Earning Value from Earned Value

There's a post on a Deltek implementation partner site about applying Earned Value. It has some good advice, but the premise of the starting point needs to be addressed.

Before going on to suggest things to do on a project using EVM, it's best to have one of those don't do stupid things on purpose discussions. If the customer or potential customer is doing stupid things on purpose, it's important to stop those first, before attempting to make any other improvements. Once that is done, the core paradigm of Earned Value Management is very simple and obvious ...

Turning the Subjective into the Objective

This phrase is not mine, it is a colleague's who said it while we were walking down the hallway of a client site, who is introducing EVM to a $1.9B weapons program that has never had EVM before, but is now being mandated to do so by Congress!!!

So Here's the Introduction to What Not To Do and the Simple Fix

Let's start with a picture of where to start. The are 32 Guidelines in ANSI-748-C. 11 are needed for he success of any project, in any domain. If you aren't doing these 11 in some way, the probability of success for your project is low. This is the case of all project management and product development processes, These are like the 5 Immutable Principles - they have to be there in some way. Here's the 32 from ANSI-748-C and the 11 are colored and listed below.

So Let's See How the 11 Can Address Each Of These Issues?

Here's their list of reasons why Earned Value Management is not readily adopted by contractors.

1. Too bureaucratic - if you don't know what you are supposed to deliver from the program (WBS), who is available to do the work (OBS), and what work has been assigned to what people (RAM), then you probably don't know what the project is all about and what done looks like. You're not being a credible project manager.
   • The organizational and process effort (bureaucracy) needed to manage the program is paid back through the visibility to project performance on final grained boundaries - weekly status
   • This information is actionable and used to Keep the Program GREEN.
   • In the end it's about the customers request for you to provide visibility to your own performance on the project and make some estimate of the Probability of Success of your efforts.
2. Too expensive to implement - if you don't have a plan (IMP) and a schedule (IMS), assigned some budget to that work in a time phased manner (Time spread BCWS), defined the intermediate and final outcomes (Milestones and Deliverables), than you don't know what done looks like. So you actually have no idea how expensive it will be because you can't say what your EAC is.
   • The resulting Performance Measurement Baseline (PMB) to the Work Package level is the minimal buy in needed to manage any project.
   • If we're not managing the work at the place where the work is performed (in the WBS), then we can't possibly have the insight needed to take corrective actions.
   • The tools to do this can be as simple as Microsoft Project using the native EV capabilities or a $700 plugin that produces the CPR from MSFT Project. In all cases it's a simple matter of coding the activities in the IMS, baselining the BCWS (budget), reporting the physical percent complete, calculating the Earned Value (BCWP), and rolling that up through the WBS and OBS to the program level.
   • More complex EV and Accounting tools should ONLY be applied if needed. Do Not buy the tool before you have assessed your readiness for EV, your process maturity, and the ROI for any tool.
3. Too many people are required to administer an EVMS - you need a schedule, a budget, a way to measure progress to plan, and at least one person to look after those. You may need more if the program is complex. This is the minimum buy in for any credible management process. These people have to do their work no matter what. In doing that work they apply EV. Determining the work load is based on the effeciency of your processes. The EV tool can help or hinder those processes. This is a process management issue first and a staffing issue second.
   • Push the accountability for maintaining the integrity of the IMS to those actually doing the work. They need to have visibility into their performance.
   • Automate with simple tools, the collection of actuals - actual actuals and estimated actuals.
   • Get plug ins, free forms, and other cheap tools for making the CPR.
   • Do this on a pathfinder project before you ever buy anything. Be an informed buyer, not just a person checking the box. You'd do your homework for a CAD system, and Accounting system, and Email server. Do the same here.
4. Special IT tool-sets are required - not true. You need to have an accounting system. If you've qualified for doing EV with an award of $20MM or more, you've already got an accounting system, a purchasing system, a time collection system, and hopefully you're already doing scheduling in some credible way. And DCAA has probably looked at it. You also need an EV Engine. It's like a smaller version of the Accounting System. It's not special, it's a business management tool. Like all business management tools, it needs someone to look after it.
   • The major impact of EV on any business is the discipline of maintaining the baseline. 
   • "No changing things" just because you don't like what it says. You can't manage any program in the absence of variances.
   • You can't drive your car without making steering inputs. Do the same thing for your program. The feedback for the needed steering inputs is the EV data you get every week when you status the IMS.
5. The Baseline cannot be established early…development programs have too much uncertainty, let’s wait and see - this is the same as saying I don't know why we are spending your money, but we just are spending it, trust us, we'll get back to you when we figure it out.
   • That's nonsense fo course. You know why your doing the work?, write that down. 
   • Up till Integrated Baseline Review (IBR) (maximum 180 days after award), you're working on an evolving PMB anyway. At IBR, snap the baseline. This is the reason for the IBR. To demonstrate to the government that they hired the right firm to do the job. Don't ever tell them there is too much uncertainty. Figure it out. Have a risk management plan. Get a plan for Management Reserve (MR) outside the baseline. Be a program manager.
   • Do Rolling Waves for work that is not definitized yet. Spread the BCWS flat (peanut butter spread) from the end of the first Rolling Wave to the End of Contract (EOC) and call it done.
   • Detail the current Rolling Wave at the Work Package level.
   • Without this detail, there is no way to tell what done looks like, so you're not a credible progam manager without that.
   • EVM works BEST for development programs. It tells you the effecacy of your dollars. I spent a dollar and "earned" a dollars value back. This is the very definition of Earned Value. You earned your budget.
6. This program is too small to need such an intrusive tool - how about Microsoft Project for $300? Is that too much?
   • You've been awarded $20,000,000 worth of the public's money. Time to strart pretending you're are real boy (Pinocchio quote, so don't get all wound up about the Politically Incorrect statement).
   • $700 will get you a plugin for MSFT Project that will produce the CPR, maintain the baseline, has an accounting calendar, and does variance analysis.
   • For a couple $1,000 you can have a more capabilities. 
   • The full up (in alphabetical order) Cobra, EcoSys, Encore, forProject, MPM, QuantumPM, Safran, wInsight, SAP and others not mentioned may be needed. But you absolutely must do a readiness assessment. I'm sure there are more, but those are the ones I've actually used to produce the CPR on a monthly basis.
   • By the way, nearly all things EV can be found at the College of Performance Management, where vendors and users come together twice a year for an EV Fest. There is a library of EV materials there. Membership is cheap.
   • EVM is NOT about tools. If the tools vendors tell you their tool is the solution to your problem, show them the door. EVM is 85% process and people. The tool is ONLY applicable once you've got a handle on what processes you will need to comply with the flowdown requirement from yuor cusotmer, who is expecting you the behave appropriately.
7. We’re only a small company and can’t afford this - Really? You've just been awarded at least $20,000,000.00 in work. Get a grip. Allocated money to actually manage that sum is part of your contract. If you're a very first time EVMS awardee, negotiate with your Contract Officer (CO) money to stand up the EVMS. They understand. If you're a small business even better. The CO's job is to help you be successful.
8. This program is too big…Earned Value is meaningless to us - this is a meaningless statement. There is no such thing. It's like saying we're too big to fail. That turned out well didn't. 
   • You've been awarded a large contract. You should read the terms of the contract, the FAR and the DFARS. You're obligated under law to properly manage that award to the benefit of the government.
   • Please if you hear this statement, assume the person saying it has never actually worked an EVM program. Otherwise they would know it is nonsense.

So What Does All This Mean?

It means applying the 11 Guidelines shown above to your program is the same as being a credible program manager. If you're not doing these 11, you're probably not doing your job as a Program Manager on an EVM program. Think about that. You've been assigned to look after $20,000,000.00 of the governments money. Would you actually use some the phrases above when asked why you're doing a poor job of managing the program? Not for long I suspect.

One Final Comment

Earned Value Management is one of several enabling technologies to turn the subjective into the objective. But it is only a necessary condition for success. It is far from a sufficient condition for success. You need an Integrated Performance Measurement Baseline with these elements

1. The Work Breakdown Structure (WBS) is Paramount 
   • The WBS defines the deliverables and the supporting processes that produce them 
   • The WBS Dictionary describes the technical and operation behaviors that will be assessed during the development of the deliverables 
   • The terminal nodes of the WBS define the deliverables produced by the Work Packages in the IMS and assessed through the IMP Accomplishment Criteria (AC)
2. The Integrated Master Plan (IMP) Starts with the buyer 
   • The IMP defines the measuring of increasing maturity for the deliverables as the program moves from left to right. 
   • Significant Accomplishments (SA) are defined by the Measures of Effectiveness (MoE) 
   • Accomplishment Criteria (AC) are defined by the Measures of Performance (MoP) 
   • Risks are assigned at all levels of the IMP and IMS
3. Natural Uncertainties and Event Based Risks 
   • Natural uncertainties in cost and schedule processes create risks to completing on time and on budget. These naturally occuring uncertainties are irreducible and can only be handled with margin - schedule margin and cost margin.
   • Event based risks create impacts to cost, schedule, and technical performance, Event risks are created by probabilistic uncertainty. 
   • Event based risks are handled through risk mitigations - risk retirement. 
   • To be credible, the PMB must include both type of risks with their handling strategies
4. Costs are assigned to Packages of Work
   • Labor and material cost are represented in the Integrated Master Schedule (IMS) and provide visibility to the probability of program success 
   • Variances in labor and material costs are modeled in the same way as work durations 
   • Event based risks impact both cost and schedule and are modeled in the PMB 
   • Risk retirement cost is allocated for the work effort in response to Event Based risks
5. Statement of Work 
   • Work in the PMB starts with the Statement of Work and flows through the Work Breakdown Structure 
   • Measures of Effective (MoE) and Measures of Performance (MoP) can be defined in the SOW or WBS Dictionary 
   • Traceability from the IMP to the IMS to all performance measures in the SOW is the basis of program performance measurement
6. Technical Performance Measures
   • Key Performance Parameters (KPP, both JROC and Program specific) and Technical Performance Measures (TPM) define how the deliverables complying with the Statement of Work, Concept of Operations, and CDRLs 
   • TPMs inform the measures cost and schedule for delivered program outcomes 
   • TPM, Measures of Effectiveness (MoE), Measures of Performance (MoP), and Key Performnce Parameters (KPPs) provide assessment of the cost and schedule effectiveness.

 

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