Performance Based IT Service Management (PBIT-SM)
Part 3 of 4 of the Performance Management Based Information Technology Series (PBIT™)
By Eric Novik - Government Solutions Group
Delta Corporate Services

Performance Based IT Service Management (PBIT-SM) is the second of three components of the Delta PBIT framework designed as the bridge between Federal Enterprise Architecture and Performance Based Services Acquisition (PBSA) guidelines. The main driver behind PBIT is to help agencies derive tangible value from new and ongoing IT investments.  PBIT-SM assumes that the IT investment has undergone the PBIT-SP phase and that the program goals, objectives and requirements have been sufficiently defined so that the contractor can start performing the task.  PBIT-SM is a broad model most closely associated with program and project management.  In this article we zero in on some of the more important elements.

There are many techniques available to the government and private contractors to help manage IT programs of various sizes.  The most popular documented account of the Project Management best practices can be found in the “Guide to the Project Management Body of Knowledge” published by the PMI (Project Management Institute).  It addresses the following project management sub disciplines: integration, scope, time, cost, quality, human resources, communications, risk and procurement.  Earned Value Management (EVM) is a specific technique that is described only briefly by the PMBK, but is nevertheless very useful for managing IT services projects.  EVM is central to the PBIT-SM framework as it places specific emphasis on performance; it is a required management tool for defense acquisitions and will eventually be required for all Development, Modernization and Enhancements (DME) initiatives undertaken by civilian agencies.

Before presenting a summary of EVM, it is important to note “Value” in EVM should not be confused with economic value or a specific tangible benefit – those objectives should have been established as part of the PBIT-SP.  Value in the EVM context refers to tracking actual work that has been performed on the contract (output) as opposed to the costs incurred (inputs).  EVM incorporates schedule, budget and scope into a holistic, integrated framework.  It offers project stakeholders an early warning system capable of accurately predicting project outcomes as early as 15% to 20% into the project.  EVM requires a detailed Work Breakdown Structure (WBS), Organizational Breakdown Structure (OBR) and a time phased budget.  Once the project is on the way the PM will monitor three variables: scheduled work for the period and cumulative (BCWS), earned value (BCWP) and actual costs (ACWP).  Earned value is determined by looking at elements that have actually been completed and multiplying by the percent complete.  The data needs to be gathered on a periodic basis; a month is the most commonly used interval.   Shorter intervals are also possible, but caution should be used – if a project is only few months in duration EVM may be overkill. 

Two useful indexes should be calculated every reporting period – Schedule Performance Index (SPI) and Cost Performance Index (CPI).  SPI is determined by dividing earned value by scheduled work or planned value (BCWP/BCWS). CPI is determined by dividing earned value by actual costs (BCWP/ACWP).  As you can see, both measures take earned value into account.  Both indices range from 0 to 1 and measure schedule and cost performance respectively.  A CPI of 70% says that the project is earning 70 cents for each dollar worked.  To estimate a likely cost at project completion the PM would divide the total project budget by the cumulative CPI.  This assumes that the project will perform at the current level of CPI until completion.  Studies have shown a lagging CPI position can rarely be recovered without significant scope reductions.  In addition, statistically CPI is stabilized 15% to 20% of the way into the project, meaning that the final cost and schedule range can be ascertained relatively early.  This early warning sign can be used to re-plan and renegotiate the project while significant investments have not yet been made.  To get maximum use out of the EVM framework, managers should use Critical Path Method in conjunction with EVM to gauge true project progress.  Further information on EVM can found in the ANSI/EIA 748 standard document.

PBIT-SM does not strive to implement every component of ANSI 748.  Rather we are focusing on the most useful parts of the framework while trying to minimize the administrative overhead.  In addition to EVM, PBIT-SM contains Service Level Management components for operational level services.  These components are directly related to Performance Based IT Service Architecture (PBIT-SA).

In the next and final article we will describe the fourth components of the PBIT frameworks - Performance Based IT Service Architecture (PBIT-SA).