Defense systems development has accelerated dramatically through digital engineering, developer security operations, Agile methodologies, and open architecture. Aerospace companies are in the forefront, led by the pioneering e-design of the Boeing-Saab T-7 Red Hawk advanced training aircraft and the Air Force’s stunning announcement that a prototype next-generation fighter was designed, manufactured, and flown in one year.
The revolution in acquisition processes represented by these programs supports the objectives in Air Force Chief of Staff Gen. Charles Q. Brown Jr.’s August 2020 paper, “Accelerate Change or Lose
.” He knew that our environment includes rapid technology development and diffusion, and stressed the need to collaborate “within and throughout to succeed”:
The U.S. Air Force is going to need help to effect the necessary changes. We must make a compelling case to external stakeholders, backed by defensible analysis and evidence, to divest or take risk in legacy missions and capabilities. The U.S. Air Force must work differently with other Department of Defense stakeholders, Congress, and traditional and emerging industry partners to streamline processes and incentivize intelligent risk-taking in support of the Warfighter and the Nation. [Emphasis added] Navigating the challenging times ahead requires effective collaboration among all stakeholders to acknowledge, balance, and share risk over time—now and into the future. Collectively, we owe it to the American taxpayers to examine how we can provide greater value at an affordable cost to the Nation’s defense. The U.S. Air Force will take the hard steps to do its part in service to the American people.
I could hardly agree more. To realize this vision, underlying acquisition processes that support the Warfighter also must change. One such process is Earned Value Management (EVM)—the proven project (or contract) method that integrates cost, schedule, and technical performance management and measurement to control execution risk. This means that the resources needed to perform a contract—labor hours, dollars, material, production units, etc.—are planned and their use measured objectively on the same basis, enabling managers to make realistic progress assessments and reliable estimates of cost at completion. The Air Force pioneered EVM in the 1960s. Recognizing its importance, the Office of the Secretary of Defense in 1967 required its use for major contracts in all military departments. In the 2000s, the Office of Management and Budget amended the Federal Acquisition Regulation (FAR) to require an Earned Value Management System (EVMS) for major acquisitions proposed for development. Today, EVM is the foundation for integrated program and project management in national and international standards and is used widely beyond government contracting.
That a management method more than a half-century old remains valid is strong evidence of its utility. However, by the early 1990s, its implementation on defense contracts had become cumbersome. It was administered by independent specialists, with defense program managers effectively left out of the loop. One result was a series of foreseeable contract overrun “surprises,” with the Navy’s A-12 Avenger II stealth aircraft the most notorious multibillion-dollar case. Even there, early EVM data clearly revealed the contractors’ failure to make progress and acknowledge the huge cost overrun—but that finding was not used to improve management. Chester Paul Beach Jr., the A-12 Inquiry Officer, concluded the November 28, 1990, A-12 Administrative Inquiry report for the Secretary of the Navy with this advice:
I believe that the fundamental problem, and the critical path to effective implementation of the Defense Management Report, is to create appropriate incentives to enable senior leaders to rely upon responsible, accountable line managers for realistic perspectives on the cost, schedule, and technical status of their programs. Only by doing so can we increase efficiency and accountability while reducing the burdens imposed by undue regulation and stifling supervision.
The A-12 report prompted a joint EVM study by the Department of Defense (DoD) and industry. Its recommendations led to policy and administrative reforms that emphasized EVM’s importance as an integral part of contractors’ design and manufacturing organizations, and greatly reduced the EVM review burden. The Integrated Baseline Review, jointly led by DoD and contractor program managers, was introduced to ensure mutual understanding of a contract’s performance goals and risks.
The reforms worked. Holding government and contractor technical staffs accountable for earned value analysis helped “cost overruns” fade as a source of damning news headlines. Indeed, major programs, including the Navy’s F/A-18E/F Super Hornet fighter, garnered praise for meeting or exceeding their cost and schedule performance goals. These achievements by DoD and its industrial partners provided material for the “best practice” guides issued by the Government Accountability Office for cost estimating (including EVM), scheduling, and Agile management.
Pentagon leaders expected that reducing government regulation would motivate the defense industrial base to sustain management improvements through self-governance and industry standards. While some companies incorporated EVM in their internal processes, the desired industry-wide governance didn’t happen. And so, as key DoD people retired in the early 2000s and attention waned, the historical excesses identified in the DoD-industry study re-emerged.
In hindsight, it also is apparent that, despite the recommendation of the A-12 administrative inquiry, DoD line-manager responsibility and accountability were not sustained. Instead, authority reverted to DoD regulatory specialists who categorized EVM as a “business system” and weaponized it to penalize contractor cash flow. The results were both predictable and unfortunate. Specialists again are imposing unnecessary, burdensome requirements, and defense and industry leaders are becoming less supportive. No wonder EVM often is seen as a hindrance to rapid development and acquisition.
While EVM implementation atrophied in DoD, other agencies applied lessons gleaned from DoD’s experience to manage their complex projects. The National Science Foundation (NSF) is a notable example. The NSF management guidance references the recommended practices documented by the National Defense Industrial Association (NDIA), emphasizing EVM as a management process tailored for each project’s individual needs and effectively integrated with the agency’s project approval and oversight. Those processes include external peer reviews, with thorough examination of all project aspects by cost and schedule experts working with science and technical experts.
Defense contractors independently applied their own lessons learned, leveraging EVM’s original intended purpose and incorporating streamlined processes and integrated commercial tools into their management systems. Most recently, a large DoD contractor implemented an EVM-based cost and schedule management control system on a $1.5 billion Air Force development program. While the contract does not require a DoD-compliant Earned Value Management System, the contractor’s solution provides cost and schedule performance data without the burdensome rules, regulations, documentation, and administration associated with DoD regulatory compliance.
The new solution exceeds expectations and fulfills the promise of EVM—providing single-source, accurate, reliable, timely program performance data used by the contractor and the Air Force to make informed decisions. The solution works so well that the customer highlighted it in a recent Contractor Performance Assessment Report and awarded two additional years on the contract. The contractor is implementing the solution enterprise-wide and briefing the company’s other business units—its civil agency and commercial as well as its defense contracts—on how to implement the solution.
It has been about 30 years since DoD took a hard look at its EVM-based integrated program management process. I recommend that DoD and the NDIA Integrated Program Management Division jointly re-evaluate EVM governance and implementation. While the e-development environment is radically different, EVM has proved compatible with every management evolution to date, including Agile methods, and I’m confident that will continue. I further recommend that DoD consider adopting a project-by-project approach.
The result should be a process “rebooted” to help DoD program managers and their contractors deliver on, or ahead of, schedule, on or under budget, and meet or beat performance goals. Program leaders need to stop the bleeding and redirect budget resources when EVM analysis shows that progress is too slow, too expensive, and fails to meet performance goals or provide timely, reliable information.
This is a fundamental change in emphasis. The audit-like DoD compliance process is sclerotic. It is implemented by external specialists who lack detailed knowledge of the project and have no stake in the outcome. They naturally focus on contractors’ process and procedure documentation and data precision, often to a fault, and at the expense of mutually respectful government-industry relationships. The excessive requirements add unnecessary cost and complexity.
The objective should be to enable successful contract delivery. The DoD EVM specialists would not disappear; their expertise would be used to advise program teams and provide independent analysis. Compliance and management value must be balanced: How much should any given EVM guideline be driven to meet the needs of the project?
Then-Under Secretary of Defense for Acquisition Donald Yockey put it concisely in a keynote address in 1991: “Let’s make this discipline do a better job of contributing what it’s supposed to contribute. Let’s make it work as intended.”
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ABBA was the senior analyst for contract performance management in the Office of the Secretary of Defense from 1982 to 1999. He is a contributor to the Government Accountability Office’s “best practice” guides.
The author can be contacted at [email protected].
The views expressed in this article are those of the author alone and not the Department of Defense. Reproduction or reposting of articles from Defense Acquisition magazine should credit the authors and the magazine.