EVM Policy NAVY CEVM July 2013 Welcome to the overview of the current EVM Policy applicable to Navy Contracts.

Outline DoDI 5000.02 DFARS 252.234-7001 DFARS 252.234-7002 19 June 2012 AT&L Policy Letter In this session we will discuss the law regarding flow down of EVM requirements. 5000.02 is the DoD policy that defines procurements. It includes Regulatory Table 5 which describes EVM requirements. The DFARS clauses listed here are required as specified in DoDI 5000.02. The 19 June 2012 policy letter modified DoDI 5000.02 by combining previously separate CPR and IMS CDRL requirements into the new IPMR deliverable. IPMR DID DI-MGMT-81861 combined and improved the cost and schedule reporting requirements. We will discuss each of the listed items on the following slides.

EVM Implementation Policy Summarized from DODI 5000.02 – Table 5 Cost, Incentive, and Fixed Price Incentive Contracts * Firm Fixed Price ≥ $50M ≥ $20M, but < $50M < $20M Any EV Reporting Use of the following DFARS Clauses: 252.234-7001 - Notice of Earned Value Management System 252.234-7002 - Earned Value Management System 252.242-7005 - Contractor Business Systems X Optional (PM Discretion based on cost-benefit analysis) Discouraged (requires MDA approval based upon business case analysis) Compliance with EVMS System Guidelines in ANSI/EIA-748 ** EVMS System Validated and Accepted by Cognizant Contracting Officer ** EVM System Surveillance Integrated Program Management Report (IPMR) DI-MGMT-81-861 OR Contract Performance Report (CPR) DI-MGMT-81-466A Integrated Master Schedule (IMS) DI-MGMT-81-650 (Monthly) (Monthly, Tailoring recommended) Integrated Baseline Reviews (IBR) (Within 180 days after contract award, exercise of options, and major contract modifications) Regulatory Table 5 in DoDI 5000.02 defines the requirements for Earned Value. These requirements are directly related to government cost risk exposure. Given relatively high government risk, Cost, Incentive, and Fixed Price Incentive contracts over $20M must be established using DFARS clauses 252.234-7001, 252.234-7002, and 252.242-7005. They must be executed using an EVM system that complies with ANSI/EIA-748. Each such contract will be subject to EVM System Surveillance, monthly IPMR reporting, and an Integrated Baseline Review within 180 days of contract award, exercise of options, or major contract modification. The subset of such contracts over $50M are additionally required to have either a DCMA Validation Review or Advance Agreement. Note that tailored IPMR reporting requirements may be written for the subset of such contracts greater than $20M but less than or equal to $50M. Note that IDIQ contracts are not yet fully defined by OSD, and generally EVM requirements are applicable at the task level. Given less risk, Cost, Incentive and Fixed Price Incentive Contracts less than $20M do not require EVMS, but it may be used at the Program Manager’s discretion following a cost benefit analysis. Given relatively low government risk, the use of EVM is discouraged for Fixed Price Contracts, and can in fact only be used if approval from the MDA has been granted following a thorough business case analysis. Note that LOE and T&M contracts are derivatives of fixed price contracts in the FAR and are treated as such for EVM application. * Contracts refers to prime contracts, subcontracts, intra-government work agreements, and other agreements. Incentive contracts include fixed-price incentive (FPI) ** Required for contract award and throughout contract performance

DFARS Clause - 252.234-7001 Notice of Earned Value Management System Required in requests-for-proposals (RFPs) where DODI 5000.02 requires application of EVM (see prior chart) Notifies contractors with an EV requirement of their obligation to provide evidence in their proposal of an EVM System that complies with ANSI-EIA 748. Notifies contractors of terms for subcontracted effort: The government and offeror must agree on which subcontracted effort will be subject to EVM flowdown requirements, and the proposal must disclose the result of that agreement The offeror shall be responsible for ensuring subcontractor compliance with the EVM System clause Evidence of ANSI EIA-748 Compliance for contracts… ≥ $50M < $50M With System Validation Documentation of existing EVM System Validation With NO System Validation Plan for achieving an EVM System Validation Mapping of management processes against ANSI-EIA 748 to demonstrate compliance Per DoDI 5000.02, DFARS clause 252.234-7001 is intended for use in RFPs for contracts that will require EVM application. The clause notifies contractors of their obligation to provide evidence in their proposal of an EVM system that complies with ANSI-EIA 748. The clause is applied regardless of the status of the contractors EVM system acceptance and advance agreement. If the contractor’s system is validated, then regardless of the contract value, the contractor should simply provide documentation of the validation. If the contractor does not have a system validation, then the response would depend on contract value. For contracts over $50M, the contractor would provide a plan for achieving system validation. For contracts between $20M and $50M, the contractor would need to provide its management processes mapped against ANSI-EIA 748 to demonstrate compliance. The clause also requires that the contractor disclose which subcontracted efforts will be subject to EVM flowdown requirements. It further stipulates that the government and contractor will agree on the selection and that the contractor is responsible for ensuring subcontractor compliance. Ultimately, 252.234-7001 is superseded by the inclusion of 252.234-7002 and 252.242-7005 in the actual contract.

DFARS Clause - 252.234-7002 Earned Value Management System Required for contracts with EVM requirements per DODI 5000.02 Contractually establishes the EVM requirements in the table below Current DFAR references an IMS and CPR. Superseded by the IPMR per an AT&L memo signed by Mrs. McFarland on June 19, 2012 Establishes that the clause shall be similarly applied to subcontracts Subcontractors or subcontracted effort shall be identified in the clause language Lays out a process for addressing identified system deficiencies Allows for the withhold of payments in cases where the EVM system is disapproved and DFARS clause 252.242.7005 is on contract Clause 252.234.7002 requirements by contract value ≥ $50M < $50M Use of an ANSI-EIA 748 Compliant EVM System X Mgmt Procedures that support IPMR reporting consistent with IPMR DID DI-MGMT-81861 Existing System Validation -OR- a plan for achieving validation Changes to the EVM System require advanced… Approval Notification Integrated Baseline Review(s) (IBR) System Surveillance Government approval to implement an Over Target Baseline/Schedule (OTB or OTS) DFARS clause 252.234-7002 is to be included in all contracts requiring EVM flow down. It adds a number of key EVM requirements, among them an ANSI-EIA-748 compliant EVM System and IPMR reporting per IPMR DID DI-MGMT-81861. NOTE: UNTIL THE 5000.02 IS UPDATED, the separate CPR and IMS CDRL requirements must be manually removed from the standard clause language and replaced with the new IPMR requirement. Authority for this change comes from the 19 June 12 policy letter. The clause also covers things like IBRs, System Surveillance, OTB/OTS approval, Subcontractor EVM flowdown, and advanced notice (approval if CV>$50M) of EVM system changes. The advanced notice language protects the Government from the contractor making changes that are inconsistent with ANSI-EIA 748. A significant change to the update to this clause is the linkage to 252.242-7005. 252.234-7002 defines withholding and system withdrawal for any significant deficiency in 16 different guidelines (1, 3, 6, 7, 8, 9, 10, 12, 16, 21, 23, 26, 27, 28, 30, or 32). These particular guidelines are those most frequently cited in findings and among those most associated with monthly recurring EVM processes.

DFARS Clause - 252.242-7005 Contractor Business Systems Required for contracts with EVM requirements per DODI 5000.02 Documents the process for dealing with significant deficiencies in one of six (6) standard contractor business systems (of which EVM is one). Specifically, the clause: Defines significant deficiencies as “a shortcoming in the system that materially affects the ability of officials of the Department of Defense to rely upon information produced by the system that is needed for management purposes” Requires mandatory payment withholding for system deficiencies through a defined process with established timelines Defines the process for correcting identified system deficiencies Specific guidance on EVMS “significant deficiencies” are found in DFARS clause 252.234-7002 DFARS Clause 252.242-7005 provides terms and conditions for the withholding of payment associated with “significant deficiencies” to contractor business systems. An EVM system is one of the subject systems, as are accounting, cost estimating, material management/accounting, property management, and purchasing. As mentioned on the last chart, details regarding specific EVM deficiencies are found in 252.234.7002.

19 June 2012 Policy Letter The 19 June 2012 policy Letter from Ms. McFarland had the effect of modifying the DFAR 252.234-7002 and implementing the requirement for IPMR reporting (IPMR DID DI-MGMT-81861). Note that Format 6 (IMS) is required on all development, major modification, and low rate initial production contracts. Section 2.8.2 of the IMPR DID defines Format 6 IMS application without the 7002 application. Specifically “Where Format 6 is applied separately, the following sections of the IPMR DID are applicable (omitting references to Formats 1-5 or 7): 1.3, 1.4, 1.5, 2.1.1, 2.1.1.2, 2.2.5, 2.3, 2.4, 2.5.1, 2.6.1, 2.7, 3.6.7 and 3.7.”

References NAVY CEVM Website: PARCA EVM Website: EVM-CR Website: https://acquisition.navy.mil/home/acquisition_one_source/cevm PARCA EVM Website: http://www.acq.osd.mil/evm/ EVM-CR Website: http://dcarc.cape.osd.mil/EVM/EVMOverview.aspx DAU EVM Community Of Practice (COP) Website: https://dap.dau.mil/cop/evm/Pages/default.aspx DFARS: Notice of Earned Value Management System (Apr 2008): http://www.acq.osd.mil/dpap/dars/dfars/html/current/252234.htm#252.234-7001 Earned Value Management System (May 2011): http://www.acq.osd.mil/dpap/dars/dfars/html/current/252234.htm#252.234-7002 Contractor Business Systems (May 2011): http://www.acq.osd.mil/dpap/dars/dfars/html/current/252242.htm#252.242-7005 The following is a list of helpful websites. All of the documents discussed and much more is at the first link Navy CEVM. It is also current the first Google match to “Navy CEVM” search.

Navy Center for Earned Value Management Point of Contact Navy Center for Earned Value Management (703) 695-0510 http://acquisition.navy.mil/acquisition_one_source/cevm