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EVM 202—Lesson 2 EVM in the Acquisition Strategy

September 2016. EVM 202—Lesson 2 EVM in the Acquisition Strategy. Lesson 2 Learning Objectives. Terminal Learning Objective Apply DoD Earned Value Management (EVM) policy to assemble the EVM elements of an acquisition strategy and pre-contract activities Enabling Learning Objectives

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EVM 202—Lesson 2 EVM in the Acquisition Strategy

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  1. September 2016 EVM 202—Lesson 2 EVM in the Acquisition Strategy

  2. Lesson 2 Learning Objectives Terminal Learning Objective • Apply DoD Earned Value Management (EVM) policy to assemble the EVM elements of an acquisition strategy and pre-contract activities Enabling Learning Objectives • Demonstrate the EVM applicability to a contract • Identify Request for Proposals (RFP) sections affected by EVM application • Given MIL-STD-881 and a risk assessment, choose the appropriate Contract Work Breakdown Structure (CWBS) level for EVM reporting • Distinguish between the EVM-related Defense Federal Acquisition Regulation Supplement (DFARS) clauses • Apply appropriate Integrated Program Management Report (IPMR) tailoring

  3. What Is Earned Value Management (EVM)? • Program management tool that utilizes a contractor’s Earned Value Management System (EVMS) to integrate the work scope, schedule, and cost parameters of a program, providing objective performance measurement and management • As work is performed, the corresponding budget value is “earned” (EV)

  4. Earned Value Management System (EVMS)

  5. Earned Value Management Gold Card

  6. Powerful Quantitative Reports

  7. EVM within the Contracting Process

  8. Statutes Related to EVM

  9. Office of Management and Budget (OMB) EVM Policy Policy Guidance • OMB Circular A-11 Supplement—Capital Programming Guide Purpose • Unified guidance to support OMB reporting to Congress Circular A-11 Policy • Agencies must establish cost, schedule, and performance goals for major acquisitions and achieve on average 90% of those goals • Provides guidance on integration of EVM, Integrated Baseline Reviews (IBRs), and risk management • As an OMB Circular, applies to DoD and all executive branch agencies

  10. Integrated Program Management Report (IPMR) Format 1: Work Breakdown Structure The level of detail to be reported normally will be at level three of the Contract Work Breakdown Structure (CWBS), but lower levels may be specified for high-cost or high-risk items. CWBS elements and levels reported shall be those specified in the contract. Format 2: Organizational Categories This format shall be used to collect organizational cost information at the total contract level for organizational elements that reflect the contractor's internal management, rather than for individual CWBS elements structure. Format 2 shall also identify each major subcontractor as defined in the contract. Format 3: Baseline Format 3 lists all significant baseline changes that have occurred by CWBS during the reporting period, to include the contract changes and supplemental agreements, allocations from management reserve (MR) and undistributed budget (UB), and any significant re-phasing of budgets. Format 4: Staffing Format 4 includes staffing forecasts in months by the organizational categories. Format 4 categories may differ from those reported in Format 2 and shall be addressed during negotiations. Format 5: Explanations and Problem Analyses Format 5 is a narrative report prepared to amplify and explain data in the other IPMR formats. Format 6: Integrated Master Schedule Format 6 defines and contains the contractor’s IMS. It integrates with Format 1 WBS, Format 2 OBS, Format 3 Baseline, and Format 5 Analysis. Format 6 contains both the baseline and forecast schedules, and predicts the contract completion date and all interim milestones. Format 7: Electronic History and Forecast File Format 7 provides supplemental historical and time-phased information. Format 7 shall normally address the following: monthly historical time-phased budgeted cost for work scheduled (BCWS), BCWP, actual cost of work performed (ACWP), estimate to complete (ETC), by control account (CA) WBS; future forecast of BCWS and ETC.

  11. DoDI 5000.02 EVM Application Requirements Enclosure 1 Table 8 Table 8 summarizes EVM application requirements. EVM is applied to cost reimbursable or incentive contracts, inclusive of options, with 18 months or greater period of performance and based on the nature of the work scope.

  12. DoDI 5000.02 EVM Policy GuidanceEnclosure 1 Table 9 EVM Reporting Requirements

  13. DoDI 5000.02 EVM Applicability - PMO 2 Step EVM Application Process Step 1. PMO Determination - Contract Criteria Review EVM placed on contract; PMO has option to seek waiver/deviation from CAE Contract is Cost Plus or Incentive Contract > $20M (including known options) Contract at least 18 months PoP Work discreetly measurable & schedulable all Yes EVM Not Applicable* 1 or 2 or 3 is No Must move to Step 2 for work scope determination only 4 is No Step 2. Work Scope Determination EVM does not apply* EVM not on contract; no deviation/waiver required No • Does EVM apply based on review of SOW, PWS, WBS, & CDRLs(i.e., work discretely measurable & schedulable) • ACAT ID & IAM – PARCA Determines • Other ACATs - SAE/CAE Determines EVM does apply EVM is placed on contract; PMO has option to seek waiver/deviation from CAE Yes • The PM has the option to make a business case to apply EVM outside the thresholds and application decision

  14. Key EVM Inputs in the RFP Development Process • Do you include EVM at all? • Where do you address EVM in the RFP? • Section C—Description/Specs/Work Statement • Section I—General Provisions • Section J—Exhibits/Attachments • Section L—Instructions to Offerors • Section M—Evaluation Factors for Award

  15. Section C—Statement of Objectives (SOO) or Statement of Work (SOW) • The SOO or SOW should contain statements requiring: • Development of a CWBS at a level adequate for management and contract control • The contracted technical effort to use a guidelines-compliant EVMS that correlates cost and schedule performance with technical progress • Designation of critical subcontractors by name for EVM compliance and flow down of EVMS compliance to subcontractors • Integrated Baseline Reviews (IBRs) • Reference to EVMS data items as part of Integrated Program Management Reporting See the Application of EVM to Contracts job aid for sample SOW paragraphs

  16. Section I—General Provisions • Use the DFARS clauses, not the FAR clauses, for EVM. • FAR Clauses • FAR 52.234-2 Notice of EVMS—Pre-Award IBR (July 2006) • FAR 52.234-3 Notice of EVMS—Post Award IBR (July 2006) • FAR 52.234-4 EVMS—The Government will conduct an IBR if a pre-award IBR has not been conducted. (May 2014) • DFARS Section 234.203—Solicitation provisions and contract clause (Dec 2011) • Use the provision at DFARS 252.234-7001, Notice of Earned Value Management System, in the solicitation instead of the provisions at FAR 52.234-2 and FAR 52.234-3. • Use the clause at DFARS 252.234-7002, Earned Value Management System, in the solicitation and contract instead of the clause at FAR 52.234-4. • Use DFARS 252.242-7005, Contractor Business Systems, in the solicitation and contract to allow for withholding payments due to a non-compliant EVMS issue. • Includes links to procedures on performing cost-benefit analyses and waivers DoD contracts will not use FAR clauses for EVM.

  17. Section J—Exhibits/Attachments • Contract Data Requirements List (CDRL) places data on contract • EVM-Related Data Item Descriptions (DID) • Integrated Program Management Report (IPMR)—DI-MGMT-81861 (current version) supersedes CPR and IMS DIDs, effective July 1, 2012 • EVM CDRLs can and should be tailored within bounds of policy • Tailoring options are limited for contracts ≥ $50M (frequency, level of detail) • Most aspects are tailorable for contracts < $50M (formats, frequency, level of detail, etc.) • FM and Cost-Related Data Item Descriptions (DIDs) • Contract Work Breakdown Structure—DI-MGMT-81334D • Contract Funds Status Report—DI-MGMT-81468A • Consider all risk factors when tailoring EVM DIDs • Type of contract (determined by cost risk) • Technology • Schedule • Past contractor performance • Scope, complexity, risk

  18. EVM Central Repository • Provides centralized reporting, collection, and distribution of the Contract Performance Reports (CPRs), Contract Funds Status Report (CFSR), the Integrated Master Schedule (IMS), and the IPMR • Mandatory for ACAT 1C, 1D (Major Defense Acquisition Program (MDAP)), and ACAT 1A (Major Automated Information System (MAIS)) programs • Available at the EVM Central Repository (EVM-CR) at http://dcarc.cape.osd.mil/evm/evmoverview.aspx

  19. Section J—EVM Report Details Required • Formats 1-5 Guidance • Formats 1 and 2 reporting levels • Reporting frequency • Submission dates • Date of first and last reports • Resources shown in dollars or hours • Format 5 variance reporting thresholds • Fixed number of variances • Percentage or dollar thresholds • Specific variances • Human readable format • Format 6 Guidance • Reporting frequency • Submission dates • Date of first and last reports • Frequency of schedule risk analysis • Electronic data interchange format • Format 7 Guidance • Reporting levels • Subcontractor information • Date elements • Reporting frequency • DoD-approved electronic XML format

  20. Section L—Instructions to Offerors • Guidance to bidders for the assembly of their proposals • Each offeror’s proposal shall include a description of the EVMS to be used in accordance with the appropriate RFP DFARS clauses • Compliance with system approval requires: • Reference to a “Proof of System Approval” (e.g., Contracting Officer Final Determination (COFD) Letter and a copy of the approved EVMS description); or • A plan to obtain EVMS approval to include how the system will be approved • Compliance only requires a written summary of the proposed EVMS reference in sufficient detail to show how it addresses all 32 EIA-748 EVMS guidelines

  21. Section M—Evaluation Factors for Award • Evaluation of the proposed EVMS is normally undertaken as part of the proposal evaluation process to determine the probability of the system meeting the guidelines • For Existing Systems—Evaluation may consist of a confirmation that the referenced system approval is accurate and current. The system should be in use currently, and surveillance should not have identified significant, uncorrected problems. • For EVMS (Without approval)—The EVMS description should be evaluated for completeness against the EIA-748 guidelines • An on-site examination of a proposed EVMS should not normally be required during proposal evaluation. But if deficiencies are identified, written communications or an on-site visit may be required when approved by the Source Selection Board and Procuring Activity • The Defense Contract Management Agency (DCMA) should be requested to provide insight regarding EVMS capability, quality, and past performance

  22. DoDI 5000.02 EVM Policy for Cost and Incentive Contracts < $20M TY • EVM optional; based on risk assessment • Requires business case analysis and MDA approval • DFARS clauses—If you decide to use EVM, use these DFARS clauses: • DFARS 252.234-7001—Notice of EVMS • DFARS 252.234-7002—EVMS • DFARS 252.242-7005—Contractor Business Systems • EVM Data Requirements • DI-MGMT-81861 (current version)—IPMR (Formats 1 and 5 recommended; Format 6 may be recommended) • IBR conducted ASAP but not later than 180 calendar days after contract award

  23. DoDI 5000.02 EVM Policy for Cost and Incentive Contracts ≥ $20M TY and < $50M TY • Comply with EIA-748 • No formal EVMS approval • DFARS clauses • DFARS 252.234-7001—Notice of EVMS • DFARS 252.234-7002—EVMS • DFARS 252.242-7005—Contractor Business Systems • EVM Data Requirements • DI-MGMT-81861 (current version)—IPMR (Formats 1, 5, 6, and 7 are mandatory) • IBR conducted ASAP but not later than 180 calendar days after contract award

  24. DoDI 5000.02 EVM Policy for Cost and Incentive Contracts ≥ $50M TY and < $100M TY • Comply with EIA-748 • No formal EVMS approval • DFARS clauses • DFARS 252.234-7001—Notice of EVMS • DFARS 252.234-7002—EVMS • DFARS 252.242-7005—Contractor Business Systems • EVM Data Requirements • DI-MGMT-81861 (current version)—IPMR (All seven formats are mandatory) • IBR conducted ASAP but not later than 180 calendar days after contract award

  25. DoDI 5000.02 EVM Policy for Cost and Incentive Contracts ≥ $100M TY • Comply with EIA-748 • EVMS formally approved by cognizant contracting officer • DFARS clauses • DFARS 252.234-7001—Notice of EVMS • DFARS 252.234-7002—EVMS • DFARS 252.242-7005—Contractor Business Systems • EVM Data Requirements • DI-MGMT-81861 (current version)—IPMR (All seven formats mandatory) • IBR conducted as soon as possible (ASAP) but not later than 180 calendar days after contract award

  26. DoDI 5000.02 EVM Policy for Firm-Fixed-Price (FFP) Contracts • EVM discouraged regardless of dollar value • Requires Milestone Decision Authority (MDA) approval and cost-benefit analysis • If MDA decides to implement EVM, need same EVM DFARS clauses • EVM Data Requirements • DI-MGMT-81861 (current version)—IPMR • Formats 1 and 2—Performance in hours (versus dollars) or reported at price rather than cost • Format 3—Optional • Format 4—Not recommended • Format 5—If concerned with schedule risk, focus on schedule variance; rely on IMS variance analysis • Format 6—IMS. Consider alternatives: Contractor internal reports, status meetings, or use line of balance schedule • Format 7—Not recommended • IBR conducted ASAP but not later than 180 calendar days after contract award

  27. Draft IPMR CDRL Exercise

  28. Acquisition Strategy Practice Exercise Is Earned Value Management (EVM) required? (Yes or No) Is EVMS approval required? (Yes or No) Which EVM DFARS contract clause(s) and number(s) should be used in the Request for Proposals (RFP)? Which EVM Data Item Description (DID) number(s) should be used in the RFP? What formats of the EVM DID (if any) would you tailor out with the Contract Data Requirements List (CDRL)? Independent Scenarios

  29. Acquisition Strategy Practice Exercise Review

  30. Practice Exercise: Scenario 1 Your Integrated Product Team (IPT) is responsible for developing the encryption hardware and encryption software for a new satellite system. The acquisition strategy is based on a complex modification of an existing aircraft system. Risk Assessment • Technical risk—High • Schedule risk—High • Cost risk—Low Contract Details • Contract Type: Cost Plus Incentive Fee/Award Fee • Period of Performance: 36 months • Estimated RDT&E Cost: $80M (TY)

  31. Practice Exercise: Scenario 2 You are preparing a Concept Exploration RFP. In source selection, you plan to award at least three eighteen month, cost plus award fee study contracts. Contract Details • Contract Type: Cost Plus Award Fee • Period of Performance: 18 months • Estimated RDT&E: $30M (for all three) (TY)

  32. Practice Exercise: Scenario 3 Your IPT is responsible for the development of simulation software. The software will be used for System Qualification Testing, Developmental Test and Evaluation (DT&E), and Operational Test and Evaluation (OT&E) of a major weapon system. The software will be provided as Government furnished property (GFP) to the primary contractor as well as the DT and OT testers. Although this is new software to the Government, most of the modules are game simulations considered commercial-off-the-shelf (COTS). Contract Details • Contract Type: Firm-Fixed-Price (FFP) • Period of Performance: 18 months • Provides six-month schedule padding before GFP need date • Estimated RDT&E Cost: $20.5M (TY)

  33. Practice Exercise: Scenario 4 Your IPT is responsible for developing an RFP for an ACAT-3 target rocket Low Rate Initial Production (LRIP) contract. The Cost Plus Award Fee (CPAF) Engineering and Manufacturing Development (EMD) contract is experiencing an 8 to 12 percent cost growth and is about six to eight months behind schedule, and a number of technical issues have been identified in DT&E. A two year LRIP has been approved while Initial OT&E (IOT&E) testing continues instead of full rate production. The LRIP contract will be a new contract with both Research Development Test and Evaluation (RDT&E) test items and Production line items. Contract Details • Contract Type: Fixed Price Incentive Firm Target • Period of Performance: 30 Months • Estimated RDT&E: $25M ($10M TY1 and $15M TY2) • Estimated Production: $80M (TY2)

  34. Practice Exercise: Scenario 5 You are the leader of a proposal development team preparing an RFP to outsource the depot maintenance for a major weapon system. The depot work is dependent on the Government getting the system to the depot as scheduled. The contract will include a base year and five annual options. The Statement of Work (SOW) has two primary tasks: • Operate depot facilities—a level of effort (LOE) task • Repair, upgrade, and test hardware on a time-and-materials (T&M) task order basis. Contract Details • Contract Type: Cost Plus Award Fee • Period of Performance: 72 months • Estimated O&M Costs: $500M (TY)

  35. Lesson 2 Summary • Terminal Learning Objective (TLO) • Apply DoD EVM policy to assemble the EVM elements of an acquisition strategy and pre-contract activities • Enabling Learning Objective (ELO) • Demonstrate the EVM applicability to a contract • Identify RFP sections affected by EVM application • Given MIL-STD-881 and a risk assessment, choose the appropriate CWBS level for EVM reporting • Distinguish between the EVM-related DFARS clauses • Apply appropriate IPMR tailoring

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