Selecting Earned Value Management (EVM) Tools

Many of our clients are looking to implement an Earned Value Management System (EVMS) to satisfy reporting requirements for EVM on US federal contracts (FAR 52.234-4, DFAR 252.234-7001, or equivalent), whether they have an existing requirement, or potential future requirement.

Other clients are interested in improving project performance or implementing better project-based financial forecasting. In all cases, Earned Value Management (EVM) tools are necessary to integrate budgeting, scheduling, performance and actual cost data. Because of differing requirements, and the wide range of software options on the market, organizations will benefit from a structured process for selecting their EVM tools. This approach should consider all the organizational objectives for the system.

Some of these objectives may include or be influenced by:

• Existing contractual or anticipated contractual reporting requirements
• If EVM will be applied to more than one program/contract
• The type of work being managed (i.e. R&D, software development, engineering, manufacturing, procurement)
• Types of systems to be interfaced with (i.e. Accounting, PLM, MRP, Procurement, etc.)
• If the system will be used to manage investment projects and/or non-EVM required contracts
• Other corporate/enterprise program management improvement needs, such as
  • Enterprise Resource Management
  • Project Portfolio Management
  • Proposal Estimating/Pricing
  • P&L forecasting and analysis
  • Project-based financial forecasting
  • Cash-flow analysis & funds management
  • Risk analysis

The first step in selecting an EVM tool is to clearly document the organizational goals and objectives as they relate to project management, including any contractual requirements. The next step is to understand the needs of your user community, including current or future project management processes that may influence tool selection. Finally, look at any IT standards and integration needs to be considered. This process should lead to a comprehensive set of requirements that include more than just meeting the EIA 748 guidelines. These requirements can be used to create a short-list of commercial off-the-shelf (COTS) EVM tools to evaluate and possibly do a pilot test with.

• Critical Path Scheduling Engine
• Cost Management Tool / EV Cost Processor
• Business Intelligence Tools
• Integration with Accounting / ERP and other business systems

It is worth noting that while there is a lot of overlap in these tools, the capabilities are often not sufficient to meet all requirements with a single software product. For example, most critical path scheduling engines provide blended rate calculations to manage project costs, but none of them can handle the complex indirect rates, fiscal period calendars and “freeze” periods required to be EIA 748 compliant.

Some of these EVM tools may already exist in an organization. In many cases, competing tools may be in sporadic use in different parts of the company. If standardization is one of the goals, consider what is already in use and why. If the existing tool cannot meet the new requirements, be sure to have a plan to transition users that does not disrupt existing program operations. In most cases, changes to accounting/General Ledger systems are not needed, though the level of detail for cost collection, and some procedures related to time-collection and accruals, may need to be adjusted.

EVM Tool Market Segmentation

When determining what types of earned value management software and tools you need, it can be very helpful to segment the types of products on the market. Most project management tools that claim Earned Value (EV) capabilities are only capable of performing basic EV calculations based on a percent complete of the budget. They do not have the full cost management capabilities required for EIA 748 compliance. Some vendors advertise products targeted toward Integrated Program Management (IPM), which is a set of related disciplines that includes cost estimating, budgeting, scheduling, earned value performance measurement, and risk management. Some vendors offer a suite of tools that work together to fulfill all your IPM needs.

When choosing IPM/EVM tools, organizations often want to simplify the integration of the software components. An intuitively obvious approach would be to buy all the components from a single vendor. A word of caution, however; In the software world, acquisition is very common. Project management tools from a single vendor may not be integrated any better than tools from separate vendors. This might lead you to consider a “Best of Breed” approach.

The leading EVM tools on the market

Critical Path Scheduling Engines 

Pinnacle has reviewed over 40 project management / scheduling tools over the last several years. The list below contains the most typical seen in EVM systems.

• Microsoft Office Project / Project Server
• Oracle Primavera P6 / EPPM
• Deltek Open Plan

Cost Management Tools / EVM Cost Processors

While the details will differ from vendor to vendor, cost management tools can be described as providing the following kinds of capabilities that are not generally provided by project / portfolio management or scheduling tools:

• Financial Calendar / fiscal period support
• Element of Cost (EOC) support
• Direct rate table calculations with escalation rules
• Indirect rate table calculations with escalation rules
  • Overhead
  • G&A
  • Cost of Money
  • Fee
• Earned Value Techniques
  • Level of Effort
  • Apportioned Effort
  • Multiple discrete rules
• Work Authorization and Change Control
• Budget Logs with tracking and reconciliation of contract budget types
  • Distributed Budget
  • Undistributed Budget
  • Management Reserve
  • Total Allocated Budget
  • Control Budget Base
  • Authorized Unpriced Work
  • Over-Target Baseline / Re-programming Adjustments
• Recognition of Control Accounts, Work Packages & Planning Packages
• Ability to track budgets and actual costs at summary levels
• Independent ETC/EAC forecasts
• Support for federal IPM reporting requirements (UN/CEFACT XML, JSON, etc.)

In addition to the features above required for full EIA 748 compliance, some cost management tools go further to provide additional project-based financial analysis and controls. Features such as financial forecasting, funding and cash-flow management, capital portfolio management and investment control, contract and procurement management and so forth may determine how the tool fits into your overall organizational needs. Some tools are highly configurable to meet a variety of project cost management needs, while others are limited primarily to executing EVM processes using EIA 748 guidelines as a framework.

The four EVM tools listed below are the most commonly used in an EIA 748 compliant environment. There are other tools on the market that may be able to work with proper configuration. While there are advantages and disadvantages for each of the tools. Most of the decision criteria will be based on an organization’s current EVM capabilities, existing infrastructure, and current and future project management goals.

• EVMS forProject
• Deltek Cobra
• ProjStream MaxTeam
• DecisionEdge CloudEVM

For an expanded list of Earned Value Management (EVM) software, please see our Overview of the Most Common EVMS Cost Engines article.

Business Intelligence Tools

Earned Value Management is more than just a method for reporting project performance to stakeholders. A good EVMS provides actionable data to help program managers make timely decisions to help keep a program on track. A good business intelligence tool is critical to being able to analyze program cost and schedule performance data in ways that provide meaningful insight into where the problem areas are and how best to address them. Many federal agencies use EV-specific business intelligence tools to analyze the contractor data supplied to them, so it makes sense to use similar tools to review your own data.

The Business Intelligence space has grown in the last decade, and this has had a transforming effect on EVM Systems. Where there used to be one or two reporting dashboards that focused on EV data, there are now several, each with a variety of capabilities. Some of the capabilities that could be found in modern EV Business Intelligence tools are:

• Integration with multiple business systems
  • Allows for drill-down capability into the source of cost & schedule problems
  • Timesheet data
  • Material/Procurement data
  • Accounting/Financial information
  • Schedule data – from the Integrated Master Schedule, MRP or other sources
  • Risk Registers
  • Etc.
• Two-way interfaces, allowing for PM/CAM input of variance analysis or other data
• Work Authorization and Change Management capabilities
• Document libraries and workflows
• Data integrity / data quality analysis
  • DCMA 14-point schedule analysis
  • DCMA data driven compliance metrics
  • Artificial intelligence to flag suspect data (i.e. performance with no actuals, zero budget work packages, etc.)
• Advanced forecasting and trend analysis

There are many business intelligence tools on the market, some of which may already be in use by your organization. While most of these can be customized to meet the needs of EV data analysis, this can be a time-consuming, expensive effort to build and maintain. The following COTS products are designed to support EV data analysis out of the box, and integrate with some or all of the EV cost management tools listed above.

• Encore Analytics Empower
• Deltek wInsight
• SNA Proteus Envision
  

EVM Integration Considerations

There are number of integration considerations that affect EVM tools product selection. Most of them will involve the cost management tool. Understanding your needs for integration before selecting a tool is a critical piece of your selection process. To understand your integration needs, look at your cost management tool capabilities. These include integration with:

• Scheduling Engines
• Finance Systems/ERP
• Manufacturing/MRP systems
• Procurement management systems
• Estimating tools
• Product Life-cycle Management (PLM)

Documenting Your Requirements

Pinnacle has defined a number of steps to help you document your EVM tool selection requirements and EVM Implementation plans. The following links to other articles describe these.

• Evaluating Project Management Software
• Critical Areas for Earned Value Management System Implementation Success

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