EVM 202—Lesson 3 EVMS Guidelines and Compliance September 2016 EVM 202—Lesson 3 EVMS Guidelines and Compliance

Lesson 3 Learning Objectives Terminal Learning Objective (TLO) Explain the importance of the formal Earned Value Management System (EVMS) approval process Enabling Learning Objectives (ELOs) Describe the 32 Electronic Industries Alliance-748 (EIA-748) EVMS guidelines Describe the DoD EVMS compliance review (CR) process

The Earned Value Management Process: A Circular Relationship From total to detail From detail to total Organization Define the work Assign responsibilities Define indirect procedures Establish proper management controls Assignments made to responsible organizations Do not modify past budget or actuals (w/o permission) Planning and Budgeting Schedule all work Authorize all work Time-phase the work Develop control accounts Revisions and Data Maintenance Analysis and Management Reports Understand contract status Use data for decision-making Maintenance of budget, work, and schedule relationships All documents properly maintained Accounting Considerations Material costs Unit/lot costs Cost summarization

EVMS Standard Area 1: Organization—5 Guidelines Define the Work Breakdown Structure (WBS) Define program Organizational Breakdown Structure (OBS) Integrate subsidiary management processes Identify overhead management Integrate WBS/OBS to create control accounts (CAs)

EVMS Standard Area 2: Planning and Budgeting—10 Guidelines Schedule work Identify products and milestones for progress assessment Establish the performance measurement baseline (PMB) Authorize and budget by cost elements Determine discrete work and objective measures Sum work package (WP) and planning package (PP) budgets to the CA budget Level of effort (LOE) planning and control Establish overhead budgets Identify management reserve (MR) and undistributed budget (UB) Reconcile to target costs

EVMS Standard Area 3: Accounting Considerations—6 Guidelines Record direct costs Summarize direct costs by WBS elements Summarize direct costs by OBS elements Record/allocate indirect costs Identify unit and lot costs Track and report material costs/quantities

EVMS Standard Area 4: Analysis and Management Reports—6 Guidelines Calculate schedule variance (SV) and cost variance (CV) Analyze significant variances Analyze indirect CVs Summarize performance data and variances for management reporting Implement corrective actions Maintain estimate at completion (EAC)

EVMS Standard Area 5: Revisions and Data Maintenance—5 Guidelines Incorporate changes in a timely manner Maintain baseline and reconcile budgets Control retroactive changes Prevent unauthorized revisions Document PMB changes

Guideline Intent

Guideline Intent (Cont.)

DoDI 5000.02 EVM Application Requirements Enclosure 1 Table 8 Table 8 summarizes EVM application requirements. EVM is applied to cost reimbursable or incentive contracts, inclusive of options, with 18 months or greater period of performance and based on the nature of the work scope.

EVMS Compliance versus Approval Compliance—The continuing operation of contractor’s EVMS in accordance with the 32 EIA-748 EVMS guidelines Approval—A formal recognition of certification by an independent party that contractor’s EVMS meets the 32 EIA-748 EVMS guidelines DoD: Conducted by Defense Contract Management Agency (DCMA) Intelligence and other agencies: Recognize DCMA EVMS approvals or may conduct own approvals DoD Tri-Lateral Memorandum of Understanding (MOU): Recognizes EVMS approvals performed by Canada and Australia

Limited DoD Alternatives for EVMS Acceptance DoD does not recognize: EIA-748 third-party and self approval options Other U.S. agency approvals (e.g., FAA, DOE, IRS, etc.) Foreign government approvals—DoD has formally entered into a tri-lateral MOU with Canada and Australia regarding EVMS approvals DoD-conducted approval

Compliance Review (CR) Process Formal review conducted to evaluate EVMS processes and implementation compliance with the 32 guidelines DCMA has overall compliance determination responsibility Documented system implemented on the reviewed program(s) Valid, timely, and auditable program information is consistently generated

CR Team CR Director—Director, EVM Implementation Division (EVMID) CR Chief—Assigned by CR Director CR Team Members Formally assigned to CR Team Knowledge of both program and contract is desirable Skills should include formal training and experience in implementing, maintaining, and operating EVMSs PMO SMEs can be used on the teams

Activity before the CR Initial Visit (IV) Should be accomplished three to six months after contract award Provides an opportunity for early dialogue between DCMA and the contractor on the CR process Sets review expectations among the stakeholders Identifies areas of noncompliance and potential problems with the EVMS processes and procedures Establishes a notional CR schedule

Compliance Review (CR) CR Activities Overview briefing to familiarize review team with proposed EVMS Review of EVMS-generated documents and reports not already provided to team Interviews with CAMs, functional staff, and program managers to assure that EVM is being used (sample basis) Exit briefing covering team findings and documenting open system discrepancies Track Corrective Action Plans to completion Provide functional expertise to the Administrative Contracting Officer (ACO) ACO will issue a Contracting Officer Final Determination (COFD) Letter

Proof of EVMS Approval COFD Letter Formal acknowledgement that the contractor has successfully demonstrated EVMS compliance with applicable guidelines Based on recommendation from Review Director to the ACO Only valid for the sites included in the CR Divisional ACO (DACO) sends COFD to Contractor

EVMS Approval of Subcontractors Subcontracted Effort (≥ $100M TY) Subcontractor EVMS approval should be specified in Government’s prime contract Subcontractor approval options and processes are the same as the prime contractor’s Subcontractor must request a Government-led CR through the prime contractor Subcontractor Flow Down (< $100M TY) Government approval is not required Prime reviews subcontractor’s EVMS for compliance Prime contractor is responsible for EVMS surveillance

Lesson 3 Summary Terminal Learning Objective (TLO) Explain the importance of the formal EVMS approval process Enabling Learning Objective (ELO) Explain the intent of the 32 EIA-748 EVMS guidelines Describe the DoD EVMS CR process