Managing Complex Projects Using EVM

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    Managing Complex Projects Using

    Earned Value Management

    Abba Consulting

    DEFENSE+INDUSTRY 07Adelaide

    20-23 August 2007

    Wayne Abba

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    Agenda

    History of EVM (abridged version) DoD Experience

    EVM as Key Element of US GovernmentProgram Management Transformation

    Office of Management and Budget Government Accountability Office

    Federal Aviation Administration

    Role of Industry and ProfessionalAssociations

    Complexity: Project, Agency, Executive and Legislative Branches

    Complexity: Project, Agency, Executive and Legislative Branches

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    Earned Value Management: Origins

    Industry BestPractices

    GovernmentRequirements

    Criterion-based Management

    Brief statements of attributes Not how-to

    Not a system Minimum acceptable standard

    1967: DoD Instruction 7000.2Cost/Schedule Control Systems Criteria (C/SCSC)

    1997: DoD Regulation 5000.2-REarned Value Management Systems (EVMS)

    1960s Complex defense programs Multiple customers Need for improved management

    Solution PERT & PERT COST 10 versions by 1964 Industry How to Manage

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    EVM Around the World

    United States

    Australia

    Canada Sweden

    United Kingdom

    Japan

    Brazil

    France

    Israel

    Italy Portugal

    and others

    International Performance

    Management Council

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    Earned Value ManagementSystems Definition

    EVMS will effectively integrate the workscope of a project with the schedule and costelements for optimum program planning andcontrol. The primary purpose of the system isto support program management.

    ANSI/EIA 748-98B

    Industry StandardGuidelines for EVMS

    EVM provides for effective planning and measurement of resource use.

    EVM provides for effective planning and measurement of resource use.

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    American National Standard for EVMS

    ANSI/EIA Standard 748-98B, Earned ValueManagement Systems Published 1998, reissued 2007

    Incorporated in governmentregulations

    Global Engineering Documents,

    http://global.ihs.com/ (US$ 62) 32 Guidelines:

    Organization

    Planning, Scheduling &Budgeting

    Accounting Considerations

    Analysis & Management Reports

    Revisions & Data Maintenance

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    CostVariance

    Approx. Time VarianceJ F M A

    Time

    Resources

    400

    300

    200

    100

    Time Now

    ACWP(ActualCost)

    BCWS(Planned

    Value)BCWP

    (EarnedValue)

    Cumulative Trend Analysis

    M J J A

    Schedule Slip

    ScheduleVariance

    Risk

    Management Reserve

    AtCompleteVariance

    ProgBudget

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    Cost/Schedule Variance TrendAnalysis

    Time

    Cost Varianceat Completion

    ScheduleVariance atCompletion

    0

    Cost Variance ---Schedule Variance

    Management Reserve

    Unfavorable

    Fa

    vorable

    ManagementReserve

    Consumption

    Schedule Slip

    Standard chartsStandard charts

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    DoD Experience 1982-99

    A-10 A-12 B-1 B-2

    C-17 DDG-51 F-18 F-22 C-130H & J

    Chinook Apache Longbow Blackhawk Kiowa Seahawk Comanche T-45 T-46

    CVN-68 SSN-21 SSN-688 SSN-774

    T-AOE-6 LHD-1 Crusader M1 M2/M3 FVS

    MK-48 ADCAP MK-50 ALWT SSBN-726 CG-47 MH-53 V-22 Osprey P-3 Orion RCAS

    LIF Hawk

    B-1 Engines

    F-414-GE-400 Engines

    Chem. Demilitirization

    D-5 TRIDENT II

    Javelin

    Pershing II

    FAMECE/UET

    Satellites

    AN/BSY-2 THAAD

    ABL

    GBL

    * Aggregate overrun 5.5% on115 largest DoD contracts($3.0B on $84.8B @ 60%complete), adjusted for overtarget baselines a/o 4/30/2000

    * OUSD(AT&L)ARA/AM, 1/16/01

    * OUSD(AT&L)ARA/AM, 1/16/01

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    A-12 Contract Actual Cost vs. EAC

    Contractor and PM EACsboth imply no cost accrualfor several years during keymanufacturing/test phases

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    Secretary of Defense on A-12

    In canceling the A-12 program in 1991, Mr. Cheney said:

    "This program cannot be sustained unless I ask Congress for moremoney and bail the contractors out. But I have made the decision that Iwill not do that. No one can tell me exactly how much more it will costto keep this program going. And I do not believe a bailout is in thenational interest. If we cannot spend the taxpayers' money wisely, wewill not spend it."

    Failure or crisis changesbehavior in bureaucracies

    Largest contract terminationcase in history

    16 years in litigation 5 trials Another decision May 3, 2007

    And another appeal Millions of documents $2.5 Billion at stake

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    Lessons of the A-12

    Abiding cultural problem Existing controls, properly applied, would have been sufficient

    Too often, earned value insights remain the sole province ofthe supporting program control staff of both contractors andthe government Earned value must be an integral part of the performing design

    and manufacturing organizations

    Only when program technical staffs are held accountable forearned value analysis, will they begin to understand itsimplications.

    Facing empty carrier decks, Navy developed theF/A-18E/F Super Hornet

    Awarded to McDonnell Douglas (now Boeing) A-12 cancellation spurred the DoD EVM initiative

    The Beach Report, A-12 Administrative Inquiry, 28 Nov 1990The Beach Report, A-12 Administrative Inquiry, 28 Nov 1990

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    F/A-18E/F Contract Performance

    No major variances Scope control Effective planning EVM used effectively Excellent performance

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    F/A-18E/F in the Fleet

    Navy Admiral John B. Nathman, vice chief of naval operations,commenting on the smoothness of the Super Hornet fighter jetacquisition program. Explaining what makes the airplane so lovable,he said "It's an efficient, effective platform... under cost, onschedule.

    * National Defense Magazine (March 2005)

    "I wake up every morning"I wake up every morning

    and I want to kiss the Superand I want to kiss the SuperHornet on the lips.Hornet on the lips. **

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    Performance Management Laws

    Government Performance

    and Results Act of 1993 Federal AcquisitionStreamlining Act of 1994,Title V

    Information TechnologyManagement Reform Act of1996 (Clinger-Cohen)

    Implemented by ExecutiveOffice of the President,

    Office of Management andBudget (OMB)

    Audited by GovernmentAccountability Office (GAO)

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    Executive Office of the President,Office of Management and Budget

    Implemented performancemanagement laws in late 1990s Worked with Defense Department

    Issued Circular A-11 Part 7 Agencies expected to achieve, on

    average, 90% of cost, scheduleand performance goals Program budgets require strong

    business case tied to projectplanning using EVM per ANSI/EIA

    748-98 Performance is graded Required for government and

    contractors

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    CIRCULAR NO. A-11

    PART 7

    PLANNING, BUDGETING,

    ACQUISITION, AND

    MANAGEMENTOF CAPITAL ASSETS

    EXECUTIVE OFFICE OF THE PRESIDENTOFFICE OF MANAGEMENT AND BUDGET

    JULY 2007

    http://www.whitehouse.gov/omb/http://www.whitehouse.gov/omb/

    A-11 Part 7 Updated annually

    constantly raising the bar

    Exhibit 300 Business Case

    Capital Programming Guidereissued 2006

    Federal Acquisition Regulationcontract clauses issued 2006

    FAR has force and effectof law

    A major transformation of US

    Government management

    PM Certification requirementsissued 2007

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    Executive

    BranchManagementScorecard

    www.results.gov

    2001 BaselineEvaluation

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    Executive

    BranchManagementScorecard

    www.results.gov

    Quarterly ReportJune 2007

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    Using EVM as an Audit Tool

    GAO began using EVM analysis in 2002 for selectedaudits

    Since that time GAO has issued 6 reports using EVManalysis as a ba