"A good metric lets you see if your technical people are doing the right things and doing them well. Moreover, it lets them know too."

--Lawrence H. Putnam
and Ware Myers

Track Earned Value

Earned value began as a government initiative in the 1960s but has now been taken over by industry, which sets commercial standards for applications. In fact, many businesses are using earned value with other commercial suppliers, even in a fixed-price environment. Earned value has come to be such an important concept in the Department of Defense, that its adoption and use is called for in DoD 5000.2R. Although only required in DoD for cost-type contracts with over $70M R&D and $300M procurement, it has value for many other contract types, including fixed price.

Earned value calls for a shift in management focus. Rather than pay attention to the input side of the management equation, earned value forces attention to the output side. Earned value measures progress not in terms of resource expenditures (i.e., people and time consumed), but in terms of products produced. Simply put, earned value puts the focus on results. While not a new concept, earned value has become easier to use because the tools available to support it have improved. In addition to voicing support for earned value management tools, managers must actually use them in day-to-day management throughout the community. The program manager must physically and personally use earned value to track progress, ask questions, and brief superiors. He must demonstrate to those performing the work that earned value tools will help them succeed, not simply be used in a punitive manner as evidence of their incompetence.

The essence of earned value is that success is achieved in small steps, with each step producing a defined product. The products combine to yield the end product. Earned value management forces program managers to concentrate on discrete steps. At the heart of earned value is the task activity network. A detailed task activity network identifies each discrete task that must be accomplished, along with the required resources (people, dollars, and equipment). Inputs required to begin each task, exit criteria used to verify task completion, expected task outputs/products, and the process used to transform the inputs into outputs are all identified. The activity network is analyzed and adjusted to ensure that resources are not overbooked, that task durations are not more than about two weeks, and that tasks are scheduled in the proper sequence.

In addition to identification of tasks, earned value requires management to identify how task completion status will be tracked. The schema for taking earned value credit must be identified and the customer must approve the schema. A data collection plan that identifies who, when, what, and how data will be collected for the various tasks is required.

The threat to earned value management is the level-of-effort (LOE) task. While a task may be best described as an on-going, continuous effort, the philosophy of earned value management views a task as something that produces a product. Because the product is concrete, it is easy to identify when it is finished. An LOE task does not enjoy this luxury. Functions that have historically been considered LOE must now be associated with discrete tasks. For example, program management is often considered LOE. Using earned value, program management functions, such as review/approval of a deliverable report, must be identified as a discrete task required to produce the product.

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