IPMR

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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Formal Reprogramming – What Happened?

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Graph of an Increasing Budget

A long time ago, in a galaxy far, far away….an Over Target Baseline (OTB) – by design – was a rare occurrence (and the OTS concept did not even exist as part of Formal Reprogramming). Formal Reprogramming was a very difficult and cumbersome process that most contractors (and the government) really did not like to consider. The government, in its 1969 Joint Implementation Guide, said:

“Reprogramming should not be done more frequently than annually and preferably no more frequently than once during the life of the contract.”

The Office of the Under Secretary of Defense (OUSD) Acquisition, Analytics and Policy (AAP) – formerly PARCA – , in their latest OTB/OTS guide, states that Formal Reprogramming now has expanded to include an Over Target Schedule (OTS).  However, in that guide, it is stated in Paragraph 1.3.8:

“Ideally, formal reprogramming should be done no more than one time during the life of a contract. However, there may be instances where another formal reprogramming is warranted… When formal reprogramming is accomplished in accordance with the procedures in this guide, with a realistic cost and schedule estimate established for the remaining work, it should not be necessary to undergo formal reprogramming again.”

Today, though, whenever contractors incur a significant cost or schedule variance, instead of resolving the variance cause, the first words seem to be: “Let’s do an OTB or OTS.”  The lure of “getting rid of cost and schedule variances” seems too good to pass up.  Unfortunately, an OTB/OTS implementation has never been an instantaneous process. With AAP’s 12 step OTB/OTS process, it is obvious that the contractor will not be able to start today and incorporate the OTB/OTS in the next Integrated Program Management Data and Analysis Report (IPMDAR) dataset. In fact, AAP’s OTB/ OTS guide states in paragraph 3.8:

“It may be difficult to ascertain the length of time it will take to implement a new baseline based on the scope of the effort. It is not uncommon for the entire process to take up to six months which would be too long of a period without basic cost reporting.”

The last line of the above cited paragraph was referencing the reporting requirements to the customer when an OTB/OTS is being implemented.

The IPMDAR Implementation and Tailoring Guide (5/21/2020) even recognizes the issues with timeliness of implementing an OTB/OTS:

2.3.2.5.5  Formal Reprogramming Timeliness. Formal reprogramming can require more than one month to implement. During formal reprogramming, reporting shall continue, at a minimum, to include ACWP, and the latest reported cumulative BCWS and BCWP will be maintained until the OTB/OTS is implemented. 

So why does it take so long to implement the OTB/OTS?  Can the contractor just adjust the bottom line variances and move on?  Actually no, nothing is really that simple.  This is one of the reasons that implementing an OTB and OTS should not be taken lightly.   The AAP OTB/OTS Guide addresses adjustments this way:

“3.5.6.2 Adjusting Variances: A key consideration in implementing an OTB is to determine what to do with the variances against the pre-OTB baseline. There are essentially five basic options. This is a far more detailed effort than these simple descriptions imply, as these adjustments have to be made at the detail level (control account or work package).”

When considering the number of control accounts and work packages involved in a major contract, a Formal Reprogramming can become a rather daunting task.  The contractor also has to report the effects of the Formal Reprogramming in the IPMDAR Reprogramming Adjustments columns. These adjustment columns appear on both Format 1 and Format 2 of the IPMDAR database, which means the contractor must undertake the assessment for both the contract’s WBS and the OBS – for each WBS element and for each OBS element reported.  This can be further complicated if the OTB/OTS exercise were flowed down to subcontractors for a given program.  The AAP OTB/ OTS Guide, paragraph 3.8 also states:

“The customer should be cognizant of the prime contractor’s coordination complexities and issues with its subcontractors. The time to implementation may be extended due to accounting calendar month overlaps, compressed reiterations of contractor ETC updates, internal reviews, subcontractor MR strategy negotiations, senior management approvals, etc., all while statusing the normal existing performance within a reporting cycle.”

In the early days, when implementing an OTB with variance adjustments, the company and the customer agreed on a month-end date to make the data adjustments.  Then the contractor ran two CPRs or IPMRs (now the IPMDAR): (1) the first report as though no OTB had been implemented [to determine the amount of adjustments to cost variance (CV) and schedule variance (SV) at all the reporting levels] and, (2) the second report [after the OTB implementation had been completed – no matter how long it took] showing the Column 12 adjustments plus whatever BAC changes were being implemented.

Under the current OTB/OTS Guide, it appears as though this process is being done all at once. As stated in the AAP OTB/ OTS Guide paragraph 3.8 above, this implementation could take up to 6 months to complete, so lagging the second report until the OTB/OTS implementation is completed seems logical. The last sentence in paragraph 3.8 also stipulates that regardless of how long implementation takes, the contractor and customer will agree on interim reporting that will be required, further stating that:

“In all cases, at least ACWP should continue to be reported.”

Perhaps this agreement with the customer should also specify the content of the first IPMDAR following OTB/OTS implementation.

All things taken into account, the process of requesting and getting approval for an OTB or OTS can be a long and difficult process, especially if, at the end of it all, the contractor’s request is denied.  Even if it were approved and the contractor implements and works to the newly recognized baseline, immediately doing another one is not a pleasant thought – and remember, it was not intended to be pleasant. Reprogramming was always supposed to be a last resort action, when reporting to the current baseline was totally unrealistic.

Now, what about those cases where a contract has one or two elements reporting against totally unrealistic budget (or schedule) baselines?  The AAP OTB/ OTS Guide does cover a partial OTB, but reiterates that this is still an OTB because the Total Allocated Budget (TAB) will exceed the Contract Budget Base (CBB).  In the early days, however, the government allowed what was called Internal Operating Budgets (IOBs) for lower level elements (control accounts, or specific WBS elements, etc.) that were having problems resulting in an unrealistic baseline for the work remaining. The 1987 Joint Implementation Guide, paragraph 3-3. I (5) described IOBs as follows:

“(5) Internal Operating Budgets. Nothing in the criteria prevents the contractor from establishing an internal operating budget which is less than or more than the total allocated budget. However, there must be controls and procedures to ensure that the performance measurement baseline is not distorted.

(a) Operating budgets are sometimes used to establish internal targets for rework or added in-scope effort which is not significant enough to warrant formal reprogramming. Such budgets do not become a substitute for the [control] account budgets in the performance measurement baseline, but should be visible to all levels of management as appropriate. Control account managers should be able to evaluate performance in terms of both operating budgets and [control] account budgets to meet the requirements of internal management and reporting to the Government.

(b) Establishment and use of operating budgets should be done with caution.  Working against one plan and reporting progress against another is undesirable and the operating budget should not differ significantly from the [control] account budget in the performance measurement baseline. Operating budgets are intended to provide targets for specific elements of work where otherwise the targets would be unrealistic. They are not intended to serve as a completely separate work measurement plan for the contract as a whole.”

Current literature no longer specifically addresses Internal Operating Budgets (IOBs), but with the recent trend of contractors jumping to the OTB/OTS conclusion, it might be a better alternative to have individual instances of unrealistic budgets (or schedules) that do not otherwise push the total program to the need for a complete OTB and/or OTS implementation.

These could be good discussion topics for future AAP and DCMA meetings with industry representatives, to determine if there are ways to streamline the process, or at least reduce the amount of requests to implement Formal Reprogramming.  Variances are, after all, performance measurement indicators that should not just be routinely and artificially eliminated.

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

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New Department of Defense Earned Value Management System (EVMS) ThresholdsOn 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.

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Earned Value Management | Integrated Program Management Report (IPMR) XML Electronic Submittals

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One of the major changes in the 2012 IPMR Data Item Description (DID) was the requirement to use the DoD-approved XML schemas and guidelines to electronically submit formats 1 through 4, 6, and 7. The DoD-approved XML schemas were developed under the auspices of the United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT), a formal international organization for establishing electronic business standards.  The DoD-approved XML guidelines are the Data Exchange Instructions (DEIs) or business rules for using the UN/CEFACT XML schemas to support the data requirements in the IPMR DID.  This XML electronic submittal format replaces the ANSI X12 Electronic Data Interchange (EDI) transaction sets 839 and 806 found in the previous reporting DIDs, the 2005, DI-MGMT-81466A, Contract Performance Report (CPR) and the 2005, DI-MGMT-81650, Integrated Master Schedule (IMS).

The purpose of using a software vendor neutral international standard to submit data to the DoD was to eliminate the need for any specific toolset or proprietary database at either end.  Contractors can use their toolset of choice or internally developed applications to produce the XML instance files and electronically submit the data. For the various DoD end-users, they can use their toolset of choice or internally developed applications to read the XML data for their use and analyses.

The business owner for the DoD IPMR Data Exchange Instructions is the OSD Office of Performance Assessments and Root Cause Analyses (PARCA), Earned Value Management (EVM) Division (https://www.acq.osd.mil/evm). The electronic submittals are designed to support the OSD EVM Central Repository (https://dcarc.cape.osd.mil/EVM/EVMOverview.aspx), a joint effort between the Defense Cost and Resource Center (DCARC) and OUSD/AT&L, managed by PARCA.  The EVM Central Repository provides a secure centralized reporting, data collection and distribution of EVM data environment for the DoD acquisition community.

There are a number of UN/CEFACT XML related resources available to contractors, software vendors, and government users on the DCARC EVM Central Repository web site.

  • Select the UN/CEFACT XML navigation option to download the base UN/CEFACT XML schemas as well as the Data Exchange Instructions for the IPMR formats. There are three primary DEIs. One for Formats 1 through 4 (can include Format 5 data as an option), one for Format 6 (the IMS), and one for Format 7 (time phased historical data). Also on this web page is a link for a digital file signing tool; this works as an outer envelope that contractors can use to digitally sign and secure an XML instance file submission to the EVM Central Repository.
  • Select the EVM Tools navigation option to download the XML instance file IPMR Schema/DEI Checker or XML instance file viewers. The schema/DEI checker can be used to verify a given XML instance file conforms to the basic XML schema requirements as well as the business rules defined in the DEIs.  The XML instance files viewers can be used to read and display the XML data content in a more human friendly format.

A number of the commercial off the shelf (COTS) software vendors have submitted their IPMR outputs for testing to the EVM Central Repository to verify their XML outputs can pass the Central Repository data submission validation process. A number of contractors also tested outputs produced from their internal application systems (no COTS tool was used). This testing was part of the implementation verification process for completing the Data Exchange Instructions. To confirm a software vendor has successfully completed the process to verify their tool-set outputs can be successfully read and uploaded to the Central Repository, send an email to the EVM Contact for PARCA listed on the DCARC EVM Central Repository web site (Contact Us navigation link).

PARCA has also recently taken ownership of the XML schema and DEI Change Control Board (CCB) and related process. The intent is to use the PARCA Issue Resolution process (https://www.acq.osd.mil/evm/ir/index.shtml) for software vendors, contractors, or other end users to submit change requests for the base UN/CEFACT XML schemas or IPMR Data Exchange Instructions.

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DoD Earned Value Management System Interpretation Guide | EVMSIG

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The updated DoD Earned Value Management System Interpretation Guide (EVMSIG), dated February 18, 2015 was released in March, 2015.

This DoD update, per the GAO, focuses on “(1) problems facing the cost/schedule control system (CS2) process; (2) progress DOD has made with reforms; and (3) challenges DOD faces in fostering and managing potentially significant changes”.

The update commences with:

EVMSIG INTRODUCTION

1.1 Purpose of Guide

Earned Value Management (EVM) is a widely accepted industry best practice for program management that is used across the Department of Defense (DoD), the Federal government, and the commercial sector. Government and industry program managers use EVM as a program management tool to provide joint situational awareness of program status and to assess the cost, schedule, and technical performance of programs for proactive course correction. An EVM System (EVMS) is the management control system that integrates a program’s work scope, schedule, and cost parameters for optimum program planning and control. To be useful as a program management tool, program managers must incorporate EVM into their acquisition decision-making processes; the EVM performance data generated by the EVMS must be timely, accurate, reliable, and auditable; and the EVMS must be implemented in a disciplined manner consistent with the 32 EVMS Guidelines prescribed in Section 2 of the Electronic Industries Alliance Standard-748 EVMS (EIA-748) (Reference (a)), hereafter referred to as “the 32 Guidelines.”

The DoD EVMS Interpretation Guide (EVMSIG), hereafter referred to as “the Guide”, provides the overarching DoD interpretation of the 32 Guidelines where an EVMS requirement is applied. It serves as the authoritative source for EVMS interpretive guidance and is used as the basis for the DoD to assess EVMS compliance to the 32 Guidelines in accordance with Defense Federal Acquisition Regulation Supplement (DFARS) Subpart 234.2 and 234.201 (References (b) and (c)). The Guide provides the DoD Strategic Intent behind each guideline as well as the specific attributes required in a compliant EVMS. Those attributes are the general qualities of effective implementation that are tested in support of determining EVMS compliance as it relates to the 32 Guidelines. As applicable, the DoD Strategic Intent section may clarify where differences in guideline interpretation exist for development and production type work. DoD agencies and organizations charged with conducting initial and continuing EVMS compliance activities will establish amplifying agency procedures and/or guidance to clarify how they are implementing this Guide to include the development of evaluation methods for the attributes associated with each of the 32 Guidelines.

1.2 EVM Policy

The Office of Management and Budget Circular No. A-11 (Reference (d)), the Federal Acquisition Regulation (FAR) Subpart 34.2 and Part 52 (References (e) through (h)) require federal government agency contractors to establish, maintain, and use an EVMS that is compliant with the 32 Guidelines on all major capital asset acquisitions. Based on these federal regulations and the DoD Instruction 5000.02 (DoDI 5000.02) (Reference (i)), the DoD established the Defense Federal Acquisition Regulation Supplement (DFARS) 234.201 (Reference (c)), which prescribes application of an EVMS, via the DFARS 252.234-7002 EVMS clause (Reference (j)). When EVM reporting is contractually required, the contractor must submit to the government an Integrated Program Management Report (IPMR) (DI-MGMT-81861) (Reference (k)) to report program cost and schedule performance data. The IPMR is being phased in to replace the Contract Performance Report (CPR) (DI-MGMT-81466) and the Integrated Master Schedule (IMS) (DI-MGMT-81650). Hereafter, for simplicity purposes, the term “IPMR” is used to reference legacy or current CPR/IMS DIDs. There are times in this Guide when the IMS reference is to an output of the contractor’s internal management system, i.e., a work product, which may not be referred to in the same context as the IPMR. [The full EVMSIG update is found here.]

Furthermore, also in March, 2015 the GAO released its “Report to the Committee on Armed Services, House of Representatives: Defense Acquisition | Better Approach Needed to Account for Number, Cost, and Performance of Non-Major Programs”.

An overview:

The Department of Defense (DOD) could not provide sufficiently reliable data for GAO to determine the number, total cost, or performance of DOD’s current acquisition category (ACAT) II and III programs (GAO-15-188 “Better Approach Needed to Account for Number, Cost, and Performance of Non-Major Programs” overview). These non-major programs range from a multibillion dollar aircraft radar modernization program to soldier clothing and protective equipment programs in the tens of millions of dollars. GAO found that the accuracy, completeness, and consistency of DOD’s data on these programs were undermined by widespread data entry issues, missing data, and inconsistent identification of current ACAT II and III programs. See the figure below for selected data reliability issues GAO identified. [The full GAO-15-188 document is found here.]

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EVM: The IPMR and Subcontract Flowdown

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EVM Contractors, EVM Subcontractors, IPMR & Flowdown

For decades government EVM project managers performed the task of integration of all prime and subcontractor performance and the associated data on a project. In the late 1960s things changed. The U.S. Federal Government mandated that the prime contractor become the integrator of the performance and the data. Many contractors undertook this responsibility nicely. However, for many contractors in this new role their subcontract management expertise and data accumulation capabilities were lacking on large R&D, SDD, and LRIP subcontract efforts in particular. The primes needed to include all of the data from their subcontractors that comprised as much as 80% of the contract effort. The timing of subcontractor reports became very important. However, software was “what it was” in the 1960s and ‘70s, and many EVM subcontractors were unable to meet the required delivery dates.

In the early 1980s the National Security Industrial Association [now the NDIA] conducted a survey and found that 40% of the subcontractor data was delayed by a month [additional reference, 2008 – NDIA.org source]. Consequently, January data from subcontractors would not be entered into the prime contractor’s performance reports [now IPMR or CPR] until the prime’s February report which may be delivered around 15 March. Today’s software has improved extensively and many EVM subcontractors recognize the importance of timeliness of data; they are also prime contractors on other EVM projects.

Many companies have not yet begun delivering performance data using the new Integrated Program Management Report (IPMR). Companies that are using the IPMR appear to be adapting well to the new requirements, specifically in regards to the submission date and successful retrieval of subcontractor data. The new IPMR Data Item Description, DI-MGMT-81861, specifically requires that “Formats 1-6 shall be submitted to the procuring activity no later than 12 working days following the contractor’s accounting period cutoff date. This requirement may be tailored through contract negotiations to allow submission as late as 17 working days, provided the contractor and Government agree that contract complexity and/or integration of subcontractor and vendor performance data warrant additional time and will yield more accurate performance.”

The table below illustrates the results of a survey H&A conducted of fifteen major contractors. While the sample size is small, the survey found that five prime contractors had an IPMR requirement flowdown to a subcontractor with NTE 12 working days submission CDRL requirement. In all five cases, the prime contractors were able to successfully incorporate subcontract data in time to meet the submission requirement.

EVM IPMR chart

While it has taken over 40 years, it is now recognized by both the government and contractors that timely incorporation of subcontractor performance data in the prime’s performance report helps validate the project data–the purpose of early visibility and prompt decision making.

Our survey found that those contractors submitting the IPMR are successfully incorporating subcontractors’ performance data in their IPMRs as the DID Instructions stipulate. It is hoped that the era of the “one-month lag” with subcontractor performance data has ended; and the government will be receiving accurate, timely IPMR performance data from its prime contractors.

EVM: The IPMR and Subcontract Flowdown Read Post »

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