1. EVM 202—Lesson 2 EVM in the Acquisition Strategy
September 2016
EVM 202—Lesson 2 EVM in the Acquisition Strategy

2. Lesson 2 Learning Objectives
Terminal Learning Objective
Apply DoD Earned Value Management (EVM) policy to assemble the EVM elements of an acquisition strategy and pre-contract activities
Enabling Learning Objectives
Demonstrate the EVM applicability to a contract
Identify Request for Proposals (RFP) sections affected by EVM application
Given MIL-STD-881 and a risk assessment, choose the appropriate Contract Work Breakdown Structure (CWBS) level for EVM reporting
Distinguish between the EVM-related Defense Federal Acquisition Regulation Supplement (DFARS) clauses
Apply appropriate Integrated Program Management Report (IPMR) tailoring

3. What Is Earned Value Management (EVM)?
Program management tool that utilizes a contractor’s Earned Value Management System (EVMS) to integrate the work scope, schedule, and cost parameters of a program, providing objective performance measurement and management
As work is performed, the corresponding budget value is “earned” (EV)
Acronym
Term
Definition
EVM
Earned Value Management
An integrated program management tool the program manager (PM) uses to track specific contract cost, schedule and performance objectives to support the Acquisition Program Baseline (APB) goals
EVMS
Earned Value Management System
The contractor-specific internal control system(s) used to meet EVM requirements EV
Earned Value
The value of completed work expressed in terms of the work’s assigned budget, or budgeted cost for work performed (BCWP)

4. Earned Value Management System (EVMS)

5. Earned Value Management Gold Card

6. Powerful Quantitative Reports

7. EVM within the Contracting Process

8. Statutes Related to EVM
Law
Purpose
Government Performance and Results Act of 1993 (GPRA)
Requires strategic planning and performance standards for Federal Government
Federal Acquisition Streamlining Act of 1994—Title V (FASA V)
Requires programs to achieve 90% of cost, schedule, and performance goals
Information Technology Management Reform Act of 1996 (ITMRA/Clinger-Cohen)
Requires executive agencies to report performance of information system acquisitions
Weapon System Acquisition Reform Act of 2009 (WSARA)
Requires DoD to describe current EVM implementation and recommend policy changes

9. Office of Management and Budget (OMB) EVM Policy
Policy Guidance
OMB Circular A-11 Supplement—Capital Programming Guide
Purpose
Unified guidance to support OMB reporting to Congress
Circular A-11 Policy
Agencies must establish cost, schedule, and performance goals for major acquisitions and achieve on average 90% of those goals
Provides guidance on integration of EVM, Integrated Baseline Reviews (IBRs), and risk management
As an OMB Circular, applies to DoD and all executive branch agencies

10. For more on Better Buying Power 3.0, visit http://bbp.dau.mil/.
Better Buying Power 3.0 Achieving Dominant Capabilities through Technical Excellence and Innovation
Achieve Affordable Programs
Continue to set and enforce affordability caps
Achieve Dominant Capabilities While Controlling Lifecycle Costs
Strengthen and expand “should cost” based cost management
Incentivize Productivity in Industry and Government
Employ appropriate contract types, but increase the use of incentive type contracts
Ensure effective use of Performance-Based Logistics
Incentivize Innovation in Industry and Government
Eliminate Unproductive Processes and Bureaucracy
Emphasize acquisition chain of command responsibility, authority, and accountability
Remove unproductive requirements imposed on industry
Promote Effective Competition
Create and maintain competitive environments
Improve DoD outreach for technology and products from global markets
Increase small business participation, including more effective use of market research
Improve Tradecraft in Acquisition of Services
Strengthen contract management outside the normal acquisition chain—installations, etc.
Improve requirements definitions for services
Improve the effectiveness and productivity of contracted engineering and technical services
Improve the Professionalism of the Total Acquisition Workforce
Establish stronger professional qualification requirements for all acquisition specialties
Improve our leaders’ ability to understand and mitigate technical risk
For more on Better Buying Power 3.0, visit

11. Integrated Program Management Report (IPMR)
Format 1: Work Breakdown Structure
The level of detail to be reported normally will be at level three of the Contract Work Breakdown Structure (CWBS), but lower levels may be specified for high-cost or high-risk items. CWBS elements and levels reported shall be those specified in the contract.
Format 2: Organizational Categories
This format shall be used to collect organizational cost information at the total contract level for organizational elements that reflect the contractor's internal management, rather than for individual CWBS elements structure. Format 2 shall also identify each major subcontractor as defined in the contract.
Format 3: Baseline
Format 3 lists all significant baseline changes that have occurred by CWBS during the reporting period, to include the contract changes and supplemental agreements, allocations from management reserve (MR) and undistributed budget (UB), and any significant re-phasing of budgets.
Format 4: Staffing
Format 4 includes staffing forecasts in months by the organizational categories. Format 4 categories may differ from those reported in Format 2 and shall be addressed during negotiations.
Format 5: Explanations and Problem Analyses
Format 5 is a narrative report prepared to amplify and explain data in the other IPMR formats.
Format 6: Integrated Master Schedule
Format 6 defines and contains the contractor’s IMS. It integrates with Format 1 WBS, Format 2 OBS, Format 3 Baseline, and Format 5 Analysis. Format 6 contains both the baseline and forecast schedules, and predicts the contract completion date and all interim milestones.
Format 7: Electronic History and Forecast File
Format 7 provides supplemental historical and time-phased information. Format 7 shall normally address the following: monthly historical time-phased budgeted cost for work scheduled (BCWS), BCWP, actual cost of work performed (ACWP), estimate to complete (ETC), by control account (CA) WBS; future forecast of BCWS and ETC.

12. DoDI 5000.02 EVM Policy Guidance Enclosure 1 Table 8 EVM Application Requirements
Enabling Learning Objective
ELO 2.1: Demonstrate the EVM applicability to a contract
ELO 2.5: Apply appropriate Integrated Program Management Report (IPMR) tailoring
Instructor Guidance
Walk students through the DoDI EVM policy shown on this slide.
Briefly discuss EVM policy as it relates to other types of contracts (e.g., major modifications; LRIP, etc.)
Notes
This slide reflects the DoDI EVM requirements, including the Defense Procurement and Acquisition Policy (DPAP) Interim Deviation. This policy grew out of a March 2005 policy that requires an EVMS on cost or incentive contracts, subcontracts, and intra-government work agreements greater than or equal to $20 million then-year (TY). For efforts greater than or equal to $100 million TY, the EVMS must be formally approved by the contracting officer.
Implementing EVM on contracts less than $20 million is a risk-based decision at the discretion of the program manager and requires a cost-benefit analysis. EVM policy also requires use of a common Work Breakdown Structure (WBS) in accordance with the DoD MIL-STD-881 (current version), which is now incorporated into the Data Item Description (DID).
EVM is discouraged for DoD firm-fixed-price (FFP), level of effort (LOE), and time-and-materials (T&M) contracts, as well as contracts less than or equal to 12 months in duration.
Note that:
DFARS Clause , Earned Value Management System (DEVIATION) (SEP 2015) raised the compliance review threshold from $50 million to $100 million.
DI-MGMT (current version) supersedes the Contract Performance Report (CPR) and Integrated Master Schedule (IMS) DIDs for contracts awarded based on solicitations or RFPs issued on or after July 1, 2012 (See the next slide for details).
The IPMR DID is required for contracts where DFARS applies.

13. DoDI 5000.02 EVM Policy Guidance Enclosure 1 Table 9 EVM Reporting Requirements
Enabling Learning Objective
ELO 2.1: Demonstrate the EVM applicability to a contract
ELO 2.5: Apply appropriate Integrated Program Management Report (IPMR) tailoring
Instructor Guidance
Walk students through the DoDI EVM policy shown on this slide.
Notes
This slide reflects the DoDI EVM Reporting
The IPMR DID is required for contracts where DFARS applies.
IPMR Formats
Formats 1-5 are the former CPR formats.
Format 6 is the IMS. It applies to all development, major modification, and Low Rate Initial Production (LRIP) efforts whether or not DFARS is applicable.
Format 7 provides the WBS-level detail for the Budgeted Cost for Work Scheduled (BCWS), BCWP, Actual Cost of Work Performed (ACWP), and Estimate to Complete (ETC) throughout the contract.

14. Decision Process for EVM Application
Contract = contracts, subcontracts, intra-government work agreements, other agreements
All $ thresholds are in TY
If contract type is mixed, then apply guidance separately to different parts of contract
ID/IQ at task order level

15. Key EVM Inputs in the RFP Development Process
Do you include EVM at all?
Where do you address EVM in the RFP?
Section C—Description/Specs/Work Statement
Section I—General Provisions
Section J—Exhibits/Attachments
Section L—Instructions to Offerors
Section M—Evaluation Factors for Award

16. Section C—Statement of Objectives (SOO) or Statement of Work (SOW)
The SOO or SOW should contain statements requiring:
Development of a CWBS at a level adequate for management and contract control
The contracted technical effort to use a guidelines-compliant EVMS that correlates cost and schedule performance with technical progress
Designation of critical subcontractors by name for EVM compliance and flow down of EVMS compliance to subcontractors
An Integrated Baseline Review (IBR)
Reference to EVMS data items as part of Integrated Program Management Reporting
See the Application of EVM to Contracts job aid for sample SOW paragraphs

17. Section I—General Provisions
Use the DFARS clauses, not the FAR clauses, for EVM.
FAR Clauses
FAR Notice of EVMS—Pre-Award IBR (July 2006)
FAR Notice of EVMS—Post Award IBR (July 2006)
FAR EVMS—The Government will conduct an IBR if a pre-award IBR has not been conducted. (May 2014)
DFARS Section —Solicitation provisions and contract clause (Dec 2011)
Use the provision at DFARS , Notice of Earned Value Management System, in the solicitation instead of the provisions at FAR and FAR
Use the clause at DFARS , Earned Value Management System, in the solicitation and contract instead of the clause at FAR
Use DFARS , Contractor Business Systems, in the solicitation and contract to allow for withholding payments due to a non-compliant EVMS issue.
Includes links to procedures on performing cost-benefit analyses and waivers
DoD contracts will not use FAR clauses for EVM.

18. Section J—Exhibits/Attachments
Contract Data Requirements List (CDRL) places data on contract
EVM-Related Data Item Descriptions (DID)
Integrated Program Management Report (IPMR)—DI-MGMT (current version) supersedes CPR and IMS DIDs, effective July 1, 2012
EVM CDRLs can and should be tailored within bounds of policy
Tailoring options are limited for contracts ≥ $50M (frequency, level of detail)
Most aspects are tailorable for contracts < $50M (formats, frequency, level of detail, etc.)
FM and Cost-Related Data Item Descriptions (DIDs)
Contract Work Breakdown Structure—DI-MGMT-81334D
Contract Funds Status Report—DI-MGMT-81468A
Consider all risk factors when tailoring EVM DIDs
Type of contract (determined by cost risk)
Technology
Schedule
Past contractor performance
Scope, complexity, risk

19. EVM Central Repository
Provides centralized reporting, collection, and distribution of the Contract Performance Reports (CPRs), Contract Funds Status Report (CFSR), the Integrated Master Schedule (IMS), and the IPMR
Mandatory for ACAT 1C, 1D (Major Defense Acquisition Program (MDAP)), and ACAT 1A (Major Automated Information System (MAIS)) programs
Available at the EVM Central Repository (EVM-CR) at

20. Section J—EVM Report Details Required
Formats 1-5 Guidance
Formats 1 and 2 reporting levels
Reporting frequency
Submission dates
Date of first and last reports
Resources shown in dollars or hours
Format 5 variance reporting thresholds
Fixed number of variances
Percentage or dollar thresholds
Specific variances
Human readable format
Format 6 Guidance
Degree of networking
Reporting frequency
Submission dates
Date of first and last reports
Frequency of schedule risk analysis
Electronic data interchange format
Format 7 Guidance
Reporting levels
Subcontractor information
Date elements
DoD-approved electronic XML format

21. Section L—Instructions to Offerors
Guidance to bidders for the assembly of their proposals
Each offeror’s proposal shall include a description of the EVMS to be used in accordance with the appropriate RFP DFARS clauses
Compliance with system approval requires:
Reference to a “Proof of System Approval” (e.g., Contracting Officer Final Determination (COFD) Letter and a copy of the approved EVMS description); or
A plan to obtain EVMS approval to include how the system will be approved
Compliance only requires a written summary of the proposed EVMS reference in sufficient detail to show how it addresses all 32 EIA-748 EVMS guidelines

22. Section M—Evaluation Factors for Award
Evaluation of the proposed EVMS is normally undertaken as part of the proposal evaluation process to determine the probability of the system meeting the guidelines
For Existing Systems—Evaluation may consist of a confirmation that the referenced system approval is accurate and current. The system should be in use currently, and surveillance should not have identified significant, uncorrected problems.
For EVMS (Without approval)—The EVMS description should be evaluated for completeness against the EIA-748 guidelines
An on-site examination of a proposed EVMS should not normally be required during proposal evaluation. But if deficiencies are identified, written communications or an on-site visit may be required when approved by the Source Selection Board and Procuring Activity
The Defense Contract Management Agency (DCMA) should be requested to provide insight regarding EVMS capability, quality, and past performance

23. DoDI 5000.02 EVM Policy for Cost and Incentive Contracts < $20M TY
EVM optional; based on risk assessment
Requires cost-benefit analysis
Requires program manager approval
DFARS clauses—If you decide to use EVM, use these DFARS clauses:
DFARS —Notice of EVMS
DFARS —EVMS
DFARS —Contractor Business Systems
EVM Data Requirements
DI-MGMT (current version)—IPMR (Formats 1 and 5 recommended; Format 6 may be recommended)
IBR conducted ASAP but not later than 180 calendar days after contract award

24. DoDI 5000.02 EVM Policy for Cost and Incentive Contracts ≥ $20M TY and < $50M TY
Comply with EIA-748
No formal EVMS approval
DFARS clauses
DFARS —Notice of EVMS
DFARS —EVMS
DFARS —Contractor Business Systems
EVM Data Requirements
DI-MGMT (current version)—IPMR (Formats 1, 5, 6, and 7 are mandatory)
IBR conducted ASAP but not later than 180 calendar days after contract award

25. DoDI 5000.02 EVM Policy for Cost and Incentive Contracts ≥ $50M TY and < $100M TY
Comply with EIA-748
No formal EVMS approval
DFARS clauses
DFARS —Notice of EVMS
DFARS —EVMS
DFARS —Contractor Business Systems
EVM Data Requirements
DI-MGMT (current version)—IPMR (All seven formats are mandatory)
IBR conducted ASAP but not later than 180 calendar days after contract award

26. DoDI 5000.02 EVM Policy for Cost and Incentive Contracts ≥ $100M TY
Comply with EIA-748
EVMS formally approved by cognizant contracting officer
DFARS clauses
DFARS —Notice of EVMS
DFARS —EVMS
DFARS —Contractor Business Systems
EVM Data Requirements
DI-MGMT (current version)—IPMR (All seven formats mandatory)
IBR conducted as soon as possible (ASAP) but not later than 180 calendar days after contract award

27. DoDI 5000.02 EVM Policy for Firm-Fixed-Price (FFP) Contracts
EVM discouraged regardless of dollar value
Requires Milestone Decision Authority (MDA) approval and cost-benefit analysis
If MDA decides to implement EVM, need same EVM DFARS clauses
EVM Data Requirements
DI-MGMT (current version)—IPMR
Formats 1 and 2—Performance in hours (versus dollars) or reported at price rather than cost
Format 3—Optional
Format 4—Not recommended
Format 5—If concerned with schedule risk, focus on schedule variance; rely on IMS variance analysis
Format 6—IMS. Consider alternatives: Contractor internal reports, status meetings, or use line of balance schedule
Format 7—Not recommended
IBR conducted ASAP but not later than 180 calendar days after contract award

28. Draft IPMR CDRL Exercise

29. Acquisition Strategy Practice Exercise
Is Earned Value Management (EVM) required? (Yes or No)
Is EVMS approval required? (Yes or No)
Which EVM DFARS contract clause(s) and number(s) should be used in the Request for Proposals (RFP)?
Which EVM Data Item Description (DID) number(s) should be used in the RFP?
What formats of the EVM DID (if any) would you tailor out with the Contract Data Requirements List (CDRL)?
Independent Scenarios

30. Acquisition Strategy Practice Exercise Review

31. Practice Exercise: Scenario 1
Your Integrated Product Team (IPT) is responsible for developing the encryption hardware and encryption software for a new satellite system. The acquisition strategy is based on a complex modification of an existing aircraft system.
Risk Assessment
Technical risk—High
Schedule risk—High
Cost risk—Low
Contract Details
Contract Type: Cost Plus Incentive Fee/Award Fee
Period of Performance: 36 months
Estimated RDT&E Cost: $80M (TY)

32. Practice Exercise: Scenario 2
You are preparing a Concept Exploration RFP. In source selection, you plan to award at least three eighteen month, cost plus award fee study contracts.
Contract Details
Contract Type: Cost Plus Award Fee
Period of Performance: 18 months
Estimated RDT&E: $30M (for all three) (TY)

33. Practice Exercise: Scenario 3
Your IPT is responsible for the development of simulation software. The software will be used for System Qualification Testing, Developmental Test and Evaluation (DT&E), and Operational Test and Evaluation (OT&E) of a major weapon system. The software will be provided as Government furnished property (GFP) to the primary contractor as well as the DT and OT testers. Although this is new software to the Government, most of the modules are game simulations considered commercial-off-the-shelf (COTS).
 Contract Details
Contract Type: Firm-Fixed-Price (FFP)
Period of Performance: 18 months
Provides six-month schedule padding before GFP need date
Estimated RDT&E Cost: $20.5M (TY)

34. Practice Exercise: Scenario 4
Your IPT is responsible for developing an RFP for an ACAT-3 target rocket Low Rate Initial Production (LRIP) contract. The Cost Plus Award Fee (CPAF) Engineering and Manufacturing Development (EMD) contract is experiencing an 8 to 12 percent cost growth and is about six to eight months behind schedule, and a number of technical issues have been identified in DT&E. A two year LRIP has been approved while Initial OT&E (IOT&E) testing continues instead of full rate production. The LRIP contract will be a new contract with both Research Development Test and Evaluation (RDT&E) test items and Production line items.
Contract Details
Contract Type: Fixed Price Incentive Firm Target
Period of Performance: 30 Months
Estimated RDT&E: $25M ($10M TY1 and $15M TY2)
Estimated Production: $80M (TY2)

35. Practice Exercise: Scenario 5
You are the leader of a proposal development team preparing an RFP to outsource the depot maintenance for a major weapon system. The depot work is dependent on the Government getting the system to the depot as scheduled. The contract will include a base year and five annual options. The Statement of Work (SOW) has two primary tasks:
Operate depot facilities—a level of effort (LOE) task
Repair, upgrade, and test hardware on a time-and-materials (T&M) task order basis.
Contract Details
Contract Type: Cost Plus Award Fee
Period of Performance: 72 months
Estimated O&M Costs: $500M (TY)

36. Lesson 2 Summary Terminal Learning Objective (TLO)
Apply DoD EVM policy to assemble the EVM elements of an acquisition strategy and pre-contract activities
Enabling Learning Objective (ELO)
Demonstrate the EVM applicability to a contract
Identify RFP sections affected by EVM application
Given MIL-STD-881 and a risk assessment, choose the appropriate CWBS level for EVM reporting
Distinguish between the EVM-related DFARS clauses
Apply appropriate IPMR tailoring