Posted by: EVMConsulting.Com | April 8, 2011

Want Good Earned Value? Challenge the Estimate!

I attended quite an interesting conference call yesterday. I will leave names and organizations nameless of course.

An organizational head was brought in to speak of his experience of leading and implementing EVM in his organization. He was seen as a leader of EVM implementation in the industry and knew how to get things done.

One of his first steps was to mandate EVM for all programs above a threshold (lower than the most common $20M number). He said he mandated this on all existing contracts. A question immediately popped in my head and before I could ask it, it was asked by one of the members physically present at the meeting. “How can you require EVM reporting if it wasn’t listed in the DID?” His answer: “I told them they had no choice. I see it as part of good Program Management.”

Well, I don’t disagree with him that it is definitely part of good program management; I do disagree that you cannot just require it after the fact without getting all kinds of extra charges (allowable) or a contractual nightmare between organizations. EVM must be included in the DID (Data Item Description) and planned accordingly. If an organization or company does not know he will be doing EVM on a contract and then is mandated to do so, it is going to severely impact the value of the outputs (and probably structure & visibility into the data).

I think this industry veteran has a wealth of experience and his heart in the right place but organizations must be careful with such mandates. This can be a dangerous concept to be passing along to other organizations.

4 Main Points on Earned Value Requirements:

1. Good EV is worth the money

2. Good EV cannot be implemented after the fact without impacting the quality of the data (accounting structure, program structure, staffing issues, etc.)

3. The extra cost of EV must be made aware to all parties.

4. Contractors-don’t cut your EV budgets during the bidding process. Government folks: challenge the contractors EV staffing plan.  Ask if it is adequate enough to handle the reporting requirements listed in the DID and get experienced Earned Value folks to look at it.

I cannot make this point enough. The number one reason problems arise with the EV reporting is because there isn’t the right people running the show. To get good EV, you need experienced people and a certain minimum level of staffing support. What do contractors do? They want to land the contract and Planning & Control departments (which are usually low on the political totem poll) get cut. What do government folks do? They accept as cost savings. Challenge the estimate! If it is a cost plus contract, you will probably pay for it later one way or the other.

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