EVM pilot takes closer look at system costs

Three agencies drill down to compare legacy, new systems metrics

The Office of Management and Budget has added a new twist to earned-value management in tests at three agencies.

Under a pilot program that ended in March, OMB worked with the departments of Agriculture and Housing and Urban Development and with the Environmental Protection Agency to use EVM to calculate the baseline cost of legacy systems versus the costs of implementing new applications and the potential savings from that system.

Earned-value management, which OMB has required agencies to use since August 2005, is a project management tool that helps agencies track cost, schedule and performance of major IT projects, and determine whether they are meeting their goals. Agencies must be within 10 percent of each of those three factors every quarter or the project manager must report to OMB on how they will fix the project.

But the pilot program took a new angle on EVM. Instead of tracking the system as it develops, agencies are tracking metrics of the new system against an existing system.

“We are capturing baseline costs such as contractor costs, software licensing fees and EPA staff costs,” said Martin Poch, a program analyst in the agency’s CFO’s office. “We are using full costing techniques. We code system costs in a way that allows us to provide meaningful system cost reports to EPA managers.”

Charles Christopherson, Agriculture’s CFO, said his agency has been doing this for some time and had to make a few minor modifications so they could standardize their measurements after meeting with OMB.

“We actively do this in a formal and informal way,” he said. “We get into finite detail. We want to make sure we are looking at apples to apples in the project plan so if there are errors, we can find them.”

Karen Evans, OMB’s administrator for IT and e-government, said the results of the work with the agencies could be applied to potential guidance OMB is developing on capturing total costs.

“The pilot [was] an extension of work we already do with agencies on implementing EVM,” she said. “The purpose is to have quantifiable data related to the actual cost savings and benefits the IT portfolio is achieving, as it relates to the information presented in the business case.”

The business case, which OMB is trying to simplify for the 2007 budget process, according to a number of CIOs, is not a good tool to use for baseline costs, said Mark Jeffery, an associate professor of technology at Northwestern University’s Kellogg School of Management.

“EVM shouldn’t just be about cost and schedule, but what you actually did,” said Jeffery, who co-authored a study on federal and private-sector use of EVM last November.

“If you track cost relative to plan, you know what you spent,” he said. “But if you know how you got there and how much effort it took to get there, then that is much more useful.”

That is the key to OMB’s pilot, Jeffery and others said.

Tracking that effort is using a code of accounts, something Agriculture has been doing for a number of years, Christopherson said.

Christopherson said USDA currently is replacing seven general-ledger financial systems that cost the agency about $55 million a year.

Using EVM, he said he hopes to not only track the cost, schedule and performance of the project, but also the implementation costs, such as contractor hours, employee hours, system testing and other associated costs.

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