Why was Earned Value Management important to the Swedish Government in the Gripen project? Sven Antvik sven.antvik@fhs.mil.se Earned Value Around the World CPM Spring Conference 2001-05-22--24 Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 1 Why was Earned Value Management important to the Swedish Government in the Gripen project? 1 2 3 4 5 Introduction The Gripen Project Managing the Gripen project at FMV* Conclusions Concluding remarks * FMV = Försvarets Materielverk (Defence Materiel Administration) Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 2 Gripen at a road base in Sweden Photo: Ulf Fabiansson/Saab Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 3 Gripen at a road base in Sweden Photo: Johnny Lindahl/Saab Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 4 1 • • • • • • • Introduction Swedish Parliament decision in 1982 Full Scale Development began in 1982 Supersonic multi-role military aircraft Need for firm project control expressed Management interest from political level Government decision 1982 on management First and largest EV application in Sweden Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 5 2 The Gripen project • • • • • • Aircraft, weapons, support equipment A complex global multi-project Subcontracts in many countries Significant US content (" 30 %) Swedish Industry Group JAS (IG JAS) Largest contract: FMV - IG JAS Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 6 IG JAS major subcontracts (examples) • • • • • Engine Escape system Fuel System Hydraulic system Automatic Gun - Volvo & GE US - Martin Baker UK - Intertechnique France - Lucas UK - Mauser Germany Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 7 Major subcontracts in the Gripen Major Systems Secondary Power System Escape System Fuel System Martin-Baker Aircraft Intertechnique SA (F) Electronic Company Ltd (GB) Display System Ericsson Saab Environmental Avionics AB (S) Control System Sundstrand Aerospace Power Systems (USA) Dowty Aerospace Wolverhampton (GB) Lucas Aerospace (GB) Hymatic Engineering Company Ltd (GB) Radar Ericsson Microwave Systems AB (S) Air Data Computer Servos Ericsson Saab Engine Avionics AB (S) Volvo Aero Corporation (S) General Electric (USA) Nord-Micro SA (D) 1 39 ( AA ) SL 3364 A(P) 9903 6 Systems Computer Gun Ericsson Microwave Systems AB (S) Flight Control System Saab AB (S) Mauser-Werke Oberndorf Waffensysteme GmbH (D) Landing Gear APPH Ltd (GB) Hydraulic System Dowty Aerospace Hydraulics Ltd (GB) 34 Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 8 Management in the customer chain • • • • An 18 year project at the start in 1982 Annual ”total project reports” required FMV integrated information into one report Reports from FMV Project Management Group forwarded upwards to Government • Annual report to parliament in budget bill Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 9 The customer chain in the Gripen project Swedish Parliament Swedish Government Swedish Armed Forces Defence Materiel Administration Other contractors IG JAS Other contractors Subcontractors Subcontractors Subcontractors Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 10 3 The Gripen project at FMV • • • • • • Reasons for Earned Value EV measured in a simple way EVM in the single seat Gripen EVM in the two-seater Gripen EVM in the Gripen project EVM at FMV Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 11 Reasons for Earned Value • • • • • • Gripen - a large and complex project FSD and first 30 aircraft ordered in 1982 Need for early project insight by FMV Relate technical, schedule & cost information EVM an early warning tool EV requested by customer Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 12 EV measured in a simple way • Low cost EV procedure developed • The simple way in three steps 1 Average schedule performance 2 Follow time-line to BCWS-curve 3 Use this ”BCWP” as an estimate • See next slide for graphical example • Used by FMV during development Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 13 Earned Value - A simple way Time now 3 Budget Earned Value 2 1 Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 14 EVM in the single seat Gripen • WBS defined 1982 in the contract • WBS used to integrate cost & schedule info • Actual costs converted to base price level – Inflation & different currencies • The box of uncertainty developed in 1987 • Communication tool with Government – E.g. Prime Minister & Secretary of Defence Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 15 The box of uncertainty, Nov 17 1987 Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 16 EVM in the two-seater Gripen • • • • • • Developed after single seat version EVM training before the contract was signed Developed during the 1990´s EVM used by FMV & IG JAS project managers Defined milestones with schedule incentive EVM actively used as dialogue instrument between customer FMV and the contractor IG JAS Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 17 Earned Value Management Gripen 39B NU-linje Q974 T o m 1997-12-31 1,500 } } BCWS BCWP 1,000 ACWP 500 0 0 0 (SOW 98-02-17 /39B_974.PRE) 923 924 931 932 933 934 941 942 943 944 951 952 953 954 961 962 963 964 971 972 973 Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 974 981 18 982 EVM in the Gripen project • Standard colours by FMV for Gripen 1982 – BCWS - Blue, ACWP - Red, BCWP - Green • Positive report from Swedish GAO in 1996 • Further development by IG JAS in 2000 – The box can now be generated from computer – Text comments generated directly into reports – Improvement of man - machine interface • Management use of EVM most important Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 19 Positive report from Swedish GAO in 1996 ”The Earned Value analysis gave FMV a good command of the development of the project already at an early project stage. Industry has pointed out that FMV had a better integrated view of schedule, cost and technical performance in many aspects than industry had themselves.” Riksrevisionsverket 1996:27, page 95, Translation by the presenter Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 20 Further development by IG JAS (computer generated graphics and text, demonstration example) Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 21 Earned Value at FMV today • • • • • • • Positive experiences from Gripen project Used on the largest Gripen contracts International conferences 1997 - 2000 EV in regular reports from IG JAS to FMV Policy decisions on EVM in FMV Avareness of project management need EVM implementation activities going on Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 22 4 • • • • • Conclusions EV - can present overall picture in one graph EV - used to define management requirements EV - a powerful tool for communication EV - easy to understand for all actors EV - a project management best practice Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 23 5 Concluding remarks • Why was EVM important to the Government ? • EVM was important because – – – – – Basis for early project control requirements Integration of technical, schedule & cost information FMV & Government got an early warning Valuable for management communication Could be applied in a simple way Sven Antvik, Earned Value Around the World, College of Performance Management, May 22-24, 2001 24 Why was Earned Value Management important to the Swedish Government in the Gripen project? Sven Antvik, PMP, PhD-candidate Royal Institute of Technology and Swedish National Defence College, Sweden INTRODUCTION This paper describes how Earned Value Management was important to the Swedish Government in the Gripen project. In June 1982 the Swedish Parliament decided to start full-scale development of the Gripen project for the Swedish Armed Forces. The Gripen is a supersonic multi-role, single engine military aircraft. The need for firm project control was clearly expressed from the political level already at the very beginning of the Gripen project. It is often mentioned in official records from the early 1980´s. The go-ahead decision by the Swedish Parliament in June 4, 1982 was expressed in terms of technical specifications, schedule and total project cost. In July 8, 1982 the Swedish Government took a special decision concerning the management and control of the project. The decisions taken by the Parliament and the Government meant that the military authorities had to develop and implement new policies and procedures to manage the Gripen project. Earned Value was intended as an important new tool for the Swedish Defence Materiel Administration (Försvarets Materielverk = FMV) in the management of the Gripen project. The Gripen project is a large global multi-project with subcontractors in many different countries. Earned Value Management gave top management within FMV valuable insight into the overall situation of the project. This information was used when informing the Swedish Armed Forces and the Swedish Government about the progress of the project. Managing global multi-project gives the project management unique tasks to handle. One example for the Gripen project was to manage the project budget and actual cost during the whole project period starting the fiscal year 1982/1983 and ending the fiscal year 1999/2000. Another example can be found in that a number of different currencies must be converted into one common, in this case the Swedish “krona”, currency unit. When comparing actual costs with budgeted costs, the effects of inflation in different countries and resulting fluctuations in exchange rates over time must be handled. New procedures were developed to compare actual costs with the budgeted costs in the base price level of February 1981. THE GRIPEN PROJECT The Swedish Gripen project is, to a larger extent than earlier Swedish military aeroplane projects, depending on subcontractors. One reason for this is to reduce the development costs. For FMV the Gripen project includes the aeroplane, the platform, as well as weapons that are normally sold directly to governments. Among the range of equipment included in the project is e.g., radio systems also used in other Swedish military aircraft. The largest contract between FMV and the industry is the aeroplane contract signed with the Swedish Industry Group JAS (IG JAS). IG JAS is formed by large Swedish industries, i.e. SAAB, VOLVO, ERICSSON and CELSIUS now part of SAAB. IG JAS has subcontracts with different companies that provide major subsystems for the aircraft. The exhibit shows major systems in the Gripen aircraft. Examples are the engine from Volvo Aero Corporation in Sweden and General Electric in USA; the escape system from Martin Baker in Great Britain; the fuel system from Intertechnique in France; the hydraulic system from Lucas Aerospace in Great Britain and the automatic gun from Mauser-Werke in Germany. IG JAS, which is the prime contractor for the aeroplane to the customer FMV, manages these major systems. Major Systems Secondary Power System Electronic Display System Escape System Fuel System Martin-Baker Aircraft Company Ltd (GB) Intertechnique SA (F) Ericsson Saab Avionics AB (S) Sundstrand Aerospace Power Systems (USA) Dowty Aerospace Wolverhampton (GB) Lucas Aerospace (GB) Environmental Control System Hymatic Engineering Company Ltd (GB) Radar Ericsson Microwave Systems AB (S) Air Data Computer Servos Engine Ericsson Saab Avionics AB (S) Volvo Aero Corporation (S) General Electric (USA) Nord-Micro SA (D) 39 (AA) SL 3364A (P) 990316 Systems Computer Gun Ericsson Microwave Systems AB (S) Flight Control System Mauser-Werke Oberndorf Waffensysteme GmbH (D) Saab AB (S) Landing Gear Hydraulic System Dowty Aerospace Hydraulics Ltd (GB) APPH Ltd (GB) 34 Exhibit 1. Major systems in the Gripen aircraft (from IG JAS 1999) The customer chain in the Gripen project The Swedish Parliament, “Riksdagen” in Swedish, is the public body that passes laws and decides on taxes and the use of public funds. The Swedish Government, “Regeringen”, executes the decisions by the Parliament. The Försvarsmakten”, is the authority responsible for the military defence. The Swedish Defence Materiel Administration, “Försvarets Materielverk” (FMV), is the authority responsible for procurement of arms and other equipment for the Swedish Armed Forces. The customer chain in this global multi-project starts with the Swedish Parliament and continues via the Swedish Government and the Swedish Armed Forces to the Defence Materiel Administration (FMV). This is the governmental part of the customer chain. FMV has contracts with industry. The largest contract is the contract with the Industry Group JAS (IG JAS). A major subcontractor to IG JAS is for example General Electric with their part of the engine. Antvik in 1999 (Antvik 1999) describes the customer chain in the Gripen project in Swedish. Swedish Parliament Swedish Government Swedish Armed Forces Defence Materiel Administration Other contractors Subcontractors IG JAS Other contractors Subcontractors Subcontractors Exhibit 2. The customer chain (from Antvik 1999) Exhibit 2 shows the customer chain from the Swedish Parliament to the participating industries. The Parliament took the major go-ahead decision on the Gripen project in early June 1982. After decisions in the customer chain FMV signed the contract with IG JAS on June 30, 1982. The Government decision on the management of the Gripen included a requirement for annual project reports after each and every fiscal year. The project started in 1982 and this part of the project was to end in the year 2000. Thus a period of eighteen years was the basis for reporting the project. Based on reports and information from contractors as well as on its own analysis, FMV integrated facts and figures into one report. This report was then sent to the Swedish Armed Forces. From there it was forwarded to the Swedish Government. The government in its turn reports every year to the Swedish Parliament in the annual budget bill. The Gripen project starting in 1982 can be described as a global multi-project with one single customer, i. e. the Swedish Government acting through one government agency, FMV. MANAGING THE GRIPEN PROJECT AT FMV Reasons for Earned Value in the Gripen project The Gripen project is a very large project for the actors in Sweden. This is true for the government as well as for the companies involved. In this large project, whether you compare it to the turnover or share capital of the companies, it was obvious to FMV that it should be very hard for the companies to pay the money back to FMV in case of failure. Hence it was reasonable that FMV should get insight also into the cost aspects of the contract from the very beginning. Thoughts regarding management of the Gripen development can be found in a report by Hökborg (Hökborg 1972) to Dr L. Stuckenbruck at University of Southern California. A book by Archibald (Archibald 1976) was used as a source for information on project management before the start of the Gripen project. It is very vital to be able to integrate and thus relate technical, schedule and cost information to each other in project management. A global multi-project is no exception to this. The detailed requirements regarding project control that were put on the Gripen project in 1982 are still unique for government projects in Sweden. These unique requirements include the annual project report from FMV to the upper levels in the customer chain. Since the late 1990´s new major Swedish defence projects are subject to similar requirements. It is obvious, but may nevertheless be important to mention, that a firm fixed price contract is not in any way a guarantee that the contractor will be able to deliver according to the signed contract. A simplified way of measuring the Earned Value When FMV started to use Earned Value Management on the Gripen project in 1982 a simplified, but yet effective, procedure was used to measure the “Earned Value” or “Budgeted Cost for Work Performed” (BCWP). The procedure can be described in tree steps that starts with "time now" and the time phased budget or, in EVMwords, “Budgeted Cost for Work Scheduled” (BCWS). This procedure was computerised by FMV in the very beginning of the Gripen development program. The first step in the procedure is to measure the average schedule performance expressed in time for the different parts (= WBS elements) of the contract. The schedule difference was then plotted (1) in a diagram with the time-phased budget for each WBS-elements. This was done for elements on level three of the Contract Work Breakdown Structure (CWBS). The second step is to follow the time-line from step 1 upward in the diagram until it hits the BCWS-curve. This value from the BCWS-curve (2) was used as an estimate of the Earned Value (BCWP). The third step means that you use this value (where the schedule line crosses the BCWS-line) as an approximate value for Budgeted Cost for Work Performed (BCWP) or Earned Value and plot (3) it at the time-now line. Earned Value - A simple way Time now 3 Budget Earned Value 2 1 Exhibit 3: The simple three-step approach to get Earned Value (from the author). Development of the single-seat Gripen The contract between FMV and IG JAS was signed on June 30, 1982. The design work was done within a Work Breakdown Structure, WBS, defined in the contract. In large multi-year contracts there is often a need to change the contract under way. In this case the parties kept close track of all contract changes. Each of them got a number in sequence. The contract is the baseline from which you measure performance. The written reports from IG JAS to FMV use the contract WBS as a base for the outline. The WBS was also used as a tool to integrate technical, schedule and cost information. In this large global multi-project there are a number of different currencies to handle. In this case FMV used the contract budget in the agreed base price level of February 1981 as the budget baseline, i.e. Budgeted Cost for Work Scheduled or BCWS. When the project started FMV had never before had a similar contract to manage. Thus FMV had to develop new policies and procedures to manage this, the largest contract with a number of different currencies. The actual costs were first recorded in present prices and currency rates. The actual costs were then converted to the base price level with respect to price escalation (indices) as well as changes in rates of exchange. Thus FMV was able to compare the Actual Costs with the Budgeted Costs using comparable conditions. For different reasons delays occurred in the development project almost from the very beginning. The box of uncertainty was first made at FMV late in 1987. It was used as a tool to describe the project situation to senior management, including the Swedish Secretary of Defence and the Swedish Prime Minister. Exhibit 4: The box of uncertainty was shown to senior management (from FMV 1987) The box of uncertainty was a useful tool that gave a good overall picture of the project in one single picture. The lower left corner of the box reflects delay and cost overrun until today. The upper right corner of the box reflects were the project will end if the present trends continue. The final cost outcome was in the order of magnitude where the trend extrapolation pointed. The final schedule outcome was later, partly due to an accident with a flight test aeroplane early in the program. According to senior management in FMV and the Secretary of Defence in 1987 the box of uncertainty was a very valuable tool when they presented the situation in the project to the Swedish Government. It is safe to say that the box of uncertainty can be a very valuable tool in the management of global multi-projects. Development of the two-seater Gripen The development of the two-seater Gripen took place after the development of the single-seat version. Here we briefly present the use of Earned Value in the development of the two-seater version. The development took place during the 1990´s. The following exhibit shows the three curves for the two-seater version. The curve for Earned Value (Budgeted Cost for Work Performed = BCWP) follows the curve for Planned Value (Budgeted Cost for Work Scheduled = BCWS) closely. The curve for the Actual Cost (Actual Cost of Work Performed = ACWP) is well below the curves for Earned Value and Planned Value. This means that there is a favourable cost difference in the project. MSEK Prisnivå 1:a Kv. 1991(enl avtal) Projektläge JAS 39 Gripen IG JAS Typarbete 39B ÖPPEN VERSION NU-linje Q974 T o m 1997-12-31 1,500 } } BCWS BCWP 1,000 ACWP 500 IG JAS Typarbete 39 B NU t o m dec - 9 7 PLAN Trend A Trend B AVTALAD FÖRKALKYL VERKLIG KOSTNAD VÄRDE UTFÖRT ARBETE BUDGETAVVIKELSE 1.058,3 1.299,4 1.343 -263 EFTERSLÄPNING KOSTNADSAVVIKELSE -249 -241 22 0 0 -241 0 -249 -241 0,814 1,000 0,821 1,000 RELATIV KOSTNADSPREST. 0,814 RELATIV TIDSPRESTATION 0,984 0 SLUTTIDPUNKT TOTALTID Mån Avvikelse TOTALTID Mån 0 69 0 68,3 70,2 -0,8 1,1 (SOW 98-02-17 /39B_974.PRE) 923 924 931 932 933 934 941 942 943 944 951 952 953 954 961 962 963 964 971 972 973 974 981 982 Exhibit 5: Earned Value curves from the two-seater Gripen (from FMV 1999) The contract between FMV and IG JAS had defined milestones with economic incentives for good schedule performance. This increased management focus on schedule from the very beginning of the contract. Earned Value was used as an instrument in the dialogue between the customer FMV and the contractor IG JAS. The cost trend that was established after about two years of work remained virtually unchanged until the completion of the contract. Experiences from the design of the single-seat version were used as a basis for the management of the twoseater version. People, including the project managers at FMV and IG JAS, were trained in Earned Value before the contract was signed. Hence it was natural for them to use Earned Value in their dialogue and when preparing reports. Further development of the box of uncertainty by IG JAS IG JAS has made further developments of the box of uncertainty. IG JAS can now generate the box of uncertainty by using the average Schedule Performance Index (SPI) and Cost Performance Index (CPI) as well as SPI and CPI for a selected period, e.g. performance during the last 20 % of the time. By doing this you can get two boxes and thus get two indications of where the project is headed with regard to cost and schedule. IG JAS can also generate text comments directly into the graph from database in the computer. The comments make the information much more understandable to project managers. It can be said to be a huge improvement of the “man – machine – interface”. The use of EVM on the Gripen project in 2000 EVM is used for the production of the Gripen. It was also included as a requirement in the lot 2-production contract that was signed in 1992. EVM was also included in the lot 3-production contract that was signed in 1997. EVM is also included in the contracts for further development work that were signed in 1997. So far, EVM is used on the largest contracts between FMV and IG JAS. EVM is so far used without formally conforming to the requirements in the earlier Cost/Schedule Control Systems Criteria (C/SCSC) from 1967 or more recently published standards like e.g. BS 6079 (BSI 1996) and EIA-748 (EIA 1998). CONCLUSIONS Control To control a large project you must have and use proper tools to give the responsible managers and other people the information they need to take the vital decisions. You can compare the execution of a project with a flight. The pilot needs suitable instruments that can present the necessary information during flight. This must be done in a way that can be understood and used by the pilot in order to make decisions during the course of the flight. In the execution of a project you must present information about the project in a concentrated and useful way. You must have an accounting system that meets the project management requirements. A pilot makes a flight plan before take off. A project manager must consequently have a “flight plan” before the “project take-off” in order to be able to compare the actual situation with the project plan. Earned Value can present an overall picture of even very large projects in one single graph. Time Earned Value was used as a tool for FMV to define management requirements and information to be delivered from the contractor before the decision to begin the project was taken. It is important to follow the schedule from the very beginning of the project. It is also important for the customer to be able to form an opinion of its own on technical, schedule and cost performance. The earlier you get information on possible delays the easier it is to minimise the negative consequences. Earned Value has also had an important early role in defining policies and procedures in the management of the Gripen project. When results and analysis from Earned Value was seen to be relevant the method was more and more accepted inside as well as outside FMV. Communication Earned Value, as shown with exhibits above, has been a powerful tool for communication between customer and contractor as well as between the customer FMV and the actors above FMV in the customer chain. The largest benefit with Earned Value is believed to be when you have to communicate the project definition and requirements for project control and use it as a basis for decisions. Actors Different actors have different perspectives. They have, however, a common interest in the project task. Earned Value is a common language that is easy to understand. The task of the industry is to perform according to the contract. FMV has signed the contract with IG JAS and acts in the customer role on behalf of the Swedish Government. FMV also reports upward in the customer chain. The Swedish Armed Forces as well as the Swedish Government and the Swedish Parliament receive information and makes decisions. Swedish Policy The Swedish Government, the Swedish Armed Forces and the Defence Materiel Administration (FMV) has taken decisions to improve its project management by using earlier experiences from the Gripen project. These earlier experiences are a firm basis for the decisions on new policies to manage the acquisition of defence materiel. The first new annual project reports will be delivered to the Government from the Swedish Armed Forces after the fiscal year 2000. CONCLUDING REMARKS In the case of the two Gripen contracts in this study it is safe to say that Earned Value has been a valuable tool for communication and decisions in the Gripen project. The most important function with Earned Value may be the role of forming requirements for integrated management of technical performance, schedule and cost. It is thus safe to say that Earned Value Management was very important to the Swedish Government in the Gripen project. REFERENCES Antvik, Sven. 1999. Control of large development projects: On the use and further development of Earned value Management in the Gripen project at the Swedish Defence Materiel Administration. (Styrning av stora utvecklingsprojekt: Om användning och vidareutveckling av Earned Value i JAS-projektet vid Försvarets Materielverk.). Stockholm: Royal Institute of Technology (in Swedish). Archibald, Russell D. 1976. Managing High-Technology Programs and Projects. New York: John Wiley & Sons Inc. British Standards Institution (BSI). 1996. Guide to project management. London: British Standards Institution. Electronic Industries Alliance (EIA). 1998. Earned Value Management Systems. Arlington, Virginia: Electronic Industries Alliance. Hökborg, Sven-Olof. 1972. Some thoughts regarding weapons system development. Los Angeles, California: University of Southern California, Institute for Aerospace Safety and Management, Report to Dr L. Stuckenbruck.
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