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Including Level of Effort (LOE) in the Integrated Master Schedule (IMS)

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A recent H&A blog titled “Level of Effort (LOE) Best Practice Tips” discussed different approaches for handling LOE to avoid generating false variances. That discussion did not elaborate on including the LOE tasks in the integrated master schedule (IMS). This blog is a follow on to that earlier discussion with a focus on options for including LOE in the IMS along with notes on best practices, tips, and customer expectations.

In the general sense of an earned value management system (EVMS), the LOE scope of work is contained in summary level planning packages (SLPPs) or control accounts as subordinate planning packages or work packages. The budget values for those elements will most likely come from a resource loaded IMS or a resource loading mechanism aligned with the IMS. Not all organizations resource load the IMS activities but instead extract time buckets from the IMS for resource loading using other mechanisms. Resource loading the IMS activities is the recommended practice because it assures cost/schedule integration, but it can be difficult.

LOE work might not appear in the IMS since it is considered optional by some customers such as the Department of Defense (DoD). The Department of Energy (DOE) requires LOE tasks to be included so you can expect it to be in the IMS when DOE is the customer.

Before we talk about LOE in the IMS we must think about the type of work the LOE tasks represent. LOE might be a general task such as “Control Account Management” that is not directly related to other work except perhaps in the time frame in which they happen. But some LOE tasks such as support tasks are related to other discrete work. Modeling the LOE in the IMS starts by understanding what type of effort is involved and can help to determine the approach for linking activities. 

LOE Best Practice Tips Related to the IMS

The Level of Effort (LOE) Best Practice Tips blog included these points related to the IMS:

  • “When LOE activities are included in the schedule, they should not drive the date calculations of discrete activities in the integrated master schedule (IMS). They should also not appear on the critical path.”
  • “LOE must be segregated from discrete work effort. In practice, this means a work package can only be assigned a single earned value method.”
  • “Consider shorter durations for the LOE when that LOE is supporting discrete effort. Should the first occurrence of the LOE trigger a data anomaly test metric, it can be proactively handled along with any future replanning. The remaining LOE would already be in one or more separate work packages so there won’t be any criticism for changing open work packages.”

Government Agency and Industry Guidance on LOE on the IMS

Is there any guidance that can help clarify how best to handle LOE tasks in the IMS? Let’s take a look at three of the guidance documents that may be useful for your environment.

  1. The Integrated Program Management Data and Analysis Report (IPMDAR) Data Item Description (DID), DI-MGMT-81861C (August 2021). This DID is typically placed on contracts with the DoD or NASA that exceed the contract value threshold for EVM reporting or EVMS compliance. Relevant mentions of the data requirements for the IMS in the DID are as follows.

“2.4.1.1 Content. The Schedule consists of horizontally and vertically integrated discrete tasks/activities, consistent with all authorized work, and relationships necessary for successful contract completion.”

Note: This is where the option to exclude LOE from the IMS appears since this requires only discrete tasks/activities. The following sections provide additional guidance when LOE is included in the IMS.

“2.4.2.7 Level of Effort (LOE) Identification. If tasks/activities within an LOE work package are included in the Schedule, clearly identify them.”

“2.4.2.9 Earned Value Technique (EVT). Identify the EVT (e.g., apportioned effort, level of effort, milestone).”

  1. National Defense Industrial Association (NDIA) Integrated Program Management Division (IPMD) Planning and Scheduling Excellence Guide (PASEG) (Version 5.0). The PASEG is a widely recognized industry guide on scheduling best practices in government contracting environments. Section 5.8, Level of Effort (LOE) provides a discussion on the topic including things to promote and things to avoid. Excerpts from the PAGEG follow.

“There are pros and cons around including or excluding LOE tasks in the IMS. Including LOE tasks in the IMS allows for a more inclusive total program look at resource distribution, which aids in the maintenance and analysis of program resource distribution. However, if modeled incorrectly, including LOE tasking in the IMS can cause inaccurate total float and critical path calculations.”

“Tasks planned as LOE in the IMS should be easily and accurately identifiable. This includes populating the appropriate Earned Value Technique field (as applicable) and possibly even identifying the task as LOE in the task description.”

“Consider adding an LOE Completion Milestone to tie all LOE tasking to the end of the program.”

“LOE tasks should not be networked so that they impact discrete tasks. Incorrect logic application on LOE can lead to invalid impacts to the program critical path.”

“Level of Effort tasks should have no discrete successors and should therefore never appear on critical/driving paths.”

  1. DOE Guide 413.3-24 Planning and Scheduling (April 2022). This document provides guidance for acceptable practices in a DOE contractual environment. The discussion on LOE can be found in Section 7 Planning and Scheduling Special Topics, 7.2 Level of Effort, and 7.3 Inclusion of Level of Effort in the Integrated Master Schedule. Excerpts and image from the Guide follow. 

“Overview: Activity-based methods either cannot, or impracticably can measure the performance of LOE WPs and activities. Include all activities, both discrete and LOE, in the IMS.”

“LOE is planned in the IMS so that it does not impact discrete work. Figure 6 shows the recommended linkages in the IMS for planning level of effort.”

Interpreting this DOE Guide diagram for the recommended modeling of LOE in the IMS, notice the inclusion of a “LOE Complete” milestone following the Critical Decision (CD) 4 milestone with no constraint. CD4 in this diagram represents the end of contract effort. The purpose of this LOE-complete milestone, with no constraint, is to provide a successor for all LOE tasks where one is needed. That will prevent generating issues where tasks have no successors.

This recommended modeling is done so that the LOE tasks are not linked to the end of the contract work and thus will not push it. The LOE tasks will also not appear on the critical path since they are not in the path that established the end date.

Also note that the LOE tasks in green are linked as successors to discrete work which is a logic linking approach intended to keep the LOE work aligned with the discrete work but off the critical path. Study the logic and you see that a movement to the right of a discrete task will drag along its related LOE task.

DOE requires the use of Primavera schedule tools so the relationships shown here can be accomplished in that tool. That may not be true of all tools. Know how your tools work before you generate any guidance.

Additional Relevant Guidance Search

H&A earned value consultants recently conducted a survey of the various government and non-government documents regarding the IMS and collected relevant guidance related to LOE among other things. The table below lists the results from a search for “LOE” wording. Note: this is a representative sample of typical government agency and industry IMS references. You should verify current references before you generate your own internal IMS guidance.

Source DocumentGuidance for Capturing all Activities, LOE in IMS
DCMA EVMS Compliance Metrics (DECM) Checks (version 6.0)
  • 06A210a: Do LOE tasks/activities have discrete successors? (0% threshold)
  • 12A101a: Are the contractor’s Level of Effort (LOE) WPs supportive in nature and/or do not produce technical content leading to an end item or product? (≤ 15% threshold)
  • 12A301a: Does the time-phasing of LOE WP budgets properly reflect when the work will be accomplished? (≤ 10% threshold)
IPMDAR DID DI-MGMT 81816CIf tasks/activities within an LOE work package are included in the Schedule, clearly identify them.
DOE Guide 413.3-24 Planning and Scheduling, Appendix A Schedule Assessment PrinciplesPrinciple 20. No LOE on critical path.
GAO Schedule Assessment Guide: Best Practices for Project Schedules (December 2015)Selected excerpts:
  • LOE activities should be clearly marked in the schedule and should never appear on a critical path.
  • LOE activities … derive their durations from other discrete work.
  • Best Practices for confirming the critical path is valid: Does not include LOE activities, summary activities, or other unusually long activities, except for future planning packages.
NDIA IPMD PASEG (version 5.0) (as noted above)
  • Tasks planned as LOE in the IMS should be easily and accurately identifiable.
  • LOE tasks should not be networked so that they impact discrete tasks.
  • Level of effort tasks should have no discrete successors and should therefore never appear on critical/driving paths.
PMI Practice Standard for Scheduling (Second Edition)Since an LOE activity is not itself a work item directly associated with accomplishing the final project product, service, or results, but rather one that supports such work, its duration is based on the duration of the discrete work activities that it is supporting.

Conclusion

Based on the various sources of guidance, it is possible to structure the IMS to include LOE in a way that provides cost/schedule integration and keeps all work correctly aligned yet does not cause issues with the critical path and the driving paths. From this guidance, it should be a straightforward effort to generate your own internal scheduling procedure defining how to handle LOE in the IMS if you choose to include it or if you are required to include it.

Need help producing a clear and concise scheduling procedure or tool specific work instructions? H&A earned value consultants and scheduling subject matter experts have worked with numerous clients to create easy to follow guides that help to ensure schedulers are following your company’s best practices using the scheduling tools of choice. Call us today at (714) 685-1730 to get started. 

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Merging Earned Value Management System Descriptions

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Are there best practices that apply when a company with an approved/certified Earned Value Management System (EVMS) acquires another company that also has an approved/certified EVMS in place? What happens with the EVM System Descriptions as well as related processes and procedures? What about the various project control tools being used? How do you level set the project control proficiency levels of personnel using the EVMS? Schedule and cost level of detail and data architecture also come into play. For example, project performance data is often used at the corporate level for financial analysis, portfolio analysis, and external reporting and may require data to be organized in a specific manner. Is the EVMS providing reliable status, forecast completion date (FCD), and estimate at completion (EAC) information to management? 

What are your options?

H&A earned value consultants have observed different approaches and often assist companies with determining their strategy. Assuming you are the acquiring company, you could:

  1. Require the acquired company to use your EVMS. 
  2. Let them continue using their EVMS for an agreed upon timeframe or indefinitely.
  3. Take the best of both and establish a new and improved EVMS.  

Each option has its pros and cons. There are also other implications for at least the acquired company. DCMA will need to conduct an Integrated Baseline Review (IBR) and/or a compliance review if the acquired company’s EVMS assessment is no longer applicable. If you make significant modifications to your EVM System Description, DCMA will need to review the revised System Description to determine whether it still complies with the EIA-748 Standard for EVMS guideline requirements.

Things to Consider

  • What do you want to achieve?

    If the goal is to establish a common EVM System Description across the corporation, the strategy will need to reflect that. Define the business objectives that clearly articulate the benefits of using a standardized approach that can help to create and implement the plan to achieve your goal. In this example, that could narrow your path forward to either option 1 or 3 depending on the state of your EVMS.

  • What is the state of your current EVM design and System Description?

    Do you already have a best in class corporate level system in place? If yes, option 1 is a good fit. The strategy would be to create a plan to transition the acquired company to your EVMS. A single EVMS is easier to maintain and to train people on how to use it effectively. Commonality makes it easier to move personnel between projects.

    Perhaps your company is fine with different EVM Systems at a business unit level. For example, perhaps the business units have a different customer base (DoD versus DOE), and the requirements are different. In this case, it may make sense to go with option 2. We recommend being prepared to do an in-depth assessment of the acquired company’s EVMS to become familiar with it, gain an understanding of how project personnel use it, and evaluate the quality of the schedule and cost data. It is imperative that you have a good understanding of the strengths and weaknesses of the acquired company’s EVMS. You may find best in class practices that you could incorporate into your EVMS. On the other hand, you may discover issues you need to address with a corrective action plan. Some of them may be as simple as providing desktop instructions for the schedulers or control account managers (CAMs). The more difficult are actions taken to change the culture such as resistance to providing visibility into the data.

    Option 3 may be good path in situations where you know there are components in your EVMS that need to be streamlined or enhanced. It provides an opportunity to fix known issues with your EVM design or System Description. It could also be an opportunity to replace a mix of software tools or home-grown tools with a standard set of commercial off the shelf (COTS) schedule, cost, and analysis as well as risk tools. Integration with a standard Agile tool may also come into play. In this case, your strategy may be to create a working group from both companies to create a best in class corporate EVMS. 

  • Structure of the EVM System Description.

    There may be “layers” to it that makes it easier to accommodate unique business unit environments. For example, perhaps you have established a corporate level System Description that states what the company does to comply with the EIA-748 guidelines when an EVMS is contractually required or what is required to satisfy internal management needs for project/portfolio analysis (no external customer management system or reporting requirements). The corporate level system should define specific rules all business units are expected to follow. The business units define how they comply with the corporate requirements (their specific process). A good approach is to also allow project managers to define project directives to specify project unique requirements as long as they comply with the corporate and business unit requirements.

    In this example, option 1 is a good fit. The strategy would be to help the acquired company to establish revised EVM processes that align with the corporate requirements similar to other business units in the corporation.

Other Considerations

Your strategy and tactical plan must address identified risks and opportunities. A common challenge is resistance to change. A potential risk mitigation approach could be to bring in the acquired company’s personnel as part of a joint corporate management team with the goal to create a single best in class EVMS. It is essential to establish ownership in the new or revised process. An example from one H&A client illustrates the importance of taking ownership in the EVMS as part of a successful transition.

“We didn’t force what we had on them, nor did we give in. We have a corporate EVM System Description. When we acquired the company, we brought them in to do a revision of the System Description, as the decision was made that we will operate as one company. They are now using that System Description and are using the same EVM cost tool. We are working other initiatives to harmonize other systems. It was surprisingly not contentious. We incorporated their leads into the organization with minimal disruption. We also have corporate training, which they supported and some of their legacy folks are leading that. The company as a whole changed, rather than forcing our way on them. Not many major differences between us, but inclusion of the folks from the acquired company as well as business groups was key. Frankly, one of our legacy divisions was harder to work with than anyone from the company we acquired.” – EVMS Director, A&D Contractor

While this is an example of where things went well, your risk mitigation approach should be prepared for situations where the teams do not agree upon the documented process, tools, or training that could result in an impasse. Knowledge of the current internal environment and personnel mix can help to determine the best mitigation strategy. A strong leadership team must be in place to ensure teams are working to achieve common objectives and to amicably resolve differences with a target completion date.

The tactical plan must also include a robust training plan that covers the revised EVMS process, procedures, and any new tools. This is critical to ensure project personnel gain a good understanding of what changed, who is responsible for what, workflow, requirements such as data coding or level of data detail, and how to use the tools effectively. Role based training is often useful to ensure project control personnel, schedulers, CAMs, and others are following the documented procedures specific to their day-to-day tasks. Desktop instructions are also useful to ensure project personnel are using the software tools effectively in alignment with the documented process and procedures.

What to do if you find yourself in this situation?

It often helps to start with a gap analysis of your or the acquired company’s EVM design and System Description as well as assess how project personnel implement the system and the quality of the data. H&A earned value consultants often conduct an EVMS gap analysis to provide a fact-based and independent analysis of the EVMS, project personnel proficiency levels, and quality of the schedule and cost data. Once you are able to identify and quantify the strengths and weaknesses of the system, you are in a better position to determine your best strategy that aligns with your corporate business objectives and goals.

Over the years, H&A earned value consultants have observed first-hand what strategies and tactics for designing and implementing a best in class EVMS ensures success in a variety of business environments. We can also help you avoid common pitfalls that can derail the best laid plans – it is often the case a client didn’t realize there were hidden risks, or they had made incorrect assumptions.

We can help you determine the right strategy for your situation. Call us today at (714) 685-1730 to get started.

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Handling Authorized Unpriced Work (AUW) and Fee in Performance Reporting

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Handling Authorized Unpriced Work (AUW) and Fee in Performance Reporting

A recent topic for the NDIA Integrated Program Management Division (IPMD) Clearinghouse was how to handle reporting fee for undefinitized work effort in the Integrated Program Management Report (IPMR) or Integrated Program Management Data and Analysis Report (IPMDAR). Undefinitized work is formally referred to as Authorized Unpriced Work (AUW) or Undefinitized Contract Actions (UCAs).

As a reminder, AUW/UCA is a contract scope change the customer’s contracting officer has directed to be performed. However, the scope, schedule and budget have yet to be fully defined and negotiated. A contractor typically creates a rough order of magnitude schedule and cost estimate which is their basis to develop a schedule and budget for the AUW/UCA scope of work.

As a reminder, the Contract Budget Base (CBB) is equal to the Negotiated Contract Cost (NCC) for definitized work plus an estimated cost for all AUW or UCAs. When all AUW/UCA work has been negotiated, the CBB equals the NCC. The CBB and PMB exclude any fee or profit.

DoD Policy and Reporting References for Guidance

For this discussion, the following DoD EVMS or Data Item Description (DID) references provide general guidance on how to report AUW/UCA, Target Profit/Fee, Target Price, and Estimated Price values for performance reporting. These references do not use the term “undefinitized contract actions.” They do use terms such as “undefinitized work” or “undefinitized change orders (known as AUW).”

  1. DoD Earned Value Management System Interpretation Guide (EVMSIG) (March 2019) includes this definition for Authorized Unpriced Work (AUW), emphasis added.

“A contract scope change which has been directed by the Government contracting officer but has not yet been fully negotiated/definitized. It includes a value, excluding fee or profit, typically associated with the authorized, unpriced change order.”

  1. IPMR DID DI-MGMT-81861A (September 2015). See Section 3.0. IPMR Format Content Requirements, 3.2.1. Contract Data, emphasis added.

“3.2.1.3. Estimated Cost of Authorized, Unpriced Work (AUW). Authorized, Unpriced Work is approved work scope that has not been definitized. The total dollar value (excluding fee or profit) of AUW shall be entered in Block 5.c.

3.2.1.3.1. The value of AUW is the value of the scope that was coordinated between the contractor and the Program Office, and authorized by the Procuring Contracting Officer (PCO).”

“3.2.1.4. Target Profit/Fee. Enter in Block 5.d the applicable fee that applies to the negotiated cost of the contract.

3.2.1.5. Target Price. Enter in Block 5.e the target price (negotiated contract cost plus profit/fee) applicable to the definitized contract effort.

3.2.1.6. Estimated Price. Based on the contractor’s most likely estimate of cost at completion for all authorized work, including the appropriate profit/fee, incentive, and cost sharing provisions, enter in Block 5.f the estimated final contract price (total estimated cost to the Government). This number shall be based on the contractor’s most likely management EAC in Block 6.c.1 and normally will change when the EAC is updated and/or when the contract is revised.”

  1. IPMDAR DID DI-MGMT-81861C (August 2021) has similar language. See Section 2. Document Requirements. 2.3 Contract Performance Dataset (CPD). 2.3.1 Heading Information, emphasis added.

“2.3.1.2 Estimated Cost of AUW. Provide the total dollar value (excluding fee or profit) of the approved work scope associated with AUW. AUW is a contract scope change that is directed by the Government contracting officer, but has not yet been fully negotiated/definitized.

2.3.1.3 Target Fee. Provide the applicable fee that applies to the NCC.

2.3.1.4 Target Price. Provide the target price (NCC plus target fee) applicable to the definitized contract effort.

2.3.1.5 Estimated Price. Provide the estimated final contract price. The estimated price shall be based on the contractor’s Most Likely Estimate at Completion (EAC) for all authorized work, including: the appropriate fee, incentive, and cost sharing provisions.”

What is the issue?

This came up as a Clearinghouse topic because contractors wanted to make sure they are accurately interpreting their government customer’s guidance and they are consistent with industry best practices. The EVMSIG, IPMR DID, and IPMDAR DID all state that AUW “excludes fee or profit.”

There are also implications for reporting the Best Case, Worst Case, and Most Likely Management EAC in the IPMR or IPMDAR. You may have noticed in the DID text above that the Estimated Price is based on the contractor’s Most Likely EAC for all authorized work plus the appropriate fee. While the DID says “all authorized work,” because the final cost has yet to be negotiated for the AUW/UCA, this creates questions. What value should be entered for the Estimated Price? Should it include fee or not for AUW/UCA?

H&A earned value consultants have seen contractors take two different approaches. To simplify and illustrate the two approaches, the following discussion uses the IPMR Format 1. The IPMDAR has similar heading information. The following examples assume a cost plus fixed fee (CPFF) contract.

Option One

The most typical approach for projects is to enter the AUW/UCA amount in the IPMR Format 1 Block 5.c (Est. Cost of Auth. Unpriced Work) and include the same AUW/UCA amount in the Block 5.f (Estimated Price). The assumption is that when the AUW/UCA work effort is definitized, the contractor will negotiate the applicable fee with the customer during this process. A contractor should clearly state they intend to negotiate a fee for their AUW/UCA in their IPMR Format 5 or the IPMDAR Performance Narrative Report as well as in the transmittal letter accompanying the AUW/UCA estimate.

To illustrate how the heading data is entered in the IPMR Format 1 (Block 5.c and 5.f are equal), see Figure 1 below. This example assumes the entire contract is AUW/UCA to clearly illustrate the proper approach. Negotiated Cost (Block 5.b) is zero because the entire scope of work has not been negotiated. Target Profit/Fee (Block 5.d) is zero because AUW does not have profit/fee. Target Price (Block 5.e) is zero because the Negotiated Cost and Target Profit/Fee are zero. The Estimated Price, Most Likely Estimated Cost at Completion (Block 6.c (1)), and Contract Budget Base (Block 6.c (2)) are equal. 

Figure 1: Example IPMR Format 1 where the AUW (5.c.) and Estimated Price (5.f.) are equal.
Figure 1: Example IPMR Format 1 where the AUW (5.c.) and Estimated Price (5.f.) are equal.

Example of a Format 5 narrative for this approach follows.

Funding Status: Undefinitized Contract Action (UCA) contract value: $30,563,565. Current funding: $9,647,000.

Significant Events:
  1. UCA contract award: September 2022.
    1. In the IPMR Format 1 Block 5.c the estimated cost of Authorized Unpriced Work (AUW) and Block 5.f Estimated Price, the amount of $30,563,565 reflects the proposed cost. The Most Likely Estimated Cost at Completion and Contract Budget Base (Block 6.c.(1) and (2)) reflect the same amount.
    2. Note: Once the work scope is definitized, the fee amount for the scope of work will be determined and displayed in the appropriate Blocks (5.d, 5.e, and 5.f). The proposed fixed fee amount for the UCA was documented in our proposal.
  2. Expected award date of the definitized contract has changed to December 2023.
  3. We performed a comprehensive EAC (CEAC) in June 2023.

Option Two

Another approach is to include the fee for the AUW/UCA value based on a long standing relationship with the customer. An example is a four year CPFF contract where a contractor can expect the same calculated fee when they negotiate the AUW/UCA. For a contractor with a proven history with the customer, they could reference a known historical fee percentage for similar work effort to document the assumed fee percentage in their transmittal letter with the accompanying the AUW/UCA estimate.

See Figure 2 as an example of including fee. The AUW/UCA amount would be included in the IPMR Format 1 Block 5.c. However, the Estimated Price in Block 5.f would include the profit/fee amount for the AUW/UCA. Also, the Most Likely Estimated Cost at Completion (Block 6.c (1)), and Contract Budget Base (Block 6.c (2)) are equal to the Block 5.c since they do not include fee.

Figure 2: Example IPMR Format 1 where the AUW (5.c.) excludes fee and the Estimated Price (5.f) includes fee.

Note: including the profit/fee amount in the Estimated Price is clearly in violation of the EVMSIG and IPMR/IPMDAR DIDs. Why this approach was taken must be addressed with the customer prior to report submittals. This action of including the fee in Block 5.f must be fully disclosed in the IPMR Format 5 or the IPMDAR Performance Narrative Report. This is required to reconcile the heading numbers. Example of a Format 5 narrative for this option two approach follows.

Funding Status: Undefinitized Contract Action (UCA) contract value: $32,609,629. Current funding: $9,647,000.

Significant Events:
  1. UCA contract award: September 2022.
    1. In the IPMR Format 1 Block 5.c the estimated cost of Authorized Unpriced Work (AUW) in the amount of $30,563,565 reflects our proposed cost of $32,609,629 less our anticipated fee of $2,046,064 as documented in our proposal. Per the DID, Block 5.c. does not include fee or profit. The Most Likely Estimated Cost at Completion and Contract Budget Base (Block 6.c.(1) and (2)) is equal to Block 5.c. (AUW).
    2. In the IPMR Format 1 Block 5.f, the Estimated Price includes an anticipated fee amount documented in our proposal which is consistent with our long term relationship. It is equal to our proposed cost ($30,563,565) plus fee ($2,046,064) for a total of $32,609,629.
  2. Expected award date of the definitized contract has changed to December 2023.
  3. We performed a comprehensive EAC (CEAC) in June 2023.

Best Practice Tips

You are likely to encounter a more complex situation than the one illustrated in Figures 1 and 2 where some work scope has been defined and fully negotiated and other work scope is AUW/UCAs. Regardless of which option was used to report AUW/UCA and fee amounts, clearly explain the basis for the numbers in the heading information to ensure the customer is able to reconcile the numbers (Block 5 heading values highlighted in the red boxes in Figures 1 and 2).

Based on our decades of experience with all types of contractors and a variety of government agencies, here are few recommendations for you.

  • Be sure your EVM System Description or related procedures explain how to handle AUW/UCA including how to report contract total values in the IPMR or IPMDAR for specific contract types.
  • Verify your EVM training courses include a section on handling AUW/UCA and the rules that apply. It often helps to remind project personnel of the basic budget flowdown reconciliation math and which budget components include or exclude fee.
  • Document how you intend to handle fee for the AUW/UCA in your proposal to ensure your customer clearly understands your intentions. Using the example of the option one approach discussed above, be sure to state your intentions to determine a fee amount once the work has been fully definitized and negotiated so the customer knows what to expect. Using the example of the option two approach above, reporting a fee for AUW/UCA amount before the work is fully negotiated is in violation of the EVMSIG and DIDs. Verify this approach is acceptable with your customer before you submit your reporting deliverables. 

H&A earned value consultants often assist clients with EVMS and contracting situations where the government customer’s policy or other guidance can be subject to interpretation. Call us today at (714) 685-1730 if you need help determining the best course of action for your situation. 

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Timely Subcontractor Data – Mission Impossible?

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Timely IPMDAR Subcontractor Data – Mission Impossible?

With the arrival of the Integrated Program Management Data and Analysis Report (IPMDAR) requirements for electronic cost and schedule dataset submittals, DoD contractors with EVMS or EVM reporting contractual requirements have a tighter time frame for submitting their month end data. A previous blog, Introduction to the IPMDAR Data Deliverable – Tips for Producing the Outputs summarizes these data reporting requirements. This includes the Contract Performance Dataset (CPD) for the time phased cost data and the Schedule Performance Dataset (SPD) along with a native file export out a schedule tool.

For month end data submittals, the IPMDAR Data Item Description (DID), DI-MGMT-81861C (20210830) states:

1.8.1 Monthly Submission Requirement. IPMDAR data shall be required at least monthly. The reporting frequency shall be specified in the Contract Data Requirements List (CDRL). All reports shall reflect data from the same accounting period and shall be provided at any time after the close of the contractor’s accounting period, but no later than sixteen (16) business days after the contractor’s accounting period end date.

On the surface, you might say requiring data delivery 16 business days after the contractor’s accounting period end date doesn’t sound unreasonable or even much different from the previous Integrated Program Management Report (IPMR) DID (DI-MGMT-81861A), and you would be right.

What is the issue?

Some people think that because the IPMDAR submittals are electronic datasets instead of report formats it is easier to generate and report that information. That is not necessarily true, and shortening the data turnaround time exacerbates the problem. The tighter time requirements also apply when there are EVM reporting subcontractors providing performance data to a prime contractor.

The third sentence of 1.8.1 above states: “All reports shall reflect data from the same accounting period…” This requirement is very challenging, especially when a subcontractor operates on a different month end accounting calendar; for example, a “5-4-4” versus the prime’s “4-4-5” calendar. Even when the prime and subcontractor are on the same month end calendar, for the prime to submit IPMDAR data in 16 business days, the subcontractor has less time to provide their data to the prime. It becomes even more challenging on very large programs that have several tiers of subcontractors.

Subcontractors cry “foul” because they don’t have enough time to get all the performance data ready in the reduced time. Prime contractors cry “foul” because they are held accountable for data that may or may not come from one or more tiers of subcontractors in time for them to conduct basic data analysis and deliver month end data for the IPMDAR. The government customer still insists all the data must be for the same accounting month end date, even though that may not be well defined. Customers also do not want the subcontractor data delayed by a month just to get the subcontractor data “caught up” – i.e., “comparing apples to oranges.”

Is incremental delivery of IPMDAR the answer?

The government suggests that incremental delivery could resolve this dilemma. The DoD IPMDAR Implementation and Tailoring Guide (August 24, 2021) expands on the paragraph from the IPMDAR DID:

1.8.1.1 Incremental Delivery. Reports may be provided incrementally, including preliminary data, with the number of days for delivery of each submittal tailored in the CDRL. Data delivered is not considered authoritative until the final submission and signature. The recommended incremental delivery process is the Schedule, followed by the CPD and the Executive Summary, Government review of submittals, Government directed Detailed Analysis, Contractor Detailed Analysis delivery and all final data.

The IPMDAR Implementation and Tailoring Guide also provides a notional example of how an incremental delivery could be handled:

1. SPD – To be delivered with native file five (5) working days after the end of the contractor’s accounting period (may be labeled preliminary)

2. CPD – To be delivered with the Executive Summary ten (10) working days after the end of the contractor’s accounting period (may be labeled preliminary)

3. Contracting Office to select items for detailed analysis (variances) – to contractor thirteen (13) working days after the end of the contractor’s accounting period

4. Performance Narrative Analysis – to be delivered NLT sixteen (16) working days after the end of the contractor’s accounting period along with any other “final” versions of previously submitted files

Note: The notional incremental delivery plan above is not additive.

Doing the above might demonstrate to the government customer that the prime contractor is at least trying their best to make the prime/subcontract situation work – even though they would be using “estimated data” until the final versions come in from the subcontractors. Does this approach really make the timely delivery of the data easier to attain? The bottom line does not change. Per number 4 above, the prime still has to deliver all the data in “final versions” by the 16th business day following the close of their accounting calendar. The note at the bottom specifies the days indicated in each step are not “additive” – i.e., the contractor does not get 5+10+13+16 = 44 business days.

In some circumstances, incremental delivery might allow some subcontractors a bit more time to get the data to the prime contractor, but there would still have to be tighter delivery dates for the incremental deliveries, so the problem does not really go away.

What are your options?

This difficult situation arises because few contractors consider the implications of having to get all data by their accounting month end. Not all the subcontractor work elements are set up the same way. Contractors who have the EVM reporting requirement, who do or will have EVM reporting subcontractors, should address this basic difference as part of the contract negotiation process. One possible part of this negotiation could be to use the IPMDAR DID, paragraph 1.4, to help level the field for reporting purposes. This paragraph states:

1.4 Direct Reporting Contractor Role.

1.4.1 A Direct Reporting Contractor is any contractor required to provide the IPMDAR directly to the Government. This includes prime contractors, subcontractors, intra-government work agreements, and other agreements, based on the contract type, value, duration, nature of the work scope, and the criticality of the information. In this document, instances of “Contractor” are synonymous with “Direct Reporting Contractor.”

There is a footnote to this paragraph that states:

In the event that the Direct Reporting Contractor is a contractor other than the prime, the Direct Reporting Contractor will additionally report to the prime. Subcontractor data shall be provided to the prime in a manner that supports the contractor’s submission to the Government.

One solution is to negotiate to have each EVM reporting subcontractor deemed a “Direct Reporting Contractor” that submits their data directly to the government, including the customer, as well as to the prime contractor. The prime and subcontractors are each submitting their IPMDAR electronic deliverables to the DoD EVM Central Repository (EVM-CR).

Each level of contract, the prime through however many tiers of subcontractors there may be, will have the same 16 business days after their own accounting month end dates to provide all interested parties with the EVM data. The prime contractor still must at least get estimated subcontractor data to do their monthly assessment, making corrections in the next month after they have received the final version of the data from their subcontractors.

Should the government customer want analysis performed on subcontracted effort, the IPMDAR dataset submittals will be in the DoD EVM-CR. They can do that analysis independently of the prime contractor’s analysis that would be provided after the prime’s 16th business day.

This approach would put pressure on the prime because they will not have seen the subcontractor’s data prior to it being delivered to the government, but that could be addressed in the next reporting period’s “errata” variance analysis narrative. The government would also have the detailed data from the subcontractors when the subcontractor is providing a reduced set of data such as only total cost data to the prime. Should the government customer not want to do that level of analysis, the government customer may need a different contracting solution to avoid requiring EVM reporting down through various levels of contracts. This is often determined by the contract value and risk factors associated with the subcontractor. 

This approach also requires the subcontractor to produce two deliverables. One for the prime contractor in an agreed upon format and one for the government customer following the IPMDAR DID electronic submittal requirements for the DoD EVM-CR. These reporting requirements should be negotiated with the subcontractor well in advance; the subcontractor needs to know their data deliverable and reporting requirements when they bid on the work effort for the prime.

This subcontractor data incorporation issue has been around for many years and can be very confusing. H&A earned value consultants can help you work through the various responses to this requirement in the best possible way for your situation. Call us today at (714) 685-1730 to get started.

Timely Subcontractor Data – Mission Impossible? Read Post »

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