Application of Earned Value Management (EVM)

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1842 and 1852

Application of Earned Value Management (EVM)

AGENCY: National Aeronautics and Space Administration (NASA).

ACTION: Proposed rule.

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SUMMARY: This proposed rule would effect a change to the NASA FAR

Supplement relative to the application of Earned Value Management (EVM)

at NASA. The proposed change would establish NASA-wide clauses and

provisions compatible with those used by DoD. Specifically, the change

would clarify the role of the Defense Contract Management Command

(DCMC) with

[[Page 63655]]

respect to its responsibility for reviewing earned value management

system (EVMS) plans and verifying initial and continuing contractor

compliance with NASA and DoD EVMS criteria, and with NASA Policy

Directive 9501.3, Earned Value Performance Management, and DoD 5000.2-

R.

DATES: Comments should be submitted on or before January 15, 1999.

ADDRESSES: Interested parties should submit written comments to Kenneth

A. Sateriale, NASA Headquarters, Office of Procurement, Contract

Management Division (Code HK), Washington, DC 20546. Comments may also

be submitted by e-mail to [email protected].

FOR FURTHER INFORMATION CONTACT: Kenneth A. Sateriale, (202) 358-0491.

SUPPLEMENTARY INFORMATION:

Background

EVM is a commonly used performance (i.e. cost, schedule, and

technical) measurement tool for program managers in the aerospace

industry. NASA and DoD are major customers in the Government sector of

the aerospace industry, and cooperate to align their business practices

wherever practicable in order to realize cost and resource

efficiencies. Therefore, they have collaborated closely over the last

several years to align their approaches to the use of EVM. This change

completes that alignment process.

Impact

NASA certifies that this regulation will not have a significant

economic impact on a substantial number of small business entities

under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) since the

changes do no more than align NASA practices with those already in

place at DoD, which shares essentially the same industry sector. This

proposed rule does not impose any reporting or recordkeeping

requirements subject to the Paperwork Reduction Act.

List of Subjects in 48 CFR Parts 1842 and 1852

Government procurement.

Tom Luedtke,

Acting Associate Administrator for Procurement.

Accordingly, 48 CFR Parts 1842 and 1852 are proposed to be amended

as follows:

1. The authority citation for 48 CFR Parts 1842 and 1852 continues

to read as follows:

Authority: 42 U.S.C. 2473(c)(1)

PART 1842--CONTRACT ADMINISTRATION AND AUDIT SERVICES

2. Subpart 1842.3 is added to read as follows:

Subpart 1842.3--Contract Administration Office Functions

Sec. 1842.302 Contract administration functions. (NASA supplements

paragraph (a))

(a) In addition to the responsibilities listed in FAR 42.302(a),

responsibility for reviewing earned value management system (EVMS)

plans and verifying initial and continuing contractor compliance with

NASA and DoD EVMS criteria is normally delegated to DCMC.

3. Section 1842.7003 is added to read as follows:

1842.7003 Modified cost performance report.

(a) Modified cost performance reporting is required for RDT&E

contracts with values between $25 million and $60 million, and

production contracts with values less than $250 million. Modified cost

performance reporting for RDT&E contracts with values of $25 million or

less may be required at the discretion of the contracting officer.

(b) The contracting officer shall insert the clause at 1852.242-76,

Modified Cost Performance Report, in solicitations and contracts, other

than for firm-fixed-price, time-and-materials, or labor-hour, when

modified cost performance reporting is required.

(c) The contracting officer shall insert the provision at 1852.242-

77, Modified Cost Performance Report Plans, in solicitations for

contracts, other than firm-fixed-price, time-and-materials, or labor-

hour, when modified cost performance reporting is required.

4. Subpart 1842.74 is added to read as follows:

Subpart 1842.74--Earned Value Management

1842.7401 Earned Value Management Systems (EVMS).

1842.7402 Solicitation provision and contract clause.

Subpart 1842.74--Earned Value Management

1842.74 Earned Value Management Systems (EVMS).

(a) Earned value is a management technique that relates resource

planning to schedules and to technical cost and schedule requirements.

All work is planned, budgeted, and scheduled in time-phased ``planned

value'' increments constituting a cost and schedule measurement

baseline. There are two major objectives of an earned value system: to

encourage contractors to use effective internal cost and schedule

management control systems; and to permit the customer to be able to

rely on timely data produced by those systems for determining product-

oriented contract status. Any system used by the contractor in planning

and controlling the performance of significant contracts shall be

certified as meeting the NASA EVM Criteria (the Criteria), unless

waived by the NASA Chief Financial Officer (CFO).

(b) Criteria-based EVMS is required in RDT&E contracts with a total

estimated final value of $60 million or more, with a period of

performance in excess of one year, and production contracts with a

total value of $250 million or more. On RDT&E contracts with a total

anticipated value greater than $25 million but less than $60 million,

or production contracts less than $250 million, the Criteria normally

is not applied. However, noncriteria-based EVM is required on these

contracts, and is optional on contracts valued at $25 million or less

at the discretion of the contracting officer. NASA Center CFO's have

been delegated the authority to waive this requirement for contracts

meeting the thresholds established for noncriteria contracts.

(c) When an offeror or contractor is required to provide an EVMS

plan to the Government, the contracting officer shall forward a copy of

the plan to the cognizant administrative contracting officer (ACO) to

obtain the assistance of the ACO in determining the adequacy of the

proposed EVMS plan.

1842.7402 Solicitation provision and contract clause.

When the Government requires Earned Value Management, the

contracting officer shall insert:

(a) The provision at 1852.242-74, Notice of Earned Value Management

System, in solicitations; and

(b) The clause at 1852.242-75, Earned Value Management System, in

solicitations and contracts.

PART 1852--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

5. Sections 1852.242-74, 1852.242-75, 1852.242-76, and 1852.242-77

are added to read as follows:

1852.242-74 Notice of Earned Value Management System.

As prescribed in 1842.7402(a), insert the following provision:

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Notice of Earned Value Management System

(XXX)

(a) The offeror shall provide documentation that the cognizant

Administrative Contracting Officer (ACO) has recognized that the

proposed earned value management system (EVMS) complies with the

EVMS criteria of NASA Policy Directive (NPD) 9501.3, Earned Value

Management, or DoD 5000.2-R, Mandatory Procedures for Major Defense

Acquisition Programs and Major Automated Information Systems

Acquisition Programs.

(b) If the offeror proposes to use a system that does not meet

the requirements of paragraph (a) of this provision, the successful

offeror shall submit a plan for compliance with the NASA EVM

criteria as described in NPD 9501.3.

(1) The plan shall--

(A) Describe the EVMS the offeror intends to use in performance

of the contract;

(B) Distinguish between the offeror's existing management system

and modifications proposed to meet the criteria;

(C) Describe the management system and its application in terms

of the criteria;

(D) Describe the proposed procedure for administration of the

criteria as applied to subcontractors; and

(E) Provide documentation describing the process and results of

any third-party or self-evaluation of the system's compliance with

EVMS criteria.

(2) The offeror shall provide information and assistance as

required by the Contracting Officer to support review of the plan.

(3) The Government will review and evaluate the successful

offeror's plan for EVMS, including the selection of subcontracted

effort to which EVMS would be applied, within sixty days following

contract award.

(c) Offerors shall identify in their proposals the major

subcontractors, or major subcontracted effort if major

subcontractors have not been selected, planned for application of

EVMS.

(End of Provision)

1852.242-75 Earned Value Management Systems.

As prescribed at 1842.7402(b), insert the following clause:

Earned Value Management System

(XXX)

(a) In the performance of this contract, the Contractor shall

use an earned value management system (EVMS) that has been

recognized by the cognizant Administrative Contracting Officer (ACO)

as complying with the criteria provided in NASA Policy Directive

9501.3, Earned Value Management, or DoD 5000.2-R, Mandatory

Procedures for Major Defense Acquisition Programs and Major

Automated Information Systems Acquisition Programs.

(b) If, at the time of award, the Contractor's EVMS has not been

recognized by the cognizant ACO as complying with EVMS criteria or

the Contractor does not have an existing cost schedule control

system (C/SCS) that has been accepted by the Government, the

Contractor shall apply that system to the contract and be prepared

to demonstrate to the ACO that its EVMS complies with the EVMS

criteria referenced in paragraph (a) of this clause.

(c) The Government may require integrated baseline reviews. Such

reviews shall be scheduled as early as practicable and should be

conducted within 180 calendar days after contract award, the

exercise of significant contract options, or the incorporation of

major contract modifications. The objectives of the integrated

baseline review are for the Government and the Contractor to jointly

assess areas, such as the Contractor's planning, to ensure complete

coverage of the statement of work, logical scheduling of the work

activities, adequate resourcing, and identification of inherent

risks.

(d) Unless a waiver is granted by the ACO, Contractor proposed

EVMS changes require approval of the ACO prior to implementation.

The ACO shall advise the Contractor of the acceptability of such

changes within 30 calendar days after receipt of the notice of

proposed changes from the Contractor. If the advance approval

requirements are waived by the ACO, the Contractor shall disclose

EVMS changes to the ACO and the NASA CO at least 14 calendar days

prior to the effective date of implementation.

(e) The Contractor agrees to provide access to all pertinent

records and data requested by the ACO or a duly authorized

representative. Access is to permit Government surveillance to

ensure that the EVMS complies, and continues to comply, with the

criteria referenced in paragraph (a) of this clause.

(f) The Contractor shall require the subcontractors specified

below to comply with the requirements of this clause: (Insert list

of applicable subcontractors)

(End of clause)

1852.242-76 Modified Cost Performance Report.

As prescribed in 1842.7003(b), insert the following clause:

Modified Cost Performance Report

(XXX)

(a) The Contractor shall use management procedures in the

performance of this contract that provide for:

(1) Planning and control of costs;

(2) Measurement of performance (value for completed tasks); and

(3) Generation of timely and reliable information for the

Modified Cost Performance Report (M/CPR).

(b) As a minimum, these procedures must provide for--

(1) Establishing the time-phase budgeted cost of work scheduled

(including work authorization, budgeting, and scheduling), the

budgeted cost for work performed, the actual cost of work performed,

the budget at completion, the estimate at completion, and provisions

for subcontractor performance measurement and reporting;

(2) Applying all direct and indirect costs and provisions for

use and control of management reserve and undistributed budget;

(3) Incorporating changes to the contract budget base for both

Government directed changes and internal replanning;

(4) Establishing constraints to preclude subjective adjustment

of data to ensure performance measurement remains realistic. The

total allocated budget may exceed the contract budget base only

after obtaining prior written approval of the NASA Contracting

Officer. For cost-reimbursement contracts, the contract budget base

shall exclude changes for cost growth increases, other than for

authorized changes to the contract scope; and

(5) Establishing the capability to accurately identify and

explain significant cost and schedule variances, both on a

cumulative basis and a projected-at-completion basis.

(c) The Contractor may use a cost/schedule control system that

has been recognized by the cognizant Administrative Contracting

Officer (ACO) as complying with the earned value management system

criteria provided in NASA Policy Directive 9501.3, Earned Value

Management, or DoD 5000.2-R, Mandatory Procedures for Major Defense

Acquisition Programs and Major Automated Information Systems

Acquisition Programs.

(d) The Government may require integrated baseline reviews. Such

reviews shall be scheduled as early as practicable and should be

conducted within 180 calendar days after contract award, the

exercise of significant contract options, or the incorporation of

major modifications. The objectives of the integrated baseline

review are for the Government and the Contractor to jointly assess

areas, such as the Contractor's planning, to ensure complete

coverage of the statement of work, logical scheduling of the work

activities, adequate resourcing, and identification of inherent

risks.

(e) The Contractor shall provide access to all pertinent

records, company procedures, and data requested by the ACO, or

authorized representative, to--

(1) Show proper implementation of the procedures generating the

cost and schedule information being used to satisfy the M/CPR

contractual data requirements to the Government; and

(2) Ensure continuing application of the accepted company

procedures in satisfying the M/CPR data item.

(f) The Contractor shall submit any substantive changes to the

procedures and their impact to the ACO for review.

(g) The Contractor shall require a subcontractor to furnish M/

CPR in each case where the subcontract is other than firm-fixed-

price, time-and-materials, or labor-hour, is 12 months or more in

duration, and has critical or significant tasks related to the prime

contract. Critical or significant tasks shall be identified by

either the Government or the Contractor. Each subcontractor's

reported cost and schedule information shall be incorporated into

the Contractor's M/CPR.

(End of clause)

1852.242-77 Modified Cost Performance Report Plans.

As prescribed in 1842.7003(c), insert the following provision;

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Modified Cost Performance Plans

(XXX)

(a) The offeror shall submit in its proposal a written summary

of the management procedures it will establish, maintain, and use in

the performance of any resultant contract to comply with the

requirements of the clause at 1852.242-74 Modified CostPerformance

Report.

(b) If the offeror proposes to use a cost/schedule control

system that has been recognized by the cognizant Administrative

Contracting Officer as complying with the earned value management

system criteria of NASA Policy Directive 9501.3, Earned Value

Management, or DoD 5000.2-R, Mandatory Procedures for Major Defense

Acquisition Programs and Major Automated Information Systems

Acquisition Programs, the offeror may submit a copy of the

documentation of such recognition instead of the written summary

required by paragraph (a) of this provision.

(End of provision)

[FR Doc. 98-30554 Filed 11-13-98; 8:45 am]

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