Thursday, April 30, 2015

Earned Value and Fixed Price - Yes You Can.

Earned Value Management is at the core of any project management framework as the method of integrating cost, schedule and scope to assess the progress of a project.  The framework has been remarkably stable over at least the past 40 years, from its earlier incarnation as the Cost/Schedule Status Report (C/SSR), and since it pretty much conforms to common sense [we can talk about Schedule Variance in another post], it is quite likely that the Pharaohs had something similar. Tens of thousands of project managers have been trained in EVM, and it is quite impossible to pass any certification test without knowing at least the basics.  And it is Federal law that any contract over $1 million must be managed using EVM.  Yet at seminar after seminar, certified PMs report that they are not using EVM.  In the public sector it is resisted with a passion that most people had assumed bureaucrats do not possess.

Sure, most people, even trained PMs, and all organizations vastly prefer to evade being held accountable. That's why we need objective reporting systems in the first place.  Let's just deal with the argument that EVM does not apply to fixed-price work (which most Federal contract work is supposed to be) or to level-of-effort work (which almost all Federal contracts are).  Once you take those two approaches off the table, particularly if you buy into the nonsense that a labor-hours contract is "fixed price" because the unit price per hour is fixed, there's not much left. But what "everybody knows" is quite untrue.  Saying that something cannot be done does not really mean that it is impossible, just that you want me to think that it is impossible so I stop asking you to do it..

The argument against using EVM for fixed-price work is that the cost is accrued only at the point that the delivery is completed, at which point the cost is always equal to the negotiated price (unless you are selling airplanes to the Defense Department).  Likewise with level-of-effort work, where people just show up and do whatever the client wants, there is no contractual relationship between the completion of deliverables and the cost of the service (which is the reason that at the Federal level such contracts are illegal bwah-hah-hah).  At, at a certain level of disingenuity, that's true.  But you don't have to set up this work in an unaccountable way, unless of course you are just trying to avoid accountability.

Assume for the moment that both the vendor and customer are interested in a quality product (or service) at a reasonable cost.  Do we really think that the vendors let their people just do whatever until a few weeks before the contract delivery period expires?     Of course not.  There are interim milestones and estimates of the work needed to achieve them; in fact, those had to be developed to come up with the proposed cost of the work in the first place.  Except for the very smallest increment of delivery, there is no reason at all that we cannot establish intervening milestones and the value associated with achieving those milestones.  That value does not have to be the costs incurred to date; doing so merely converts the work back to cost-based.  And please do not allow the vendor (or a lazy contracting officer) to set up straight-line progress payments; that, too, converts the work to cost-based.  What are you going to do when after the 11th month it finally becomes clear that the deliverable will not arrive on time?  Now instead of 100% of the payment (highly motivational), then vendor only has 9% of the total payment at risk.  Good luck pressuring them into timely delivery at that point.  You should determine the value of the milestones and pay for those deliveries only when they are complete and acceptable - and if they are late or do not perform as required, you don't pay for them at all.  Now you have deliverables that have schedules and a planned value (which, notice, does not have to be a planned cost-to-date).

You can get a simple template that allows you to produce an EVM graph and metrics in this manner (see the Solutions tab).

Tune in next time for a discussion of EVM in a Level-of-Effort situation.

Friday, April 10, 2015

Trust but verify - heavy on the verify

If a decision happens but nobody writes it down, does anybody hear it?
If a decision is published but nobody checks to see that it is being followed, will anybody follow it?

Why can't you see the glass as half-full once in a while?
We've got good people here. We told them what we wanted to do. They don't need to be baby-sat.

If everyone was in agreement we would just go ahead and do it.
The reason we have highly-paid executives to decisions is that there are conflicting points of view as to the best course of action.
Therefore, whatever they decide is going to differ from what a good proportion of the next layer or two in the organization would have done if left to themselves.

At the same time, most executives didn't get where they are by having no political instincts, which means that quite often they say things that they don't really believe because that seems like the proper thing to say at the time.
So it's entirely possible that a decision isn't really a decision, more like a pronouncement to kick the real decision down the road a while.
All very Byzantine.

So what do people do while trying to get on with life in their smaller part of the organization?
If the executives don't have the gumption or the stamina to make sure that their decisions are carried out, it sends a pretty strong signal that they don't care too much either.
Then the people who didn't agree with the decision in the first place won't be very deterred from giving it at best lip-service until they find out whether this initiative is anything more than the fad of the month.
The first sign that the decisions aren't really decisions is that the deciders don't really want anyone to know what they decided or why.
It removes their latitude later for changing their minds.
Of course, in the short run, it also means that it is more likely that the decision will be ignored.

If our governance decision authorities (whether boards or individuals) are serious about having their decisions respected and followed, then:

  • Write down what was decided in clear terms: Who will do what by when with what resources

  • Include enough information to understand why the decision was reached and any issues that were raised<\li>
  • Publish the decisions to those who are affected - at all levels. That way intermediate managers can't slow-roll or pocket-veto.

  • Follow up on the progress of the actions that were decided on

  • When it makes sense to do so, change a decision and publish the fact that it has been changed

  • Assuming that the PMs and/or staff have done due diligence before offering up solutions for the board to approve, then the approved course of action should be achievable.
    If the intermediate managers can't or won't get things done, find someone who will.
    Preferably someone who was rooting for the original decision. It will greatly improve the quality of analysis in the future.