By Kim Koster, VP of Industry Marketing at Unanet
When an executive from a government contracting firm reaches out to me, seeking ideas about how they can distinguish themselves from the crowd to win more project business, oftentimes I’ll point them to the practice of earned value management and the systems that support it.
EVM happens to be one of my favorite subjects. Firms that excel at the practice not only give themselves an advantage in competing for government projects, they also significantly strengthen their project-execution credentials. When a firm can demonstrate it uses a disciplined, EVM-focused approach to project management, one that consistently produces on-schedule, on-budget outcomes, that’s the kind of differentiator that really attracts new customers and repeat business.
We’ve spent plenty of time in this space discussing how important it is for firms to have adequate business systems in place, particularly accounting systems. In fact, in the latest GAUGE benchmarking report from Unanet and CohnReznick (available for free download here), government contractors identified business system adequacy as one of their biggest audit challenges, right behind rates (see graphic below). The systems to support a strong EVM practice are among the tools firms can use to meet that challenge, for their ability to further mature a firm’s project management capabilities, and help win more business along the way.
Before we turn to the steps involved in implementing an EVM practice, let’s first explore what an EVM practice entails and why it’s a worthwhile undertaking for GovCon firms. EVM systems track the actual cost and schedule of work performed against the planned cost and schedule of that work. The specialized calculations and reports produced by an EVM system utilize transaction data from a firm’s accounting system. EVM systems are reviewed by the Defense Contract Management Agency for a determination of adequacy. While a GovCon firm can enlist a commercial auditor or consulting firm for such a review, agency contracting officers aren’t required to — and often do not — accept the findings from those reviews.
What makes the adequacy of accounting systems in general, and EVM systems in particular, a potential competitive differentiator for GovCons? The Federal Acquisition Regulation makes accounting systems a gate for cost-type contracts. However, depending on the agency, systems for purchasing, estimating and EVM also sometimes show up as requirements or gates in solicitation provisions (OASIS, CIO-SP4, etc.), with bidders earning points for systems that have been deemed adequate. An EVM system is required in about half of defense-related solicitations (see the graphic below).
For an EVM system to be determined adequate in the context of a solicitation, the contractor must demonstrate it actively uses an integrated planning and control system/process that meets the intent of all 32 EIA-748 guidelines to manage programs and projects. EVM systems are validated via an independent assessment. Depending on contract requirements, that validation could come from:
- A self-assessment by the contractor, using an internal EVM certificate of eligibility, or a similar finding by an outside firm;
- A compliance review by DCMA certifying the system is compliant; or,
- A certification from the Cognizant Federal Agency that the system complies with that agency’s EVM policy.
There’s no need to panic if your firm lacks an EVM system that’s been validated and certified. Even without one, you can still win contracts. But you likely won’t be eligible to win certain kinds of contracts. During a U.S. Department of Defense solicitation, for example, if the offeror proposes to use an EVM system that has not already been certified, the offeror must submit a comprehensive plan indicating when its will be compliant with EIA-748 EVMS Guidelines. Requirements from other agencies may differ. The graphic below refers to DOD requirements.
EVM is much more than just a way for firms to earn points to win contracts. Really, it’s an essential part of a smart, mature project management practice, providing the framework for a disciplined approach that integrates scope, schedule and cost, as well as risk. EVM reinforces planning, baselining, forecasting, claiming performance and change control discipline. It also functions as a valuable early warning system for potential cost and schedule issues within a project. And ultimately, it puts firms in a stronger position to delight customers with on-schedule and on-budget projects that lead to repeat business.
How, then, to build a strong EVM practice at your firm? Here’s a quick step-by-step guide:
1. Understand the concepts of EVM. EVM is a three-legged stool that stands on scope, schedule and cost. As impactful as EVM can be for a firm, basic EVM training can help your organization, especially project teams, understand how to apply the concepts.
2. Pick a project or projects in which to test application of EVM concepts. An internal research & development project could be a good candidate, as could a fixed-price project for which you want to maximize profit. If you have a contract that requires EVM, you will want to double down on training and process adherence.
3. Develop EVM capabilities. This comes through learning, role-based EVM training, creation of processes and selection of tools. If you win a contract that requires EVM, that education could come via a crash course.
4. Successfully apply EVM principles. Here’s where you acclimate your team to the business cadence associated with EVM activities and viewing projects through the EVM lens of scope, schedule and cost. As part of the process, be sure you’re meeting specific project requirements and expectations. A self-audit program around EVM can help to ensure the business is on track in meeting requirements and maturing in the EVM discipline.
Once EVM becomes part of your project-management approach and your organizational culture, the benefits you’re likely to realize are substantial. Project managers will better understand where they stand in their work. Your customers and executive team will appreciate having greater certainty and predictability with projects. Your firm will be able to demonstrate it has a more mature project-management approach than many of its peers. And, of course, your firm may be able to earn points for having an EVM practice — points that could mean the difference between winning and losing a contract.
Download the GAUGE Report to dive in to more GovCon metrics and see where you stand in the industry.
