[Federal Register Volume 62, Number 43 (Wednesday, March 5, 1997)]
[Rules and Regulations]
[Pages 9990-9993]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-5362]


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DEPARTMENT OF DEFENSE

48 CFR Parts 234, 242, and 252

[DFARS Case 96-D024]


Defense Federal Acquisition Regulation Supplement; Earned Value 
Management Systems

AGENCY: Department of Defense (DoD).

ACTION: Interim rule with request for comments.

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SUMMARY: The Director of Defense Procurement has issued an interim rule 
amending the Defense Federal Acquisition Regulation Supplement (DFARS) 
to adopt industry-standard ``Guidelines for Earned Value Management 
Systems'' in lieu of the cost/schedule control systems criteria that 
are unique to DoD contracts.

DATES: Effective date: March 5, 1997.
    Comment date: Comments on the interim rule should be submitted in 
writing to the address shown below on or before May 5, 1997 to be 
considered in the formulation of the final rule.

ADDRESSES: Interested parties should submit written comments to: 
Defense Acquisition Regulations Council, Attn: Mr. Michael Pelkey, 
PDUSD(A&T)DP(DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 
20301-3062. Telefax number (703) 602-0350.

[[Page 9991]]

    Please cite DFARS Case 96-D024 in all correspondence related to 
this issue.

FOR FURTHER INFORMATION CONTACT:
Michael Pelkey, (703) 602-0131.

SUPPLEMENTARY INFORMATION:

A. Background

    On August 19, 1996, the National Security Industrial Association, 
Aerospace Industries Association, American Shipbuilding Association, 
Shipbuilders Council of America, and Electronic Industries Association 
proposed that DoD recognize industry-standard ``Guidelines for Earned 
Value Management Systems (EVMS)'' as an alternative to DoD-unique cost/
schedule control systems. On December 14, 1996, the Under Secretary of 
Defense for Acquisition and Technology directed that these guidelines 
be adopted for use as the criteria by which the acceptability of DoD 
contractors' management control systems will be evaluated. Since DoD's 
cost/schedule control systems criteria are considered to be equivalent 
to EVMS, contractors' previously approved cost/schedule control systems 
are considered to be acceptable under the EVMS criteria.

B. Regulatory Flexibility Act

    The interim rule is not expected to have a significant economic 
impact on a substantial number of small entities within the meaning of 
the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because the rule 
only applies to contractors for certain major defense programs, and 
eliminates the requirement that such contractors use a unique 
management control system for DoD contracts. An initial regulatory 
flexibility analysis has, therefore, not been performed. Comments are 
invited from small businesses and other interested parties. Comments 
from small entities concerning the affected DFARS subparts also will be 
considered in accordance with Section 610 of the Act. Such comments 
should be submitted separately and should cite DFARS Case 96-D024 in 
correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the rule does 
not impose any new information collection requirements that require the 
approval of the Office of Management and Budget under 44 U.S.C. 3501, 
et seq.

D. Determination to Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense to issue this rule as in interim rule. Urgent and compelling 
reasons exist to promulgate this rule without prior opportunity for 
public comment. This interim rule implements the December 14, 1996, 
direction from the Under Secretary of Defense for Acquisition and 
Technology that DoD recognizes industry-standard ``Guidelines for 
Earned Value Management Systems'' as an alternative to DoD-unique cost/
schedule control systems. Immediate implementation is necessary to 
preclude incurring unnecessary costs to create or maintain DoD-unique 
cost/schedule control systems at DoD contractors' facilities where 
acceptable earned value management systems exist. However, comments 
received in response to the publication of this interim rule will be 
considered in formulating the final rule.

List of Subjects in 48 CFR Parts 234, 242, and 252

    Government procurement.
Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.

    Therefore, 48 CFR Parts 234, 242, and 252 are amended as follows:
    1. The authority citation for 48 CFR Parts 234, 242, and 252 
continues to read as follows:

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

PART 234--MAJOR SYSTEM ACQUISITION

    2. Section 234.005-70 is revised to read as follows:


234.005-70  Earned value management systems.

    When an offeror provides an earned value management system (EVMS) 
plan as part of its proposal in accordance with the provision at 
252.234-7000, the contracting officer shall forward a copy of the plan 
to the cognizant administrative contracting officer (ACO). The 
procuring contracting officer shall obtain the assistance of the ACO in 
determining the adequacy of the proposed EVMS plan.
    3. Section 234.005-71 is added to read as follows:


234.005-71  Solicitation provision and contract clause.

    When the Government requires contractor compliance with DoD earned 
value management system criteria--
    (a) Use the provision at 252.234-7000, Notice of Earned Value 
Management System, in solicitations; and
    (b) Use the clause at 252.234-7001, Earned Value Management 
Systems, in solicitations and contracts.

PART 242--CONTRACT ADMINISTRATION

    4. Section 242.302 is amended by revising paragraph (a)(41) to read 
as follows:


242.302  Contract administration functions.

    (a) * * *
    (41) The Defense Contract Management Command (DCMC) has 
responsibility for reviewing earned value management system (EVMS) 
plans and verifying initial and continuing contractor compliance with 
DoD EVMS criteria.
* * * * *
    5. Section 242.1107-70 is revised to read as follows:


242,1107-70  Solicitation provision and contract clause.

    (a) Use the clause at 252.242-7005, Cost/Schedule Status Report, in 
solicitations and contracts for other than major systems that require 
cost-schedule status reporting (i.e., the Contract Data Requirements 
List includes DI-MGMT-81467).
    (b) Use the provision at 252.242-7006, Cost/Schedule Status Report 
Plans, in solicitations for other than major systems that require cost/
schedule status reporting.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    6. Section 252.234-7000 is revised to read as follows:


252.234-7000  Notice of earned value management system.

    As prescribed in 234.005-71, use the following provision:

Notice of Earned Value Management System (Mar 1997)

    (a) The offeror shall provide documentation that the cognizant 
Administrative Contracting Officer (ACO) has recognized that the 
proposed earned value management system (EVMS) complies with the 
EVMS criteria of DoD 5000.2, Mandatory Procedures for Major Defense 
Acquisition Programs and Major Automated Information Systems, or 
that the proposed cost/schedule control system has been accepted by 
the Government.
    (b) If the offeror proposes to use a system that does not meet 
the requirements of paragraph (a) of this provision, the offeror 
shall submit a comprehensive plan for compliance with the EVMS 
criteria.
    (1) The plan shall--
    (A) Describe the EVMS the offeror intends to use in performance 
of the contract;
    (B) Distinguish between the offeror's existing management system 
and modifications proposed to meet the criteria;
    (C) Describe the management system and its application in terms 
of the 32 EVMS criteria;

[[Page 9992]]

    (D) Describe the proposed procedure for administration of the 
criteria as applied to subcontractors; and
    (E) Provide documentation describing the process and results of 
any third-party or self-evaluation of the system's compliance with 
EVMS criteria.
    (2) The offeror shall provide information and assistance as 
required by the Contracting Officer to support review of the plan.
    (3) The Government will review the offeror's plan for EVMS 
before contract award.
    (c) Offerors shall identify the major subcontractors, or major 
subcontracted effort if major subcontractors have not been selected, 
planned for application of the criteria. The prime contractor and 
the Government shall agree to subcontractors selected for 
application of the EVMS criteria.

(End of provision)

    7. Section 252.234-7001 is revised to read as follows:


252.234-7001  Earned value management system.

    As prescribed in 234.005-71, use the following clause:

Earned Value Management System (Mar 1997)

    (a) In the performance of this contract, the Contractor shall 
use an earned value management system (EVMS) meeting the criteria 
provided in DoD 5000.2-R, Mandatory Procedures for Major Defense 
Acquisition Programs and Major Automated Information Systems.
    (b) If the Contractor has an EVMS that has been recognized by 
the cognizant Administrative Contracting Officer (ACO) as complying 
with the EVMS criteria (or an existing cost/schedule control system 
(C/SCS) that has been accepted by the Government), the Contractor 
shall apply the system to this contract within 60 calendar days 
after contract award or as otherwise agreed to by the parties.
    (c) If the Contractor does not have an EVMS that has been 
recognized by the cognizant ACO as complying with EVMS criteria (or 
does not have an existing C/SCS that has been accepted by the 
Government), the Contractor shall be prepared to demonstrate to the 
ACO that the EVMS complies with the EVMS criteria referenced in 
paragraph (a) of this clause.
    (d) The Government may require an integrated baseline review 
within 180 calendar days after (1) contract award, (2) the exercise 
of significant contract options, or (3) the incorporation of major 
modifications. The purpose of the integrated baseline review is for 
the Government and the Contractor to jointly assess areas, such as 
the Contractor's planning, to ensure complete coverage of the 
statement of work, logical scheduling of the work activities, 
adequate resourcing, and identification of inherent risks.
    (e) Unless a waiver is granted by the ACO, Contractor proposed 
EVMS changes require approval of the ACO prior to implementation. 
The ACO shall 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 ACO, the Contractor shall disclose 
EVMS changes to the ACO at least 14 calendar days prior to the 
effective date of implementation.
    (f) The Contractor agrees to provide access to all pertinent 
records and data requested by the ACO or duly authorized 
representatives. Access is to permit Government surveillance to 
ensure that the EVMS complies, and continues to comply, with the 
criteria referenced in paragraph (a) of this clause.
    (g) The Contractor shall require those subcontractors specified 
in the contract for application of the EVMS criteria to comply with 
the requirements of this clause.

(End of clause)

    8. Section 252.242-7005 is revised to read as follows:


252.242-7005  Cost/Schedule Status Report.

    As prescribed in 242.1107-70(a), use the following clause:

Cost/Schedule Status Report (Mar 1997)

    (a) The Contractor shall use management procedures in the 
performance of this contract that provide for--
    (1) Planning and control of costs;
    (2) Measurement of performance (value for completed tasks); and
    (3) Generation of timely and reliable information for the cost/
schedule status report (C/SSR).
    (b) As a minimum, these procedures must provide for--
    (1) Establishing the time-phased budgeted cost of work scheduled 
(including work authorization, budgeting, and scheduling), the 
budgeted cost for work performed, the actual cost of work performed, 
the budget at completion, the estimate at completion, and provisions 
for subcontractor performance measurement and reporting;
    (2) Applying all direct and indirect costs and provisions for 
use and control of management reserve and undistributed budget;
    (3) Incorporating changes to the contract budget base for both 
Government directed changes and internal replanning;
    (4) Establishing constraints to preclude subjective adjustment 
of data to ensure performance measurement remains realistic. Unless 
the Contracting Officer provides prior written approval, in no case 
shall the total allocated budget exceed the contract budget base. 
For cost-reimbursement contracts, the contract budget base shall 
exclude changes for cost growth increases, other than for authorized 
changes to the contract scope; and
    (5) Establishing the capability to accurately identify and 
explain significant cost and schedule variances, both on a 
cumulative basis and projected at completion basis.
    (c) The Contractor may use a cost/schedule control system that 
has been recognized by the cognizant Administrative Contracting 
Officer (ACO) as complying with the earned value management system 
criteria provided in DoD 5000.2-R, Mandatory Procedures for Major 
Defense Acquisition Programs and Major Automated Information 
Systems.
    (d) The Government may require an integrated baseline review 
within 180 calendar days after (1) contract award, (2) the exercise 
of significant contract options, or (3) the incorporation of major 
modifications. The purpose of the integrated baseline review is for 
the Government and the Contractor to jointly assess areas, such as 
the Contractor's planning, to ensure complete coverage of the 
statement of work, logical scheduling of the work activities, 
adequate resourcing, and identification of inherent risks. The 
Contractor shall provide necessary documents and data which describe 
the methods of planning, control and data generation in actual 
operation and satisfy the requirements of paragraph (a) of this 
clause.
    (e) The Contractor shall provide access to all pertinent 
records, company procedures, and data requested by the ACO, or 
authorized representative, to--
    (1) Show proper implementation of the procedures generating the 
cost and schedule information being used to satisfy the C/SSR 
contractual data requirements to the Government; and
    (2) Ensure continuing application of the accepted company 
procedures in satisfying the C/SSR data item.
    (f) The Contractor shall submit any substantive changes to the 
procedures and their impact to the ACO for review.
    (g) The Contractor shall require a subcontractor to furnish C/
SSR in each case where the subcontract is other than firm-fixed-
price, is 12 months or more in duration, and has critical or 
significant tasks related to the prime contract. Critical or 
significant tasks shall be defined by mutual agreement between the 
Government and Contractor. Each subcontractor's reported cost and 
schedule information shall be incorporated into the Contractor's C/
SSR.

(End of clause)

    9. Section 252.242-7006 is added to read as follows:


252.242-7006  Cost/Schedule Status Report Plans.

    As prescribed in 242.1107-70(b), use the following provision:

Cost/Schedule Status Report Plans (Mar 1997)

    (a) The offeror shall submit a written summary of the management 
procedures it will establish, maintain, and use in the performance 
of any resultant contract to comply with the requirements of the 
clause at 252.242-7005, Cost/Schedule Status Report.
    (b) If the offeror proposes to use a cost/schedule control 
system that has been recognized by the cognizant Administrative 
Contracting Officer as complying with the earned value management 
system criteria of DoD 5000.2-R, Mandatory Procedures for Major 
Defense Acquisition Programs and Major Automated Information 
Systems, the offeror may submit a copy of the documentation of such 
recognition instead of the written summary required by paragraph (a) 
of this provision.

[[Page 9993]]

(End of provision)

[FR Doc. 97-5362 Filed 3-4-97; 8:45 am]
BILLING CODE 5000-04-M