RE: GPCCAR on EVM
09.0 - MANAGING PROJECT PROGRESS - 09.5.3.2 THE PERIODIC PROGRESS REPORT - STEP 7: OPTION 2: REJECT THE PROGRESS UPDATE AND REQUIRE A RE-BASELINE BE PREPARED
In the event that the project as being built is “materially” or “significantly” different than what was originally planned, (and the “rule of thumb” is +/-10 variance is a “significant” variance) then we can recommend to the clients and key stakeholders that we RE-BASELINE the schedule. When Re-baselining, there are two options or approaches:
1. Option 1 - Leave the ACWP and BCWP to date UNCHANGED and only adjust the BCWS Early and BCWS Late Date Curves to reflect the changes. (+/-)
2. Option 2 - Zero Based Budgeting Method- In this method, we “close out” all the work completed to date and effectively create a new project baseline consisting of the work already done and the work remaining, and use the only known fact- ACWP to date as the starting point for the new project.
From a CONTRACTORS perspective, Option 1 is generally preferred as it enables the contractor to demonstrate the impact of the changes, while in most cases, owner’s prefer to see Option 2 as it gives them a more clear picture of what work is remaining and how it will be executed regardless of which dates have been agreed to.
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The above statements regarding the Re-baselining options are wrong and misleading.
1. GPCCAR on EVM completely misses the concept of formal re-programming, the Over-Target-Baseline and Over-Target-Schedule. It only mentions the confrontational approach to require a mandatory Re-Baselining.
a. Re-programming is a sensible approach when Re-Baselining is falling behind and there is no mutual agreement on all pending time and cost issues, a common scenario in construction jobs.
b. Formal re-programming does not changes the contractual conditions as Re-baselining might do.
c. http://www.acq.osd.mil/evm/docs/OTB-OTS%20Guide%20121205.pdf
2. The DOD provides five basic options for Re-baselining the Over-Target-Baseline and Over-Target-Schedule, four of them must be mutually agreed while there is one that does not require mutual agreement, DOD 3.5.6.2.1 Eliminate all Variances. The remaining DOD options require cumbersome manipulations of the Baseline schedule, are error prone.
a. 3.5.6.2.1 Eliminate all Variances
b. 3.5.6.2.2 Eliminate the Schedule Variance (SV) Only
c. 3.5.6.2.3 Eliminate the Cost Variance (CV) Only
d. 3.5.6.2.4 Eliminate Selected Variances
e. 3.5.6.2.5 Retain All Variances
3. GPCCAR on EVM fails to mention that for fixed price contracts the DOD is against use of EVM no matter the contract price. The DOD recognizes that the recommendation to use EVM is very dependent on contract type.
a. http://www.goaztech.com/media/documents/evmigoct06.pdf
b. 2.2.3.7 Exclusions for Firm Fixed Price (FFP) Contract Type. The application of EVM on FFP contracts and agreements is discouraged, regardless of dollar value.
c. EVM is dependent on Activity Based Costing. Due to the amount of activities on construction CPM Schedules, ABC method is considered impractical by Construction Contractors.
4. To say Option 1 is generally preferred as it enables the contractor to demonstrate the impact of the changes is wrong.
a. None of these Delay Analysis Methodologies Contemporaneous or Forensic depends on EV theories; otherwise the DOD recommendation to avoid EVM on Fixed Price Contracts would be stupid as well as AACE® International Recommended Practice No. 29R-03 that makes no single reference to EV.
b. DOD 3.5.6.2.1 option is superior because of how cumbersome the Baseline Schedule manipulations can be.
c. No single local contractor voluntarily uses formal EVM procedures. I suppose it is only required on DOD non-fixed price jobs, very rare around here. If you know of a single such job let me know, I want to see this rare bird.
5. GPCCAR on EVM misses to mention the inherent limitations of EVM theory when applied to CPM Schedules.
a. http://wbia.pollub.pl/files/83/attachment/1914_3_2.pdf
b. Many organizations worldwide adopted Earned Value as a standard management tool (e.g. US Department of Defense [13], an Australian standard [14]). It is described in practically all management handbooks and incorporated into management software. However, if to be implemented, the method should be used according to its purpose: it is not a tool for forecasting; instead, it facilitates progress monitoring, determination of project status (on time? to budget?), identification of potentially negative occurrences and a rough estimate of their combined effect on the project’s outcome. If the project is to be managed consciously, these occurrences should be then investigated into by means of more accurate methods.
c. http://www.planningplanet.com/guild/library/project-control-methodologies
d. http://www.spiderproject.com/images/img/pdf/Project%20Control%20Methodology.pdf
e. http://earnedschedule.com/Docs/Schedule%20is%20Different.pdf
f. http://www.redorbit.com/news/health/1436113/earned_value_management_clog...
From a CONTRACTORS
Raf, given that the US DoD's
Raf, given that the US DoD's track record on their projects is less than exemplary (See research by Glenn Butts from NASA http://www.build-project-management-competency.com/wp-content/uploads/2010/09/Glenn.Butts-Mega-Projects-Estimates.pdf and Bent Flyvbjerg in particular) I don't encourage people to hold the US DoD out as exemplary examples of what others should be doing.
My perspective is as a small to medium sized, hard money CONTRACTOR where my own money is on the line if the project "succeeds" or "fails". In that context, I have put forward what I know WORKS and works well.
IF others want to put forward alternatives, we have made provision in the GPCCAR to accomodate DIFFERING opinions or intepretations of "best tested and proven" practices. My only concern with what the DoD does is whether it actually works or not and if it does NOT then how can it qualify as a "BEST TESTED AND PROVEN" practice?
BR,
Dr. PDG, Jakarta, Indonesia
Paul, You said - I also
Paul,
You said - I also disagree vehemently that EVM is inconsistent with Activity Based Costing.
You said - Bottom line- keep in mind the rather abysmal track record of the US government in general in terms of bringing their projects in on time and within budget.
You said - Anyway, if you have something you feel is really MISSING or flat out WRONG then by all means, fill in the appropriate form and submit it for review by the relevant Technical Committee.
You said - Bottom line- keep in mind the rather abysmal track record of the US government in general in terms of bringing their projects in on time and within budget, which is why I wrote the two papers I did.
You said - Rafael, what sector do you work in?
You said - The big difference I see between the DOD is that as a private sector contractor, I apply risk mitigation at the ACTIVITY level and not at the PROJECT level, with the premise that by "managing the details" (the activities) the "big picture" will take care of itself.
Paul,I think that discussions
Paul,
I think that discussions on EVM and risk analysis are interesting not only to the relevant Technical Committee members and so I ask Rafael and anyone who will decide to join do it at planningplanet forum openly. I expect that these members read forum discussions and may contribute.
And could you please explain what do you mean by applying risk mitigation on activity level?
BR,
Vladimir
Hmmmm....... Rafael, what
Hmmmm....... Rafael, what sector do you work in? As noted I have been using EVM as a "hard money" (FFP) private sector contractor since the 1970's and when combined with Activity Based Costing, it works out just great for risk management? Also keep in mind that at least the contracting I did (in the NE and Alaska) we were working on single digit EBIT margins meaning we has close to zero "buffer" to cover UNKNOWN risk events.....
The big difference I see between the DoD is that as a private sector contractor, I apply risk mitigation at the ACTIVITY level and not at the PROJECT level, with the premise that by "managing the details" (the activiities) the "big picture" will take care of itself.
FWIW, I've also used Earned Value FORECASTING as the basis upon which to calculate the pricing of claims.....
Anyway, if you have something you feel is really MISSING or flat out WRONG then by all means, fill in the appropriate form and submit it for review by the relevant Technical Committee.
BR,
Dr. PDG, Jakarta
Hi Rafael,As a private
Hi Rafael,
As a private sector, hard money contractor, I totally DISAGREE with the US government saying that EVM is inappropriate for FFP contracts. For 20+ years I used EVM for projects where my own money was on the line if they "failed" or "succeeded", as do nearly all the contractors I know. For more on this, here are two published articles related to this topic:
1) http://pmworldjournal.net/wp-content/uploads/2013/04/pmwj9-apr2013-giammalvo-do-small-contractors-comply-ANSI748-FeaturedPaper.pdf
2) http://pmworldjournal.net/article/practical-look-at-how-private-sector-entrepreneurial-contractors-use-earned-value-and-what-lessons-learned-this-might-offer-for-state-and-federal-governments/
Having said that, I do agree that when we update Module 9, it would be appropriate to expand the section to cover the nuances between Rebaselining/Re-Programming/Recovery Schedules, explaining the DoD.
I also disagree vehemently that EVM is inconsistent with Activity Based Costing. The best example against what you are saying is the RS Means Cost Databases, which for as long as I have been in the business have been ACTIVITY BASED, just as demonstrated in Modules 7 and Module 8.
Bottom line- keep in mind the rather abysmal track record of the US government in general in terms of bringing their projects in on time and within budget, which is why I wrote the two papers I did. Explained another way, I don't think holding the US Government out as an example of "best teested and proven practices" is such a great idea, which is why we looked more to the GAO as they are very critical of how many US government organizations use or apply EVM.
Enjoyable debate, none the less...
BR,
Dr. PDG, Jakarta
When an additional view to
When an additional view to traditional scheduling reports are desired there is a tendency to ask for RA risk analysis using statistical methods and not require EVM because in addition to the many reasons why many of us reject formal EVM it is incompatible with risk analysis.