Validating the Performance Measurement Baseline and Integrated Baseline Reviews

Just as EVM supports risk management by identifying problems when there is still time to act, so an integrated baseline review (IBR) helps program managers fully understand the detailed plan to accomplish program objectives and identify risks so they can be included in the risk register and closely monitored. The goal of the IBR is to verify, prior to or soon after contract award, if the performance measurement baseline is realistic. The IBR should assist in aiding the contractor and government in mutually understanding program scope, schedule, and risks, and verify that the baseline’s budget and schedule are adequate for performing the work. Too often, programs overrun because estimates fail to account for the full technical definition, unexpected changes, and risks. Using poor estimates to develop the performance measurement baseline will result in an unrealistic baseline for performance measurement.

Conducting an IBR increases confidence that the performance measurement baseline provides reliable cost and schedule data for managing the program and that it projects accurate estimated costs at completion.

The IBR is the crucial link between cost estimating and EVM because it verifies that the cost estimate has been converted into an executable program plan. While the cost estimate provides an expectation of what could be, based on a technical description and assumptions, the baseline converts those assumptions into a specific plan for achieving the desired outcome. Once the baseline is established, the IBR assesses whether its estimates are reasonable and risks have been clearly identified.

OMB requires agencies to conduct IBRs prior to award or as soon as possible after award, and whenever there is a major modification to a program. OMB states the purposes of the IBR are to:

  • Track, manage, and report risk associated with the program;

  • Develop the risk management requirements; and

  • Identify new risks associated with the program and develop necessary mitigation/contingency strategies.

Experts agree that it is a best practice for the government and prime contractor to partner in conducting an IBR on every major subcontract in conjunction with the prime contract IBR. This practice is especially important because subcontracts can make up a substantial portion of the prime contract. The increasing roles and responsibilities assumed by subcontractors in these contracts make the accuracy of subcontractor EVM data that much more significant.

Review of the Performance Measurement Baseline

The performance measurement baseline (PMB) represents the time-phased budget plan against which program performance is measured for the life of the contract. This plan comes from the total roll-up of work that has been planned in detail through control accounts, summary planning packages, and work packages with their schedules and budgets.

The IBR examines the performance measurement baseline to determine whether the control accounts encompass all contract requirements and are reasonable given the risks. To accomplish this, the government and contractor management teams meet to understand whether the program plan is realistic. They ask:

  • Have all tasks in the statement of work been accounted for in the baseline?

  • Are adequate staff and materials available to complete the work?

  • Have all tasks been integrated using a well-defined schedule?

Since it is not always feasible for the IBR team to review every control account, the team often samples control accounts to review. To ensure a comprehensive and value-added review, teams can consider:

  • medium to high technical risk control accounts,

  • moderate to high dollar value control accounts,

  • critical and near-critical activities,

  • elements identified in the program risk management plan, and

  • significant material subcontracts and non-firm-fixed-price subcontracts.

The IBR team should ask the contractor for a list of all performance budgets in the contract. The contractor can typically provide a matrix of all control accounts, their managers, and approved budget amounts. Often called a dollarized responsibility assignment matrix, it is a valuable tool in selecting control accounts that represent the most risk. More information on how to perform an IBR is found in appendix IX.

After the PMB is validated, the team’s findings inform the program’s risk management plan and should give confidence in the quality of the contractor’s performance reports. If the PMB is not validated, there should be less confidence in the accuracy and soundness of monthly EVM reporting.

Management Processes

After the PMB is completed and validated, the focus should be on the ongoing ability of management processes to record actual program performance and detect program risks. A risk matrix and risk management plan should give management a better understanding of risks facing the program, allowing them to manage and control cost and schedule impacts. The following management processes should occur:

  • the baseline maintenance process should continue to ensure that the performance measurement baseline reflects a current depiction of the plan to complete remaining work and follows a disciplined process for incorporating changes, and

  • the risk management process should continue to document, classify, and quantify risks according to the probability that they will occur, their consequences, and their handling.

Other typical business processes that should continue to support the management of the program involve activities such as scheduling, developing estimates to complete, and EVM analysis, so that risks may be monitored and detected throughout the life of the program.