Corrective Action Request (CAR)

Common Problems Found in EVM Systems and Recommended Corrective Actions – Part 4

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This is the fourth part of a five part series regarding common problems found in EVM Systems and the recommended corrective actions to help mitigate those findings.  The previous three articles discussed:

common problems found in evm systems - part 4

The topics anticipated for part five are: Inappropriate use of PERT and LOE; Misuse of Management Reserve: Administrative CAMs.

1)  Misalignment between BCWP and ACWP

The Earned Value Management System Description Document (EVM SDD) should include a statement that requires Actual Cost of Work Performed (ACWP) to be reported within the same accounting period as Budgeted Cost for Work Performed (BCWP) is earned; which is most applicable for material.  Both ACWP and BCWP contain the term “Work Performed”.  The ACWP is not a measure of how much has been spent but rather reflects how much it cost to accomplish the scope of work reflected in the BCWP.

Accounting systems generally record actual costs for material when invoices are paid; this may or may not align with when earned value is claimed for that material.  If material earned value is claimed at point of usage, it may be necessary to collect actual costs in a holding account and then delay recording ACWP in the earned value system until the material is used.

When material earned value is taken at the point of receipt, invoice payments may be delayed for 45 days (or more). The actual costs associated with this material will be recorded in the accounting system after the earned value credit is taken.  In this case, recording ACWP in the earned value system must be accelerated.  The process of delaying or accelerating the recording of ACWP in the earned value system is often called using “Estimated Actuals” or, more appropriately, “Estimated ACWP”.

There are two obvious examples of this process being done incorrectly.  The first is in the data where BCWP is claimed without corresponding ACWP in the current period, or vice versa.  This may be below the threshold level for variance explanation and is often attributable to Level of Effort (LOE) control accounts, but it creates a situation that attentive customers will need to understand.  The second example is more direct, and occurs when contractors simply explain the situation in Variance Analysis Reports that are subsequently summarized in the Contract Performance Report (CPR) or Integrated Program Management Report (IPMR) Format 5.  The Control Account Manager (CAM) will use words such as “billing lag,” “accrual delay,” or “late invoicing” in the explanation of a cost variance.  Consequently, any time that financial billing terms are used to explain a cost variance, it raises a flag regarding a potential misalignment between BCWP and ACWP.

One issue with ACWP and BCWP misalignment is that it invalidates the use of the earned value data for predictive purposes.  Unless both data elements are recorded within the same accounting period, using indices such as the CPI, TCPI, or IEAC  (Independent Estimate at Completion) will deliver erroneous results.  The time and effort of the CAMs in the variance analysis process should be spent on managing the physical progress and efficiencies of the work, not having to explain payment or accounting system irregularities.

Most Common Corrective Action Plans

When this issue is reported, the best response is to develop a disciplined Estimated ACWP process, including logs and a monthly trace from the Accounting General Ledger to the EVM ACWP.  It is also important to train the CAMs and support staff on how to record and subsequently retire those entries in an Estimated ACWP log book.  Reviewers of the Variance Analysis Reports should be trained to screen for entries that indicate an inappropriate alignment between BCWP and ACWP.  In addition, as indicated in the blog discussion on Data Integrity (Part 2 of this series), situations where there is BCWP without corresponding ACWP, or vice versa, at the control account level, should be flagged and justified by the CAM prior to submittal of the CPR/IPMR to the customer.

2)  Freeze Period Violations

“Freeze Period” refers to future accounting periods, including the current accounting period, in which baseline changes should be strictly controlled.  This is also sometimes called the “Change Control Period”.  The definition of this period should be in the company’s EVM SDD, but will usually have a time-frame such as “current accounting period plus the next accounting period”.  The SDD should specify what kinds of changes are allowed within this period, how they are to be documented in the CPR/IPMR, and any necessary customer notification or approval requirements when these changes are incorporated.  The SDD should require that customer approval is necessary for changes to open work packages that affect BCWS or BCWP in the current or prior accounting periods, and any changes to LOE data in prior periods or in the current period if the LOE account has incurred charges (ACWP).

There is an additional requirement specific to retroactive adjustments which includes the current period.  The EIA-748-C Guideline 30 specifically stipulates the requirement that these types of changes be controlled, and that adjustments should be made only for “correction of errors, routine account adjustments, effects of customer or management directed changes, or to improve the baseline integrity and accuracy of performance measurement data”.  Again, the reasons allowed for the changes should be specified in the EVM SDD.  However, regardless of the reason, it is a requirement that all retroactive changes be reflected in the current period data in the CPR/IPMR Formats 1 and 3, and that Format 5 include the related explanations (National Defense Industrial Association (NDIA), Integrated Program Management Division (IPMD), Earned Value Management Systems Intent Guide, August 2012).

Some projects have a great deal of volatility.  The incorporation of subcontractor data (especially if that data lags the prime contractor reporting period) and accounting system adjustments often create retroactive (including current period) adjustments.  The operation of change boards may also result in changes, both internal and external, which require immediate implementation.  EVM compliance in this environment is a matter of disciplined incorporation of changes, including visibility and communication to the customer (and sometimes prior approval) of any impacts to the baseline.

Most Common Corrective Action Plans

When discrepancies are found with freeze period noncompliances, the first action should be to ensure that procedures are in place that are compliant with the EIA-748.  The discipline required by these procedures must be communicated to the program team so that a consistent change control processes is maintained.  Key to compliance is visibility and communication of freeze period changes via CPR/IPMR Formats 3 and 5.

H&A has seen a loose interpretation of the guideline allowance for adjustments to “improve the baseline integrity and accuracy of performance measurement data”.  Care must be taken that adjustments falling under this category are not made to avoid variances.

3)  Failed Data Traces

The reviews associated with EVM surveillance and compliance have become increasingly data centric for the past several years.  One of the first steps in a review is submittal to the customer of a complete set of EVM data so analysis can be conducted against predefined success criteria prior to conducting an on-site review.  When there is an on-site review, the data trace portion of that review can be a major component at the company, project, and Control Account Manager levels.

The primary purpose of the data traces is to evaluate the Earned Value Management System.  Is the EVMS operating as a single integrated system that can be counted on for reliable and valid information?  The data traces performed generally follow three separate threads: Scope, Schedule, and Budget.  There are a variety of documents and reports that contain this information, but the reviewers will look for a single thread of data to flow and be traceable throughout the system.

All systems are different, but a common strategy for data traces might be as follows:

  • Scope:  WAD → WBS Dictionary → Contract Statement of Work.
  • Schedule:  WAD → IMS → CAP.
  • Cost (Budget):  RAM → WAD → IMS → CAP → CPR/IPMR Format 1 → CPR/IPMR Format 5.
  • Cost (ACWP):  CAP → Internal Reports → CPR/IPMR (Formats 1 & 2) → General Ledger.

If there are also supplemental sources of data that flow into the EVMS, such as subcontractor, manufacturing, or engineering reports, then these should also be a part of the data trace.

The key to this process is the concept of “traceability”.  The easiest path to prove traceability is if the data are an exact match; however, this is not always possible.  Prime contractors often have to make adjustments to subcontractor data, use of estimated ACWP often will not allow a match with the accounting ledger, and supplemental schedules often “support” the IMS while not matching exactly.  These are normal and explainable disconnects in the data.  When submitting data for review, it is important to know where the data does not match and to pass that information on to the reviewers.  If preparing for an on-site review, the CAMs and others who may be scheduled for discussions should perform a thorough scrub of the data and have quick explanations available when a trace is not evident in that data.

Most Common Corrective Action Plans

It is important that any special circumstances that cause traceability issues be relayed to the review team with the data submittal.  The people who conduct the analysis often operate independently until they are on-site for the review, and it is possible to avoid misunderstandings by identifying any issues with the submitted data set.  This type of communication has the potential to eliminate unnecessary findings.

A short term response to a data trace issue is to establish a process to screen the EVM data before submission to the customer.  Starting with the accounting month end, the statusing and close-out process requires a comparative analysis of the various databases containing the same information.  Because of the volume of data contained in most systems, this should be automated.  There should be time in the monthly business rhythm to allow for corrections and data reloads to improve the accuracy across the various data locations.

The best approach to improved data traces is to design a system that minimizes the number of entries for a single set of data.  For example, H&A found one contractor with over 10 different databases where the CAM’s name was hand entered which resulted in a configuration control nightmare for that data element.  The process of system design should include a complete listing of common data elements that are included in the storyboarding of the process flow.

The topics anticipated for Part 5 are: Inappropriate use of PERT and LOE; Misuse of Management Reserve: Administrative CAMs.

To read previous installments:

  • Part 1 – EAC Alignment Issues, Poor Variance Analysis, Lack of Effective Subcontract Management
  • Part 2 – Poor use of Percent Complete; Data Integrity Issues; Poor Scope Language
  • Part 3 – IMS Health Problems; Data Item Non-Compliance; Planning Package Misuse

Common Problems Found in EVM Systems and Recommended Corrective Actions – Part 4 Read Post »

Common Problems Found in EVMS Reviews and Recommended Corrective Actions – Part 2

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Part 2:  Poor use of Percent Complete; Data Integrity Issues; Poor Scope Language

This is the second part of a five part series regarding common findings discovered in EVMS reviews and the recommended corrective actions to mitigate those findings.  In the previous article, EAC alignment issues, poor variance analysis, and lack of subcontract management were discussed.  This second part focuses on: poor use of the percent complete earned value technique, data integrity issues, and poor scope language.

The topics anticipated for parts three through five are:

Part 3:  IMS Health Problems; Data Item Non-Compliance; Planning Package Misuse.

Part 4:  Misalignment between BCWP and ACWP; Freeze Period Violations; Failed Data Traces.

Part 5:  Inappropriate use of PERT and LOE; Misuse of Management Reserve; Administrative CAMs.

Here are the three topics for this installment;

1. Poor Use of the Percent Complete Earned Value Technique

Earned Value techniques (EVT) fall into three distinct classifications:

  • Discrete
  • Apportioned
  • Level of Effort (LOE)

Within the Discrete technique there are methods ranging from objective to subjective.  The most objective methods are those that employ a “yes/no” question as the primary measure of accomplishment, e.g., “Has the activity begun?” or “Was the hardware delivered?”.  In these cases, there is no subjectivity in the evaluation of performance.

The percent complete technique can introduce very subjective criteria as the source of measuring accomplishment.  These are sometimes called “Manager’s Estimate”, or, derisively, “The Percent Guess” technique.  The problem with this application of percent complete is that visibility into accurate work package performance may be hidden until it is too late to take effective managerial action.  Worse, managers responsible for activities linked downstream from the percent complete work package may not discover the true status of a critical predecessor until it is too late to implement effective mitigation actions.   While a key mantra for effective project management is “no surprises”, misuse of the percent complete earned value technique can introduce the possibility for a great deal of surprise.

Most Common Corrective Action Plans

The goal in selecting the most appropriate EVT is to use the most objective rationale possible given the nature of the work.  There are key strategies that should be employed to reduce the subjectivity of the percent complete technique.

  1. Quantifiable Backup Data (QBD):  This is also sometimes referred to as “Predetermined Rationale”, and essentially requires the establishment of lower level milestones, activities, or steps to determine the percent complete.  These steps are established and weighted prior to beginning the effort. The percent complete is determined when the steps for the percent complete work package are accomplished; i.e. the weight assigned to the steps is earned.  It is recommended that a work package has at least one objective measurement point in each earned value period (generally monthly).
  2. Shorter Duration Activities:  Because one of the dangers of using the percent complete technique is a potential delay in reporting accurate status until it is too late to take management action, it is recommended that these types of work packages be relatively short in duration.  The DCMA publication “EVMS Program Analysis Pamphlet”(DCMA-EA PAM 200.1, July 2012) defines any activity more than 44 working days to be a “high duration”activity.  The choice of 44 days generally means that an activity with a duration of that or less will start and finish within 2 months.  Included in the pamphlet is the recommendation that the IMS contain no more than 5% of activities greater than 44 days.
  3. Percent Complete Threshold:  One method often employed when using percent complete is the introduction of a percentage ceiling that limits the reported accomplishment until the effort is 100% complete.  This limits the “99% Complete”scenario that can introduce false status and create the often incorrect impression that completion is imminent.  A common threshold in this mandate is to limit the percent complete to 75% or 80% until the activity is 100% complete. Some even limit the work package budget; example, maximum of 300 hours and the duration not to exceed three months.

2)  Data Integrity Issues

To standardize its reviewing organizations and the reduction in resources available to conduct on-site reviews, the DCMA is transitioning to establishing predefined success criteria and testing methods to evaluate the compliance of each guideline using data submitted by the contractor.  In addition, as mentioned above, the DCMA has released to its staff a “Program Analysis Pamphlet” that contains 17 measures of data integrity for contractor supplied data.  A few of these are:

Data Integrity Issues by Humphreys & Associates

Most Common Corrective Action Plans

In many cases, there may be scenarios that result in a temporary data condition that trips one of the above thresholds; such as Level of Effort (LOE) but these should be the exception rather than the rule.

Because of the growing interest in data integrity, it is important to screen for these conditions prior to submitting the data to the customer.  If possible, an organization should allow time in its monthly business rhythm to correct the easy-to-fix errors prior to submittal of the reports.  Those data flags that are legitimate or cannot be corrected prior to submittal should be reported to the customer in Format 5 of the Integrated Program Management Report (IPMR) or Contract Performance Report (CPR).  Some issues can be more systemic and require a longer correction process. These should also be identified to the customer with a corrective action plan which includes a date for when the corrections will be in effect.

And finally the prime contractor must review all reports delivered by the subcontractor for compliance with the appropriate DID Instructions, and be prepared to take action when the reports are noncompliant with the CDRL and/or DID Instructions.  This action can take the form of a contracting officer’s letter requiring adjustments in future reports, rejection and resubmittal of non-compliant reports, or rejection and contractual remedies; such as payment withholds or Award Fee impact, as applicable.

3) Poor Scope Language in the WBS Dictionary and/or Work Authorization Documents

The original scope for the project/contract is defined in the Contract Statement of Work (CSOW) and then organized within the Work Breakdown Structure (WBS).  The WBS Dictionary defines the technical boundaries of each WBS element and identifies the work products.  At a more detailed level, the scope is also identified in the control account plan and the work authorization documents.  There is an expectation that the scope language will become more specific and descriptive as it migrates from the project’s top level, through the WBS, down to the control accounts.

In EVM Surveillance Reviews, as well as Integrated Baseline Reviews (IBR)s, a normal set of activities includes data traces.  The project’s scope, schedule, and budget are traced across all the pertinent documents and reports to ensure that the EVMS is operating as a single, integrated system.  Included in the scope trace is a review of lower level (WBS element or control account) scope statements to ensure they are consistent with the CSOW.  It is also expected that the WBS Dictionary will be maintained and current with all external and internal changes that add scope to WBS elements or control accounts.  Often an organization begins a project with a well-documented set of scope statements, only to let them languish in the face of constant and voluminous changes.

Most Common Corrective Action Plans

Like Variance Analysis and Reporting, having accurate, current, and descriptive scope statements in all pertinent documents requires a disciplined approach and persistent review.  The first step is establishing a procedure that makes this an important part of the earned value process, including the importance of maintaining the currency of the WBS Dictionary by technically qualified personnel.  The quality of these documents is generally the responsibility of the CAMs in concert with the system engineering organization or equivalent; however, the Project Controls staff plays an important role in assisting the CAMs and reviewing the products.

One of the most common findings in this area is the failure to maintain the WBS Dictionary.  This document must reflect the current scope and incorporate all approved changes.  The contractor should establish a process in the monthly business rhythm that “sweeps” all known changes, generally through the work authorization documents, and evaluates those for incorporation into the Dictionary.

Please contact Humphreys & Associates if you have any questions on this article.

Common Problems Found in EVMS Reviews and Recommended Corrective Actions – Part 2 Read Post »

Common Problems Found in EVM Systems – Recommended Corrective Actions – Part 1

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Humphreys & Associates Corrective ActionsHumphreys & Associates (H&A) has the opportunity to work with a broad spectrum of clients who operate their Earned Value Management System (EVMS) under the contractual authority of a variety of customers.  Many clients have a surveillance program conducted by the Defense Contract Management Agency (DCMA), the Department of Defense (DoD) Executive Agent for EVMS which also has a reciprocal agreement with other agencies.  Some agencies, such as the Department of Energy (DoE), have their own surveillance programs.  H&A also works with many companies to help them “tune up” their EVMS as a part of sound business practices.

In the course of conducting and supporting client reviews, H&A has identified several recurring themes that many organizations allow into their EVMS, and because we often support the resolution of these issues through the Corrective Action Planning process, we can also recommend the most common remedies to prevent or correct them.

This will be a 5 part series that will cover three topics in each article.

The anticipated topics for parts two through five (subject to change) are:

            Part 2:  Poor use of Percent Complete; Data Integrity Issues; Poor Scope Language.

            Part 3:  IMS Health Problems; Data Item Non-Compliance; Planning Package Misuse.

            Part 4:  Misalignment between BCWP and ACWP; Freeze Period Violations; Failed Data Traces.

            Part 5:  Inappropriate use of PERT and LOE; Misuse of Management Reserve: Administrative CAMs.

1) The Estimate at Completion (EAC) is systemically out of alignment with cumulative performance with no justification.

The Earned Value Management System Guidelines (EVMSG) define the EAC as the sum of the contract’s cumulative to date Actual Cost of Work Performed (ACWP) plus the company project manager’s best estimate of the time-phased resources (funds) required to complete the remaining authorized work, the Estimate to Complete (ETC).  One of the measures that is used to provide a “sanity check” of the reasonableness of the EAC is to compare the To Complete Performance Index (TCPI) to the Cost Performance Index (CPI).

  • CPI = BCWP / ACWP: An indicator of the cost efficiency at which work is being performed.
  • TCPI = (BAC-BCWP) / (EAC-ACWP): The cost efficiency that would have to be attained in order to achieve the EAC value being used in the formula.

According the DCMA publication “EVMS Program Analysis Pamphlet” (DCMA-EA PAM 200.1, July 2012), a mathematical difference of 0.10 or greater is used as an early warning indication that the contractor’s forecasted completion cost could possibly be unrealistic, stale, or not updated recently.  This is generally measured at all levels of the project, but is often the focus at the control account level.

Having a difference greater than 0.10 does not mean the EAC must be adjusted.  Often the TCPI formula will give unusually high or low values when the account being measured is at the beginning or end of its progress.  There may be a very good reason for the forecasted efficiency of an Estimate to Complete (ETC) to be out-of-line with its historical efficiency.  But often surveillance reveals a large number of accounts that are out-of-line by this measurement, indicating a lack of discipline in an organization’s EAC process.

Most Common Corrective Action Plans:

The first action should be to ensure that the Earned Value Management System stipulates an update to the ETC on at least a monthly basis, and the Control Account Managers (CAMs) are held accountable for their EACs’ realism.  This is often accomplished through training, updating processes, and the development of easy to use tool sets.  The organization could also require the CAM to justify any control account’s ETC that is out of tolerance with an EAC realism check.

Care must be taken to ensure that the EACs are not being set just to avoid tripping this metric.  It is easy to “calculate” an EAC by dividing the BAC by the CPI; however, this does not meet the intent of the guideline requirements.

2) Poor Variance Analysis and Reporting (VAR)

This is probably the most common Corrective Action cited by reviewers performing EVMS surveillance.  Because the variance analysis relies completely on the discipline of the CAMs and their support staffs, the process often atrophies for various reasons. Within the variance analysis report (VAR) process, probably the most troublesome is the identification and tracking of Corrective Actions to their logical completion.  A well written variance analysis will explain the root cause, impact and corrective action associated with a cost (current period, cumulative, at completion) or a schedule (current period, cumulative) variance.  Cost variance explanations should provide a breakdown of the rate versus hours for labor or the price versus usage for material.  Schedule variance explanations should focus on identifying the effort that is not being accomplished per the plan, and forecast the Estimated Completion Date (ECD) for when the schedule variance will go to zero.  Most important in all of this process is the identification and tracking of the Corrective Actions that are being taken to either mitigate the variance or at least ensure that the variance does not worsen.

Reviewers of VARs often find that there is a lack of clear and concise treatment of the problem, and that many writers of VARs simply reiterate the variance as indicated by the data, such as “The cost overrun is because more hours were expended than originally planned”.  Many VARs will point a finger back to the system that generated the data.  But the worst offender is the lack of a corrective action plan that includes mitigations steps that address the issue.

Most Common Corrective Action Plans

Poor variance analysis is primarily a discipline issue with the CAMs and their support staffs. Like most discipline issues, this can be addressed by training, adding structure, and incorporating reviews of the VAR process.  The writing of VARs is one area where annual refresher training may be needed in order to verify that the concepts are still being practiced.  This training should involve the managers in the organizational chain above the CAMs who are responsible for reviewing and approving the variance analysis reports.

It can also be beneficial to add a structured approach to the variance explanation page.  This should include required inputs on Root Cause, Impact, and Corrective Action, and may include a link to a corrective action tracking system that allows the user to create and assign mitigation steps plus provide status of previously identified corrective actions.  Some organizations have also introduced the scoring of VARs using a scoring template as a feedback mechanism for those writing the reports.

3) Lack of Effective Subcontract Management

The Interim DoD Instruction for 5000.02, “Operation of the Defense Acquisition System” (November 25, 2013), reiterates the requirements for earned value application on all cost/incentive contracts greater than $20M including subcontracts.  In the DCMA Instruction 1201, “Corrective Action Process” (September 23, 2013), the importance of subcontract management is stressed with the following:

“Prime contractors have wide latitude as to how they control their supply chain and are ultimately responsible for flow down and execution of contract requirements. When DCMA discovers a noncompliance requiring a Level I or II CAR at a subcontract level, the appropriate CAR (Level I or II) shall be issued directly to the subcontractor with notification to the prime contractor via the prime CMO. The notification to the prime contractor shall be redacted as needed to prevent disclosure of subcontractor proprietary information. In situations where a noncompliance(s) at the subcontract level meets the criteria for a Level III CAR, the CAR shall be issued to the prime contractor.”

Over the past few years, the lack of effective and consistent management of subcontractors with an EVM flow down requirement has been the source of numerous discrepancy reports (DRs), and has been cited as a significant attributor to EVMS disapprovals/de-validations.  As noted in the language above, prime contractors are not only responsible for including the correct clauses in subcontracts but also have responsibility for the execution of the contract requirements.  When a subcontractor does not follow its own system description, is not in compliance with the EIA-748 Guidelines, or submits reports that do not meet the requirements of the contractual Data Item Description (DID), it is the responsibility of the prime to enforce compliance.

The reasons for ineffective subcontract management are many, but in some organizations enforcement of contractual requirements is the domain of a subcontract administrator/buyer who may not have a firm understanding of the EVMS requirements.  Many subcontractors also often resist the surveillance attempts by their prime, or attempt to reject any efforts by their prime to enforce the execution of these types of contractual requirements.

Most Common Corrective Action Plans

The first step in corrective action is a thorough understanding of the contractual requirements and language in the subcontracts.  H&A has found numerous examples of incorrect contractual language, or even language implying that the subcontractor reports are for “information only”, thus diminishing the ability of the prime to enforce compliance.  The contract should include: 1) A requirement for compliance with the EVM system guidelines in EIA-748, preferably by including the appropriate DFARs clauses (DFARs 252.234-7001 and 7002); 2) the appropriate DID, currently DI-MGMT-81861, referenced in the Contract Data Requirements List (CDRL) with any special tailoring or reporting guidance documented (for contracts issued prior to June, 2012, the Contract Performance Report DID is DI-MGMT-81466A and the IMS DID is DI-MGMT-81650); 3) language which establishes the right of the prime contractor to conduct reviews, such as Integrated Baseline Reviews (IBRs) and recurring system surveillance.

The prime contractor must then establish a disciplined surveillance program that includes review of all 32 EIA-748 Guidelines on an annual basis at each subcontractor’s facility.  This process should also include the procedure for issuing and tracking corrective actions.  These surveillance reviews are often conducted jointly with the cognizant DCMA/DCAA for each subcontractor.

And finally the prime must review all reports delivered by the subcontractor for compliance with the appropriate DID, and be prepared to take action when the submitted reports are noncompliant with the CDRL and/or DID Instructions.  This action can take the form of a subcontract administrator’s letter requiring adjustments in future reports, rejection and resubmittal of non-compliant reports, or rejection and contractual remedies; such as payment withholds or Award Fee impact, as applicable.

Please contact Humphreys & Associates if you have any questions on this article.

April 25th, 2014 – Part 2:  Common Problems found in EVMS | Poor use of Percent Complete; Data Integrity Issues; Poor Scope Language.

Common Problems Found in EVM Systems – Recommended Corrective Actions – Part 1 Read Post »

Corrective Action Response: Planning and Closure – Part 2 of 2

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Review Part 1 of Corrective Action Responses addresses Planning and Closure

Responding to a Corrective Action Request (CAR)– Planning and Closure

It is important that the contractor develop a disciplined, standardized approach for responding to a corrective action response.  This not only helps ensure that the responses are complete and contain compliant corrective actions, but that they also represent the position of the entire contractor team.  Below are nine suggested steps for successful Corrective Action Plan (CAP) development.

1)    Review the DRs/CARs with the customer

Prior to developing a corrective action in response to a Corrective Action Request (CAR), the first step is to ensure that both parties, the contractor and the review team, have a mutual understanding of the finding.  This also serves to screen those findings that may have been the result of a misunderstanding with the data or an incorrect statement from a member of the contractor’s team.  It is also recommended that DRs/CARs with similar or duplicative findings be grouped together so that a single Corrective Action Plan (CAP) can be used to address the issue.  When doing this, it is imperative that this approach is communicated to the review team lead and the grouping strategy approved before beginning corrective actions.  This is generally an acceptable approach providing the CAP closures can be traced to the original findings.

2)     Organize for successful CAP management

Once a mutual understanding has been reached on the corrective actions, the contractor must then begin the process of correcting or mitigating the identified issues.  It is critical that the process of corrective action has the participation of key management and organizations that can affect change.  When there are a significant number of findings that are to be corrected, the establishment of a senior management Review Board is a recommended method for managing the process.  The roles of the board are:

    • Ensure a CAP is developed and supported by a structured CAR/DR resolution process;
    • Assign an individual from the responsible organization to lead the corrective action efforts;
    • Review the proposed schedule for the CAP, and monitor progress towards CAP closure;
    • Review and approve all CAR/DR root cause assessments and proposed corrective action including the closure criteria;
    • Serve as the primary point of contact with the Customer for CAR/DR resolution and closure.

3)     Begin a thorough Root Cause Analysis

A tempting direction at this stage is to allow for a quick fix of the identified issue.  This may be acceptable for “just fix it” types of findings such as typos, formula errors, incorrect data runs, etc.; but most findings require a more in-depth approach to ensure that the underlying drivers of the issue are being addressed.  Most organizations have employees who are specialized in root cause analysis, such as Six Sigma or LEAN process improvement advisers. This would be a good time to employ their skills.  Tools such as “The 5 Whys” and the Ishikawa Fishbone Diagram are excellent methods for identifying the root causes.  These tools and processes are extremely effective in uncovering the sources of the problem.

A customer review team often samples a subset of CAMs, processes, or data in its review because of a limited amount of time or resources.  It is often the case that a more thorough root cause analysis conducted by the contractor team will uncover additional issues that need to be addressed and corrected.   The contractor’s obligation to the customer is to provide full visibility regarding the corrective actions associated with those findings identified by the customer.  While it is important that all issues are corrected or mitigated, it is, however, the contractor’s choice to allow visibility into those issues that were not discovered by the customer review team.

4)     Develop and evaluate Corrective Action Plans

A single DR or CAR issued by a customer team may have numerous corrective actions identified in the solution process.  Often a single problem may have corrective actions that entail changes in processes, training, tools, or management approach, or any combination of all of these.  Regardless, it is important to identify corrective actions that will prevent recurrence of similar outcomes, and will not cause or introduce other new or additional problems.  One important benefit of including senior management in the CAP Review Board process is the capability to reach beyond the owners of a particular CAP to influence other stakeholders in the organization who have the responsibility to incorporate corrective actions or who may be impacted by the solutions being identified.

5)     Develop verification closure steps

It is critical that verification methods, objective measures, metrics, artifacts, and evidential products are identified that will verify that the corrective actions are effective.  This includes any exit criteria for any activities in the CAP Integrated Master Schedule (IMS), which is a schedule network that contains all the detailed work packages (including activities and milestones) and planning packages to support the events, accomplishments, and criteria of the Integrated Master Plan  (if applicable). It is directly traceable to the Contract Work Breakdown Structure (CWBS) and the contract statement of work. The IMS is critical to CAP success.  On data driven findings, the criteria for verification often involves producing several accounting periods of results as evidence that the corrective actions were effective.  The CAP Review Board is responsible for reviewing the status of the exit criteria, and verifying that the required objective measures have been satisfied.

6)     Develop a detailed Integrated Master Schedule for CAP implementation

A critical component of any project, including corrective action development and implementation, is a detailed IMS containing the project scope and the required dates of completion.  There should be a unique IMS for each CAP that includes:

    1. Root Cause Analysis
    2. Changes to processes, tools, training, and other required system adjustments
    3. Management Review and regular team meetings
    4. Responsibility assignment for each activity
    5. Development of products and artifacts which will demonstrate effectiveness
    6. Validation and Verification steps with Closure Criteria

Resource loading the IMS is an important process, as it communicates to the management team the required personnel to accomplish implementation of the Corrective Action Plans, and can serve as a commitment on its part to support the process until closure.  If there is a lack of available resources available to support the process, this may impact the completion dates established for the corrective actions.  All tasks should be logically networked (with predecessors and successors) without any constraints.  Progress should be based on a 0 to 100% scale without subjective interpretation.  As mentioned above, data validation normally requires several months of data submittals, and these deliveries should be milestones in the IMS.  Completion milestones should include notifying the customer of corrective action implementation and confirmation by the customer that the implementation is complete.  Each activity should also have fields which identify the CAR or DR number, the EV Process Area and Guideline, the responsible manager for the CAP, and a unique ID number for each task.

Reviewing the CAP IMS and the accomplishment status is a critical role of the CAP Review Board.

7)     Submit CAP and CAP IMS to the customer for approval prior to implementing the Corrective Actions

While some corrective actions may be straight forward responses to simple findings, it is important to reach a mutual agreement of the CAP approach prior to implementation.  Often the customer’s approval of the CAP is a required step before proceeding.  Important in this agreement is consensus on the artifacts and data sets that will be delivered, along with the timing of the deliveries.

One topic that may need to be addressed with the customer review team is a cutoff date for data corrections.  For example, it is important to reach agreement on the “as of” date for clean data, because changing historical data is usually an unnecessary step.  Occasionally a corrective action is delayed until a new contract modification is implemented or a new contract baselined before a correction can be implemented and verified.  These conditions need to be agreed upon with the customer prior to proceeding.

8)     Implement Corrective Action Plans and track progress to successful completion

One path to the escalation of a CAR to Level IV*, and possibly the introduction of Business System payment withholds, is the failure to successfully implement an agreed upon Corrective Action Plan.  Many organizations discover that the actual implementation of the approved corrective actions is the most difficult part of the process.  Sometimes a successful plan will include interim modifications or fixes in the short term, with long term changes identified as well.  If for example, the issue were with the integration between the  MRP and EVM systems, an interim solution may involve a change in the interface or translation of data between the systems while in the long term a replacement of the MRP is required.  It is important to have CAP solutions that not only mitigate the findings, but also can also be implemented in an acceptable period of time.

It is also important to meet interim commitments of data, processes, or any agreed to delivery of an artifact.  If the execution of a CAP will be delayed for any reason, this should be communicated quickly to the customer.

9)     CAR closure and follow-up

When the issuer of the CAR is satisfied that the contractor’s corrective actions are appropriate to prevent recurrence of the noncompliance, and the solutions have been verified to be effective, the contractor will be notified that the CAR is considered closed.  Even after closure, the areas identified as needing improvement are often targeted for periodic follow-on reviews; so it is important that management attention is maintained to sustain the corrective action.  A well organized and disciplined internal surveillance program is often the best safeguard against future discrepancy reports.

For more information about responding to Corrective Action Requests, contact our consultants at Humphrey’s & Associates.

*Link to part 1 of Corrective Action Response: Sources

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Corrective Action Response: Sources – Part 1 of 2

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Skip to Part 2 of Corrective Action Responses addresses Planning and Closure

Sources of Corrective Action Requests

Earned Value Management System by DAUA healthy part of any system, including an Earned Value Management System (EVMS), is regular review and surveillance by both those who operate within the system (the contractor) and those customers who rely on information from the system to manage programs.  The DCMA and the DCAA have the responsibility to conduct surveillance for all Department of Defense (DoD) contract efforts that require Earned Value regardless of whether a validated system is required. Similar guidelines exist for those agencies that do not use the DCMA for surveillance, such as the Department of Energy.

In addition, other reviews such as an Integrated Baseline Review (IBR) or technical program reviews are also conducted during the life cycle of most programs.  Normal results of system surveillance and program reviews are findings or issues discovered during the review.  The findings are usually documented in Corrective Action Requests (CARs) and Discrepancy Reports (DRs).  Often, the DR form is used to identify the finding, which is delivered to the contractor in the CAR form.

The current guidance used by the DCMA for conducting surveillance is the Standard Surveillance Instruction (SSI), which can be found on the DCMA Guidebook.  In addition to system surveillance, the DCMA EVM Center conducts Compliance or Validation reviews that may result in corrective actions required by the contractor.  Currently the DCMA is evolving its approach to the compliance evaluation of DoD contractor systems.  Because of a desire to standardize across its reviewing organizations and the reduction in resources available to conduct on-site reviews, the DCMA is transitioning to establishing predefined success criteria and testing methods to evaluate the compliance of each guideline using data submitted by the contractor.

This does not change the components of a compliant EVMS; it merely adjusts the priority of the review steps required for a compliance rating.  Regardless of the method, a complete EVMS should consist of:

  • A set of procedures that are compliant with the EIA-748 Guidelines and followed by the contractor organization;
  • System output, or data, that is valid, reliable, and auditable.  This data will have demonstrable integrity and compliance to EVM requirements;
  • A disciplined work force that uses the EVMS to manage programs and accurately inform the customers of current status, future conditions, and management decisions.

Discrepancy Reports are documented whenever issues are discovered during the system review that involve  non-compliance with contract requirements, including the EIA-748 and the Data Item Descriptions (DID) for the Contract Performance Report (CPR) or the Integrated Project Management Report (IPMR), or the Integrated Master Schedule (IMS).  The finding is documented in a Discrepancy Report (DR), which identifies the EVM Process Group (Organizing, Scheduling, Accounting, etc.) and the specific guideline regarding the finding.  Additional information might include the source of the issue such as the CAM name, Control Account title, or the process document that was reviewed.  The DR may also include attachments or exhibits which provide examples of the discrepancies.

The DCMA, or the DCAA, may choose to communicate the DRs in the form of a CAR.  The severity of the findings determines the level of the CAR issued:

  • Level 1: For more minor issues that require no special management attention to correct.  Usually directed to the working level personnel of the contractor.
  • Level II:  For non-compliance that is systemic in nature and could adversely impact cost, schedule, or performance if not corrected.  A Level II CAR may be the result of Level I issues that are found across several programs or involve several CAMs.  They are issued to the contractor’s management level responsible for the process with a copy to the Administrative Contracting Officer (ACO).
  • Level III:  For non-compliance where cost, schedule, technical performance, resources, or management process issues have unfavorably affected program performance and have not been corrected.  These may also be issued when the Corrective Action Plans associated with Level II CARs have been unsuccessful.  In addition, noncompliance with any of the sixteen foundational guidelines will immediately be classified as a Level III CAR.  Level III CARs are issued to the contractor’s top tier business manager at the site where the discrepancies were noted.  This CAR level may trigger other reviews such as a review for cause or a compliance review, which could result in a suspension of the contractor’s EVMS validation.
  • Level IV:  Generally results from an escalation of a Level III CAR, but issued to the contractor’s corporate level.  They are often used to advise the contractor of contractual penalties; such as payment withholds, termination for default, suspension, etc.

Both Level III and IV CARs may result in a “business system” withhold.  DFARs 252.242-7005* identifies 6 business systems that may result in payment withholds if significant deficiencies are found, these are: Accounting, Earned Value Management, Cost Estimating, Material Management and Accounting, Property Management, and Purchasing.  Deficiencies found in a single business system may result in up to a 5% withhold; however, if there are multiple business systems cited for deficiencies the withholds may be as much as 10%.

At this point, the submittal of a quality and timely Corrective Action Plan (CAP), and following through with implementation of the actions is critical.  If the contractor submits an acceptable CAP within 45 days of the Contracting Officer’s (CO) intent to withhold payments, and the CO believes the contractor is implementing the plan, the withholds may be reduced to 2%.  However, if at any time the CO determines that the contractor is not following through on the corrective actions, the payments may be increased to 5%.

When the CO determines that corrective actions are implemented and are expected to correct the significant deficiencies, the CO will discontinue withholding payments and release any payments previously withheld.  Previously withheld payments are not released when the withhold is reduced from 5% to 2%; only when the corrective actions are proven to correct the findings.

In part 2 of Corrective Action Response, we will address Planning and Closure.

*Resource blog – DFARS 252.234-7001 – “Thou Shalt Do Earned Value”

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Level Of Effort Decision Tree – Clarifying Source Articles

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Level Of Effort Decision Tree – Clarifying Source Articles
Updated January 20, 2021

 

Level of Effort Decision Tree – Introduction

If you have not read the LOE source articles, Level of Effort (LOE) Replanning and How to Avoid Corrective Action Requests Related to Level of Effort, it is necessary to read prior to these articles in order to have the context for the following subject matter.

Humphreys & Associates, Inc. prepared an article a couple of months ago in order to increase the awareness of Earned Value Management Systems (EVMS) reviews related to Level of Effort (LOE) replanning. This resulted in considerable attention because we did not adequately explain our intention.

We had hoped readers would recognize that there are many strong and diametrically opposed opinions on acceptable approaches to LOE replanning. An important point to remember is that the principal purpose of an EVMS is to provide adequate information from which to make logical, well-informed decisions based on the best data available.

Our article resulted in a request for the National Defense Industrial Association (NDIA) Integrated Program Management Division (IPMD) to address this topic in its EVMS Clearinghouse Working Group. The company that submitted the issue used one of the approaches that we listed, which led to a DCMA Discrepancy Report. Consequently, they were clearly concerned. To address that one issue would not have provided an intelligent approach – it would have resulted in even more concerns for other organizations. For that reason, we chose to provide an update to our article in the form of a “white paper.” We do not address the many approaches being employed, as some display thinking that is “way out of the box;” such as earning whatever the actual costs are – as opposed to the budget.

We chose to leave some of those approaches out of the options addressed below. One could almost conclude that we are observing the classic consultant response to some issues – “It depends.”

BACKGROUND

The distinctive feature of the Level of Effort (LOE) earned value technique is that it earns value through the passage of time with no consideration of any work being performed. Therefore, it can earn value with no incurrence of actual costs and incur actual costs without earning value. Both of these conditions are currently considered by some DCMA review teams as noncompliant to the EVMS Guidelines (#16 and/or #22) that could result in a DCMA issued Corrective Action Request (CAR).

This is usually not an issue for the typical LOE that is support to the entire project (e.g., project management, contract management, financial management, systems engineering, security, safety, etc.) because these efforts almost always start on time and only face a problem if the support extends past the contract baseline. However, it is frequently an issue for LOE that provides support to discrete efforts that could slip or be moved up for various reasons (e.g., test site availability, equipment failures, successes that eliminate future planned effort, etc.) if the LOE work is not allowed to be replanned to the time period where the discrete work is actually being performed.

The LOE baseline period of performance should match the discrete effort’s period of performance. While the discrete effort can occur early or late and have earned value and actual costs coincide, that is not necessarily true for the supporting LOE, because it earns its value as planned in the baseline regardless of when the work actually starts or when the actual costs are incurred. The examples below show the possible LOE conditions when discrete effort starts early, finishes early, starts late, and finishes late. Each condition trips a significant item of concern when the DCMA runs its diagnostics of a contractor’s EVMS data:

If the discrete effort starts early, and LOE is not allowed to replan, LOE incurs ACWP with no BCWP.

H&A 1 - LOE Decision Tree

If the discrete effort finishes early, the remaining months of LOE support earn BCWP with zero ACWP.

H&A 2 - LOE Decision Tree

If the discrete effort starts late, LOE earns value (BCWP) with no actual costs (ACWP).

H&A 3 - LOE Decision Tree

If the discrete effort finishes late, LOE incurs ACWP without accompanying BCWP because the BCWP now equals the BAC. However, when the support effort’s manager reports an EAC that includes the to-go LOE to report an accurate EAC, it creates the situation of EAC>ACWP with BCWP=BAC, again tripping a DCMA significant item of concern.

H&A 4 - LOE Decision Tree

These conditions have resulted in Corrective Action Requests (CARs) from some local DCMA representatives because they are identified as significant items of concern by the DCMA diagnostics. Unfortunately, the diagnostics applied to discrete work packages are also applied to LOE tasks. There is no consideration of the special circumstances associated with LOE in the diagnostic software being used by review teams.

It is important to note that LOE is often (erroneously) called a work package just like discrete effort is called a work package and, therefore, work package rules are automatically applied to LOE. But not all work package attributes apply to LOE. For example, LOE does not consist of discrete tasks, is not required to be of short duration, and does not measure performance. The special circumstances of LOE were recognized in 1991 by the Department of Defense issuance of the Performance Measurement Joint Executive Group (PMJEG)’s Supplemental Guidance to the Joint Implementation Guide (JIG) involving the Cost/Schedule Control Systems Criteria (C/SCSC). Section 3-6, Revisions, subsection b (Internal Replanning) specified special handling of LOE for the circumstances cited above. However, the JIG Supplemental Guidance has not been incorporated into current implementation guidance. Please note that some DCMA EVMS Center of Excellence personnel have stated that the 1991 JIG Supplemental Guidance is applicable to current guidance. This is the way it used to be and was understood by all. But that position has not been documented and distributed to DCMA field office personnel, resulting in different determinations as to which actions are allowable and which are not. Many DCMA field office EVMS personnel have never been exposed to the JIG Supplemental Guidance. Those that are aware of the 1991 JIG Supplemental Guidance or who would agree with the JIG Supplemental Guidance approach as being compliant tend not to create CARs for the same conditions, while, unfortunately, those who are not aware of the Guidance write CARs.

INTRODUCTION TO THE DECISION TREE

The following decision tree relies heavily on the JIG Supplemental Guidance for recommending actions to avoid CARs. It is organized in outline format with major sections being the four discrete effort status possibilities that can cause LOE to result in a CAR as shown above. The first sub-topic in each section is the supporting LOE condition that results in tripping a significant item of concern in the diagnostic software DCMA employs from the Data Call before arriving on-site. The second sub-topic provides a quotation from the PMJEG Supplemental Guidance to the C/SCSC JIG, Section 3-6 Revisions, Subsection b. Internal Replanning that applies to the identified condition. The third sub-topic provides suggestions on how to implement the guidance to avoid the condition. The following sub-topics provide the advantages, disadvantages, and reporting requirements for each avoidance action.

In presenting these actions we need to make the point that depending on the interpreter none of these or only some of these would be acceptable to a DCMA reviewer. We are merely attempting to bring forth the options observed so that many can consider which approach is best for them and then use simple examples to present their desires to their customers.

Note that JIG references to “cost account” apply to control accounts.

LEVEL OF EFFORT (LOE) DECISION TREE

OUTLINE

Discrete Effort Starts Early

  1. Condition that may result in a DCMA CAR
    1. The LOE BCWS does not start until a later period (cannot earn value in the current period).
    2. LOE has ACWP without BCWP, a significant item of concern condition.
    3. Applicable JIG Supplemental Guidance, Internal Replanning
      1. Paragraph (3)(c).
      2. “Replan future LOE to correlate to the changes in work. LOE, whether planned in separate cost accounts or as part of predominantly discrete cost accounts, has additional flexibility and may be adjusted within the current accounting period without government approval, provided no actual costs (ACWP) have been charged to the LOE.”
      3. How to implement the Supplemental Guidance
        1. In the current accounting period, replan the LOE to begin in the current period.
        2. Determine whether the discrete effort’s early start will result in an early finish (length of the period of performance remains the same).
          1. If so, no BAC change should occur – only the shift in the BCWS.
          2. If not, either provide additional BAC from MR or re-spread the BAC over the revised future period of performance (often called the “peanut butter” approach).
  2. Advantage
    • Avoids the ACWP without BCWP condition.
  3. Disadvantage
    • Changes the baseline in the current period. If the local DCMA office is not aware of the Supplemental Guidance or knows about its existence but disagrees with it, a CAR may be issued. Also, some DCMA teams consider the stretching out of current budget over a longer period of time as creating “token budgets” – for which they have written CARs.
  4. Reporting requirement
    • Must be reported in Integrated Program Management Data and Analysis Report (IPMDAR) database for Format 5.

Discrete Effort Finishes Early

  1. Condition that may result in a DCMA CAR
    1. The discrete effort has finished early and if the LOE had not previously been replanned in anticipation of the early finish, no LOE support effort would be required for the remaining period(s) of the LOE BCWS that must still earn value.
    2. The LOE has BCWP without ACWP, a significant item of concern condition.
    3. Applicable JIG Supplemental Guidance, Internal Replanning
      1. Paragraph (3)(b).
      2. “Replan incomplete future work and adjust the work package budget at completion (BAC) to reflect the change in accordance with normal replanning guidance…”
      3. How to implement the Supplemental Guidance
        1. Because the “incomplete future work” has been eliminated, close the LOE package. The BCWS will already be equal to the BCWP earned to date.
        2. Subtract the BCWP from the BAC and return the BCWR initially to the UB Log and subsequently to the MR Log.
        3. If this can be achieved in the period in which the discrete effort was completed, this is a change to the next accounting period, thus avoiding a change to the current period baseline.

        NOTE: There is another point to be made here. The LOE task was to support the discrete work scope no matter how long it took. If the discrete task finished early because its work scope was reduced, the LOE task requirement was also reduced and the above action is justified. If the discrete task simply finished early, this would be a cost variance in that it cost less to support the unchanged work scope. The above action would be done solely to avoid the BCWP without ACWP condition.

  2. Advantage
    • Avoids the BCWP without ACWP condition.
  3. Disadvantage
    1. If the change is made in the same period in which the discrete effort was completed (or a prior period), there is no disadvantage although some would argue that this approach would be “changing budgets based on performance” which is akin to using MR to hide true cost variances.
    2. If the change is made in the period subsequent to the completion of the discrete effort, the current period baseline will change. If this is a repetitive occurrence, it probably means that a contractor is constantly changing the baseline to avoid true cost variances; therefore, it may result in a DCMA CAR.
  4. Reporting requirement
    • Must be reported in IPMDAR database for Format 5 (MR was increased).

Discrete Effort Starts Late

  1. Condition that may result in a DCMA CAR
    1. The discrete effort has not started (no ACWP or BCWP), hence no LOE was required. This results in zero ACWP for the LOE, but it does report BCWP because of the passage of time.
    2. The LOE has BCWP without ACWP, a significant item of concern condition.
    3. Applicable JIG Supplemental Guidance, Internal Replanning
      1. Paragraph (3)(c).
      2. “Replan future LOE to correlate to the changes in work. LOE, whether planned in separate cost accounts or as part of predominantly discrete cost accounts, has additional flexibility and may be adjusted within the current accounting period without government approval, provided no actual costs (ACWP) have been charged to the LOE.”
      3. How to implement the Supplemental Guidance
        • In the current month replan the LOE to begin in the month that the discrete effort is currently scheduled to begin.
  2. Advantage
    • Avoids the BCWP without ACWP condition.
  3. Disadvantages
    1. Changes the baseline in the current period. If the local DCMA office is not aware of the Supplemental Guidance or disagrees with the Supplemental Guidance, a CAR may be issued.
    2. If the discrete effort recovers its schedule variance, the LOE will be put in the position of having BCWP yet to be earned with no LOE required (equivalent to the early finish condition presented below).
  4. Reporting requirement
    • Must be reported in IPMDAR database for Format 5.

Discrete Effort Finishes Late

  1. Conditions that may result in a DCMA CAR
    1. The LOE incurs ACWP with no accompanying BCWP.
    2. The LOE incurs ACWP with no accompanying ETC, usually indicated by ACWP>EAC.
    3. Both of these are significant items of concern conditions.
    4. Applicable JIG Supplemental Guidance, Internal Replanning
      1. Paragraph (3)(b).
      2. “Replan incomplete future work and adjust the work package budget at completion (BAC) to reflect the change in accordance with normal replanning guidance…”
      3. How to implement the Supplemental Guidance
        1. In or before the last period of performance of the LOE, replan the LOE to cover the extended discrete effort.
        2. Use one of two methods to provide budget for the additional effort:
          1. If ACWP is less than BCWP, recover budget from the previously earned LOE BCWP by using the single point adjustment technique of setting BCWS and BCWP equal to ACWP and replan the recovered budget (BAC minus BCWP) into the future.
          2. If ACWP is equal to or greater than BCWP, but less than BAC, replan the unearned budget (BAC minus BCWP) into the future.

        NOTE: Alternative to 3) implementing the Supplemental Guidance

        1. Allow the LOE package to complete without replanning, which results in accepting the ACWP without BCWP condition.
        2. To mitigate the severity of this approach, be certain to provide an ETC for the periods beyond the LOE baseline period of performance. This action would avoid an ACWP>EAC condition.
  2. Advantages
    1. Avoids the ACWP without BCWP condition.
    2. Avoids the ACWP>EAC condition.
  3. Disadvantage
    • There will be a baseline change in the current period. Because ACWP has occurred, the LOE exception to be able to make a change in the current period if no ACWP has been recorded does not apply. Therefore, a DCMA CAR may be issued.
  4. Reporting requirement
    • Must be reported in IPMDAR database for Format 5.

Observations/RECOMMENDATIONS based on the foregoing:

  1. First and foremost, because many DCMA personnel are not familiar with the JIG Supplemental Guidance or may not agree with it (remember that the DCMA Center of Excellence has not formally confirmed that the JIG Supplemental Guidance remains in effect), contractors must determine the desired approach of the cognizant DCMA personnel for handling the LOE conditions noted above. Early discussions to determine acceptable approaches to the LOE special conditions will avoid many of the CARs/DRs being issued.
  2. Eternal vigilance is required. If a potential change in the performance period of the discrete effort becomes apparent sufficiently early, the change can be accomplished with little chance of incurring a DCMA CAR. This assumes that people recognize the right to change LOE in an “open LOE task”.
  3. The DCMA Center of Excellence must officially transmit additional guidance to the DCMA field offices to ensure consistent application of EVMS Guideline requirements to LOE.
  4. Some may suggest using the Apportioned Effort technique in lieu of LOE, but that would require that the supporting budget be estimated as a percentage of the discrete effort and its time-phasing be established at the same percentage as the time-phasing of the base. Usually, LOE budget is based on an average level of support that is inconsistent with or has a “loose” relation to the discrete package’s time-phasing.
  5. One alternative approach is to consider short duration (3-4 months) LOE for supporting discrete effort. An advantage to this approach is that while the first LOE in the series might incur a significant item of concern condition, the following efforts could be adjusted without penalty.
  6. Another alternative approach is to make the entire support effort a percent complete EVT work package with the Quantifiable Backup Data (QBD) being the milestones in the supported discrete effort.
  7. If the LOE has been reported as complete in the prior month, it has been suggested by some in the DCMA EVMS Center of Excellence that the LOE BCWP that has already been earned can be “harvested” to budget a continuation of the LOE past its original period of performance. This was not a consideration of the JIG Supplemental Guidance and most would argue that this approach is in direct conflict with Guideline 30. Contractors should not use this method unless it is formally approved by the DCMA EVMS Center of Excellence.

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