1.1 Concepts of Earned Value Management. Earned Value Management (EVM) is a program management tool that integrates the technical, cost, and schedule parameters of a contract. During the planning phase, an integrated baseline is developed by time phasing budget resources for defined work. As work is performed and measured against the baseline, the corresponding budget value is “earned”. From this earned value metric, cost and schedule variances can be determined and analyzed. From these basic variance measurements, the program manager (PM) can identify significant drivers, forecast future cost and schedule performance, and construct corrective action plans to get the program back on track. EVM therefore encompasses both performance measurement (i.e., what is the program status) and performance management (i.e., what we can do about it). EVM is program management that provides significant benefits to both the Government and the contractor.
1.2 EVM and Management Needs. A fundamental requirement for managing any major acquisition system is insight into the contractors' performance specifically the program management and control. Proper EVM implementation ensures that the PM is provided contractor performance data that:
• relates time-phased budgets to specific contract tasks and/or statements of work (SOW)
• objectively measures work progress
• properly relates cost, schedule, and technical accomplishment
• allows for informed decision making and corrective action
• is valid, timely, and able to be audited
• allows for statistical estimation of future costs
• supplies managers at all levels with status information at the appropriate level, and
• is derived from the same EVM system used by the contractor to manage the contract.
1.3 Uniform Guidance. This document provides uniform guidance for DoD PMs responsible for implementing EVM. It also provides a consistent approach to tailoring EVM based on the particular needs of the program that is both cost effective and sufficient for integrated program management. Consistent application of this guide across all DoD acquisition commands should result in improved program performance and result in greater consistency in program management practices throughout the contractor community. Other federal agencies are encouraged to adopt this guide and adapt it as necessary to each agency’s EVM policy.