- EVM is too expensive to implement.
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It is expensive to implement EVM when no formal EVM system is in place. Some companies spend $1 million to $2 million to put a good system in place, including efforts such as performing an initial assessment, developing an implementation plan, creating compliance documentation, implementing hardware and software, establishing good cost, scheduling, and reporting systems, conducting training, and doing certification preparation.
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Many companies already have some elements in place and can get certified with less effort. Even so, most of the time this is a significant investment that can translate instead into several hundred thousand dollars. Something as simple as a spreadsheet workbook with worksheets for the plan and time-stamped snapshots of status to date can serve as an effective EVM function for smaller projects.
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On the other hand, companies that do establish a good EVM system realize better program management decision making and have fewer cost and schedule overruns and potentially greater repeat business. It is hard to measure what those gains amount to, but some experts have noted that the return on investment is reasonable. The smaller the company, the more difficult EVM is to implement because upfront costs may be prohibitive with their need to maintain adequate cash flow to manage the business.
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Another perspective is that although an EVM system is expensive to implement, not having one may cost an organization future work because of the inability to compete with others that have a system in place.’The cost of not getting potential business is also expensive. Balancing must be done to implement what is required in a manner that is sensitive to the corporate bottom line, taking into account the long-term effects and consequences of the implementation decision.
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- EVM is not useful for short-term, small-dollar projects.
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A certain amount of judgment must be applied to determine the viability and utility of a full-blown EVM system for short-term or small-dollar projects. Because typical EVM reporting is monthly, a program of 6 months or less cannot use trends (at least three data points) effectively; it would be half way completed before any trending could be adequately used, and then corrective action would take another data point or two to realize. Weekly reporting would impose significantly higher resource demands and costs that might not be acceptable for small-dollar contracts.
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Even on shorter, less costly projects, a well-structured, planned, and executed program is desirable. In some cases, for every large and high visibility program there are 10 to 20 small programs. Failure of these small programs to execute on time or within costs is as unacceptable as on large projects even though the relative impact is smaller. Several small programs can add up to a substantial loss of money and can result in the loss of larger projects or future awards if a pattern of overruns is evident.
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EVM can be tailored and ingrained into the culture to ensure that program cost and schedule goals are met for smaller or shorter projects; smaller projects will benefit from having the work scope defined by a WBS and having a detailed plan and schedule for accomplishing the work. Small-dollar projects still need to have a baseline in place to manage changes and variances and risk management plans to address issues.
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On the corporate side, losing money is not an acceptable option, even if the program’s visibility is lower. Poor performance on a smaller program can damage a company’s reputation just as much as poor performance on a large, highly visible program. Although a full EVM system is not required for small, short-term projects, the need to apply the fundamentals of EVM may still pertain. EVM is a good, practical program management tool.
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- EVM practices go above and beyond basic program management practices.
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Our experts noted program managers who claim that they have been successfully managing their projects for years without EVM. Yet, when pressed to say how they ensure that cost and schedule goals are met, and how they manage their baselines along with changes, they inevitably resort to EVM by other means.
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The biggest difference for successful program managers is the formality and rigor of EVM. Our experts noted that program managers who do not use a formal EVM system generally do so because they are not required to. Those who are forced to use formal EVM practices often do so grudgingly but warm up to it over time. Those who have been using formal EVM for years often do not know how they got by without it in the past.
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A second difference between formal EVM practices and basic program management practices is the uniformity of data and formatting of information that makes it possible to draw comparisons against other like projects. Successful program managers who do not use a formal EVM system invariably have their ‘own system’ that works for them and does much of the same things as a formal system. Unfortunately, it is difficult to compare their systems to other projects, to do analysis, or to validate the data for good decision making. How much management visibility these systems have for timely decision making is debatable. In many companies, this would hinder the company with respect to problem identification and corrective actions, and limit management and executive visibility into projects.
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The rigor and discipline of a formal EVM system can ensure a certain continuity and consistency that are useful, notwithstanding the availability and turnover of knowledgeable personnel. When staff leave the job for an extended time, the structure of the system makes it possible for another person to take over for those who left. The new staff may not have the personal knowledge of the specific program, schedule, or EVM data, but understand enough about EVM to know how to interpret the data and evaluate the processes (planning, budgeting, executing, controlling, change control) because of this disciplined structure.
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EVM practices go beyond the basics and have greater rigor and formality. This ensures uniform practices that are auditable (or verifiable) and consistent with other entities for relative comparison and benchmarking. Without this formality, it would be much more difficult to draw industry standard benchmarks and comparisons for improvement and guidance.
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- EVM is merely a government reporting requirement.
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One benefit of a formal EVM system in government reporting is that the end-product occurs after organizing, planning, authorizing, executing, change management, analysis, and controlling are completed. The reports give management as well as government a view into the health of a program to make sure taxpayer money is being used judiciously.
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While it makes for program visibility for the government, it is primarily intended as a systematic approach to help manage a program. Reports are only as good as the data and the processes that support them; EVM serves more as a set of mandated government program management tools with reporting as a by-product.
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- Reports are a key product of EVM.
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It would be short sighted to focus on reporting without recognizing the need for other subsets of an EVM system to provide reliable and auditable data. What comes out is a byproduct of what goes in and how well it is maintained.
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EVM reporting is intended to provide reliable information for timely decision making to maximize the probability of successfully executing a program. It is a program management ‘process tool set’ that helps ensure that proven management techniques are used to run projects.
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Where EVM is institutionalized, management uses reports to identify significant variances and drill down into areas of exception (management by exception) for corrective actions and decision making. When EVM is ingrained, reports are anticipated and discussed by senior management.
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- EVM is a financial management tool.
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EVM is best viewed as an enhancement to traditional financial management. EVM requirements came about largely to reduce the high percentage of cost and schedule overruns that ended up delivering to the government a product that was technically inferior.
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EVM enhances the traditional financial management tool by adding visibility of actual performance for budgeted tasks. This dimension of information coupled with the traditional planned budget versus actual costs allows for better forecasting of final costs, as well as early warning of performance variances for timely decision making and corrective actions.
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Because EVM is a more accurate mechanism for predicting costs than the traditional financial models, it is more reliable for determining funding requirements and use.
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- EVM data are backward looking and too old to be useful.
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Some metrics produced by an EVM system are backward looking and show performance to date, both cumulative and by period. They can help identify past trends that can be used to predict costs and schedule performance, along with the final cost of a program.
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Presenting standard graphics is a best practice for reporting EVM trends and status to senior management.
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Using EVM, management has the ability to make timely decisions and adjustments as needed to affect the final outcome of a program.
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- Variances EVM reveals are bad and should always be avoided.
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Variances are expected because programs rarely perform exactly to plan. Variances are neither good nor bad but simply a measure of how much actual performance has varied from the plan.
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Variance thresholds quantify an acceptable range of deviation. Variances that exceed a threshold are worthy of further inspection to determine the best course of action to minimize any negative impacts to cost and schedule objectives.
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Variances can indicate one or more of the following: how well the program was planned, how well changes to the baseline plan are being implemented, how much planned and unplanned change has occurred since inception, and how well the program is being executed.
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- No one cares about EVM data.
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If line managers and the program manager ignore EVM data, they may not achieve cost and schedule goals. EVM data help them make the necessary midcourse adjustments based on timely and accurate program status data.
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- EVM does not help with managing a program.
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As noted in the previous nine items’especially 3, 7, 8, and 9’when managing a program, it is important to identify and manage resources to ensure that over- or under-allocations do not exist. EVM helps identify these conditions.
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It helps identify and manage program risks and funding requirements to ensure that funding shortfalls do not surprise the program manager.
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- My program is using Agile software development and we do not need EVM to manage the program.
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Agile development emphasizes working software over detailed documentation, but a program still needs to develop data to report program status and performance metrics.
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Many software-intensive programs also have other elements, such as hardware and program support, which also need to be tracked with performance metrics and should be managed with EVM.
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