HHS OCIO Policy for Information Technology (IT) Earned Value Management (EVM)June 11, 2007HHS-OCIO-2007-0001.001Table of ContentsThis is a revision of the December 30, 2005, HHS OCIO Policy for Investment Technology (IT) Earned Value Management (EVM). The following changes have been made to modify incorrect information as well as to reflect changes in HHS operations as they are related to the application of EVM data and analysis of HHS IT investments. Many of the changes contained in this revision were discussed at the March 14, 2006 ITIRB and follow-up by email on March 15, 2006, and have been operational since that time. This policy revision serves as a codification of those modifications and changes and can be found in the following sections: 1. Section 1, Purpose, cites the nature of the changes herein and that this policy revision supercedes the December 30, 2005, issuance. 2. Section 4, sub-section 4.1, General, includes consideration of future life-cycle Development, Enhancement and Modernization (DME) funding in the EVM reporting requirements. The definition of Tiers has been modified to reflect the change. 3. Section 4, Table 1, corrects Contract Performance Report (CPR) requirements. 4. Section 6, Applicable Policies and Guidance, has been updated to reflect the most current URL to access the HHS OCIO Web site. This revision to the Policy for Earned Value Management (EVM) within the Department of Health and Human Services (HHS) supercedes HHS OCIO Policy for Information Technology (IT) Earned Value Management, dated December 30, 2005. This policy does not supersede any other applicable law or higher level agency directive, policy guidance, or existing labor management agreement in affect as of the effective date of this policy. This Policy serves as the authority for performing EVM requirements, objectives, responsibilities, and standards for managing information technology (IT) investments using EVM. Specifically, the policy establishes EVM as an IT Investment Management requirement at HHS and incorporates EVM as a fundamental element of HHS CPIC and investment portfolio management oversight. As required by the Office of Management and Budget (OMB) Circular A-11 Part 7. Section 300, HHS will use EVM to monitor its investments’ cost, schedule, and performance goals. The HHS Office of the Chief Information Officer (OCIO) is ensuring that all investments use an appropriate level of EVM as a management tool. This policy will apply to IT investments which include DME funding and will not apply to Steady State investments. EVM provides government Investment Managers and contractors with reliable data from which to make responsible management decisions. EVM minimizes risk by effectively integrating the investment scope of work with cost, schedule, and performance elements for optimum project planning and control. Earned Value Management provides a quantitative measure of project management progress as measured against a performance baseline established from a project’s work breakdown structure and project plan. DOD originally utilized EVM methodology to manage large developmental projects. Further information regarding the DOD implementation of EVM is referenced in Section 6.3. Earned value management (EVM) data is a critical component of the Control phase of the Capital Planning and Investment Control (CPIC) process, because it provides investment managers with the cost, schedule, and performance data necessary to ensure that HHS investments are delivered on time and perform within budget and scope. The addition of the variance and trend analysis aspect of EVM permits an evaluation that monitors deviation from the baseline plan, which may indicate potential impact of threats or opportunities. This increases the reliance management has that investments are behaving in accordance with both sound project management and alignment of Departmental goals and objectives. OMB has increased its requirements for the use of EVM through the issuance of Memorandum M-04-24 Expanded Electronic Government (E-Gov) Presidents Management Agenda (PMA) Scorecard Cost, Schedule and Performance Standard for Success, August 2004 and Memorandum M-05-23 Improving Information Technology (IT) Project Planning and Execution, August 2005. As of February 2005, the CPIC process was augmented to incorporate monthly EVM reporting for Development, Modernization, and Enhancement (DME) IT investments.[1] EVM data is used as part of the HHS CPIC Select and Control Phases primarily. An OMB-approved three-tiered approach for EVM was instituted by HHS to incorporate stronger EVM application in project management processes. Also, in June 2005, guidelines were introduced that called for an integrated project team approach in which the Operating Division (OPDIV) Chief Information Officer (CIO) and Head of Contracting Activity (HCA) would work in partnership with cognizant project managers to address fully the EVM requirements in applicable project and acquisition plans.[2] In addition, a requirement was put in place for HHS solicitations and resulting contracts issued on or after October 1, 2005, in support of Tier 1, Tier 2, or Tier 3 IT investments, to include all EVM requirements appropriate to the specific Tier. This Policy applies to the Office of the Secretary of Health and Human Services (OS), including all Staff Divisions (STAFFDIVs), the Office of the Inspector General, and the Operating Divisions (OPDIVs). This Policy applies to all HHS IT investments, whether owned and operated by HHS, or operated on behalf of HHS. This Policy applies to all HHS IT investments with the exception of those that are funded by direct grants to states or other external entities or associated with the basic claims processing costs incurred by contractors in the course of performing Medicare operations. Within this Policy, the term OPDIV shall be read to include the Office of the Secretary, including all STAFFDIVs, and the Office of the Inspector General unless otherwise noted. All HHS OPDIVs shall use this Policy or may create a more restrictive OPDIV-specific policy, but not one that is less restrictive or less comprehensive. This Policy shall be applied in conjunction with the HHS EVM Procedures document, the HHS CPIC Policy, the HHS CPIC Procedures, and any Federal Acquisition Regulation (FAR) and HHS Acquisition Regulation (HHSAR) rules that are promulgated on the subject. In order to provide HHS Investment Managers with reliable data to support responsible management decisions, it is HHS policy to apply “varying levels of EVM rigor, depending on the size and complexity of the IT investment,”[3] as follows: - Tier 1: IT investments that have current-year DME funding equal to or greater than $10 million or future life-cycle DME funding equal to or greater than $10 million. Those investments must apply EVM in full compliance with American National Standards Institute-Electronic Industries Alliance (ANSI/EIA) Standard 748-A in any investments supporting the DME effort. Attachment 1 lists the Standard’s 32 criteria.
- Tier 2: IT investments that have current-year DME funding equal to or greater than $1 million and less than $10 million or future life-cycle DME funding equal to or greater than $1 million and less than $10 million. Those investments must apply EVM principles for tracking investment cost, schedule, and performance, but need only comply with a subset of ANSI-EIA Standard 748-A criteria in any investments supporting the DME effort. Attachment 2 lists this subset of ANSI/EIA Standard 748-A criteria.
- Tier 3: IT investments that have current-year DME funding of less than $1 million or future life-cycle DME funding less than $1 million. Those investments must apply EVM principles for tracking investment cost, schedule, and performance, but are not required to meet ANSI/EIA Standard 748-A criteria. The appropriate EVM approach for each Tier 3 investment will be determined by the dollar amount and complexity of the affected investment.
The IT Investment Manager shall ensure that EVM is integrated into standard investment and project management operations. To ensure that investments are managed and monitored against their approved performance measurement baselines, the IT Investment Manager shall perform EVM as an integral part of standard investment management operations. As directed by OMB[4], and in accordance with the HHS CPIC Policy, the IT Investment Manager shall: 1) Establish and validate performance measurement baselines with clear cost, schedule, and performance goals. 2) Use EVM to manage and measure investments to within ten percent of baseline goals. 3) Use EVM performance measures and management processes to monitor actual versus expected results. 4) Use EVM to measure progress against milestones on an independently verifiable basis. 5) Use EVM to ensure that IT investments proceed in a timely fashion toward approved milestones and security requirements. 6) Use EVM in conjunction with a risk management strategy that is adhered to. 7) Ensure accurate recognition of EV by applying EVM to established project Work Breakdown Structures (WBS) that permit independently verifiable measurement of progress in terms of cost, schedule, and performance goals. 8) Prepare corrective action plans when variances exceed acceptable performance tolerances. 9) Document the methodology the Government will employ to analyze and use the EVM data to assess and monitor contract performance. 10) Comply with Department requirements for reporting the EVM status of investments. 11) For steady-state investments, perform operational analyses (refer to HHS-CPIC Policy for operational analysis requirements). The HHS or OPDIV CIO, as appropriate, shall: 1) Ensure that qualified personnel[5] are assigned to IT investments and that they properly implement EVM policies and processes. 1) IT Investment Managers shall submit all investment EVM performance measurement baselines (PMB) and changes to the PMB to the ITIRB for review and approval. For investments that meet the Department threshold for review, IT Investment Managers shall submit the EVM PMB and any changes to the PMB to the HHS ITIRB for review and approval. For investments that do not meet the Departmental threshold for review, IT Investment Managers shall submit the EVM PMB and any changes to the PMB to the OPDIV ITIRB for review and approval. Submissions shall address the rationale and driving factors leading to the new investment EVM PMB or any changed PMB. 2) Any new investment EVM PMB, or PMB changes approved by the HHS ITIRB, will be forwarded to OMB for final approval. Any new investment EVM PMB, or PMB changes approved by the OPDIV ITIRB, will be forwarded to the Department, as part of the Capital Planning and Investment Control process, for final approval. 3) Unless specific instruction is given to stop work on the investment, work may continue while any proposed changes to the PMB are under review. 4) Any new investment EVM PMB, or PMB changes not approved by the HHS or OPDIV ITIRB, will be returned to the IT Investment Manager for appropriate action. An IT investment’s Tier designation will dictate the level of that investment’s required EVM compliance in solicitations and contracts. To ensure that all OMB-mandated EVM requirements are reflected in the investment’s acquisition phase, the EVM requirements for contract language relevant for EVM in solicitation provisions and contract clauses listed in the EVM Procedures document shall be incorporated in all IT contracts and solicitations for Tier 1 IT investments. Contract language was originally established in the HHS Memorandum Team-Based Earned Value Management Guidelines, June 16, 2005. These requirements were derived from the proposed Federal Acquisition Regulations (FAR) rule on EVMS[6]. The HHS Acquisition Regulation (HHSAR) provides additional acquisition requirements for HHS IT investments. The June 16, 2005 Memorandum, Team-Based Earned Value Management Guidelines, also established that HHS solicitations and resulting contracts issued on or after October 1, 2005, in support of Tier 1, Tier 2, or Tier 3 IT investments, must include all EVM requirements appropriate to the specific Tier. This policy establishes that all HHS IT contracts and solicitations will comply with the HHS EVM Policy requirements, as based on the IT investment’s Tier level. This policy also establishes that all HHS IT contracts and solicitations will comply with EVM requirements in the FAR rule and the HHSAR. When changes occur to the FAR, HHS will apply EVM requirements in accordance with the most current FAR rule. When changes occur to the HHSAR, HHS will apply EVM requirements in accordance with the most current HHSAR rule. To ensure that EVM requirements are reflected in supporting elements of the contract, contract deliverable reports and associated Integrated Baseline Reviews (IBR) must be included in the Contract Data Requirements List (CDRL) with complete descriptions included in the Data Item Description (DID). More information regarding the CDRL and DID is provided in the EVM Procedures document. An IT investment’s Tier designation will dictate the level of that investment’s required EVM reporting. When EVM reporting is needed, the requirement must be integrated into the investment’s solicitation and the resulting contract. Table 1, below, lists the contract EVM requirements based on Tier. Table 1: EVM Requirements Based on Tier EVM Requirements | Tier 1 | Tier 2 | Tier 3 |
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Contract Performance Report (CPR) | R | T | O |
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Integrated Master Schedule (IMS) | R | T | T |
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Integrated Baseline Reviews (IBR) | R | O | O |
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EVMS ANSI 748-A-1998 Standard Compliance* | R | R | O |
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EVM System Certification** | R | O | O |
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R = Required, T = Tailored (requirement may be tailored by investment), O = Optional * Refer to Section 4.1 for ANSI Standard requirements for each Tier. **Refer to the Glossary for the definition of requirements listed in the table The minimum EVM reporting requirement is monthly reporting. Contracting Officers shall require contractors to submit the appropriate EVM monthly reports. Table 2 lists contractor EVM reporting requirements. Contracting Officers and Investment Managers may implement more frequent reporting requirements as appropriate to the size and complexity of the investment. When an EVMS is required, the Government will conduct an Integrated Baseline Review (IBR). The purpose of the IBR is to verify the technical content and realism of the related performance budgets, resources, and schedules. It should provide a mutual understanding of the inherent risks in the offerors’/contractors’ performance plans and the underlying management control systems, and it should formulate a plan to handle these risks. The IBR requirements apply to both contracted IT development projects and IT development projects wholly staffed by Federal employees. The HHSAR and the HHS EVM Procedures document will provide further requirements and guidance as applicable for EVMS certification and IBRs. Further guidance and definitions regarding the Contract Performance Report (CPR) and the Integrated Master Schedule, including examples of CPR formats 1-5, will also be found in the EVM Procedures document. This policy establishes contractor reporting requirements as listed above and in the below table.
Table 2. Contractor EVM Reporting Requirements EVM Reporting Requirements | Tier 1 | Tier 2 | Tier 3 | CPR Format 1 – WBS | R | R | T | CPR Format 2 – Organizational Categories | R | O | O | CPR Format 3 – Baseline | R | O | O | CPR Format 4 – Staffing | R | O | O | CPR Format 5 – Explanation and Problem Analyses | R | R | T | Contract Funds Status Report | R | R | O |
R = Required, T = Tailored (requirement may be tailored by investment), O = Optional For internal HHS investments with no contractor involvement, the IT Investment Manager shall ensure all Tier-appropriate EVM requirements, as defined in each section of this policy, are met by the performing organization. The IT Investment Manager would therefore ensure that those requirements that would be met by the contractor, such as those listed in Tables 1 and 2 of this section (4.4), are met for those internal HHS investments with no contractor involvement. The Contracting Officer shall establish contract requirements for IBRs for Tier 1 investments and, if deemed necessary by the Contracting Officer in conjunction with the Investment Manager, Tier 2 and Tier 3 investments. The IT Investment Managers shall be responsible for performing an IBR for each investment. An IBR provides HHS and the contractor an opportunity to review the PMB and come to an agreement that the PMB accurately reflects the scope of the work to be performed, the appropriateness of its schedule, the appropriateness of the assigned EV recognition methods, and the investment’s key milestones. The HHSAR and the HHS EVM procedures document will provide further requirements and additional guidance on the process for performing IBRs. To provide a timely mutual understanding of risks inherent in the investment’s performance plans and underlying management control systems, IBRs shall be documented in the project plan and shall be conducted as early as possible, but no later than 180 days after contract award. The HHS CIO chairs the HHS ITIRB and the HHS CIO Council and is responsible for establishing HHS Information Technology-related EVM policies, processes, and procedures. The HHS CIO is responsible for oversight of the development, implementation and management of the HHS EVM policy and all EVM-related processes and guidance. The HHS ITIRB is responsible for approving new and revised IT investment PMBs from a financial management perspective and in relation to the HHS IT investment portfolio. Upon HHS ITIRB approval, the HHS ITIRB shall forward new or revised PMBs to OMB for approval. The HHS CIO Council is responsible for reviewing the technical and managerial soundness of IT investments and providing technical recommendations to the ITIRB, as they relate to the application of EVM. The HHS Capital Planning and Investment Control Officer ensures that the appropriate rigor for EVM is fully integrated into the CPIC process, and that the underlying investments accurately capture the necessary EVM data. The HHS Capital Planning and Investment Control Officer ensures that HHS and OPDIV EVM policies meet OMB and any other legal or regulatory requirements on behalf of the HHS CIO. The HHS Capital Planning and Investment Control Officer works in conjunction with the HHS CIO, HHS Chief Enterprise Architect, OPDIV CIOs and OPDIV CPIC Managers to ensure that required EVM processes are implemented for IT development projects and programs, that the EVM information is used effectively in HHS and OPDIV CPIC processes, and that EVM results and reports are provided to OMB in an appropriate and timely manner. The OPDIV CIO oversees the development, implementation and management of OPDIV EVM policy, procedures, and processes in accordance with HHS CPIC Policy, HHS CPIC Procedures, HHS EVM Policy, HHS EVM Procedures, and other Policies and Guidance. The OPDIV CIO serves as a member of the HHS CIO Council. For IT investments supporting Tier 1 DME efforts, each OPDIV CIO and Head of Contracting Activity (HCA) are jointly responsible for participating in the conduct of IBRs[7]. The Head of Contracting Activity, in coordination with the CIO is responsible for defining requirements for inclusion of EVM in all IT development contracts. For IT investments supporting Tier 1 DME efforts, each OPDIV CIO and HCA is jointly responsible for participating in the conduct of IBRs.[8] The OPDIV CPIC Manager works with the OPDIV IT Investment Managers, the OPDIV CIO and the HHS Capital Planning and Investment Control Officer to ensure that the required EVM processes are developed, implemented and executed for IT development investments at the OPDIV; that the EVM information is used effectively in the OPDIV CPIC process; and that the EVM results and reports are provided to HHS to forward to OMB in an appropriate and timely manner. The IT Investment Contracting Officer (CO) shall ensure that the investment’s contract includes all the deliverables necessary for EV reporting. The CO is responsible for ensuring that all FAR and HHSAR references that apply to EVM reporting are included in the investment’s solicitation and contract, as well as FAR and HHSAR references that directly affect the technical content of the work program. The CO, in partnership with the IT Investment Manager and as part of the Integrated Project Team, is responsible for ensuring that all contract deliverables (e.g., Integrated Master Schedule, CPRs) have been delivered by the contractor on time and are in compliance with the contract’s requirements. The COTR is responsible for ensuring that EVM requirements are met for the contract. The COTR and the IT Investment Manager may be the same person for some investments. The IT Investment Manager is responsible for the overall success of the investment and all funding and scheduling issues, and acts as the Government’s point of contact with the contractor’s project management team. The IT Investment Manager is responsible for ensuring that project management principles, including the appropriate use of EVM, are applied to their investment(s). The IT Investment Manager has the primary responsibility for ensuring that the data used to support EVM is accurate, the analysis of EVM data is timely, the reporting of EVM information is current, and the investment’s EVM results are reported to the appropriate persons responsible for oversight, and to the governance bodies responsible for CPIC at HHS and the OPDIVs. To fulfill these responsibilities, the IT Investment Manager will, in conjunction with the cognizant Contracting Officer, work directly with the contractor’s project management team to ensure that the contractor incorporates EVM into its management practices. The IT Investment Manager establishes appropriate cost, schedule, and performance baselines; collects and analyzes EVM data regarding performance against those baselines; prepares corrective action plans or re-baseline proposals, as necessary, when cost, schedule, or performance exceeds acceptable tolerances; and provides required EVM reports as established by the OPDIV, the Department, or OMB. Links to the regulations and guidance listed below are located on the HHS OCIO Capital Planning Web site, http://www.hhs.gov/ocio/. 1) Government Performance and Results Act of 1993. 2) Federal Acquisition Streamlining Act of 1994. 3) FAR 7.105. 4) FAR Case 2004-019, Federal Acquisition Regulation Earned Value Management System (EVMS), Federal Register, Volume 70, Number 67, April 8, 2005. 5) Clinger Cohen Act of 1996. 6) OMB Circular A-11 (Part 7, Planning Budgeting, Acquisition & Management of Capital Assets). 7) OMB Memorandum M-04-24 Expanded Electronic Government (E-Gov) Presidents Management Agenda (PMA) Scorecard Cost, Schedule and Performance Standard for Success, August 2004. 8) OMB Memorandum M-05-23 Improving Information Technology (IT) Project Planning and Execution, August 2005. 1) American National Standards Institute/Electronic Industries Alliance (ANSI/EIA) Standard 748-A, Earned Value Management Standards, May 1998. 2) Defense Contract Audit Agency, Earned Value Implementation Guide (DCAA Pamphlet 7641.47), Ft. Belvoir, VA, 1996. 3) Department of Defense Earned Value Management Implementation Guide: http://www.acq.osd.mil/pm. 4) National Defense Industrial Association (NDIA) Program Management Systems Committee Intent Guide for Earned Value Management Systems: http://www.ndia.org or http://www.acc.dau.mil. 1) HHS Deputy Assistant Secretary for Grants and Acquisition Management Memorandum, OMB’s New Capital Asset Requirements, May 30, 2002. 2) HHS Chief Information Officer and Director, Office of Acquisition Management & Policy Memorandum, Team Based Earned Value Approach, January 24, 2005. 3) HHS Memorandum Monthly Reporting of Earned Value Cost and Schedule Variances, January 31, 2005. 4) HHS Memorandum Team-Based Earned Value Management Guidelines, June 16, 2005. 5) HHS Acquisition Regulation (HHSAR) 6 ) Defense Contract Audit Agency, Earned Value Implementation Guide (DCAA Pamphlet 7641.47), Ft. Belvoir, VA, 1996. 7) Department of Defense Earned Value Management Implementation Guide: http://www.acq.osd.mil/pm. 8) National Defense Industrial Association (NDIA) Program Management Systems Committee Intent Guide for Earned Value Management Systems: http://www.ndia.org or http://www.acc.dau.mil. Direct questions, comments, suggestions, or requests for further information to the Office of the Chief Information Officer, (202) 690-6162. The effective date of this policy is the date the policy is approved. This policy will not be implemented in any recognized bargaining unit until the union has been provided notice of the proposed changes and given an opportunity to fully exercise its representational rights. The HHS policy contained in this issuance shall be exercised in accordance with Public Law 93-638, the Indian Self-Determination and Education Assistance Act, as amended, and the Secretary’s policy statement dated August 7, 1997, as amended, titled “Department Policy on Consultation with American Indian/Alaska Native Tribes and Indian Organizations.” It is HHS policy to consult with Indian people to the greatest practicable extent and to the extent permitted by law before taking actions that affect these governments and people; to assess the impact of the Department’s plans, projects, programs and activities on tribal and other available resources; and to remove any procedural impediments to working directly with tribal governments or Indian people. ___ _________/s/_____________________________ _June 11, 2007 Charles Havekost HHS Chief Information Officer DATE The following data is extracted directly from the American National Standards Institute/Electronic Industries Alliance Standard 748-98, Earned Value Management Standards, May 1998. Organization
1. Define the authorized work elements for the program. A work breakdown structure (WBS), tailored for effective internal management control, is commonly used in this process. 2. Identify the program organizational structure including the major subcontractors responsible for accomplishing the authorized work, and define the organizational elements in which work will be planned and controlled. 3. Provide for the integration of the company's planning, scheduling, budgeting, work authorization and cost accumulation processes with each other, and as appropriate, the program work breakdown structure and the program organizational structure. 4. Identify the company organization or function responsible for controlling overhead (indirect costs). 5. Provide for integration of the program work breakdown structure and the program organizational structure in a manner that permits cost and schedule performance measurement by elements of either or both structures as needed. Planning, Scheduling and Budgeting
6. Schedule the authorized work in a manner which describes the sequence of work and identifies significant task interdependencies required to meet the requirements of the program.
7. Identify physical products, milestones, technical performance goals, or other indicators that will be used to measure progress.
8. Establish and maintain a time-phased budget baseline, at the control account level, against which program performance can be measured. Initial budgets established for performance measurement will be based on either internal management goals or the external customer negotiated target cost including estimates for authorized but undefinitized work. Budget for far-term efforts may be held in higher level accounts until an appropriate time for allocation at the control account level. On government contracts, if an over target baseline is used for performance measurement reporting purposes; prior notification must be provided to the customer.
9. Establish budgets for authorized work with identification of significant cost elements (labor, material, etc.) as needed for internal management and for control of subcontractors.
10. To the extent it is practicable to identify the authorized work in discrete work packages, establish budgets for this work in terms of dollars, hours, or other measurable units. Where the entire control account is not subdivided into work packages, identify the far term effort in larger planning packages for budget and scheduling purposes.
11. Provide that the sum of all work package budgets plus planning package budgets within a control account equals the control account budget.
12. Identify and control level of effort activity by time-phased budgets established for this purpose. Only that effort which is unmeasurable or for which measurement is impractical may be classified as level of effort.
13. Establish overhead budgets for each significant organizational component of the company for expenses which will become indirect costs. Reflect in the program budgets, at the appropriate level, the amounts in overhead pools that are planned to be allocated to the program as indirect costs.
14. Identify management reserves and undistributed budget.
15. Provide that the program target cost goal is reconciled with the sum of all internal program budgets and management reserves. Accounting Considerations
16. Record direct costs in a manner consistent with the budgets in a formal system controlled by the general books of account.
17. When a work breakdown structure is used, summarize direct costs from control accounts into the work breakdown structure without allocation of a single control account to two or more work breakdown structure elements.
18. Summarize direct costs from the control accounts into the contractor's organizational elements without allocation of a single control account to two or more organizational elements.
19. Record all indirect costs which will be allocated to the contract.
20. Identify unit costs, equivalent units costs, or lot costs when needed.
21. For EVMS, the material accounting system will provide for: • Accurate cost accumulation and assignment of costs to control accounts in a manner consistent with the budgets using recognized, acceptable, costing techniques. • Cost performance measurement at the point in time most suitable for the category of material involved, but no earlier than the time of progress payments or actual receipt of material. • Full accountability of all material purchased for the program including the residual inventory. Analysis and Management Reports
22. At least on a monthly basis, generate the following information at the control account and other levels as necessary for management control using actual cost data from, or reconcilable with, the accounting system: • Comparison of the amount of planned budget and the amount of budget earned for work accomplished. This comparison provides the schedule variance. • Comparison of the amount of the budget earned the actual (applied where appropriate) direct costs for the same work. This comparison provides the cost variance.
23. Identify, at least monthly, the significant differences between both planned and actual schedule performance and planned and actual cost performance, and provide the reasons for the variances in the detail needed by program management.
24. Identify budgeted and applied (or actual) indirect costs at the level and frequency needed by management for effective control, along with the reasons for any significant variances.
25. Summarize the data elements and associated variances through the program organization and/or work breakdown structure to support management needs and any customer reporting specified in the contract.
26. Implement managerial actions taken as the result of earned value information.
27. Develop revised estimates of cost at completion based on performance to date, commitment values for material, and estimates of future conditions. Compare this information with the performance measurement baseline to identify variances at completion important to company management and any applicable customer reporting requirements including statements of funding requirements. Revisions and Data Maintenance
28. Incorporate authorized changes in a timely manner, recording the effects of such changes in budgets and schedules. In the directed effort prior to negotiation of a change, base such revisions on the amount estimated and budgeted to the program organizations.
29. Reconcile current budgets to prior budgets in terms of changes to the authorized work and internal replanning in the detail needed by management for effective control.
30. Control retroactive changes to records pertaining to work performed that would change previously reported amounts for actual costs, earned value, or budgets. Adjustments should be made only for correction of errors, routine accounting adjustments, effects of customer or management directed changes, or to improve the baseline integrity and accuracy of performance measurement data.
31. Prevent revisions to the program budget except for authorized changes.
32. Document changes to the performance measurement baseline. An abridged EV system for Tier 2 investments essentially employs 10 of the ANSI/EIA Standard’s 32 criteria to the program’s management. 10 Criteria for Tier 2: EVM Criterion 1: Define authorized work elements for the program. A work breakdown structure (WBS), tailored for effective internal management control, is commonly used in this process. EVM Criterion 2: Identify the program organizational structure, including the major subcontractors responsible for accomplishing the authorized work, and define the organizational elements in which work will be planned and controlled. EVM Criterion 3: Provide for integration of the company’s planning, scheduling, budgeting, work authorization and cost accumulation processes and, as appropriate, the program WBS and organizational structure. EVM Criterion 6: Schedule the authorized work in a manner that describes the sequence of work and identifies the significant task interdependencies required to meet the requirements of the program. EVM Criterion 7: Identify physical products, milestones, technical performance goals or other indicators used to measure progress. EVM Criterion 8: Establish and maintain a time-phased budget baseline at the control account level against which program performance can be measured. Initial budgets established for performance measurement will be based on either internal management goals or the external customer-negotiated target cost, including estimates for authorized (but incomplete) work. Budget for long-term efforts may be held in higher level accounts until it is appropriate for allocation at the control account level. On government contracts, if an over-target baseline is used for performance measurement reporting purposes; prior notification must be provided to the customer. EVM Criterion 16: Record direct costs consistently with the budgets in a formal system controlled by the general books of account. EVM Criterion 22: At least monthly, generate the following information at the control account and other levels as necessary for management control using actual cost data from, or reconcilable with, the accounting system: The amount of planned budget versus the budget earned for work accomplished. This comparison provides the schedule variance. The amount of the budget earned versus the actual (applied where appropriate) direct costs for the same work. This comparison provides the cost variance. EVM Criterion 27: Develop revised cost estimates at completion based on performance to date, commitment values for material and estimates of future conditions. Compare this information with the performance measurement baseline to identify variances at completion important to company management and any applicable customer reporting requirements, including statements of funding requirements. EVM Criterion 28: Incorporate authorized changes in a timely manner, recording the effects in budgets and schedules. Base changes on the amount estimated and budgeted to the program organizations. Term | Definition | Contract Data Requirements List (CDRL) | An element of the contract that specifies the data submittal requirements. | Contract Performance Report (CPR) | The Contract Performance Report (CPR) presents the cost and schedule data for the current period as well as in a cumulative format. Formats 1 and 5 provide the HHS IT Investment Manager the insight needed to manage the investment. Format 1 is a WBS-oriented contract report. Costs are organized by WBS element at a level pre-determined by the HHS IT Investment team. Format 5, Variance Narrative, is a problem analysis and variance-oriented report. It provides explanations for cost and schedule variances that have exceeded thresholds. It provides a written explanation as to why the variance occurred, as well as written descriptions on how the contractor plans to resolve the cause of the variance. Examples of the CPR Forms 1-5 are provided in the CPIC guide. | Data Item Description (DID) | Data Item Description contains the format and content preparation instructions for the data product generated by the specific and discrete task requirements as delineated in the contract. | Earned Value (EV) | EV quantifies the amount or volume of work completed to date, and is commonly known as the Budgeted Cost of Work Performed (BCWP). When compared to the planned value (Budgeted Cost of Work Scheduled) and its actual cost (Actual Cost of Work Performed), EV provides an objective measure of schedule and cost performance. | Earned Value Management (EVM) | EVM is a methodology that integrates a program’s work scope, schedule, and resources to enable government and contractor management to objectively track program progress throughout the project’s life cycle. Please refer to the ANSI/EIA Standard 748-A for additional information. | Earned Value Management System (EVMS) | EVMS is the integrated set of processes, applications, and practices that follow the guidelines in the ANSI/EIA Standard 748-98. The guidelines describe the attributes of an effectively integrated cost, schedule, and technical performance management system. | EVM System Certification | EVM System Certification is the process to determine that the proposed EVM System being used for a specific investment fully complies with the ANSI 748-A-1998 Standard. | Integrated Baseline Review (IBR) | An IBR is intended to verify the technical content and realism of the related performance budgets, resources, and schedules. It should provide a mutual understanding of the inherent risks in the offerors’/contractors’ performance plans and the underlying management control systems, and it should formulate a plan to handle these risks. | Integrated Master Schedule (IMS) | The IMS is developed for the HHS IT Investment so that tasks and milestones are clearly defined. It is updated regularly to identify IT investment elements that are behind as well as those ahead of schedule. The IMS maps directly to the CWBS enabling the investment management team a single point of reference for all activities. | Performance Measurement Baseline (PMB) | The PMB is the time-phased budget plan against which contract performance is measured. It is formed by the budgets assigned to scheduled cost accounts and the applicable indirect budgets. It equals the total budget less management reserve and undistributed budget. Once the PMB is frozen or established, cost and schedule changes must be processed through formal change control procedures. Authorized changes must then be incorporated into the PMB in a timely manner and reflected in both budgets and schedules. |
Acronym | Definition | ANSI/EIA | American National Standards Institute-Electronic Industries Alliance | CDRL | Contract Data Requirements List | CO | Contracting Officer | COTR | Contracting Officer’s Technical Representative | CPIC | Capital Planning and Investment Control | CPR | Contract Performance Report | DID | Data Item Description | DME | Development Modernization and Enhancement | EVM | Earned Value Management | EVMS | Earned Value Management System | FAR | Federal Acquisition Regulation | HCA | Head of Contract Activity | HHSAR | HHS Acquisition Regulation | IBR | Integrated Baseline Reviews | IMS | Integrated Master Schedule | NDIA | National Defense Industrial Association | PMB | Performance Measurement Baselines | WBS | Work Breakdown Structures |
[1] HHS Memorandum Monthly Reporting of Earned Value Cost and Schedule Variances, January 31, 2005. [2] HHS Memorandum Team-Based Earned Value Management Guidelines, June 16, 2005. [3] HHS, Charles Havekost, CIO Memorandum Team-Based Earned Value Management Guidelines, June 16, 2005. [4] OMB Memorandum M-05-23 Improving Information Technology (IT) Project Planning and Execution, August 2005. [5] HHS Memoranda dated August 18, 2005, entitled: FY 2007 Project Management Qualification Status Instructions; and July 20, 2006, entitled: FY 2008 Update to Project Management Qualification Status, Project Level and High-Priority Designations, and Submission of IT Exhibits to OMB, and all attachments. [6] FAR Case 2004-019, Federal Acquisition Regulation Earned Value Management System (EVMS), Federal Register, Volume 70, Number 67, April 8, 2005. [7] HHS Memorandum Team-Based Earned Value Management Guidelines, June 16, 2005.
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