Industry questions proposed rule

OMB gets serious about earned value management

A proposed rule change to the Federal Acquisition Regulation requiring greater contractor use of earned value management (EVM) has some industry groups worried.

"We're nervous when government decides it ought to be applied like peanut butter," said Alan Chvotkin, senior vice president and counsel of the Professional Services Council.

Acquisitions that are likely candidates for expanded EVM oversight include information technology services, supplies and equipment, and construction, according to a Federal Register notice.

EVM systems collect near-real-time data on a project's status measured against its original cost and timeline projections.

"Whether or not procurements require [EVM] should be part of a wider procurement strategy," Chvotkin said.

Agencies' use of the management technique in major IT projects is already a prerequisite for them to earn a green score in the e-government column of the quarterly President's Management Agenda score card.

Office of Management and Budget officials have increasingly stressed EVM use as a way to prevent future large-scale IT flops, such as the FBI's Virtual Case File.

But using EVM to garner implementation data in less tangible government procurements such as IT services is difficult, said Valerie Perlowitz, chairwoman of the Small Business Subcommittee of the IT Association of America.

"It probably costs more to figure out what the baseline is than to go ahead and set up the schedule," Perlowitz said. Previous efforts to capture baselines for time-and-materials contracts, such as the total-cost-of-ownership model, have been widely unpopular for the same reason, she said. "Most organizations, government or commercial, don't have a centralized IT buying source," she added.

The proposed rule change could have a significant economic impact on a substantial number of small businesses because it would require contractors to set up EVM systems.

It's also unlikely that small businesses could recoup the costs of setting up such systems, Perlowitz said.

The notice uses a $20 million threshold to illustrate the potential effects on small businesses, but agencies can classify the amount that defines a major acquisition, OMB officials wrote in an e-mail message. The notice states that OMB does not expect EVM oversight on acquisitions costing $20 million or less.

Using any dollar threshold as a major variable for when EVM should be applied would be a mistake, Chvotkin said.

"The fact that a procurement is larger than that threshold doesn't mean that it's a right candidate for EVM reporting, and the fact that something is below that doesn't mean it might not be appropriate," he said.

EVM is scalable and therefore applicable to any size and type of investment, OMB officials said.

Comments on the proposed change are due by June 7.

About the Author

David Perera is a special contributor to Defense Systems.

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