Posted by: EVMConsulting.Com | January 5, 2009

Abuse of the LOE (Level of Effort) Earned Value Technique

bradley

It is a very common occurence with CAM’s of new EV programs to use LOE for all their tasks. This must be prevented at all costs. During an IBR, the customer (and also DCMA during an audit) will look at your LOE percentage to total program in both dollars and WBS numbers to see if this is logical. If too many LOE activities exists, it ruins the credibility of the metrics or brings up the question-why was Earned Value used at all for this program? If the contract is support by nature, EV would not be appropriate.

LOE  should only be used for work tasks that are supportive in nature and or have no measurable delivery product. Any EVM schedule metric would track progress on your test – rework – test – accept scenario if your work is planned and managed using discrete incremental milestones along with the disciplined baseline maintenance required by EVMS.

From the DoD Implementation Guide:

“LOE activities may be included or excluded in the network as appropriate.  This determination should be made based on contractor standard procedures.  LOE activities should not normally drive the critical path; and this can be avoided by including LOE activities on the IMS without network logic.  If LOE activities are included within the IMS, they are clearly identified as such.  As a best practice, understand that LOE work package (or lower level task/activity), by definition, cannot influence an event-driven schedule and are not required to be included in the IMS.  However, if inclusion is desired to maintain consistency with the cost system they should be included in such a way that they do not yield erroneous critical paths.  LOE is required to be in the IMS whenever a resource-driven schedule is constructed utilizing resource limitations/constraints.  In these cases, LOE is required to be included in the schedule along with the interdependencies with discrete work.”

Want more info?Here is a link to the official implementation guide:

http://guidebook.dcma.mil/79/EVMIG.doc

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