Source: https://www.federalregister.gov/documents/2008/04/23/E8-8706/defense-federal-acquisition-regulation-supplement-earned-value-management-systems-dfars-case
Timestamp: 2017-08-21 10:26:29
Document Index: 553052494

Matched Legal Cases: ['art 7', 'art 242', 'art 234', 'art 7', 'art 7', '§\u2009234', 'art 234', '§\u2009234']

Federal Register :: Defense Federal Acquisition Regulation Supplement; Earned Value Management Systems (DFARS Case 2005-D006)
A Rule by the Defense Acquisition Regulations System on 04/23/2008
73 FR 21846
E8-8706
https://www.federalregister.gov/d/E8-8706 https://www.federalregister.gov/d/E8-8706
Mr. Mark Gomersall, Defense Acquisition Regulations System, OUSD (AT&L) DPAP (DARS), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone 703-602-0302; facsimile 703-602-7887. Please cite DFARS Case 2005-D006.
This final rule updates DFARS text addressing earned value management policy for DoD contracts. The rule supplements the final FAR rule published at 71 FR 38238 on July 5, 2006, and establishes DoD-specific earned value management requirements, as permitted by the FAR. The DFARS rule is consistent with the policy in the memorandum issued by the Under Secretary of Defense (Acquisition, Technology, and Logistics) on March 7, 2005, Subject: Revision to DoD Earned Value Management Policy (available at http://www.acq.osd.mil/​dpap/​ops/​policy_​vault.html).
The DFARS changes in this rule include the following:
○ For cost or incentive contracts and subcontracts valued at $20,000,000 or more, the rule requires an earned value management system that complies with the guidelines in the American National Standards Institute/Electronic Industries Alliance Standard 748, Earned Value Management Systems (ANSI/EIA-748).
○ For cost or incentive contracts and subcontracts valued at $50,000,000 or more, the rule requires an earned value management system that has been determined by the cognizant Federal agency (as defined in FAR 2.101) to be in compliance with the guidelines in ANSI/EIA-748.
○ For cost or incentive contracts and subcontracts valued at less than $20,000,000, the rule provides that application of earned value management is optional and is a risk-based decision.
○ For firm-fixed-price contracts and subcontracts of any dollar value, the rule discourages the application of earned value management.
○ The Defense Contract Management Agency is assigned responsibility for determining earned value management compliance when DoD is the cognizant Federal agency.
○ Requirements for contractor cost/schedule status reports are eliminated.
DoD published a proposed rule at 71 FR 3449 on January 23, 2006. Five sources submitted comments on the proposed rule. A discussion of the comments is provided below.
1. Comment: One respondent stated that the $20,000,000 threshold for earned value management (EVM) further aggravates the ability to mitigate cost, schedule, and technical risks, since receiving EVM data below that threshold would be helpful in assisting leadership to make affordable decisions.
DoD Response: The rule allows for EVM below the $20,000,000 threshold when its application is determined to be appropriate as the result of a cost-benefit analysis.
2. Comment: Two respondents stated that the rule should be revised to specifically state that EVM requirements do not apply to time-and-materials, labor-hour, and level-of-effort contracts.
DoD Response: The rule requires EVM to be applied only on cost and incentive type contracts and subcontracts over certain thresholds. EVM is discouraged on firm-fixed-price contracts and subcontracts of any dollar value. Further, performance-based acquisition management on developmental efforts, as described in OMB Circular A-11, Part 7, focuses on the use of EVM on cost and incentive type contracts.
3. Comment: One respondent expressed support of the rule, but urged that the Defense Acquisition Regulations Council work with the Civilian Agency Acquisition Council to ensure that the final FAR rule is consistent with the DFARS rule. In particular, the respondent stated that the FAR rule should be revised in four areas to make it consistent with the DFARS rule as follows: Explicitly limit application of EVM requirements to cost or incentive contracts; establish a fixed dollar value for the applicability of EVM requirements; limit integrated baseline reviews to contract post-award; and establish an executive agency (such as the Defense Contract Management Agency (DCMA)) within the Government responsible for Government-wide EVM system compliance reviews.
DoD Response: The respondent's recommendations regarding the FAR were addressed in the preamble to the FAR rule published at 71 FR 38238 on July 5, 2006. Additional changes have been made to the DFARS rule for consistency with the FAR rule. Those changes include: Start Printed Page 21847
○ Relocation of EVM policy from Part 242 to Part 234.
○ For cost or incentive contracts and subcontracts valued at $50,000,000 or more, replacement of the requirement for a contracting officer's formal validation and acceptance with the requirement for an EVM system that has been determined by the cognizant federal agency to be in compliance with the guidelines in ANSI/EIA-748. DCMA is assigned responsibility for determining EVM system compliance when DoD is the cognizant Federal agency.
○ Elimination of the text included in the proposed rule at 252.242-7006(b), which specified that the terms for compliance with ANSI/EIA-748 for contracts below $50,000,000 may be subject to negotiation between the contractor and the contracting officer; compliance with the guidelines in ANSI/EIA-748 is not subject to negotiation.
○ Addition of text in the solicitation provision at 252.234-7001(a)(2)(ii) and (iii) to require an offeror proposing to use a system that has not been determined to be in compliance with ANSI/EIA-748, to provide information and assistance as required by the contracting officer to support review of the offeror's plan for compliance and to provide milestones that indicate when the offeror will be compliant.
○ Elimination of a separate provision and clause to address requirements for contracts valued at $20,000,000 or more but less than $50,000,000. The provision and clause at 252.234-7001 and 252.234-7002 address requirements for contracts above or below $50,000,000.
4. Comment: One respondent recommended that the contract clause for EVM compliance be modified to indicate that the contract performance report may be tailored in accordance with the DoD Earned Value Management Implementation Guide, in order to reduce the burden on contractors while still ensuring that DoD managers receive useful information. The memorandum issued by the Under Secretary of Defense (Acquisition, Technology, and Logistics) on March 7, 2005, indicates that the contract performance report may be tailored, based on guidance in the implementation guide, for cost or incentive contracts valued at $20 million or more but less than $50 million.
DoD Response: DoD does not believe it is necessary to address tailoring of the contract performance report within the contract clause. The contracting officer may tailor the report in accordance with the DoD Earned Value Management Implementation Guide. A reference to the guide has been added to the DFARS companion resource, Procedures, Guidance, and Information. Any tailoring of contract performance reports for a particular contract will be documented in the contract data requirements list to ensure the contractual requirements are clear.
5. Comment: One respondent recommended that language be added to the contract clause to state that the contractor is responsible for ensuring that selected subcontractors comply with ANSI/EIA-748.
DoD Response: Paragraph (h) of the contract clause in the final rule specifies that the contractor must require certain subcontractors (or subcontractor effort if subcontractors have not been selected) to comply with the EVM requirements of the clause. This includes compliance with the EVM guidelines in ANSI/EIA-748.
6. Comment: One respondent recommended adding the following language to the contract clause for consistency with language included in the solicitation provision: “The terms for compliance with ANSI/EIA-748 may be subject to negotiation between the contractor and subcontractor. The conduct of the integrated baseline reviews also may be subject to negotiation between the contractor and subcontractor.”
DoD Response: The cited language has been excluded from the final rule. The clause at 252.234-7002 requires contractors to ensure subcontractor compliance with the EVM requirements of the clause, to include compliance with the guidelines in ANSI/EIA-748. Likewise, contractors are required to ensure that any necessary participation by a subcontractor in the performance of integrated baseline reviews is in accordance with the clause. However, since integrated baseline reviews are a joint assessment between the contractor and the Government, the timing of such reviews will necessarily be coordinated between the parties.
7. Comment: One respondent indicated that emphasis should be placed on establishing a system that requires a company-wide commitment to standardized actual collection systems, budgeting systems, scheduling systems, status systems, change management systems, and reporting systems, rather than simply emphasizing what threshold should be used to apply EVM.
DoD Response: The Government can not mandate contractor management and budgetary control systems used outside of Government contracts. However, contractors that are frequently awarded Government contracts that require EVM may find it in their best interests to establish company-wide standardized EVM systems that are in compliance with ANSI/EIA-748.
This final rule amends the DFARS to update requirements for DoD contractors to establish and maintain earned value management systems. The rule revises the dollar thresholds at which DoD applies earned value management policy, and eliminates requirements for DoD contractors to submit cost/schedule status reports.
The rule supplements the FAR rule published at 71 FR 38238 on July 5, 2006. The FAR rule provides standard earned value management policy, consistent with the requirements of OMB Circular A-11, Part 7, Planning, Budgeting, Acquisition, and Management of Capital Assets, and the supplement to Part 7, the Capital Programming Guide. The OMB Circular and its supplement implement statutory requirements for the Government to define the cost, performance, and schedule, and schedule goals for major acquisitions and to achieve, on the average, 90 percent of the established goals.
The FAR rule permits agency supplementation with regard to earned value management applicability criteria, post-award review requirements, and procedures for implementation of the guidelines in American National Standards Institute/Electronic Industries Alliance Standard 748 (ANSI/EIA-748), Earned Value Management Systems. This DFARS rule establishes the DoD-specific earned value management requirements.
The threshold at which a DoD contractor previously was required to Start Printed Page 21848have an earned value management system that complied with ANSI/EIA-748 was $73 million for contracts and subcontracts funded with research, development, test and evaluation funding; and $315 million for contracts and subcontracts funded with operation and maintenance or procurement funding. This DFARS rule lowers those thresholds to a single $20 million for all cost or incentive contracts and subcontracts, regardless of funding type, and establishes a new threshold of $50 million for an earned value management system that has been determined by the Government to be in compliance with ANSI/EIA-748. The rule discourages the application of earned value management requirements to fixed-price contracts and subcontracts of any dollar value.
During fiscal year 2006, DoD awarded 8,266 cost or incentive contracts to small business concerns, with only 16 of those contracts exceeding $20 million in value. During the same fiscal year, DoD awarded 53,585 fixed-price type contracts to small business concerns, with only 70 of those contracts exceeding $20 million in value. The use of earned value management requirements in fixed-price contracts is expected to be rare.
The DFARS rule mitigates the impact on small businesses by establishing a $20 million contract threshold for earned value management requirements, and discouraging the application of earned value management requirements to fixed-price contracts and subcontracts, thereby establishing a very small subset of the small business community for which the rule would be applicable. The cost for a small business concern to establish a compliant earned value management system would be a one-time cost that the concern may offset through cost reimbursement on the resulting Government contract.
This rule does not impose any new information collection requirements that require the approval of the Office of Management and Budget (OMB) under 44 U.S.C. 3501, et seq. The contract performance reports required by the rule are approved under OMB Clearance Number 0704-0188, Acquisition Management Systems and Data Requirements Control List.
§ 234.005
2. Section 234.005 is removed.
3. Subpart 234.2 is added to read as follows:
§ 234.201
(4) See PGI 234.201(4) for additional guidance on earned value management.
(1) Use the provision at 252.234-7001, Notice of Earned Value Management System, instead of the provisions at FAR 52.234-2, Notice of Earned Value Management System—Pre-Award IBR, and FAR 52.234-3, Notice of Earned Value Management System—Post-Award IBR, in the solicitation; and
4. Section 242.1106 is amended by revising paragraph (a) to read as follows:
5. Section 242.1107-70 is removed.
6. Sections 252.234-7001 and 252.234-7002 are added to read as follows:
(a) If the offeror submits a proposal in the amount of $50,000,000 or more—Start Printed Page 21849
(B) Distinguish between the offeror's existing management system and modifications proposed to meet the EVMS guidelines;
(iii) The offeror's EVMS plan must provide milestones that indicate when the offeror anticipates that the EVMS will be compliant with the guidelines in ANSI/EIA-748.
(i) A matrix that correlates each guideline in ANSI/EIA-748 (current version at time of solicitation) to the corresponding process in the offeror's written management procedures; and
(b) If this contract has a value of $50,000,000 or more, the Contractor shall use an EVMS that has been determined by the Cognizant Federal Agency (CFA) to be in compliance with the EVMS guidelines as stated in paragraph (a)(1) of this clause. If, at the time of award, the Contractor's EVMS has not been determined by the CFA to be in compliance with the EVMS guidelines as stated in paragraph (a)(1) of this clause, the Contractor shall apply its current system to the contract and shall take necessary actions to meet the milestones in the Contractor's EVMS plan.
(c) If this contract has a value of less than $50,000,000, the Government will not make a formal determination that the Contractor's EVMS complies with the EVMS guidelines in ANSI/EIA-748 with respect to the contract. The use of the Contractor's EVMS for this contract does not imply a Government determination of the Contractor's compliance with the EVMS guidelines in ANSI/EIA-748 for application to future contracts. The Government will allow the use of a Contractor's EVMS that has been formally reviewed and determined by the CFA to be in compliance with the EVMS guidelines in ANSI/EIA-748.
(d) The Contractor shall submit notification of any proposed substantive changes to the EVMS procedures and the impact of those changes to the CFA. If this contract has a value of $50,000,000 or more, unless a waiver is granted by the CFA, any EVMS changes proposed by the Contractor require approval of the CFA prior to implementation. The CFA will advise the Contractor of the acceptability of such changes as soon as practicable (generally within 30 calendar days) after receipt of the Contractor's notice of proposed changes. If the CFA waives the advance approval requirements, the Contractor shall disclose EVMS changes to the CFA at least 14 calendar days prior to the effective date of implementation.
(e) The Government will schedule integrated baseline reviews as early as practicable, and the review process will be conducted not later than 180 calendar days after (1) contract award, (2) the exercise of significant contract options, and (3) the incorporation of major modifications. During such reviews, the Government and the Contractor will jointly assess the Contractor's baseline to be used for performance measurement to ensure complete coverage of the statement of work, logical scheduling of the work activities, adequate resourcing, and identification of inherent risks.
252.242-7001 and 252.242-7002
7. Sections 252.242-7001 and 252.242-7002 are removed and reserved.
252.242-7005 and 252.242-7006
8. Sections 252.242-7005 and 252.242-7006 are removed.
[FR Doc. E8-8706 Filed 4-22-08; 8:45 am]