CASG uses the Australian Standard for Earned Value Management (AS 4817) for applicable contracts to promote better project management practices in the industry. This ensures that contract performance data is shared between the contractor and Commonwealth staff, enabling the identification and resolution of emerging problems at an early stage. AS 4817 provides the principles and requirements for implementing EVM, which integrates the cost, schedule, and technical aspects of a project. By applying these requirements, an EVM system will be established, integrating planning, scheduling, budgeting, work authorisation, accounting, and managerial control. EVM systems should be designed to facilitate the effective execution of any contract. The requirements of AS 4817 and this supplement do not limit the potential for continuous improvement of existing or newly implemented systems. This supplement to AS 4817 provides additional requirements and clarifications specific to the Department of Defence. It enables effective management of defence projects/contracts and should be read in conjunction with AS 4817. The requirements outlined in this supplement are additional to, or clarify, those in the standard. Please find below the guidance for manual users: # Precedence: `1.5` In case of a conflict between AS 4817 and this supplement, this supplement will take precedence. `1.6` In case of a conflict between this supplement and the contract, the contract will take precedence. # Consistency: `1.7` The combined requirements of AS 4817 and this supplement are primarily consistent with existing standards, including ANSI EIA-748, and DEF(AUST) 5655 & 5657. The existence of an EVM system that meets alternative standards does not waive the need to meet the requirements contained in AS 4817 and this supplement. Any differences that are only in terms of terminology should be reconcilable but not necessarily altered. `1.8` The use of the term "shall" indicates a mandatory requirement as per AS 4817. Any guidance is listed separately. # Limitations: `1.9` This supplement does not address reporting requirements or acceptance of the EVM system by Defence. These requirements are project-specific and will be detailed in the contract. --- The following requirements relate to the construction and reporting of an Earned Value Management System (EVMS) based on cost to the contractor. `Requirement 1:` The EVMS must be constructed and reported to the Project Authority on the same cost basis. `Requirement 2:` All data must be reported on the same basis. `Requirement 3:` The contractor must provide information on the basis of costs and explain the process for escalation or de-escalation. `Guidance:` Defence prefers base date reporting as it allows for effective trend analysis, integration with existing Defence reporting mechanisms, and reporting to senior management. If the contract requires base date reporting for payment, the performance measurement system should provide data on that same basis. If an EVMS exists and the basis is other than base date, Project Office personnel will need access to detailed data and processes for escalation to ensure that the baseline integrity is being maintained and that any reported variances are meaningful. The use of current date values will require further verification by the Project Office due to the increased level of complexity and potentially reduced level of insight into performance. The requirements and their associated guidance have been correlated to the steps contained in AS 4817 for simplicity. --- # STEP SPECIFIC REQUIREMENTS ### `STEP 1:` DECOMPOSE THE PROJECT OR PROGRAMME SCOPE `3.1` Nil additional requirements. ### `STEP 2:` ASSIGN RESPONSIBILITY Work Assignment `3.2 Requirement 1.` A CONTROL ACCOUNT MANAGER (CAM), or designated WORK PACKAGE manager, SHALL: 1. Accept responsibility for achieving assigned work scope, schedule, and resource targets; 2. Demonstrate the basis of planning (resource and schedule estimates); 3. Be responsible for the accuracy of information generated at the CONTROL ACCOUNT level; and 4. Analyze and act upon variances from planned performance. ### `STEP 3:` SCHEDULE THE WORK Relationship between the Schedule and WBS `3.3-3.4 Requirement` 1. The WBS SHALL be used as the basis to develop the PROJECT schedule. Requirement 2. There SHALL be an interface between the WBS and the schedule to enable WORK PACKAGES and/or activities to be easily traced between the two without the need for a traceability matrix. `3.5 Guidance.` The WBS represents all of the work to be completed. It forms the basis for resource estimation and performance measurement. Integrating the WBS and schedule serves to integrate schedule information with the resource targets, SCOPE, and accumulated costs contained in the EVMS. The level of the WBS chosen to integrate the EVMS with the schedule allows effective development of the schedule activity network. Activity descriptions, durations, and interdependencies are developed so that they accurately reflect the sequence of work and provide a network capable of forecasting completion dates for all contract deliverables. # Schedule Integrity `3.6-3.7 Requirement 3.` The schedule SHALL be vertically and horizontally traceable. `Guidance.` All work SCOPE is traceable throughout the PROJECT to each level of schedule consistent with its level of planning, and the logical relationship between WORK PACKAGES is established. Vertical and horizontal traceability results in zero inconsistencies between schedules at any level. STEP 4: DEVELOP TIME-PHASED BUDGET Integration with Schedules `3.8 Requirement 1.` The Contract Master Schedule (CMS) and PERFORMANCE MEASUREMENT BASELINE (PMB) SHALL be integrated. `3.9 Requirement 2.` The schedule(s) and PMB SHALL be identical in planning and consistent in their representation of progress. # Management Reserve `3.10 Requirement:` Management Reserve (MR) must be set aside for unforeseen work within the project scope and known risks that may or may not occur. `3.11 Requirement:` The use of MR must be controlled and documented. **`Guidance:`** MR will typically include an estimate for unknown risk and known risks that may or may not occur. MR is generally consumed over the duration of the contract as risks eventuate, and MR is allocated to the Project Management Baseline (PMB) through the change control processes. MR cannot be eliminated by Defence, nor can it be used to absorb the cost of contract changes, unless a sharing arrangement has been agreed for the contract change. # Rework `3.13 Requirement:` Where there is a high probability of rework occurring within the project scope (e.g. document revisions, retesting), provision for that work must be included in the PMB. `3.14 Requirement:` Where rework is required, zero budget work packages must not be used, and a budget must be assigned, the effort planned, and performance measured. `3.15 Guidance:` Rework is often encountered when documents are reviewed, equipment is tested, or assembly and integration are required. Whether rework is to be expected will depend upon the nature of the work to be undertaken, past experiences, and industry norms. # Development of Budgets `3.16 Requirement:` The basis of estimate of all resource requirements must be documented. `3.17 Requirement:` The basis of estimate must be developed using sound estimating principles. `3.18 Guidance:` The development of a baseline relies upon the underlying estimates for undertaking the scope of work. For the baseline to be meaningful and provide valid measurement data, the basis must be sound (e.g. historical performance, industry standards, learning curve development). To enable effective variance analysis, the basis of estimate must be documented so that any changes to assumptions can be noted and explained. # Mixed Elements of Cost `3.19 Requirement:` Elements of cost must not be mixed in the one work package where a variance in performance of one element will make an assessment of Earned Value (EV) misleading or inaccurate. `3.20 Guidance:` Different elements of cost are permissible within a single work package. However, this should only occur where the techniques and performance data are clearly identifiable, and the resulting variances are not distorted. ### `Step 5:` Assign Objective Measures of Performance `3.21-3.22:` No additional requirements. ### `Step 6:` Set the Performance Measurement Baseline No additional requirements. ### `Step 7:` Authorise and Perform the Work # Work Authorisation `3.23 Requirement:` A formal authorisation system must be used to authorise work. `3.24 Requirement:` There must be traceability between authorisation documents. `Requirement 3:` The work authorization for each level should clearly identify what is to be done, who is to do it, when it is to be done, the amount of resources budgeted, acceptance by the person responsible for the work, and agreement of other stakeholders (e.g., scheduler, functional manager, etc.). ### `STEP 8:` ACCUMULATE AND REPORT PERFORMANCE DATA Accounting `Requirement 1:` Interfaces between accounting systems and the EVMS should be defined with resulting data reconciled and controlled. # Indirect Costs `Requirement 2:` A process should exist and be implemented for recording, managing, and recovering all INDIRECT COSTS that are allocated to the contract. `Guidance 3.28:` It will not be sufficient to state that INDIRECT COSTS/overheads are allocated to the contract. Once INDIRECT COSTS are allocated to a contract, they may be managed at the level determined by the contractor appropriate as needed for effective management control. # Direct Costs `Requirement 3:` DIRECT COSTS should be recorded in a manner consistent with generally acceptable accounting principles. `Requirement 4:` DIRECT COSTS should be recorded in a manner consistent with the manner in which BUDGETS were planned. `Guidance 3.31:` DIRECT COSTS should be derived from contractor accounting systems without the need to duplicate data. An EVMS should be using data from the financial tools for cost collection. # Material and Subcontractor Data `Requirement 5:` The contractor should have defined processes to deal with progress to be claimed for commonly encountered items such as material and subcontractor effort. `Requirement 6:` Recording and measuring the progress of material should be no earlier than the actual receipt and acceptance of the item by the contractor. `Guidance 3.34:` Material and subcontractor PLANNED VALUE and EARNED VALUE should reflect events that reflect performance and achievement of outcomes, not merely administrative or financial events (booking of costs or invoice payments). This aligns with the requirement to have objective measures (as per Step 5). The purpose of defining processes is to ensure a consistent approach is taken throughout the EVMS. Contractors should consider the method of performance reporting that the subcontractors are required to implement based on risk and the contractor's subcontractor management requirements. ### `Step 9:` Analyse Performance Data `Requirement 1:` The contractor must explain the differences between schedules and performance data within the EVMS. `Requirement 2:` Variances related to material items should be analyzed to distinguish between usage variances and price variances. **Guidance:** As material often forms a significant portion of Defense projects, it's vital to track its performance due to the impact it may have over time. Material price variance is an essential element of material cost control. Price variance refers to the aspect of variation that is strictly related to a change in the costs of material. Usage variance refers to the quantity of material used. To manage materials, the EVMS should track the cost of material usage, any resulting scrap, or excess materials. ### `Step 10:` Take Management Action There are no additional requirements. ### `Step 11:` Maintain the Baseline `Requirement 1:` The scope and budget should not be transferred independently of one another. `Requirement 2:` Changes to the PMB should be controlled and implemented in a timely manner to enable effective performance management. **Guidance:** Controlling changes to the baseline is fundamental to ensuring that the PMB remains a sound reference point for performance management analysis. A baseline that continually fluctuates quickly becomes unusable for trend analysis and performance forecasts. When transferring the scope to another area for completion, the associated budget must also be transferred to avoid distortion of the PMB. Due to the importance of maintaining a valid baseline for performance management, changes need to be implemented systematically and promptly. Failure to incorporate changes expeditiously will result in a meaningless baseline as the scope of work will differ from actual work being undertaken. # Baseline Control `Requirement 3:` Time-phased budgets should be controlled to prevent the premature use of budget planned and required for far-term effort. `Requirement 4:` A process should exist for rolling wave planning, including freeze periods, to enable the management of planning packages and the progression of work packages. `Requirement 5:` Planning packages should be converted into work packages before the current period. `Requirement 6:` The scope of the planning package should not be altered without appropriate change control. **Guidance:** Planning packages will only be necessary where all work cannot be planned in detail. Far-term effort that is not yet planned in detail logically resides in a Planning Package. A Planning Package will contain budget and schedule data but will not be broken into detailed work packages until the plan for that work becomes more defined. Rolling wave planning is a method that allows for the detailed planning of work scope in planning packages that are due to begin soon. This ensures that any future work that has not yet been planned is reviewed and planned in detail before the activities start. `Requirement 7` states that no changes should be made to an open work package once EV, PV or AC has been allocated to it, with the exception of administrative changes or reprogramming. `Requirement 8` states that internal replanning should not be used as an alternative to proper initial planning, nor should it be used to mask variances. Guidance suggests that it may be necessary to perform internal replanning actions within the scope of the project budget to compensate for problems that have caused the original plan to become unrealistic. This replanning should be done within the constraints of the existing CMS and budget. The nature of work packages should result in short duration, detailed planned activities. As a result, changes to open work packages are undesirable due to the effect this has on reporting progress. Where it can be demonstrated that no distortion of progress has occurred or will occur in the future, replanning of future effort within open work packages may be necessary to reduce administrative burdens. However, this should not be routine, and Defence will require visibility of the process should this be undertaken in this manner. `Requirement 9` states that Project Authority approval must be sought prior to the implementation of a revised PMB that exceeds the project budget. `Requirement 10` states that in the event that reprogramming is required, PV and EV should be set equal to AC to date, the work package should be closed, remaining budget should be transferred to MR or UB as appropriate, and a new work package should be created for the remaining work scope in accordance with the steps described in AS 4817. Guidance suggests that situations may arise where available budgets for the remaining work are insufficient. Under these circumstances, performance measurement against existing budgets becomes unrealistic. Replanning activities which result in a PMB that exceeds the availabl budget (project budget) are known as “reprogramming” and require Project Authority approval. Thorough analysis of remaining work and progress to date should precede the implementation of a budget in excess of the project budget. Approval to implement a revised PMB in excess of the project budget in no way obligates the Project Authority to fund the revised PMB. `Requirement 11` states that logs must be maintained to enable traceability of changes occurring within the EVMS and to provide assurance of data integrity. `Requirement 12` states that as a minimum, changes to the PMB, UB, and MR should be recorded in a log or logs. Guidance suggests that the purpose of the logs is to control and document all changes, thereby enabling changes to be tracked. The types and number of logs will vary depending on the complexity of the EVMS. It is possible to have one log to record and document all changes to the PMB, UB, and MR. The logs should be an indexed chronological record of all transactions and indicate the reason for the change or link to the documentation detailing the change.