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 [1]
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 [2]
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 [3]
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 [4]
d. http://www.spiderproject.com/images/img/pdf/Project%20Control%20Methodology.pdf [5]
e. http://earnedschedule.com/Docs/Schedule%20is%20Different.pdf [6]
f. http://www.redorbit.com/news/health/1436113/earned_value_management_clog... [7]