Measuring Uncertainty in Earned Value
Abstract
The Department of Defense is transforming its logistics and business systems to become agile, global-in-reach, and readily adaptable to evolving threats, all with significantly reduced Total Ownership Costs. However, the scope and complexity of these systems pose significant technical and programmatic challenges, successful management of which requires accurate engineering, planning, and cost estimation data. Because these programs and systems are information intensive, the costs of data acquisition are governed by the efficiency of communication, coordination and control activities. Likewise, they govern the capability of tools such as Earned Value Management (EVM). Unfortunately, much of the information essential to formulating accurate Planned Value (PV) estimates is not available until after a program is well underway. The key to information/data accuracy lies in the rate and extent to which uncertainty surrounding estimates is eliminated. The confidence that can be placed in estimates, such as Planned Value, depends on a range of factors?all dominated by the maturity and discipline of Project Management, Quality Assurance, Enterprise Architecture, and Systems Engineering. Unfortunately, measures of their effectiveness have traditionally proven to be hard to implement, hard to interpret, and lack a clear relationship to the accuracy of Planned Value calculations. However, several observations from Information Theory can be applied to these estimation problems. These include: (1) directly measuring the often unknown and usually unobservable "true" Planned Value parameters; (2) measuring the indirect costs for coordination and control which represent the vast majority of activity costs for information-intensive organizations and programs which could pave the way for more efficient and more comprehensive Activity-based Costing.
Document Details
- Document Type
- Technical Report
- Publication Date
- May 18, 2006
- Accession Number
- ADA494807
Entities
People
- Richard Suter
Organizations
- Naval Postgraduate School