As the deadline for development of comprehensive policies for agencies’ use of Earned Value Management (EVM) rapidly approaches — December 31— the time to understand and plan for the requirement is now.

The Office of Management and Budget (OMB) issued a memorandum in August 2005 requiring agencies to utilize Earned Value Management (EVM), a process that measures the value of work on a project against its costs. In theory, the methodology should allow project managers to track money spent on a project — in near-real time — and measure that against timelines and deadlines. The OMB directed agencies to develop a model EVM policy by Dec. 31 and will make compliance a part of the President’s Management Agenda scorecard under the e-government category.

As OMB’s last-day-of-the-year deadline swiftly approaches, results of a recent survey in this regard should be noted: a doctoral fellow at George Washington University and a professor with Northwestern University’s Kellogg School of Management recently found that “the government is well ahead of the Fortune 1000 companies in understanding the benefits of EVM.” This according to an article in GCN in November. Of the 130 private-sector officials interviewed for the survey, 85 percent said they do not track earned-value management; that is twice the number of federal executives who said they did not use EVM.

The Federal Acquisition Council also is finalizing a rule in the Federal Acquisition Regulations under which agencies will require vendors to provide monthly, weekly and, if necessary, daily access to project costs and milestones.

To wit, understanding and planning the EVM requirement is now. Members of the professional acquisition community should grasp EVM’s enablement of working in ways that further contribute to project success.

EVM processes, systems and software enable the continuous assessment of project performance and status via the provision of a methodology that can assist agencies in effectively measuring project alignment with resources and goals by comparing status to original plans and end goals.

Further, it can help agencies achieve “green” marks on the President’s Management Agenda scorecard. In fact, EVM is currently one of the central requirements for “Getting to Green” on President George Bush’s Management Agenda. According to EVM solutions provider Primavera, “To achieve and maintain this high score, agency projects must stay within a 10 percent variance from their cost, schedule and performance goals.” In other words, in order to be awarded “green” — in which an agency has met all of OMB’s requirements — on the President’s Management Agenda scorecard, agencies must meet 90 percent of their goals for cost, schedule and performance. If not green, an agency is either yellow or red, which spells mild-to-serious problems for the agency. (Add blue and orange to the scorecard and you’ve got the wonderfully sophisticated color-coded Homeland Security Advisory System.).

The Department of Defense (DoD) developed EVM in the late 1960s as a way of instituting a standard project reporting analysis and methodology. While the DoD’s use of EVM has been well documented, the rapid expansion of EVM usage into other agencies has occurred only recently.

For the professional acquisition community, according to a recent GovPro article, “EVM necessitates earlier and deeper investment in projects. It requires that projects be fully defined at the outset and designed with a bottom-up baseline plan, enabling measurement to take place during the entire period of performance, from one percent to 100 percent of the project’s lifecycle.”

Procurement officers must work with contractors to ensure that contracts are developed with clear expectations with regard to both budget and time.

Employing EVM, said GovPro, requires a three-dimensional measurement of project performance, ideally following the development of the Work Breakdown Structure (WBS) through the project’s conclusion. The three key components are as follow: planned value, or the estimated cost for a task’s planned schedule; actual cost, or the actual amount of money paid for the work as it progresses; and earned value, or the budgeted cost for work performed.

Using EVM’s three dimensions, the project management teams can monitor both the cost and the schedule performance status of their projects — at all times.

GovPro further proffered the following:

With as little as 15 percent of the project complete, EVM provides accurate and reliable performance readings. Project managers can use readings to predict how much it will cost to complete the project within a narrow band of values. If early warning signs convey unacceptable readings to the project team, steps can be taken immediately to avoid the undesired results.

It is necessary — vitally so, according to GovPro — that the program office, project manager and acquisition community incorporate an earned value element into the acquisition process PRIOR to the contract reward. In effect, contracts from the actual outset must be structurally designed to include EVM requirements. Suppliers and subcontractors also must be aware of the tasks and reporting expectations now required by the government.

For further information about Earned Value Management, here is a lengthy list of EVM resources.

References

Agencies see the gain — and pain — of EVM
by Rob Thormeyer
Government Computer News, Nov. 21, 2005
http://www.gcn.com/24_33/news/37614-1.html

Study Reveals Disconnect Between Perceived Merits of Earned Value Management and Federal Agencies’ Readiness to Implement
Press Release (via Businesswire)
Primavera Systems, Inc., Nov. 8, 2005
http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20051108005808&newsLang=en

Homeland Security Advisory System
Department of Homeland Security
http://www.dhs.gov/dhspublic/display?theme=29

An Education in Earned Value: Procurement Officers’ Expanding Role
by Bill Damaré and John Peterson
GovPro, Oct. 18, 2005
http://www.govpro.com/ASP/ViewArticle.asp?strArticleId=106582

“Work Breakdown Structure”
Wikipedia
http://en.wikipedia.org/wiki/Work_breakdown_structure

Niwot Ridge Resources
http://www.niwotridge.com/Resources/DomainLinks/EarnedValue.htm

Additional Resources

What Is the Health of My Project? The Use and Benefits of Earned Value
by Ruthanne Schulte, PMP
Project Magazine, Sept. 15, 2002
http://www.projectmagazine.com/v3i7/evmv3i7.html

Earned Value Management Part One
Project Magazine, November 2000
http://projectmagazine.com/pages/indv1i7/earned-value-management.php

Earned Value Management Part Two
Project Magazine, December 2000
http://projectmagazine.com/pages/indv1i8/earned-value-management.php

Earned Value Management Part Three
Project Magazine, January 2001
http://www.projectmagazine.com/jan01/evm3.html