[Federal Register: April 23, 2008 (Volume 73, Number 79)]
[Rules and Regulations]
[Page 21846-21850]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23ap08-17]
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DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 234, 242, and 252
RIN 0750-AF19
Defense Federal Acquisition Regulation Supplement; Earned Value
Management Systems (DFARS Case 2005-D006)
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD).
ACTION: Final rule.
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SUMMARY: DoD has issued a final rule amending the Defense Federal
Acquisition Regulation Supplement (DFARS) to update requirements for
DoD contractors to establish and maintain earned value management
systems. The rule also eliminates requirements for DoD contractors to
submit cost/schedule status reports.
EFFECTIVE DATE: April 23, 2008.
FOR FURTHER INFORMATION CONTACT: Mr. Mark Gomersall, Defense
Acquisition Regulations System, OUSD (AT&L) DPAP (DARS), IMD 3D139,
3062 Defense Pentagon, Washington, DC 20301-3062. Telephone 703-602-
0302; facsimile 703-602-7887. Please cite DFARS Case 2005-D006.
SUPPLEMENTARY INFORMATION:
A. Background
This final rule updates DFARS text addressing earned value
management policy for DoD contracts. The rule supplements the final FAR
rule published at 71 FR 38238 on July 5, 2006, and establishes DoD-
specific earned value management requirements, as permitted by the FAR.
The DFARS rule is consistent with the policy in the memorandum issued
by the Under Secretary of Defense (Acquisition, Technology, and
Logistics) on March 7, 2005, Subject: Revision to DoD Earned Value
Management Policy (available at http://www.acq.osd.mil/dpap/ops/
policy_vault.html).
The DFARS changes in this rule include the following:
[cir] For cost or incentive contracts and subcontracts valued at
$20,000,000 or more, the rule requires an earned value management
system that complies with the guidelines in the American National
Standards Institute/Electronic Industries Alliance Standard 748, Earned
Value Management Systems (ANSI/EIA-748).
[cir] For cost or incentive contracts and subcontracts valued at
$50,000,000 or more, the rule requires an earned value management
system that has been determined by the cognizant Federal agency (as
defined in FAR 2.101) to be in compliance with the guidelines in ANSI/
EIA-748.
[cir] For cost or incentive contracts and subcontracts valued at
less than $20,000,000, the rule provides that application of earned
value management is optional and is a risk-based decision.
[cir] For firm-fixed-price contracts and subcontracts of any dollar
value, the rule discourages the application of earned value management.
[cir] The Defense Contract Management Agency is assigned
responsibility for determining earned value management compliance when
DoD is the cognizant Federal agency.
[cir] Requirements for contractor cost/schedule status reports are
eliminated.
DoD published a proposed rule at 71 FR 3449 on January 23, 2006.
Five sources submitted comments on the proposed rule. A discussion of
the comments is provided below.
1. Comment: One respondent stated that the $20,000,000 threshold
for earned value management (EVM) further aggravates the ability to
mitigate cost, schedule, and technical risks, since receiving EVM data
below that threshold would be helpful in assisting leadership to make
affordable decisions.
DoD Response: The rule allows for EVM below the $20,000,000
threshold when its application is determined to be appropriate as the
result of a cost-benefit analysis.
2. Comment: Two respondents stated that the rule should be revised
to specifically state that EVM requirements do not apply to time-and-
materials, labor-hour, and level-of-effort contracts.
DoD Response: The rule requires EVM to be applied only on cost and
incentive type contracts and subcontracts over certain thresholds. EVM
is discouraged on firm-fixed-price contracts and subcontracts of any
dollar value. Further, performance-based acquisition management on
developmental efforts, as described in OMB Circular A-11, Part 7,
focuses on the use of EVM on cost and incentive type contracts.
3. Comment: One respondent expressed support of the rule, but urged
that the Defense Acquisition Regulations Council work with the Civilian
Agency Acquisition Council to ensure that the final FAR rule is
consistent with the DFARS rule. In particular, the respondent stated
that the FAR rule should be revised in four areas to make it consistent
with the DFARS rule as follows: Explicitly limit application of EVM
requirements to cost or incentive contracts; establish a fixed dollar
value for the applicability of EVM requirements; limit integrated
baseline reviews to contract post-award; and establish an executive
agency (such as the Defense Contract Management Agency (DCMA)) within
the Government responsible for Government-wide EVM system compliance
reviews.
DoD Response: The respondent's recommendations regarding the FAR
were addressed in the preamble to the FAR rule published at 71 FR 38238
on July 5, 2006. Additional changes have been made to the DFARS rule
for consistency with the FAR rule. Those changes include:
[[Page 21847]]
[cir] Relocation of EVM policy from Part 242 to Part 234.
[cir] For cost or incentive contracts and subcontracts valued at
$50,000,000 or more, replacement of the requirement for a contracting
officer's formal validation and acceptance with the requirement for an
EVM system that has been determined by the cognizant federal agency to
be in compliance with the guidelines in ANSI/EIA-748. DCMA is assigned
responsibility for determining EVM system compliance when DoD is the
cognizant Federal agency.
[cir] Elimination of the text included in the proposed rule at
252.242-7006(b), which specified that the terms for compliance with
ANSI/EIA-748 for contracts below $50,000,000 may be subject to
negotiation between the contractor and the contracting officer;
compliance with the guidelines in ANSI/EIA-748 is not subject to
negotiation.
[cir] Addition of text in the solicitation provision at 252.234-
7001(a)(2)(ii) and (iii) to require an offeror proposing to use a
system that has not been determined to be in compliance with ANSI/EIA-
748, to provide information and assistance as required by the
contracting officer to support review of the offeror's plan for
compliance and to provide milestones that indicate when the offeror
will be compliant.
[cir] Elimination of a separate provision and clause to address
requirements for contracts valued at $20,000,000 or more but less than
$50,000,000. The provision and clause at 252.234-7001 and 252.234-7002
address requirements for contracts above or below $50,000,000.
4. Comment: One respondent recommended that the contract clause for
EVM compliance be modified to indicate that the contract performance
report may be tailored in accordance with the DoD Earned Value
Management Implementation Guide, in order to reduce the burden on
contractors while still ensuring that DoD managers receive useful
information. The memorandum issued by the Under Secretary of Defense
(Acquisition, Technology, and Logistics) on March 7, 2005, indicates
that the contract performance report may be tailored, based on guidance
in the implementation guide, for cost or incentive contracts valued at
$20 million or more but less than $50 million.
DoD Response: DoD does not believe it is necessary to address
tailoring of the contract performance report within the contract
clause. The contracting officer may tailor the report in accordance
with the DoD Earned Value Management Implementation Guide. A reference
to the guide has been added to the DFARS companion resource,
Procedures, Guidance, and Information. Any tailoring of contract
performance reports for a particular contract will be documented in the
contract data requirements list to ensure the contractual requirements
are clear.
5. Comment: One respondent recommended that language be added to
the contract clause to state that the contractor is responsible for
ensuring that selected subcontractors comply with ANSI/EIA-748.
DoD Response: Paragraph (h) of the contract clause in the final
rule specifies that the contractor must require certain subcontractors
(or subcontractor effort if subcontractors have not been selected) to
comply with the EVM requirements of the clause. This includes
compliance with the EVM guidelines in ANSI/EIA-748.
6. Comment: One respondent recommended adding the following
language to the contract clause for consistency with language included
in the solicitation provision: ``The terms for compliance with ANSI/
EIA-748 may be subject to negotiation between the contractor and
subcontractor. The conduct of the integrated baseline reviews also may
be subject to negotiation between the contractor and subcontractor.''
DoD Response: The cited language has been excluded from the final
rule. The clause at 252.234-7002 requires contractors to ensure
subcontractor compliance with the EVM requirements of the clause, to
include compliance with the guidelines in ANSI/EIA-748. Likewise,
contractors are required to ensure that any necessary participation by
a subcontractor in the performance of integrated baseline reviews is in
accordance with the clause. However, since integrated baseline reviews
are a joint assessment between the contractor and the Government, the
timing of such reviews will necessarily be coordinated between the
parties.
7. Comment: One respondent indicated that emphasis should be placed
on establishing a system that requires a company-wide commitment to
standardized actual collection systems, budgeting systems, scheduling
systems, status systems, change management systems, and reporting
systems, rather than simply emphasizing what threshold should be used
to apply EVM.
DoD Response: The Government can not mandate contractor management
and budgetary control systems used outside of Government contracts.
However, contractors that are frequently awarded Government contracts
that require EVM may find it in their best interests to establish
company-wide standardized EVM systems that are in compliance with ANSI/
EIA-748.
This rule was not subject to Office of Management and Budget review
under Executive Order 12866, dated September 30, 1993.
B. Regulatory Flexibility Act
DoD has prepared a final regulatory flexibility analysis consistent
with 5 U.S.C. 604. A copy of the analysis may be obtained from the
point of contact specified herein. The analysis is summarized as
follows:
This final rule amends the DFARS to update requirements for DoD
contractors to establish and maintain earned value management systems.
The rule revises the dollar thresholds at which DoD applies earned
value management policy, and eliminates requirements for DoD
contractors to submit cost/schedule status reports.
The rule supplements the FAR rule published at 71 FR 38238 on July
5, 2006. The FAR rule provides standard earned value management policy,
consistent with the requirements of OMB Circular A-11, Part 7,
Planning, Budgeting, Acquisition, and Management of Capital Assets, and
the supplement to Part 7, the Capital Programming Guide. The OMB
Circular and its supplement implement statutory requirements for the
Government to define the cost, performance, and schedule, and schedule
goals for major acquisitions and to achieve, on the average, 90 percent
of the established goals.
The FAR rule permits agency supplementation with regard to earned
value management applicability criteria, post-award review
requirements, and procedures for implementation of the guidelines in
American National Standards Institute/Electronic Industries Alliance
Standard 748 (ANSI/EIA-748), Earned Value Management Systems. This
DFARS rule establishes the DoD-specific earned value management
requirements.
The FAR rule permits agency supplementation with regard to earned
value management applicability criteria, post-award review
requirements, and procedures for implementation of the guidelines in
American National Standards Institute/Electronic Industries Alliance
Standard 748 (ANSI/EIA-748), Earned Value Management Systems. This
DFARS rule establishes the DoD-specific earned value management
requirements.
The threshold at which a DoD contractor previously was required to
[[Page 21848]]
have an earned value management system that complied with ANSI/EIA-748
was $73 million for contracts and subcontracts funded with research,
development, test and evaluation funding; and $315 million for
contracts and subcontracts funded with operation and maintenance or
procurement funding. This DFARS rule lowers those thresholds to a
single $20 million for all cost or incentive contracts and
subcontracts, regardless of funding type, and establishes a new
threshold of $50 million for an earned value management system that has
been determined by the Government to be in compliance with ANSI/EIA-
748. The rule discourages the application of earned value management
requirements to fixed-price contracts and subcontracts of any dollar
value.
During fiscal year 2006, DoD awarded 8,266 cost or incentive
contracts to small business concerns, with only 16 of those contracts
exceeding $20 million in value. During the same fiscal year, DoD
awarded 53,585 fixed-price type contracts to small business concerns,
with only 70 of those contracts exceeding $20 million in value. The use
of earned value management requirements in fixed-price contracts is
expected to be rare.
The DFARS rule mitigates the impact on small businesses by
establishing a $20 million contract threshold for earned value
management requirements, and discouraging the application of earned
value management requirements to fixed-price contracts and
subcontracts, thereby establishing a very small subset of the small
business community for which the rule would be applicable. The cost for
a small business concern to establish a compliant earned value
management system would be a one-time cost that the concern may offset
through cost reimbursement on the resulting Government contract.
C. Paperwork Reduction Act
This rule does not impose any new information collection
requirements that require the approval of the Office of Management and
Budget (OMB) under 44 U.S.C. 3501, et seq. The contract performance
reports required by the rule are approved under OMB Clearance Number
0704-0188, Acquisition Management Systems and Data Requirements Control
List.
List of Subjects in 48 CFR Parts 234, 242, and 252
Government procurement.
Michele P. Peterson,
Editor, Defense Acquisition Regulations System.
0
Therefore, 48 CFR parts 234, 242, and 252 are amended as follows:
0
1. The authority citation for 48 CFR parts 234, 242, and 252 continues
to read as follows:
Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.
PART 234--MAJOR SYSTEM ACQUISITION
Sec. 234.005 [Removed]
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2. Section 234.005 is removed.
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3. Subpart 234.2 is added to read as follows:
Subpart 234.2--Earned Value Management System
Sec.
234.201 Policy.
234.203 Solicitation provisions and contract clause.
Subpart 234.2--Earned Value Management System
Sec. 234.201 Policy.
(1) DoD applies the earned value management system requirement as
follows:
(i) For cost or incentive contracts and subcontracts valued at
$20,000,000 or more, the earned value management system shall comply
with the guidelines in the American National Standards Institute/
Electronic Industries Alliance Standard 748, Earned Value Management
Systems (ANSI/EIA-748).
(ii) For cost or incentive contracts and subcontracts valued at
$50,000,000 or more, the contractor shall have an earned value
management system that has been determined by the cognizant Federal
agency to be in compliance with the guidelines in ANSI/EIA-748.
(iii) For cost or incentive contracts and subcontracts valued at
less than $20,000,000--
(A) The application of earned value management is optional and is a
risk-based decision;
(B) A decision to apply earned value management shall be documented
in the contract file; and
(C) Follow the procedures at PGI 234.201(1)(iii) for conducting a
cost-benefit analysis.
(iv) For firm-fixed-price contracts and subcontracts of any dollar
value--
(A) The application of earned value management is discouraged; and
(B) Follow the procedures at PGI 234.201(1)(iv) for obtaining a
waiver before applying earned value management.
(2) When an offeror proposes a plan for compliance with the earned
value management system guidelines in ANSI/EIA-748, follow the review
procedures at PGI 234.201(2).
(3) The Defense Contract Management Agency is responsible for
determining earned value management system compliance when DoD is the
cognizant Federal agency.
(4) See PGI 234.201(4) for additional guidance on earned value
management.
234.203 Solicitation provisions and contract clause.
For cost or incentive contracts valued at $20,000,000 or more, and
for other contracts for which EVMS will be applied in accordance with
234.201(1)(iii) and (iv)--
(1) Use the provision at 252.234-7001, Notice of Earned Value
Management System, instead of the provisions at FAR 52.234-2, Notice of
Earned Value Management System--Pre-Award IBR, and FAR 52.234-3, Notice
of Earned Value Management System--Post-Award IBR, in the solicitation;
and
(2) Use the clause at 252.234-7002, Earned Value Management System,
instead of the clause at FAR 52.234-4, Earned Value Management System,
in the solicitation and contract.
PART 242--CONTRACT ADMINISTRATION AND AUDIT SERVICES
0
4. Section 242.1106 is amended by revising paragraph (a) to read as
follows:
242.1106 Reporting requirements.
(a) See DoDI 5000.2, Operation of the Defense Acquisition System,
for reporting requirements for defense technology projects and
acquisition programs.
* * * * *
242.1107-70 [Removed]
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5. Section 242.1107-70 is removed.
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
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6. Sections 252.234-7001 and 252.234-7002 are added to read as follows:
252.234-7001 Notice of Earned Value Management System.
As prescribed in 234.203(1), use the following provision:
Notice of Earned Value Management System (Apr 2008)
(a) If the offeror submits a proposal in the amount of
$50,000,000 or more--
[[Page 21849]]
(1) The offeror shall provide documentation that the Cognizant
Federal Agency (CFA) has determined that the proposed Earned Value
Management System (EVMS) complies with the EVMS guidelines in the
American National Standards Institute/Electronic Industries Alliance
Standard 748, Earned Value Management Systems (ANSI/EIA-748)
(current version at time of solicitation). The Government reserves
the right to perform reviews of the EVMS when deemed necessary to
verify compliance.
(2) If the offeror proposes to use a system that has not been
determined to be in compliance with the requirements of paragraph
(a)(1) of this provision, the offeror shall submit a comprehensive
plan for compliance with the guidelines in ANSI/EIA-748.
(i) The plan shall--
(A) Describe the EVMS the offeror intends to use in performance
of the contract, and how the proposed EVMS complies with the EVMS
guidelines in ANSI/EIA-748;
(B) Distinguish between the offeror's existing management system
and modifications proposed to meet the EVMS guidelines;
(C) Describe the management system and its application in terms
of the EVMS guidelines;
(D) Describe the proposed procedure for administration of the
EVMS guidelines as applied to subcontractors; and
(E) Describe the process the offeror will use to determine
subcontractor compliance with ANSI/EIA-748.
(ii) The offeror shall provide information and assistance as
required by the Contracting Officer to support review of the plan.
(iii) The offeror's EVMS plan must provide milestones that
indicate when the offeror anticipates that the EVMS will be
compliant with the guidelines in ANSI/EIA-748.
(b) If the offeror submits a proposal in an amount less than
$50,000,000--
(1) The offeror shall submit a written description of the
management procedures it will use and maintain in the performance of
any resultant contract to comply with the requirements of the Earned
Value Management System clause of the contract. The description
shall include--
(i) A matrix that correlates each guideline in ANSI/EIA-748
(current version at time of solicitation) to the corresponding
process in the offeror's written management procedures; and
(ii) The process the offeror will use to determine subcontractor
compliance with ANSI/EIA-748.
(2) If the offeror proposes to use an EVMS that has been
determined by the CFA to be in compliance with the EVMS guidelines
in ANSI/EIA-748, the offeror may submit a copy of the documentation
of such determination instead of the written description required by
paragraph (b)(1) of this provision.
(c) The offeror shall identify the subcontractors (or the
subcontracted effort if subcontractors have not been selected) to
whom the EVMS requirements will apply. The offeror and the
Government shall agree to the subcontractors or the subcontracted
effort selected for application of the EVMS requirements. The
offeror shall be responsible for ensuring that the selected
subcontractors comply with the requirements of the Earned Value
Management System clause of the contract.
(End of provision)
252.234-7002 Earned Value Management System.
As prescribed in 234.203(2), use the following clause:
Earned Value Management System (Apr 2008)
(a) In the performance of this contract, the Contractor shall
use--
(1) An Earned Value Management System (EVMS) that complies with
the EVMS guidelines in the American National Standards Institute/
Electronic Industries Alliance Standard 748, Earned Value Management
Systems (ANSI/EIA-748); and
(2) Management procedures that provide for generation of timely,
reliable, and verifiable information for the Contract Performance
Report (CPR) and the Integrated Master Schedule (IMS) required by
the CPR and IMS data items of this contract.
(b) If this contract has a value of $50,000,000 or more, the
Contractor shall use an EVMS that has been determined by the
Cognizant Federal Agency (CFA) to be in compliance with the EVMS
guidelines as stated in paragraph (a)(1) of this clause. If, at the
time of award, the Contractor's EVMS has not been determined by the
CFA to be in compliance with the EVMS guidelines as stated in
paragraph (a)(1) of this clause, the Contractor shall apply its
current system to the contract and shall take necessary actions to
meet the milestones in the Contractor's EVMS plan.
(c) If this contract has a value of less than $50,000,000, the
Government will not make a formal determination that the
Contractor's EVMS complies with the EVMS guidelines in ANSI/EIA-748
with respect to the contract. The use of the Contractor's EVMS for
this contract does not imply a Government determination of the
Contractor's compliance with the EVMS guidelines in ANSI/EIA-748 for
application to future contracts. The Government will allow the use
of a Contractor's EVMS that has been formally reviewed and
determined by the CFA to be in compliance with the EVMS guidelines
in ANSI/EIA-748.
(d) The Contractor shall submit notification of any proposed
substantive changes to the EVMS procedures and the impact of those
changes to the CFA. If this contract has a value of $50,000,000 or
more, unless a waiver is granted by the CFA, any EVMS changes
proposed by the Contractor require approval of the CFA prior to
implementation. The CFA will advise the Contractor of the
acceptability of such changes as soon as practicable (generally
within 30 calendar days) after receipt of the Contractor's notice of
proposed changes. If the CFA waives the advance approval
requirements, the Contractor shall disclose EVMS changes to the CFA
at least 14 calendar days prior to the effective date of
implementation.
(e) The Government will schedule integrated baseline reviews as
early as practicable, and the review process will be conducted not
later than 180 calendar days after (1) contract award, (2) the
exercise of significant contract options, and (3) the incorporation
of major modifications. During such reviews, the Government and the
Contractor will jointly assess the Contractor's baseline to be used
for performance measurement to ensure complete coverage of the
statement of work, logical scheduling of the work activities,
adequate resourcing, and identification of inherent risks.
(f) The Contractor shall provide access to all pertinent records
and data requested by the Contracting Officer or duly authorized
representative as necessary to permit Government surveillance to
ensure that the EVMS complies, and continues to comply, with the
performance criteria referenced in paragraph (a) of this clause.
(g) When indicated by contract performance, the Contractor shall
submit a request for approval to initiate an over-target baseline or
over-target schedule to the Contracting Officer. The request shall
include a top-level projection of cost and/or schedule growth, a
determination of whether or not performance variances will be
retained, and a schedule of implementation for the rebaselining. The
Government will acknowledge receipt of the request in a timely
manner (generally within 30 calendar days).
(h) The Contractor shall require its subcontractors to comply
with EVMS requirements as follows:
(1) For subcontracts valued at $50,000,000 or more, the
following subcontractors shall comply with the requirements of this
clause:
[Contracting Officer to insert names of subcontractors (or
subcontracted effort if subcontractors have not been selected)
designated for application of the EVMS requirements of this clause.]
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(2) For subcontracts valued at less than $50,000,000, the
following subcontractors shall comply with the requirements of this
clause, excluding the requirements of paragraph (b) of this clause:
[Contracting Officer to insert names of subcontractors (or
subcontracted effort if subcontractors have not been selected)
designated for application of the EVMS requirements of this clause.]
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(End of clause)
252.242-7001 and 252.242-7002 [Removed and Reserved]
0
7. Sections 252.242-7001 and 252.242-7002 are removed and reserved.
[[Page 21850]]
252.242-7005 and 252.242-7006 [Removed]
0
8. Sections 252.242-7005 and 252.242-7006 are removed.
[FR Doc. E8-8706 Filed 4-22-08; 8:45 am]
BILLING CODE 5001-08-P