EARNED VALUE MANAGEMENT SYSTEM INTERPRETATION HANDBOOK (EVMSIH) Office of Project Management Oversight and Assessments (PMOA) U.S. Department of Energy Washington, DC September 30, 2015 Table of Contents TABLE OF FIGURES 4 FOREWORD 5 INTRODUCTION 6 1.1 PURPOSE OF EVMSIH 6 1.2 EVM POLICY 6 1.4 CONTENT AND FORMAT OF THE EVMSIH 8 1.5 GENERAL TOPICS TO UNDERSTAND GUIDELINE INTENT 10 SECTION 2.0 ORGANIZATION (GUIDELINES 1-5) 12 Guideline 1 – Define the WBS 13 Guideline 2 – Define the Project OBS 22 Guideline 3 - Integrate Subsidiary Management Processes 29 Guideline 4 – Identify Overhead Management 39 Guideline 5 - Integrate WBS/OBS to Create Control Accounts 40 SECTION 3.0 PLANNING, BUDGETING AND SCHEDULING (GUIDELINES 6-15) 49 Guideline 6 – Scheduling Work 51 6.A Subsection – IMS Content 51 6.B Subsection - IMS Structure 70 6.C Subsection - IMS Validity 91 6.D Subsection - IMS Status 99 Guideline 7 - Identify Products and Milestones for Progress Assessment 111 7.A Subsection - Schedule Technical Accomplishments 111 7.B Subsection - Schedule Change Traceability 120 Guideline 8 - Establish the Performance Measurement Baseline (PMB) 122 8.A Subsection - PMB Development 122 8.B Subsection - Summary Level Planning Packages (SLPPs) 139 Guideline 9 - Authorize and Budget by Cost Elements 144 9.A Subsection - Work Authorization 144 9.B Subsection - Elements of Cost 149 1 9.C Subsection - WP Budgets 150 Guideline 10 - Determine Discrete Work and Objective Measures 155 10.A Subsection - WP Planning 155 10.B Subsection - WP Status 170 10.C Subsection - Planning Packages 175 Guideline 11 - Sum WP/PP Budgets to Control Account 180 Guideline 12 - Level of Effort (LOE) Planning and Control 182 Guideline 13 –Establish Overhead Budgets 189 Guideline 14 - Identify MR and UB 190 14.A Subsection – Management Reserve 190 14.B Subsection - Undistributed Budget 195 Guideline 15 - Reconcile to Target Costs 199 SECTION 4.0 ACCOUNTING (GUIDELINES 16-21) 202 Guideline 16 - Record Direct Costs 202 16.A Subsection – Accounting Accumulation and Reconciliation with Reporting 204 16.B Subsection – Accounting Reconciliation With Source Systems 214 16.C Subsection – Accounting Documentation 221 Guideline 17 - Summarize Direct Costs by WBS Elements 224 Guideline 18 - Summarize Direct Cost by OBS Elements 229 Guideline 19 - Record/Allocate Indirect Costs 233 Guideline 20 - Identify Unit and Lot Costs 234 Guideline 21 - Track and Report Material Cost/Quantities 237 SECTION 5.0 ANALYSIS AND MANAGEMENT REPORTING (GUIDELINES 22 – 27) 255 Guideline 22 - Calculate Schedule Variance and Cost Variance 255 Guideline 23 - Analyze Significant Variances 268 23.A Subsection - Variance Analysis Policy Aspects 268 23.B Subsection - VAR Content 275 23.C Subsection - VAR Analysis 279 Guideline 24 - Analyze Indirect Cost Variances 287 Guideline 25 - Summarize Performance Data and Variances for Management Reporting 288 Guideline 26 - Implement Corrective Actions 293 2 Guideline 27- Maintain Estimate at Completion 301 27.A Subsection - EAC Process or General Expectations 301 27.B Subsection - CAM monthly EAC Review 311 27.C Subsection - Project Manager/Total Project Monthly EAC 318 27.D Subsection - Comprehensive EACs 323 SECTION 6.0 REVISIONS AND DATA MAINTENANCE (GUIDELINES 28-32) 339 Guideline 28 – Incorporate Changes in a Timely Manner 340 28.A Subsection - Incorporate Negotiated Changes 340 28.B Subsection - Authorized Unpriced Work 348 Guideline 29 – Maintain Baseline and Reconcile Budgets 352 29.A Subsection - Freeze Period Definition and Restrictions 353 29.B Subsection - Change Reconciliation Content 359 29.C Subsection - Changes to Open WPs 369 29.D Subsection - Logs 372 Guideline 30 – Control Retroactive Changes 376 Guideline 31 – Prevent Unauthorized Revisions 388 Guideline 32 – Document PMB Changes 392 SECTION 7 – INDIRECT GUIDELINES (GUIDELINES 4, 13, 19, 24) 400 Guideline 4 - Identify Overhead Management 402 Guideline 13 - Establish Overhead Budgets 414 Guideline 19 - Record/Allocate Indirect Costs 424 Guideline 24 - Analyze Indirect Cost Variances 430 APPENDIX A – ACRONYMS AND ABBREVIATIONS 439 APPENDIX B – DEFINITIONS AND SOURCES 442 APPENDIX C – REFERENCES 452 APPENDIX D – PRODUCTION AND MANUFACTURING UNIQUE ASPECTS 453 3 Table of Figures Figure 1 – WBS Example .....................................................................................................................17 Figure 2 - WBS and OBS Integration and Control Account (CA) .........................................41 Figure 3 - Schedule Hierarchy ...........................................................................................................70 Figure 4 – Activities Supporting a WP ............................................................................................70 Figure 5 Schedule Granularity ...........................................................................................................71 Figure 6 - EVMS Requirements – Source PMOA EVM Training Snippet 1.1 ............... 116 Figure 7 - Example IMS to Accounting Calendar Days ........................................................ 125 Figure 8 - Cost Hierarchy ................................................................................................................. 126 Figure 9 - OTB Implementation .................................................................................................... 128 Figure 10 - Format 1 of the CPR ..................................................................................................... 129 Figure 11 - Format 1 of the CPR ..................................................................................................... 131 Figure 12- QBD Example ................................................................................................................. 170 Figure 13 - Apportioned Effort Example ..................................................................................... 172 Figure 14 - Factoring Example without Freeze Period .......................................................... 177 Figure 15 - Impact of LOE Comingling ...................................................................................... 187 Figure 16 - Estimated Actuals Example ...................................................................................... 213 Figure 17 - Freeze Period Example ............................................................................................... 354 Figure 18 - Freeze Period Changes ................................................................................................ 356 Figure 19 - Single Point Adjustment Approaches ..................................................................... 383 Figure 20 - TAB Illustration ............................................................................................................. 390 Figure 21 - Indirect Rate Illustration ............................................................................................ 400 Figure 22 - Indirect Rate Illustration 2 ......................................................................................... 410 4 FOREWORD Earned Value Management (EVM) is one of DOE’s and industry's most powerful project management tools. Government and industry project managers use EVM to assess cost, schedule and technical progress on projects. A key aspect is the ability to capture physical technical progress verses the planned schedule and cost as an early warning indicator of performance. This supports proactive decision-making as they navigate the day-to-day constraints and risks that are inherent in all DOE capital asset projects. With respect to use of EVM on capital asset projects subject to DOE Order 413.3, the Office of Project Management Oversight and Assessments (PMOA) is the prime authority for EVM policy, oversight, and governance across the DOE. To be effective, EVM practices and competencies must be integrated into the project manager’s acquisition decision-making process; the data provided by the EVM System (EVMS) must be timely, accurate, reliable and auditable; and the EVMS must be implemented in a disciplined manner consistent with the 32 Guidelines contained in the Electronic Industries Alliance Standard-748 EVMS (EIA-748) (see App. C - References). The DOE EVMS Interpretation Handbook EVMSIH is the basis for defining and assessing EVMS compliance to the EIA-748 Guidelines. It was developed in collaboration with DOE and contractor EVMS experts, and based extensively on the complete EVM historical body of knowledge documents from industry and various Government organizations as well as DOE unique situations/conditions. The DOE EVMSIH consolidates the necessary elements from existing EVM body of knowledge documents into a single source for EVM interpretation within DOE to ensure consistency of expectations, implementation, and assessment. The following strategies support the intended uses of the document: 1) Standardization of the expectations of an EVM compliant system 2) Standardization of the EVM compliance and surveillance review assessment process 3) Serve as a benchmark for contractor System Descriptions 4) Serve as the foundation for effective contractor self-certification and internal surveillances 5) Serve as an effective baseline to measure corrective action 6) Serve as a training tool for both the DOE Federal staff and DOE capital asset contractors 5 INTRODUCTION 1.1 Purpose of EVMSIH Earned Value Management (EVM) is a widely accepted industry best practice for project and project management that is used across DOE,