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DoD is proposing to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to clarify DoD's policy for Earned Value Management System (EVMS) application on DoD contracts, beyond the basic triggers of contract types and dollar values. Specifically, the rule:

• Clarifies that EVMS requirements are applicable to all DoD contracts, task orders, and delivery orders, that are cost reimbursement or incentive fee; have a value of $20 million or more (inclusive of all options); and have a period of performance of 18 months or longer;
• Clarifies that, with the exception of a contractor EVMS under the cognizance of the Naval Sea Systems Command, where system approval is not delegated to the Defense Contract Management Agency (DCMA), DCMA is responsible for approving a contractor’s EVMS;
• Removes the reference to American National Standards Institute (ANSI) guidelines and states that EVMS must comply with guidelines in Electronic Industries Alliance (EIA) Standard 748 (EIA-748);
• Raises the threshold for a formal earned value management system compliance determination by the Defense Contract Management Agency  from $50 million to $100 million; and
• Clarifies that EVMS requirements apply unless the requirements package includes a determination of earned value management nonapplicability or a waiver signed by the component acquisition executive.

This rule will not increase costs for contractors.  DoD expects that this rule will decreases costs for contractors by increasing the dollar threshold for formal EVMS compliance determinations from $50 million to $100 million, and providing for earned value management non-applicability determinations and waivers.  DoD estimates that this rule will reduce the number of contractor reviews by nearly 20 percent with very little risk to the Government, since over 97 percent of the contract dollars will still be covered by the increased threshold. 

Statement of Need:

This rule is necessary to ensure proper application of EVMS requirements in DoD contracts, task orders, and delivery orders based on contract type and period of performance, and increase the contractual threshold for an approved earned value management system from $50 million to $100 million.

Summary of the Legal Basis:

This rule is proposed under the authority at 41 U.S.C. 1303, functions and authority, which provides the authority to issue and maintain the Federal Acquisition Regulation and executive agency implementing regulations. 

Alternatives:

No alternatives were considered.

Anticipated Costs and Benefits:

Based on the DoD Performance Assessments and Root Cause Analyses (PARCA) Earned Value Management Division’s assessment of DoD application of earned value management, the reduction in DoD EVMS compliance surveillance will allow for the valuable repurposing of an estimated 50 personnel to support other essential priorities and missions, resulting in direct savings to the Department in excess of $3 million. Furthermore, corresponding savings in reduced DoD contractor overhead costs are conservatively estimated at two to three times the DoD savings (One contractor alone in PARCA’s study estimated approximately $6 million company-wide savings annually). Since the actual cost impact is difficult to quantify, DoD is conservatively estimating annualized savings of $10 million.

Risks:

Failure to implement this rule will perpetuate the unproductive regulatory earned value management compliance requirements on industry for certain types of contracts where such oversight is unnecessary.