Contracts Less than $20M
The application of Earned Value Management (EVM) is not required on cost or incentive contracts or agreements valued at less than $20M. The decision to implement EVM on these contracts and agreements is a risk-based decision, at the discretion of the Program Manager (PM), based on a cost-benefit analysis that compares the program risks vs. the cost of EVM implementation. The purpose of the cost-benefit is to substantiate that the benefits to the Government outweigh the associated costs. It does not require approval above the PM; however, if desired, it may be included in the program Acquisition Strategy. Factors to consider when making a risk-based decision to apply EVM on cost or incentive contracts or agreements valued at less than $20M are as follows: [1]

  • The total contract value including planned options. If the value of a contract is expected to grow to reach or exceed $20M, the PM should consider imposing an EVM requirement on the contract.
  • Earned value implementation costs with respect to the total contract value. Implementation should not be seen as a cost driver.
  • Type of work and level of reporting available. Developmental or integration work is inherently more risky to the Government and reporting should reflect how programs are managing that risk basis.
  • Schedule criticality of the contracted effort to a program’s mission. Items required to support another program or schedule event may warrant EVM requirements.

Contracts Less than 12 Months in Duration
EVM is also optional for contracts or agreements of less than 12 months in duration including options, since the cost and time needed for EVM implementation may outweigh any benefits received. [1]

Non-Schedule-Based Contracts
The application of EVM to contracts that may be categorized as “non-schedule-based”, i.e., those that do not ordinarily contain work efforts which are discrete in nature, should be considered on a case-by-case basis. “Non-schedule-based” contracts include: [1]

  • those compensated on the basis of “Time and Materials” (T&M) used, such as in Time and Material Contracts,
  • “services” contracts,
  • any contracts composed primarily of Level of Effort (LOE) activity; such as program management support contracts.
  • Indefinite Delivery/Indefinite Quantity (ID/IQ) or task order type contracts, within which work is awarded on the basis of delivery orders that may or may not be schedule-based.

“Non-Schedule-Based” contracts might not permit objective work measurement due to the nature of the work most of which cannot be divided into segments that produce tangible, measurable product(s). The nature of the work associated with the contract is the key factor in determining whether there will be any appreciable value in obtaining EVM information. In cases where the nature of the work does not lend itself to meaningful EVM information, it may be appropriate to waive the EVM requirement. When appropriate, waiver requests should be included in the program acquisition strategy. If the EVM requirement is waived for a contract due to the nature of the work, the PM should implement an alternative method of management control to provide advanced warning of potential performance problems. [1]

Every effort should be made to identify, separate, and measure any discrete work from any work that is typically identified as LOE in nature. Since the earned value metric, Budgeted Cost for Work Performed (BCWP), is automatically earned for LOE activities, i.e., BCWP = Budget Cost for Work Scheduled (BCWS), there can be no schedule variances for LOE activities.  Also, since BCWP is not based on objective work measurement, the resulting Cost Variances (CV) are likely to be misleading. [1]

AcqTips:

  • The DoD has accepted the ANSI/EIA-748 – American National Standards Institute/Electronic Industries Alliance Standard 748, Earned Value Management Systems as the DoD standard.

AcqLinks and References:

Updated: 7/28/2017

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