11.3.1. Earned Value Management (EVM)
EVM is a key integrating process in the management and oversight of acquisition programs, to include information technology projects. It is a management approach that has evolved from combining both government management requirements and industry best practices to ensure the total integration of cost, schedule, and work scope aspects of the program.
Unless waived by the Milestone Decision Authority, EVM applies to contracts as described in the subsections below. The program manager's approach to satisfying the EVM requirement for applicable contracts should be documented in the program acquisition strategy. This strategy then should be reflected in the contract language and CDRLs provided to the contractor for a given contract while not violating the basic tenets of sound EVM implementation.
The Office of Performance Assessment and Root Cause Analysis (PARCA) is responsible for developing, publishing, and maintaining DoD policy and guidance on EVM. For more information on EVM, refer to the OSD PARCA EVM web site or the EVM Community of Practice web site on the Acquisition Community Connection knowledge sharing system.
11.3.1.1. Earned Value Management (EVM) Applicability
The requirement for EVM applies to cost or incentive contracts, subcontracts, intra-government work agreements, and other agreements that meet the dollar thresholds prescribed in DoD Instruction 5000.02 and DFARS Subpart 234.2 . The application thresholds (total contract value including planned options in then-year dollars) are summarized below:
- $20 million but less than $50 million – EVM implementation compliant with ANSI/EIA-748 is required. No formal Earned Value Management System (EVMS) validation is required.
- $50 million or greater – EVM implementation compliant with the guidelines in ANSI/EIA-748 is required. An EVMS that has been formally validated and accepted by Defense Contract Management Agency (DCMA) (per paragraph 11.3.1.5) in coordination with, the cognizant contracting officer is required.
The program manager will implement EVM on applicable contracts within acquisition, upgrade, modification, or materiel maintenance programs, including highly sensitive classified programs, major construction programs, and automated information systems. EVM should also be implemented on applicable contracts wherein the following circumstances exist: (1) the prime contractor or one or more subcontractors is a non-U.S. source; (2) contract work is to be performed in government facilities, or (3) the contract is awarded to a specialized organization such as the Defense Advanced Research Projects Agency (DARPA). In addition, EVM should be implemented on applicable contracts designated as major capital acquisitions in accordance with Office of Management and Budget Circular A-11, Part 7, and the Capital Programming Guide.
The application of EVM is not required on contracts, subcontracts, intra-government work agreements, and other agreements valued at less than $20 million (total contract value including planned options). The decision to implement EVM on these contracts is a risk-based decision at the discretion of the program manager. The program manager is required to conduct a cost-benefit analysis before deciding to implement EVM on these contracts. The purpose of the cost-benefit analysis is to explain the rationale for the decision to require cost/schedule visibility into the contract and to substantiate that the benefits to the government outweigh the associated costs. If the value of a contract is expected to grow to $20 million or more, the program manager should impose an EVM requirement on the contract.
The application of EVM is not required on contracts, subcontracts, intra-government work agreements, and other agreements less than 12 months in duration, including options. The decision to implement EVM on these contracts is a risk-based decision at the discretion of the program manager. If the duration of a contract is expected to grow to reach or exceed 12 months, the program manager should impose an EVM requirement on the contract.
The application of EVM on Firm-Fixed Price (FFP) contracts, subcontracts, intra-government work agreements, and other agreements is discouraged regardless of dollar value. If knowledge by both parties requires access to cost/schedule data, the first action is to re-examine the contract type (e.g., is a fixed price incentive contract more appropriate). However, in cases where cost/schedule visibility is required, such as for development or integration efforts valued at or greater than $20 million, the program manager is required to obtain a waiver for individual contracts from the MDA. In these cases, the program manager is required to conduct a business case analysis that includes rationale for why a cost or fixed price incentive contract was not the proper contracting vehicle. When possible, the business case analysis should be included in the acquisition approach section of the program acquisition strategy.
If a contract type is mixed, the EVM policy should be applied separately to the different parts (contract types).
For Indefinite Delivery/Indefinite Quantity (ID/IQ) or task order types of contracts, the application of EVM based on dollar threshold is assessed at the computed total contract value and not by each separate order. To determine EVM applicability, anticipated cost or incentive orders should be summed to reach the computed total contract value. FFP orders are generally not included in that summation.
11.3.1.2. Earned Value Management (EVM) Requirements
The DoD program manager should use Defense Federal Acquisition Regulation Supplement (DFARS) clauses 252.234-7001 and 252.234-7002 to place the Earned Value Management System (EVMS) requirement in solicitations and contracts.
The contract should not, either at the time of award or in subsequent modifications, specify requirements in special provisions and/or statements of work that are not consistent with the EVM policy and EVMS guidelines (required by imposition of DFARS 252.234-7002), or which may conflict with offerors’ or contractor’s approved EVM system descriptions. Consult DCMA for guidance on compliance of the contractor's EVMS.
11.3.1.3. Integrated Baseline Reviews (IBRs)
An IBR is a joint assessment of the Performance Measurement Baseline (PMB) conducted by the government program manager and the contractor. The IBR is not a one-time event. It is a process, and the plan should be continually evaluated as changes to the baseline are made (modifications, restructuring, etc.). IBRs should be used as necessary throughout the life of a project to facilitate and maintain mutual understanding of:
- The scope of the PMB consistent with authorizing documents;
- Management control processes;
- Risks in the PMB associated with cost, schedules, and resources; and
- Corrective actions where necessary.
IBRs should be scheduled as early as practicable and the timing of the IBRs should take into consideration the contract period of performance. The process will be conducted not later than 180 calendar days (6 months) after a significant program event or contract change including, but not limited to: (1) contract award, (2) the exercise of large contract options, and (3) the incorporation of major modifications. IBRs are also performed at the discretion of the program manager at any time, even without the occurrence of a major event in the life of a program.
Events that may trigger an IBR include completion of the preliminary design review, completion of the critical design review, a significant shift in the content and/or time phasing of the PMB, or when a major milestone such as the start of the production option of a development contract is reached. Continuous assessment of the PMB will help identify when a new IBR should be conducted.
with the clause at DFARS 252.234-7002 and DoD Instruction 5000.02 require IBRs on all contracts that require the implementation of Earned Value Management The IBR is not dependent on the contractor's Earned Value Management System being formally validated as complying with the guidelines in ANSI/EIA-748. Subcontracts, intra-government work agreements, and other agreements also require IBRs as applicable. The scope of the IBRs should be tailored to the nature of the work effort.
The policy allows for the use of IBRs prior to contract award in situations where they may be appropriate and beneficial. If a program manager elects to conduct a pre-award IBR on a DoD contract, that requirement should be included in the statement of work.
See the NDIA Guide to the Integrated Baseline Review Process(April 2003 version) for additional guidance on IBRs.
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