Earned Value for Time and Materials

Earned Value for discrete contracts is obvious. It's use for Time and Materials and IDIQ (Indefinite Duration and Indefinite Quantity) contracts is discourages in the guidance found in the 7 March 2005 Memorandum from the OUSD(P):

5. EVM is discouraged on firm-fixed price, level of effort, and time and materials efforts, including contracts, subcontracts, intra-government work agreements, and other agreements, regardless of dollar value. If knowledge by both parties requires access to cost/schedule data, the first action is to re-examine the contract type (e.g., fixed price incentive). However, in extraordinary cases where cost/schedule visibility is required and cannot be obtained using the Truth in Negotiations Act, the program manager shall obtain a waiver for individual contracts from the Milestone Decision Authority. In these cases the program manager will conduct a business case that includes rationale for why a cost or fixed price incentive contract was not an appropriate contracting vehicle.

This said, it may be an easy out to say - No EV.

An 28 April 2008 memorandum states

The application of EVM to work efforts that are not discrete in nature (non-schedule based), such as level of effort, time and materials, and services, should be considered on a case-by-case basis.  In cases where the nature of the work does not lend itself to the meaningful use of EVM, it may be appropriate to waive the EVM requirement.  When EVM is waived, the program manager will implement an alternate method of management control.

What method used for "management control" to replace EV needs to answer the questions:

• What does "Done" look like? - when the money runs out? Or the time runs out? Both? When the contract is canceled for lack of performance?
• How can we know we are actually providing "value" (earning this value) for the customer?
• What "value" should be earned during the performance of a T&M contract?
• If we are spending money and passing time, what is the customer getting for this?

These are answers that Earned Value provides. But getting these answers in the absence of Earned Value requires the use of some other performance measurement process.

Ways to Use EV on Non-Discrete Deliverables

Time and Materials contracts vehicles that accrue costs with the passage of time and consumption of materials. In T&M contracts there is very often a produced product or service. The service aspects are vaguer that the delivered product. In cases where the T&M  contract is considered "non-schedule" the measurement of discrete value is more difficult. However, there are many instances where T&M results in discrete outcomes, and follows a planned schedule of work. In these cases EV can provide value in the same way it does for discrete work. The challenges are:

• What is the BCWS for a T&M contract for the period of performance?
• How can Percent Complete, or better Physical Percent Complete, be measured for calculate BCWP?
• How can the delivered value from a T&M contract be assessed?

On interesting side light from a 23 April 2008:

During fiscal year 2006, DoD awarded 8,266 cost or incentive contracts to small business concerns, with only 16 of those contracts exceeding $20 million in value. During the same fiscal year, DoD awarded 53,585 fixed-price type contracts to small business concerns, with only 70 of those contracts exceeding $20 million in value. The use of earned value management requirements in fixed-price contracts is expected to be rare.

So even in the DoD procurement world EV is "rare" at the official level.
Measures of Progress Using EV without being "compliant" need to address

• Measuring "deliverables" from the work effort. If there are no deliverables, it's easy.
• If there are deliverables, assigning "value" to them in response to the T&M "plan" can at least make visible what the "planned" value is. When the ACWP comes in (the actual time and materials) and the BCWS is the Planned T&M costs some form of "performance against plan" can be produced.

In the end the only time EV can or should NOT be used is when there is no "Plan" or Schedule" for the work. If that is the case the project is called "train watching." The participants sit in the gate house and watch the trains pass buy - a common occurance in the German train system, when mechanical crossing gates were used.