EVM Goes Mainstream

Earned Value Management (EVM) is the 21st Century term for a project management discipline that has been around for more than 40 years. It has its roots in the Program Evaluation and Review Technique (PERT) methodology developed by Booz Allen and Hamilton for the Polaris Submarine program in the late 1950s. By the late 1960s, the Department of Defense had developed its own very rigorous standards for program evaluation referred to as the Cost and Schedule Control Systems Criteria (CSCSC), often called the (CS)2 Criteria or just CS2.

DOD’s standard was not widely applied even within the Armed Services and never outside the Department. The problem was the cost. The CS2 standard was probably over specified and that contributed to the cost of implementing it. But the real cost driver was the custom nature of most of the software systems built to do the calculations and produce the reports. The CS2 discipline was so expensive to implement and operate that DOD prohibited its use on R&D programs of less than $20 Million and production programs of less than $315 Million.

The advent of “commercial, off the shelf” (COTS) scheduling and EVM software tools in the 1990s began to mitigate the cost issue. With DOD’s cancellation of the CS2 instructions in 1999 and adoption of the ANSI 748(a) EVM standard – an electronics industry developed methodology – EVM began to look like a discipline that could be cost-effectively applied to almost any program.

By the way, from 1968 when the CS2 instruction was first promulgated until 1999 when it was cancelled, less than 100 companies achieved validation of their systems.

OMB really started the EVM ball rolling with a 2004 white paper suggesting that widespread application of EVM techniques could save significant amounts of money for the taxpayer and making eight specific recommendations, among them being:
· Standardize on one methodology (ANSI 748) across Government
· Mandate it on all cost-type contracts over $20 Million
· Permit it on other contract types and contracts of smaller size
· Enforce compliance through contract provisions and actually read the reports

In July 2006, the Federal Acquisition Regulation (FAR) was amended to implement all of the recommendations but one. The regulations left it to each Agency to set its own threshold for when EVM would be mandatory. Most agencies have set theirs at $20M. None have set a higher threshold. A few have set theirs as low as $5M.

Fast forward to today.

Just this morning I was reading through the highlights of Grant Thornton’s 13th Annual Survey of the Government Contractor Industry. This survey represents findings from well over 100 companies who do business with the Federal Government. Of the companies surveyed, 27% reported that they had contracts which require an EVM system. I believe this is the first time this question has been included in the survey. Certainly if that question had been in the survey two years ago, or even last year, the response would probably have been near zero.
Very few initiatives in Government progress this fast. Of course, so far we are seeing mostly the impact of a new contractual requirement, not results from a new program management discipline. Only time will tell whether it can achieve the cost savings that were claimed. And there are some near term barriers to real effectiveness.

I talk frequently with program managers who work in this discipline day in and day out. It’s clear to me that the number one problem they face is availability of people with the right skill sets and it’s not a problem that will be solved overnight. But progress is being made there, too.

All in all, a standard EVM approach across Government seems like an idea whose time has come – maybe even one that could work.