What percentage of your projects have earned value management system (EVMS) requirements? For a typical company with government contracts, roughly 80 percent of their projects are below the threshold for EVMS compliance reviews ($100M) or reporting ($20M). These smaller projects are often cost incentive or firm fixed price contracts, that when taken a whole, are equally important to the company’s bottom line. How are you maintaining management visibility and control into that portfolio of projects to ensure project objectives and profit margins are met?
Perhaps you purchased earned value management (EVM) cost management software for contracts with EVMS requirements. Project managers of smaller projects are often reluctant to use the EVM cost management software because it is seen as burdensome and overkill for their needs. There is a perceived process penalty and a forced level of project control rigor that is unnecessary for smaller projects.
Rather than a single point solution for projects with EVM requirements, a better alternative is a robust cost management software tool such as ProjStream’s MaxTeam. MaxTeam can easily scale to match project control and contractual requirements. The project manager determines the set of time phased cost data they need for their project.
For a short duration, low risk project with routine time and material (T&M) work scope, the project manager may just need budget, actual cost, and estimate to complete (ETC), and estimate at completion (EAC) data. For a high risk or more complex project, the project manager may need a complete set of cost data including budget, earned value, actual costs, estimated actuals, ETC, and EAC.
The objective is to create and maintain reliable time phased cost data regardless of the size and scope of the project that management at all levels can use to assess a variety of work and financial performance indicators. This could be for a single project or portfolio of projects. Management needs timely information so they can make fact-based decisions and quickly make course adjustments to ensure project objectives and financial targets are met.
There is also more to maintaining visibility into project performance associated with EVM such as schedule and cost variances or performance indices. MaxTeam was designed for management teams to also capture bookings, funding profiles, revenue, payments, and cash flow to produce a range of financial performance metrics to ensure profit targets are being met. Combined with ProjStream’s BOEMax, management can also assess resource capacity and demand across pipeline and active projects.
Leveraging Cost Management Software Tools
The ability to effectively use cost management software tools is the process people follow. The software should morph to support the processes you have in place. The project control process should also be scalable. For example, when the only process document is an EVM System Description written just for large projects with EVM contractual requirements, that doesn’t help a project manager of a small T&M project. What are the basic project control requirements for that type of project?
Project managers need a project control framework that can scale to align with project characteristics such as scope of work, duration, complexity, risk factors, and contractual requirements. A common process foundation with optional components to fit different types of projects helps to ensure project teams create and maintain useful project management data following preferred practices.
For example, a minimal requirement for all projects may be to produce a time phased budget plan, record bookings, establish the funding profile, collect actual costs, and maintain ETC data so management has reliable EAC data. Should the project manager want to produce earned value metrics, they implement the applicable process components so the project control team identifies completion criteria to objectively measure completed work and calculate earned value.
The goal is to establish an optimal level of project control with a light management layer.
Establishing a Consistent Set of Data for Visibility and Control
How do you establish a consistent set of reliable project control data so you can produce a routine set of performance metrics for trend analysis? Here are a few suggestions to help you get started.
- Figure out your minimal requirements to maintain cross-project visibility and control. What do you want to measure? What data is required to produce the metrics you want? For example, perhaps you want visibility into:
Resource capacity and demand for pending new contracts and portfolio of existing projects. Consider establishing a common set of resource roles for all proposal and active projects. Proposal and project managers can then map their project specific resources to these resource roles. This can help you manage the demand for critical resources, get resources on board for a new project, or move resources between projects.
Project bookings, funding profiles, and EAC. This data is useful for keeping track of contract funding effective dates and when a project is likely to hit a percent spent point.
Receipt of project payments and cash flow trends. This data can help you assess whether monthly expenses compared to money coming in is positive or negative for a portfolio of projects.
Revenue and profit margins. This data is useful for determining which projects are meeting profit targets. This can help you fine tune your strategy for new business development, pricing proposals, or make other adjustments such as changing how work is performed or which resources are doing the work to improve profit margins.
Schedule and cost performance analysis. To calculate the standard EVM metrics, projects need to measure completed work to determine earned value. These performance metrics are useful for identifying elements of work that need management attention and doing an independent analysis of a project manager’s EAC. Is their EAC realistic?
Create a standard project data coding framework to organize the data. For example, you could require all projects to use a standard set of code fields for the work breakdown structure (WBS), contract line item number (CLIN), responsibility assignment, work package ID, resource assignment, and element of cost. This enables cross-project analysis because you have a common set of code fields.
Establish a scalable project control process to help project control teams create reliable data needed for project portfolio analysis. You could create a decision tree or a matrix of project characteristics to help project managers determine the appropriate level of data detail as well as which project control components are required for their project. For example, a short duration, routine T&M contract doesn’t need a risk register or change control board that would be required for a complex, high risk project.
Start with realistic data driven cost estimates. Why is this important? This provides project control teams with the quantifiable basis to create a realistic, executable budget baseline that is in line with the proposal’s cost estimate and known risk factors. This helps to prevent those ugly surprises where actual costs are consistently higher than the proposal estimated costs and budget plan which impacts the company’s profit margins. Creating quality data from the start is a virtuous cycle. Proposal teams need useful performance and actual cost historical data to substantiate their cost estimates that provide the foundation for the project control team to quickly create their budget plan after contract award. This also helps the project control team maintain their ETC data and create credible EAC data.
Implement MaxTeam, an easy to use cost management software tool to create and maintain time phased cost data and related bookings, funding, cash flow, and revenue data for project portfolio analysis. Regardless of the size and type of project, MaxTeam can easily morph to support your project cost management requirements.
Why Limit Yourself with EVM Software?
There is an alternative to siloed EVM cost management software. ProjStream’s BOEMax, MaxTeam, and MaxBoard software provide an end-to-end solution for proposal and project cost management with an interactive cross-project performance analysis dashboard. Call us today to schedule a demo.