Government program management policies and processes are subject to change, especially when a new presidential administration’s management philosophy differs sharply from its predecessor. Public servants are responsible for implementing the changes as effectively and efficiently as possible. But as the changes filter through the many levels of political and career managers in the bureaucracy, “effectiveness and efficiency” are subject to multiple interpretations.
As the senior program analyst for contract performance management in the Office of the Secretary of Defense from 1982-99, I served under three presidents, six secretaries of defense, and twelve principal executives (all political appointees – comptrollers and under secretaries of defense). Political appointees’ tenures on average are brief and development cycles for defense programs are long, just one of many factors that contribute to seesaw policy swings. Effective executives achieve good results by fostering dialogue with their career staff and stakeholders both within and outside government to understand what is working in their area of responsibility and what needs improvement.
Throughout my years in the Pentagon I was the senior OSD analyst for contract performance measurement, reporting to Mr. Gary Christle, a career member of the Senior Executive Service who enjoyed excellent relationships with his career and political superiors and received several top-rank SES awards. Mr. Christle guided the evolution of Earned Value Management through numerous changes, both externally and internally driven.
When established as DoD policy in 1967, EVM was meant to be the integrating tool for technical, cost and schedule performance measurement of major defense contracts. But EVM implementation exceeded its intended purpose as time passed. Policy became disconnected from practice. Earned value came to be regarded both in government and industry as a contract financial reporting requirement, with increasingly stringent processes demanded by DoD review teams that audited the contractors. In the early 1990s Mr. Christle initiated a series of reforms designed to restore management value to EVM.
The implementing guidance for the “three-legged stool” supporting DoD program management requirements included MIL-STD 499 for systems engineering (the technical leg), and DoD instructions governing cost estimating and EVM and its associated performance reports (the cost leg) and contract funds reporting (the financial leg). The cost and financial pieces, along with quarterly reporting to the Congress in the Selected Acquisition Report, were known collectively as “Selected Acquisition Information and Management Systems.”
Policy and oversight for the functions represented by the three legs belonged to three different organizations. Systems engineering was in acquisition, cost estimating was in Program Analysis and Evaluation’s Cost Analysis Improvement Group, and cost and financial management and reporting requirements were assigned to Mr. Christle’s office in the Defense Comptroller (later transferred to the acquisition office).
This article discusses the major changes to EVM from its DoD origins to the beginning days of the Obama Administration, with EVM now required for all agencies. More than forty years after becoming Defense policy, EVM experience is mixed. The DoD management stool is not just wobbly, it’s broken. The technical leg is missing, the financial leg is weak and the cost leg is being reconfigured as an audit leg – a trend that, if not reined in, threatens to further erode EVM’s usefulness as a proven management concept. Meanwhile, the civilian agencies are improving their management processes in response to Office of Management and Budget requirements and challenging DoD’s reputation as the leading EVM authority.
What Happened to Technical Performance?
The Clinton-Gore “Reinventing Government” agenda mandated new ways of doing business in all government agencies. Its aptly named “Hammer” award rewarded regulatory destruction on a massive scale. The Pentagon created an Acquisition Reform organization and cancelled thousands of military specifications and standards. Among them were two that governed disciplines essential to EVM-based management – MIL-STD-499 for systems engineering and MIL-STD-881 for work breakdown structures. My office owned WBS policy.
With the regulatory environment laid waste by the mass extinction of specs and standards, policy owners faced stark choices. We could appeal to the Defense Standards Improvement Council to retain the documents, convert them to another form or let them die. Because a standard program WBS is essential to define the program and to provide a framework for systematic cost collection and for setting up an EVM system, my office pursued the conversion alternative. In those heady reform days, retention simply was not an option. We didn’t waste time – ours was the first case heard by the council.
The standards council approved our proposal to create a military handbook, MIL-HDBK-881, that preserved WBS as a policy requirement at the program level and that provided guidance for contractors to extend the contract WBS. In the recurrent struggle to strike a balance between specific requirements vs. general guidance, the OSD Acquisition Reform office emphasized high-level guidance.
The systems engineering proponents took a different tack, arguing that MIL-STD-499 should be retained. When asked by the Deputy Under Secretary of Defense for Acquisition Reform why the Department needed the standard, they replied that defense contractors do not do systems engineering well. She countered with the pointed question: “Why in the world would you want to contract with such a company?”
Why, indeed? A decade later, with perfect hindsight, the situation is clearer. Failure to sustain a robust DoD systems engineering standard and the lack of effective competition as the defense industrial base shrank combined in a perfect storm. Auditors cite inadequate systems engineering as a key contributor to program failures. In the vacuum created by loss of the standard, defense EVM policy alone, with brief allusions to technical performance integration, was insufficient to maintain the balance. To restore it, the recently approved DoD Instruction 5000.02, Operation of the Defense Acquisition System, includes greatly strengthened systems engineering requirements.
EVM Reform
Defense Acquisition Reform initiatives helped to improve EVM policy and implementation. Mr. Christle did not dispute an Acquisition Reform-sponsored study finding that EVM contributed 0.9% to the 18% non-value-added cost premium that the study identified for companies doing business with DoD. However, he was able to show that fully two thirds of the 0.9% was caused by excessive EVM implementation requirements. Good management is not free. Of course it should not be excessive, but any “cost of management” pales next to the cost of program failure.
For example, the failure of the Navy’s A-12 Avenger II aircraft development program also fueled the reform initiative. Failure and crisis spark behavioral changes in government and the A-12 provided both to unprecedented degrees when the multi-billion dollar contract was terminated for default in 1991. Mired in litigation and appeals since then, the A-12 is the largest contract termination case in history – settlement costs to the eventual loser are estimated at $2.7 Billion and growing – and a profound example of EVM information not being used by industry and government managers.
By restoring EVM’s value to management and working with all stakeholders – the military departments, industry and the EVM community – measurable improvements were made to defense management during the 1990s. The A-12 successor, the F/A-18E/F “Super Hornet,” pioneered government-industry teamwork, EVM and other management reforms that contributed to the program’s exceptional acquisition success and helped bring the Department’s EVM reforms to the attention of OMB.
Leaders at OMB were surveying government agencies for best management practices to implement statutory performance requirements including the Government Performance and Results Act and the Federal Acquisition Streamlining Act. They decided that DoD was in the lead and incorporated defense EVM principles in OMB Circular A-11, Part 3 (now Part 7), “Planning, Budgeting, Acquisition and Management of Capital Assets,” in 1997.
By the end of the millennium, DoD had built a new foundation for EVM-based program management. Unfortunately it did not prove to be durable. After Mr. Christle retired from public service in 2000, his successors did not build on that foundation and reduced the level of collaboration with industry. The emphasis on management was replaced by reliance on data reporting – a return to the discredited notion that EVM is about contract reporting and oversight, not management.
Given the lack of management attention, EVM regressed. Before long, defense contracts again suffered “surprise” cost and schedule problems that attracted scathing attention from DoD and Government Accountability Office auditors. In response, DoD reinvigorated its contractor review process by beefing up the audit staff at the Defense Contract Management Agency. The auditors are resurrecting the traits of the pre-acquisition reform era: unilaterally interpreted, excessively detailed, non-value-added requirements – an overcorrection that is harming project management and government-industry relations.
A memorandum signed by the Under Secretary of Defense (Acquisition, Technology & Logistics) on January 24, 2009 may herald a long overdue correction. It assigns primary EVM policy to the Deputy Under Secretary of Defense (Acquisition & Technology) and establishes a Defense Support Team chaired by the Director of Defense Procurement and Acquisition Policy.
The team will include senior executives and flag officer representatives from OSD, DCMA, Defense Acquisition University and the military departments. Along with appropriate input from defense industry, formation of this team can go a long way toward ensuring that all stakeholders’ views are considered in formulating the policy and guidance changes that are needed to restore balance to EVM implementation.
A Word on EVM and Software
Guidance from OMB requiring application of EVM-based management to capital investment programs includes software development programs. The emphasis stems from the Information Technology Management Reform Act (Clinger-Cohen) and from strong leadership by directors of OMB’s Office of E-Government & Information Technology. No longer considered to be so “different” that normal project management disciplines do not apply, IT management will continue to benefit from incorporation into the project management mainstream.
The Growing Role of GAO
On March 2, 2009, the Government Accountability Office released the “GAO Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Capital Program Costs.” The guide was developed initially as a guide for auditors but has evolved into a resource for agencies that lack the cost estimating staff of large agencies like DoD and NASA.
The GAO guide is a comprehensive description of best practices for integrating the cost estimating, risk management and EVM disciplines. OMB Circular A-11 Part 7 and the Capital Programming Guide point agencies to the GAO guide, making this excellent new document a vital resource for the entire government – Executive Branch agencies and auditors alike. It is available at www.gao.gov – enter “GAO-09-3SP” into the search block.
Conclusion
“Change is not made without inconvenience, even from worse to better.” — Samuel Johnson 1709-1784, English lexicographer
Through more than forty years, earned value management has proved itself as the best way known to measure and manage integrated technical, cost and schedule performance – first on defense contracts and more recently on all government programs. Its promise is achieved when it is viewed primarily as a management tool. When that ideal is lost or marginalized, EVM tends to devolve to an excessive reporting and oversight requirement that further diminishes its value for management – a vicious cycle that harms management in the long run.
The state of EVM in DoD has been deteriorating for several years. Some would argue that the heightened oversight of contractors by DCMA will improve the situation. I disagree. No doubt the “accuracy” of contractor reporting will improve, but at the expense of management – in other words, DoD is repeating the mistakes that led to the wave of reforms undertaken during the Clinton-Gore era, and ignoring the lessons learned from Acquisition Reform.
Can the balance be restored? I believe the answer is a qualified “yes.” If the new DoD EVM policy is informed by an open dialogue – if DoD leaders are willing to reverse the excesses being perpetrated in the name of EVM – if OMB and GAO efforts are synergistic – we can indeed right the balance. All the pieces are in place to support the Obama Administration’s call for more openness, transparency and accountability in government. This time, we can get it right.
About the Author
Wayne Abba is an Earned Value Management expert who teams with government entities and the private sector. He also is a part-time member of the Research Staff at the Center for Naval Analyses.
Mr. Abba retired from the Office of the Secretary of Defense in 1999. He is a principal author of National Defense Industrial Association management guides that were adopted by the US Office of Management and Budget for use by government agencies and their contractors. As president of PMI’s College of Performance Management in 2002-2003, Mr. Abba began development of the Practice Standard for Earned Value Management.
Mr. Abba is a contributing author of the Government Accountability Office’s “GAO Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Capital Program Costs,” intended for use by auditors and all government agencies, and of chapters 7 (Cost) and 12 (Procurement) in the PMBOK ® Guide 4th Edition. He is on the editorial board of CrossTalk, the Journal of Defense Software Engineering.
Author Contact Information
Email: Wayne Abba [abbaconsulting@cox.net]
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