Acquisitions and Earned Value Management1

ACQUISITIONS AND EARNED VALUE MANAGEMENT1

Acquisitions and Earned Value Management

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Acquisitions and Earned Value Management

In the United States General Accounting Office (GAO)’s May 1997 Report to the Subcommittee on Acquisitions and Technology concerning “Major Acquisitions: Significant Changes Underway in DOD’s Earned Value Management Process,”the GAO described the DOD’s earned value process of CS2. According to the report, while the CS2 process is a worthy method measuring the progress of acquisitions programs, it does have some accompanying issues (United States General Accounting Office, 1997).

The Department of Defense established an earned value process in 1967 dubbed the CS2 as a means of measuring the value of work performed compared to the actual costs. This process looks at the work accomplished during a given period with the work scheduled for that period, and alerts program managers to potential problems that may arise. The report provides an illustration of this process with the example of a $4 million railroad contract that appears to be on track after 3 weeks of work and $2 million expenditures, but is, in actuality, behind schedule with only 1 mile of track laid(United States General Accounting Office, 1997).

The report explains the communities that have a generally seated interest in the CS2 process, such as program managers, contractors, and overseers. All of these entities are responsible for the overall management responsibility and successful execution of a contract, in most cases, and the earned value process can assist them in achieving their goals(United States General Accounting Office, 1997).

The DOD recognizes that while the CS2 process is a comprehensive means of measuring the progress of major acquisitions programs, some users are pleased and others are not. CS2 reports are not always timely enough to be valuable, which prevents them from functioning as any kind of early warning system. The process, further, does not fully assimilate cost, schedule, and technical data. In acknowledgement of the necessity for reform, the DOD is working to implement reforms to improve the process(United States General Accounting Office, 1997).Reforms include realigning the internal organization to reduce cultural resistance to change, recognizing the management position of the contractor in commercial industry sectors, and improving the timeliness of CS2 data through direct electronic access.

Reference

United States General Accounting Office. (1997). Major acquisitions: significant changes underway in DOD’s earned value management process. National Security and International Affairs Division, May.