Authorized Unpriced Work (AUW) and Earned Value Management Systems

Authorized unpriced work (AUW) is an area that can cause contractors difficulties and when not handled properly, can result in a DCMA EVMS review team writing up a Corrective Action Request (CAR) as we have discussed in previous blogs.

At times, contractors can find themselves in a position where projects are not following commonly used and recommended practices that are described in the EIA-748 Standard for EVMS as well other guidance such as the NDIA Integrated Program Management Division  (IPMD) EIA-748 Intent Guide and the DCMA Earned Value Management Implementation Guide (EVMIG).

It is always better to be proactive to ensure projects have the proper direction they need. H&A suggests that you review your EVM System Description as well as any related procedures to ensure that they:

1. Reflect the guidelines in the EIA-748(for AUW in particular, see Guidelines 8, 9, and 28) as well as related industry and government implementation guidance
2. Are clear and specific on how projects are to handle authorized unpriced work

Humphreys & Associates suggest verifying the following items are fully outlined in your EVM System Description:

1. How and when undistributed budget (UB) is distributed to control accounts.This includes:

• Describing what controls are placed on the use and distribution of undistributed budget
• Stipulating a specific period of time that budget can be held in UB for fully negotiated work
• Describing how and when UB is distributed to control accounts when the work scope has not been defined (i.e., the work scope represents AUW
• The interim budgeting procedure used during the definitization process that allocates budgets from UB to the work package level for the near term effort (such as three to six months).  This interim budgeting procedure should be followed until the AUW scope of work held in UB is definitized and distributed to control accounts

2. Incorporating authorized changes in a timely manner.The EVM System Descriptionwill need to describe what:

• Constitutes an authorized change
• Indicates authorized changes have been incorporated
• Constitutes “timely” incorporation

3. The process for establishing internal budgets for authorized but unpriced changes should be based on a resource plan for accomplishing the work.  Projects should have a detailed plan in place for the near term work using cost estimates and resource plans with appropriate direction to notify the customer when spending approaches any not to exceed (NTE) spending limits.  It is critical that traceability through all steps of the process can be demonstrated.

For a more in-depth discussion on how to handle authorized unpriced work (AUW), see the full article posted on the Humphreys & Associates EVMS Education Center, EVMS Practitioner section.

Humphreys & Associates is available for consulting and information on this topic.  Give us a call!