external sources for earned value management. DOE participated in the development of many of these guides among peers from other government agencies and industry working groups. The National Defense Industrial Association, or NDIA, has sponsored several guides and provides an excellent source of information relative to project planning and EVM. The Planning and Scheduling Excellence Guide, referred to as the PASG, is a frequently used resource within DOE. With its focus on scheduling, the PASG, along with EIA-748 Intent Guide, the EVMS Acceptance Guide, the EVMS Application Guide, the EVMS Guidelines Scalability Guide, the Integrated Baseline Review, or IBR, Guide, and the Surveillance Guide, are generally written for contractors; however, they provide information helpful to DOE. These guides are located on the NDIA link shown.
The concept of earned value has historical significance going back to the turn of the twentieth century as a means of providing insight into both time and cost by measuring the work performed and cost of performance as measured against the planned baseline. Earned value application has evolved through the years to keep current with process improvements in all aspects of project management. EVMS is an integrated project management tool comprised of processes, systems, and people. The EIA-748 is accepted by the US government as the standard of EVMS compliance. The output of the EVMS is data which is used as a decision-making tool for management to take immediate steps to minimize current risks and prevent future risks.
PARS is DOE's central repository for capital asset project performance data and information, with monthly data submissions required at the start of CD-2 for projects with a total project cost of greater than or equal to $50 million dollars. PARS and Empower provide an abundance of analysis dashboards, views, charts, and reports for project management use. For additional information relative to EVMS procedures, templates, helpful references, training materials, and other snippets, please refer to DOE PM External EVM homepage or the internal MAX.GOV PM library. Check back periodically for updated or new information. Thank you for using the snippet library.