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1 EVMlOl Fundam entals of Earned Value Managem e nt Welcome to Lesson 5.3 Predicting Future Performance This lesson details the Predict Future Performance step of the Integrated Analysis Model. The terminal learning objective for this lesson is to demonstrate the Predict Fu ture Performance step of the Integrated Analysis Model. This lesson includes two topics: ( - Analyze EAC Topic 1: Estimates at Completion Reasonableness Topic 2: Assessing EAC Reasonableness - Develop Government Independent EAC Predict Future Performance... I P ge1of 43 I...

2 EVMlOl Fundam entals of Earned Value Managem e nt Welcome to Lesson 5.3 Predicting Future Performance This lesson details the Predict Future Performance step of the Integrated Analysis Model. The terminal learning c Long Description demonstrate the Pred1 Integrated Analysis M' Predict future performance consists of analyze EAC reasonableness and develop Government This lesson includes t1 independent EAC lljlll!l.alyzeeac Topic 1: Estimates at Completion Reasonableness Topic 2: Assessing EAC Reasonableness - Develop Government Independent EAC Predict Future Performance... I P ge 1of 43 I...

3 In this topic, you will: Given typical information sources (Integrated Program Management Report (IPMR), technical performance measures (TPMs)), recognize typical analysis tasks completed to update estimates at completion (EACs)... I P ge2of43 I...

4 I ntroduction to Estimate at Completion After completing a thorough analysis of the past performance of Work Breakdown Structure (WBS ) elements, the Government and contractor control account managers (CAMs) must also look to the future. The estimate at completion (EAC) is an essential requirement of program management and a key data point for formulating a plan for successful project completion. The EAC is the estimated total cost for all authorized work. I t equals the sum of actual costs of work performed ( ACWP) to date plus the estimated costs to complete the work remaining on the contract, called the estimate to complete (ETC). EAC = ACWP + ETC EACs can be developed using formulas or in a more detailed fashion. Regardless of the method chosen to determine the EAC, the formula must always include costs to date ( ACWP) and the estimated cost of remaining work (ETC). The only variable in this formula is how to estimate the cost of remaining work. The ACWP is a given input reflecting actual costs for work performed, recorded in the contractor's accounting system. We will explore how to generate an EAC using Earned Value Management (EVM) metrics, and more detailed approaches.... I Page3of 43 I...

5 EVMlOl Fundam entals of Earned Value Managem ent Predict Future Performance The contractor reports its EACs in the Integrated Program Management Report {IPMR). The Government checks the reasonableness of the contractor's EACs using EVM metrics and develops its own independent EACs as well. IPMR Contractor develops IPMR documents EACs estimatesof final project cost - Analyze EAC Reasonableness - Develop Government Independent EAC Does the contractor EAC fall within a reasonable range of EACs? If not, how does the contractor explain this? Predict Future Performance...ii I P aige 4 of 4,3 I... i 1

6 EVMlOl Fundam entals of Earned Value Managem ent Predict Future Performance The contractor reports its EACs in the Integrated Program Management Report {IPMR). The Government checks the reasonableness of the contractor's EACs using EVM metrics and develops its own independent EACs as well. Contractor develops Long Description he contractor EAC The contrac tor develops an EAC, the IPMR documents hin a reasonable estimates of final project cost, and the Government checks of EACs? the reasonableness of contractor EACs and develops Government EACs. Predict future performance consists of analyze EAC reasonableness and develop Government independent EAC. EACs estim1lft!""~ill"'""'ll!!l!l!llllll!lrl!b~ ,. project cost contractor _._ EACs; Government EACs how does the or explain this? - Analyze EAC Reasonableness - Develop Government Independent EAC...ii I P aige 4 of 4,3 I... i 1

7 Contractor EACs Contractor management reports a range of management EACs in the IPMR. The required range of estimates is intended to allow contractor management flexibility to express multiple, justifiable final cost outcome positions. The most likely EAC is the value that the contractor's management believes is the most likely outcome based on a knowledgeable estimation of all authorized work, known factored risks, and probable future conditions. Management EACs Best Case Most Likely Worst Case CAMs also report EACs for their control accounts, subject to review by their management. Each month, these EACs are reported in the monthly IPMR Formats 1 and 2 at the WBS and Organizational Breakdown Structure (OBS ) reporting levels. The management Most Likely EAC is the official contractor EAC. Any difference between it and the EACs detailed in the WBS and OBS breakouts must be explained in Format 5 in terms of risk and opportunities and senior management knowledge of current or future contract conditions. Contractors update their EACs as necessary to reflect the latest available information, but also have regular, comprehensive EAC update cycles (annually, quarterly, etc.). The contractor Earned Value Management System (EVMS) Description describes their specific EAC process and update cycle. The Government should be aware of this update cycle and pay close attention to EAC updates.... rl~p -a_ g e S_~-~~, of iii You must select Management EACs, Best Case, Most Likely, and Worst Case to move on. )

8 Contractor EACs Contractor management reports a range of management EACs in the IPMR. The required range of estimates is intended to allow contractor management flexibility to express multiple, justifiable final cost outcome positions. The most likely EAC is the value that the contractor's management believes is the most likely outcome based on a knowledgeable estimation of all authorized work, known factored risks, and probable future conditions. Management EACs Management EACs Best Case Most Likely Worst Case The management EACs are the contractor's range of estimated costs of the authorized contractual scope. The required range of estimates is intended to allow contractor management flexibility to express multiple, justifiable final cost outcome positions. Contractors shall provide the most accurate EACs possible that include: CAMs also report EACs Contract- level assessments of factors that may affect the cost, schedule, these EACs are report and/ or technical outcome of the contractual effort Structure (OBS ) repor Consideration of known and anticipated risk areas The management Mos detailed in the WBS an Planned risk reductions; cost containment measures seniormanagementkn"&o... Contractors update their EACs as necessary to reflect the latest available information, but also have regular, comprehensive EAC update cycles (annually, quarterly, etc.). The contractor Earned Value Management System (EVMS) Description describes their specific EAC process and update cycle. The Government should be aware of this update cycle and pay close attention to EAC updates.... rl~p -a_g e S_ o~f-~~, iii You must select Management EACs, Best Case, Most Likely, and Worst Case to move on. )

9 Contractor EACs Contractor management reports a range of management EACs in the IPMR. The required range of estimates is intended to allow contractor management flexibility to express multiple, justifiable final cost outcome positions. The most likely EAC is the value that the contractor's management believes is the most likely outcome based on a knowledgeable estimation of all authorized work, known factored risks, and probable future conditions. Management EACs Best Case Best Case The best case EAC reflects the lowest potential cost to the Government. This estimate shall be based on the outcome of the most favorable set of Most Likely circumstances. If this estimate is different from the most likely management EAC, the assumptions, conditions, and methodology underlying the estimate shall Worst Case be explained in Format 5. This estimate is for informational purposes only; it is not an official company estimate. CAMs also report EACs these EA Cs a re rep o rte!!''!!!!"'l!l!!'!!,n e "!m!!'!!n o!l!!'l'!'!"'l~tl'l'"l"!! o!'!m!'!~ r!!! a s "!l""!! a'!! n!!!l"ll"!!'l!"l!l!!'!!!"l!!'ll!!!ll"!!!'!!'!,.,~ r'!! g"!! a'!! n'!!za!p.!o!'! 1!'!! 1 n!'!! a!'l"!~~'!!l!! o!'!w!'!~ n Structure (OBS ) reporting levels. The management Most Likely EAC is the official contractor EAC. Any difference between it and the EACs detailed in the WBS and OBS breakouts must be explained in Format 5 in terms of risk and opportunities and senior management knowledge of current or future contract conditions. Contractors update their EACs as necessary to reflect the latest available information, but also have regular, comprehensive EAC update cycles (annually, quarterly, etc.). The contractor Earned Value Management System (EVMS) Description describes their specific EAC process and update cycle. The Government should be aware of this update cycle and pay close attention to EAC updates.... rl~p -a_ g e S_~-~~, of iii You must select Management EACs, Best Case, Most Likely, and Worst Case to move on. )

10 Contractor EACs Contractor management reports a range of management EACs in the IPMR. The required range of estimates is intended to allow contractor management flexibility to express multiple, justifiable final cost outcome positions. The most likely EAC is the value that the contractor's management believes is the most likely outcome based on a knowledgeable estimation of all authorized work, known factored risks, and probable future conditions. Management EACs Best Case Most Likely Worst Case Most Likely The most likely EAC is the contractor's official contract EAC and takes precedence over the cost projections at the WBS level. The most likely EAC is the value that the contractor's management believes is the most probable outcome based on a knowledgeable estimation of all authorized work, known factored risks, and probable future conditions. CAMs also report EACs or,_,.e1r conlr01 accounls, suujecl LO review uy,_,.e1r managemenl. cacri mon..,,, these EACs are reported in the monthly IPMR Formats 1 and 2 at the WBS and Organizational Breakdown Structure (OBS ) reporting levels. The management Most Likely EAC is the official contractor EAC. Any difference between it and the EACs detailed in the WBS and OBS breakouts must be explained in Format 5 in terms of risk and opportunities and senior management knowledge of current or future contract conditions. Contractors update their EACs as necessary to reflect the latest available information, but also have regular, comprehensive EAC update cycles (annually, quarterly, etc.). The contractor Earned Value Management System (EVMS) Description describes their specific EAC process and update cycle. The Government should be aware of this update cycle and pay close attention to EAC updates. You must select Management EACs, Best Case, Most Likely, and Worst Case to move on.... rl~p -a_g e S_~-~~, of iii )

11 Contractor EACs Contractor management reports a range of management EACs in the IPMR. The required range of estimates is intended to allow contractor management flexibility to express multiple, justifiable final cost outcome positions. The most likely EAC is the value that the contractor's management believes is the most likely outcome based on a knowledgeable estimation of all authorized work, known factored risks, and probable future conditions. Management EACs Worst Case Best Case The worst case EAC reflects the highest expected cost to the Government. This estimate shall be based on the outcome of the least favorable set of Most Likely circumstances. I f this estimate is different from the most likely EAC, the assumptions, conditions, and methodology underlying the estimate shall be Worst Case explained in Format 5. This estimate is for informational purposes only; it is not an official company estimate. CAMs also report EACs~ these EACs are reported 1n the monthly IPMR Formats 1 and 2 at the WBS and Organizational Breakdown Structure (OBS ) reporting levels. The management Most Likely EAC is the official contractor EAC. Any difference between it and the EACs detailed in the WBS and OBS breakouts must be explained in Format 5 in terms of risk and opportunities and senior management knowledge of current or future contract conditions. Contractors update their EACs as necessary to reflect the latest available information, but also have regular, comprehensive EAC update cycles (annually, quarterly, etc.). The contractor Earned Value Management System (EVMS) Description describes their specific EAC process and update cycle. The Government should be aware of this update cycle and pay close attention to EAC updates. You must select Management EACs, Best Case, Most Likely, and Worst Case to move on.... rl~p -a_g e S_~-~~, of iii )

12 LAR EACs in Format 1 Management EACs for the Lightweight, Assault and Reconnaissance (LAR) program are displayed below. Integrated Program Management Report, Format 1 6. ESTI MATES COST AT COMPLETION Management EACs Management Est At Completion Contract Budget Base Variance a. Best Case $61, b. Worst Case $64, c. Most Likely $64, $64, $ I.I.I - Frame Suspension/ Steering Power Package Engine J Page 6 of 43,... )... <iii

13 LAR EACs in Format 1 Management EACs for the Lightweight, Assault and Reconnaissance (LAR) program are displayed below. Integrated Program Management Report, Format 1 6. ESTI MATES COST AT COMPLETION Management EACs Management Est At Completion Contract Budget Base a. Best Case b. Worst Case Long Descript ion c. Most Likely "Iii,~I i 1.1 Prin1e Vehicle Variance IPMR Format 1 displays management estimates at completion as follows: Best case is $61,915.40, Worst case is $64, , and Most likely is $64, with a contract budget base of $64, and a variance of $ The EACs are provided by the CAMs calculated from cost projections using ACWP + ETC. If this total (revised EAC) does not agree with the management most likely EAC, the difference should be explained in Format I.I.I- Frame Suspension/ Steering Power Package Engine J Page 6 of 43,... )... <iii

14 EVMlOl Fundam entals of Earned Value Managem ent Knowledge Review What are typical steps taken when predicting future performance using the Integrated Analysis Model? Select all that apply. Validate data LJ Analyze cost and schedule drivers ~ Assess EAC reasonableness ~ Develop a Government independent estimate at completion {EAC) To predict future performance using the Integrated Analysis Model, assess t he reasona bleness of the contractor's EAC and develop a Governme nt independent EAC. You validate data and analyze cost and schedule drivers when analyzing past performance.... I P ge7of 43 I... W 1

15 EVMlOl Fundam entals of Earned Value Managem ent Knowledge Review Which estimate at completion {EAC) reflects the highest expected cost to the Government, and is based on the outcome of the least favorable set of circumstances? Best case EAC LJ Most likely EAC ~ worst case EAC Check Answer The w orst case EAC reflects the highest expected cost to the Government, and is based on the outcome of the least favorable set of circumstances.... I P ge 8 of43 I... iii 1

16 In this topic, you will: Recognize the meaning of the cost performance index (CPI) and schedule performance index (SP!) Given CPI and SP! trend charts, interpret the meaning of the indexes Given sample Integrated Program Management Report (IPMR) Format 1 data, calculate the CPI, SP!, and to-complete performance index (TCP! ) Given the necessary data, calculate a formula based es timate at completion (EAC) using common performance factors Given Earned Value Management (EVM) data and trend charts, interpret if the contractor EAC appears reasonable... I P ge Qof 43 I...

17 EVMlOl Fundam entals of Earned Value Managem ent Analyze EAC Reasonableness Upon receipt of the IPMR, the Government EVM analyst should check the reasonableness of the contractor's EAC. Analyzing EAC reasonableness is done through a series of checks, including these three key comparisons: Comparing the cumulative cost performance index ( CPi cum) with the to-complete performance index (Il:e!) Comparing the cumulative cost variance (CVcum) with the variance at completion ( VAC) Generating the Government's own range of reasonable EACs and comparing them with the contractor's estimates t o answer the question " Does the contract or's most likely EAC fall within a reasonable range of EACs?' - Analyze EAC Reasonableness - Develop Government Independent EAC In addition, the Program Managemen t Office (PMO) Integrated Product Teams (IPTs) evaluate the reasonableness of the contractor's EAC by analyzing trends in EVM data. The outcomes of trend analyses inform which performance factors are used to develop the Governmen t independent EAC.... I P ge 10of43 I...

18 EVMlOl Fundam entals of Earned Value Managem ent Analyze EAC Reasonableness Upon receipt of the IPMR, the Government EVM analyst should check the reasonableness of the contractor's EAC. Analyzing EAC reasonableness is done through a series of checks, including these three key comparisons: Comparing the cu (CPicum) with th Long Description Comparing the cu To predict future performance, analyze EAC reasonableness variance at compl and develop the Government independent EAC. Focus is on analyze EAC reasonableness. Gener a ting the G ~"'rl'~'l""lllim'""''l!'~~~'!'l!l""r!' 'mm~ EACs and comparin t o answer the question " Does the contract or's most likely EAC fall within a reasonable range of EACs?' In addition, the Program Managemen t Office (PMO) Integrated Product Teams (IPTs) evaluate the reasonableness of the contractor's EAC by analyzing trends in EVM data. The outcomes of trend analyses inform which performance factors are used to develop the Governmen t independent EAC.... I P ge 10of43 I...

19 EVMlOl Fundam entals of Earned Value Managem ent Analyze EAC Reasonableness Upon receipt of the IPMR, the Government EVM analyst should check the reasonableness of the contractor's EAC. Analyzing EAC reasonableness is done through a series of checks, including these three key comparisons: Comparing the cumulative cost variance (CVcum) variance at completion (VAC) Generating the Government's own range of reason TCP! is the cost performance efficiency required EACs and comparing them with the contractor's es for the remainder of the project to reach a TCPI to answer the question " Does the contractor's mo targeted value such as an estimate at i likely EAC fall within a reasonable range of EACs?' completion or the budget at completion. In addition, the Program Management Office (PMO) Integrated Product Teams {IPTs) evaluate the reasonableness of the contractor's EAC by analyzing trends in EVM data. The outcomes of trend analyses inform which performance factors are used to develop the Government independent EAC.... I P ge10of43 I...

20 Performance Indices To check the reasonableness of the contractor's EAC, the EVM analyst or relevant PMO IPT members evaluate the EVM data used to determine the EAC. In addition to the schedule and cost variances analyzed as part of the Analyze Past Performance step of the Integrated Analysis Model, the Government must also understand how to calculate and interpret Schedule Performance Index (SPI) and CPI. iif1qlll c.ost Performance Index (CPI) I The SPI is an efficiency factor representing the relationship between the performance achieved and the initial planned schedule. The equation for calculating SPI is budgeted cost for work performed (BCWP) divided by budgeted cost for work scheduled (BCWS). SPI = BCWP / BCWS Interpreting SPI: An index of 1.00 or greater indicates that work is being accomplished at a rate on or ahead of what was planned ( favorable) An index of less than 1.00 indicates work is being accomplished at a rate below the planned schedule (unfavorable) The program manager (PM ) can establish an SPI threshold for their program to use as an early warning indicator; for example, an index of less than. 95 is used as an early warning indication of execution and should be explained. SPI always returns to 1.0 by the end of the contract. When all work is completed, BCWP = BCWS. Therefore, SPI will return to 1.0. You must select each tab to move on.... I Page 11 of 43 I...

21 Performance I ndices To check the reasonableness of the contractor's EAC, the EVM analyst or relevant PMO!PT members evaluate the EVM data used to determine the EAC. In addition to the schedule and cost variances analyzed as part of the Analyze Past Performance step of the Integrated Analysis Model, the Government must also understand how to calculate and interpret Schedule Performance Index (SP!) and CPI. I Schedule Performance Index (SPI) 183.fjlQ#ji.lj.ifil,13j@i iij3qim The CPI is an efficiency factor representing the relationship between the actual cost expended and the performance accomplished. The equation for calculating CPI is budgeted cost for work performed (BCWP) divided by actual cost of work performed ( ACWP). CPI = BCWP / ACWP Interpreting CPI: An index of 1.00 or greater indicates that work is being accomplished at a cost below what was planned ( favorable; underrun condition) An index of less than 1.00 indicates that work was accomplished at a cost greater than planned (unfavorable; overrun condition) The program manager (PM ) can establish a CPI threshold for their program to use as an early warning indicator; for example, an index of less than. 95 is used as an early warning indicator of cost increase and should be explained You must select each tab to move on.... I Page 11 of 43 I...

22 Calculating Performance Indices Let's use the data for the LAR's power package to calculate its schedule and cost performance indices. SPI SP! = BCWP / BCWS For Power Package: SP! = I SPI = 2.16 This is a favorable SP!. It indicates that more work was performed than was scheduled. CPI CPI = BCWP / ACWP For Power Package: CPI = I CPI= 1.18 This is a favorable CPI. It indicates that the work was accomplished at a cost less than what was planned. The Defense Acquisition University (DAU) EVM Gold Card provides a quick reference to EVM metrics, terminology, and formulas.... I Page 12 of 43 I...

23 Calculating Performance Indices Let's use the data for the LAR's power package to calculate its schedule and cost performance indices. Long Description SPI SP! = BCWP / BCWS Power Package, WBS 1.1.3, has BCWS of 395.5, BCWP of 853.8, ACWP of 722.1, BAC of , and EAC of For Power Package: SP! = I SPI= 2.16 T his is a favorable SP!. I t indicates that more work was performed than was scheduled. For Power Package: CPI = I CPI= 1.18 T his is a favorable CPI. I t indicates that the work was accomplished at a cost less than what was planned. T he Defense Acquisition University (DAU ) EVM Gold Card provides a quick reference to EVM metrics, terminology, and formulas.... I Page12of 43 I...

24 I nterpreting SPI and CPI Charts SPI and CPI metrics are often plotted on charts with the index value on the vertical axis and time on the horizontal axis. If you planned and executed perfectly, the SPI and CPI would be 1.0. If CPI = 1.0, this means it has cost exactly what you budgeted for the completed work. If SPI = 1.0, this means you have completed exactly the value of work that was scheduled ( without looking at the Integrated Master Schedule (IMS), you don't know if the work accomplished was the work that was scheduled to be accomplished). Whether you are looking at a chart of SPI or CPI, remember that values above 1.0 are favorable and below 1.0 are unfavorable. Review this example for a contract's SPJ SPI above 1.0 is Favorable SPI below 1.0 is Unfavorable.85 Sep Oct Nov Dec Jan Feb...illll Page 13 of 43 I _...

25 I nterpreting SPI and CPI Charts SP! and CPI metrics are often plotted on charts with the index value on the vertical axis and time on the horizontal axis. If you planned and executed perfectly, the SP! and CPI would be 1.0. If CPI = 1.0, this means it has cost exac tly what you budgeted for the completed work. If SP! = 1.0, this means you have completed exac tly the value of work that was scheduled ( without looking at the Integrated Master Schedule (IMS), you don't know if the work acco Long Description Whether you are looki favorable and below 1.0 are unfavorable. R Graph representing SP! plotted over time. The SP! from --.1 September through December is unfavorable, below 1.0. SP! 1.20 from December through February is favorable, above SPI above 1.0 is Favorable SPI below 1.0 is Unfavorable.85 Sep Oct Nov Dec Jan Feb...illll Page 13 of 43 I _...

26 Knowledge Review Using the data below, taken from the Integrated Program Management Report (IPMR), what is the cost performance index (CPI) for the Armament Work Breakdown Structure (WBS ) element? Refer to the DAU EVM Gold Card if you need a reminder for the CPI formula. ~ D o.93s D i.086 Check Answer The CPI for the Armament WBS element, using the data from the IPMR, is Recall the formula for CPI is budgeted cost for work performed (BCWP) / actual cost of work performed (ACWP). The calculation for the Armament CPI is: CPI = BCWP / ACWP CPI = I CPI = I Page14of 43 I...

27 EVMlOl Fundam entals of Earned Value Managem e nt Knowledge Review Using the data below, taken from the Integrated Program Managemen t Report {IPMR), what is the cost performance index {CPI) for the Armamen t Work Breakdown Structure {WBS) element? Refer to the DAU EVM Gold Card if you need a reminder for the CPI formula. ~ LJ D i.006 Long Description Armament, WBS 1.1.5, has BCWS of , BCWP of , ACWP of , BAC of , and EAC of Check Answer The CPI for the Armamen t was elemen t, using the data from the IPMR, is Recall the formula for CPI is budgeted cost for work performed (BCWP) / actual cost of work performed {ACWP). The calculation for the Armamen t CPI is : CPI = BCWP / ACWP CPI = / CPI = I P ge 14 of43 I...

28 Assessing EAC Reasonableness - Method 1 : Comparing CPI with TCPI T he T CPJ is the cost performance index required for all remaining work to achieve a target. You can calculate the TCPJ for various target estimates such as contractor EAC, Government EAC, or budget at completion (BAC). The TCPJ is particularly useful in comparisons with CPJcum metrics, because it can help gauge how reasonable a target estimate is compared to the actual CPI performance data. Let's use WBS element 1.2.2, Systems Engineering, to understand the application of this test of an EAC's reasonableness. WNBSb Description CPlcum TCPI um er Systems Engjneering The CPJcum, which represents historical cost performance, is This means that for every dollar spent, only 93.4 cents worth of work was completed. This is unfavorable cost performance. Yet in the future, the contractor projects a TCPJ of ; this means that for every dollar spent, dollars' worth of work will need to be performed to meet their EAC. The contractor will have to perform better in the future than they have performed to date. A mathematical difference of± 10% (0.10 ) or more may be used as an early warning indication that the contractor estimate at completion* cost could possibly be unrealistic. Jn the above example, there is a difference o f 0.10, so we could conclude that the contractor EAC for WBS element deserves further investigation to determine reasonableness. * Any EAC can be tested.... I Page1Sof 43 I...

29 Assessing EAC Reasonableness - Method 1: Comparing CPI with TC PI The TCPJ is the cost performance index required for all remaining work to achieve a target. You can calculate the TCPJ for various target estimates such as contractor EAC, Government EAC, or budget at completion (BAC). The TCPJ is particularly useful in comparisons with CPJcum metrics, because it can help gauge how reasonable a target estimate is compared to the actual CPI performance data. Let's use WBS element 1.2.2, Systems Engineering, to understand the application of this test of an EAC's reasonableness. Long Description Systems Engineering, WBS has CPI of and TCPI of The CPJcum, which represents historical cost performance, is This means that for every dollar spent, only 93.4 cents worth of work was completed. This is unfavorable cost performance. Yet in the future, the contractor projects a TCPJ of 1.034; this means that for every dollar spent, dollars' worth of work will need to be performed to meet their EAC. The contractor will have to perform better in the future than they have performed to date. A mathematical difference of± 10% (0.10) or more may be used as an early warning indication that the contractor estimate at completion* cost could possibly be unrealistic. Jn the above example, there is a difference o f 0.10, so we could conclude that the contractor EAC for WBS element deserves further investigation to determine reasonableness. * Any EAC can be tested.... I Page1S of 43 I...

30 Assessing EAC Reasonableness - Method 1: Comparing CPI w ith TC PI The TCPJ is the cost performance index required for all remaining work to achieve a target. You can calculate the TCPJ for various target estimates such as contractor EAC, Government EAC, or budget at completion (BAC). The TCPJ is particularly useful in comparisons with CPJcum metrics, because it can help gauge how reasonable a target estimate is compared to the actual CPI performance data. Let's use WBS element 1.2.2, Systems Engineering, to understand the application of this test of an EAC's reasonableness. WNBSb Description CPlcum TCPI um er Systems Engjneering The CPJcum, which represents historical cost performan< difference o f 0.10 spent, only 93.4 cents worth of work was completed. Tl future, the contractor projects a TCPJ of 1.034; this me worth of work will need to be performed to meet their E, The comparison equation is: the future than they have performed to date. (TCPJ-CPJ ) x 100 A mathematical difference of± 10% (0.10) or more may contractor estimate at completion* cost could possibly Using the data in the example, this works out as follows: Jn the above example, there is a difference o f 0.10, so v = ( ) x 100 WBS element deserves further investigation to det = (.10) x 100 = 10% * Any EAC can be tested.... I Page1Sof 43 I...

31 EVMlOl Fundam entals of Earned Value Managem ent Calculating TCPI The formula for calculating a TCP! is : TCPI (Target estim ate)= (BAC - BCWPcum )/(Ta rget estim ate - A CWPcum ) (Note: BCWPcum = cumulative BCWP; ACWPcum = cumulative ACWP) The top part of the equation (BAC - BCWPcum) represen ts the budgeted cost for work remaining (BCWR) of the original BAC. The bottom part of the equation represents the budget remaining from the target this is also known as the ETC. Using the following project information, calculate the TCP! of the EAC: Now, you fill in the formula with the relevant information. In this example, the EAC is the target estimate. TCP! (EAC) = (BAC - BCWPcum)/(EAC - ACWPcum) TCP! (EAC) = ( )/( ) TCP! (EAC) = 500/500 = 1.0 This means that the contrac tor must achieve cost performance of 1.0 for the work remaining in order to complete the work within the EAC of $ I P ge 16of43 I...

32 EVMlOl Fundam entals of Earned Value Managem ent Calculating TCPI The formula for calculating a TCP! is : TCPI (Target estimate)= (BAC - BCWPcum)/(Target estimate - ACWPcum) (Note: BCWPcum = cumulative BCWP; ACWPcum = cumulative ACWP) The top part of the e qua r ~ remaining (BCWR) of the original BAC. The t Long Description rom the target this is also known as the BWCPcum is 500, ACWPcum is 700, BAC is 1000, and EAC Using the following proj e< is ' Now, you fill in the formula with the relevant information. In this example, the EAC is the target estimate. TCP! (EAC) = (BAC - BCWPcum)/(EAC - ACWPcum) TCP! (EAC) = ( )/( ) TCP! (EAC) = 500/500 = 1.0 This means that the contractor must achieve cost performance of 1.0 for the work remaining in order to complete the work within the EAC of $ I P ge 16of43 I...

33 Knowledge Review The formula for the to- complete performance index (TCP! ) is [budget at completion (BAC) minus cumulative budgeted cost for work performed (BCWPcum)] divided by [ target minus cumulative actual cost of work performed ( ACWPcum)], or TCPI = ( BAC - BCWPcum) / ( Target - ACWPcum). Using the data below, taken from the Integrated Product Management Report (IPMR), what is the TCP! (EAC) (estimate at completion) for the Armament Work Breakdown Structure (WBS ) element? D ~ D D Check Answer The TCP! (EAC) for the Armament WBS element, using the data from the IPMR, is The calculation for the Armament TCP! (EAC) is: TCP! (EAC) = (BAC - BCWPcum) / (EAC - ACWPcum) TCP! (EAC) = ( ) / ( ) TCP! (EAC) = I Page17of 43 I...

34 Knowledge Review The formula for the to- complete performance index (TCP! ) is [budget at completion (BAC) minus cumulative budgeted cost for work performed (BCWPcum)] divided by [ target minus cumulative actual cost of work performed ( ACWPcum)], or TCPI = ( BAC - BCWPcum) / (Target - ACWPcum). Using the data below, taken from the Integrated Product Management Report (IPMR), what is the TCP! (EAC) (estimate at completion) for the Armament Work Breakdown Structure (WBS ) element? D Long Description ~ Armament, WBS 1.1.5, has BCWS of , BCWP of , ACWP of , BAC of , and EAC of D D Check Answer The TCP! (EAC) for the Armament WBS element, using the data from the IPMR, is The calculation for the Armament TCP! (EAC) is: TCP! (EAC) = (BAC - BCWPcum) / (EAC - ACWPcum) TCP! (EAC) = ( ) / ( ) TCP! (EAC) = I Page17of 43 I...

35 Example Comparing CPI with TCPI Graphed The CPI vs. TCPI metric can be graphed as a chart. This chart is popular because it produces dramatic and easily interpreted lines. When CPI and TCPI differ significantly, it can be a red flag that the EAC may not be reasonable, or may not have been updated to reflect recent trends. This graph visually represents the 1.09 findings we just learned about for 1.08 WBS element TCPI = ~ difference t::=- between the TCPI 0.99 and CPI metrics 0.98 This is the cost 0.97 performance to date CPI = ~ 0.91 Sep Oct Nov Dec Jan Feb... I Page18of 43 I...

36 Example Comparing CPI with TCPI Graphed The CPI vs. TCPI metric can be graphed as a chart. This chart is popular because it produces dramatic and easily interpreted lines. When CPI and TCPI differ significantly, it can be a red flag that the EAC may not be reasonable, or may not have been updated to reflect recent trends. This graph visually repr;e;;: s::; e.:,: n,:;~~e ts th :;_.1.:1~.0 :;:;9::.L !!!!!!!!!!!! findings we just learne WBS element Long Description TCPI and CPI graphed over time from September through November. CPI is and TCPI is TCPI is the cost performance required to meet EAC. CPI is the cost performance to date. There is a 0.10 difference between the TCPI and CPI metrics. " ,...,i ,...,...~nc e t::=- between the TCPI 0.99 and CPI metrics 0.98 This is the cost 0.97 performance to date CPI = ~ 0.91 Sep Oct Nov Dec Jan Feb... I Page18of 43 I...

37 Knowledge Review Review the graph comparing the cost performance index ( CPI ) with the to-complete performance index (TCP!) of the contractor's estimate at completion (EAC). Assume a mathematical difference of± 10% (0.10) or more may be used as an early warning indication that the contractor's estimate at completion cost could possibly be unrealistic. What might you say about the contractor's EAC? ~ The contractor's EAC is 0.92 reasonable D The contractor's EAC is not reasonable. Check Answer TCPI = CPI = The contractor's EAC is reasonable. The CPI to TCP! comparison shows a difference of 4.6%, which is within the program manager's ± 10% threshold. However, you can see that the TCP! and CPI lines are getting farther apart which means the contractor's EAC is becoming less reasonable over time.... I Page 19of 43 I...

38 Knowledge Review Review the graph comparing the cost performance index ( CPI ) with the to-complete performance index (TCP!) of the contractor's estimate at completion (EAC). Assume a mathematical difference of± 10% (0.10 ) or more may be used as an early warning indication that the contractor's estimate at completion cost could possibly be unrealistic. What might you say about the contractor's EAC? ~ The contract reasonable. Long Description Graph displaying TCP! and CPI plotted over time from September through December. December TCP! value is D The contract and CPI value is notreasonab1..,...,'!!!!!""..."""...""" TCPI = CPI = Check Answer The contractor's EAC is reasonable. The CPI to TCP! comparison shows a difference of 4.6%, which is within the program manager's ± 10% threshold. However, you can see that the TCP! and CPI lines are getting farther apart which means the contractor's EAC is becoming less reasonable over time.... I Page19of 43 I...

39 Assessing EAC Reasonableness - Method 2 : Comparing CVcum with VAC The reasonableness of the contrac tor's EAC can also be assessed by comparing the CVcum with the contrac tor's projected VAC, presented either in dollars or as a percentage. Recognize that the VAC is a way of representing the contrac tor's EAC in relation to the BAC, since the formula is: VAC = BAC - EAC. Let's use WBS element , Cooling System, to understand the application of this second test of the reasonableness of an EAC. - WNBSb um er Description CPI TCPI Cooling I System In this example, the CVcum is - $101. 7, which is an unfavorable CV indicating a cost overrun. Ye t the contrac tor is forecasting a VAC of +$21.6, which is an underrun at completion. This means the contrac tor will have to recover from the unfavorable CVcum and improve performance in order to achieve this VAC. The comparison of the percentages more clearly shows the magnitude of the difference. The CVcum % is - 28%, which means this is a significantly unfavorable cost variance for the Cooling System WBS element. Ye t the contrac tor VAC % is +1%. This is a 29% difference, so the contrac tor must improve significantly in the future to achieve their EAC. Based on this significant difference, the Government may conclude that the contrac tor's VAC is unreasonable. Note also that the T CP! (EAC) and CPI differ significantly, confirming that the contrac tor's EAC appears unreasonable. The question to ask is: "How does t he cont ractor expect to improve performance so much in t he fut ure?"... I Page20of 43 I....Q

40 Assessing EAC Reasonableness - Method 2: Comparing CVcum with VAC The reasonableness of the contractor's EAC can also be assessed by comparing the CVcum with the contractor's projected VAC, presented either in dollars or as a percentage. Recognize that the VAC is a way of representing the contractor's EAC in relation to the BAC, since the formula is: VAC = BAC - EAC. Let's use WBS element i.i second test of the reasonableness of an Long Description Data for Cooling System, WBS , is as follows: CPI is O. 780, TCP! is 1.067, CVcum in dollars is , CVcum percentage is - 28, VAC in dollars is 21.6, and VAC percentage is 1. In this example, the CVcum is - $101. 7, which is an unfavorable CV indicating a cost overrun. Yet the contractor is forecasting a VAC of +$21.6, which is an underrun at completion. This means the contractor will have to recover from the unfavorable CVcum and improve performance in order to achieve this VAC. The comparison of the percentages more clearly shows the magnitude of the difference. The CVcum % is - 28%, which means this is a significantly unfavorable cost variance for the Cooling System WBS element. Yet the contractor VAC % is +1%. This is a 29% difference, so the contractor must improve significantly in the future to achieve their EAC. Based on this significant difference, the Government may conclude that the contractor's VAC is unreasonable. Note also that the TCP! (EAC) and CPI differ significantly, confirming that the contractor's EAC appears unreasonable. The question to ask is: "How does t he cont ractor expect to improve performance so much in t he fut ure?"... I Page20of 43 I....Q

41 Assessing EAC Reasonableness - Method 2: Comparing CVcum with VAC The reasonableness of the contractor's EAC can also be assessed by comparing the CVcum with the contractor's projected VAC, presented either in dollars or as a percentage. Recognize that the VAC is a way o in dollars or as a percentage formula is: VAC = BAC - EAC. Examining variances both in dollars and as percentages provides a Let's use WBS element , c clearer view of the degree of the variance and its potential the reasonableness of an EAC. influence on the contract. While the dollar value of a CV may WBS D.. seem small in comparison to the dollar value of its budget, the escnpti Number percentage of the variance shows the magnitude of the CV 1 compared to its budget Cooling"'" System In this example, the CVcum is - $ 101.7, which is an unfavorable CV indicating a cost overrun. Yet the contractor is forecasting a VAC of +$21.6, which is an underrun at completion. This means the contractor will have to recover from the unfavorable CVcum and improve performance in order to achieve this VAC. The comparison of the percentages more clearly shows the magnitude of the difference. The CVcum % is -28%, which means this is a significantly unfavorable cost variance for the Cooling System WBS element. Yet the contractor VAC % is +1%. This is a 29% difference, so the contractor must improve significantly in the future to achieve their EAC. Based on this significant difference, the Government may conclude that the contractor's VAC is unreasonable. Note also that the TCP! (EAC) and CPI differ significantly, confirming that the contractor's EAC appears unreasonable. The question to ask is: "How does t he cont ractor expect to improve performance so much in t he future?"... I Page20of43 I....Q

42 EVMlOl Fundam entals of Earned Value Managem ent Graphing CV and VAC Notice that the VAC for both the contractor and Government are plotted as points on this graph at the end of the contract period of performance. Dollars are on the vertical axis, and time is on the horizontal axis. When plotting cost (and schedule) variance trends in dollars, the 0.0 value 15 on the horizontal axis represents meeting the plan (0 variance from the plan). Anything above o is a favorable variance; anything below o is an unfavorable variance. This chart makes it visually clear that the contractor is projecting a favorable VAC, as it shows up in the area of -;;; c E c =!!!.!l! Contractor's VAC... Favorable favorable performance (above 0.0.). The Gov ernment VAC, on the other hand, is -15 Unfavorable in the unfavorable range (below O). 0.s Government's VAC ' 1001' = End of Cost Variance Contract... I P ge21of43 I...

43 EVMlOl Fundam entals of Earned Value Managem ent Graphing CV and VAC Notice that the VAC for both the contractor and Government are plotted as points on this graph at the end of the contract period of performance. Dollars are on the vertical axis, and time is on the horizontal axis. When plotting cost (a r variance trends in doli; Lo ng Descri ption on the horizontal axis I meeting the plan (0 va above zero is favorable and variance below zero is : ' plan). Anything above unfavorable. Four data points, in chronological order are unfavorable variance. 0.2, O,.25, and The contractor's VAC is approximately 0.6 and the Government's VAC is approximately This chart makes it vis t he contractor is proj ect1ng a tavoradle VAC, as it shows up in the area of.!l! favorable performance (above 0.0. ). The 0 variance; anything be1, - Cost variance is displayed in dollars in millions. Variance ntractor's!!! 0-10 \ ~ I-Favorable Government VAC, on the other hand, is -15 I-Unfavorable in the unfavorable range (below 0 )..20 ~ Government's ""' VAC ' "' End of Cost Variance Contract... I P ge21of43 I...

44 Lesson Predicti ng Future Performance Graphi ng CV and VAC, Cont. The contractor's VAC and the Government's VAC are significantly different, indicating vastly different assumptions about how efficiently work in the future will be perfonned. The solid green line represents i , the historical cost variance trend, which has become unfavorable. 1.5 The green dashed line shows that the Government VAC reflects a.5 continuation of the unfavorable. " CV cum trend over time. 1.0 ~. The dotted green line shows that the ;3. unfavorable CVcum trend over time would have to suddenly and dramatically change course to a ~ ' ' ' favorable trend if the contractor VAC ' ' is to be believed.... ' '... History with Department of Defense (DoD) programs has shown that such a dramatic change in the CVcum is lo.rj--..,.,.., ,2"'0"" VAC -,. Government's', 01~5--"~ nd of 14,---"'"-~2~ E.., very unlikely, which means the Contract contractor's VAC is probably Cost Variance unreasonable. ~ I Pagellof43 I ~

45 Graphing CV and VAC, Cont. The contractor's VAC and the Government's VAC are significantly different, indicating vastly different assumptions about how efficiently work in the future will be performed. The solid green line represents 2.0~ ~ the historical cost variance trend, which has become unfavorable _""'..-ends on this ndicate that The green dash Long Descript ion performance Government VA mprove over cal performance continuation of Cost variance is displayed in dollars in millions. Four historical data points, ~t the CVcum trend ov in chronological order are -0.2, O,.25, and The contractor's VAC is ctor's projected approximately 0.6 and the Government's VAC is approximately The dotted gree Future data points represent the contractor's projected VAC. Additional unfavorable eve future data points represent the Government's projected VAC. The trends would have to s on this chart indicate that future performance must improve over historical dramatically cha performance to meet the contractor's projected VAC. favorable trend iil'"!!l"l'l!' """m!~"'"""t'e'---, ~ "i"---' is to be believed..2.0 ', ' History with Department of Defense ' ' (DoD ) programs has shown that such a dramatic change in the CVcum is very unlikely, which means the contractor's VAC is probably unreasonable.. 1 o. ol--=----=-_,v,,a Cost Variance 2014 Government's ', c_~~ -~ _.~._, End of Contract... I Page22of 43 I...

46 lesson Predicting Future Performance RESOURCES I PRINT 1 HELP Knowledge Review Review the graph depicting the contractor's cost variance and schedule variance trends along with the contractor's variance at completion {VAC). Based on the graph, does the contractor's VAC, and therefore the estimate at completion {EAC) used to calculate the VAC, appear reasonable? Yes. The contractor's VAC appears reasonable../ No. The contractor's VAC appears unreasonable. Check Answer z.o uist and Schecl!Ae Variance! u 1.0 " '.z.o I\ \... ~ \... '\.... \....JD... U <ID ""' \... \ IZ.O... IZ.O Vanance... Cost VananceI JUi \ IZ.0 HS m MIUions......'. '.. I I ~!Contraclllf s VAC No. The cont ractor's VAC a ppears unreasonable. Given the negative trend of cost variance, it appears unreasonable and merits further investigation.... I Page23of43 I...

47 EVMlOl Fundam entals of Earned Value Managem ent Knowledge Review... ICOst and Schedule Variance! Review the graph depicbng the contractor's cost... v ariance and schedule v ariance trends along with the u contractor's varianc e at completion (VAC}. Based on the graph, does the contractor's VAC, and therefore ' the estimate at compleb on (EAC) used to calculate the VAC, appear reasonable? 4J) Yes. The contra Long Description VAC appears rea ~ No. The contrac appears unreaso 1.0 ~ 0 ~ 1.0 U 4.5-3D.. \ \ Cost and Schedule Variance in millions of dollars plotted over time from 2013 through Four data points for schedule variance, in chronological order, are: - 2.9, 6.25, -6.25, and Four data points for cost variance, in chronological order, are 0, - 4.1, -9.5, and The contract or's VAC is \ Check Answ er... '-I$ in Ml ions W l&.o... l&.5 \ l6.0 Cost Variance I ' ariance ICoubactor"s VN:, ' " ' '. ' " No. The contractor 's VAC appears unreaso na ble. Given the negative trend of cost variance, it appears unreasonable and merits further investigation.... I P ge23 of 43 I...

48 Assessing EAC Reasonableness - Method 3 : Calculating Formula-based EACs Recall that EAC is the sum of ACWPcum plus the estimate for the cost of remaining work (ETC), or EAC = ACWPcum + ETC. T wo versions of the basic EAC formula are depicted below. In the second version of the formula, ETC is expressed as (BAC - BCWPcum)/performance factor (PF ). The expressions within the red box represent the same thing: the estimated cost of the remaining work. The second version of the formula allows you to use data from the IPMR ( ACWPcum, BAC, BCWPcum), and a performance factor to develop an EAC. Basic EAC Formula: EAC = ACWPcum + ETC EAC = ACWPcum + [(BAC - BCWPcum) / PF] In the formula above, the (BAC - BCWPcum) portion represents the BCWR. BAC is the original budget allocated for the effort, and BCWPcum represents work that has been completed. Thus, BCWR = BAC - BCWPcum. Dividing the BCWR by a PF creates a new estimate for the remaining work, one that has been adjusted to reflect the chosen PF. Thus, choosing an appropriate PF is an important decision that must include inputs from a team of analysts that could include EVM analysts, schedule analysts, cost estimators, and engineers. Examples of typical PFs are CPi cum and cumulative CPI x SPI ( CPi cum x SPi cum) but there are other possibilities as well. For instance, you could choose CPI for a shorter period of time, such as the last 3 or 6 months. EVM analysts can provide these types of metrics and trend charts to help the IPT choose a performance factor.... I Page 24of 43 I...

49 Assessing EAC Reasonableness - Method 3 : Calculating Formula-based EACs Recall that EAC is the sum of ACWPcum plus the estimate for the cost of remaining work (ETC), or EAC = ACWPcum + ETC. T wo versions of the basic EAC formula are depicted below. In the second version of the formula, ETC is expressed as (BAC - BCWPcum)/performance factor (PF ). The expressions within the red box represent the same thing: the estimated cost of the remaining work. The second version of the formula allows you to use data from the I develop an EAC. Long Description Basic EAC formula is EAC = ACWP + ETC. To calculate ETC, subtract BCWP from BAC and divide the difference by a performance factor. 1 ' ' I In the formula above, the (BAC - BCWPcum) portion represents the BCWR. BAC is the original budget allocated for the effort, and BCWPcum represents work that has been completed. Thus, BCWR = BAC - BCWPcum. Dividing the BCWR by a PF creates a new estimate for the remaining work, one that has been adjusted to reflect the chosen PF. Thus, choosing an appropriate PF is an important decision that must include inputs from a team of analysts that could include EVM analysts, schedule analysts, cost estimators, and engineers. Examples of typical PFs are CPi cum and cumulative CPI x SPI ( CPi cum x SPi cum) but there are other possibilities as well. For instance, you could choose CPI for a shorter period of time, such as the last 3 or 6 months. EVM analysts can provide these types of metrics and trend charts to help the IPT choose a performance factor.... I Page24of 43 I...

50 Calculating a Range for Reasonable EACs Formula-based EACs are good ways of generating a quick range within which reasonable EACs should fall. Below are two formula-based EACs for the LAR Engine WBS element. The data to fill the formula are obtained from the JPMR, with ACWPcum, BAC, and BCWPcum coming directly from the JPMR. The only difference in the formulas is the PF used. The analyst must develop the PF, but again can use the data in the JPMR to do so. These formulas below are commonly used to provide a range of reasonable EA Cs : Optimistic EAC- Historical studies have shown that using CPJcum as the PF generally produces an optimistic estimate Pessimistic EAC- Historical studies have shown that using CPJcum x SPJcum as the PF generally produces a pessimistic estimate EAC = ACWPcum + [(BAC-BCWPcum) / EAC = ACWPcum + [(BAC-BCWPcum) / CPicum) (CPicum x SPicum)) EAC = [( )/0.922) EAC = [1000.1/ 0.922) EAC = EAC = EAC = [( )/(0.922 x 0.962)) EAC = [ I 0.887) EAC = EAC = illll Page 25 of 43 I _...

51 Calculating a Range for Reasonable EACs Formula- based EACs are good ways of generating a quick range within which reasonable EACs should fall. Below are two f'a--'"--"---"""'-'-''--"'""'--'""'-' - -' _._.,... formula are obtained from th Historical studies MR. T he only difference in the n use the data in the JPMR to do s Christensen, David ( 1999, Summer). Using the Earned Value Cost Management Report t o Ev aluate the Contractor's Estimate At T hese formulas Completion. Acquisition Review Quarterly 19:283:296. Op timistic EAC- Historical studies have shown that using CPJcum as the PF generally produces an optimistic estimate EAC = ACWPcum + [(BAC- BCWPcum) / CPicum) EAC = [( )/0.922) EAC = [ / 0.922) EAC = EAC = Pessimistic EAC- Historical studies have shown that using CPJcum x SPJcum as the PF generally produces a pessimistic estimate EAC = ACWPcum + [(BAC- BCWPcum) / (CPicum x SPicum)) EAC = [( )/(0.922 x 0.962)) EAC = [ I 0.887) EAC = EAC = illll Page 25 of 43 I _...

52 Calculating a Range for Reasonable EACs Formula- based EACs are good ways of generating a quick range within which reasonable EACs should fall. Below are two f'a--'"--"---"""'-'-''--"'""'--'""'-' - -' _._.,... formula are obtained from th Historical studies MR. T he only difference in the n use the data in the JPMR to do s Christensen, David ( 1999, Summer). Using the Earned Value Cost Management Report t o Ev aluate the Contractor's Estimate At T hese formulas Completion. Acquisition Review Quarterly 19:283:296. Op timistic EAC- Historical studies have shown that using CPJcum as the PF generally produces an optimistic estimate EAC = ACWPcum + [(BAC- BCWPcum) / CPicum) EAC = [( )/0.922) EAC = [ / 0.922) EAC = EAC = Pessimistic EAC- Historical studies have shown that using CPJcum x SPJcum as the PF generally produces a pessimistic estimate EAC = ACWPcum + [(BAC- BCWPcum) / (CPicum x SPicum)) EAC = [( )/(0.922 x 0.962)) EAC = [ I 0.887) EAC = EAC = illll Page 25 of 43 I _...

53 Calculating a Range for Reasonable EACs Formula-based EACs are good ways of generating a quick range within which reasonable EACs should fall. Below are two formula-based EACs for the LAR Engine WBS element. The data to fill the formula are obtained from the JPMR, with ACWPcum, BAC, and BCWPcum coming directly from the JPMR. The only difference in the formulas is the PF used. The analyst must develop the PF, but again can use the data in the JPMR to do so. These formulas below, Long De script ion Optimistic EAC- Histori that using CPJcum as t an optimistic estimate WBS element , Engine, has a BCWScum of , a BCWPcum of , a ACWPcum of , a BAC of , a CPI of 0.922, and an SPI of ave shown that nerally produces a EAC = ACWPcum + [(BAC-BCWPcum) / EAC = ACWPcum + [(BAC-BCWPcum) / CPicum) (CPicum x SPicum)) EAC = [( )/0.922) EAC = [ / 0.922) EAC = EAC = EAC = [( )/(0.922 x 0.962)) EAC = [ I 0.887) EAC = EAC = illll Page 25 of 43 I _...

54 EVMlOl Fundam entals of Earned Value Managem ent Comparing Contractor EACs with a Range of Formula-based EACs Using the optimistic and pessimistic fonnula-generated EACs, the Government can establish a range of estimates, shown here graphically. The intent for establishing and graphing the range of estimates is to answer the question ooes the contractor's EAC fall within a range of reasonable EAes? The further into the future.... the greater the uncertainty "' 6.5 c 6.0 ~ 5.5 :i r! l.5 ~ 2.5 l.o _, Time Now Contract Completion If the contractor's EAC falls outside the range of calculated EACs, the Government should investigate why. Format 5 provides some insight into the rationale for the contractor's EAC, so that is a starting point. While the IPMRs provide a standard way to communicate abou t the program, they don't provide all the answers.... I P ge26of 43 I....!2

55 Comparing Contractor EACs w ith a Range of Formula-based EACs Using the optimistic and pessimistic formula-generated EACs, the Government can establish a range of estimates, shown here graphically. The intent for establishing and graphing the range of estimates is to answer the question "Does the contractor's EAC fall within a range of reasonable EACs?". Tl..- f, ~L. - o the future,! uncertai nty Long Descript ion 8.5 ~- 8.0 f to--- EACs are graphed as follows, pessimistic is $7.5 M, EAC is 7.0 $6.4M and optimistic is $5. 7M. The further into the future, the greater the uncertainty ' I I ' I ' 4.0 ' ' / ' - - I ' I ' ' ' I I I I I I I I ' ' ' Time Now Contract Completion If the contractor's EAC falls outside the range of calculated EACs, the Government should investigate why. Format 5 provides some insight into the rationale for the contractor's EAC, so that is a starting point. While the JPMRs provide a standard way to communicate about the program, they don't provide all the answers..q... I Page26of 43 I... I I I I I I I I I I I I I I I 1

56 EVMlOl Fundam entals of Earned Value Managem ent Knowledge Review Which of the following are quick checks the Government can perform to assess the reasonableness of a contractor's estimate at completion (EAC)? Select all that apply. ~ Compare cost performance index (CPI) with to-complete cos t per formance index (TCP! ) ~ Compare cumulative cost variance (CVcum) with variance at completion ( VAC) ~ Compare contract or EAC against range of Government generated EACs Compare schedule v ariance (SV) with cost variance (CV) Check Answer Co mparing CPI wit h TCPI, CVcum w it h VAC, a nd co nt ractor EA C agai nst a range of Governme nt- generat ed EACs are all quick checks the Government can perform to assess the reasonableness of a contrac tor's EAC.... I P ge 27of43 I

57 Knowledge Review The formula for calculating estimate at completion (EAC) using the cumulative cost performance index ( CPi cum) is: cumulative actual cost of work performed ( ACWPcum) plus [budget at completion (BAC) minus cumulative budgeted cost for work performed (BCWPcum)] divided by CPi cum, or EAC = ACWPcum + [(BAC - BCWPcum) / CPicum]. Using the data below taken from the Integrated Program Management Report (IPMR), calculate the EAC using CPI for the Armament Work Breakdown Structure (WBS ) element. D 3454.o D ~ D Check Answer The EAC using CPI for the Armament WBS element is The calculation for the Armament EAC is: EAC = ACWPcum + [(BAC - BCWPcum) / CPi cum) EAC = [( ) I 0.861) EAC = [1011 I 0.861) EAC = EAC = I Page28of 43 I...

58 Knowledge Review The formula for calculating estimate at completion (EAC) using the cumulative cost performance index ( CPi cum) is: cumulative actual cost of work performed ( ACWPcum) plus [budget at completion (BAC) minus cumulative budgeted cost for work performed (BCWPcum)] divided by CPi cum, or EAC = ACWPcum + [(BAC - BCWPcum) / CPicum]. Using the data below taken from the Integrated Program Management Report (IPMR), calculate the EAC using CPI for the Armament Work Breakdown Structure (WBS) element. D 3454.o D ~ D Long Description Armament, WBS 1.1.5, has BCWS of , BCWP of , ACWP of , BAC of , and CPI of Check Answer The EAC using CPI for the Armament WBS element is The calculation for the Armament EAC is: EAC = ACWPcum + [(BAC - BCWPcum) / CPi cum) EAC = [( ) I 0.861) EAC = [10 11 I 0.861) EAC = EAC = I Page28of 43 I...

59 Knowledge Review The formula for calculating estimate at completion (EAC) using cumulative cost performance index ( CP!cum) multiplied by cumulative schedule performance index ( SP!cum) is: cumulative actual cost of work performed ( ACWPcum) plus [budget at completion (BAC) minus cumulative budgeted cost for work performed (BCWPcum)] divided by ( CP!cum x SP!cum), or EAC = ACWPcum + [(BAC-BCWPcum)/ (CPicum x SPicum)]. Using the data below taken from the Integrated Program Management Report (IPMR), calculate the EAC using CP!cum x SP!cum for the Armament Work Breakdown Structure (WBS ) element. D D D ~ Check Answer The EAC using CPI x SP! for the Armament WBS element is The calculation for the Armament EAC is: EAC = ACWPcum + [(BAC- BCWPcum)/(CPi cum x SP!cum)] EAC = [( ) I (0.861 x 0.921)) EAC = [ 1011 I ) EAC = EAC = I Page29of 43 I...

60 Knowledge Review The formula for calculating estimate at completion (EAC) using cumulative cost performance index ( CP!cum) multiplied by cumulative schedule performance index (SP!cum) is: cumulative actual cost of work performed ( ACWPcum) plus [budget at completion (BAC) minus cumulative budgeted cost for work performed (BCWPcum)] divided by ( CP!cum x SP!cum), or EAC = ACWPcum + [(BAC-BCWPcum)/ (CPicum x SPicum)]. Using the data below taken from the Integrated Program Management Report (IPMR), calculate the EAC using CP!cum x SP!cum Long Description Armament, WBS 1.1.5, has BCWS of , BCWP of , ACWP of , BAC of , CPI of 0.861, D D D and SP! of ~ Check Answer The EAC using CPI x SP! for the Armament WBS element is The calculation for the Armament EAC is: EAC = ACWPcum + [(BAC- BCWPcum)/(CPi cum x SP!cum)] EAC = [( ) I ( x 0.921)) EAC = [ 1011 I ) EAC = EAC = I Page29of 43 I...

61 Knowledge Review Review the graph showing the contractor's estimate at completion (EAC) for the Armament Work Breakdown Structure (WBS ) element, along with the optimistic (best case) and pessimistic (worst case) EACs. Based on the graph, is the contractor's EAC reasonable? Pessimistic EAC: (/) s.so1-,_!:!:1:!:!:1t:!::1:!:!:1:!:!:1t:!::1:!:!:1:!:!:1t:!::1:!:!:1:!:!:1~ lij ~ 4.25.g c: 3.25 j :c ij s. 25 ~±:J:±tit±±t:t±t:t±ti±ti:±±t±±t:t±t:t±r Contractor's EAC: ~ Yes. The contractor's ~ 4.00 EAC is reasonable. Optimistic EAC: ~ 3.75 D No. The contractor's EAC is unreasonable..e 2.so,_,_+-+,...+-+> > ~ (/) '1-++-ll-++-IH+-H-+-+-l-+-+-l-++-ll-++-IH+-H-H (ij 2.0CIH-< H> H> ~ = l l ih+-h-+-+-l-+-+-l-++-ll-++-ih+-h-h 8 lsoh> > > ~ Time Now Contract Completion Check Answer Select to enlarge the graohic. Yes. The contractor 's EAC is reason able. The contractor's estimate falls between the Government's pessimistic and optimistic EACs.... I Page30of 43 I...

62 Knowledge Review Review the graph showing the contrac tor's estimate at completion (EAC) for the Armamen t Work Breakdown Structure (WBS) element, along with the optimistic (best case) and pessimistic (worst case) EACs. Based on the graph, is the contrac tor's EAC reasonable? Long Description Yes. The contra Pessimistic EAC is $4536.6, Con trac tor's EAC is $4435.9, EAC is reasonabl and Optimistic EAC is $ c: J.25 D No. The contrac tor's j 3.00 EAC is unreasonable. :c "O ~~~~~~~~~~~~~~~~~~~~~~.E 2.soH-+-+,...+-+> > ~ (/') 2.25H-?-"l-++-ll-++-IH+-H+-+-l-++-l-++-ll-++-ll-++-H-H (ij 2.0CIH-< H> H> ~ = l l-++-ll-++-ih+-h+-+-l-++-l ll-++-h-h 8 l50h> h> h> ~ 1.25 Check Answer Time Now Contract Completion Select to enlarge the graohic. Yes. The contractor's EAC is reasonable. The contrac tor's estimate falls between the Government's pessimistic and optimistic EACs.... I Page30 of 43 I...

63 EVMlOl Fundam entals of Earned Value Managem ent Types of EVM Data Trends To help with the decision about which PF to possibly use in developing an EAC, the following information can be useful: SPI trends CPI trends Schedule variance (SV) trends Cost variance (CV) trends Schedule Risk Assessment (SRA) results The question an analyst trying to develop an EAC must answer is: Which EVM indices best represent the anticipated future trend and might therefore be useful to include in a PF for developing an EAC? Answering this requires knowledge of technical and schedule performance to date, remaining work, and risks ahead.... I P gellof43 I...

64 Interpreting SPI Trend Charts An SPJ trend chart shows the SPJ plotted over time, allowing trends to be identified that might be useful for projections of future trends. The 1.0 line represents performance in accordance with plan. The networked schedule needs to be examined, in addition to EVM metrics, for a more complete interpretation of contrac t health. One thing to keep in mind when using SPJ is that it will equal 1.0 at contrac t completion since BCWS and BCWP are equal when all work is complete. Favorable Unfavorable Cumulative vs. Current 6-month Favorable SPJ trends indicate that more work is being performed than anticipated during a given schedule period. The SPJcum is showing an increasingly favorable trend over the nine months shown SPI cum !. 1 *if!.is 1 ijl i.l, M 1 L f,!.#ff.miffigf!.jfoijifi.i,::i!.lf+.90 Sep Oct Nov Dec Jan Feb Mar Apr May -- SPlcum... j Page32of 43 j... You must select each!!

65 I nterpreting SPI Trend Charts An SPJ trend chart shows the SPJ plotted over time, allowing trends to be identified that might be useful for projections of future trends. The 1.0 line represents performance in accordance with plan. The networked schedule needs to be examined, in addition to EVM metrics, for a more complete interpretation of contract health. One thing to keep in mind when using SPJ is that it will equal 1.0 at contract completion since BCWS and BCWP are equal when all work is complete. Favorable Unfavorable Cumulative vs. Current 6-month This SPJcum trend chart shows a trend of increasingly unfavorable schedule performance over time. This means that 1.20 less work is being performed than 1.15 planned, and that the trend is 1.10 increasingly unfavorable Like schedule variance, unfavorable SPJ 1.00 metrics may or may not indicate a late delivery at contract end. That can only be determined by reviewing the network schedule. Schedule performance can be a leading indicator for future cost problems. When efforts fall behind schedule, contractors may apply additional resources or work overtime to recover schedule. SPI cum h.!.6! 1 1 &6 ifiij5#!.l. H1 1 v 0.95 's'ij# h H ' ' Sep Oct Nov Dec Jan Feb Mar Apr May -- SPl cum... \ Page32of 43 \... You must select each tab to move on.!!

66 I nterpreting SPI Trend Charts An SPJ trend chart shows the SPJ plotted over time, allowing trends to be identified that might be useful for projections of future trends. The 1.0 line represents performance in accordance with plan. The networked schedule needs to be examined, in addition to EVM metrics, for a more complete interpretation of contrac t health. One thing to keep in mind when using SPJ is that it will equal 1.0 at contrac t completion since BCWS and BCWP are equal when all work is complete. I Favorable lunfavorablei311,hiilfiiiiijifff311ii rlll 6-month Current period SPJ (SPJcur) metrics can change drastically from month to 1.20 month, creating an erratic data set from which it is difficult to determine a 1.15 I \,.p; 0 1 /\ rmmmr1 ::111 8 I \ trend. I I 1.10, \ SPJcum metrics "smooth out" SPJ data, I \ 1.05 I \ ' I \ I I making cumulative SPI more useful for I ' I \ I I I ' I I trend analysis and projections.,' ' I I -1, I 1.00 Although SPJcur has limited usefulness / ' 1 \ I \ I for trend projections due to its volatile \/ \. I nature, tracking current period data 0 90 can help you spot a significant change )1! '9' '"s% 'r'15!.i"'i!.!ii from the prior month and could be 0.85 Sep Oct Nov Dec Jan Feb Mar Apr May indicative of emerging problems. Analysts should understand the causes - - SPI cur --SPlcum of large spikes in the SPJcur. ~ ~ You must select each tab to move on.!!... j Page32of 43 j... I

67 I nterpreting SPI Trend Charts An SPJ trend chart shows the SPJ plotted over time, allowing trends to be identified that might be useful for projections of future trends. The 1.0 line represents performance in accordance with plan. The networked schedule needs to be examined, in addition to EVM metrics, for a more complete interpretation of contract health. One thing to keep in mind when using SPJ is that it will equal 1.0 at contract completion since BCWS and BCWP are equal when all work is complete. Favorable Unfavorable Cumulative vs. Current 6-month Jn this chart, the SPJcum trend line is plotted,~ ~ along with a line of the SPJ data averaged over 6 months p!.!.!!!8 * -ldm r '" A 6-month average SPJ trend line shows recent trends that could be indicative of emerging problem areas Jn the chart, the 6-month average SPJ line shows that the SPJ performance has been 0.95 deteriorating more rapidly recently. The SPJcum has smoothed this out somewhat ~~~~!!::.,-,_=-=:::::::1::::::~::~~ 0.90 l.:-~,,~,~ ~, m;;;~.. ~b~!i~m~;~@~ ~ lr~::~h~ l ~il 0.85 ~ Sep Oct Nov Dec Jan Feb Mar Apr May. SPI cum -+-6-month SPI... I Page32of 43 I... You must select each tab to move on.!!

68 Interpreting SPI Trend Charts An SPJ trend chart shows the SPJ plotted over time, allowing trends to be identified that might be useful for projections of future trends. The 1.0 line represents performance in accordance with plan. The networked schedule needs to be examined, in addition to EVM metrics, for a more complete interpretation of contract health. One thing to keep in mind when using SPJ is that it will equal 1.0 at contract completion since BCWS and BCWP are equal when all work is complete. ~ Long Descript ion Graph representing a favorable SPI cum performance trend over time from September through May. Above 1.0 =Favorable Performance. Below 1.0 =Unfavorable Performance. Graph representing an unfavorable SPI cum performance trend over time from September through May. Above 1.0 =Favorable Performance. Below 1.0 =Unfavorable Performance. Graph representing SPJcum and SPJcur performance trends over time from September through May. The SPJcur trend varies sharply from month to month from favorable to unfavorable performance. The SPJcum trends just below 1.0 with much less variation. Above 1.0 = Favorable Performance. Below 1.0 = Unfavorable Performance. Graph representing SPJcum and 6-month SPI performance trends over time from September through May. Above 1.0 = Favorable Performance. Below 1.0 = Unfavorable Performance.... I Page32of 43 I... You must select each tab to move on.!!

69 Interpreting CPI Trend Charts A CPI trend chart shows the CPI plotted over time, allowing trends to be identified that might be useful for projections of future trends. Favorable Unfavorable Cumulative vs. Current 6-month The chart shows the CPicum has been favorable (above 1.0), and the trend line is sloping upward indicating the CPicum has become more favorable over time I CPI cum ++Hi 1 9ifl M ,,H,H ,,s1.1t 11? 10 ifrmmml 1 1 ;,,iui Sep Oct Nov Dec Jan Feb Mar Apr May - CPI cum... I Page 33of 43 I... You must select each tab to move on.

70 Interpreting CPI Trend Charts A CPI trend chart shows the CPI plotted over time, allowing trends to be identified that might be useful for projections of future trends. Favorable Unfavorable Cumulative vs. Current 6-month The chart shows the CPicum has been under 1.0 (unfavorable) and the trend line is sloping downward, indicating the CPicum has become more unfavorable over time. CPI cum '4.!.Hi 1 Aifl lf1ijf 1 '. 11 M Hr ''S!.!f 11? 10 ifrmmim 1!1,,MU.? r Sep Oct Nov Dec Jan Feb Mar Apr May - CPI cum... I Page 33of 43 I... You muse select each tab to move on.

71 Interpreting CPI Trend Charts A CPI trend chart shows the CPI plotted over time, allowing trends to be identified that might be useful for projections of future trends. I Favorable lunfavorable!i311.hiilfiiiiijifff311ii rlll 6-month As with SPI, current period CPI (CPicur) metrics can change drastically from month to month, making it difficult to identify a trend. CPicum metrics "smooth" CPI data, creating a more even depic tion of the data, from which it is easier to identify a trend ijifff!.ismll!.!u+'di Below 1.0 = Unfavorable Performance 0.80 ~~~~~~~~~~~~~~~~~~~~~~~~~~- Sep Oct Nov Dec Jan Feb Mar Apr May - - CPI cur - CPI cum... I Page33of 43 I... You must select each tab to move on.

72 RESOURCES I PRINT 1 HELP Interpreting CPI Trend Charts A CPI trend chart shows the CPI plotted over time, allowing trends to be identified that might be useful for projections of future trends. I Favorable ] untavorablel Cumulative vs. Current ] 6 -month Just as with the SP!, a 6-month average CPI trend line shows more recent trends that could be indicative of emerging problem areas. The EVM analyst and technical team should assess whether it makes more sense to use a more current trend such 1.15 as a 6-month CPI to predict future costs. A trend is just one input. A decision on 1.10 whether to use that trend data to 1.()5 estimate future costs requires an '.1 I 'f.ifl+"mr%!,.,tl.1.9 understanding of the remaining work 1.00~~~~ including risks u 1 ;;1~~~L 0.90 ~-:-~~,~1~o~~ ~~m~ 0.85 ~ S.., Oct Nov Dec Jan Feb Mar Apr May ~ CPIcum.6<norrtl1 CPI ~ I Page 33of43 I ~ You must select each tab to move on.

73 Interpreting CPI Trend Charts A CPI trend chart shows the CPI plotted over time, allowing trends to be identified that might be useful for projections of future trends. Favorable lunfavorablel Cumulative vs. Current I 6-month Long Descript ion Graph representing a favorable CPi cum performance trend over time from September through May. Above 1.0 = Favorable Performance. Below 1.0 = Unfavorable Performance. Graph representing an unfavorable CPi cum performance trend over time from September through May. Above 1.0 = Favorable Performance. Below 1.0 = Unfavorable Performance. Graph representing CPi cum and CPi cur performance trends over time from September through May. The current CPI trend varies sharply from month to month from favorable to unfavorable performance. The CPi cum trends below 1.0 with much less variation. Above 1.0 =Favorable Performance. Below 1.0 =Unfavorable Performance. Graph representing CPi cum and 6-month CPI performance trends over time from September through May. Above 1.0 = Favorable Performance. Below 1.0 =Unfavorable Performance.... I Page33of 43 I... You must select each tab to move on.

74 Comprehensive EAC Updates The Government and contractor PMs must ensure they have: An EAC that properly considers program performance to date Estimates for future conditions based on the most recent contract information, including technical performance and risk The EVMS guidelines require the contractor to conduct periodic comprehensive EACs. The Government also must have its own internal comprehensive EAC. Each DoD agency may have different procedures regarding comprehensive EACs. However, the basic crosscutting principle is that Government PMs must have their own robust internal EAC. The Defense Contract Management Agency (DCMA ) also develops independent EACs, and various levels of DoD agencies develop their own EACs using a variety of methods. EAC reasonableness checks, updated risk assessments, or other program dynamics may indicate the need for a more comprehensive review and update of the contract EAC. Some organizations also may have inhouse procedures requiring regular EAC updates. Contractors describe their comprehensive EAC update processes in their EVMS descriptions. DoD PMs may choose to update their in-house EACs around the same time that the contractor completes their updates.... I Page34of 43 I...

75 EVMlOl Fundam entals of Earned Value Managem ent PMO Team Member Contributions to an Update In developing their comprehensive EACs, both the DoD and the contractor follow steps similar to the three in the integrated analysis model. For the contractor, CAMs and their technical teams are key players in updating the EACs, with assistance from the schedule analysts, EVM analysts, and cost estimators. The players are similar for the Government. The typical team members involved in updating EACs include: EVM analyst Schedule analyst T echnical team Cost estimator... I P gel5 of 43 I... You must select EVM analyst, Schedule analyst, Technicalteam, and Cost estimator t o move on.

76 PMO Team Member Contributions to an Update In developing their comprehensive EACs, both the DoD and the contractor follow steps similar to the three in the integrated analysis model. For the contractor, CAMs and their technical teams are key players in updating the EACs, with assistance from the schedule analysts, EVM analysts, and cost estimators. The players are similar for the Government. The typical team membr-~~~~~~...,. EV M analyst EVM analyst Schedule analyst Technical team Cos t estimator The assigned EVM analyst gives the PM a range of EACs. Selection of EAC PFs is one of the most important jobs of the EVM analyst. An analyst must be able to explain and defend their selections. The EVM analyst develops the trend charts and EVM data that the IPT needs to update their estimates. The EVM analyst, possibly with the help of a cost estimator (if available), will time- phase the EAC and adjust the cost estimate to price, including any adjustments to fee. This is necessary to help the financial manager determine if sufficient funds are available in each fiscal year. I f the financial manager's determination is incorrect, serious repercussions could result, such as stop work orders, or increased costs later on.... I Page3Sof43 I... You must select EVM analyst, Schedule analyst, Technical team, and Cost estimator to move on.

77 PMO Team Member Contributions to an Update In developing their comprehensive EACs, both the DoD and the contractor follow steps similar to the three in the integrated analysis model. For the contractor, CAMs and their technical teams are key players in updating the EACs, with assistance from the schedule analysts, EVM analysts, and cost estimators. The players are similar for the Government. The typical team membr-~~~~~~~~--...,. Schedule analyst EVM analyst Schedule analyst Technical team Cos t estimator T ypically, the PMO will have a professional schedule analyst to support IMS analysis, or will assign this as an extra duty. I t is important to have an individual or a few individuals who understand how to analyze schedule data and provide meaningful and actionable information to the IPTs and the PM. This information is needed because changes in the schedule will affect how much additional cost is incurred. Contractor CAMs are also typically supported by schedule analysts to help them with the IMS analysis. The schedule analyst identifies the items on the critical path and provides this information to the IPT. All IPTs should review the status of tasks that are slipping compared to their baseline dates. The schedule analyst on the team prepares an IMS excerpt of slipping tasks for the control account the IPT is responsible for.... I Page3Sof 43 I... You must select EVM analyst, Schedule analyst, Technical team, and Cost estimator to move on.

78 PMO Team Member Contributions to an Update In developing their comprehensive EACs, both the DoD and the contractor follow steps similar to the three in the integrated analysis model. For the contractor, CAMs and their technical teams are key players in updating the EACs, with assistance from the schedule analysts, EVM analysts, and cost estimators. The players are similar for the Government. The typical team membr-~~~~~~~~...,. Technical team EVM analyst Schedule analyst Technical team Cos t estimator The IPT technical team members must apply their technical understanding of risk to understanding EVM cost and schedule performance, and help update the EAC. The technical team can help the PM decide on any trades that could help the program stay within cost and schedule objectives or achieve cost goals.... I Page3Sof 43 I... You must select EVM analyst, Schedule analyst, Technical team, and Cost estimator to move on.

79 PMO Team Member Contributions to an Update In developing their comprehensive EACs, both the DoD and the contractor follow steps similar to the three in the integrated analysis model. For the contractor, CAMs and their technical teams are key players in updating the EACs, with assistance from the schedule analysts, EVM analysts, and cost estimators. The players are similar for the Government. The typical team membr-~~~~~~~--...,. Cost estimat or EVM analyst Schedule analyst Technical team Cos t estimator The cost estimator, possibly in collaboration with the EVM analyst, will time - phase the EAC and adjust the cost estimate to price, including any adjustments to fee. This is necessary to help the financial manager determine if sufficient funds are available in each fiscal year. I f the financial manager's determination is incorrect, serious repercussions could result, such as stop work orders, or increased costs later on. The cost estimator helps develop a probabilistic range of EACs and provides additional EAC methodologies (e.g., learning curve analysis; cost estimating relationships).... I Page3Sof 43 I... You must select EVM analyst, Schedule analyst, Technical team, and Cost estimator to move on.

80 EVMlOl Fundam entals of Earned Value Managem ent How to Develop 11 Government Inde,pendent EAC The Government PMO can dev elop an updated, detailed EAC at lower lev els of the WBS using IPMR EVM metrics, IMS analysis, and technical inputs. The team developing the EAC must select an estimating method, with the focus typically on EVM Pfs. However, other cost estimating methods also may be recommended. A risk-based approach is helpful in focusing this effort: Recall that in the Analyze Past Performance step of the Integrated Analysis Process, the IPTs identified certain drivers. These drivers typically become the EAC focus areas. The EVM analyst also provides trend charts that can be used to help pick a reasonable PF. The outcome of a schedule risk assessment also can be used as input in choosing a PF. Cost estimators can help with other estimating methodologies where the technical team feels the EVM trends do not provide the best estimating methodology. The sum of the EACs for the WBS elements becomes the PMO updated EAC.... I P ge36of 43 I...

81 Know ledge Review Match member of the Integrated Product Team (IPT) with a description of the role that team member may play in developing a Government Independent estimate at completion (EAC). Drag t he!pt Mem ber to t he matching Role. IPT Me mber Role Develops a probabilistic range of EACs and provides additional EAC methodologies (e.g., cost estimating relationships) Develops the trend charts and Earned Value Managment (EVM) data that the IPT needs to update their estimates Identifies items on the critical path and provides this information to the IPT Helps the program managerm (PM ) decide on any trades that could help the program stay within cost and schedule objectives Check Answer The correct matches are indicated.... I Page37of 43 I...

82 Selecting Performance Factors This table shows a range of EACs for the cooling system generated by EVM software using a variety PFs. T ypically there is no "right" or "wrong" PF. The appropriateness of a PF is subjective. It is up to the analyst creating the estimate to justify why they selected EAC!CPlcum) 3,129.3 a given performance factor to calculate an EAC. EAC (3-month CPll $ 3,883.6 EAC (6-month CPll $ 3,069.5 For example, the first EAC is shown as EAC (CPicum), which means this is an EAC that was generated using the CPicum as its PF. Since the IPT responsible for the cooling system EAC chose to use the CPI x SPI PF to generate the cooling system EAC, their estimate is $3, EAC!CPI x SPll $ 3,438.0 Use the Cooling System displayed in the table above to calculate its EAC. EAC = ACWP + ((BAC-BCWP) /(CPI x SPI)) EAC = $ 1, (($2, $1,444.10) /.578) EAC = $3, I Page38of 43 I... You must select each EAC in the table to move on.!!

83 Selecting Performance Factors This table shows a range of EACs for the cooling system generated by EVM software using a variety PFs. T ypically there is no "right" or "wrong" PF. The appropriateness of a PF is subjective. It is up to the EAC!CPlcum) 3,129.3 EAC (CPicum) EAC (3-month CPll $ 3,883.6 CPJcum is the most commonly used PF and is widely EAC (6-month CPll $ 3,069.5 considered to produce an optimistic EAC. When used, this EAC!CPI x SPll $ 3,438.0 PF assumes that future cost performance will be the same as past cost performance. Use the Cooling System displayed in the table above to calculate its EAC. EAC = ACWP + ((BAC-BCWP) / (CPI x SPI)) EAC = $ 1, (($2, $1,444.10) /.578) EAC = $3, I Page38of 43 I... You must select each EAC in the table to move on.!!

84 Selecting Performance Factors This table shows a range of EACs for the cooling system generated by EVM software using a variety PFs. T ypically there is no "right" or "wrong" PF. The appropriateness of a PF is subjective. It is up to the EAC!CPlcum) 3,129.3 EAC (3- m onth CPI) EAC (3-month CPI) $ 3,883.6 Another EAC formula that is used to project final costs at EAC (6-month CPI) $ 3,069.5 completion is the 3- Month Moving Average CPI. This EAC EAC!CPI x SPll $ 3,438.0 formula assumes the contractor will perform the remainder of the contract effort at the same level of performance that the latest 3- Month Moving Average CPI indicates. Note that the average CPI is not calculated by simply adding the CPis and dividing by 3. The BCWP for each of the last 3 months must be summed for the numerator, and the ACWP for each of the 3 months must be summed for the denominator. Use of this CPI might make sense if the IPTs assessment is that recent trends are more likely to continue to affect future work than, for instance, the CPicum. This might occur, for example, where there are emerging technical problems. EAC = $3, I Page 38 of 43 I... You must select each EAC in the table to move on.!!

85 Selecting Performance Factors This table shows a range of EACs for the cooling system generated by EVM software using a variety PFs. T ypically there is no "right" or "wrong" PF. The appropriateness of a PF is subjective. It is up to the EAC!CPlcum) 3,129.3 EAC (6- m onth CPI) EAC (3-month CPI) $ 3,883.6 Similar to the 3 month CPI, this average assumes the EAC (6-month CPI) $ 3,069.5 contractor will perform the remainder of the contract EAC!CPI x SPll $ 3,438.0 effort at the same level of performance that the latest 6 month moving average CPI indicates. The BCWP for each of the last 6 months is summed for the numerator, and the ACWP for each of the last 6 months is summed for the denominator. The use of this CPI might make sense, again, if the IPT assessment is that recent trends are more likely to continue to affect future work than, for instance, cumulative trends. """-----!!"'l!., !11!' ~ late its EAC. EAC = ACWP + ((BAC-BCWP) / (CPI x SPI)) EAC = $ 1, (($2, $1,444.10) /.578) EAC = $3, I Page38of 43 I... You must select each EAC in the table to move on.!!

86 Selecting Performance Factors This table shows a range of EACs for the cooling system generated by EVM software using a variety PFs. T ypically there is no "right" or "wrong" PF. The appropriateness of a PF is subjective. It is up to the EAC!CPlcum) 3,129.3 EAC (CPI x SPI) EAC (3-month CPll $ 3,883.6 This PF is frequently used where a contract has EAC (6-month CPll $ 3,069.5 experienced both cost and schedule performance problems EAC!CPI x SPll $ 3,438.0 which are expected to continue. It is commonly used in DoD to create a range of EACs, with the cum CPI establishing the low EAC and the cum CPI * cum SPI establishing the high EAC in a range of likely EACs. Use the Cooling System displayed in the table above to calculate its EAC. EAC = ACWP + ((BAC-BCWP) / (CPI x SPI)) EAC = $ 1, (($2, $1,444.10) /.578) EAC = $3, I Page38of 43 I... You must select each EAC in the table to move on.!!

87 Selecting Performance Factors This table shows a range of EACs for the cooling system generated by EVM software using a variety PFs. T ypically there is no "right" or "wrong" PF. The appropriateness of a PF is subjective. It is up to the analyst creating the estimate to justify why they selected EAC!CPlcum) 3,129.3 a given performance factor to calculate an EAC. EAC (3-month CPll $ 3,883.6 EAC (6-month CPll $ 3,069.5 For example, the first EAC is shown as EAC (CPicum), which means this is an EAC that was generated using the CPicum as its PF. Since the IPT responsible for the cooling system EAC chose to use the CPI x SPI PF to generate the cooling system EAC, their estimate is $3, EAC!CPI x SPll $ 3,438.0 Use the Cooling System displayed in the table above EAC = ACWP + ((BAC-BCWP) /(CPI x SPI)) EAC = $ 1, (($2, $1,444.10) /.57 CPI x SPI =.732 x.789 =.578 CPI = BCWP/ ACWP SPI = BCWP/ BCWS = / = / = = EAC = $3, I Page38of 43 I... in the table to move on.!!

88 Selecting Performance Factors This table shows a range of EACs for the cooling system generated by EVM software using a variety PFs. T ypically there is no "right" or "wrong" PF. The appropriateness of a PF is subjective. It is up to the analyst creating the estimate to justify why they selected EAC!CPlcum) 3,129.3 a given performance factor to calculate an EAC. EAC (3-month CPll $ 3,883.6 EAC (6-month CPll $ 3,069.5 For example, the first EAC is shown as EAC CPicum which means this is an $ 3,438.0 CPicum as its PF. Since Long Description system EAC chose to us Summary Data for the period of October 2014 displays the the cooling system EAC, following formula-based EACs. EAC SPi cum is $3,045.9; EAC CPi cum is $3, 129.3; EAC 3- month CPI is $33,883.6; EAC 6 month CPI is $3,069.5; and EAC CPI x SPI is $3, WBS element , Cooling System, has a BCWScum of , a BCWPcum of , a ACWPcum of , and a BAC of Use the Cooling System displayed in the table above to calculate its EAC. EAC = ACWP + ((BAC-BCWP) / (CPI x SPI)) EAC = $ 1, (($2, $1,444.10) /.578) EAC = $3, I Page38of 43 I... You must select each EAC in the table to move on.!!

89 PMO Detailed EAC The PMO IPTs go through a similar process for updating the EAC for all of their WBS elements. To simplify things for the elements that are not high risk, they may default to a simple method such as choosing the CP!cum to generate the EACs for all WBS elements, with the exception of the risk drivers. For the risk drivers, they take a closer look at the PF, similar to what was done with the cooling system. This table shows the roll -up for the LAR PMO EAC. PMO Detailed EAC Responsible IPT WBS Elements PMO EAC BAC Contractor EAC Vehicle IPT FRAME $2,816 $2,710 $2,781 Vehicle IPT SUSPENSION/ STEERING $8,716 $7,803 $8,147 Numerous POWER PACKAGE $12,982 $11,455 $11,989 Drive Train IPT ENGINE $4,657 $4,009 $4,337 Drive Train IPT COOLING SYSTEM $3,438 $2,291 $2,562 Drive Train IPT EXHAUST SYSTEM $1,706 $1,718 $1,716 Numerous Numerous OTHER $3,181 $3,437 $3,374 Aux.Comm IPT AUXILIARY AUTO $254 $284 $277 Armament IPT ARMAMENT $4,465 $4,323 $4,387 ALL OTHER WBS ELEMENTS $44,756 $38,202 $37,092 TOTAL LAR PROGRAM $ $64,777 $64,673 As the data shows, the PMO EAC is quite a bit higher than the contractor EAC and the BAC for the contract.the PM will need to compare the new EAC, plus any applicable contract fees or profit, to the available budget the Government has in the Planning, Programming, Budgeting, and Execution ( PPBE) system for the contract.... I Page39of 43 I...

90 PMO Detailed EAC The PMO IPTs go through a similar process for updating the EAC for all of their WBS elements. To simplify things for the elements that are not high risk, they may default to a simple method such as choosing the CP!cum to generate the EACs for all WBS elements, with the exception of the risk drivers. For the risk drivers, they take a closer look at the PF, similar to what was done with the cooling system. This table shows the roll -up for the LAR PMO EAC. Long Description PMO Detailed EAC table. T he Vehicle!PT is responsible for WBS element 1.1.1, frame with a PMO EAC of $2816, BAC of $2710, and contractor EAC of $2781. T he Vehicle!PT is responsible for WBS element 1.1.2, suspension and steering with a PMO EAC of $8716, BAC of $7803, and contractor EAC of $8147. Numerous IPT s are responsible for WBS element 1.1.3, power package with a PMO EAC of $12982, BAC of $11455, and contractor EAC of $ T he drive train!pt is responsible for WEB element , engine with a PMO EAC of $4657, BAC of $4009, and contractor EAC of $4337. T he drive train!pt is responsible for WBS element , cooling system with a PMO EAC of $3438, BAC of $2291, and contractor EAC of $2562. T he drive train!pt is responsible for WBS element , exhaust system with a PMO EAC of $1706, BAC of $1718, and contractor EAC of $1716. Numerous IPT s are responsible for numerous other WBS elements with a PMO EAC of $3181, BAC of $3427, and contractor EAC of $3374. T he aux- comm!pt is responsible for WBS element 1.1.4, auxiliary auto with a PMO EAC of $254, BAC of $284, and contractor EAC of $277. T he armament!pt is responsible for WBS element 1.1.5, armament with a PMO EAC of $4465, BAC of $4323, and contractor EAC of $4387. All other WBS elements have a PMO EAC of $44756, BAC of $38,202, and contractor EAC of $37,092. T he T otal LAR program PMO EAC is $77169, BAC is $64777, and contractor EAC is $ v 1 IU... I,....,., TT "',....._..., r t:: U u:::::, ' '- TT...,...,,..., t''""'... ""'' ' Y '-,... V I t"'..,,,._,._..., U u::::: available budget the Government has in the Planning, Programming, Budgeting, and Execution ( PPBE) system for the contract.... I Page39of 43 I...

91 EVMlOl Fundam entals of Earned Value Managem ent Lesson Summary Congratulations! You have completed the Predicting Future Performance lesson. You should now know the following key points: Predict Future - Analyze EAC Performance Steps to predic ting future performance include Reasonableness analyzing the reasonableness of contract es timates - Develop Government Independent EAC of cost to complete the projec t work and developing a Government estimate when the contractor's estimates seem optimistic. The EAC is an essential requirement of program management and a key data point for formulating a plan for successful project completion. The contractor calculates comprehensiv e EACs and, through the Integrated Program Management Report ( IPMR), provides projections to the Government of the estimated final cost of the project. IPMR The Government checks the reasonableness of the COfltractordevelops IPMR documents contractor's es timates at the contract level or at a lower level. EACs estimates of final project cost... I P ge 40of43 I...

92 EVMlOl Fundam entals of Earned Value Managem ent Lesson Summary Congratulations! You have completed the Predicting Fu t ure Performance lesson. You should now know the following key points: Long Description - Analyze EAC nee include Reasonablenes ntract estimates Predict future performance consists of analyze EAC - Develop Govern reasonableness and develop Government independent Independent E EAC. The contractor develops an EAC, the IPMR documents estimates of final project cost, and the Government checks the reasonableness of contractor rk and developing ontractor's The EAC is an essential r EACs and develops Government EACs. ormulating a plan for successful proje' dt"'lllll~l'l!ll~ The contractor calculates comprehensive EACs and, through the Integrated Program Management Report ( IPMR), provides projections to the Government of the estimated final cost of the project. IPMR The Government checks the reasonableness of the COfltractordevelops IPMR documents contractor's estimates at the contract level or at a EACs lower level. estimates of final project cost... I P ge 40of43 I...

93 EVMlOl Fundam entals of Earned Value Managem ent Lesson Summary Congratulations! You have completed the Predicting Fu t ure Performance lesson. You should now know the following key points: Predict Future - Analyze EAC Performance Steps to predic ting future per formance include Reasonableness analyzing the reasonableness of contract estimates - Develop Government Independent EAC of cost to complete the projec t work and developing a Government estimate when the contractor's estimates seem optimistic. The ~ is an essential requirement of program management and a key data point for formulating a pla EAC EAC = ACWP + ETC IPMR The EAC is the estimated total cost for all authorized work. It equals the sum of ACWP to date, plus the estimated costs to complete the work remaining on the contract, some times called the ETC. ontractor develops EACs IPMR documents estimates of final project cost... I P ge 40of 43 I...

94 Lesson Summary, Cont. 1 Contractor management reports a range of management EACs in the monthly JPMR, explaining any differences between the management and CAM estimates. Best case Most likely Worst case Integrated Program Management Report, Fonnat 1 6. ESTI MATES COST AT COMPLETION a. Best Case b. Worst Case c. Most Likely Management Est At Completion Contract Budget Base Variance $61, $64, $64, $64, $ Analyzing EAC reasonableness is done through a series of three key checks: Comparing CPI with TCPJ : ( TCPI - CPI) x 100 Comparing CVcum with VAC Generating Government's own range of reasonable, formulabased EACs against which to compare contractor estimates Jn addition to comparative evaluations, the Government can examine EVM trend data to assess the reasonableness of a contractor's EAC: SPI trends CPI trends SV trends CV trends Recall that the OAU EVM Gold Card provides a quick reference to EVM metrics, terminology, and formulas (including schedule and cost variance formulas).... I Page41of 43 I...

95 Lesson Summary, Cont. 1 Contractor management reports a range of management EACs in the monthly IPMR, explaining any differences between the management and CAM estimates. Best case Integrated Program Management Report, Fonnat 1 6. ESTI MATES COST AT COMPLETION Most likely I Management Est At I r. -. l>ooo I Variance Worst cas Long Description IPMR Format 1 displays management estimates at completion as follows: Best case is $61,915.40, Worst case is $ $64, , and Most likely is $64, with a contract budget base of $64, and a variance of $ Analyz ing EAC re ' ations, -~ through a series of three key checks: Comparing CPI with TCPI: ( TCPI - CPI) x 100 Comparing CVcum with VAC Generating Government's own range of reasonable, formula based EACs against which to compare contractor estimates the Government can examine EVM trend data to assess the reasonableness of a contractor's EAC: SPI trends CPI trends SV trends CV trends Recall that the DAU EVM Gold Card provides a quick reference to EVM metrics, terminology, and formulas (including schedule and cost variance formulas).... I Page41of 43 I...

96 Lesson Summary, Cont. 1 Contractor management reports a range of management EACs in the monthly JPMR, explaining any differences between the management and CAM estimates. Best case Most likely Worst case Best case The best case EAC reflects the lowest potential cost to the Government. This estimate shall be based on the outcome of the most favorable set of circumstances. I f this estimate is different from the most likely management EAC, the assumptions, conditions, and methodology underlying the estimate shall be explained in Format 5. This estimate is for informational purposes only; it is not an official company estimate. Analyzing EAC reasonableness is done through a series of three key checks: Comparing CPI with TCPJ : (TCPI CPI) x 100 Comparing CVcum with VAC Generating Government's own range of reasonable, formulabased EACs against which to compare contractor estimates Jn addition to comparative evaluations, the Government can examine EVM trend data to assess the reasonableness of a contractor's EAC: SPI trends CPI trends SV trends CV trends Recall that the DAU EVM Gold Card provides a quick reference to EVM metrics, terminology, and formulas (including schedule and cost variance formulas).... I Page41of 43 I...

97 Lesson Summary, Cont. 1 Contractor management reports a range of management EACs in the monthly JPMR, explaining any differences between the management and CAM estimates. Best case Most likely Worst case Most likely The most likely EAC is the contractor's official contract EAC and takes precedence over the cost projections at the WBS level. The most likely EAC is the value that the contractor's management believes is the most possible outcome based on a knowledgeable estimation of all authorized work, known factored risks, and probable future conditions. Analyzing EAC reasonableness is done through a series of three key checks: Comparing CPI with TCPJ : (TCPI CPI) x 100 Comparing CVcum with VAC Generating Government's own range of reasonable, formulabased EACs against which to compare contractor estimates Jn addition to comparative evaluations, the Government can examine EVM trend data to assess the reasonableness of a contractor's EAC: SPI trends CPI trends SV trends CV trends Recall that the DAU EVM Gold Card provides a quick reference to EVM metrics, terminology, and formulas (including schedule and cost variance formulas).... I Page41of 43 I...

98 Lesson Summary, Cont. 1 Contractor management reports a range of management EACs in the monthly JPMR, explaining any differences between the management and CAM estimates. Best case Most likely Worst case W orst case The worst case EAC reflects the highest expected cost to the Government. This estimate shall be based on the outcome of the least favorable set of circumstances. I f this estimate is different from the most likely EAC, the assumptions, conditions, and methodology underlying the estimate shall be explained in Format 5. This estimate is for informational purposes only; it is not an official company estimate. Analyzing EAC reasonableness is done through a series of three key checks: Comparing CPI with TCPJ : (TCPI CPI) x 100 Comparing CVcum with VAC Generating Government's own range of reasonable, formulabased EACs against which to compare contractor estimates Jn addition to comparative evaluations, the Government can examine EVM trend data to assess the reasonableness of a contractor's EAC: SPI trends CPI trends SV trends CV trends Recall that the DAU EVM Gold Card provides a quick reference to EVM metrics, terminology, and formulas (including schedule and cost variance formulas).... I Page41of 43 I...

99 Lesson Summary, Cont. 1 Contractor management reports a range of management EACs in the monthly IPMR, explaining any differences between the management and CAM estimates. Best case Most likely Worst case Analyzing EAC reas through a series of Comparing CPI with TCPI: ( TCPI - CPI) x 100 Comparing CVcum with VAC Integrated Program Management Report, Fonnat 1 6. ESTI MATES COST AT COM PLETION Management Est At Completion a. Best Case $61, b. Worst Case $64, Comparing CPI with TCPI Contract Budget Base Variance A mathematical difference of± 10% (0.10 ) may be used as an early warning indication that the contractor's EAC could be unrealistic. Generating Government's own range of reasonable, formula based EACs against which to compare contractor estimates UQ Q W '-1 I<;;; I VI d contractor's EAC: SPI trends CPI trends SV trends CV trends Recall that the OAU EVM Gold Card provides a quick reference to EVM metrics, terminology, and formulas (including schedule and cost variance formulas).... I Page41of 43 I...

100 Lesson Summary, Cont. 2 The Government develops a comprehensive EAC to serve as the Government PMO EAC. As the contract work progresses, the Government updates the PMO EAC as necessary to reflect contract status accurately. If the contractor's EACs seem unreasonable given trend analysis and program risks and technical status, the Government should request an adequate explanation from the contractor. EVMS Guidelines require estimates to be updated. The Government PMO should develop an independent EAC of its own. This can be a detailed EAC at lower levels of the WBS using IPMR EVM metrics, IMS analysis, and technical inputs. EAC (CPicuml EAC (3-month CPI) EAC (6-month CPI) EAC (CPI x SPJl Basic EAC Formula: EAC = ACWPcum + ETC EAC = ACWPcum + [(BAC - BCWPcum) / PF] An SRA predicts the probability of project completion by contractual dates. The contractor may incorporate SRA results in its EAC. The DoD IPMR DID requires the contractor to perform an SRA prior to an IBR, over target baseline (OTB)/over target schedule (OTS) and Single Point Adjustment. I t also requires the contractor to explain the results of its SRA in the Format 5. Various PMO team members contribute to a comprehensive update to the program EAC: EVM analyst, schedule analyst, and technical team.... I Page42of 43 I... Select each performance factor {PF) to review..q

101 Lesson Summary, Cont. 2 The Government develops a comprehensive EAC to serve as the Government PMO EAC. As the contract work progresses, the Government updates the PMO EAC as necessary to reflect contract status accurately. If the contractor's EACs seem unreasonable given trend analysis and program risks and technical status, the Government should request an adequate explanation from the contractor. EVMS Guidelines require estimates to be updated. The Government PMO should develop an independent EAC of its own. This can be a detailed EAC at lower levels of the WBS using IPMR EVM metrics, IMS analysis, and technical inputs. EAC (CPicuml EAC (3-month CPI) EAC (6-month CPI) EAC (CPI x SPJl EAC (CPicum) CPi cum is the most commonly used PF and is widely considered to produce an optimistic EAC. When used, this PF assumes that future cost performance will be similar to past cost performance. An SRA predicts the probability of project completion by contractual dates. The contractor may incorporate SRA results in its EAC. The DoD IPMR DID requires the contractor to perform an SRA prior to an IBR, over target baseline (OTB)/over target schedule (OTS) and Single Point Adjustment. I t also requires the contractor to explain the results of its SRA in the Format 5. Various PMO team members contribute to a comprehensive update to the program EAC: EVM analyst, schedule analyst, and technical team.... I Page42of 43 I... Select each performance factor {PF) to review..q

102 Lesson Summary, Cont. 2 The Government develops a comprehensive EAC to serve as the Government PMO EAC. As the contract work progresses, the Government updates the PMO EAC as necessary to reflect contract status accurately. If the contractor's EACs seem unreasonable given trend analysis and program risks and technical status, the Government should request an adequate explanation from the contractor. EVMS Guidelines require estimates to be updated. The Government PMO should develop an independent EAC of its own. This can be a detailed EAC at lower levels of the WBS using IPMR EVM metrics, IMS analysis, and technical inputs. EAC (CPicuml EAC (3- month CPI) EAC (3-month CPI) EAC (6-month CPI) EAC (CPI x SPJl Another EAC formula that is used to project final costs at completion is the 3- Month Moving Average CPI. This EAC formula assumes the contractor will perform the remainder of the contract effort at the same level of performance that the latest 3- Month Moving Average CPI indicates. An SRA predicts the incorporate SRA resu Note that the average CPI is not calculated by simply adding the CPi s and dividing by 3. The BCWP for each of the last 3 months must be prior to an IBR, over Adjustment. I t also r summed for the numerator, and the ACWP for each of the 3 months must be summed for the denominator. Various PMO team m analyst, schedule an Use of this CPI might make sense if the IPT's assessment is that recent trends are more likely to continue to affect future work than, for instance, the CPi cum. This might occur, for example, where there are emerging technical problems. ~AU... I Page42of 43 I... e

103 Lesson Summary, Cont. 2 The Government develops a comprehensive EAC to serve as the Government PMO EAC. As the contract work progresses, the Government updates the PMO EAC as necessary to reflect contract status accurately. If the contractor's EACs seem unreasonable given trend analysis and program risks and technical status, the Government should request an adequate explanation from the contractor. EVMS Guidelines require estimates to be updated. The Government PMO should develop an independent EAC of its own. This can be a detailed EAC at lower levels of the WBS using IPMR EVM metrics, IMS analysis, and technical inputs. EAC (CPicuml EAC (6- m onth CPI) EAC (3-month CPI) EAC (6-month CPI) EAC (CPI x SPJl Similar to the 3 month CPI, this average assumes the contractor will perform the remainder of the contract effort at the same level of performance that the latest 6 month moving average CPI indicates. The BCWP for each of the last 6 months is summed for the numerator, and the ACWP for each of the last 6 months is summed for the denominator. An SRA predicts the incorporate SRA resu The use of this CPI might make sense, again, if the IPT's assessment is prior to an IBR, over that recent trends are more likely to continue to affect future work than, for instance, cumulative trends. Adjustment. I t also r Various PMO team m,..., r t"' ~ analyst, schedule analyst, and technical team.... I Page42of 43 I... Select each performance factor {PF) to review..q