Applying EVM

Applying EVM
to stop embezzlement

I am writing in response to the article in the Jan. 27 edition
of The Jakarta Post titled Donors must share blame for graft and
the related editorial, Embezzling foreign loans.

For many years those of us trying to introduce modern project
management to Indonesia have been advocating for the adoption of
Earned Value Management (EVM) (aka Cost/Schedule Control Systems
Criteria or C/SCSC). This is a proven methodology developed
almost 40 years ago by the U.S. Department of Defense
(www.acq.osd.mil/pm) to prevent contractors from overcharging the
U.S. government for goods and services (i.e. US$300 toilet seats,
$200 screwdrivers).

To explain EVM simply, it is based on the principle of
"Quantum Merit", or paying the fair market value for goods and
services as they are delivered and accepted. Stated another way,
using Earned Value Management enables the funding and/or
sponsoring agency to pay only for what they received and was
proven to meet the specifications and contractual terms and
conditions -- no more, no less. And to be able to make the
determination before the funds are released, not after. While
this methodology will not end corruption, implementing EVM at all
funding steps along the way and at all levels will go a long way
toward making it less easy to hide or disguise corruption
embedded in project billings.

Implementing EVM also works hand in glove with the post-
project audits by providing a documented history by independent
evaluators at each major milestone (payment tranche) of the
project.

What the U.S. Department of Defense learned long ago is that
controlling project costs through audits alone is an exercise in
futility. Audits alone are akin to locking the barn door after
the horse has escaped. The money is long gone and the cost to
recover it and prosecute the thieves in many cases would exceed
the value of the project. (And that assumes a court system that
would in fact prosecute and punish the perpetrators, assuming
they were proven guilty.)

Indonesia has a significant number of internationally
certified Project Management Professionals (PMP), either through
the U.S.-based Project Management Institute or the Australian
Institute of Project Managers (Reg PM).

Both these organizations recognize Earned Value Management and
have both Indonesian and expatriates in place to professionally
evaluate whether the work performed does or does not meet the
criteria specified in the contract documents. These professionals
can serve as independent auditors to sign off on each release of
funds. By evaluating the work before and not after the payment
has been made is the key to controlling, if not eliminating,
corruption and embezzlement of project funds.

PAUL D. GIAMMALVO
Jakarta