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EVM – Contracting and Subcontracting
Breakout Session #: C15
Lisa Wolf, MBA, EVP, PMP Dale Gillam, MBA, PMP, CPCM
Date: Monday, July 25
Time: 4:00pm- 5:15pm
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Abstract
Things are changing in the EVM Government Contracting world. Recently, a class deviation was released lowering compliance review thresholds and the OMB released a memorandum reducing the burden of certifying EVM Systems. These changes have been met with some confusion in industry as to what it all really means. Discuss how these changes impact what to look for when contracting with EVM requirements, properly flowing down the requirements to subcontractors, and ensuring it all meets PM needs.
Why We Should Care: Contracts Controls the Environment
• Contracts controls the levers to align Government, Prime, and Subcontractor interests and efforts
• EVM is a key lever to ensure effective “integrated program management” across the entire program environment
Scope, Schedule, & Budget
Scope, Schedule, & Budget
Program Team - Worst Case Program Team - Best Case
Stakeholders Pulling in Different Directions
Stakeholders Working to Same Direction
Topics
• What is an EVMS? • A Brief History of EVM • What is the EIA-748 EVMS Standard? • The Governing Policies • The Way we Were • The Way we are Changing • How to Help the Program Manager and
Subcontractors
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What is an EVMS?
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EV
EVM
EVMS
• A Project Management discipline – The ‘forcing function’ for solid, integrated
project management
* Wolf Project Management, LLC, Project Management and EVMS Surveillance, 2012. Used with Permission.
What is an EVMS?
• EV – The value of work performed on a
project based upon the baseline estimated costs to perform the subject work
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EV
EVM
EVMS
What is an EVMS?
• EVM – A quantified, disciplined approach to project
management requiring the integration of cost, scope, and schedule into a single baseline against which project execution performance in measured (called a “Performance Measurement Baseline” or PMB).
– One cannot accurately calculate EV without managing a project using EVM.
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EV
EVM
EVMS
What is an EVMS?
• EVMS – The system of people, processes, and tools established,
maintained, and followed to accurately and adequately perform EVM. “A forcing function for solid Project Management practices.”*
– An EVMS is implemented primarily for internal management use.
– It is also used to satisfy customer requirements for project visibility and performance reporting when contractually proscribed.
– Attempting to perform EVM without an EVMS leads to “garbage in-garbage out.”
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EV
EVM
EVMS
What is an EVMS? • One of six business systems subject to DCMA
oversight: – Accounting systems (252.242-7006) – EVM systems (252.234-7002) – Estimating systems (252.215-7002) – Material management and accounting systems
(252.242-7004) – Property management systems (252.245-7003) – Purchasing systems (252.244-7001)
• Both the system clause and business system clause (252.234-7005) need to be on a contract for the business system controls to be in effect
A Little EVM History... Highlights: • 1959 – Introduced as “PERT/COST”
– Booz Allen ‘invented’ PERT for estimating in 1963 for the Navy Polaris Program
• 1967 – Became C/SCSC – Cost/Schedule Control Systems Criteria – 35 Criteria
• 1989 – Elevated to Undersecretary of Defense for Acquisition
• 1991 – First Contract Canceled Due to Deficiencies Discovered by EVM
• 1996 – C/SCSC Became EVM
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A Little EVM History...
Highlights (Continued): • 1998 – ANSI/EIA-748 Issued
– 32 Guidelines – Updated/Refreshed Every 5 Years – Now on Version C (2013 Release) – Now ‘only’ EIA
• 2002 – Sarbanes-Oxley Act • 2011 – PARCA Office Created
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What is the EIA-748 Standard?
• Formerly called the ANSI/EIA-748 – ANSI dropped with move to new certifying
body, “EIA-748” is the document number – EIA is the Electronic Industries Alliance – The NDIA IPMD is responsible for periodic
updates to the standard – Latest version – “EIA-748-C” - was
released March 1, 2013 • Available for purchase at store.sae.com
for $77
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EIA-748 Content • The primary goal for an EVMS • The seven principles of an EVMS • The 32 basic guidelines grouped by five major
categories: – Organization – Planning, scheduling, and budgeting – Accounting considerations – Analysis and management reports – Revisions and data maintenance
• A process elaboration on the application of the guidelines
• The system documentation expectations • The system evaluation process, acceptance
and surveillance expectations
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The Governing Policies - OMB
• OMB Circular A-11 • Requires - ‘All major acquisitions with
development effort will include the requirement for the contractor to use an EVMS’ that meets the EIA-748 Standard (§1.5.5.4)
• States EVMS is ‘normally used on FP Incentive and CR contracts for major acquisitions’ or on FFP on major acquisitions if the Contract or TO contains a ‘significant amount of development effort’
• Identifies EVM as a ‘critical component’ of risk management
• Leaves the definition of ‘major’ to the agencies
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The Governing Policies - FAR
• FAR Subpart 34.2 • 34.201 – Policy – EVMS is required for
major acquisitions for development (points to OMB A-11). May require for ‘other acquisitions’, as determined by agency
• 34.202 – Requires Integrated Baseline Reviews (IBRs)
• 34.203 – Provides solicitation provisions 52.234-2, -3, and -4
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The Governing Policies
• FAR 52.234-2 • Notice of Pre-Award IBR
• FAR 52.234-3 • Notice of Post-Award IBR
• FAR 52.234-4 • Contractor required to use an EVMS that
has been determined as compliant with EIA-748 by its CFA
• If not determined compliant, must provide comprehensive EVMS implementation plan
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The Governing Policies
• DFARS 234.201 Policy • For cost or incentive contracts valued at…
• >= $20M, the EVMS shall comply with EIA-748 • >= $50M, now >=$100M, the EVMS shall have
their EVMS determined as compliant with the EIA-748 by the Cognizant Federal Agency (CFA)
• COs can still require EVMS on lower dollar value or other contract types
• Solicitation provisions at 252.234-7001 and 7002
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The Way We Were…
• For DoD, whenever the 252.234-7002 clause was on contract, DCMA was supposed to conduct • “surveillance reviews” • “compliance reviews” if the total contract
value was >=$50M • The reality was
• DCMA was significantly backlogged for getting a compliance review
• Surveillance reviews by local DCMA reps was inconsistent in application and performance
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And Now…A Change in DoD • Class Deviation 2015-O0017, Earned Value
Management System Threshold was published September 28, 2015
• DoD has raised the compliance review threshold from $50M to $100M
• DoD also established a $100M total contract value for when surveillance by DCMA would automatically apply
• Surveillance can still be done on <$100M contracts if data is suspect
• This does not change when EVMS is required – just reviews by DCMA
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What Does That Mean?
• If our contract is <$100M, do we still have to be compliant with the EIA-748? • Yes, if it has the 252.234-7002 clause. • You still must be compliant, regardless of
whether you are subject to surveillance under the class deviation.
• The requirement does not change; your risk of external audit does.
• But do not get complacent!
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What Does That Mean?
• Must we still flow down EVM requirements to our Subcontractors if they are below the $100M threshold? • Yes, if you have the 252.234-7002 clause
and they are identified in subsection k(1) or k(2).
• If not specifically identified, then the prime decides the approach (e.g., flow-down, incorporate into Prime’s EVMS)
• The actual requirement for EVMS did not change; just the level at which compliance reviews and surveillance will occur.
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What Are Non-DoD Requirements?
• These can vary greatly. Some examples: • Department of Commerce: EVM required on all
IT projects ≥ $25M • FAA: Required on contracts ≥$10M • HUD: Required for major IT investments ≥$5M • Treasury: External validation required on
contracts ≥$50M. Self-validation required on contracts ≥$20M and < $50M. “Core” EVM requirements (10 guidelines) on contracts <$20M.
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A Great Source
• NDIA Federal Agency EVM Policy Summary • http://www.ndia.org/Divisions/Divisions/IPMD/D
ocuments/OtherDocuments/NDIAIPMDAgencyEVMSPolicySummaryRev20130621-a.pdf
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And Now…A Change by OMB • Issued a memo on 10/23/15 with the goal to
reduce the burden of certifying EVMS • The intent was to encourage “reciprocity” to
recognize and accept compliance reviews from one government organization to another
• The intent is good, but is hard to see it embraced by DoD or Intel communities
• The idea has been debated for years. The OMB memo brought new energy to it.
• NASA and FAA did sign a reciprocity agreement on 3/31/16
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How Can I Best Support the PM?
• During Proposal Stages: • Let the PM and Capture Manager know
right away if EVM requirements are on the contract so it is considered in bid and proposal efforts
• Use Q&A process to clarify or redefine requirements
• Make sure things like staffing and software tools are considered
• Engage your EVM Focal Point early
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How Can I Best Support the PM?
• During Project/Program Execution • Engage early with customers – use the
IBR as a catalyst for implementation • Keep the PM and line managers on board • Make sure PM team understands scope
changes must be communicated to project controls personnel, too
• Make sure Project Controls personnel are aware of any contract mods that affect cost, scope, or schedule
• Ensure timely changes/modifications
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How Can I Best Support the Subcontractor? • Speak with the PM and Project Controls personnel
to understand what is actually needed. • Formal flow-down or integration into prime’s
EVMS? • Does the subcontractor need their own
approved system? How will the Prime conduct surveillance?
• If integrated, will the sub be a CAM over other team members?
• Must they take your (the Prime’s) EVM training?
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How Can I Best Support the Subcontractor? • How will business rhythm and data be integrated
into the IMS and IPMR? • How will actuals be accounted for to ensure
honoring ‘time now’ and other considerations? Dual-timekeeping?
