Posted by: darrylcshawgo | January 11, 2011

Earned Value on FFP Contracts? Are you Kidding?

Happy 2011 Everyone!

I have been hearing a lot recently about EVM requirements on FFP contracts. I wanted to hear about your experiences out there on the ground.

My initial thoughts are why not just make it a cost-type contract if you want EVMS, but let’s take a closer look. By doing a FFP contract most of the risk is shifted to the contractor from the prime, so requiring EVMS may be overkill. You could still do a FFP contract and require a non-integrated schedule and have closely watched cost reports with estimates to complete. Additionally, technically performance could be updated on a quarterly, monthly or even weekly review/conference call (PMR’s).

So, I think they are ways of getting the information without the requirement. However, the customer is always right and recently we have seen a big government shift in requiring EVM on all contracts to make sure government money is being well spent.  It is hard to argue with that with so much waste out there.

My advice: Make sure there are adequate resources for the EVMS requirement. Often, this is the first area cut in negotiations and usually the first to cause problems. It always puzzles me how little respect is given to the Planning & Control department of any corporation. If you are the prime, make sure they are adequately staffed for the requirement. Just because it is cheaper, doesn’t make it better. Program Managers: make sure you have experienced people who know what they are doing and make sure you have enough of them. If not, you could be in for a world of pain later.

Conclusion: At first, EVM on FFP contracts seems counter productive, but I think we are beginning to see a shift within the government to require EVM on many different types of contracts. Government organizations just want to be sure their money is being well spent and within the contractual parameters. That cannot be all bad.

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Responses

  1. I agree. If you think EVM is a solid management tool, then why isn’t it applicable for FFP? First I think it is something the contractor should do for themselves because the primary risk in on the contractor. If they are going to use EVM, then the reporting is a byproduct.
    If the customer is putting EVM on the contract and the contractor does not use EVM as a standard on all work, that is going to increase the cost a little. So I agree that there needs to be cost estimate for that work.


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