Earlier this year the Joint Space Cost Council (JSCC) released the first in a series of reports on the cost impacts of government earned value management requirements. The JSCC study team collected data from organizations across the spectrum of government contracting, from government program offices to contractors, to identify 15 key cost drivers associated with implementing and executing an earned value management system.
They then compiled the results of a survey to identify which of those cost drivers were impacting projects the most. The results of the report support what most people involved in the industry might have intuitively known; but now we have supporting data that will hopefully provide a catalyst for addressing change.
The three major themes for what drives the cost and complexity of an earned value management system are:
- The Control Account level – There is always a tendency for the customer PMO to want more detail and the contractor to want less. The key is understanding that there is a cost associated with data, so the more and lower level data required the higher the costs. The report dives into costs arbitrary level definitions and environments where every bit of possible data needs to come through the earned value reporting. There’s no silver bullet for WBS/reporting level. The right answer is, it still depends on the project, but the cost/benefit of lower and lower data requirements needs to be considered.
- Volatility in scope and funding – Just as there is a cost impact on the technical side from constant changes in scope (or lack of scope definition) there is also direct impact on the amount of management that needs to be applied to execute those changes programmatically. Changes require surges in effort on the project management side so the more surges there are, the higher the costs will be. Similarly, the recent environment of short funding extensions drive up costs because they trigger the effort to update plans, reporting, etc. associated with funding. Ironically, a practice driven by tight budgets at the federal level is diverting more of that budget to overhead instead of product.
- The frequency and level of reviews – No one disputes the value of reviewing baselines and project performance, but the frequency of those reviews, sometime driven by multiple customer stakeholders, and application of the guidelines during those reviews can be a major driver of costs. The report notes that sometimes reviews such as the Integrated Baseline Review, originally intended to get both customer and contractor on the same page for what the plan to deliver is, can devolve into a process audit. In that case, minor data discrepancies drive major findings; irrespective of the impact of the data error has on the reporting or execution of the project. It also finds that these reviews are most value add when executed during the right time of a project lifecycle instead of based on an arbitrary window. Sometimes 60 days, often noted in contracts, is not the ideal time to hold an IBR, but projects will conduct one to meet the requirement. This can lead to having to repeat the IBR later in the project when it is more applicable.
The report goes on to identify recommendations for addressing the cost drivers affecting each of the three themes. Most of the recommendations will take time to come to fruition as they impact stakeholders across the spectrum and will likely need to be fleshed out in more detail for final implementation. However, as with any improvement process, the first thing you need to do is identify the problems and this report is an important step in that direction.
To read the full report click here.