Earned Value, Courting the Law

Jarndyce and Jarndyce drones on. This scarecrow of a suit has, in course of time, become so complicated that no man alive knows what it means. The parties to it understand it least, but it has been observed that no two Chancery lawyers can talk about it for five minutes without coming to a total disagreement as to all the premises. From the first chapter in the novel Bleak House by Charles Dickens. Jarndyce and Jarndyce is a fictional court case in Chancery but there is another court case that almost fits Dickens’ morbid description………

The A-12 “Avenger II” was to be a carrier-based stealth attack aircraft for the US Navy that has been in the courts since 1991. The plaintiffs (McDonnell Douglas and General Dynamics – since acquired by Boeing and Lockheed Martin respectively) sued for relief after the Navy terminated the A-12 development contract for default.

Based on the contractor’s Earned Value analysis that showed ‘catastrophic’ cost and schedule problems on this complex, multi-billion $ fixed price incentive contract, the then Sec. of Defense Dick Cheney withdrew his support for the program.

Wayne Abba was selected by the Department of Justice/Navy litigation team as a fact witness who could have an opinion about the EVM data because he had not been involved in the Government’s decision making process. Wayne testified in the 5th trial after the appellate court agreed with the government that performance (or lack thereof) was indeed an issue. His testimony helped set the stage for a reversal by the trial judge from his prior 4 decisions – a reversal that has been upheld by appellate courts since, most recently in June 2009; with further pleadings this month.

As Dickens continued…. Scores of persons have deliriously found themselves made parties in Jarndyce and Jarndyce without knowing how or why…… Fair wards of court have faded into mothers and grandmothers; a long procession of Chancellors has come in and gone out; the legion of bills in the suit have been transformed into mere bills of mortality; …… but Jarndyce and Jarndyce still drags its dreary length before the court, perennially hopeless.

This is an important decision for anyone involved in the proactive management of projects. If the US Governments position holds, reliable predictive data that clearly shows a ‘catastrophe’ in the making will allow project owners to take pre-emptive steps to protect their position. If the plaintiff contractors eventually prevail, the only safe option for owners will be to wait for the train wreck then try to pick up the pieces.

Hopefully we won’t have to wait another 18 years for an answer……….

Earned Value Confusion = No Value

I have just finished reading another article published in late 2008 where a proponent of Earned Value seems to deliberately set out to do as much damage to the general acceptance of the methodology as possible!

From its inception EV has been plagued with confusion generated by acronyms. EV ‘experts’ used to prove how knowledgeable they were by confusing business managers with a barrage of acronyms and formula. Before the turn of this Century, a decade ago, leaders in the profession recognised one of the major barriers to acceptance of EV was a general lack of understanding and sought to simplify the ‘alphabet soup’ that was making EV too hard for busy managers to understand.

ANSI EIA 748 A released in 2002, AS 4817 2003 released in 2003 and the 2000 version of the PMBOK® Guide all adopted a common, simple set of acronyms:

EV = Earned Value instead of BCWP (Budgeted Cost of Work Performed)

PV = Planned Value instead of BCWS (Budgeted Cost of Work Scheduled)

AC = Actual Cost instead of ACWP (Actual Cost of Work Performed)

These standards between them cover some 90% of the world’s Earned Value community! The intention was (and is) to demystify the process of Earned Value so managers could understand the data their project ‘controls’ staff were generating and use the information to make wise decisions. A really great idea! EV is an extremely useful and powerful tool if the data being presented to management is understood and acted upon.

What I cannot understand is why so many self professed advocates of EV are so keen to cause confusion by writing articles using the old, superseded acronyms.

• Is it to try to look clever by confusing the ‘dumb reader’?
• Is it to attempt to re-wind history back to the 1990s?
• Are they actually opposed to the general use of EV and seek to prevent its general adoption by spreading confusion?

The UK (where EV is used to a very limited extent) is the only place that still published standards that use the old acronyms. These ‘standards’ are primarily from the Association for Project Management rather than British Standards.

Surely it’s time everyone used the same acronyms for the same item in an EV article and dragged themselves into the 21st century – it’s hard enough getting EV accepted in senior management circles without so-called experts and practitioners creating excuses for ‘not understanding’ by reverting to outdated acronyms, even in the UK??

What do you think?

• To read a brief overview of EV see: http://www.mosaicprojects.com.au/Techniques.html#EarnedValue
• For papers on EV see: http://www.mosaicprojects.com.au/Resources_Papers.html#EVPM

Earned Schedule

Earned Schedule (ES) is emerging as a valuable tool in the overall management of projects. In our view, the ES methodology provides a valuable adjunct to, and a useful sanity check of, the ‘critical path’ (CPM) schedule developed for a project, for very little effort – provided the project has implemented Earned Value Management (EVM).

Using the same data as EVM, ES ‘scales’ the remaining duration of the project based on the volume of work accomplished to date compared to the planned volume, as measured by SPI(t).  SPI(t) has the potential to predict future slippages that the CPM schedule may not be indicating.

CPM schedules have two major flaws inherent in the methodology:

a.  CPM assumes all future work will be accomplished as planned. There is no ‘scaling function’ for the performance of future work similar to the EVM calculations of EAC = BAC/CPI for cost.

b. CPM schedules do not show critical path slippage if ‘float’ is being consumed. The ‘bow wave’ of delayed work eventually becomes critical (usually with disastrous consequences) but there may not be pre-warning.  (for more on scheduling see: http://www.mosaicprojects.com.au/Planning.html)

Research by Henderson and Zwikael has demonstrated that CPI and SPI(t) are closely correlated at a summary level across a range of commercial projects. This and other research suggests ES will provide a valuable management insight to help the successful delivery of projects, but whilst this debate needs to be finalised it will ultimately be determined in the marketplace.

The Earned Schedule tools are freely available from http://www.earnedschedule.com together with published papers and links to other sites.

CPI Stability Myth

There is undoubtedly the equivalent of an ‘urban myth’ in circulation within the general project management community, arising from US Defence based research from the early 1990s, that the Cost Performance Index (CPI) always stabilizes at the 20% completion and the final outcome will be within 10% of this value and usually worse. This myth has been extended by some authors to all projects in all industries; and I would suggest that this is demonstrably false in at least some circumstances. If CPI stability was an incontrovertible ‘fact’ for all projects, there would be no need for active management of the project after 20% completion!

The erstwhile peaceful halls of the PMI College of Performance Management (PMI-CPM) are resounding to an ever increasing battle between the proponents of CPI stability and newer research suggesting CPI stability is not automatic.

 

Earned Value is a very useful project management control tool mandated by many Government agencies in the USA, UK and Australia; and the PMI-CPM is one of the leading international organisations focused on providing a forum for EV practitioners. However, the migration of the EV toolset from carefully controlled major defence projects into the general PM business community is definitely creating issues.

 

The DoD research established ‘CPI stability’ on a large number of military projects. Newer research by Henderson, Zwikael (See the Fall 2008 edition of Measurable News) has found CPI stability is not a ‘given’ and it rarely exists on commercial projects. These findings have prompted a very strong response (also in the Fall 2008 Measurable News).

 

Rather than arguing over research findings, I would the next steps should be to start identifying what underlying factors cause stability in the CPI measure as evidenced by the DoD research, determine if the factors are desirable and then find ways to improve project management practice in other industries so that the desirable factors are encouraged.

 

My feeling is that when CPI stability is shown to be established, the ‘CPI Stability’ is a strong indicator of other important (but much harder to measure) factors such as stable management, stable requirements, an efficient management system, effective project culture, etc (many of which are likely to be present in major Defence projects as evidenced by the research undertaken by Christensen).  Conversely, where CPI is unstable, significant changes in the underlying project can be reasonably assumed to be occurring, either at the management level or at the requirements/scope level. These changes may be beneficial or detrimental but are undoubtedly a risk that warrants the attention of senior management.

 

If these feelings are correct, it would also be useful to develop an understanding of the usefulness of CPI instability as a risk indicator (ie, what level of instability indicates a ‘project at risk’).

 

‘Watch this space’ there are likely to be many interesting moves over the next few months!