Beyond the baseline

Delivering assurance to customers and project sponsors is essential when it comes to allaying fears of project overrun. David Bright of BMT Sigma looks at adding value to the baseline review.

Earned Value Management (EVM) was established in the late 1960s to ensure disciplined project management systems were developed to give consistent reporting across projects and enable early warning and action on problems. It is a system of project control, based on a structured approach to planning, cost control and performance measurement. EVM integrates project scope, time and cost objectives by establishing a baseline plan against which performance can be measured.

EVM turns conventional business systems upside down by concentrating on the work to be done on a project rather than costs. Traditionally, cost is managed and work is a measure. With EVM, work is measured and cost is an element of the measurement metric. In the most successful implementations, it is used as a project management early warning system, enabling managers to identify problems in their infancy when management redirection has the greatest potential to prevent cost overruns or schedule delays.

The cornerstone of any EVM System (EVMS) is the baseline plan. This baseline is called the Performance Measurement Baseline (PMB) and is the basis for all reporting, comparison and control.

Clearly, to provide confidence to customers and senior management, a method of assurance is required to ensure the accuracy of the PMB. The Integrated Baseline Review (IBR) is widely recognised as an important step in assuring that a robust PMB has been established; that an EVMS is in place to monitor performance against the PMB; and that project staff have the knowledge, skills and attitude to manage the system.

The IBR, along with System Reviews and Demonstration Reviews, provide significant benefit to both the customer and project sponsor in the form of improved confidence that the project will deliver, and deliver within anticipated costs.

The IBR is conducted against well established standards; usually ANSI-748A, but others such as AS-4817 and the Earned Value Management: APM Guide for the UK can be applied. Additionally, there are many sources of guidance on the conduct of IBRs. These have been honed by EVM practitioners over several years, serving to make the process efficient and to maximise the assurance benefits from the review.

Despite the maturity of the process, experience of conducting IBRs on behalf of the UK Ministry of Defence (MoD) and Security Services has highlighted certain limitations to the standard IBR.

The first limitation relates to the scope of the IBR. When conducting reviews against the criteria of ANSI-748A, it is possible for a project to achieve compliance without achieving the full benefit of an EVMS. As a consequence, to maximise the benefit of the review, it is very important to have a clear understanding of the intent behind the 32 criteria of the ANSI-748A.

Experience shows that the close interaction of project control processes, the toolsets in place to support these processes, and the knowledge, skills and attitudes of staff involved with performing the project control functions are critical to maximise the benefits of an EVMS. It is also very important that the behaviours of Project Sponsors and Directors are appropriate to take advantage of information and forecasts provided by EVM reports.

It has been found to be an advantage, when conducting reviews, to measure additional performance beyond the criteria of the ANSI-748A standard. This limitation has been recognised by the Defence Earned Value Management Implementation Group (DEVMIG) in that all IBRs conducted against ANSI-748A on behalf of the MoD apply an additional three criteria concerning project risk management. However, even further additional areas of performance should also be considered.

Broadening the scope of the review to cover systems engineering and requirement management (for example) can improve significantly the assurance benefit offered by the IBR. If this broader approach is taken, it is very important to make sure that there are experienced members of the review team to comment on these broader areas of scope.

Another limitation involves obtaining the assurance benefits of an IBR when a project is not being delivered within an EVM environment.

This situation is quite common. Despite a policy across many government departments that mandate the use of EVM, the particular elements of the project control system are often casualties of contract negotiations. Additionally, there are many projects that fall below the thresholds for cost, risk or strategic importance and as a result, EVM is not a mandated requirement. Also, there are some government departments that do not recognise the value of EVM and do not include it in contract terms and conditions for projects.

Achieving assurance in these scenarios is a challenge, but the following approach can provide the desired level of customer and senior management confidence. The suggestion is to use the IBR approach, but apply it to a different set of standards. For example, instead of reviewing an EVM based project control system against the ANSI-748A standard, a review could be conducted comparing the project management practices being used to deliver a project against BS 6090. Similarly, other sources of good practice could be used; PRINCE2, CMMi, APM BoK, for example. In this scenario, the review would be conducted against good or best practice rather than the particular criteria of an EVMS standard.

To use this alternative approach effectively, the criteria to be used in the review need to be established. Fortunately, it is often the case that the criteria are very similar to those examined within a conventional IBR.

Standard EVM Terminology

BCWS Budgeted Cost of Work Scheduled (How much work should have been done)

BCWP Budgeted Cost of Work Performed (How much work has actually been done)

ACWP Actual Cost of Work Performed (How much the actual work done has cost)

SV Schedule Variance = BCWP BCWS A measure of project effectiveness)

CV Cost Variance

• David Bright is a Director of BMT Sigma Ltd, a subsidiary of BMT Group Ltd. He has chaired and facilitated Integrated Baseline Reviews and offered project control advice to a range of defence and other government department programmes. He is a member of the Governance of Project Management SIG and the newly formed PPA SIG.