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Pentagon revises program performance regulations.

The Defense Department is attempting to simplify the complex and conflicting rules that govern program performance management. Program performance, or earned value management, has been a requirement for major defense programs for more than 35 years. Contractors are required to provide the government with schedule status and cost performance information on a regular basis throughout the life of a project to assess how successfully the project is meeting its schedule and cost objectives. The data also is used to identify high-risk or problem areas and for planning future work.

Earned value management is a widely accepted industry best practice for project management that is used in the commercial sector, the Defense Department and the rest of the federal government.

The National Defense Industrial Association's Program Management Systems Committee was the catalyst for developing the American National Standards Institute/Electronic Industries Alliance Standard for Earned Value Management Systems. Consistent with industry practices, the Defense Department adopted the ANSI/EIA Standard for Earned Value Management Systems in 1998.

In March of this year, the acting undersecretary of defense for acquisition, technology and logistics approved revisions to the Department of Defense long-standing earned value management policy. The changes were intended to improve consistency in the application of earned value management across programs.

The previous rendition of the policy dated from the mid-1990s. "A number of factors led the Defense Department to re-examine its use of earned value management," said Debbie Tomsic, a senior acquisition analyst at the Defense Department. "Both industry and entities within the Defense Department had expressed concerns with the state of earned value management and program management, in general, in the defense acquisition process."

These concerns included the inconsistency in the application of earned value management, conflicting contractual requirements, duplicative management systems reviews and unique oversight activities. Other factors included process and technology advancements as well as recent Office of Management and Budget initiatives that revised the definition of major capital acquisitions and mandated the use of earned value management.

The revised policy was developed in consultation with the military services, the defense and intelligence agencies, the Defense Contract Management Agency and the Defense Acquisition University. NDIA's Program Management Systems Committee provided industry's input. Here are highlights of the new policy.

* Compliance with the industry standard is required. Whenever earned value management is applied, the contractor's management system must be compliant with the current version of the industry standard as interpreted by the NDIA PMSC ANSI/EIA Standard for Earned Value Management Intent Guide.

* New thresholds were set for applying earned value management. Various separate upper and lower thresholds based on the phase of the program were eliminated and replaced with streamlined guidelines. For example, separate thresholds for research, development, test, evaluation and procurement were eliminated. The lower threshold was raised from $6.3 million to $20 million. The upper threshold was lowered from $73 million and $315 million (the former RDT&E and procurement thresholds) to $50 million.

* The policy states that earned value management is required on cost or incentive contracts, subcontracts, intra-government work agreements, and other agreements valued at or greater than $20 million. The implementation of earned value management on cost or incentive efforts valued at less than $20 million is a risk-based decision at the discretion of the program manager. Earned value management may not be optional if the product or service being acquired is designated as a major capital acquisition in accordance with OMB Circular A-11, Part 7. The contractor's system must be formally validated and accepted by the applicable contracting officer for contracts and agreements valued at or greater than $50 million.

* Changes were made to cost and schedule reporting requirements. Contract performance reports and an integrated master schedule are required. The less comprehensive cost/schedule status report was eliminated. Changes to schedule requirements include mandating an integrated master schedule, integrating schedule information with the cost reporting, and requiring a fully integrated network schedule of discrete project tasks or activities.

* The industry standard for earned value management leaves it to the government to determine the details of the cost and schedule data to be reported and the level of analysis required. To ensure that contractors and program offices use EVM data to manage, rather than manage the EVM data, the item descriptions for the contract performance report (DI-MGMT-81466) and the integrated master schedule (DI-MGMT-81650) have been updated to reflect industry best practices and to enable the use of earned value management software tools.

* Integrated baseline reviews now are mandated whenever earned value management is required.

The revised policy is being incorporated into DoD Instruction 5000.2, Operation of the Defense Acquisition System, and the Defense Acquisition Guidebook.

The changes have been added to the DoD Earned Value Management Implementation Guide, the principal reference for detailed implementation guidance, which is available on the DCMA web site at:

In addition, new Defense Federal Acquisition Regulation Supplement (DFARS) clauses are in process to implement the changes in solicitations and contracts.

More information about the NDIA Program Management Systems Committee and earned value management is available on the NDLA web site ( The committee has published a series of documents that are useful for anyone implementing or using an earned value management system. Available documents include the NDIA PMSC ANSI/EIA Standard for Earned Value Management Systems Intent Guide, a Surveillance Guide, and a Program Manager's Guide to the Integrated Baseline Review Process. The committee meets four times a year in various locations within the United States. New attendees interested in learning more about earned value management are welcome.

For additional information on NDIA procurement policy programs, please contact Ruth Franklin,

Peter Wynne is chair of the NDIA Program Management Systems Committee.
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Article Details
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Author:Wynne, Peter
Publication:National Defense
Geographic Code:1USA
Date:Dec 1, 2005
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