Clarification on the New Department of Defense Earned Value Management System EVMS Thresholds | DOD & DPAP

On September 28, 2015, the Defense Procurement and Acquisition Policy Directorate (<abbr=”Defense Procurement and Acquisition Policy Directorate”>DPAP) released a memorandum entitled “Class Deviation – Earned Value Management System Threshold”. In this memo the DoD changed the threshold for <abbr=”Earned Value Management System”>EVMS application to $100 million for compliance with EIA-748 for cost or incentive contracts and subcontracts. That same memorandum stated that no EVMS surveillance activities will be routinely conducted by the Defense Contract Management Agency (<abbr=”Defense Contract Management Agency”>DCMA) on contracts or subcontracts between $20 million to $100 million. As attachments to this memorandum, there was a reissuance of the Notice of Earned Value Management System <abbr=”Department of Defense Federal Acquisition Regulations”>DFARs clause (252.234-7001) and the Earned Value Management Systems DFARs clause (252.234-7002), with both reflecting the new $100 million threshold.In response to this guidance, a series of questions from both contractors and other government personnel were submitted to Shane Olsen of the DCMA EVM Implementation Division (<abbr=”EVM Implementation Division”>EVMID). Below are the salient points from this communication:

• There will be no EVMS surveillance of DFARs contracts under $100 million. Contracts without the DFARs clause, such as those under other agencies using the FAR EVM clause, will continue surveillance under their current thresholds.
• The $100 million threshold is determined on the larger of the contract’s Ceiling Price or Target Price; as reported on the Integrated Program Management Report (IPMR) or Contract Performance Report (CPR) Format 1.
• The threshold is based on the Contract Value including fee (at Price) as noted above. If there is an approved Over Target Baseline (OTB) which increases the Total Allocated Budget (TAB), this cannot push a contract over the threshold.
• The new thresholds not only apply to subcontracts, but also Inter-organizational work orders with an EVMS flow-down.
• Regardless of the circumstances, the DCMA will not conduct surveillance on contracts less than $100 million. However, if there are Earned Value issues that the buying command or other parties believe need to be reviewed, then the DCMA may conduct a Review for Cause (RFC) of the system against potentially affected guidelines.
• The DCMA Operations EVM Implementation Division (EVMID) will not be conducting Compliance Reviews in FY-2016 unless there is an “emergent need”.
• If a site is selected for a Compliance Review, only contracts greater than $100 million would be in the initial scope of the Implementation Review (IR). However, if an issue is discovered that requires the team to “open the aperture”, other contracts are not precluded.

The DCMA is still working on a response to the following questions:

• How do I handle a contract that is currently below $100 million but has options that, in aggregate, would exceed $100 million?
• How is the contract value determined on:
  • Indefinite Delivery/Indefinite Quantity (ID/IQ) Contracts
  • Non-ID/IQ with Multiple CLIN-Level or Task Order reports?

This blog will be updated and reposted as answers to these questions are given.