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.
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