ACQUISITION POLICY MEMORANDUM NO. 2008 -- 02

To: Heads of Contracting Activity

Executive Officers

From: Martin J. Brown /s/

Senior Procurement Executive

Subject: HHS Interim Acquisition Guidance Concerning Earned Value
Management

Effective Date: October 1, 2008

1\. [Purpose]{.underline}: The purpose of this memorandum is to set
forth the specific implementation parameters for the application of
Earned Value Management (EVM) to contracts issued by the Department of
Health and Human Services (HHS), consistent with the flexibility and
discretion allowed by the Federal Acquisition Regulation (FAR). Please
treat this memorandum as interim acquisition guidance, pending formal
incorporation in the HHS Acquisition Regulation.

2\. [Background]{.underline}: Earned value management is a program
management tool and technique that facilitates systematic planning for,
and monitoring of, high-value, complex projects. It integrates a
project's scope of work with the related budget and schedule to permit
detailed assessment of overall performance during the life of the
project.

Several government-wide guidance documents govern the definition and use
of EVM systems. Guidelines outlining the qualities and characteristics
of an EVM system (EVMS) are set forth in American National Standards
Institute/Electronic Industries Alliance (ANSI/EIA) Standard-748.[^1]
More detailed and specific guidance and direction is contained in OMB
Circular A-11, *Preparation, Submission and Execution of the Budget*,
specifically in Part 7 of that Circular, *Planning, Budgeting,
Acquisition, and Management of Capital Assets*, and its supplement, the
*Capital Programming Guide*. Based on this collective OMB guidance, EVMS
is intended to be used on those parts of acquisitions[^2] that will
involve developmental effort. This would include not only those
acquisitions designated by the agency as major systems but also those
acquisitions that include significant developmental, modification, or
upgrade efforts during the operational or steady-state phase of a
program.

The FAR rule on EVMS became effective on July 5, 2006.[^3] Its purpose
is to implement EVMS policy in accordance with OMB Circular A-11. Prior
to that action, there was no specific coverage of EVMS in the FAR.
Because the new FAR coverage applies throughout the executive branch and
to agencies with disparate definitions of and processes and procedures
for major systems acquisitions, the FAR Council decided against a
"one-size-fits-all" approach and left several significant aspects of the
detailed implementation up to the discretion of each covered agency. For
example, the final FAR rule does not establish specific dollar-value
thresholds or set universal EVMS applicability criteria. Similarly, with
respect to integrated baseline reviews (IBRs)---an essential element and
step in the application of EVMS at the program and/or contract
level---the final rule does not mandate their use in the pre-award phase
and leaves to the agency's discretion whether to pay offerors for
preparation for, and participation in, pre-award IBRs conducted as part
of the source selection process. Also, although the final FAR rule
contains two solicitation provisions and a contract clause addressing
EVMS, agencies were given the flexibility to develop provisions and
clauses for their own use as long as they are substantially the same as
those contained in the FAR.

3\. [Analysis and Discussion]{.underline}: EVM principles and techniques
provide program managers with timely, accurate, and detailed cost,
schedule, and performance status information with which to make informed
decisions during the life of a program. However, using EVM on contracts
involves added time, cost, and effort on the part of both vendors and
the Government. For vendors, there are costs associated with
establishing EVMS in accordance with the ANSI/EIA standard, setting the
basic budget and schedule parameters for specific contract efforts, and
preparing and submitting periodic reports of progress and status. For
the Government, there are costs associated with evaluating offerors' and
contractors' EVMS and with receiving, reviewing, and analyzing periodic
EVM reports. Because of this workload, EVM should be used only when the
benefits of applying its tools and techniques are deemed by the agency
to outweigh the associated costs. To establish these parameters, the
HHSAR coverage sets a contract value floor below which the application
of EVM is not mandatory and any planned requirement for its use must be
approved in advance by the HCA. For contracts with values exceeding the
floor, this HHSAR coverage makes a distinction, also based on contract
value, between contracts that require the use of EVM techniques and
those that require that the successful offeror's EVMS be reviewed and
approved by the Cognizant Federal Agency (CFA) as being in conformance
with the full requirements of ANSI/EIA Standard-748.

Several considerations in addition to contract value should apply when
determining whether to use EVM. Among the most important of these
considerations are the proposed contract type and the subject matter of
the underlying effort. Failure to address these considerations could
result in the use of EVM to achieve results that other potentially
equally effective and less costly tools and techniques could provide.
Among the primary indicators of performance status that EVM provides are
estimates of cost and schedule variances from the performance plans, at
the detailed work package level, established during contract formation.
This is done by comparing three specific values: the budgeted cost of
work scheduled (BCWS); the budgeted cost of work actually performed
(BCWP); and the actual cost of work performed (ACWP). At any point, to
the extent that BCWP varies from BCWS, a positive or negative schedule
variance exists. Schedule deviation or variance could just as easily be
determined merely by comparing planned activities with those actually
performed over any time interval using tools other than EVM -- e.g.,
Microsoft Project or a similar schedule tracking application. Similarly,
to the extent that ACWP varies from BCWP, a positive or negative cost
variance exists.

If the type of contract does not expose the Government to any cost risk
of performance, the existence of a cost variance is of no actionable
concern to the Contracting Officer's Technical Representative (COTR) or
the Contracting Officer (CO). For example, under a firm-fixed-price
contract, the amount the Government will pay for the supplies or
services has been established at the time of contract formation, and as
long as no changes are made or requested in the work to be performed,
the final price to be paid will not be affected by the amount of costs
the contractor incurs in performing the contract. However, if the amount
the Government may pay for the contracted performance could vary or if
the amount of performance actually received could be affected by the
level of cost being incurred, then the existence of a cost variance is,
and should be, of interest to the COTR and the CO. This would be the
case if a cost-reimbursement or fixed-price-incentive type contract is
being used. Also, for term form contracts (i.e., when the contracted
performance is defined as a set level-of-effort), time-and-material and
labor-hour contracts, and commercial contracts under FAR Part 12, the
existence of a cost variance is not an actionable condition for either
the COTR or CO because the contracted performance required is measured
in terms of labor hours for which a fixed price, estimated cost limit,
or ceiling price accompanied by fixed hourly rates has been established.
Therefore, depending on the contract type, the HHSAR coverage permits
either full or partial EVM. Under full EVM both the cost and schedule
aspects of a contract are tracked and reported whereas, under partial
EVM, tracking and reporting is limited to only the schedule aspects of
the contract. The coverage also contains language prohibiting the
selection of a particular contract type merely to avoid the application
and use of full EVM.

The table on the following page summarizes the applicability of EVMS
consistent with the specific content of the interim guidance.

+---------------+-----------+---------------------+----+----+---+----+
|               |           |                     | EV |    |   |    |
|               |           |                     | MS |    |   |    |
+---------------+-----------+---------------------+----+----+---+----+
| Category      | Contract  | Contract Type       | >  | >  | > | >  |
|               | Value     |                     | Fu |  P |   | Op |
|               |           |                     | ll | ar | N | ti |
|               |           |                     | >  | ti | o | on |
|               |           |                     |  ( | al | t | al |
|               |           |                     | Co | >  | > | >  |
|               |           |                     | st |  ( |   | wi |
|               |           |                     | >  | Sc | R | th |
|               |           |                     |  a | he | e | >  |
|               |           |                     | nd | du | q |  H |
|               |           |                     | >  | le | u | CA |
|               |           |                     |  S | >  | i | >  |
|               |           |                     | ch |  O | r |  P |
|               |           |                     | ed | nl | e | ri |
|               |           |                     | ul | y) | d | or |
|               |           |                     | e) | >  |   | >  |
|               |           |                     | >  |  E |   | Ap |
|               |           |                     |  E | VM |   | pr |
|               |           |                     | VM | >  |   | ov |
|               |           |                     | >  | Re |   | al |
|               |           |                     | Re | qu |   |    |
|               |           |                     | qu | ir |   |    |
|               |           |                     | ir | ed |   |    |
|               |           |                     | ed |    |   |    |
+---------------+-----------+---------------------+----+----+---+----+
| Major         | \< \$ 10  | Any type            |    |    |   |    |
| acquisitions  | million   |                     |    |    |   |    |
| for           |           |                     |    |    |   |    |
| development   |           |                     |    |    |   |    |
| (per OMB      |           |                     |    |    |   |    |
| Circular      |           |                     |    |    |   |    |
| A-11) and\    |           |                     |    |    |   |    |
| Acquisitions  |           |                     |    |    |   |    |
| for           |           |                     |    |    |   |    |
| development,  |           |                     |    |    |   |    |
| m             |           |                     |    |    |   |    |
| odernization, |           |                     |    |    |   |    |
| or upgrade    |           |                     |    |    |   |    |
| (non-major)   |           |                     |    |    |   |    |
+---------------+-----------+---------------------+----+----+---+----+
|               | =/\> \$10 | Cost                | \* |    |   |    |
|               | million   | Reimbursement/Fixed |    |    |   |    |
|               | to \$25   | Price\              |    |    |   |    |
|               | million   | Incentive (with     |    |    |   |    |
|               |           | incentive based on  |    |    |   |    |
|               |           | cost)               |    |    |   |    |
+---------------+-----------+---------------------+----+----+---+----+
|               | =/\> \$10 | Firm-fixed-price,   |    | \* |   |    |
|               | million   | Time-and-Materials, |    |    |   |    |
|               | to \$25   | Labor-hour, and     |    |    |   |    |
|               | million   | Term form           |    |    |   |    |
+---------------+-----------+---------------------+----+----+---+----+
|               | \> \$25   | Cost                | \* |    |   |    |
|               | million   | Reimbursement/Fixed | \* |    |   |    |
|               |           | Price\              |    |    |   |    |
|               |           | Incentive (with     |    |    |   |    |
|               |           | incentive based on  |    |    |   |    |
|               |           | cost)               |    |    |   |    |
+---------------+-----------+---------------------+----+----+---+----+
|               | \> \$25   | Firm-fixed-price,   |    | \* |   |    |
|               | million   | Time-and-Materials, |    | \* |   |    |
|               |           | Labor-hour, and     |    |    |   |    |
|               |           | Term form           |    |    |   |    |
+---------------+-----------+---------------------+----+----+---+----+
| Acquisition   | Any value | Any type            |    |    |   |    |
| of            |           |                     |    |    |   |    |
| non-          |           |                     |    |    |   |    |
| developmental |           |                     |    |    |   |    |
| services,     |           |                     |    |    |   |    |
| routine       |           |                     |    |    |   |    |
| services,     |           |                     |    |    |   |    |
| steady state  |           |                     |    |    |   |    |
| operations,   |           |                     |    |    |   |    |
| basic and     |           |                     |    |    |   |    |
| applied       |           |                     |    |    |   |    |
| research, or  |           |                     |    |    |   |    |
| commercial    |           |                     |    |    |   |    |
| items (in     |           |                     |    |    |   |    |
| accordance    |           |                     |    |    |   |    |
| with FAR Part |           |                     |    |    |   |    |
| 12)           |           |                     |    |    |   |    |
+---------------+-----------+---------------------+----+----+---+----+
| \             |           |                     |    |    |   |    |
| *Contractor's |           |                     |    |    |   |    |
| EVM system    |           |                     |    |    |   |    |
| must comply   |           |                     |    |    |   |    |
| with ANSI/EIA |           |                     |    |    |   |    |
| St            |           |                     |    |    |   |    |
| andard-748-A. |           |                     |    |    |   |    |
|               |           |                     |    |    |   |    |
| \*\           |           |                     |    |    |   |    |
| *Contractor's |           |                     |    |    |   |    |
| EVM system    |           |                     |    |    |   |    |
| must be       |           |                     |    |    |   |    |
| validated and |           |                     |    |    |   |    |
| accepted by   |           |                     |    |    |   |    |
| the CFA.      |           |                     |    |    |   |    |
+---------------+-----------+---------------------+----+----+---+----+

Once a decision is made to apply EVM (whether full or partial) to a
proposed contract, other related decisions will also have to be made.
Among them is the choice of when to establish the performance
measurement baseline (PMB). One of the first and most important steps in
applying EVM techniques to an acquisition is the establishment of
baseline planned schedule and/or budget parameters (the PMB) at the work
package level. When the baseline has been established, all future EVM
reporting of cost and/or schedule status is accomplished with respect to
that plan.

The meeting to establish the PMB can take place either before award (as
part of the competitive process), or after award and only with the
successful offeror. In either case, it is a joint responsibility of the
Project Officer (PO) (who performs technical/programmatic
responsibilities in a pre-award environment), the CO, and the
offeror(s)/contractor. This process is referred to as the integrated
baseline review (IBR). The decision of when to conduct an IBR can have
significant cost and time implications for both vendors and the
Government. As a consequence, the proposed HHSAR coverage treats
pre-award IBRs as an exceptional item requiring advance approval and
specific funding. When pre-award IBRs are conducted, all offerors will
incur added bid and proposal costs, the cost for the Government to
conduct multiple IBRs can be significant, and the source selection and
award phase of the acquisition may be delayed. Government personnel will
need to review and establish several baselines and also assess the
compliance of several offerors' EVMS with the ANSI/EIA standard. The use
and implications of pre-award IBRs in the source evaluation and
selection process must be clearly set forth in both the acquisition plan
and the solicitation.

The use of performance-based contracting techniques presents yet another
issue with respect to pre-award IBRs. In a performance-based
acquisition, each offeror's submission is likely to be significantly
different in areas such as approach, content, and detailed schedule,
along with the expected differences in offered prices and, therefore,
associated budgets. As a result, establishing an acceptable budget
and/or schedule baseline with each offeror is likely to be a more
resource-intensive activity for the Government. Alternatively, when an
IBR is conducted after contract award, it involves only the successful
offeror and thus the time and cost impact will be reduced. In fact, even
when pre-award IBRs have been conducted, a post-award IBR is often still
necessary to incorporate any changes that may have resulted from
negotiations with the successful offeror. Also, the use of pre-award
IBRs may adversely affect the desire or ability of small business
concerns to compete effectively for business opportunities.

Therefore, the interim HHSAR coverage places significant limitations on
the decision to use pre-award IBRs and requires that offerors be
compensated for preparing for and participating in them.

4\. [Impact on HHSAR]{.underline}: This interim acquisition guidance has
an impact on two parts of the HHSAR:

*HHSAR 334.2---Earned Value Management System (EVMS):* It adds a new
subpart that addresses the implementation of earned value management
within HHS. This new subpart sets forth the contract value thresholds
for EVMS use, establishes criteria for applying either full or partial
EVMS based upon the contract type used, states policy with respect to
the decision to use pre-award IBRs, and prescribes the use of two
solicitation provisions and two contract clauses addressing EVMS.

*HHSAR 352.234-X---Solicitation Provisions and Contract Clauses*: It
adds two solicitation provisions---one to be used in contract
solicitations when pre-award IBRs are contemplated and one to be used
when only a post-award IBR is contemplated. Further, it adds two
contract clauses to be used in solicitations and contracts that,
depending upon contract type, will require the use of either full or
partial EVM. The FAR provisions and contract clause are not used because
of unique HHS EVM applicability and implementation issues, which can be
addressed more effectively and efficiently using the HHSAR-specific
provisions and clauses.

5\. [Regulatory Language]{.underline}: Attached is the interim
regulatory language to address EVM.

cc: ASRT/OCIO (Phil Clark)

ASAM/OFMP (Diane Stewart)

ASPR/BARDA (Michael Blumenfeld)

Attachment

Attachment

**Interim HHSAR Guidance - Earned Value Management**

◄●►

a\) *Add a new subpart at HHSAR 334.2, as follows:*

**[Part 334---Major System Acquisition]{.underline}**

**\[Subpart 334.2---Earned Value Management System**

200. **Definitions.**

As used in this subpart **--**

*"Full EVMS"* means tracking and reporting of both the cost and schedule
aspects of a contract using the principles and guidelines described in
ANSI/EIA Standard-748, Earned Value Management Systems (using the
version of the Standard that is in effect at the time of the
solicitation).

"Partial EVMS" means tracking and reporting of only the schedule aspects
of a contract using the principles and guidelines described in ANSI/EIA
Standard-748, Earned Value Management Systems (using the version of the
Standard that is in effect at the time of the solicitation).

**334.201 Policy.**

\(a\) For acquisitions for development designated as major in accordance
with both OMB Circular A-11 and HHS policy on major acquisitions; for
acquisitions that involve substantial development, modification or
enhancement; or for acquisitions that involve significant upgrade of
operational or steady state systems or programs, use of an Earned Value
Management System (EVMS) is required as follows:

(i) For individual cost-reimbursement or fixed-price-incentive contracts
    (with incentive based on cost) valued at \$10 million to \$25
    million, including options, full EVMS (as defined in 334.200) is
    required and the contractor's EVMS shall comply with the guidelines
    in ANSI/EIA Standard-748.

(ii) For individual firm-fixed-price, term form (level-of-effort) of any
     type, time-and-materials, or labor-hour contracts valued at \$10
     million to \$25 million, including options, partial EVMS (as
     defined in 334.200) is required and the contractor's EVMS shall
     comply with the guidelines in ANSI/EIA Standard-748.

(iii) For individual cost-reimbursement or fixed-price-incentive
      contracts (with incentive based on cost) valued at more than \$25
      million, including options, full EVMS (as defined in 334.200) is
      required and the contractor's EVMS must be formally validated and
      accepted by the Government (i.e., the contractor's Cognizant
      Federal Agency (CFA), as defined in FAR 2.101 and described in FAR
      42.003).

(iv) For individual firm-fixed-price, term form (level-of-effort) of any
     type, time-and-materials, or labor-hour contracts valued at more
     than \$25 million, including options, partial EVMS (as defined in
     334.200) is required and the contractor's EVMS must be formally
     validated and accepted by the Government (i.e., the contractor's
     CFA).

(v) For individual contracts of any type valued at less than \$10
    million, including options, full or partial EVM application, as
    appropriate to the contract type involved, is optional. The
    recommendation to use EVM should be based upon a risk analysis by
    the program manager/Project Officer (PO). A decision to use EVM at
    this level requires the prior approval of the cognizant Head of the
    Contracting Activity (HCA).

\(b\) EVM is not required, but may be applied with prior written
approval of the HCA, on contracts of any dollar amount meeting either of
the following criteria:

> \(i\) The acquisition is for non-developmental support services (e.g.,
> program office support, Independent Verification & Validation
> services), steady state operations, basic and applied research, and
> routine services (e.g., building maintenance, help-desk services,
> landscaping services); or
>
> \(ii\) The contract is for a commercial item(s) under FAR Part 12.

\(c\) When full EVM is required on a prime contract, it applies to
subcontracts issued thereunder if those subcontracts have a value and
are of a type and subject matter that would have required the use of
full EVM had they been prime contracts. However, if the prime contract
requires the use of only partial EVM, any subcontracts to which EVM is
made applicable, because of dollar value, contract type or subject
matter, shall require only partial EVM.

\(d\) When offerors are required to provide an EVMS plan as part of
their proposals, the contracting officer shall request the assistance of
the PO (and/or an appropriate HHS-designated third party) in determining
the adequacy of such proposed EVMS plans.

\(e\) The selection or use of a particular contract type, if done only
or primarily to avoid the application of full EVM to the acquisition, is
prohibited.

**334.202 Integrated Baseline Reviews (IBRs).**

\(a\) An IBR normally should be conducted as a post-award activity. A
pre-award IBR may be conducted only if:

(i) The acquisition plan contains documentation that demonstrates the
    need and rationale for a pre-award IBR, including an assessment of
    the impact on the source selection schedule and the expected
    benefits;

(ii) The use of a pre-award IBR is approved in writing by the cognizant
     HCA prior to the issuance of the solicitation;

(iii) The source selection plan specifically addresses how the results
      of a pre-award IBR will be used during source selection, including
      any weight to be given to it in source evaluation, and that same
      or similar rationale is clearly set forth in the solicitation;
      and,

(iv) Specific arrangements are made, and budget authority is provided,
     to compensate all offerors who prepare for or participate in a
     pre-award IBR; and the solicitation informs prospective offerors of
     the means for and conditions of such compensation.

**334.203 Solicitation provisions and contract clauses.**

The FAR EVMS solicitation provisions and contract clause will not be
used in HHS contracts. See 334.203-70 for the HHS solicitation
provisions and contract clauses.

**334.203-70 HHS solicitation provisions and contract clauses.**

As provided in 334.201(a) and 334.202, the Contracting Officer (CO)
shall insert --

\(a\) The provision at 352.234-1, Notice of Earned Value Management
System---Pre-Award IBR, in solicitations for contracts that will require
the contractor to use an Earned Value Management System (EVMS), whether
full or partial, when the Government requires an Integrated Baseline
Review (IBR) prior to award.

\(b\) The provision at 352.234-2, Notice of Earned Value Management
System---Post-Award IBR, in solicitations for contracts that will
require the contractor to use an EVMS, whether full or partial, when the
Government requires an IBR after contract award.

\(c\) The clause at 352.234-3, Full Earned Value Management System, in
solicitations and contracts that will: be either cost-reimbursement or
fixed-price-incentive (where the incentive is based on cost), have an
expected value, including options, equal to or greater than \$25
million, and require a contractor to use full EVMS. The CO shall use the
clause with its Alternate I when the contract value, including options,
is equal to or greater than \$10 million but less than \$25 million.

\(d\) The clause at 352.234-4, Partial Earned Value Management System,
in solicitations and contracts that will be firm-fixed-price,
time-and-materials, labor-hour, or term form; have an expected value,
including options, equal to or greater than \$25 million; and require a
contractor to use partial EVMS. The CO shall use the clause with its
Alternate I when the contract value, including options, is equal to or
greater than \$10 million but less than \$25 million.**\]**

◄●►

b\) *Add sections 352.234-1, 352.234-2, and 352.234-3 to read as
follows:*

\[**352.234-1 Notice of Earned Value Management System -- Pre-Award
IBR.**

As prescribed in 334.203-70(a), use the following provision:

NOTICE OF EARNED VALUE MANAGEMENT SYSTEM -- PRE-AWARD IBR (OCT 2008)

(a) The offeror shall provide documentation that its proposed Earned
    Value Management System (EVMS) complies with the EVMS guidelines in
    ANSI/EIA Standard-748 (current version at time of solicitation).

(b) If the offeror proposes to use a system that currently does not meet
    the requirements of paragraph (a) of this provision, the offeror
    shall submit a comprehensive plan for compliance with the
    guidelines.

    1.  The plan shall --

```{=html}
<!-- -->
```
(i) Describe the EVMS the offeror intends to use in performance of the
    contract;

(ii) Distinguish between the offeror's existing management system and
     modifications proposed to meet the guidelines;

(iii) Describe the management system and its application in terms of the
      EVMS guidelines;

(iv) Describe the proposed procedure for application of the EVMS
     requirements to subcontractors;

(v) Provide documentation describing the process and results, including
    Government participation if applicable, of any third-party
    evaluation or self-evaluation of the system's compliance with the
    EVMS guidelines;

(vi) Provide a schedule of events leading up to formal validation and
     Government acceptance of the offeror's EVMS, if the value of the
     offeror's proposal, including options, is \$25 million or more.

     1.  The offeror shall provide information and assistance, as
         required by the Contracting Officer, to support review of the
         plan.

     2.  The Contracting Officer will review the offeror's EVMS
         implementation plan prior to contract award.

     3.  The offeror's EVMS plan must provide milestones indicating when
         the offeror anticipates that the EVMS will be compliant with
         the ANSI/EIS Standard-748 guidelines.

```{=html}
<!-- -->
```
(c) The offeror shall identify in its offer the subcontractors, or
    subcontracted effort if subcontractors have not been identified, to
    which the requirements of EVMS will be applied. Prior to contract
    award, the offeror and HHS shall agree on the subcontractors, or
    subcontracted effort, subject to the EVMS requirement.

(d) HHS will conduct an Integrated Baseline Review (IBR) prior to
    contract award. The offeror shall be compensated as set forth
    elsewhere in this solicitation for its preparation for and
    participation in the IBR.

(End of provision)

**352.234-2 Notice of Earned Value Management System -- Post-Award
IBR.**

As prescribed in 334.203-70(b), use the following provision:

NOTICE OF EARNED VALUE MANAGEMENT SYSTEM -- POST-AWARD IBR (OCT 2008)

\(a\) The offeror shall provide documentation that its proposed Earned
Value Management System (EVMS) complies with the EVMS guidelines in
ANSI/EIA Standard-748 (current version in effect at time of
solicitation).

\(b\) If the offeror proposes to use a system that currently does not
meet the requirements of paragraph (a) of this provision, the offeror
shall submit a comprehensive plan for compliance with the guidelines.

1.  The plan shall --

```{=html}
<!-- -->
```
(i) Describe the EVMS the offeror intends to use in performance of the
    contract;

> \(ii\) Distinguish between the offeror's existing management system
> and modifications proposed to meet the guidelines;
>
> \(iii\) Describe the management system and its application in terms of
> the EVMS guidelines;
>
> \(iv\) Describe the proposed procedure for application of the EVMS
> requirements to subcontractors;
>
> \(v\) Provide documentation describing the process and results,
> including Government participation if applicable, of any third-party
> evaluation or self-evaluation of the system's compliance with the EVMS
> guidelines;
>
> \(vi\) Provide a schedule of events leading up to formal validation
> and Government acceptance of the offeror's EVMS, if the value of the
> offeror's proposal, including options, is \$25 million or more.

1.  The offeror shall provide information and assistance, as required by
    the Contracting Officer, to support review of the plan.

2.  The Contracting Officer will review the offeror's EVMS
    implementation plan prior to contract award.

3.  The offeror's EVMS plan must provide milestones indicating when the
    offeror anticipates that the EVM system will be compliant with the
    ANSI/EIA Standard-748 guidelines.

\(c\) The offeror shall identify in its offer the subcontractors, or
subcontracted effort if subcontractors have not been identified, to
which the requirements of EVMS will be applied. Prior to contract award,
the offeror and HHS shall agree on the subcontractors, or subcontracted
effort, subject to the EVMS requirement.

(End of provision)

3.  **Full Earned Value Management System.**

As prescribed in 334.302-70(c), insert the following clause:

FULL EARNED VALUE MANAGEMENT SYSTEM (OCT 2008)

a.  The Contractor shall use an Earned Value Management System (EVMS)
    that has been validated and accepted by the Cognizant Federal Agency
    (CFA) as being compliant with the guidelines in ANSI/EIA
    Standard-748 (current version at the time of award) to manage this
    contract. If the Contractor's current EVMS has not been validated
    and accepted by the CFA at the time of award, see paragraph (b) of
    this clause. The Contractor shall submit EVM reports in accordance
    with the requirements of this contract.

b.  If, at the time of award, the Contractor's EVM system has not been
    validated and accepted by the CFA as complying with EVMS guidelines
    in ANSI/EIA Standard-748 (current version at time of award), the
    Contractor shall--

```{=html}
<!-- -->
```
(1) Apply the current system to the contract; and

(2) Take necessary and timely actions to meet the milestones in the
    Contractor's EVMS plan approved by the Contracting Officer.

    a.  HHS requires the Contractor to obtain validation and acceptance
        of its EVM system by the CFA during the base period of
        performance of this contract. The Contracting Officer or
        designee will conduct a Compliance Review to assess the
        Contractor's compliance with its approved plan. If the
        Contractor does not follow the approved implementation schedule
        or correct all resulting system deficiencies noted during the
        Compliance Review within a reasonable time, the Contracting
        Officer may take remedial action, which may include, but is not
        limited to, suspension of or reduction in progress payments, or
        a reduction in fee.

    b.  HHS will conduct an Integrated Baseline Review (IBR). If a
        pre-award IBR has not been conducted, a post-award IBR will be
        conducted by HHS as early as practicable, but no later than
        ninety (90) days after contract award. The Contracting Officer
        may also require an IBR as part of the exercise of an option or
        the incorporation of a major modification.

    c.  Unless a waiver is granted by the CFA, Contractor-proposed EVMS
        changes require approval of the CFA prior to implementation. The
        CFA will advise the Contractor of the acceptability of such
        changes within 30 calendar days after receipt of the notice of
        proposed changes from the Contractor. If the advance approval
        requirements are waived by the CFA, the Contractor shall
        disclose EVMS changes to the CFA at least 14 calendar days prior
        to the effective date of implementation.

    d.  The Contractor shall provide access to all pertinent records and
        data requested by the Contracting Officer or a duly authorized
        representative as necessary to permit Government surveillance to
        ensure that the EVMS conforms, and continues to conform, with
        the requirements referenced in paragraph (a) of this clause.

    e.  The Contractor shall require the subcontractors specified below
        to comply with the requirements of the clause: (*Insert list of
        applicable subcontractors*.)

(End of clause)

(Alternate I) (OCT 2008)

As prescribed in 334.203-70(c), substitute the following paragraphs (a),
(b), and (c) for paragraphs (a), (b), and (c) of the basic clause and
delete paragraph (e) of the basic clause:

\(a\) The Contractor shall use an Earned Value Management System (EVMS)
that is compliant with the guidelines in ANSI/EIA Standard-748 (current
version at the time of award) to manage this contract. If the
Contractor's current EVMS is not compliant at the time of award, see
paragraph (b) of this clause. The Contractor shall submit EVM reports in
accordance with the requirements of this contract.

\(b\) If, at the time of award, the Contractor's EVM system is not in
compliance with the EVMS guidelines in ANSI/EIA Standard-748 (current
version at time of award), the Contractor shall-

1.  Apply the current system to the contract; and

2.  Take necessary and timely actions to meet the milestones in the
    Contractor's EVMS plan approved by the Contracting Officer.

\(c\) HHS will not formally validate or accept the Contractor's EVMS
with respect to this contract. The use of the Contractor's EVMS for this
contract does not imply HHS acceptance of the Contractor's EVMS for
application to future contracts. The Contracting Officer or designee
will conduct a Compliance Review to assess the Contractor's compliance
with its approved plan. If the Contractor does not follow the approved
implementation schedule or correct all resulting system deficiencies
noted during the Compliance Review within a reasonable time, the
Contracting Officer may take remedial action that may include, but is
not limited to, suspension of or reduction in progress payments, or a
reduction in fee.

3.  **Partial Earned Value Management System.**

As prescribed in 334.203-70(d), insert the following clause:

PARTIAL EARNED VALUE MANAGEMENT SYSTEM (OCT 2008)

(a) The Contractor shall use an Earned Value Management System (EVMS)
    that has been validated and accepted by the Cognizant Federal Agency
    (CFA) as being compliant with the schedule-related guidelines in
    ANSI/EIA Standard-748 (current version at the time of award) to
    manage this contract. If the Contractor's current EVMS has not been
    validated and accepted by the CFA at the time of award, see
    paragraph (b) of this clause. The Contractor shall submit EVM
    reports in accordance with the requirements of this contract.

(b) If, at the time of award, the Contractor's EVM system has not been
    validated and accepted by the CFA as complying with the
    schedule-related EVMS guidelines in ANSI/EIA Standard-748 (current
    version at time of award), the Contractor shall--

> \(1\) Apply the current system to the contract; and
>
> \(2\) Take necessary and timely actions to meet the milestones in the
> Contractor's EVMS plan approved by the Contracting Officer.

(c) HHS requires the Contractor to obtain validation and acceptance of
    the schedule-related portions of its EVM system by the CFA during
    the base period of performance of this contract. The Contracting
    Officer or designee will conduct a Compliance Review to assess the
    Contractor's compliance with its approved plan. If the Contractor
    does not follow the approved implementation schedule or correct all
    resulting system deficiencies noted during the Compliance Review
    within a reasonable time, the Contracting Officer may take remedial
    action, which may include, but is not limited to, suspension of or
    reduction in progress payments, or a reduction in fee.

(d) HHS will conduct an Integrated Baseline Review (IBR). If a pre-award
    IBR has not been conducted, a post-award IBR will be conducted by
    HHS as early as practicable, but no later than ninety (90) days
    after contract award. The Contracting Officer may also require an
    IBR as part of the exercise of an option or the incorporation of a
    major modification.

(e) Unless a waiver is granted by the CFA, Contractor-proposed EVMS
    changes require approval of the CFA prior to implementation. The CFA
    will advise the Contractor of the acceptability of such changes
    within 30 calendar days after receipt of the notice of proposed
    changes from the Contractor. If the advance approval requirements
    are waived by the CFA, the Contractor shall disclose EVMS changes to
    the CFA at least 14 calendar days prior to the effective date of
    implementation.

(f) The Contractor shall provide access to all pertinent records and
    data requested by the Contracting Officer or a duly authorized
    representative as necessary to permit Government surveillance to
    ensure that the EVMS conforms, and continues to conform, with the
    requirements referenced in paragraph (a) of this clause.

(g) The Contractor shall require the subcontractors specified below to
    comply with the requirements of the clause: (*Insert list of
    applicable subcontractors*.)

(End of clause)

(Alternate I) (OCT 2008)

As prescribed in 334.203-70(d), substitute the following paragraphs (a),
(b), and (c) for paragraphs (a), (b), and (c) of the basic clause and
delete paragraph (e) of the basic clause:

\(a\) The Contractor shall use an Earned Value Management System (EVMS)
that is compliant with the schedule-related guidelines in ANSI/EIA
Standard-748 (current version at the time of award) to manage this
contract. If the Contractor's current EVMS is not compliant at the time
of award, see paragraph (b) of this clause. The Contractor shall submit
EVM reports in accordance with the requirements of this contract.

\(b\) If, at the time of award, the Contractor's schedule-related EVM
system is not in compliance with the schedule-related EVMS guidelines in
ANSI/EIA Standard-748 (current version at time of award), or the
Contractor does not have an existing schedule control system that is
compliant with such guidelines, the Contractor shall --

(1) Apply the current system to the contract; and

(2) Take necessary and timely actions to meet the milestones in the
    Contractor's EVMS plan approved by the Contracting Officer.

\(c\) HHS will not formally validate or accept the Contractor's
schedule-related EVMS with respect to this contract. The use of the
Contractor's EVMS for this contract does not imply HHS acceptance of the
Contractor's EVMS for application to future contracts. The Contracting
Officer or designee will conduct a Compliance Review to assess the
Contractor's compliance with its approved plan. If the Contractor does
not follow the approved implementation schedule or correct all resulting
system deficiencies noted during the Compliance Review within a
reasonable time, the Contracting Officer may take remedial action, that
may include, but is not limited to, suspension of or reduction in
progress payments, or a reduction in fee.\]

[^1]: OMB Circular A-109, *Major System Acquisitions*, was the first
    government-wide policy on the acquisition of major systems. Although
    that Circular has not been officially rescinded, it is no longer
    available in other than hard-copy form by special request to OMB.

[^2]: It should be noted that OMB policy on the use EVM applies to major
    acquisition programs generally. Thus, EVM is to be applied not only
    to contracts with the private sector but also to intra-governmental
    activities. This HHSAR case addresses only the use of EVM on
    contracts. It will be supplemented by companion policy guidance on
    the application of EVM to acquisition programs that may involve
    intra-governmental agreements, in house efforts, and/or consist of a
    series of contracts which individually may not invoke EVM (because
    the individual contract values do not exceed the thresholds).

[^3]: The final FAR rule (in case 2004-019) was issued as a part of
    Federal Acquisition Circular (FAC) 2005-11. The full text of the
    final version of the rule can be found at:
    <http://www.acqnet.gov/FAR/FAC/fac2005-11_federal_register.pdf>