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IT Investment Performance Measurement and Performance Reporting Policy

U.S. Department of Commerce
Office of the Chief Information Officer

Information Technology Investment
Performance Measurement and Performance Reporting Policy

What is the purpose of this policy and to whom does it apply?
Why is a policy on performance measurement and performance reporting required?

What is performance measurement and performance reporting?

What is a major IT investment?

What types of performance measurement and performance reporting are required by this policy?

What is Earned Value Management?

When and how must I employ Earned Value Management?

What are the specific requirements for incorporation of Earned Value requirements into major IT developmental contracts?

What is Operational Analysis?

When must I conduct an Operational Analysis?

Who is responsible for conducting performance measurement and performance reporting?

How, when, and to whom must I provide performance measurement reporting?

How does the Department use the performance measurement reports I submit?

Are there any exceptions to this policy?

Where can I get information on Earned Value Management and Operational Analysis?

Who can address questions regarding this policy?

What is the purpose of this policy and to whom does it apply?

This policy establishes and outlines relevant guidance related to performance measurement and performance reporting of major information technology (IT) capital investments in both the developmental, modernization, and enhancement (DME) and operational (or steady state) phases, and applies to all operating units of the Department of Commerce, as well as the Office of the Secretary. The monitoring and management of performance on our major IT investments is a critical part of the Department's Capital Planning and Investment Control (CPIC) process. The CPIC process is built on a foundation of strategic and operational IT planning that is integrated with processes for the selection, control, and evaluation of IT investments. The performance measurement process and Departmental monitoring of IT investment performance are vital parts of the control and evaluation phases of the CPIC process, and the roles and responsibilities of those involved in the management of our IT investments are spelled out in the CPIC Guide.

Why is a policy on performance measurement and performance reporting required?

This policy is required because the success of major IT investments is critical to the achievement of Commerce's mission and goals set out by the Secretary of Commerce. Effective management of the Department's major IT investments is key to delivering IT services of the highest quality while controlling the cost to the taxpayer, and the accurate measurement and reporting of the performance of our major IT investments is an important part of the effective management of those investments.

What is performance measurement and performance reporting?

The Office of Management and Budget's (OMB) Capital Programming Guide defines performance measurement as a "means of evaluating efficiency, effectiveness, and results. Performance measurement should include program accomplishments in terms of outputs (quantity of products or services provided) and outcomes (results of providing outputs in terms of effectively meeting intended agency mission objectives)." Performance measurement and performance reporting of Commerce's major IT investments are a means of monitoring whether those investment initiatives satisfy defined requirements and attain identified results.

What is a major IT investment?

A major IT investment is defined by the Commerce Office of the Chief Information Officer (OCIO) as a system or project meeting one or more of the following criteria:

    • meriting special attention due to its sensitivity, mission criticality, or risk potential or,

    • that includes $25 million or more in development, modernization, and enhancement costs over the life of the project.

What types of performance measurement and performance reporting are required by this policy?

You must use Earned Value Management to measure and report the performance of the DME portion of all major IT investments and conduct Operational Analysis on the operational portion of the investment. Earned Value Management and Operational Analysis are two methods of performance measurement applicable to IT capital investments. They are analytical processes used to measure objectively how well a project or program is accomplishing its mission.

What is Earned Value Management?

Earned Value Management (EVM) is a performance measurement tool commonly used in developmental IT projects that relates project and resource planning to actual cost and schedule achievements. All work is planned, budgeted, and scheduled in time-phased "planned value" increments that constitute a cost and schedule measurement baseline. EVM is practiced through the use of an Earned Value Management System (EVMS) that provides an integrated picture of the cost and schedule performance of a project and allows a project manager to analyze deviations from plans, forecast completion of events, and implement corrective actions in a timely manner. Two major objectives of an EVMS are:

    • to ensure that Commerce's project managers and contractors use effective internal cost and schedule management control systems, and

    • to provide the government with timely cost and schedule performance data to allow project managers to effectively monitor and control their projects.

When and how must I employ Earned Value Management?

You must use Earned Value Management techniques in the management all Department of Commerce with a lifecycle DME cost of $25 Million or more, and these techniques must be part of an EVMS that meets the criteria specified in the Electronic Industries Alliance standard, "ANSI/EIA-748, Earned Value Management Systems," including the requirement to conduct a monthly assessment of cost and schedule performance.

You must also include in all contracts for major DME investments a requirement directing the contractor to utilize program management methods and Earned Value reporting that meet the best business practice guidelines provided in the ANSI/EIA-748 Standard. The contract requirement must also ensure that subcontractors comply as well.

What are the specific requirements for incorporation of Earned Value requirements into major IT developmental contracts?

You must incorporate Earned Value Management clauses in all future contracts, as spelled out in the joint memo issued by the Commerce Chief Information Officer (CIO) and Chief Acquisition Officer. You must also incorporate EVM requirements into existing contracts where practicable.

You are also required to conduct an Integrated Baseline Review (IBR) on contracts with an EVMS requirement, before or after award as appropriate, in order to establish a performance measurement baseline agreed to by both parties and against which performance will be measured. In conducting the IBR, you should use the National Defense Industrial Association (NDIA) Program Manager's Guide to the Integrated Baseline Review Process as a resource document.

In addition to including a requirement for an EVMS in contracts for major DME investments, you also must demonstrate, through a compliance review, that the Earned Value data and analysis used to measure and report the contractor's work progress are produced by an EVMS that meets the guidelines in the ANSI/EIA-748 Standard. You may use the NDIA Intent Guide as a resource document to conduct the compliance review. In addition to the initial compliance review, you must also, on a triennial basis, review the EVMS to ensure it continues to meet the requirements of ANSI/EIA-748. You may use the NDIA Surveillance Guide to conduct the triennial review.

What is Operational Analysis?

Operational Analysis is a method of examining the current performance of the operational (or steady state) portion of an investment, measuring that performance against an established set of performance parameters, and examining opportunities for improvement in operational performance. Beyond the typical developmental performance measures of "Are we on schedule?" and "Are we within budget?" an Operational Analysis should seek to answer more subjective questions in the specific areas of:

    • Customer Results,

    • Strategic and Business Results,

    • Financial Performance, and

    • Innovation.

Operational Analysis is another phrase for "process improvement," and should trigger considerations of how the investment's objectives could be better met, how costs could be saved, and whether, in fact, the organization should even be performing a particular function.

When must I conduct an Operational Analysis?

All Commerce operating units, as well as the Office of the Secretary, must conduct an annual Operational Analysis of the operational (or steady state) portion of their major IT investment initiatives. Operational Analyses of steady-state investments must address the four specific areas of Customer Results, Strategic and Business Results, Financial Performance, and Innovation and must include the investment's performance measurement baseline and actual performance measurement information to determine if the investment is continuing to provide realizable benefits.

Who is responsible for conducting performance measurement and performance reporting?

Project managers of all major IT investments must provide quarterly Earned Value performance measurement reports on the DME portion of the investment, and annual Operational Analysis reports on the operational (or steady state) portion.

Project managers of other IT investments not classified as major may also be required to submit quarterly Earned Value performance reports or annual Operational Analysis reports. These investments will typically be those that are identified by the Departmental CIO as high risk or that are named in the Department's Strategic IT Plan as requiring management attention.

How, when, and to whom must I provide performance measurement reporting?

You must provide the required performance measurement reports to the Commerce OCIO. Earned Value performance measurement reports are due on a quarterly basis and Operational Analysis reports on an annual basis. Quarterly Earned Value performance reports must include performance data through the end of the month previous to the month of the report, and annual Operational Analysis reports must address the calendar year ending in the month previous to the reporting date. The IT Investment Performance Measurement and Reporting Data Call issued by OCIO provides information as to the exact dates on which performance measurement reports are due, as well as the reports' required content and format.

How does the Department use the performance measurement reports I submit?

The quarterly Earned Value performance reports and annual Operational Analysis reports are used by Departmental managers in the control and evaluation phases of the Capital Planning and Investment Control process. The Office of the CIO reviews the quarterly Earned Value performance reports and annual Operational Analysis reports and reports to the Commerce IT Review Board and the Deputy Secretary on investments that deviate from cost, schedule, or performance goals by more than -10% or that are in other ways troublesome. The OCIO also ensures that, where necessary, corrective action is taken to correct unacceptable variances and monitors ongoing corrective action to ensure that projects continue to meet cost and schedule goals.

Are there any exceptions to this policy?

In rare instances where performance risk is low, exceptions may be granted to the requirements for quarterly submission of Earned Value performance measurement reports or annual submission of Operational Analyses. Such exceptions will apply only to the reporting of Earned Value and Operational Analysis, not to the requirement to use Earned Value management and Operational Analysis in the management of major investments.

You may request an exception to the requirement to submit quarterly Earned Value performance measurement reports or annual Operational Analyses by submitting your request in accordance with the instructions provided in the IT Investment Performance Measurement and Reporting Data Call. In your request for an exception, you must explain fully why you believe the performance risk of your investment initiative is low enough to justify the exception.

Where can I get information on Earned Value Management and Operational Analysis?

The requirements of an EVMS are spelled out in ANSI/EIA Standard 748A, "Earned Value Management Systems." This Standard is copyrighted and is available for purchase from Global Engineering Documents, Inc. While copyright provisions preclude the Standard's availability on the Web, the National Defense Industrial Association (NDIA) has published an Intent Guide, which delineates the criteria for, and typical attributes of, an EVMS. The NDIA Program Management Systems Committee has also produced a number of other publications and supplemental guidance to assist governmental agencies with EVMS implementation. The guides can be found on the Committee's Web site, but are most easily accessed on the Defense Acquisition University's Web site under OMB Recommended References.

Information on Operational Analysis can be found in the Management-In-Use section of the OMB Circular A-11, Part 7 Supplement, "Capital Planning Guide." More detailed information on the Operational Analysis process and specific guidance on content required for Operational Analyses of Commerce's major operational IT investments can be found on the OCIO Web site, under Operational Analysis and Performance Reporting.

Also, contact the following specialists for:

Commerce's IT Capital Planning and Investment Control process;: Office of IT Policy and Planning, Stuart Simon, 202-482-0275, ssimon@doc.gov.

EVM and Operational Analysis content requirements and characteristics; Office of IT Policy and Planning, Jerry Harper, 202-482-0222, jharper@doc.gov.

Who can address questions regarding this policy?

Contact Jerry Harper, 202-482-0222, jharper@doc.gov.

Supersedes policy dated: None
Origination DATE: May 22, 2006
Approved by: Karen Hogan, Acting Chief Information Officer,
May 22, 2006
Revision Status: Initial Publication