Chapter 19: Earned Value Management:
Execution
Page 270 GAO-20-195G Cost Estimating and Assessment Guide
EVM detail planning continues until the program is complete. Rolling
wave planning gives the contractor flexibility for planning the effort in
detail and allows for incorporating lessons learned. Work may be planned
by calendar dates, for example, in 6-month increments; all effort beyond 6
months is held in a planning package. Each month, near-term planning
packages are converted to detailed work packages to ensure that 6
months of detailed planning are always available to management. This
continues until all work has been planned in detail and the program is
complete. However, rolling-wave planning based on calendar dates may
result in insufficient detail. A best practice is to plan the rolling wave to a
design review, test, or other major milestone rather than an arbitrary
period, such as 6 months.
Continually planning the work supports an EVM system that will help
management complete the program within the planned cost and proposed
schedule. This is important because EVM data are essential to effective
program management and can be used to answer basic program
management questions such as those in table 25.
Continue EVM until
the Program is
Award Fee Criteria
Best practices indicate that award fee
criteria should motivate the contractor to
effectively manage its contract using EVM
to deliver the best product possible. For
example, programs should use criteria that
reward the contractor for:
• integrating EVM with program
management,
• establishing realistic budgets and
schedules, and estimates of costs at
completion
• providing meaningful variance analysis,
• performing adequate cost control, and
• providing accurate and timely data.
In addition, experts agree that award fee
periods should be tied to specific contract
events like preliminary design review rather
than monthly cycles.
It is bad management practice to use EVM
measures, such as variances or indexes, as
award fee criteria, because they put
emphasis on the contractor’s meeting a
predetermined number instead of achieving
program outcomes. Award fees tied to
reported EVM measures may encourage
the contractor to behave in undesirable
ways, such as overstating performance or
changing the baseline budget to meet
variance thresholds and secure potential
profit. These actions undermine the benefits
to be gained from the EVM system and can
result in a loss of program control. For
example, contractors may front-load the
performance measurement baseline or
categorize discrete work as level of effort,
with the result that variances are hidden
until the last possible moment. Moreover,
tying award fee criteria to specific dates for
completing contract management
milestones, such as the IBR, is also bad
practice, because it may encourage the
contractor to conduct the review before it is
ready.
Source: GAO | GAO-20-195G