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Compliant EVMS in SAP

Overview

Dassian is SAP’s key development partner in the area of Earned Value. SAP provides a

fundamental basis and process for Project Management. Dassian provides tools which reside in the SAP

solution to fill functional requirements specific to the ANSI 32 EVMS criteria. The Dassian tools are not

bolt-ons or interfaces, but true programs which reside in and utilize the existing SAP instance. These

tools only require transport into the customers SAP box. There are no additional servers or interface

technologies. The Dassian tools referenced in this document include DP010 (Project Planning

Composite), DP51 (MS Project Integration), and DP007 (Manufacturing Earned Value).

Earned Value is utilized in Project Management as a statistical tool to evaluate a project’s

performance against its plan, and then to utilize that performance to forecast the remaining plan.

Industry standards show that this method of forecasting is extremely accurate once 25% of the project

has been completed. This ability to accurately forecast the outcome of the project is vital if a project is

to be successful. The potential for success brought by Earned Value is in the timeliness of the

information. Projects which are 70% or more complete have very little window of opportunity to make

changes to improve the outcome of the project. A project which can identify an issue at 25% complete

has time to make changes to fix the issues and get back on plan. The Dept. of Defense, Office of

Management & Budget, and numerous private corporations require the use of Earned Value on the

projects they sponsor.

There are numerous documents available discussing the calculations and uses of Earned Value

data. This document will address the fundamental requirements for each of the criteria of a compliant

EVMS solution and define specifically how that is accomplished in SAP. SAP ERP software provides a

unique opportunity to leverage Centric Project Management processes to enable accurate and timely

Earned Value data. Although we will not discuss Centric Project Management in this document, the

concept is important to understand the value and accuracy of the data provided for the EV statistical

analysis. SAP by definition is an ERP system, which means all data and processes, which the customer

has residing in SAP (vs external to SAP) can be integrated into one data source. When Project

Management is performed in SAP, all project support processes are dynamically integrated to the

project. For example, Subcontract work is planned and executed in a project plan. The plan tasks

become purchasing documents. Invoices against those purchasing documents become actual costs on

the project. This occurs throughout all scope items in the project. This concept makes SAP unique in

Project Management tools. This concept will be detailed in a follow on publication.

The document is laid out according to the 32 criteria for a compliant EVMS tool. Each criterion is

stated, sample audit questions are provided, and the SAP/Dassian solution is defined.


ANSI 748

Organization Criteria 1 –

ANSI

Define the authorized work elements for the program. A work breakdown structure (WBS),

tailored for effective internal management control, is commonly used in this process.

Sample Audit Questions

Is only one CWBS used for the contract?

Is all contract work included in the CWBS?

Are the following items included in the CWBS: Contract line items and end items?

SAP/Dassian Solutions

Standard SAP Project Systems provides the user with a single WBS to organize the project scope.

The WBS may also be linked to the Contract line items in the Sales & Distribution module to

allow for project data to support billing creation.


ANSI

Identify the program organizational structure including the major subcontractors responsible for

accomplishing the authorized work, and define the organizational elements in which work will

be planned and controlled.



Are all authorized tasks assigned to identified organizational elements?

Is subcontracted work defined and identified to the appropriate subcontractor within the proper

WBS element?


Standard SAP allows the identification of Organizational data through the assignment of

Company Codes, Plants, and other Organizational data.


ANSI

Provide for the integration of the company’s planning, scheduling, budgeting, work

authorization and cost accumulation processes with each other, and as appropriate, the

program work breakdown structure and the program organizational structure.


Are the contractor's management control systems listed above integrated with each other, the

CWBS, and the organizational structure at the Total Contract Level?

Are the contractor's management control systems listed above integrated with each other, the

CWBS, and the organizational structure at the Cost Account Level?


Standard SAP provides many of these functions. In some cases there are better tools. SAP

provides authorization through the use of Status Management. Until a piece of work is approved

to be worked on the Status can prevent charges of hours and dollars, yet maintain the plan data.

SAP allows for the creation of a Budget amount, which can be selected for Availability Control or

not. Scheduling is generally considered cumbersome in SAP. Most companies use a 3rd party

scheduling tools. This is not to say SAP is not functional. SAP provides robust functionality for

CPM scheduling.

Dassian offers an integrated MS Project desktop solution. This solution is loaded into SAP and

requires no interface or additional servers. This product integrates scheduling of WBS, Network

Activities, and PM Orders. This product (DP051 – MS Project Interface) is also integrated into

Dassian’s (DP010 – Project Planning Composite) product.



ANSI

Identify the company organization or function responsible for controlling overhead (indirect

costs).


Are the following organizational elements and managers clearly identified:( l ) Those responsible

for the establishment of budgets and assignment of resources for overhead performance?

Are the following organizational elements and managers clearly identified: (2) Those responsible

for overhead performance control of related costs?


SAP standard provides for planning cost and receiving actual cost for overhead and indirect

costs. SAP performs this function in Project Systems utilizing Costing Sheets to perform

percentage and qty based allocations of indirect costs.

Dassian’s DP010 – Project Planning Composite provides advanced capabilities for managing

indirect costs by providing the user the ability to maintain an indirect rate reportable to the


company and an external rate for reporting to external customers. These different rates

support both plan and actual indirect costs.


ANSI

Provide for integration of the program work breakdown structure and the program

organizational structure in a manner that permits cost and schedule performance measurement

by elements of either or both structures as needed.


Is each cost account assigned to a single organizational element directly responsible for the

work and identifiable to a single element of the CWBS?

Are the following elements for measuring performance available at the levels selected for

control and analysis:

o (1) Budgeted cost for work scheduled?

o (2) Budgeted cost for work performed?

o (3) Actual cost of work performed?


SAP standard provides for limited integration of the WBS and OBS. In standard SAP a code field

is used for a fairly flat (2-level) OBS. Dassian’s DP010 Planning Composite allows for a robust

functionality for defining multiple OBS’s. The OBS can be an alternate full structure with

descriptions (like IPT) and/or an OBS based on the type of costs (a functional OBS). Theses OBS

hierarchies can then be use to support OBS and IPT reporting in the standard CPR format

reports.


Planning, Scheduling, & Budgeting Criteria 6 –

ANSI

Schedule the authorized work in a manner which describes the sequence of work and identifies

significant task interdependencies required to meet the requirements of the program.


Does the scheduling system contain (Prepare exhibit showing traceability from contract task

level to work package schedules.)—(1) A master program schedule?

Does the scheduling system contain Intermediate schedules, as required, which provide a logical

sequence from the master schedule to the cost account level?

Does the scheduling system contain detailed schedules which support cost account and work

package start and completion dates/events?

Does the scheduling system provide for the identification of work progress against technical and

other milestones, and also provide for forecasts of completion dates of scheduled work?

Are work packages formally scheduled in terms of physical accomplishment by month, week, or

day as appropriate?



SAP standard supports Project Scheduling, although it is very cumbersome and limited. Most

companies utilize a 3rd party scheduling tool. The open issue is getting the 3rd party tool

integrated with the SAP tasks. There are several interface tools which provide import/export of

data. These require a separate server for the scheduling tool and interface. The validation of

the data being created in SAP occurs only at the point where the data is imported. These

solutions are very cumbersome in themselves and in some cases very expensive and difficult to

set up and maintain.

Dassian provides solutions which are integrated to SAP. In this case, the DP51 (MS Project Tool)

provides seamless integration with MS Project desktop and SAP PS and PM. We launch MS

Project engines from within SAP, link SAP tables to MS Project fields, and allow CPM scheduling

across PS WBS, Networks, and PM orders. Dassian’s DP51 product also integrates with the

DP010 product for Project Planning.


ANSI

Identify physical products, milestones, technical performance goals, or other indicators that will

be used to measure progress


Are meaningful indicators identified for use in measuring the status of cost and schedule

performance?

Does the contractor's system identify work accomplishment against the schedule plan?

Are current work performance indicators and goals relatable to original goals as modified by

contractual changes, replanning, and reprogramming actions?


SAP standard supports sequential milestones for Projects. Dassian’s DP010 Planning Composite

is much more flexible. DP010 allows the user to define multiple milestones and “weight” each

milestone. When taking progress, the milestone can be earned at a percentage (generally

known as POC weighted milestones).



ANSI

Establish and maintain a time-phased budget baseline, at the control account level, against

which program performance can be measured. Initial budgets established for performance

measurement will be based on either internal management goals or the external customer

negotiated target cost including estimates for authorized but undefinitized work. Budget for far-

term efforts may be held in higher level accounts until an appropriate time for allocation at the

control account level. On government contracts, if an over-target baseline is used for

performance measurement reporting purposes, prior notification must be provided to the

customer


Are meaningful indicators identified for use in measuring the status of cost and schedule

performance?

Does the performance measurement baseline consist of the time-phased cost account budgets?

Does the performance measurement baseline consist of the Higher level CWBS element budgets

(where budgets are not yet broken down into cost account budgets)?

Does the performance measurement baseline consist of Undistributed budgets, if any?

Does the performance measurement baseline consist of Indirect budgets, if not included in the

above?

Is the entire contract planned in time-phased cost accounts to the extent practicable?


In the event that future contract effort cannot be defined in sufficient detail to allow the

establishment of cost accounts, is the remaining budget assigned to the lowest practicable

CWBS level elements for subsequent distribution to cost accounts?

Does the contractor require sufficient detailed planning of cost accounts to constrain the

application of budget initially allocated for future effort to current effort? (Explain constraints.)

Are cost accounts opened and closed based on the start and completion of work contained

therein?


SAP with Dassian’s DP010 supports this requirement. There is a basic planning functionality

within core SAP, but being able to control a baseline with updates is cumbersome at best.

DP010 provides add-on applications to make it easier to control the baseline. DP010 provides a

robust change log capability and allows a very controlled process of managing the baseline

plan(s). SAP Core does not provide “Over Target Baseline” functionality (S=P) or (S=P=A). This is

available in DP010.



ANSI

Establish budgets for authorized work with identification of significant cost elements (labor,

material, etc.) as needed for internal management and for control of subcontractors.


Are the budgets assigned to cost accounts planned and identified in terms of the Material

and/or subcontract dollars?


SAP with Dassian’s DP010 support this requirement. There is a basic planning functionality




plan(s).



ANSI

To the extent it is practicable to identify the authorized work in discrete work packages,

establish budgets for this work in terms of dollars, hours, or other measurable units. Where the

entire control account is not subdivided into work packages, identify the far term effort in larger

planning packages for budget and scheduling purposes.


Do work packages represent the way work will be done?

Are they meaningful products or management subdivisions of higher level work?

Are detailed work packages planned as far in advance as practicable?


Is work detailed as requirements are defined?

Is future work planned and scheduled to the lowest extent possible?

Are work packages reasonably short in duration or have adequate milestones?

Are budgets assigned to work packages in dollars, hours, or other measurable units?

Are work packages assigned to performing organizations?

Is learning used to develop the budget and appropriately time phased in the project plan?






plan(s).


ANSI

Provide that the sum of all work package budgets plus planning package budgets within a

control account equals the control account budget


Do the detail work packages total the budget in the cost accounts?






plan(s).



ANSI

Identify and control level of effort activity by time-phased budgets established for this purpose.

Only that effort which is unmeasurable or for which measurement is impracticable may be

classified as level of effort.


Are Level of Effort plans controlled by type of resource or material or other category?

Is work properly defined as measured effort, LOE or apportioned, and separated from other

types of work?






plan(s).

SAP provides some EVMS calculations including level of effort. This functionality is limited in

some of the acceptable practices. For example POC adjustments may change historical BCWP

amounts. DP010 provides the functionality that core SAP provides plus additional functionality

for more robust BCWP calculations.



ANSI

Establish overhead budgets for each significant organizational component of the company for

expenses which will become indirect costs. Reflect in the program budgets, at the appropriate

level, the amounts in overhead pools that are planned to be allocated to the program as indirect

costs.


Are overhead budgets established across the entire organization at least annually?

Are overhead budgets established for each organization which can incur overhead costs?

Are elements of indirect expense defined to overhead budgets?

Are overheads being handled according to the disclosure statement?

Is the anticipated business base developed in a consistent manner?

Are overhead budgets created based on the anticipated direct business base?


Are overhead pools formally identified?

Are the organizations and items of cost assigned to each pool identified?

Are projected indirect pool costs and direct costs used to establish allocation rates to the

contracts?

Are projected overhead rates applied to the contract beyond the current year? If so, what is

used as the business base?

Are overhead pools adjusted in a timely manner to reflect changes? (organizational, base, pools)


SAP supports this requirement through the use of Costing Sheets. Overhead amounts are

determined from a percentage of the defined cost or quantity base.

Dassian’s DP010 takes this ability further by providing calculations of this data at the customers

rates. This allows the project to report Earned Value and Baseline data to the customer using

the customers cost numbers instead of the contractors Internal cost numbers.


ANSI

Identify management reserves and undistributed budget.


Is the Management Reserve identified and kept separate from the baseline?

Are records maintained to show the use of Management Reserve?

Is Undistributed Budget limited to contract efforts which cannot be planned, yet?

Are records maintained to show the use of Undistributed Budget?






plan(s).


SAP does not handle Management Reserve (Contingency) or Undistributed Budget. Dassian’s

DP010 handles these appropriately. Specifically, Management Reserve is a below the line item

and is managed in a standalone Version, therefore, it is not normally reported in the Project

reports. The CPR reports pull that data from the Management Reserve version and apply it

below the line.


ANSI

Provide that the program target cost goal is reconciled with the sum of all internal program

budgets and management reserves


Does the overall project budget include the baseline and Management Reserve?

Does the detail cost plan for Undistributed Budget, Management Reserve, and detail work

packages total the overall project budget?


This is a Business Process and not specific to the tool. However, SAP provides the reports to

verify this business process.

Accounting Criteria 16 –

ANSI

Record direct costs in a manner consistent with the budgets in a formal system controlled by the

general books of account


Are the costs charged to the project auditable?

Are costs charged to the project accumulated to the correct budget accounts?


SAP is likely the best of breed when it comes to fulfilling this requirement. The Direct costs to

the project are in many instances automatically charged to the original planning object, since

the planning object is likely what started the process to begin with. For example, an External

Network Activity automatically creates a Purchase Requisition, which is assigned to the Network


Activity. All subsequent documents and invoices are automatically charged back to the Network

Activity.


ANSI

When a work breakdown structure is used, summarize direct costs from control accounts into

the work breakdown structure without allocation of a single control account to two or more

work breakdown structure elements


Is it possible to summarize the direct costs from the Cost account level through the WBS without

allocation of lower level costs?


Standard SAP supports this requirement. If the user defines the lowest level WBS as the Control

Account, then it can have only one parent assignment up the structure. If the user defines the

Network Activity as the Control Package, the Activity can have only one Parent WBS.


ANSI

Summarize direct costs from the control accounts into the contractor’s organizational elements

without allocation of a single control account to two or more organizational elements


Is it possible to summarize direct costs to the highest organizational level with allocation?


SAP with the use of Dassian OBS solutions assigns a single OBS lowest level to a single WBS

Element. Standard SAP may also utilize user fields to define the assignment to the OBS.


ANSI

Record all indirect costs which will be allocated to the contract



Can indirect costs be summarized to the contract total without further allocation?

Are indirect costs accumulated to comparison to appropriate budgets?

Are indirect costs charged to the correct pools and organizations?

Are bases and rates for allocating indirect costs from each pool applied consistently?

Are bases and rates for allocating costs applied equally for commercial and government work?

Are rates for allocation adjusted to ensure a realistic monthly allocation of indirects without

significant annual year-end adjustments?

Are procedures for indirect allocations formally documented?


Standard SAP handles Actual costs and reporting of those costs very nicely. Including indirect

and allocated charges.


ANSI

Identify unit costs, equivalent unit costs, or lot costs when needed.


Does the system provide for unit costs in terms of labor, material, other directs, and indirects?

Is there a procedure for handling recurring and non-recurring costs?


Standard SAP supports this function especially well. For example, hours of work are planned

and the unit costs are defined and integrated with the schedule of the activity and the amount

of hours.


ANSI

For EVMS, the material accounting system will provide for:


Accurate cost accumulation and assignment of costs to control accounts in a manner consistent

with the budgets using recognized, acceptable, costing techniques.

Cost performance measurement at the point in time most suitable for the category of material

involved, but no earlier than the time of progress payments or actual receipt of material.

Full accountability of all material purchased for the program including the residual inventory


Are material costs accumulated in an accurate fashion and consistent with the budget?

Are material costs reported in the same period as that in which BCWP is earned for that

material?

Does the system allow for determination of price variances between plan and actual

commitments?

Does the system allow for determination of material variances caused by excess usage?

Does the system provide unit or lot costs when applicable?

Are records kept to show all material cost for the project and residual inventory?


Material Earned value is a very complex issue and SAP only attempts in some cases to calculate

BCWP for material. Materials planned in Project Systems using SAP can be assigned to any type

of Activity. SAP allows for a single EV Method for each Activity. In this case, Materials would

not be allowed to assign to a Internal Activity as that is where the labor occurs and labor has its

own EV Method. For Manufactured parts or end items, SAP provides no solution for Earned

Value.

Dassian utilizes two products to meet the requirements of Material Earned Value. For Projects,

DP010 Planning Composite treats the Materials as a separate planning object, with its own

unique EV Method. For Make parts and subsequent assemblies , Dassian offers DP007

Manufacturing Earned Value which works with SAP’s Production Planning (PP) module. Utilizing

MRP, Production, and Procurement data DP007 calculates the active Earned Value of the Make

Part and all sub-assemblies.

Make Part EV in DP007


Buy Part EV in DP007


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