No one-size-fits-all approach for EVM

New FAR rule allows agencies to tailor their IT project management policies

A new rule issued July 5 gives federal agencies extensive latitude in determining how and when to apply earned value management to track information technology programs. EVM policies “should be based on the particular agency facts and circumstances,” according to comments accompanying the rule’s publication in the Federal Register.

EVM is a rigorous project management discipline that puts a dollar value on work as organizations complete it. Implementing the discipline usually requires setting up special-purpose information systems to collect EVM data.

In June 2002, the Office of Management and Budget mandated the use of EVM systems for all major IT service and acquisition contracts. But the final rule issued by the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council — which together form the Federal Acquisition Regulation Council — gives federal agencies broad discretion in determining when and how to use EVM.

For example, although OMB requires EVM systems for all major acquisitions involving IT systems development, “agencies have significant discretion in determining the size and complexity of projects that meet the criteria for a major acquisition set by the agency,” the FAR Council wrote.

OMB’s Office of Federal Procurement Policy leads the FAR Council, which includes representatives from the Defense Department, the General Services Administration and NASA. With the new rule, the council tried to resolve differences between a proposed FAR rule issued in August 2005 and a proposed Defense Federal Acquisition Regulation (DFAR) supplemental EVM rule issued in January.

Industry organizations had lobbied for a final FAR rule that more closely followed defense guidelines, and some are unhappy with the outcome.

“The defense version distinguishes very clearly between the types of contracts where it’s appropriate to use this management tool and where it is not,” said Trey Hodgkins, director of defense programs at the IT Association of America. “The FAR doesn’t make those distinctions at all.”

DOD requires EVM on contracts worth more than $50 million and the application of at least some EVM principles on contracts worth more than $20 million.

Under the new rule, agencies can set their own dollar thresholds. The cost of implementing and administering EVM could become overwhelming when applied to small contracts, Hodgkins said. The final rule does not exempt certain types of contracts, such as fixed-price, time-and-materials and labor-hour contracts as many in industry had hoped. DOD allows those exemptions.

Industry officials said they have other concerns about the new rule, including the lack of a sole EVM system certifier. Many industry officials had advocated a one-stop approach in which all agencies would recognize a single source of certification. Only the Defense Contract Management Agency certifies EVM systems for defense contractors.

Under the new rule, individual agencies must determine whether a company’s EVM system complies with standards, the FAR council wrote. That approach may require companies to seek certifications from several agencies.

EVM’s integrated baseline review process is another industry sore spot. During such reviews, companies are subject to an audit process, sometimes before contract award. The final rule lets agencies conduct preaward reviews.

Such reviews add to companies’ business costs while responding to requests for proposals. Companies may not have all the necessary information at that early stage. “Instead of placing the burden on everyone who might respond to an RFP, place the burden on the one who actually wins,” Hodgkins said.

More broadly, EVM is facing application difficulties because it wasn’t originally designed for service contracts, said Stan Soloway, president of the Professional Services Council. “It’s typically a capability you would apply to weapons systems or production programs,” he said.

Soloway said the government is acting prematurely by mandating EVM systems in civilian agencies that have little experience working with such systems.

The FAR rule will take effect Aug. 4. After that, companies without EVM systems can still bid for contracts if they submit a plan for implementing EVM. The DFAR proposed rule, which would be subservient to the FAR rule, is now under review.

Sizing up EVM

A Federal Acquisition Regulation rule that takes effect Aug. 4 sets new defense and civilian agency guidelines for the mandatory use of earned value management. The new rule requires, among other things, that agencies:

  • Ask companies that lack operational EVM systems to include plans for implementing such systems with their bids for federal contracts.

  • Inform companies during the contracting process that they plan to use EVM data to monitor a particular contract after they award it.

  • Require companies that use EVM to comply with EVM system standards of the American National Standards Institute and Electronics Industries Alliance.

  • — Florence Olsen

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