Earned Value Management (EVM)

FAQs

Q&As Regarding the New EVM Policy from RDT Sessions

  1. What is Earned Value Management?
  2. What are the EVM System guidelines?
  3. There appears to be a lot of jargon associated with EVM. What do all the terms and acronyms mean?
  4. The new EVMS Defense Federal Acquisition Regulation Supplement (DFARS) clauses were published in April 2008. What is the effective date for their use on DoD contracts?
  5. Should the EVMS clauses in the FAR be put on DoD contracts?
  6. I understand that the DoD EVM policy was revised in March of 2005. What were the major changes?
  7. The DoD EVM application thresholds are now in then-year dollars rather than base-year dollars. Whats the difference and why was this change made?
  8. Are the changes to the DoD EVM policy retroactive to existing contracts?
  9. What is the policy on the retroactivity of the requirement for EVMS validations for contractors performing work for DoD?
  10. What impact do the new application thresholds have on determining when the use of EVM is required on DoD contracts?
  11. Wont the changes to the application thresholds increase the quantity of DoD contracts that require the use of EVM?
  12. When deciding whether a DoD contract requires the use of EVM, how do I determine the contract value against which to apply the application thresholds?
  13. Does the DoD EVM policy apply to programs or contracts that are not governed by the acquisition policy in the DoD 5000 series documents?
  14. If I have an existing contract valued at less than $20 million and intend to sign a contract modification that will increase the total value of the contract over the $20 million EVM application threshold, am I required to modify the contract to place the new EVM requirements on the contract?
  15. What types of contracts does the DoD EVM policy apply to? Does it apply to fixed price incentive contracts?
  16. Has the DoD policy on applying EVM to Firm-Fixed Price (FFP) contracts changed?
  17. Isn't DoDs policy on applying EVM to FFP contracts in conflict with OMBs direction?
  18. How should I handle a situation where a contractor proposes to use its EVMS to manage a DoD contract to which EVM is not being applied, e.g, a FFP contract?
  19. How do I apply the DoD EVM policy to contracts for which the nature of the work is level of effort?
  20. How do I get a waiver to the DoD EVM policy?
  21. How do I apply EVM on a contract that includes FFP CLINS, as well as cost and/or incentive CLINS?
  22. Do the DoD EVM requirements flow down to subcontractors?
  23. Does the DoD EVM policy require pre-award IBRs?
  24. If I place funds transferred from a DoD organization on a non-DoD contract, does the DoD EVM policy apply?
  25. Does the DoD EVM policy apply to foreign suppliers?
  26. Where can I find the Contract Performance Report (CPR) Data Item Description (DID), the forms for CPR Formats 1–5, and the Integrated Master Schedule (IMS) DID?
  27. What are the rules with regard to reporting to the EVM Central Repository (CR)?
  28. On CPR Format 1, Section 8 (f) Management Reserve, column (15) is shaded. Does this mean that I cannot put management reserve in this cell?
  29. On CPR Format 3, Section 6 Performance Data (b) Baseline Changes Authorized During Report Period, column (2) through (15) are shaded. Does this mean that I cannot put data in these cells?
  30. If a contract is rebaselined using an Over Target Baseline (OTB) or a single point adjustment, does that change the EVM requirements for the contract?
  31. The DoD EVM policy addresses the IMS but does not address the Integrated Master Plan (IMP). Does this mean the IMP is not required?
  32. If the requirement for an IMS is implemented on a contract option, must the existing contract be modified to require an IMS?
  33. Is there a DoD requirement for a resource-loaded schedule?
  34. Who determines how the CPR and the IMS will be tailored?
  35. How can the CPR and the IMS be integrated if the information is maintained in different software applications?
  36. Where can I find out more about EVM and its uses in the DoD environment?
  37. Where can I find information on EVM for industry users?

What is Earned Value Management?

Earned Value Management, or EVM, is a widely accepted industry best practice for project management that is being used across the Department of Defense (DoD), the Federal government, and the commercial sector. It is the use of an integrated management system that coordinates the work scope, schedule, and cost goals of a program or contract, and objectively measures progress toward these goals. EVM is a tool used by program managers to: (1) quantify and measure program/contract performance, (2) provide an early warning system for deviation from a baseline, (3) mitigate risks associated with cost and schedule overruns, and (4) provide a means to forecast final cost and schedule outcomes.

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What are the EVM System guidelines?

The implementation and use of EVM is governed by an industry standard—ANSI/EIA-748, Earned Value Management Systems. ANSI/EIA stands for American National Standards Institute/Electronic Industries Alliance. The standard establishes 32 minimum management control guidelines for an Earned Value Management System (EVMS) to ensure the validity of the information used by management. DoD and the Federal government at large have adopted the guidelines in ANSI/EIA-748 for use on government programs and contracts. The DoD EVM policy requires contractor management systems compliant with the current version of ANSI/EIA-748 whenever EVM is required. In DoD, the Defense Contract Management Agency (DCMA) is the executive agency for EVMS and in this capacity has responsibility for determining that contractor systems comply with ANSI/EIA-748.

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There appears to be a lot of jargon associated with EVM. What do all the terms and acronyms mean?

The Glossary of EVM Terms and the Gold Card External Link are good references for more information on EVM terms and acronyms.

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The new EVMS Defense Federal Acquisition Regulation Supplement (DFARS) clauses were published in April 2008. What is the effective date for their use on DoD contracts?

The final rule on the new EVMS DFARS clauses was published in the Federal Register on April 23, 2008. The new clauses (252.234-7001 for solicitations and 252.234-7002 for contracts) shall be applied to newly awarded DoD contracts effective immediately. Existing contracts that contain the previous clauses (252.242-7001 and 252.242-7002) do not require modification to apply the new clauses.

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Should the EVMS clauses in the FAR be put on DoD contracts?

No, the FAR clauses should not be put on DoD contracts. The FAR allows for Federal departments and agencies to use clauses that are substantially the same as the FAR clauses. The EVMS DFARS clauses are substantially the same and therefore satisfy the FAR requirements. In fact, Section 234.203 of the April 2008 DFARS specifically states that the DFARS will be used instead of the FAR. It should be noted, however, that the FAR contains a clause for pre-award IBRs but the DFARS do not. Therefore, if a program manager elects to conduct a pre-award IBR on a DoD contract, he or she should include that requirement in the statement of work.

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I understand that the DoD EVM policy was revised in March of 2005. What were the major changes?

On March 7, 2005, the Defense Acquisition Executive signed a memorandum approving some relatively significant changes to the Departments longstanding EVM policy. The policy was revised to provide consistency in EVM application and implementation across DoD programs and to better manage the programs through improvements in DoD and industry EVM practices. The revised policy requires that all EVM applications comply with ANSI/EIA-748. It also mandates new EVM application thresholds, which are now in then-year dollars. Other key changes include: improving and renaming the Contract Performance Report (CPR) (previously called the Cost Performance Report); expanding the use of the Integrated Master Schedule (IMS); clarifying the requirement for Integrated Baseline Reviews (IBRs); and eliminating the Cost/Schedule Status Report (C/SSR).

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The DoD EVM application thresholds are now in then-year dollars rather than base-year dollars. Whats the difference and why was this change made?

Then-year dollars are current dollars that reflect the impact of inflation over time, such as the dollars in your wallet. Base-year dollars are constant dollars that reflect the cost of the program as if inflation had not occurred (the cost to acquire a multi-year system if you paid for it in advance in one specific year). The EVM application thresholds were changed from base-year dollars to then-year dollars because then-year dollars represent a more accurate measure of the value of contracts. Contracts are awarded in then-year dollars, which represent what the government has to pay. Base-year dollars are used primarily for cost estimating purposes and are not good indicators of current contract value. The threshold dollar values will be reassessed periodically and revised as necessary to keep pace with future inflation.

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Are the changes to the DoD EVM policy retroactive to existing contracts?

No, the changes to the EVM policy are not retroactive to existing contracts. However, they are effective immediately on new cost or incentive contracts awarded in response to solicitations or requests for proposals issued on or after April 6, 2005 (30 days from the date of the memorandum signed by the Defense Acquisition Executive). While the changes are not retroactive, program managers are not precluded from imposing new or different EVM requirements on existing contracts if the benefits outweigh the costs. Remaining contract duration and estimated costs, as well as other risk factors, should be taken into consideration when determining whether to modify the EVM requirements on existing contracts. In addition, the costs associated with the modifications will be borne by the government.

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What is the policy on the retroactivity of the requirement for EVMS validations for contractors performing work for DoD?

To reiterate, the changes to the EVM policy are not retroactive to existing contracts (see the answer to the previous question). This includes EVMS validations that were not required under the old policy but would be under the new policy. However, if a contractor (or subcontractor) without an EVMS validation is awarded a new cost or incentive contract that is valued at or greater than $50 million, validation is then required.

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What impact do the new application thresholds have on determining when the use of EVM is required on DoD contracts?

The old DoD policy required EVM on development contracts over $73 million and procurement and operations and maintenance contracts over $315 million. It also required C/SSRs on contracts over $6.3 million. The March 2005 revisions to the policy raised the lower threshold from $6.3 million to $20 million and lowered the upper threshold from $73 million and $315 million to $50 million (it also eliminated the separate thresholds for development and procurement). Under the new DoD policy, EVM compliance is required on cost or incentive contracts, subcontracts, intra-government work agreements, and other agreements valued at or greater than $20 million. An EVMS that has been formally validated by DCMA and accepted by the cognizant contracting officer is required on cost or incentive contracts, subcontracts, intra-government work agreements, and other agreements valued at or greater than $50 million.

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Wont the changes to the application thresholds increase the quantity of DoD contracts that require the use of EVM?

While on the surface it appears as though this would be true, it is in fact not the case. A comprehensive business case analysis conducted in November 2004, based on DoD contracts data supplied by DCMA and industry-representative contracts data provided by the National Defense Industrial Association, concluded that the new application thresholds would result in significant cost avoidance relative to the former thresholds. Specifically, the cost of eliminating C/SSRs on low dollar value contracts (those valued below $20 million) more than offsets the increased cost of additional CPRs and tailored CPRs, which replace C/SSRs, on the higher dollar value contracts (those valued at $20 million and above).

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When deciding whether a DoD contract requires the use of EVM, how do I determine the contract value against which to apply the application thresholds?

When determining the contract value for the purpose of applying the EVM thresholds, the total contract value in then-year dollars, including planned options placed on contract at the time of award, should be used.

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Does the DoD EVM policy apply to programs or contracts that are not governed by the acquisition policy in the DoD 5000 series documents?

All major acquisitions with development effort, regardless of whether they have been designated as DoD acquisition programs, are subject to the EVM policy in accordance with the direction in Office of Management and Budget (OMB) Circular A–11, Part 7, and the corresponding Capital Programming Guide.

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If I have an existing contract valued at less than $20 million and intend to sign a contract modification that will increase the total value of the contract over the $20 million EVM application threshold, am I required to modify the contract to place the new EVM requirements on the contract?

Generally speaking, the changes to the EVM policy are not retroactive to contracts awarded in response to solicitations or requests for proposals issued before April 6, 2005. However, the program manager is strongly encouraged to add or change the EVM requirements when modifying an existing contract to proceed to a subsequent acquisition phase, or in cases where the duration of the contract exceeds 12 months, the value of the contract reaches $50 million or greater, and/or the nature of the work imposes risk to the government. The costs associated with the modifications will be borne by the government. To minimize the likelihood of this situation occurring, the program manager should impose an EVM requirement on the contract when it is initially awarded if there is knowledge at the time that the value of the contract will grow to reach or exceed $20 million.

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What types of contracts does the DoD EVM policy apply to? Does it apply to fixed price incentive contracts?

The EVM policy applies to all cost or incentive type contracts, subcontracts, intra-government work agreements, and other agreements valued at or greater than $20 million. Since a fixed price incentive contract is by definition an incentive contract, it requires the implementation of EVM if it is valued at or greater than $20 million.

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Has the DoD policy on applying EVM to Firm-Fixed Price (FFP) contracts changed?

When the EVM policy was revised in March 2005, the Defense Acquisition Executive decided to retain the existing policy for FFP contracts based on the rationale that, if the risk warrants the need for EVM to manage, FFP may not be the appropriate contract type. Therefore, the use of EVM on FFP contracts continues to be limited to cases where the program manager believes there is significant schedule risk and/or concern about the impact of cost pressures on product or service quality. In these cases, the program manager should ask for a waiver from the program decision authority to implement EVM on individual FFP contracts. In addition, if a FFP contract is used for development or integration efforts valued at or greater than $20 million, the program manager is required by OMB (see next question) to use EVM and should request a waiver to do so. Such waiver requests must include a business case analysis that provides the rationale for why a cost or incentive contract was not an appropriate contracting vehicle.

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Isn't DoDs policy on applying EVM to FFP contracts in conflict with OMBs direction?

No, the DoD EVM policy only appears to differ from the OMB policy. If the DoD policies on selecting contract type and applying EVM are followed, the instances of noncompliance with the OMB policy will be the exception not the rule. While the OMB policy does not exempt FFP contracts from the EVM requirements, OMB's focus is on development efforts in both the planning and acquisition phases. DoD does not as a matter of course use FFP contracts for development and integration efforts, which are inherently more risky to the government. (OMB also discourages the use of FFP contracts for development efforts.) Therefore, in DoD the use of FFP contracts is typically limited to mature, lower risk production work, which uses means other than earned value to manage contract performance. Higher risk development work is usually accomplished with cost type contracts, which require EVM. Low rate initial production and early production contracts tend to be of the fixed price incentive type, which also require EVM. In order to preclude any disconnects with regard to the applicability of EVM based on contract type, DoD program managers need to adhere to the Department's policies on selecting contract type and applying EVM. And, when a FFP contract is chosen for development work, the program manager needs to apply EVM to the contract and should request a waiver from the program decision authority to do so.

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How should I handle a situation where a contractor proposes to use its EVMS to manage a DoD contract to which EVM is not being applied, e.g, a FFP contract?

The contractor should not be prohibited from employing its EVMS if the use of EVM is an ingrained corporate process. DoD, however, would not typically require EVM reporting (Contract Performance Report and Integrated Master Schedule) on contracts to which EVM is not being applied, such as FFP contracts. When the contractors EVMS is an ingrained corporate process and no reporting to DoD is required, DoD should incur little or no implementation costs associated with use of the contractors EVMS. But, in cases where there may be some minor costs, they should be negotiated up front with the contractor.

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How do I apply the DoD EVM policy to contracts for which the nature of the work is level of effort?

As a general rule, EVM is required on cost or incentive contracts valued at or greater than $20 million; however, it may be necessary to consider the nature of the work associated with the contract when determining EVM applicability. In the EVM context, there are two basic classifications of the nature of work—discrete and level of effort (LOE). Discrete work is related to the completion of specific end products or services and can be directly planned, scheduled, and measured. LOE is effort of a general or supportive nature that does not produce definite end products (time and materials and services contracts may contain LOE work). The application of EVM on work that is LOE in nature may be impractical and inefficient. Therefore, if the work on a contract is exclusively LOE, it may be appropriate to request a waiver to the EVM policy from the program decision authority. When possible, waiver requests should be included in the program acquisition strategy. If EVM is waived for a contract due to the nature of the work, the program manager is required to implement an alternative method of management control to provide advanced warning of potential performance problems. Waivers to the EVM policy should be the exception not the rule because they are appropriate only in cases where a cost or incentive contract is being used for work that is exclusively LOE.

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How do I get a waiver to the DoD EVM policy?

Waivers to the EVM policy—just like any other policy waiver—should be obtained on a case-by-case basis from the appropriate program decision authority using the pre-existing processes. However, requests to waive specific EVM requirements can also be requested via inclusion in the acquisition strategy that is approved by the program decision authority.

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How do I apply EVM on a contract that includes FFP CLINS, as well as cost and/or incentive CLINS?

If a contract type is mixed, the EVM policy should be applied separately to the different parts (contract types). In other words, the use of EVM on any cost or incentive parts that are valued at $20 million or greater would be required but EVM would not be required on any FFP parts, unless the work involves development or integration effort.

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Do the DoD EVM requirements flow down to subcontractors?

Yes, the EVM requirements flow down to the subcontractor if the subcontract is valued at or greater than $20 million. Subcontractors with contracts valued at or greater than $50 million are subject to the EVMS validation requirement. In accordance with the DFARS clauses, the prime contractor identifies the major subcontractors in its proposal. The government then determines, and specifies by name in the prime contract, which of those major subcontracts must comply with the EVM requirements.

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Does the DoD EVM policy require pre-award IBRs?

No, the EVM policy does not mandate pre-award IBRs. The policy requires that IBRs be initiated as early as practicable and that the timing of the IBRs take into consideration the contract period of performance. The IBR process should be conducted not later than 180 calendar days (6 months) after: (1) contract award, (2) the exercise of significant contract options, and (3) the incorporation of major modifications. However, the policy does not prohibit the use of pre-award IBRs in situations where they may be appropriate and beneficial. If a program manager elects to conduct a pre-award IBR on a DoD contract, he or she should include that requirement in the statement of work.

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If I place funds transferred from a DoD organization on a non-DoD contract, does the DoD EVM policy apply?

No, the contract will be awarded in accordance with the rules of the organization receiving the transferred funds, and in accordance with the FAR as applicable.

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Does the DoD EVM policy apply to foreign suppliers?

Yes, the EVM thresholds and requirements apply to both domestic and foreign contractors and subcontractors. In fact, many foreign suppliers operate in countries that have EVM policies very similar to those of the United States, such as Canada, Australia, and the United Kingdom.

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Where can I find the Contract Performance Report (CPR) Data Item Description (DID), the forms for CPR Formats 1–5, and the Integrated Master Schedule (IMS) DID?

The approved CPR and IMS DIDs are available on the ASSIST website External Link. The CPR forms (Formats 1–5) are located on the DoD Forms Program website External Link in .pdf format. A Microsoft Excel version of Formats 1–5 is available on both the OSD EVM web site and the EVM Community of Practice website External Link on the AT&L Acquisition Community Connection knowledge sharing system. See our Resources, Policies and Standards page where we have link to the DID documents.

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What are the rules with regard to reporting to the EVM Central Repository (CR)?

The EVM information (CPR, IMS, and CFSR) for all ACAT I programs is required to be submitted directly to the EVM CR by the reporting contractor. The EVM CR should be the sole addressee on the contract data requirements lists (CDRLs) for these reports. The use of a standard electronic data exchange format is required for all reports. All data must be in a readable digital format (e.g., pdf files are not acceptable). The Extensible Markup Language standard (Project Schedule Cost Performance Management message) is the preferred format. The American National Standards Institute X12 standard (839 transaction set) is also acceptable. On-line access to the data may be provided to augment formal submission. See the EVM CR Manual External Link for additional guidance on the CR requirements.

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On CPR Format 1, Section 8 (f) Management Reserve, column (15) is shaded. Does this mean that I cannot put management reserve in this cell?

Management reserve data should be included in Section 6 (a), (b), and (c) Estimated Cost at Completion under the Management Estimate at Completion (1). As per the DID, the estimate at completion in column (15) would only be for work included in the Performance Measurement Baseline (PMB). Any impacts due to additional risk, management reserve, or higher level management knowledge would be included in Section 6 (1).

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On CPR Format 3, Section 6 Performance Data (b) Baseline Changes Authorized During Report Period, column (2) through (15) are shaded. Does this mean that I cannot put data in these cells?

That is correct. Data cannot be input into shaded cells. Baseline changes should be included in Section 6 (b) Baseline Changes Authorized During Report Period, column (16) as a total value for each significant change. Differences between the beginning PMB time phasing and the ending PMB time phasing in Format 3 should be amplified and explained in Format 5.

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If a contract is rebaselined using an Over Target Baseline (OTB) or a single point adjustment, does that change the EVM requirements for the contract?

The changes to the EVM policy are not retroactive to contracts awarded in response to solicitations or requests for proposals issued before April 6, 2005. However, the policy does not prohibit contract modifications to impose new or different EVM requirements provided that the cost associated with the change is borne by the government. The program manager should consider the new contract value, the remaining contract duration, the risk associated with the contract, and the cost/benefit tradeoff in determining how to apply the EVM requirements to a rebaselined contract.

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The DoD EVM policy addresses the IMS but does not address the Integrated Master Plan (IMP). Does this mean the IMP is not required?

The requirement for an IMP has not changed. Both the IMP and the IMS continue to be important tools that provide significant assistance in the planning and scheduling of work efforts. The IMP is a contractual event-based plan consisting of a hierarchy of program events, with each event being supported by specific accomplishments and completion criteria. The IMS is a time-based schedule that flows directly from the IMP and provides the level of detail necessary for day-to-day program/contract execution. The IMS is typically requested through a CDRL. The policy changes in March 2005 strengthened the requirement for an IMS DoD-wide by requiring an IMS whenever a CPR is required. The aim of this change is to better integrate cost and schedule reporting and to improve schedule performance.

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If the requirement for an IMS is implemented on a contract option, must the existing contract be modified to require an IMS?

The changes to the EVM policy are not retroactive to contracts awarded in response to solicitations or requests for proposals issued before April 6, 2005. However, the decision to impose the IMS requirement on the original contract should be made based on negotiations between the government and contractor, and should be based on all relevant factors to include the dollar value and duration of the contract, the degree of risk, and the nature of the work. If a decision is made to modify the contract, keep in mind that the IMS can be tailored as appropriate within the bounds of the policy. Detailed guidance on tailoring the IMS can be found in the DoD Earned Value Management Implementation Guide.

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Is there a DoD requirement for a resource-loaded schedule?

No, the IMS DID does not prescribe a resource-loaded schedule, nor does it prohibit resource loading in those situations where it is appropriate and beneficial to do so.

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Who determines how the CPR and the IMS will be tailored?

The program manager is ultimately responsible for determining how EVM reporting will be tailored, but the degree of tailoring must be appropriate and allowable within the bounds of the EVM policy. Both the CPR and the IMS are tailorable for contracts valued at less than $50 million. For example, reporting frequency, submission dates, and level of detail can be negotiated. All relevant risk factors should be considered when determining the degree of tailoring that is appropriate.

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How can the CPR and the IMS be integrated if the information is maintained in different software applications?

The policy aims to link the CPR and the IMS by requiring the submission of both reports any time EVM is required and mandating that a common work breakdown structure that follows MIL-HDBK-881A (Work Breakdown Structure Handbook) be used for both reports. The policy does not prescribe specific software applications.

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Where can I find out more about EVM and its uses in the DoD environment?

The DAU EVM Training Center site External Link contains training modules to familiarize users with the EVM process and its application to DoD programs/contracts. The EVM Community of Practice website External Link also provides users with a variety of resources applicable to EVM including tools, published articles, training material, a research library, and an EVM discussion forum.

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Where can I find information on EVM for industry users?

The National Defense Industrial Associations Program Management Systems Committee is the recognized body for subject matter expertise on ANSI/EIA-748. The Committees web site hosts several guides that represent best practices in EVM application and implementation. The guides can be accessed from the EVM Community of Practice website External Link (click on OMB Recommended References). In addition, the Project Management Institute, College of Performance Management (PMI/CPM) website External Link provides a forum for sharing information in the private sector regarding EVM and its application in the business environment. This site posts conferences, training opportunities, and events of interest to all users of EVM.

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