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1 This lesson introduces key concepts o f Earned Value Management ( EVM), including the basic EVM process, key elements of EVM, reports, and risk management. The tenninal learning objective for this lesson is to recognize key c oncepts about EVM as a program managemen t tool that integrates cost, schedule, and technical perfonnance. Management Reserve This lesson includes two topics: Topic 1 : What is EVM? $ inm Topic 2 : EVM and Other Functional Disciplines Contract Sbrt To me Tome Now Contract End... I Page1of46 I... Back Next

2 This lesson introduces key concepts of Earned Value Management ( EVM), including the basic EVM process, key elements of EVM, reports, and risk management. Long Description is to reo: o onizei m<>n<>l A graph depicts project EVM data in terms of dollars in millions and time. The program y- axis reflects dollars in millions. A bar at the top of the graph indicates a cost, management reserve. Time is indicated on the x- axis Contract Start to Contract End. A vertical line labeled Time Now identifies the current point in This lesson time. Three curves are shown. A curve labeled BCWS begins in the lower left corner at Contract Start and slopes upward, crosses the Time Now line, and terminates in the upper right corner at Contract End, at the bottom of the Management Reserve bar. The end point of the BCWS line is labeled BAC. A second curve, labeled BCWP, is shown beneath the BCWS curve and ends at Di!;Cilplirl C the Time Now line. A third curve, labeled ACWP, runs between the BCWP and BCWS curves, crosses the Time Now line, and continues as a dashed curve to cross above the BCWS and Management Reserve bar, and past the Contract End point. Where the ACWP curve terminates, it is labeled EAC. A bracket labeled CV encompasses the span between where the ACWP and BCWP lines intersect with the Time Now line. A bracket labeled SV encompasses the span between where the BCWS and BCWP lines intersect the Time Now line.... I Pagelof 46 I... Back Next

3 In this topic, you will: Recognize tha t Earned Value Managemen t {EVM) is a management tool that program managers use for insight into cost, schedule and performance o f Department of Defense (DoD) acquisition programs and that supports proactive decision-making De fine the terms for key EVM elements : budge ted cost for work scheduled { BCWS), budge ted cost for work performed {BCWP), actual cost o f work performed {ACWP), budge t a t comple tion {BAC), and es timate at completion {EAC) Recognize a favorable and unfavorable cost and schedule variance, giv en a graphic depic tion of a time- phased performance measurement baseline { PMB), cumulativ e sews, BCWP, and ACWP { BCWScum, BCWPcum, ACWPcum)... I Pogelof 46 I... Back Next

4 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM in the Acquisition life Cycle EVM is an integrated program management tool that the program manager ( PM ) uses to track specific contract cost, schedule and performance objectives, in support of the Acquisition Program Baseline CAPS ) goals. EVM is primarily used in development and integration contracts with measurable and discrete work scope, to measure cost and schedule performance and manage risk. These contracts are usually in the Engineering and Manufacturing Development ( EMD ) phase and early production phases of the acquisition life c ycle, as illustrated in the graphic below. Engineering & Materiel Solution Technology Maturation Production & Manufacturing Analys s & Risk Reduction Deployment Development Operations & Support Tracks contract cost, schedule, and performance Where arc we now? Where arc we going? What can be done to get us there?... I Page3of 46 I... Back Next

5 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM in the Acquisit ion life Cycle EVM is an integrated program management tool that the program manager ( PM ) uses to track specific contract cost, schedule and performance objectives, in support of the Acquisition Program Baseline CAPS ) goals. Acquisitio n Program Baseline An agreement between the program manager ( PM ) and the Milestone Decision Authority ( MDA) that reflects the approved program and contains schedule, performance, and cost parameters that are the basis for satisfying an identified mission need. T he first APB is approved by the MDA prior to a program entering Engineering and Manufacturing Development, or at program initiation, whichever occurs later. As a minimum, the APB contains the objective and threshold values for major milestones and significant schedule events, key performance parameters from the approved requirements document, and the life- cycle cost estimate approved for the program. Tracks contract cost, schedule, and performance Where arc we now? Where arc we going? What can be done to get us there?... I Page3of 46 I... Back Next

6 EVMlOl Fundamentals of Earned Value Management lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM in the Acquisition life Cycle EVM is an integrated program management tool that the program manager contrac t schedule and of the goals. l o ng Descriptio n The ac quisition life cycle displays with five sequential phases: 1. Materiel Solution EnairleE!ril Analysis, 2. T echnology Maturation and Risk Reduc tion, 3. Engineering and cvcie!i Manufac turing Development, 4. Produc tion and Deployment, and 5. Operations and Support. Performance, cost, and schedule requirements are de termined in the Materiel Solution Analysis phase. Earned Value Management ( EVM) occurs across the acquisition life cycle phases and it tracks contrac t cost, schedule, and performance. EVM answers these questions: Where are we now? Where are we going? What can be done to ge t us there? Tracks contract cost, schedule, and performance Where arc we now? Where arc we going? What can be done to get us there?... I Page3of 46 I... Back Next

7 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM in Relation to the APB Th e APB is an agreement between the Milestone Decisjon Authority {MDA) and the PM. It is established at program initiation and revised throughout the program's life cycle. The APB contains the objective and threshold values for major milestones and significant schedule events, key performance parameters (KPP), and the approved program life-cycle cost estimate. These include: Technical Performance - What technical characteristics are needed and to what level? Schedule - When is it needed? Cost - What is the cost constraint for the program? EVM is applied at t he contract level, with contract cost, schedule, and technical performance objectives that support the APB parameters. Take a look at some of the Ughtweight, Assault and Reconnaissance (LAR) Vehicle program APB Parameters for the EMD phase, and the supporting LAR EMD contract objectives. Note that the contract was awarded on June 1, 2013.

8 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM in Relati on t o the A PB The APB is an agreement betw een the Mil es t one Decision Authority CMDA l and the PM. It is established at program initiation and re v is ed throughout the program's life c y c le. Sample of Government APB Key Performance Parameters (KPPs) EMD Contract KPP Objective Threshold Specifications Survivability Rate Grade 50 degrees 40 degrees 40 degrees Turning Radius 20 feet 25 feet 25 feet Range 400 miles 350 miles 385 miles Mean Time to Repair (MTIR) 1 hour 1.5 hours 1.4 hours

9 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM in Relation to the A PB Government APB Schedule Parameters EMD Contract Schedule Requirements Key Event Objective Threshold MS B Decision EMD Contract Award Critical Design Review (CDR) Production Prototype Delivery Dev Test;Op Test (DT/ On Com plete Mar-13 Mar-13 N/ A Mar-13 Jun-13 Jun-13 Sep-14 Dec-14 Sep-1 4 Jul-15 Dec-15 Sep-15 Jan-16 Apr-16 Apr-16

10 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM in Relation to the A PB The APB is an agreement betw een the Mil es t one Decision Authority CMDA l and the PM. It is established at program initiation and re v is ed throughout the program's life c y c le. Government APB Cost Parameters EMD Negotiated Contract Cost Cost $ in Millions (SM) Objective Threshold Research, Development, Test & Evaluati on (RDT&E) $100M $110M Target Price: $72.4M Target Cost: $65M The APB will in clude affordability caps for unit production and sustainment costs. Affordability caps are established as fi xed cost requirements equivalent to key perform ance parameters (KPPs). The contract cost is not the only item that must be accounted for in th e APB cost parameters. The APB cost will also in clude fu nding required for testing, program office support, and possibly other elements.

11 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM in Relation to the APB T he APB is an agreement between the Milestone Decision Authority CMDAl and the PM. I t is established at program initiation and revised throughout rth~e ;;..,~;,;,oa.;,;;;;m's;..,;;;~ prr,;;grra.;,;.; li fe;..;;y<c~~ C.~.;,Ie T he APB contains the objective and ~ Milestone Decisio n Authority ( MOA) events, key performance parame ters ( KPP Designated individual with overall responsibility for a T hese include: program. T he MDA shall have the authority to approve entry of an acquisition program into the next phase of the acquisition process and shall be accountable for Te chnical Performa n c e - What te cost, schedule, and performance reporting to higher Schedule - When is it needed? authority, including congressional reporting. Cost - What is the cost constraint for the program? EVM is applied at the contract level, with contract cost, schedule, and technical performance objectives that support the APB parameters. T ake a look at some of the Lightweight, Assault and Reconnaissance ( LAR) Vehicle program APB Parameters for the EMD phase, and the supporting LAR EMD contract objectives. Note that the contract was awarded on June 1,

12 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM in Relation to the APB Th e APB is an agreement between the Milestone Decisjon Authority {MDA) and the PM. It is established at program initiation and revised throughout the program's life cycle. The APB contains the objective and threshold values for major milestones and significant schedule events, kpv.~ " ycle cost estimate. o bjective These include: Value of an attribute that is applicable when a Tec hnical Perfor higher level of performance delivers significant and to what level? Schedule - Whe increased operational effect, or decreased operational risk, if it can be delivered at an Cost - What is tt affordable life-cycle cost. The objective value is the desired operational goal that is achievable EVM is applied at t he c but at a higher risk in life-cycle cost, schedule, rical performance objectives that support the APB p and technology. Performance above the objective does not justify additional expense. Tak.,. ~ nnaissance (LAR} Vehicle program APB Parameters for the EMD phase, and the supporting LAR EMD contract objectives. Note that the contract was awarded on June 1, 2013.

13 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM in Relation to the APB The APB is an agreement between the Milestone Decision Authority CMDAl and the PM. It is established at program initiation and revised throughout the program's life c ycle. The APB contains the objective and threshold values for major milestones and significant schedule events, key performan ce parame ters,j... a -.,~..a ad!?wo...~~ imate. t hreshold These include: Reflects the minimum performance required to Technical Performance - Wha achieve the required operational effect, while level? being achievable through the current state of Schedule - When is it needed? technology at an affordable life-cycle cost. Cost - What is the cost constr Performance below the threshold value is not operationally effective or suitable or may not EVM is applied at the contract level, provide an improvement over current nee objectives that support the APB parameters. capabilities. Take a look at some of the Lightweight, Assault and Reconnaissance ( LAR) Vehicle program APB Parameters for the EMD phase, and the supporting LAR EMD contract objectives. Note that the contract was awarded on June 1, 2013.

14 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM in Relation to the APB Th e APB is an agreement between the Milestone Decisjon Authority {MDA) and the PM. It is established at program initiation and revised throughout the program's life cycle. The APB contains the objective and threshold values for major milestones and significant schedule events, key performance parameters (KPP), and the approved program life-cycle cost estimate. These inc ke y pe rform a nce parameters Te Performance attribute o f a sys tem considered s are needed and to what level? critical or essential to the development o f an Sc effective military capability. KPPs are contained in the Capabili ty Development Document (COD) and the Capability Production Documen t (CPO) EVM is ap and are included verbatim in the Acquisition ule, and technical performance objectives Co that supp Program Baseline (APB). -~::~-~T:a:k~e:"":a~lo= = o~k~a~t~s~om:e:-:o~ ~ f~= th e~ u7ghtwe:ig~t.~~ === =h ~ Assault and Reconnaissance (LAR) Vehicle program APB Parameters for the EMD phase, and the supporting LAR EMD contract objectives. Note that the contract was awarded on June 1, 2013.

15 EVMlOl Fundamentals of Earned Value Management lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM in Relation to the APB The APB is an agreement between the Miles tone Decision Authority CMDAl and the PM. It is established at ro ram initiation and revised throu hout the ro ram's life c cle. l ong Descript ion Three data tables display: Sample of Government APB Key Performance Parameters ( KPPs ) for the EMD contract, Government APB Schedule Parameters with the EMD Contract Schedule Requirements for Key Events, and Government APB Cost Parameters with the EMD Negotiated Contract Cost. The data for the sample of Government APB Key Performance Parameters ( KPPs ) follows: Surviv ability objective is 0.95, threshold is 0.95, and contract specification is Grade objective is 50 degrees, threshold is 40 degrees, and contract specification is 40 degrees. Turning radius objectiv e is 20 feet, threshold is 25 feet, and contract specification is 25 feet. Range objective is 400 miles, threshold is 350 miles, and contract specification is 385 miles. Mean Time to Repair ( MTTR) objective is 1 hour, threshold is 1.5 hours, and contract specification is 1.4 hours. Schedule parameters are : MS 8 Decision objectiv e date is March 2013, threshold date is March 2013, and no contract schedule requirement date. EMD Contract award objectiv e date is March 2013, threshold date is June 2013, and contact schedule date is June Critical design review ( CDR) objective date is September 2014, threshold date is December 2014, and contract schedule date is September Production prototype delivery objective date is July 2015, threshold date is December 2015, and contract schedule date is November Dev Test/Op Test ( DT/ OT) Complete objective date is June 2016, threshold date is April 2016, and contract schedule date is May APB cost data displays in millions of dollars for Research, Development, Test, & Evaluaton (RDT&E ). The APB Objective is $ 100 million, the APB threshold is $ 110 million. The EMD negotiated contract costs are a target price of $72.4 million and target cost of $65 million. The APB will include affordability caps for unit production and sustainment costs. Affordability caps are established as fixed cost requirements equivalent to KPPs. "'iillllllll I Page4of 46 I... Back Iii ) Next You must select each LAR document to move on.!!

16 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP The APB and Risk All programs involve mjs to technical performance, schedule, and cost. Moreover, these risks are interrelated. For example, consider risks to the LAR EMD program: Technical performance Risk : High technical risk is associated with the inclusion of state-of-the-art technologies for a quiet running high performance diesel engine, and requirement that vehicle temperature remains at or appears to remain at a constant with the opera ting environment temperature in order to avoid detection. Schedule Rjsk: Moderate risk based on aggressive production delivery schedule and tight technical requirements mitigated by the integration of proven technology in vehicle development. Cost Rjsk: Moderate based on an already aggressive initial production delivery schedule and tight technical specifications which may drive higher costs than are reflected in the cost estimates.... I PogeSof 46 I... Back 'i 1 Next

17 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP The APB and Risk All programs involve mjs to technical performance, schedule, and cost. Moreover, For example, coo,sicieot A measure of future uncertainties in achieving program performance goals and objectives within defined cost, associated schedule, and performance cons train ts. technologies engine, and requiremen t that vehicle temperature remains at or appears to remain at a constant with the opera ting environment temperature in order to avoid detection. Schedule Rjsk: Moderate risk based on aggressive production delivery schedule and tight technical requirements mitigated by the integration of proven technology in vehicle development. Cost Risk: Moderate based on an already aggressive initial production delivery schedule and tight technical specifications which may drive higher costs than are reflected in the cost estimates. 'm"' I PogeSof 46 I... Back 'i 1 Next

18 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP The APB and Risk All programs involve mjs to technical performance, schedule, and cost. Moreover, these risks are interrelated. For example, consider risks to the LAR EMD program: Technical performance Risk : technical risk is associated with the technologies for a Technical Performance Risk engine, and ""'""'o" at or appears to The risk that arises from activities related to environment tennpe!rl technology, design and engineering, manufac turing, and the critical technical processes of test, Schedule Rjsk: production, and logistics. production delivery ~.,;,...;; requirements mitigated by the integration of proven technology in vehicle development. Cost Risk: Moderate based on an already aggressive initial production delivery schedule and tight technical specifications which may drive higher costs than are reflected in the cost estimates.... I PogeSof 46 I... Back 'i 1 Next

19 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP The APB and Risk All programs involve mjs to technical performance, schedule, and cost. Moreover, these risks are interrelated. For example, consider risks to the LAR EMD program: Technical performance Risk : High technical risk is associated with the inclusion of state-of-the-art technologies for a quie t running high performance diesel engine, and requirement that vehicle temperature remains at or appears to remain at a constant with the operating environment temperature in order to avoid detection. Schedule Rjsk: Moderat e risk based on aggressive production de requirements Schedule Risk technology in The risk that a program will not meet its acquisition Cost Risk: Mo strategy schedule objectives or major milestones production de established by the acquisition authority. specifications;l.~.---~----~--~...~...~ reflected in the cost estimates.... I Poge Sof46 I... Back 'i 1 Next

20 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP The APB and Risk All programs involve mjs to technical performance, schedule, and cost. Moreover, these risks are interrelated. For example, consider risks to the LAR EMD program: Technical performance Risk : High technical risk is associated with the inclusion of state-of-the-art technologies for a quiet running high performance diesel engine, and requirement that vehicle temperature remains at or appears to remain at a constant with the opera ting environment temperature in order to avoid detection. Schedule Rjsk: Moderate risk based on aggressive production delivery schedule and tight technical requirements mitigated by the integration of proven technology in vehicle development. Cost Rjsk: Moderate based on an already aggressive initial Cost Risk The risk that a program will not meet its acquisition strategy cost objectives that were developed using Cost as an Independent Variable ( CAIV) or cost objectives es tablished by the acquisition authority.... I Poge Sof46 I... Back 'i 1 Next

21 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP The APB and Risk All programs involve mjs to technical performance, schedule, and cost. Moreover, these risks are interrelated. For example, consider risks to the LAR EMD program: technical risk is associated technologies engine, and at or appe.ars;l APB risk diagram illustrating the relationship between the APB environment and risks rela ted to technical performance, schedule, and cost. Schedule Rjsk: Moderate risk based on production delivery schedule and tight technical requirements mitigated by the integration of proven technology in vehicle development. Cost Risk: Moderate based on an already aggressive initial production delivery schedule and tight technical specifications which may drive higher costs than are reflected in the cost estimates.... I PogeSof 46 I... Back 'i 1 Next

22 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM -A Program Management Approach PMs h ave a wide range of supporting data and processes to h elp them manage risk, including EVM. EVM is unique in that it integrates contract cost, schedule, and technical performance objectives into a performance measurement baseline {PMB) : Sch edule : EVM baseline includes a time-phased integrated schedule o f contract even ts Cost : EVM baseline includes a time-phased budge t baseline tha t captures contrac t cost objectives in dollars Te chniclll Performan ce : EVM baseline includes a product-oriented work breakdown structure that rela tes technical requirements t o ongoing work Contractors may incorporate risk mitigation strategies in the EVM PMB. As the contract is executed, c ontractors submit EVM r eports that include metrics that measure cost and schedule performance against this b aseline. RISK CONTRACT Program Manager Program managers can analyze this EVM informa tion for iden tifica tion of emerging risk items or worsening performance trends for known risk items. They can also use EVM data to assess the realism o f contractor estimates at completion and adequacy of contractor corrective ac tion plans.... I Poge 6of46 I... Back W 1 Next

23 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM -A Program Management Approach PMs have a wide range of supporting data and processes to help them manage risk, including EVM. EVM is unique in that it integrates contract cost, schedule, and technical performance objectives into a performance measurement baseline {PMB): Program Manager Schedule : EVM baseline includes a time-phased integrated schedule of contract events Cost : EVM baseline includes a time-phased budget baseline that captures contrac t cost objectives in dollars Techniclll Performan c e : EVM baseline includes a product-oriented work breakdown structure that relates technical requirements t o ongoing work Estimates at Co m plet ion (EAC) Program managers can analyze this EVM information for The estimated total cost for identification of emerging risk items or worsening perform authorized work trends for known risk items. They can also use EVM data assess the realism of contractor estimates at completion Ac tual costs plus the estimate of adequacy of contractor corrective ac tion plans. costs for authorized work remaining Term can apply at any WBS level... I Poge 6of46 I... Back W 1 Next

24 EVMlOl Fundam entals of Earned Value Managem ent lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM -A Program Management Approach PMs h ave a wide range of supporting data and processes to h elp them manage risk, including EVM. EVM is unique in that it integrates contract cost, schedule, and technical performance objectives into a performance measurement baseline {PMB) : Program Schedule: EVM ; integra ted l ong De scription..,;;;:. 1 Cost: EVM basell Contract risk diagram illustrating the relationship between baseline tha t the contract and risks related to technical performance, schedule, and cost. Technic 111 ~~~:~~~~~~rn~~~~tu:re"t'h'at'relrat product-orien ISK technical requirements t o ongoing work Contractors may incorporate risk mitigation strategies in the EVM PMB. As the contract is executed, c ontractors submit EVM r eports that include metrics that measure cost and schedule performance against this b aseline. Program managers can analyze this EVM informa tion for identifica tion of emerging risk items or worsening performance trends for known risk items. They can also use EVM data to assess the realism o f contrac tor estimates at completion and adequacy of contractor corrective action plans. "'- Manager CONTRACT... I Po ge 6of46 I... Back W Next 1

25 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM as a Contract Manageme.nt Tool EVM is a method of managing projects that integrates the technical performance, schedule, and cost parameters of a contract. As you learned, the APB documents the technical performance, schedule, and cost parameters of a program. RISK CONTRACT When EVM is required as a management tool, the requirement applies to a specific contract rather than the entire program. The EVM PMB supports the attainment of the contract cost, schedule, and technical performance objectives, which can differ from the APB parameters, particularly if a program includes multiple contracts. The PMB is the time-phased budget plan for accomplishing the contract objectives, against which contract performance is measured.... I Poge 7of46 I... Back ii 1 Next

26 EVMlOl Fundam entals of Earned Value Managem ent lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM as a Contract Manageme.nt Tool EVM is a method of managing projects that integrates the technical performance, schedule, and cost parameters of a contract. As you learned, the APB l o ng Descriptio n technical performance, parameters of a nr<>nr ;,rr,l Reprised contract risk diagram illustrating the relationship between the contract and risks related to technical w hen EVM is required as performance, schedule, and cos t. requirement applies to a ~!!'1!!!'1'11!!'~"""" than the entire program. The EVM PMB supports the attainment of the contract cost, schedule, and technical performance objectives, which can differ from the APB parameters, particularly if a program includes multiple contracts. The PMB is the time-phased budget plan for accomplishing the contract objectives, against which contract performance is measured.... I Poge 7of46 I... Back ii 1 Next

27 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP The Performance Measurement Base.line During the acquisition planning phase, the Government outlines the cost, schedule, and technical performance parameters that the contractor will use to build the PMB after the contract is awarded. The PMB integrates the technical objectives, schedule, and cost of the contract by: 1. Te c hnical Pe rform a nce: The Work Breakdown Struc ture (WBSl breaks down the work required to meet technical requirements resulting from the systems engineering process 2. Sch e dule: Time-phasing t he tasks to meet contract milestones 3. Co st : Time- phasing the contract budget in accordance with the schedule The PMB must reflect the major contract events (such as captured in an Integrated Master Plan ( IMP)), and the Integrated Master Schedule (!MS), which indicates Contract when those milestones will be met. Once the PMB is crea ted, it is reviewed to ensure a mutual understanding by both the contrac tor and Governmen t PMs throughout the proj ect li fe cycle during Integrated Baseline Reviews (IBRs).... I P oge 8of46 I... Back ii Next 1 End

28 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP The Performance Measurement Base.line During the acquisition planning phase, the Government outlines the cost, schedule, and technical performance parameters that the contra ctor will use to build the PMB after the contract is awarded. The PMB integrates the technical objectives, schedule, and cost o f the contract by: 1. Technical Performance: The Work Breakdown Struc ture (WBSl breaks down t......;..=d to + t o -~~-""'-; ents r Work Breakdown Structure {WBS) ess 2 s A product - oriented family tree composed of hardware, software, 3. services, data, and facilities. T he a family tree results from systems engineering efforts during the The PM acquisition of a defense materiel item. such c as cap and the Integrated Master Schedule (IMS), which indicates when those milestones will be met. Contract End Once the PMB is crea ted, it is reviewed to ensure a mutual understanding by both the contrac tor and Governmen t PMs throughout the project li fe cycle during Integrated Baseline Reviews {IBRs)...._ Pilge 8of46 Back ii I ~ 1 Next

29 EVMlOl Fundamentals of Earned Value Management lesson Key Concepts of Earned Value Management RESOURCES I PRINT I HELP The Performance Measurement Baseline During the acquisition planning phase, the Government outlines the cost, schedule, and technical performance parameters that the contractor will use to build the PMB after the contrac t is awarded. The PMB integrates the technical objectives, schedule, and cost of the contrac t by: 1. Technical Performance: The Worts Breakdown Structure CWBS} breaks down the work required to meet technical requirements resulting from the systems engineering process 2. Sche dule: Time -phasing the tasks to meet contract milestones 3. Co st: Time-phasing the contract budget in accordance with the schedule T he PMB must reflect the major contract..v.r l l J.-J as captured in an Integrated Master Plan I n tegrated Baseline Reviews the Integrated Master Schedule ( IMS), whic-h when those milestones will be met. Review of a contractor's performance measurement baseline (PMB). It is conducted by program managers Once the PMB is created, it is reviewed to ( PMs) and their technical staffs, or Integrated Product mu tual understanding by both the contrac Teams (JPTs), on contrac ts requiring compliance with Government PMs throughout the project life during I ntegra ted Baseline Reviews ( IBRs). Cost DoD Earned Value Management System (EVMS) criteria requiremen ts within 6 months after contract award...._ Page8of46,... Back Eii J Next -

30 EVMlOl Fundam entals of Earned Value Managem ent lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP The Performance Measurement Base.line During the acquisition planning phase, the Government outlines the cost, schedule, and technical performance parameters that the contractor will use to build the PMB after the contract is awarded. l ong Description 1. An EVM graph depic ts the PMB. The y -axis depicts dollars the work required in millions, up to the total contract cost, and the x-axis resulting from the A line labeled Performance Measurement Baseline displays 2. Schedule: Tirne oh beginning in the lower lef t comer at Contract Start and contractm;loct n,,oj terminating in the upper right comer at Contract End. 3. depicts units of time from contract start to contract end. Work to be accomplished is represented in dollars. Tasks are time phased from contract start to c ontract end. The performance measurement baseline (PMB) integrates cost, The PM Bmustrefte~c;~t!~; ~~e~ ~h~i~cal obr b v es.,~~-.--~--~-.--~r--~~---r-l as captured in an 11 ~~sc~h~ed~ul,a~n~d~tenc~n ~~~~ je c..r the Integrated Master Schedule (IMS), Contract when those milestones will be met. Tasks are time phased from Once the PMB is created, it is reviewed to ensure a contract start to contract end mutual understanding by both the contractor and Governmen t PMs throughout the project life cycle during Integrated Baseline Reviews (IBRs)...._ Pilge 8of46 I ~ Back ii 1 Next End

31 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP The LAR EVM PMB For example, look at how the lar EVM PMB reflects contract cost, schedule, and performance objectives: Cost Objectives $65M Management Reserve!FM) Sin M LAR Vohlclo Program Con1ract Start Prod Proto: ConO'act End: June 2013 Sep 15 April I PogeQof46 I... Back Next

32 EVMlOl Fundamentals of Earned Value Management lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP The LAR EVM PMB For example, look at how the LAR EVM PMB reflects contract cost, schedule, and performance objectives : Cost Objectives S65M l ong Description A simplified EVM graph depicts the LAR PMB. The y-axis depicts dollars in millions and the x-axis depicts units of time from contract start of June 2013 to contract end of April A management reserve of 2 million dollars is shown at the top of the graph. $65M = LAR Negotiated Contract $ inm Cost. Cost objectives include the management reserve and negotiated contract cost. Schedule objectives include the contract start, CDR of September 2014, Prod Proto of September 2015, and the contract end. Performance Objectives : The PMB reflects the work that is required to meet the technical requirements resulting from the systems engineering process. ti t::. Tin-. Contract Start COR: Prod Proto: Contract End: June 2013 Sep 14 Sep 15 April I Page9 of 46 I... Back Next

33 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP The LAR EVM PMB: Cost Objectives Th e LAR contract was negotiated at a targ et price of million, with a target cost of 565 million. Th e PMB will measure progress towa rd that cost objective. Cost Objectives Government APB EMD EMD Negotiated Cost Parameters Contract Cost S65M Manaaoment Reserve ($2M) Cost $ in S in M Millions (SM) Objective Threshold RDT&E $100M $110M Target Price: $72.4M Target Cost $65M Contract Start Prod Proto: Contract End: June 2013 Sep 15 April I Poge 10of 46 I... Back Next

34 EVMlOl Fundam entals of Earned Value Managem ent lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP The LAR EVM PMB: Cost Objectives The LAR contract was negotiated at a target price of million, with a target cost of 565 million. The PMB will measure progress towa rd that cost objective. S65M Manaacment Cost Objectives l ong Description Government APB EMD Cost Parame ters ( $ in millions ) and EMD Nego tiated Cost, as depicted in the LAR PMB graph. T he APB cost parame ters for RDT&E are : obj ectiv e is $ 100 million, threshold is $110 million, and for negotiated contract cost, the target price is $72.4 million and the Sin M target cost is $65 million. EMD Negotiated Contract Cost Target Price: $72.4M Target Cost $65M Contract Start Prod Proto: Contract End: June 2013 Sep 15 April I Poge10of46 I... Back Next

35 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Th e LAR EVM PM B: Sch e dul e Objectives The contrac t sc h edule param e t ers are c aptured in the LAR EV M PMB mil eston e an d r eview date s. $6501 Management Reserw ($2M) $ in M CoatriCt Start,..ne 2013 cost Objectives Key Event Government APB Schedule Parameters Obj ective Threshold MS B Decision Mar-13 Mar-13 EMD Cont ract Mar-13 Jun-13 Award Subsystem Crit ical Design Jan-14 May-14 Review Crit ical Desi ~n Review (CDR Sep-14 Dec-14 Production Prototype Jul-15 Dec-15 Delivery Draft LRIP / Prod RFP Jan-16 Apr-16 Release DT OT Complete Jan-16 Apr-16 LRIP Proposal Jun-16 Sep-16 Received EMD Contract Schedule Requirements N/A Jun-13 Feb-14 Sep-14 Sep-15 N/A Apr-16 N/A... I Page 11of 46 I... Bac k Next.Q

36 EVMlOl Fundamentals of Earned Value Management lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP The LAR EVM PM B: Schedule Obj ectives The contract schedule parameters are captured in the LAR EVM PMB milestone and review dates. cost Objectives Government APB Schedule Parameters EMD Contract Schedule Requirements $6501 $ in M l ong Descript ion Government APB Schedule Parameters and EMD Contract Schedule Requirements as 1-.,...,.-----l depicted in LAR PMB Graph. Under the APB schedule parameters there are eight key ev ents, each with an associated objective and threshold, and contract schedule 1:-:-:-----l requirement. MS 8 Decision has an objective and threshold of March 2013 and no associated contract schedule requirement. EMD Contract Award has an objective of1--,-.,.-----l March 2013, a threshold of June 2013, and a contract schedule requirement of June Subsystem Critical Design Review has an objective of January 2014, a threshold of May 2014, and a contract schedule requirement of February Critical Design Review ( CDR) has an objective of September 2014, a threshold of December 2014, and a contract schedule requirement of September Production Prototype Deliv ery has an objectiv e of July 2015, a threshold of December 2015, and a contract schedule requirement of November Draft lrip/ Prod RFP Release has an objective of January 2016, a threshold of April 2016, and no contract schedule requirement. DT OT Complete has an objective of June 2016, a threshold of April 2016, and a contract schedule requirement of May lrip Proposal Receiv ed has an objective of June 2016, a threshold of September 2016, and no contract schedule requirement.... I Page11of 46 I... Back Next

37 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP The LAR EVM PMB : Performance Obj ectives The contract performance specifications are captured in the LAR EV M PMB tasks and technical ev ents in the! MS. S65M $ inm Cost Objectives I Sample of Government APB Key EMD Contract Performance Parameters (KPPs) KPP Objective Threshold Specifications Survivability Rate Grade 50 degrees 40 degrees 40 degrees Tun1ing Radius 20 feet 25 feet 25 feet Range 400 miles 350 miles 385 miles 1 hour 1.5 hours 1.4 hours Contract Start COR: Prod Proto: Contract End: June 2013 Sep 14 Sep 15 April I Page12of 46 I... Back Next

38 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP The LAR EVM PM B: Performance Obj ectives The contract performance specifications are captured in the LAR EVM PMB tasks and technical events in the IMS Sample of Government APB Key Performance Parameters (KPPs) EMD Contract An integrated and networked multi-layered schedule of program tasks required to complete the work effort Threshold Specifications ~~~~~;;bjiijt;:-ro:95i-1~i5-~ 0.95 captured in a related IMP S65M $ inm 50 degrees 40 degrees 40 degrees Tun1ing Radius 20 feet 25 feet 25 feet Range 400 miles 350 miles 385 miles 1 hour 1.5 hours 1.4 hours Contract Start COR: Prod Proto: Contract End: June 2013 Sep 14 Sep 15 April I Pa ge12of 46 I... Back Next

39 EVMlOl Fundamentals of Earned Value Management lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP The LAR EVM PM B: Performance Obj ectives The contract performance specifications are captured in the LAR EVM PMB tasks and technical events in the!ms. EMD Contract l ong Descript ion Cost Objectives ~S6:;;5M;;-r-;;;;;;;;;;~~ Government APB Key Performance Parameters ( KPPs ) and EMD Contract Specifications as depicted in LAR PMB Graph. Under the APB key performance parameters, KPPs are listed with their associated objective, threshold, and EMD contract specification. Survivability has an objective and threshold of 0.95 and a contract specification of Grade has an objective of 50 degrees, a $ inm threshold of 40 degrees, and a contract specification of 40. Turning Radius has an objective of 20 feet, a threshold of 25 feet, and a contract specification of 25 feet. Range has an objective of 400 miles, a threshold of 350 miles, and a contract specification of 385 miles. MTTR has an objective of 1 hour, a threshold of 1.5 hours, and a contract specification of 1.4 hours. Specifications degrees 25 feet 385 miles 1.4 hours Contract Start June 2013 COR: Sep 14 t::. Prod Proto: Sep 15 Contract End: April I Pa ge12of 46 I... Back Next

40 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Developing the PMB How do I establish my project baseline?... I Poge13of46 I... Back Next

41 EVMlOl Fundamentals of Earned Value Management l esson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Developing the PMB l ong Description Bob, the Government Program Manager, displays. Question displays: How do I establish my project baseline? A Hardware item icon displays. Calendar displays labeled five months. Joe, the contractor, displays. Contract price of $6, 000 displays. $500 fee and remaining $5, 500 contract amount display. $500 management reserve and remaining $5, 000 contract amount display. Five components display next to the hardware item. T ex t displays for each component: 1 month, $1, 000, and BCWS equals $1, 000. PMB diagram displays with five components, plotted out over five months, at one component per month for a total cost of $5, 000. II... I Page13of 46 I... ~AU Back Next

42 Closed Captioning Let s take a closer look at the development of the PMB. Consider a simple example: Bob is a Government program manager. He needs one hardware item built in 5 months. Bob hires Joe to do the work, and they agree on a cost plus incentive fee contract price of $6,000 that includes a $500 fee as an incentive for Joe to perform efficiently. That fee is not part of Joe s performance measurement baseline because it is Joe s incentive to perform well. From that $6,000 price, Joe has $5,500 with which to perform the scope of the contract. Joe decides to set $500 aside as a management reserve. This management reserve is an amount contractors withhold for management control purposes, rather than for the accomplishment of a specific task. Joe knows there are risks on any project and having a management reserve is part of his risk management planning. This leaves $5,000 for labor and supplies, and other costs necessary to complete the work. Joe will build five components for the hardware item. He can only build them one at a time, so he plans to take one month to build each component, and estimates each component will cost $1,000 in labor and supplies to complete. This is also known as the budgeted cost for work scheduled, or BCWS, for each component. So Joe plans out the performance measurement baseline. He plans to build 1 component per month over the course of the 5-month-long project. Plotting the planned value of all components against the project schedule yields the PMB. The planned value is the BCWS. Now, as work is accomplished, it can be compared to this baseline plan to determine if the project is on schedule and on budget. Let s see how that works.

43 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Measuring Performance - Month 1 How do I measure performance? Bob Government Program Manager... I Poge14 of 46 I... Back Ne xt

44 EVMlOl Fundamentals of Earned Value Management l esson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Measur ing Performance - Month 1 l ong De script ion Bob, the Government Program Manager, displays. Question displays: How do I measure performance? Five components display. Calendar displays with label: 5 months. Joe, the contractor displays. Contract displays with contract amounts: $5, 500 plus $500 fee. $500 management reserve displays. $5, 000 displays with tex t : labor, supplies, and other costs. PMB diagram displays with Budgeted Cost for Work Scheduled, or BCWS, plotted out over five months with a Budget at Completion, or BAC, of $5, 000. Table displays showing number of Components produced for months one through five, including one planned component per month, each with a BCWS of $1, 000, for a total of five components with a BCWS of $5, 000. Time now displays at month one. T wo completed components are added to the table at month one, and the total displays t wo completed. Budgeted Cost for Work Performed, or BCWP, of $2, 000 displays at month one. Text displays: Ahead of schedule. Actual Cost of Work Performed, or ACWP, of $ 1, 500 displays at month one. Text displays: Under budget. Question displays: Why are the costs so low? Question displays: Will it continue? II ~AU... I Pa ge14of 46 I... Back Next

45 Closed Captioning Once the PMB is in place, PMs use EVM to measure performance. Consider Bob s project. Remember, he needs one hardware item composed of five components in five months. He negotiated with Joe, the contractor, to develop the components at a contract cost of $5,500. As you know, Joe allocated $500 of the contract cost to management reserve and the remaining $5,000 for labor, supplies, and other costs to build the components. Joe built the PMB for the entire project scope of work based on this $5,000, which represents the budget at completion, or BAC. Let s look at how Bob and the contractor, Joe, use EVM to measure project progress with respect to the PMB. Recall that Joe planned to build one component per month, at a cost of $1,000 for each component. This is the budgeted cost for work scheduled, or BCWS. In the first month, Joe planned to complete one component, so the BCWS is $1000 for month one. At the end of the month, Joe actually has completed two components. Since, according to the plan, each component represents $1,000 worth of work, Joe has earned $2,000 of value or, said another way, has an earned value of $2,000. This 'earned value' measurement is also called the budgeted cost for work performed, or BCWP. By comparing the BCWP to the BCWS, Joe realizes that he is ahead of schedule. His BCWP is $2,000, which reflects the completion of two components, but his BCWS is only $1,000 for month one he only planned to complete one component in the first month. So Joe has completed more work than planned. But how much did it actually cost Joe to build those components? It turns out, it only cost Joe $1,500 in labor and materials to build two components. This is the actual cost of work performed, or ACWP. It represents what Joe actually spent on labor and materials on the first two components. These costs are recorded in Joe s books of account, and are costs he must actually pay. By comparing the ACWP to the BCWP, Joe sees he is doing well he has made $2,000 worth of components for only $1,500. Note that in order to anticipate future performance, Joe needs a clear understanding of why he is doing so well. Did it take less labor? Were supplies cheaper than planned? And, importantly, does he expect it to continue? Bob will also want to understand this performance.

46 So, what happens next?

47 EVMlOl Fundame ntals o f Earned Value Manage ment Lesson Ke y Concepts of Earned Va lue Manage ment RESO URCES 1 PRI NT 1 HELP Measuring Pe rformance- Mo nth 2 II of Coo1ponents Produced Ahead of schedule Month Planned BCWS Co111>leted Time Now Over budget_ ~~~~ 7,000 I,' ,000 4,500 4,000 I I $1,000 2,, 2 $1,000 I,' 3 $1,000 I, I, 4 I $1,000 I,' I 5 I $1.000 I I TOTAL 5 $5, Bob Joe Government Program Contractor Manager II 'JAU ~ I Page1Sof46 I ~ Back Next

48 EVMlOl Fundamentals of Earned Value Management l esson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Measur ing Performance - Month 2 # of Compooents Produced Ahead of schedule Month Planned BCWS Completed l ong De script ion Bob, the Government Program Manager, and Joe, the contractor, display. Reprised PMB diagram displays with Budgeted Cost for Work Scheduled, or BCWS, plotted out over five months with a Budget at Completion, or BAC, of $5, 000 ; Budgeted Cost for Work Performed, or BCWP, of $2, 000 displays at month one ; and Actual Cost of Work Performed, or ACWP, of $ 1, 500 displays at month one. Reprised number of components produced displays for months one through five, including one planned component per month, each with a BCWS of $1, 000, and two completed in month one, for a total of five components with a BCWS of $5, 000 with t wo completed. Text displays: Ahead of schedule ; and Under budget. Time Now displays at two months. Tex t displays: supply problems. Question displays: How does this impact the project? One completed component is added to the table at month t wo, and the total displays three completed. BCWP of $3,000 displays at Time Now. ACWP of $4, 500 displays at Time Now. Tex t displays: Ahead of schedule ; and Over budget. Text displays: I think I've resolved the supply issues. Projected ACWP of $6, 500 displays. Text displays: Joe's Estimate at Completion, or EAC, equals $6, 500. Questions display. Are the supply issues really resolved? What does the EVM trend information tell me? Second projected ACWP of $7, 500 displays. Text displays: Bob's Estimate at Completion, or EAC, equals much higher. Government Program Manager Contractor II... I Page1Sof 46 I... ~AU Back Next

49 Closed Captioning Joe and Bob s project has been performing very well. In the second month, however, Joe runs into supply problems. He had to find a new supplier, labor was standing by in the meantime, and the new supplier charged a much higher price. So what was the impact on the project in month two? Joe does manage to build one more component, for a total of three components completed by month two. At $1,000 BCWS per component, the total BCWP for completing the three components is $3,000. However, looking at the ACWP, Joe sees that he spent a lot more on that third component than he planned, due to the supply issues. Building that third component actually cost Joe $3,000 in labor and materials instead of the $1,000 he had planned. The total ACWP is now up to $4,500 for the project. By comparing the BCWS to the BCWP, Joe sees that he is still ahead of schedule, but by comparing the BCWP to the ACWP, Joes realizes that he is now over budget by $1,500. By the end of month two, Joe thinks the problems with his new supplier may be behind him and that he is close to having his production back on track. Joe thinks he will make the remaining two components for $2,000, as planned, so he adds $2,000 to the $4,500 of ACWP, and estimates it will cost him $6,500 to complete all components. This is Joe s estimate at completion, or EAC. Joe s EAC is a detailed estimate based on Joe s intimate knowledge of the costs of labor and materials for each component. Bob, on the other hand, is not so sure the supply problems are fixed, and is less optimistic. As a Government PM, Bob can use the EVM trend information for potential early warning of cost or schedule performance problems. By seeing the early warning information, Bob can potentially help identify ways of resolving issues before they become major problems. In this case, Bob extrapolates from the trends and thinks costs could go much higher. He talks to Joe about mitigation plans and alerts his management to likely funding pressure. Let s find out what happens next.

50 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Measuring Performance - Month 3 # of Components Produced Month Planned BCWS Completed I I $1, I $1,000 I 3 I $1,000 4 I $1,000 5 I $1,000 5,000 TOTAL 5 $5,000 3 ~ 4,000 g.!!! Months Bob Joe Government Program Contractor Manager DBI... I Poge16of46 I... ~AU Back Next

51 EVMlOl Fundamentals of Earned Value Management l esson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Measuring Performance - Month 3 7,000 Month I 2 # of Com pooents Produced Planned BCWS I $ 1,000 I $ 1,000 Co mpleted 2 I l ong Descript ion Bob, the Government Program Manager, and Joe, the contractor, display. Reprised PMB diagram displays with BCWS plotted out over five months with a BAC of $5, 000 ; BCWP of $3,000 and ACWP ~ of $4,500 display at month 2. Reprised number of components produced displays for months one "' through five, including one planned component per month, each with a BCWS of $1, 000, and two ;g completed in month one, and one completed in month t wo, for a total of five components with a BCWS of $5,000 with three completed. Text displays: Ahead of schedule ; and Over budget. Time Now displays at three months. BCWS of $3,000 and BCWP of $4, 000 display at Time Now. One completed component is added to the table at month three, and the total displays four completed. ACWP of $5,500 displays at Time Now. Questions display. What are our assumptions?: What can we learn from the latest data? Projected ACWP of $6, 500 displays at month four. Text displays: EAC equals $6, 500. Text displays at difference between BCWP and BCWS: Ahead of schedule. Text displays at difference between ACWP and BCWP: Over budget. Projected BCWP and BCWS of $5, 000 display at month five. Months Bob Joe Government Program Contractor Manager Dill... I P a ge16of 46 I... ~AU Back Next

52 Closed Captioning In month two, Joe ran into supply problems, and this impacted the project. Well, in month three, Joe makes one more component and spends $1,000 on labor and materials. At this point, Joe has completed four components, so his total BCWP is $4,000. Joe spent $5,500 to build those four components, so his total ACWP is $5,500. While Joe is over budget, it looks like he was right, and the supply issues are behind him, since he built the 4th component for $1,000. The ACWP trend line is flattening out as a result. Joe and Bob will both revisit their assumptions about the supply and labor costs and update their estimates based on this latest data. There is one more component left to build. Since Joe thinks his production is back on track, and the supply issues do appear to be under control, he estimates that the remaining component will cost $1,000 to build and that it will take one month, as usual. His EAC for all five components is therefore still $6,500, and he will finish ahead of schedule. However, Joe s final costs will be $1,500 more than the original budget of $5,000. It looks like Bob will need to get more funding or cut out some scope if he wants to pay Joe to complete the fifth component. At month five, if Joe completes all five components, the BCWP line will equal the BCWS line, since all the work is complete. At that point, Joe and Bob will know what the actual completion costs.

53 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Key Definitions Take a moment to review the definitions of each of these key elements of EVM by selecting the callouts Estimate at Completioo (EAC) Budget at Completion (BAG) ~~~~- ~.!! Time Mo~s Now... I Pogel7of46 I... Back Next You must select eacfl fligflfigflted EVM element to m o ve on..!2

54 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Key Definitions Take a moment to review the definitions of each of these key elements of EVM by selecting the callouts. ~.!! Estimate at Completioo (EAC) Budget at Completion (BAG) Est imat e a t CQmpletion ( EAC) The estimated total cost for authorized work Actual costs plus the estimate of costs for authorized work remaining 0 Tenm can apply at any WBS level Time Mo~s Now... I Poge l7of46 I... Back Next You must select eacfl fligflfigflted EVM element to m o ve on..!2

55 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Key Definitions Take a moment to review the definitions of each of these key elements of EVM by selecting the callouts Estimate at Completioo (EAC) Budget at Completion (BAG) Budget a t Completion ( BAC) ~.!! The sum of all EVM perfonmance budgets for a given effort Equal to the total cumulative BCWS value for the work planned Time Mo~s Now 4 5 Tenm can apply at any WBS level... I Poge l7of46 I... Back Next You must select eacfl fligflfigflted EVM element to m o ve on..!2

56 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Key Definitions Take a moment to review the definitions of each of these key elements of EVM by selecting the callouts Estimate at Completioo (EAC) Budget at Completion (BAG) ~.!! Budget ed Cost f or Work Performe d (BCWP) Also called earned value (EV) The v alue of completed work expressed as the value of the BCWS assigned to that work May be expressed as a value for a specific 0 period, or cumulative to date Time Mo~s Now 4 5 Term can apply at any WBS level... I Poge l7of46 I... Back Next You must select eaclllligllligllted EVM element to m o ve on..!2

57 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Key Definitions Take a moment to review the definitions of each of these key elements of EVM by selecting the callouts Estimate at Completioo (EAC) Budget at Completion (BAG) ~.!! Budget ed Cost f or Work Scheduled (BCWS) The sum of the performance budgets for all work scheduled to be accomplished May be expressed as a value for a specific period, or cumulative to date 0 Tenm can apply a t any WBS level Time Mo~s Now... I Pogel7of46 I... Back Next You must select eacfl fligflfigflted EVM element to m o ve on..!2

58 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Key Definitions Take a moment to review the definitions of each of these key elements of EVM by selecting the callouts ~.!! Time Mo~s Now Estimate at Completioo (EAC) Budget at Completion (BAG) Actual Cost of Wo rk Performed ( ACWP) The costs actually incurred and recorded in accomplishing the work performed within a given time period May be expressed as a value for a specific period or cumulative to date 5 Term can apply at any WBS level... I Poge l7of46 I... Back Next You must select eacfl fligflfigflted EVM element to m o ve on..!2

59 EVMlOl Fundamentals of Earned Value Management lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Key Definitions Take a moment to review the definitions of each of these key elements of EVM by selecting the c allouts... f l o n g Descriptio n A simplified EVM graph is shown. The y - axis depic ts dollars up t o $8, 000. The x axis depic ts months up to month fiv e. " Time Now" is indicated at month three The Budge ted Cost for Work Scheduled ( BCWS) curve begins in the lower left corner at Contrac t Start and slopes upw ard, c rosses the time now line, and t erminates at the intersection of month five and $5, 000. The end of this curve is 4,0 00 ;8 3, labeled Budge t at Comple tion ( BAC). The Budge ted Cost for Work Performed ( BCWP) curve begins in the lower left corner and ends at the intersection of month three and $4, 000. The Ac tual Cost of Work Performed ( ACWP) c urve begins in the lower left corner, c rosses the Time Now line at $5, 500 and continues as a dashed line t o t erminate at the intersection of month five and $6, 500. The end of this c urve is labeled Estimate at Comple tion ( EAC). 0 0 I Time Months N ow... I Page 17 of 46 I... Back Next You must select each highlighted EVM element to move on..q

60 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Analyzing Perfor mance Once the work performed to date ( the cumulative BCWP, or BCWPcum ) and the actual costs ( the cumulative ACWP, or ACWPcum ) have been measured and recorded, PMs can use that information to determine cost and schedule variances from the original plan. In Bob's simple project, the contractor, Joe, compared BCWPcum to cumulative BCWS ( BCWScum ) to determine if the project was on schedule, and he compared BCWPcum to ACWPcum to see if the project was on budget. In more complex situations, the comparison of BCWPcum to BCWScum will indicate the value of the work scheduled and the value of the work completed but to determine how that affects schedule, an analysis of the I MS must be undertaken. This comparison is captured with t wo metrics: schedule variance ( SV) and cost variance (CV) ACWP 1Cost Variance BCWP 1Schedule Variance ,000 ~ BCWS I Page18of 46 I... Back Next Time Months Now

61 EVMlOl Fundamentals of Earned Value Management lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Analyzing Performance Once the work performed to date ( the cumulative BCWP, or BCWPcum ) and the actual costs ( the cumulative ACWP, or ACWPcum ) have been measured and recorded, PMs can use that information to determine cost and schedule variances from the original plan. In Bob's simple project, the contractor, Joe, compared BCWPcum to cumulative BCWS ( BCWScum ) to determine if the project was on schedule, and he compared BCWPcum to ACWPcum to see if the project was on budge te the value of the l ong Descrip t ion t affects schedule, an Comparing BCWP to ACWP determines Cost Variance ( CV). Comparing This comp,ariscj BCWP to BCWS determines Schedule Variance ( SV). A simplified EVM schedule graph depicts three curves plotted in dollars up to $8, 000 over five months. The three curves are : budgeted cost for work scheduled (BCWS), actual cost of work performed ( ACWP), and budgeted cost for work performed ( BCWP). Time Now is indicated at month three. The difference between the ACWP and BCWP curves at Time Now shows Cost Variance. The difference between the BCWP and BCWS curves at Time Now shows Schedule Variance. 1Schedule Variance BCWS... I Page 18 of 46 I... Back Next M on ths Time Now

62 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Analyzing Performance - Schedule Variance SV: the value of the work actually accomplished compared to the v alue of the work originally planned sv = scwp - sews A negative sv is unfavorable ; a positive sv is favorable The sv does not show the number of days ahead or behind schedule. This requires looking at the Integrated Master Schedule (IMS ) Recall that Joe planned to build 3 widgets by month 3, but he actually built 4 widgets in that timeframe. At month 3: sews = $3,ooo SeWP = $4,000 SV = SeWP - SeWS = $4,000 - $3,000 = $1,000 The po sitive SV is favorable. Joe has s completed more work than planned. Time Months Now Select tile chart to enlarge.... I Poge1Qof46 I... Back Next You must select unfavorable and favorable to move on..!2

63 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Analyzing Performance - Schedule Variance SV: the value of the work actually accomplished compared to the v alue of the work originally planned sv = scwp - sews A negative sv is unfavorable ; a positive sv is favorable The sv does not unfavorable. This requires looking at the Integrated MastEl If the BCWP is less than the SCWS, this is an unfavorable schedule variance Joe to 3 widge ts month 3, but he actually built 4 widgets in that timeframe. At month 3: sews = $3,ooo BCWP = $4,000 SV = BCWP - BCWS = $4,000 - $3,000 = $ 1,000 The po sitive SV is favorable. Joe has s completed more work than planned. Time Months Now Select tile chart to enlarge.... I Poge1Qof46 I... Back Next You must select unfavorable and favorable to move on..!2

64 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Analyzing Performance - Schedule Variance SV: the value of the work actually accomplished compared to the v alue of the work originally planned SV = BCWP - BCWS A negative sv is unfavorable ; a positive sv is ;fa~yor;!~~ =~ able:_., The SV does not show the number of days ah favorable g a t the Integrated Mas ter Schedule (IMS) If the BCWP is greater than the BCWS, this is a favorable schedule variance. ge ts by month 3, but he actually built 4 widge ts in tha t timeframe. At month 3: BCWS = $3,000 BCWP = $4,000 SV = BCWP - BCWS = $4,000 - $3,000 = $1,000 The positive SV is favorable. Joe has s completed more work than planned. Time Months Now Select tile chart to enlarge.... I Poge 1Qof46 I... Back Next You must select unfavorable and favorable to move on..!2

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66 EVMlOl Fundamentals of Earned Value Management lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Analyzing Performance - Schedule Variance SV: the value of the work actually a ccomplished compared to the value of the work originally planned SV = BCWP - BCWS A negative SV is unfavorable ; a positive SV is favorable The SV does not JP...Ii:O..t~.Jll.u:ol:>.ru:~~~;_a~ad...PL~i.billd..~l~:lu)~J:bis.,j~!.\!ijjes looking at the Integrated Master l ong Descript ion A simplified EVM graph depicts three curves plotted in dollars up to $8,000 over five months. The three curves are : budgeted cost for work scheduled ( BCWS), actual cost of work performed (ACWP), and budgeted cost for work performed ( BCWP). Time Now is indicated at month three. At Time Now the BCWP is $4,000 and the BCWS is $3, 000. The difference between the BCWP and BCWS curves at Time Now shows Schedule Variance. = 4 widgets in SV = BCWP - BCWS = $4, $3, 000 = $1, 000 The posit ive SV is favorable. Joe has completed more work than planned. Time Months Now Select the chart to enlarge.... I Page19of 46 I... Back Next You must select unfavorable and favorable to move on..q

67 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Analy zing Performa nce- Cost Va riance cv: the work accomplished compared to the actual costs to accomplish that work CV = BCWP - ACWP A nega tive cv is unfavorable ; a positive CV is favorable 6,500 5,000 4,000 ~ ~ ~ Recall that Joe built 4 widgets by month 3, and actually spent $5,500 to build them. At month 3: BCWP = $4,000 ACWP = $5,500 CV = BCWP - ACWP = $4,000 - $5,500 = -$1, 500 LOOO The negative cv is unfavorable. Joe Tillle Months Now ~ I Page20of46 I ~ Back Next is over budget. You must se lect unfavorable and favorable to move on. Q

68 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Analy zing Performa nce- Cost Variance cv: the work accomplished compared to the actual costs to accomplish that work CV = BCWP - ACWP i ~v~e~cv i s..!fa~o!:;!~ l ~"""J A negative cv s ~~~~!!! :...!a~~ti ~~ ~ v~ra b!!;e 6,500 unfa v orable 5, ~ ~ ~ At month 3: BCWP = $4,000 ACWP = $5,500 CV = BCWP - ACWP = $4,000 - $ 5,500 = -$1, 500 LOOO The n egative cv is unfavorable. Joe Tillle Months Now ~ I Page20of46 I ~ Back Next is over budget. You must se lect unfavorable and favorable to move on. Q

69 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Analy zing Performa nce- Cost Va riance cv: the work accomplished compared to the actual costs to accomplish that work CV = BCWP - ACWP A nega tive cv is unfavorable ; a positive CV s. ~fa::;~ ra :!!::, "ll i =: vo:;!!!b l e favor11ble 6,500 If the BCWP is greater than the ACWP, this is a favorable cost va riance. 3, 5,000 4,000 ~ ~ ~ At month 3 : BCWP = $4,000 ACWP = $5,500 CV = BCWP - ACWP = $4,000 - $5,500 = -$1, 500 LOOO The negative cv is unfavorable. Joe Tillle Months Now ~ I Page20of46 I ~ Back Next is over budget. You must se lect unfavorable and favorable to move on. Q

70 EVMlOl Fundamentals of Earned Value Manage ment lesson Key Concepts of Earned Value Management RESO URCES 1 PRI NT 1 HELP Analyzing Performance - Cost Va riance CV: the work accomplished compared to the actual costs to accomplish that work CV = BCWP - ACWP A negative CV is unfavorable ; a positive cv is favorable 6,500 long Description 6,000 A simplified EVM graph depic ts three curves plotted in dollars up to $8, 000 over five months. T he three curves 5,000 are : budgeted cost for work scheduled ( BCWS), actual cost of work performed ( ACWP ), and budgeted cost for work performed ( BCWP). Time Now is indicated at month three. At Time Now, the ACWP is $ 5, 500 and the BCWP $4,000. The difference between the ACWP and BCWP curves at Time Now shows Cost Variance. DU_Ogeteo \,,St Oi 000.: n-'!'c~~~ Scheduled (BCWS). = $4,000 - $5,500 = - $1, 500 The negative cv is unfavorable. Joe is over budget Time Months Now You must select unfavorable and favorable t o move on. Q ~ I I ~ Page 20 of 46 Back Next

71 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Knowledge Review The performance measurement baseline {PMB), or cumulative budgeted cost for work scheduled {BCWScum), developed for the lar EMD contract is shown below. What is the budget at completion {BAC) of the PMB indicated in the graph? $34.7M u $54.7M ~ $62.7M $10l.SM Sin M Check Answer nme r1111e Now The budget at completion {BAC) for the LAR EMD is $62.7 M, which is equal to the total cumula tive BCWS (BCWScum) for the work planned.... I Poge ll of 46 I... Back Next

72 EVMlOl Fundamentals of Earned Value Management lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Knowledge Review The performance measurement baseline ( PMS ), or cumulative budgeted cost for work scheduled ( SCWScum ), developed for the LAR EMD contract is shown below. What is the budget at completion (SAC) of the PMS indicated in the graph? D $34.7M D ~ ~~----~ l ong Descriptio n A simplified EVM graph with three curves is shown. The y- axis is labeled Dollars in Millions and the x- axis is labeled Time through Completion Date. Time Now is indicated approximately two- thirds of the way along the x- axis. The curve labeled sews begins ~ $62 in the lower left corner of the graph and slopes upward, crosses the Time Now line at $54.7 million, and terminates at the Completion Date line at $62.7 million. The curve labeled SCWP begins in the lower left corner of the graph and terminates at the Time D $10 Now line at $34.7 million. The curve labeled ACWP begins in the lower left corner of the graph up to the Time Now at $44.7 million. After the Time Now line, it continues as a dashed line that terminates after the Completion Date line at $101.5 million. --~ Check Answer Time Time Now Completion Date The budget at completion ( SAC) for the LAR EMD is $ 6 2.7M, which is equal to the total cumulative sews ( SCWScum ) for the work planned.... I Page21of 46 I... Ba ck Next

73 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Knowledge Review Bob has a contract with a negotiated price of $10,000 which includes a negotiated fee of $1,000. Bob sets aside $1,000 for management reserve {MR). Given just this information, what is the budget at completion (BAC) available to build the performance measurement baseline {PMB)? $12,000 ~ $8,000 $10,000 $11,000 The PMB cost objective Bob will use to measure performance using EVM is $8,000. This is the negotiated price less the fee and MR values {$10,000 - $1,000 - $1,000 = $8,000).... I Pogellof 46 I... Back Next

74 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Knowledge Review The actual cost of wor1< performed (ACWP} is shown below. Which of these metrics can you determine by comparing the budgeted cost for wor1< performed (BCWP} and the ACWP? ~ Cos t variance (CV} S64.7 Schedule variance {SV} Variance at completion (VAC} S in M [ J Management reserve ( MR} Contract Start Time Time Check Answer Contract Now End Cost variance {CV} can be determined: CV = BCWP - ACWP ~ I Page23of46 I ~ Back Next

75 EVMlOl Fundamentals of Earned Value Management lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Knowledge Review The actual cost of work performed ( ACWP) is shown below. Which of these metrics can you determine by comparing the budgeted cost for work performed ( BCWP) and the ACWP? l o ng Descriptio n A simplified EVM graph is shown with three curves labeled BCWS, BCWP, and ACWP. The D y- axis is labeled Dollars in Millions up to $64.7 and the x- axis is labeled Time from contract start through contract end. The BCWS curve begins in the lower left corner of the graph and terminates at Contract End at $ The ACWP curve begins in the lower left corner of the graph and terminates at the Time Now line. The BCWP curve begins in D the lower left corner of the graph and terminates at the Time Now line. At time now BWCS is higher than ACWP, which is higher than BCWP. A bracket encompasses the space between where the ACWP and BCWP curves intersect the Time Now line. The D bracket's label is a question mark. Check Answer Contract Start: Time Time Now Contract End Cost v arian ce (CV) can be determined : CV = BCWP - ACWP... I Page23of 46 I... Back Next

76 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Knowledge Review The chart below shows the budgeted cost for work scheduled ( BCWS), actual cost of work performed (ACWP), and budgeted cost for work performed ( BCWP) at the current time. Given the data in the chart, which of the following statements is true? Remember: Schedule variance ( SV) = BCWP - BCWS and cost variance (CV) = BCWP - ACWP $64.7 D CV and SV are both favorable ~ D D CV and SV are both unfavorable CV is favorable and SV is $ unfavorable CV is unfavorable and SV is favorable in M Check Answer Contract Time Ti me Start: Now Completion Date The CV and SV are b o t h u nfavorable. CV = BCWP - ACWP = = -10 SV= BCWP - BCWS = = I Page24of46 I... Back Next

77 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Knowledge Review The chart below shows the budgeted cost for work scheduled ( BCWS), actual cost of work performed ( ACWP), and budgeted cost for work performed ( BCWP) at the current time. Given the data in the chart, which of the following statements is true? Remember: Schedule variance ( SV) = BCWP - BCWS and cost variance ( CV) = BCWP - ACWP $ 64.7 A simplified EVM graph is shown with three curves labeled BCWS, BCWP, and ACWP. The y- axis is labeled Dollars in Millions up to $64.7 and the x- axis is labeled Time from contract start through contract end. The BCWS curve begins in the lower left corner of the graph and terminates at Contract End at $62.7. At Time Now, the BCWS is $ The ACWP curve begins in the lower left corner of the graph and terminates at the Time Now line at $ The BCWP curve begins in the lower left corner of the graph and terminates at the Time Now line at $ Check Answer Contract Time Ti me Sta rt: Now Completion Date The CV and SV are b o t h unfa vor ab le. CV = BCWP - ACWP = = -10 SV= BCWP - BCWS = = I Page24of 46 I... Back Next

78 EVMlOl Fundam entals of Earned Value Managem ent lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Integrat ed Pr ogr 11m Manageme.nt EVM is a powerful integrated program management tool that is fundamentally interrelated with other program management disciplines, such as: logistics Sys tems engineering Contracting Cost es tima ting EVM Risk management Quality management Financial management In order to use EVM effectively, PMs must ensure that EVM is considered in the context of a ll of these key disciplines.... I Poge 1Sof 46 I... Back Next

79 EVMlOl Fundam entals of Earned Value Managem ent lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Integrat ed Pr ogr 11m Manageme.nt EVM is a powerful integrated progra m management tool that is fundamentally interrelated with other program management disciplines, such a s: Logistics Systems engin, ee rinr ~ l ong De scription Contracting Cost estimating Diagram depic ts EVM as being interrela ted to the following disciplines: Logis tics, Systems Engineering, Contrac ting, Risk management Cos t Estimating, Risk Management, Quali ty Management, and Financial Managemen t. Quality manaclerr enl Financial management ~ In order to use EVM effectively, PMs must ensure that EVM is considered in the context of all of these key disciplines.... I Poge1Sof 46 I... Back Next

80 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Knowledge Review Earned value management {EVM) is a powerful tool that c an be used instead of cost estimating and risk management. True ~ False Check Answer This is a fa l se statement. In a successful program PMs must ensure tha t EVM is considered in the context of all of these key disciplines.... I Pogel6of46 I... Back Next

81 In this topic, you will: Given typical Earned Value Management (EVM) data and notional Government budget value, recognize that EVM provides information useful for updating budget and funding projections Compare EVM and Technical Performance Measurement Given a graphical depic tion o f the Departmen t of Defense ( DoD) risk managemen t process, identify typical EVM processes related to each step in the risk management process... I Pogel7of46 I... Back Next

82 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM and Budgeting In addition to providing vital early- warning cost and schedule variance information to Program Management teams, EVM is useful specifically for the Government financial manager ( FM ) in preparing budget requests and tracking expenditures via the Planning. Programming. Budge ting. and Execution CPPBE l process. The Government PM and FM face a number of challenges in the development of budget requests and tracking of funding for contracts: Government PMs budget to the most likely price of a contract, but most likely estimates change over time ( contract negotiations, cost reimbursable and incentive contract cost grow th), so budget requests must be updated Government PMs must also come up with a reasonable breakdown of the most likely contract estimate by fiscal year so as to have appropriated funds available at the right time to pay for contract costs The Governement PM and FM must work closely together in order to comply with DoD financial management policy and fiscal law. EVM provides useful information to help with financial management: EVM provides updated contractor EACs based on cost and schedule performance to support updated budget requests EVM provides cost and schedule performance metrics that help the Government PM develop an updated EAC Contract EVM and EVM-related reports provide information on the time-phasing of the contract costs Program Manager Business/ Financial... I Pa ge28of 46 I... Back Next

83 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM and Budgeting In addition to providing vital early- warning cost and schedule variance information to Program Management teams, EVM is useful specifically for the Government financial manager ( FM) in preparing budget requests and tracking expenditures via the Planning. Programming. Budge ting. and Execution CPPBE l process. The Government PM and FM face Planning, Programming, Budgeting, and Ex e cutio n ( PPBE ) challenges in the development of requests and tracking of funding f T he PPBE process is how the DoD "allocates its resources". PPBE is an annual process which produces the Secretary's Defense Planning and Government PMs budget to Programming Guidance ( DPPG ), five year approved Program Objectives price of a contract, but mos Memoranda ( POMs ), and one year Budget Estimate Submissions ( BES) estimates change over time for the military departments and defense agencies, and the DoD negotiations, cost reimbursa portion of the President's Budget ( PB ). incentive contract cost gro, budget requests must be updated Government PM develop an updated EAC Government PMs must also come up with a reasonable breakdown of the most likely contract estimate by fiscal year so as to have appropriated funds available at the right time to pay for contract costs The Governement PM and FM must work closely together in order to comply with DoD financial management policy and fiscal law. Contract EVM and EVM-related reports provide information on the time- phasing of the contract costs Program Manager Business/ Financial... I Page28of 46 I... Back Next

84 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM and Financial Management EVM budgets are g o als fo r work performanc e. The EVM budgets must be sufficient to represent a realistic plan to capture all scope on contract. I n EVM, the term Total Allocated Budget (T AB) is used to represent the sum of all budgets allocated to the performance of the contractual effort, including management reserve. I t will differ from PPBE budgets and from contract funding because it does not include profit and/ or fee. Additionally, for cost reimbursable contracts the PPBE budgets must be updated to reflect the contractor's latest estimate at completion, but the EVM PMB does not change. I f the contract has only incremental funding appropriated Time Now that does not cover the entire contract price, the EVM PMB still Management Reserve (S2M) reflects a realistic plan for the I,' I entire scope of work. FMs and I PMs must monitor contract I I performance to ensure funding is I I available at the right time to pay for necessary costs or take $ other contractual action. One report that can help with this task is the Contractor Funds Status Report ( CFSR). The CFSR provides the contractor's updated estimates for the price ( including profi t/fee), since the funding must cover all costs, profits, and fees. Time... I Page 29of 46 I... Bac k Next Contract End

85 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM and Financial Management EVM budgets are g o als fo r work performanc e. The EVM budgets must be sufficient to represent a realistic plan to capture all scope on contract. I n EVM, the term Total Allocated Budget (T AB) is used to represent the sum of all budgets allocated to the performance of the contractual effort, including management reserve. I t will differ from PPBE ts and from contract because it does not include profit and/ or fee. Additionally, for cost t the contractor's latest estimate at funding I f the contract has only incremental funding appropriated that does not cover the entire contract price, the EVM PMB still reflects a realistic plan for the entire scope of work. FMs and PMs must monitor contract performance to ensure funding is available at the right time to pay for necessary costs or take other contractual action. $ Congress grants funding for federal agencies via appropriations, using the agency budgets as inputs to monitor how funds are spent. '1""-...,...,_.._B One report that can help with this task is the Contractor Funds Status Report ( CFSR). The CFSR provides the contractor's updated estimates for the price ( including profi t/fee), since the funding must cover all costs, profits, and fees. Time... I Page 29of 46 I... Ba c k Next Contract End

86 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM and Financial Management EVM budgets are goals for work perform ance. The EVM budgets must be sufficient to represent a realistic plan to capture all scope on contract. In EVM, the term Total Allocated Budget (TAB ) is used to represent the sum of all budgets allocated to the performance of the contractual effort, including management reserve. It will differ from PPBE budgets and from contract funding because it does not include profit and/ or fee. Additionally, for cost reimbursable contracts the PPBE budgets must be updated to reflect the contractor's latest estimate at completion, but the EVM PMB does not change. If the contract has only incremental funding appropriated Time Now that does not cover the entire contract price, the EVM PMB still Management Reserve (S2M) reflects a nf""'""".._,oj,o._....,_-; I,' I entire sco price I PMs must I I performan includes profit/fee I I available a.._"'!,...,;,.,..,.. for necessary costs or take other contractual action. $ One report that can help with this task is the Contractor Funds Status Report (CFSR). The CFSR provides the contractor's updated estimates for the price ( including profit/fee), since the funding must cover all costs, profits, and fees. Time... I Page29of46 I... Back Next Contract End

87 EVMlOl Fundamentals of Earned Value Management lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM and Financial Management EVM budgets are g o als fo r work performanc e. The EVM budgets must be sufficient to represent a realistic plan to capture all scope on contract. I n EVM, the term Total Allocated Budget (T AB) is used to represent the sum of all budgets allocated to the performance of the contractual effort, including management reserve. I t will differ from PPBE budgets and from contract funding because it does not include profit and/ or fee. Additionally, for cost reimbursable contracts the PPBE budgets must be updated to reflect the contractor's latest estimate at completion, but the EVM PMB does not change. I f the l o ng Descriptio n EVM graph displays the BCWS, BCWP, and ACWP in dollars plotted over time through Contract End. BCWS displays through the contract end. BCWP and ACWP terminate at Time r<>1~.,,- ( Now, and the ACWP is projected through the contract end. The contract has a $ 2 million " "'t;rd management reserve. The T AB is indicated at the top of the management reserve. Three steps of incremental funding display from contract start until past Time Now, but not ""'rfn,rl through contract end. The EAC is updated to reflect the contractor's latest estimates. The av aii<iiu EVM PMB is planned to reflect all authorized, contractually agreed to effort. for other contractual action. One report that can help with this task is the Contractor Funds Status Report (CFSR). The CFSR provides the contractor's updated estimates for the price ( including profi t/fee), since the funding must cover all costs, profits, and fees. Time... I Page 29of 46 I... Back Next Contract End

88 EVMlOl Fundamentals of Earned Value Management lesson 1.1- Key Concepts of Earned Value Management RESOURCES I PRINT I HELP The Contract Funds Status Report ( CFSR) The CFSR is an important financial management report, prepared by defense contractors for Government PMs.. Contractors report the accrued expenditures to date, the forecast expenditures to the end of the project, and the estimated forecasts of billings to the Government. PMs use CFSR data to gain insight into contractor funding requirements f rom the current reporting period to the end of the proj ect. The CFSR is used by Govem1ment FMs to help assess budget and funding needs for a contract. It can be used on contracts that don't requ i re EVM. When the contractor has developed a range of estimates at completion such as those reported in the Integrated Program Management Report {IPMR), the most likely estimate is used to develop the projected data in the CFSR. The CFSR, however, shows the estimates "at price", meaning it includes contractor fee and/ or profit, wh i ~e the IPMR reports estimates "at cost", meaning it does not include contractor fee and/ or profit. The CFSR is r eported at price because Government funding must be provided to cover the,entir e contract price, including profit and/ or fee. The CFSR: Contains data that updates and for ecasts contract funding requ irements by appropriation Includes planning and decision-making data for funding changes to contracts Develops f undi ng requirements and budget estimates in support of approved programs Determines funds that are in excess of contract needs and avai lable for de-obligation Contains rough estimates of termination costs Contract Funds Status Report (CFSR) " Page 3 0 of 46 l ~ Back Next

89 EVMlOl Fundamentals of Earned Value Management lesson 1.1- Key Concepts of Earned Value Management RESOURCES I PRINT I HELP The Contract Funds Status Report ( CFSR) The CFSR is an important financial management report, prepared by defense contractors for Government PMs.. Contractors report the accrued expenditures to date, the forecast expenditures to the end of the project, and the estimated forecasts of billings to the Government. PMs use CFSR data to gain insight into contractor funding r equirements f rom the current reporting period to the end of the proj ect. The CFSR is used by Govem1ment FMs to help assess budget and funding needs for a contract. It can be used on contracts that don't require EVM. When the contractor has developed a range of estimates at completion such as those reported in the Integrated Program Management Report {IPMR), the most lik ely estimate is used to develop t 1 1 estimates "at price", meaning it includes ll Integrated Program Management Report (IPMR) "at cost", meaning it does not include contrc Government funding must be provided tc The IPMR is the primary means of communicating program cost and schedule performance measurement The CFSR: information between the contractor and the Government. ll It is carefully tailored to meet program needs. Contains data that updates and for ecasts contract runamg requ1rements oy appropnat10n Includes planning and decision-making data for funding changes to contracts Develops f undi ng requirements and budget estimates in support of approved programs Determines funds t hat are in excess of contract needs and avai lable for de-obligation Contains rough estimates of termination costs Contract Funds Status Report (CFSR) " Page 3 0 of 46 l ~ Back Next

90 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM and Cost Estimating EVM and cost estimating are also inextricably linked. Cost estimating begins early in a program's life cycle, with a comprehensive life-c ycle c ost estimate that includes a cost -risk a nalysis that quantifies the program's cost, schedule, and technical impacts. Cost estimators use EVM analysis da ta for ongoing cost estimation. As a best practice, cost es timators and EVM analysts should : Use each other's da ta to update program costs and examine differences between es tima ted and ac tual cos ts Compare program s ta tus to historic al da ta to unders tand variances Cost Estimator EVM Analyst uses EVM analysis for Uses cost estimation to ongoing cost estimation develop the EVM EAC... Poge 3 1 of 46 I... Back Next

91 EVMlOl Fundam entals of Earned Value Managem ent lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM and Cost Estimating EVM and cost estimating are also inextricably linked. Cost estimating begins early in a program's life cycle, with a comprehensive life-cycle cost estimate that includes a cost -risk analysis that quantifies the program's cost, schedule, and technical impacts. Cost estimators use EVM analysis da ta for ongoing cost estima tion. As a best practice, cost r ~ Use each o ther's d ac tual cos ts Compare program s l o ng Descriptio n The cost es timator uses EVM analysis for ongoing cost estimation and the EVM analyst uses cost es timation to develop the EVM EAC. ~ ~ es tima ted and Cost Estimator EVM Analyst uses EVM analysis for ongoing cost estimation... Back Poge 3 1 of 46 I... Next Uses cost estimation to develop the EVM EAC

92 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP A LAR Example In this example, you can see typical differences, in dollar values, due to timing between the cost estimating, financial management, and EVM processes. In the LAR program, the FM submitted a budget request for $81M in the pre- contract award time period, based on the most likely cost estimate available at the time. The contract was negotiated SSIM at a lower price of $72.4M, resulting in a target cost of $64. 7M, which becomes the total allocated budget (T AB) for EVM. So at the next budget update, the FM might consider updating the budget request to reflect that amount, unless, for example, the EVM data indicates a higher most likely target price. The contract is incrementally funded at $37 million. I n spite of this, the contractor develops the EVM PMB to reflect a realistic plan for the ENTIRE contract scope using the contract T AB, which is equal to the Negotiated Contract Cost (Target Price Target Fee ) in the LAR example. S81 M Note: Budget based on most likely estimate pre-contract S inm 2 years of RDT&E funding "'iillllllll I Pag e 32 of 46 Back Next

93 EVMlOl Fundamentals of Earned Value Management l esson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP A LAR Example In this example, you can see typical differences, in dollar values, due to timing between the cost estimating, financial management, and EVM processes. LAR EMD Contract In the LAR program, the FM submitted a t for Pre Contract Award Post Contract Award l ong De scriptio n A table entitled " LAR EMD Contract" depicts contract financial data for Pre- Contract Award and Post Contract Award. Pre- Contract Award, both the Original Cost Estimate and the Budget Estimate are $81M. Budget based on most likely estimate pre- contract. Post Contract Award, Contract Cost is $64. 7M, Contract Target Fee is 7. 7M, and Contract Target Price is $72.4M. Contract Target Price was negotiated lower than estimated. Contract Funding Allocated is $37M. 2 years of RDT&E incremental funding. A simplified EVM graph depicting the PMB is shown. The y- axis is labeled $ in Millions up to $65M. The x- axis is labeled Time from Contract Start of June 2013 through Contract End at April LAR negotiated contract cost equals $65M. There is a management reserve of 2 million dollars. A performance measurement baseline curves begins at Contract Start and $0 and terminates at Contract End just below the management reserve. T wo events display along the x- axis. CDR at September 2014 and Prod Proto at September develops the EVM PMB to reflect a realistic plan for the ENTIRE contract scope using the contract T AB, which is equal to the Negotiated Contract Cost (Target Price Target Fee ) in the LAR example. I I "'iillllllll I Pag e 32 of 46 Back Next

94 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Know ledge Rev iew What credible management information can you determine from EVM data such as that presented in the graph shown below? Select all that apply. Whether more or less work than planned has been accomplished as o f time now Whether work is a ccomplished at planned cost ~ Estimated costs at completion..., Management Reserve(S2M) S ill M I I I [ J De tailed technical specifications Check Answer caract... - Ud EVM data will indicate to management whether work is being accomplished as planne d as of time now and at planned cost, and will provide estimated cost s at completion. ~ I Page33of46 I ~ Back Next

95 EVMlOl Fundamentals of Earned Value Management lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Knowledge Review What credible management information can you determine from EVM data such as that presented in the graph shown below? Select all t hat apply. ~ Whether more or less work than l ong Descriptio n D A graph depicts project EVM data from contract start through contract end, for a contract valued at $64.7 million with a management reserve of $2 million. BCWP and ACWP are indicated through time now. BCWS and projected ACWP are indicated through contract end. At time now, BCWS is higher than ACWP, which is higher than BCWP. Schedule variance, SV, at time now is depicted as the difference between BCWS and BCWP. Cost variance, or CV, at time now is depicted as the difference between ACWP and BCWP. The budget at completion, or BAC, corresponds to the sews at contract end. The estimate at completion, or EAC, corresponds to the projected ACWP at contract end. contract start rime Time Check Answer Now contract End EVM data will indicate to management whether work is being accomplished as p lanne d as o f time now and a t p lanne d cost, and will provide e stima t e d cost s a t com p le tion.... I Page 33of 46 I... Back Next

96 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Knowledge Review A contract has a target cost of $80M, incremental funding of $45M, and a Government budget of $90M. What is the total allocated budget (TAB) for EVM? $45M U $90M ~ $80M There is not enough information to answer this question Check Answer The TAB for EVM is $80M.... I Pogel4 of 46 I... Back Next

97 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM Measures of Pr og ress (BCWP) Clearly, the BCWP is of paramount importance in EVM. The cost and schedule variances are meaningful only in so far as the BCWP measure reflects real performance accomplishments. EVM requires the identification of physical products, milestones, technical performance goals, or other indicators that will be used to measure progress. I n our simple hardware item case, those requirements are reflected in the contract specification that defines the hardware item component, a physical product. We could also define Technical Performance Measures (TPMs ) to help us measure progress toward performance specifications. TPMs are a subset of metrics and measures that evaluate technical progress. For instance, we might want to measure the strength or weight of our components to help us determine if we are making progress toward our technical specifications. We could use TPMs directly to determine earned value ( BCWP) or we may evaluate the TPMs alongside the EVM cost and schedule variances to assess the status of our project. RISK CONTRACT TPMs provide: An early warning of technical problems, in order to support assessments of their risk impacts A crosscheck on the validity of BCWP claimed by a contractor... I Page3Sof 46 I... Back Next

98 EVMlOl Fundamentals of Earned Value Management lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM Measures of Pr og ress (BCWP) Clearly, the BCWP is of paramount importance in EVM. The cost and schedule variances are meaningful only in so far as the BCWP measure reflects real performance accomplishments. EVM requires the identification of physical products, milestones, technical performance goals, or other indicators that will be used to measure progress. I n our simple hardware item case, those requirements are reflected in the contract specification that defines the hardware item component, a physical product. We could also define T l o ng De scriptio n ogress toward performance specificat e technical progress. For instance, we migh APB risk diagram illustrating the relationship between the o help us determine if we are making progres APB and risks related to technical performance, schedule, ctly to determine earned value ( BCWP) c and cost. Technical performance is emphasized. edule variances to assess the status of o"'""""->1'1111!. RISK CONTRACT TPMs provide: An early warning of technical problems, in order to support assessments of their risk impacts A crosscheck on the validity of BCWP claimed by a contractor... I Page3S of 46 I... Back Next

99 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Technical Perfor mance Measurement and EVM Technical managers ( such as systems engineers and logisticians ) integrate a variety of technical assessment tools and metrics to measure progress in meeting stakeholder and technical requirements. Key tools used in technical assessment include testing, technical reviews, EVM, and technical performance measurement. Technical performance measurement and EVM are both performance measurement processes that: Verify actual versus anticipated achievement Confirm progress Identify variances that might jeopardize meeting a higher- level end product requirement Assess values that fall outside established tolerances Indicate the need for management attention and corrective action Provide early warning of problems Provide regular reports as contract deliverables Recall that TPMs can be used as criteria by contractors to determine if work is complete and BCWP can be earned. Even if not used directly to determine work completion, TPM data should be considered as part of an integrated performance analysis along with EVM data. TPM analysis can give early warning of issues that might impact cost and schedule performance. Early insight into developing problems allows earlier management action. EVM performance should reflect the status and progress of TPMs even though a one- to- one mapping of TPMs to EVM control accounts is not required.... I Page36of 46 I... Back Next

100 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP TPMs -A LAR Ex ample TPMs: Are defined to align with key performance parameters Specify progress of selected technical parameters in terms of expected performance at specific points and with specific measurements Record actual performance observed during the program Compare actual vs. planned profile performance LAR v.hldo Progrwn As an example, the LAR program chose to have a TPM report on Infrared {IR) Signature. This TPM report was selected to help manage technical risk on the LAR program towards meeting the Survivability Key Performance Parameter { KPP ), which was identified as a high risk area for the program no ~, ; "" : 1ZV Q J IR Signature Dec 11 TPM IR signature is coming in at the upper tolerance In early tests, indicating possible technical problems... o.-r...,- U~~~P"loler.ulce _ Tl'nshokl : - AclloiM ~ D-11 r.t-12 J Mo1 3J 3 1.1!1 J D U... I Poge37of46 I... Back Next

101 EVMlOl Fundamentals of Earned Value Management lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP TPMs - A LAR Example TPMs: Are defined to align with key performance parameters Specify progress of selected technical parameters in terms of e xpected performance at specific points and with specific measurements Re Co l ong Description A graph titled "IR Signature Dec 11 TPM" is shown with y-axis labeled Degrees (C) and x-axis labeled with project dates from J-11 through D-14. The graph shows 5 lines. The line labeled Threshold spans the graph from J-11 to D-14 at 55 degrees. The line labeled Upper Tolerance starts at the intersection of J-11 and 220 degrees, slopes downward to the intersection of S-13 and 60 degrees, and then spans the remainder of the graph horizontally at 60 degrees. The line labeled lower Tolerance rat starts at the intersection of J-11 and 180 degrees, drops to the intersection of S-13 ~ rly and 50 degrees, spans the remainder of the graph horizontally at 50 degrees. The e dashed line labeled Plan spans the graph from J-11 to D-14 staying consistently between the Upper and lower Tolerance lines. Finally, the line labeled Actual depicts io< T""'m~ progress for the first three time points, J-11 to D-11, that closely follows the Upper - roomn" Tolerance line. Text associated with the Actual line displays : "IR signature is coming r-' ~ane x b- ~~~~~e~!~ini.ja~t:t~h~e~u~p~pje\rit~ojle:r~ajnjcieii::nie!a!r(ly~tle:s;ts:,:i~n:d:ic;a:t;in;gj!pjo~s~ program towards meeting the Survivability Key 8o s~ ib~ leji~ te~ c~~ h n~~aj~p ic l ~~ ro~jleimiis b,!"!!~~l:~;!;:l~. Performance Parameter (KPP ), which was identified as a high risk area for the program. 70 8o so 40 J..11 S 11 D-11 M 12 J 12 S M 13 J 13 S M 14 J I Page 37 of 46 I... Back Next

102 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Risk and EVM Effective qualitative and quantitative risk, issue, and opportunity managemen t a re critical to a program's success. EVM brings important information to the table that can help in the management of risk. As you know, EVM provides critical ma nagement information regarding technical performance, schedule, and cost. To understand how this EVM data helps managers mitigate performance, schedule, and cost risks, le t's take a closer look at what risk is, how the DoD manages risk, and the role that EVM plays in the risk management process. RISK CONTRACT... I Poge 33of 46 I... Back Next

103 EVMlOl Fundamentals of Earned Value Management Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP What is Risk? Proactively addressing not only risks, but also issues and opportunities, can help programs achieve cost, schedule, and performance objectives at every stage of the life c ycle. Risks are future uncertainties relating to achieving program technical performance goals within defined cost and schedule constraints. I ssues are current problems ( realized risks ) that should be addressed with action plans, resourced and resolved. Opportunit ies are events that may or may not occur that have the potential for improving the program in terms of cost, schedule, and performance. EVM data can provide important cost and schedule performance data helpful to the risk management process.... I Page39of 46 I... Back Next

104 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP The DoD Risk Management Process Model Th e DoD manages risk using the DoD risk management process, which is shown here as a 4 step model. Risk management is not a stand-alone progra m office task but should be integrated with other Processes,, the risk management process. By integrating the technical, cos t, and schedule parameters o f a contrac t in to an integra ted baseline, EV M allows the measuremen t of work performance against this baseline in terms o f c ost and schedule variances. I f EVM da ta s tarts to show cost and schedule variances, the program team can then use EV M t o analyze the data and isolate causes including EVM. EVM contributes important information useful in of the v ariances and identify any risks that may be associated with the v ariance. This data helps the program manager identify significant risk d rivers, forecast future cost a nd sch edule performance, and implement corrective action pla ns to get back on track. ' EVM is e ffective in helping a program monitor WBS elements that are experiencing issues. The strength o f EVM lies in its rigorous examina tion o f wha t has already occurred on the project, using quantita tive me trics to evaluate project pas t per formance. The program can then analyze what ac tions are necessary to es tablish or modify a risk mi tiga tion approach. Risk Mitigation Should the risk be accepted, avoided, transferred, or controlled? \... I Poge 40of46 I... Back Next

105 EVMlOl Fundam entals of Earned Value Managem ent lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP The DoD Risk Management Process Model The DoD manages risk using the DoD risk management process, which is shown here as a 4 step model. Risk management is not a stand-alone program office task but should be integrated with other Processes, including EVM. EVM contributes important information useful in the risk management technical, cost, and l o ng Description \ contract into an int"''"'td the measurement of this baseline in terms o f Four- step risk management cycle is shown. The steps variances. If EVM data are : 1. Risk Identification - What c an go wrong? 2. Risk schedule variances, the Analysis - What is the likelihood and consequence of the use EVM to analyze the risk? 3. Risk Mitigation - Should the risk be accepted, of the variances and avoided, transferred, or controlled? 4. Risk Monitoring be associated with the How has the risk changed? Communication and Feedback the program manager occur throughout the cycle. drivers, forecast future c~l!!:!'~l!l""!~~il!!l!"""-----~~-- perforrnance, and implement corrective action plans to get back on track. EVM is effective in helping a program monitor WBS elements that are experiencing issues. The strength of EVM lies in its rigorous examination of what has already occurred on the project, using quantitative metrics to evaluate project past performance. The program can then analyze what ac tions are necessary to establish or modify a risk mitiga tion approach.... I Poge 40of46 I... Back Next

106 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM in Key DoD Reports Another use of EVM information is for required reporting to higher headquarters and Congress. Key reports include: Defense Acquisition Executive Summary (DAES) Selected Acquisition Report (SAR) Uni t Cost Report (UCR) Defense Selected Unft Cost Aequi5ition Acquisition Report (UCR) Executive Report (SAR) Summary (OAES) Program Manager... I Pa ge 41 of 46 I... Back Next You must select e ach report to move on..!2

107 EVMlOl Fundamentals of Earned Value Management lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM in Key DoD Reports Another use of EVM informa Key reports include : Defense Acquisition E Selected Acquisition R Unit Cost Report ( UCR Program Manager Defense Acquisition Executive SUmmary (DAES) Defense Acq uisit ion Executive Summary ( OA ES) The goal of the DAES process is to facilitate communication between, and provide feedback to, key stakeholders in OSD, the Joint Staff, the Components, and Program Offices. DAES is not just a report. It is a process that includes : A DAES report is provided by PMs of Major Defense Acquisition Programs ( MDAPs), Acquisition Category ( ACAT ) I, and Major Automated Information Systems ( MAIS ), ACAT l A programs, to the Under Secretary of Defense for Acquisition, Technology, and logistics (USD( AT&l)) each calendar quarter Independent assessments by the OSD and Joint Staff stakeholders DAES meetings The Defense Contract Management Agency ( DCMA ) and the Performance Assessment and Root Cause Analy ses ( PARCA) office are the assessing organizations for DAES Contract Performance Assessment ( CPA), which contains predominantly EVM information. Information is submitted in the online Defense Acquisition Management Information Retrieval ( DAMIR) sy stem. IPMR data is updated in DAMIR monthly.... I Page41of 46 I... Back Next You must select each report to move on.!!

108 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM in Key DoD Reports Another use of EVM information is for r e Key reports include: Defense Acquisition Executive Su Selected Acquisition Report (SAR) Unit Cost Report (UCR) Oefenoo Selected Aequi5ition Acquisition Executive Report (SAR) Summary (OAES) Selected Ac quis ition Report (SAR) The SAR is a report to Congress for all Major Defense Acquisition Programs ( MDAPs). It includes : Annual status of total program c ost, schedule, and performance ( the EAC) Quarterly program unit cost and uni t cost breach in formation for a specific program A full li fe-cycle cos t analysis EVM information includes EACs and the reasons for any cos t or schedule variances. Program Manager... I Pa ge 41 of 46 I... Back Next You must select e ach report to move on..!2

109 EVMlOl Fundamentals of Earned Value Management lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM in Key DoD Reports Another use of EVM information is for required ror nn~ Unit Cost Report ( UCR) Key reports include : UCRs are quarterly reports to the Component Acquisition Executive (CAE ). Defense Acquisition Executive Summary ( DAES Selected Acquisition Report (SAR) Unit Cost Report (UCR) Defense Selected Un~ Cost Acquisitioo Acqulsftion Report (UCR) Executive Report (SAR) SUmmary (DAES) EVM information included in the UCR report includes: EVM cost and schedule variances, for each of the major contracts Anticipated or known changes from b aseline program schedule milestones Program Manager... Back You must s e lect each report to move on..q

110 EVMlOl Fundam entals of Earned Value Managem ent lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP EVM in Key DoD Reports Another use of EVM information is for required reporting to higher headquarters and Congress. Key reports include: l ong Description Defense Acquisitio The Program Manager submits information to Congress Selected Acquisiti and the Department of Defense in the Defense Acquisition Executive Summary ( DAES), Selected Acquisition Report Uni t Cost Report ( ( SAR), and Unit Cost Report (UCR). Defense Selected Unft Cost Aequi5ition Acquisition Report (UCR) Executive Report (SAR) Summary (OAES) Program Manager... I Pa ge 41 of 46 I... Back Next You must select e ach report to move on..!2

111 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Knowledge Review Which of the following is a report to Congress that contains EVM information? Integrated Program Management Report (IPMR) Contract Funds Status Report ( CFSR) 0 Cost and Software Data Reporting (CSDR) plan ~ Selected Acquisition Report ( SAR) Check Answer The Selec ted Acq uisition Re port (SAR) is a report to Congress that contains EVM information.... I Poge 4lof 46 I... Back Next

112 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP Knowledge Review Routine EVM analysis can help track known risks, but it will not help PMs identify new risks. True ~ False Check Answer This is a fa l se statement. Routine EVM analysis can help PMs track known risks AND identify new risks.... I Poge 43of 46 I... Back Next

113 EVMlOl Fundam entals of Earned Value Managem ent lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP lesson Summary Congratulations! You have completed the lesson Ke y Concepts of Earned Value Managem e n t. You should now know the following key points: There are many tools available to manage risk, but EVM is unique because it integrates contract cost, schedule, and technical performance objectives into a PMB. Early in a project the contractor develops the em!!. The PMB is the baseline against which all EVM data will be measured. Management Reserve S in M """ Now Contract Sblrt Time Contrecc... r1--=-p.-g-e"'"' End Select EAC, BAC, ACWP, SV, CV, BCWS, and :- "'"f 7 46;---,l... Back Next BCWP to review a descript ion o f each..!2

114 EVMlOl Fundamentals of Earned Value Manage ment lesson Key Concepts of Earned Value Manage ment RESO URCES 1 PRI NT 1 HELP l esson Summary Congratulations! You have completed the lesson Key Conc e pts of Earned Valu e Ma n a gem e n t. You should now know the following key points: There are many tools available to manage risk, but EVM is unique because it integrates contract ~ schedule. and technical performance objectives into a PMB. cost Early in a project the contract or develops the fml!. The PMB is the ba data will be measured. T he PMB captures contract cost objectives in dollars. Management Reserve S iii M Contr.ct Stal't Time Time Now Contrac::l ~ rl-p.-g-... End Select EAC, BAC, ACWP, SV, CV, BCWS, and BCWP to review a description o f each. Q --.-=f-46,---,l ~ Bac k Next

115 EVMlOl Fundamentals of Earned Value Manage ment lesson Key Concepts of Earned Value Manage ment RESO URCES 1 PRI NT 1 HELP l esson Summary Congratulations! You have completed the lesson Key Con ce pts of Earned Valu e Managem e n t. You should now know the following key points: There are many tools available to manage risk, but EVM is unique because it integrates contract cost, and into a PMB. schedule fml!. The PMB is the baseline against which all EV M The PMB includes a time- phased integrated schedule of contrac t events. Management Reserve S iii M Contr.ct Stal't Time Time Now Contrac::l ~ rl -P.-g-... End Select EAC, BAC, ACWP, SV, CV, BCWS, and BCWP to review a description o f each. Q --.-=f-46,---,l ~ Ba c k Next

116 EVMlOl Fundam entals of Earned Value Managem ent lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP lesson Summary Congratulations! You have completed the lesson Ke y Concepts of Earned Value Managem e n t. You should now know the following key points: There are many tools available to m<ma,oe risk, but EVM is unique because it integrates contract cost, schedule, and into a PMB. Early in a data will be t e chnical perfor m a nce is the baseline against which all EVM.--~----1 The PMB includes a product-oriented work breakdown structure that relates technical requirements to ongoing work. S in M Contract Sblrt Time """ End Select EAC, BAC, ACWP, SV, CV, BCWS, and Now... Contrecc r1--=-p.-g-e "'"' :- "'"f 7 46;---,l... Back Next BCWP to review a descript ion o f each..!2

117 EVMlOl Fundamentals of Earned Value Management lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP l esson Summary Congratulations! You have completed the lesson Key Concepts o f Earne d Value Manage m e nt. You should now know the following key points: There are many tools available to manage risk, but EVM is unique because it integrates contract cos t, schedule, and technical performance objectives into a PMB. Early in a project the contractor develops the PMB. The PMB is the baseline against which all EVM data will be measured. The PMB integrates the technical objectives, schedule, and cost of the contract by: 1. Technical Performance : The WBS breaks down the work required to meet technical requirements resulting from the systems $ inm engineering process 2. Schedule : Time- phasing the tasks to meet contract milestones 3. Cost: Time- phasing the contract budget in accordance with the schedule Contract Start Time Now Contract End... r1--::p,-ag_e_44 :-: o-;f:-:4,-: 6--,l... Back Select EAC, BAC, ACWP, SV, CV, BCWS, and BCWP to review a description ofeach.!! Next

118 EVMlOl Fundam entals of Earned Value Managem ent lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP lesson Summary Congratulations! You have completed the lesson Ke y Concepts of Earned Value Managem ent. You should now know the following key points: There are many tools available to ma nage risk, but EVM is unique because it integrates contract cost, schedule, and technical performance objectives into a PMB. Early in a project the contractor develops the em!!. The PMB is the baseline against which all EVM data will be measured. EAC S in M Management Reserve The estimated to tal cos t for authorized work Equal to the sum of actual costs to date (including all allocable indirect c osts}, plus the estimated costs to completion Term can apply at any WBS level, from control account through total contract """ Now Contract Sblrt Time Contrecc... r1--=-p.-g-e"'"' End Select EAC, BAC, ACWP, SV, CV, BCWS, and :- "'"f 7 46;---,l... Back Next BCWP to review a descript ion o f each..!2

119 EVMlOl Fundam entals of Earned Value Managem ent lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP lesson Summary Congratulations! You have completed the lesson Ke y Concepts of Earned Value Managem e n t. You should now know the following key points: There are many tools available to manage risk, but EVM is unique because it integrates contract cost, schedule, and technical performance objectives into a PMB. Early in a project the contractor develops the em!!. The PMB is the baseline against which all EVM data will be measured. BAC S in M Management Reserve The sum of all EVM performance budget s for a given effort Term can apply at any WBS level, from control account through total contract Equal to the total cumulative BCWS value for the work planned Contract Sblrt Time """ End Select EAC, BAC, ACWP, SV, CV, BCWS, and Now... Contrecc r1--=-p.-g-e"'"' :- "'"f 7 46;---,l... Back Next BCWP to review a descript ion o f each..!2

120 EVMlOl Fundam entals of Earned Value Managem ent lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP lesson Summary Congratulations! You have completed the lesson Ke y Concepts of Earned Value Managem ent. You should now know the following key points: There are many tools available to ma nage risk, but EVM is unique because it integrates contract cost, schedule, and technical performance objectives into a PMB. Early in a project the contractor develops the em!!. The PMB is the baseline against which all EVM data will be measured. ACWP S in M Management Reserve The costs actually incurred and recorded in accomplishing the work performed within a given time period May be expressed as a value for a specific p eriod or cumulative to date Term can apply at any WBS level, from control account through total contract """ Now Contract Sblrt Time Contrecc... r1--=-p.-g-e"'"' End Select EAC, BAC, ACWP, SV, CV, BCWS, and BCWP to review a descript ion o f each..!2 :-... "'"f 7 46;---,l Back Next

121 EVMlOl Fundam entals of Earned Value Managem ent lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP lesson Summary Congratulations! You have completed the lesson Ke y Concepts of Earned Value Managem e n t. You should now know the following key points: There are many tools available to manage risk, but EVM is unique because it integrates contract cost, schedule, and technical performance objectives into a PMB. Early in a project the contractor develops the em!!. The PMB is the baseline against which all EVM data will be measured. Management Reserve SV Schedule variance (SV) = BCWP - sews T his metric depicts the work actually accomplished compared to the work originally planned. A negative sv, which S in M results when the BCWP is less than the BCWS, is unfavorable. A positive sv, which results when the BCWP is greater tha n the BCWS, is favorable. Contract Sblrt Time """ End Select EAC, BAC, ACWP, SV, CV, BCWS, and Now... Contrecc r1--=-p.-g-e"'"' :- "'"f 7 46;---,l... Back Next BCWP to review a descript ion o f each..!2

122 EVMlOl Fundam entals of Earned Value Managem ent lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP lesson Summary Congratulations! You have completed the lesson Ke y Concepts of Earned Value Managem ent. You should now know the following key points: There are many tools available to ma nage risk, but EVM is unique because it integrates contract cost, schedule, and technical performance objectives into a PMB. Early in a project the contractor develops the em!!. The PMB is the baseline against which all EVM data will be measured. Management Reserve CV Cost variance ( CV) = BCWP - ACWP This metric depicts the work accomplished compared to the actual costs to accomplish that work. A S in M negativ e CV, which results when the BCWP is less than the ACWP, is unfavorable. A positiv e CV, which results when the BCWP is greater than the ACWP, is favorable. """ Now Contract Sblrt Time Contrecc... r1--=-p.-g-e"'"' End Select EAC, BAC, ACWP, SV, CV, BCWS, and :- "'"f 7 46;---,l... Back Next BCWP to review a descript ion o f each..!2

123 EVMlOl Fundam entals of Earned Value Managem ent lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP lesson Summary Congratulations! You have completed the lesson Ke y Concepts of Earned Value Managem e n t. You should now know the following key points: There are many tools available to manage risk, but EVM is unique because it integrates contract cost, schedule, and technical performance objectives into a PMB. Early in a project the contractor develops the em!!. The PMB is the baseline against which all EVM data will be measured. BCWS S in M Management Reserve Also called the PMB T he sum of the performance budgets for all work scheduled to be accomplished May be expressed as a value for a specific period, or cumulative to date Term can apply at any WBS level, from control account through to tal contract Contract Sblrt Time """ End Select EAC, BAC, ACWP, SV, CV, BCWS, and Now... Contrecc r1--=-p.-g-e"'"' :- "'"f 7 46;---,l... Back Next BCWP to review a descript ion o f each..!2

124 EVMlOl Fundam entals of Earned Value Managem ent lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP lesson Summary Congratulations! You have completed the lesson Ke y Concepts of Earned Value Managem e n t. You should now know the following key points: There are many tools available to manage risk, but EVM is unique because it integrates contract cost, schedule, and technical performance objectives into a PMB. Early in a project the contractor develops the em!!. The PMB is the baseline against which all EVM data will be measured. BCWP S in M Management Reserve Also called earned value (EV) T he value of completed work expressed as the value of the BCWS assigned to that work May be expressed as a value for a specific period, or cumulative to date Term can apply at any WBS level, from control account through to tal contract """ Now Contract Sblrt Time Contrecc... r1--=-p.-g-e"'"' End Select EAC, BAC, ACWP, SV, CV, BCWS, and :- "'"f 7 46;---,l... Back Next BCWP to review a descript ion o f each..!2

125 EVMlOl Fundamentals of Earned Value Management lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP l esson Summary Congratulations! You have completed the lesson Key Concepts o f Earne d Value Manage m e nt. You should now know the following key points: There are many tools available to manage risk, but EVM is unique because it integrates contract cos t, schedule, and technical performance objectives into a PMB. l ong Description A graph depicts project EVM data in terms of dollars in millions and time. The y- axis reflects dollars in millions. A bar at the top of the graph indicates a management reserve. Time is indicated on the x- axis Contract Start to Contract End. A vertical line labeled Time Now identifies the current point in time. Three curves are shown. A curve labeled BCWS begins in the lower left corner at Contract Start and slopes upward, crosses the Time Now line, and terminates in the upper right corner at Contract End, at the bottom of the Management Reserve bar. The end point of the BCWS line is labeled BAC. A second curve, labeled BCWP, is shown beneath the BCWS curve and ends at the Time Now line. A third curve, labeled ACWP, runs between the BCWP and BCWS curves, crosses the Time Now line, and continues as a dashed curve to cross above the BCWS and Management Reserve bar, and past the Contract End point. Where the ACWP curve terminates, it is labeled EAC. A bracket labeled CV encompasses the span between where the ACWP and BCWP lines intersect with the Time Now line. A bracket labeled SV encompasses the span between where the BCWS and BCWP lines intersect the Time Now line. Contract Start Contract End... r1--:: P,-ag 44 e :-:--;f:-: o 4,-: 6--,l... Back Select EAC, BAC, ACWP, SV, CV, BCWS, and BCWP to review a description ofeach.!! Next

126 EVMlOl Fundamentals of Earned Value Management lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP l esson Summary, Cont. EVM provides management with key information. The IPMR is the primary means of communicating program cost and schedule performance measurement information between the contractor and the Government. It is carefully tailored to meet program needs. Financial managers use EVM data to prepare budgets and track funding. The CFSR provides insight into funding requirements. Cost Estimators and EVM Analysts use each other's data to update program costs. EVM provides PMs with many benefits including insight into program performance, accountability, and an early warning of potential issues. EVM also provides information that can be used in reports to higher headquarters and Congress. EVM assists in risk mitigation throughout the DoD risk management process. Technical performance can impact cost and schedule performance, so it is important to consider both EVM and TPM data as part of an integrated performance assessment.... I Page4Sof 46 I... Back Next

127 EVMlOl Fundam entals of Earned Value Managem ent lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP lesson Summary, Cont. EVM provides management with key information. The key information m cost and schedule performance mea ~e Government. It is carefully tailored to mee Using EVM information, managers can determine Fina whether work is accomplished at planned cost d track funding. The CFSR provides insig and on schedule, estimate costs and schedules at comple tion, and understand the root causes Cos of key variances from the plan. ~ to update program costs. EVM prov ~e:j es PMs w1th many oenet1ts 1nc1u<:11ng 1ns1gm 1nto program performance, accountability, and an early warning of potential issues. EVM also provides information that can be used in reoorts to higher headquarters and Congress. EVM assists in risk mitigation throughout the pod risk management process. Technical performance can impact cost and schedule performance, so it is important to consider both EVM and TPM data as p art of an integrated performance assessment.... I Poge45of 46 I... Back Next

128 EVMlOl Fundamentals of Earned Value Manage ment lesson Key Concepts of Earned Value Manage ment RESO URCES 1 PRI NT 1 HELP l esson Summary, Cont. EVM provides management with key information. The IPMR is the primary mea ns of communicating program cost and schedule performance measurement information between the contractor and the Government. It is carefully tailored to meet prog CFSR Financial r FSR provides insight int The CFSR is a financial managemen t report prepared by defense contractors for Government project managers. Contractors n osts. Cost Esti repor t the accrued expenditures to date, the forecast EVM provi expenditures to the end o f the project, and the estima ted ce, accountability, and an ea forecasts o f billings to the Government. EVM also provides ~----~~ ~ 1nformat1on that can be used in reports to h1gher headquarters and Congress. EVM assists in risk mitigation throughout the pop rjsk management process. Technical performance can impact cost and schedule performance, so it is important to consider both EVM and TPM data as part of an integrated performance assessment. ~ I Page 4Sof 46 I ~ Bac k Next

129 EVMlOl Fundam entals of Earned Value Managem ent lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP lesson Summary, Cont... reports to higher headquarters and Congress In addition to regular reports from the contractor to the PM, EVM also requires regular reporting to higher headquarters and Congress, including: rogram cost and schedule performance and the Governmen t. It is carefully tailored to ts and track funding. The CFSR provides Defense Acquisition Executive Summary (DAES) Selected Acquisition Report (SAR) Uni t Cost Report (UCR) s data to update program costs. ight into program performance, accountability, reoorts to higher headquarters and Congress. EVM assists in risk mitigation throughout the pod risk management process. Technical performance can impact cost and schedule performance, so it is important to consider both EVM and TPM data as part of an integrated performance assessment.... I Poge 45of 46 I... Back Next

130 EVMlOl Fundam entals of Earned Value Managem ent Lesson Key Concepts of Earned Value Management RESOURCES 1 PRINT 1 HELP DoD risk management process Th e DoD manages risk using the DoD risk management rogram cost and schedule performance and the Governmen t. It is carefully tailored to Risk identification process. This model consists of four steps : Risk analysis Risk mitiga tion Risk moni toring '---~~~a~~a c,~o a,,~,,~~~vj~,,~,mv,~cocc~"'~"''~''a~o~~~ y~ ~ ts and track funding. The CFSR provides s da ta to update program cos ts. igh t into program performance, accoun tability, EVM also provides information that can be used in reoorts to higher headquarters and Congress. EVM assists in risk mitigation throughout the pod risk management process. Technical performance can impact c ost and schedule performance, so it is important to consider both EVM and TPM d ata as p art o f a n integrated performance assessmen t.... I Poge 45of 46 I... Back Next