[Federal Register Volume 63, Number 220 (Monday, November 16, 1998)]
[Proposed Rules]
[Pages 63654-63657]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30554]


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NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1842 and 1852


Application of Earned Value Management (EVM)

AGENCY: National Aeronautics and Space Administration (NASA).

ACTION: Proposed rule.

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SUMMARY: This proposed rule would effect a change to the NASA FAR 
Supplement relative to the application of Earned Value Management (EVM) 
at NASA. The proposed change would establish NASA-wide clauses and 
provisions compatible with those used by DoD. Specifically, the change 
would clarify the role of the Defense Contract Management Command 
(DCMC) with

[[Page 63655]]

respect to its responsibility for reviewing earned value management 
system (EVMS) plans and verifying initial and continuing contractor 
compliance with NASA and DoD EVMS criteria, and with NASA Policy 
Directive 9501.3, Earned Value Performance Management, and DoD 5000.2-
R.

DATES: Comments should be submitted on or before January 15, 1999.

ADDRESSES: Interested parties should submit written comments to Kenneth 
A. Sateriale, NASA Headquarters, Office of Procurement, Contract 
Management Division (Code HK), Washington, DC 20546. Comments may also 
be submitted by e-mail to [email protected].

FOR FURTHER INFORMATION CONTACT: Kenneth A. Sateriale, (202) 358-0491.

SUPPLEMENTARY INFORMATION:

Background

    EVM is a commonly used performance (i.e. cost, schedule, and 
technical) measurement tool for program managers in the aerospace 
industry. NASA and DoD are major customers in the Government sector of 
the aerospace industry, and cooperate to align their business practices 
wherever practicable in order to realize cost and resource 
efficiencies. Therefore, they have collaborated closely over the last 
several years to align their approaches to the use of EVM. This change 
completes that alignment process.

Impact

    NASA certifies that this regulation will not have a significant 
economic impact on a substantial number of small business entities 
under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) since the 
changes do no more than align NASA practices with those already in 
place at DoD, which shares essentially the same industry sector. This 
proposed rule does not impose any reporting or recordkeeping 
requirements subject to the Paperwork Reduction Act.

List of Subjects in 48 CFR Parts 1842 and 1852

    Government procurement.
Tom Luedtke,
Acting Associate Administrator for Procurement.

    Accordingly, 48 CFR Parts 1842 and 1852 are proposed to be amended 
as follows:
    1. The authority citation for 48 CFR Parts 1842 and 1852 continues 
to read as follows:

    Authority: 42 U.S.C. 2473(c)(1)

PART 1842--CONTRACT ADMINISTRATION AND AUDIT SERVICES

    2. Subpart 1842.3 is added to read as follows:

Subpart 1842.3--Contract Administration Office Functions


Sec. 1842.302  Contract administration functions. (NASA supplements 
paragraph (a))

    (a) In addition to the responsibilities listed in FAR 42.302(a), 
responsibility for reviewing earned value management system (EVMS) 
plans and verifying initial and continuing contractor compliance with 
NASA and DoD EVMS criteria is normally delegated to DCMC.
    3. Section 1842.7003 is added to read as follows:


1842.7003  Modified cost performance report.

    (a) Modified cost performance reporting is required for RDT&E 
contracts with values between $25 million and $60 million, and 
production contracts with values less than $250 million. Modified cost 
performance reporting for RDT&E contracts with values of $25 million or 
less may be required at the discretion of the contracting officer.
    (b) The contracting officer shall insert the clause at 1852.242-76, 
Modified Cost Performance Report, in solicitations and contracts, other 
than for firm-fixed-price, time-and-materials, or labor-hour, when 
modified cost performance reporting is required.
    (c) The contracting officer shall insert the provision at 1852.242-
77, Modified Cost Performance Report Plans, in solicitations for 
contracts, other than firm-fixed-price, time-and-materials, or labor-
hour, when modified cost performance reporting is required.
    4. Subpart 1842.74 is added to read as follows:

Subpart 1842.74--Earned Value Management

1842.7401  Earned Value Management Systems (EVMS).
1842.7402  Solicitation provision and contract clause.

Subpart 1842.74--Earned Value Management


1842.74  Earned Value Management Systems (EVMS).

    (a) Earned value is a management technique that relates resource 
planning to schedules and to technical cost and schedule requirements. 
All work is planned, budgeted, and scheduled in time-phased ``planned 
value'' increments constituting a cost and schedule measurement 
baseline. There are two major objectives of an earned value system: to 
encourage contractors to use effective internal cost and schedule 
management control systems; and to permit the customer to be able to 
rely on timely data produced by those systems for determining product-
oriented contract status. Any system used by the contractor in planning 
and controlling the performance of significant contracts shall be 
certified as meeting the NASA EVM Criteria (the Criteria), unless 
waived by the NASA Chief Financial Officer (CFO).
    (b) Criteria-based EVMS is required in RDT&E contracts with a total 
estimated final value of $60 million or more, with a period of 
performance in excess of one year, and production contracts with a 
total value of $250 million or more. On RDT&E contracts with a total 
anticipated value greater than $25 million but less than $60 million, 
or production contracts less than $250 million, the Criteria normally 
is not applied. However, noncriteria-based EVM is required on these 
contracts, and is optional on contracts valued at $25 million or less 
at the discretion of the contracting officer. NASA Center CFO's have 
been delegated the authority to waive this requirement for contracts 
meeting the thresholds established for noncriteria contracts.
    (c) When an offeror or contractor is required to provide an EVMS 
plan to the Government, the contracting officer shall forward a copy of 
the plan to the cognizant administrative contracting officer (ACO) to 
obtain the assistance of the ACO in determining the adequacy of the 
proposed EVMS plan.


1842.7402  Solicitation provision and contract clause.

    When the Government requires Earned Value Management, the 
contracting officer shall insert:
    (a) The provision at 1852.242-74, Notice of Earned Value Management 
System, in solicitations; and
    (b) The clause at 1852.242-75, Earned Value Management System, in 
solicitations and contracts.

PART 1852--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    5. Sections 1852.242-74, 1852.242-75, 1852.242-76, and 1852.242-77 
are added to read as follows:


1852.242-74  Notice of Earned Value Management System.

    As prescribed in 1842.7402(a), insert the following provision:

[[Page 63656]]

Notice of Earned Value Management System

(XXX)

    (a) The offeror shall provide documentation that the cognizant 
Administrative Contracting Officer (ACO) has recognized that the 
proposed earned value management system (EVMS) complies with the 
EVMS criteria of NASA Policy Directive (NPD) 9501.3, Earned Value 
Management, or DoD 5000.2-R, Mandatory Procedures for Major Defense 
Acquisition Programs and Major Automated Information Systems 
Acquisition Programs.
    (b) If the offeror proposes to use a system that does not meet 
the requirements of paragraph (a) of this provision, the successful 
offeror shall submit a plan for compliance with the NASA EVM 
criteria as described in NPD 9501.3.
    (1) The plan shall--
    (A) Describe the EVMS the offeror intends to use in performance 
of the contract;
    (B) Distinguish between the offeror's existing management system 
and modifications proposed to meet the criteria;
    (C) Describe the management system and its application in terms 
of the criteria;
    (D) Describe the proposed procedure for administration of the 
criteria as applied to subcontractors; and
    (E) Provide documentation describing the process and results of 
any third-party or self-evaluation of the system's compliance with 
EVMS criteria.
    (2) The offeror shall provide information and assistance as 
required by the Contracting Officer to support review of the plan.
    (3) The Government will review and evaluate the successful 
offeror's plan for EVMS, including the selection of subcontracted 
effort to which EVMS would be applied, within sixty days following 
contract award.
    (c) Offerors shall identify in their proposals the major 
subcontractors, or major subcontracted effort if major 
subcontractors have not been selected, planned for application of 
EVMS.

(End of Provision)


1852.242-75  Earned Value Management Systems.

    As prescribed at 1842.7402(b), insert the following clause:

Earned Value Management System

(XXX)

    (a) In the performance of this contract, the Contractor shall 
use an earned value management system (EVMS) that has been 
recognized by the cognizant Administrative Contracting Officer (ACO) 
as complying with the criteria provided in NASA Policy Directive 
9501.3, Earned Value Management, or DoD 5000.2-R, Mandatory 
Procedures for Major Defense Acquisition Programs and Major 
Automated Information Systems Acquisition Programs.
    (b) If, at the time of award, the Contractor's EVMS has not been 
recognized by the cognizant ACO as complying with EVMS criteria or 
the Contractor does not have an existing cost schedule control 
system (C/SCS) that has been accepted by the Government, the 
Contractor shall apply that system to the contract and be prepared 
to demonstrate to the ACO that its EVMS complies with the EVMS 
criteria referenced in paragraph (a) of this clause.
    (c) The Government may require integrated baseline reviews. Such 
reviews shall be scheduled as early as practicable and should be 
conducted within 180 calendar days after contract award, the 
exercise of significant contract options, or the incorporation of 
major contract modifications. The objectives of the integrated 
baseline review are for the Government and the Contractor to jointly 
assess areas, such as the Contractor's planning, to ensure complete 
coverage of the statement of work, logical scheduling of the work 
activities, adequate resourcing, and identification of inherent 
risks.
    (d) Unless a waiver is granted by the ACO, Contractor proposed 
EVMS changes require approval of the ACO prior to implementation. 
The ACO shall advise the Contractor of the acceptability of such 
changes within 30 calendar days after receipt of the notice of 
proposed changes from the Contractor. If the advance approval 
requirements are waived by the ACO, the Contractor shall disclose 
EVMS changes to the ACO and the NASA CO at least 14 calendar days 
prior to the effective date of implementation.
    (e) The Contractor agrees to provide access to all pertinent 
records and data requested by the ACO or a duly authorized 
representative. Access is to permit Government surveillance to 
ensure that the EVMS complies, and continues to comply, with the 
criteria referenced in paragraph (a) of this clause.
    (f) The Contractor shall require the subcontractors specified 
below to comply with the requirements of this clause: (Insert list 
of applicable subcontractors)

(End of clause)


1852.242-76  Modified Cost Performance Report.

    As prescribed in 1842.7003(b), insert the following clause:

Modified Cost Performance Report

(XXX)

    (a) The Contractor shall use management procedures in the 
performance of this contract that provide for:
    (1) Planning and control of costs;
    (2) Measurement of performance (value for completed tasks); and
    (3) Generation of timely and reliable information for the 
Modified Cost Performance Report (M/CPR).
    (b) As a minimum, these procedures must provide for--
    (1) Establishing the time-phase budgeted cost of work scheduled 
(including work authorization, budgeting, and scheduling), the 
budgeted cost for work performed, the actual cost of work performed, 
the budget at completion, the estimate at completion, and provisions 
for subcontractor performance measurement and reporting;
    (2) Applying all direct and indirect costs and provisions for 
use and control of management reserve and undistributed budget;
    (3) Incorporating changes to the contract budget base for both 
Government directed changes and internal replanning;
    (4) Establishing constraints to preclude subjective adjustment 
of data to ensure performance measurement remains realistic. The 
total allocated budget may exceed the contract budget base only 
after obtaining prior written approval of the NASA Contracting 
Officer. For cost-reimbursement contracts, the contract budget base 
shall exclude changes for cost growth increases, other than for 
authorized changes to the contract scope; and
    (5) Establishing the capability to accurately identify and 
explain significant cost and schedule variances, both on a 
cumulative basis and a projected-at-completion basis.
    (c) The Contractor may use a cost/schedule control system that 
has been recognized by the cognizant Administrative Contracting 
Officer (ACO) as complying with the earned value management system 
criteria provided in NASA Policy Directive 9501.3, Earned Value 
Management, or DoD 5000.2-R, Mandatory Procedures for Major Defense 
Acquisition Programs and Major Automated Information Systems 
Acquisition Programs.
    (d) The Government may require integrated baseline reviews. Such 
reviews shall be scheduled as early as practicable and should be 
conducted within 180 calendar days after contract award, the 
exercise of significant contract options, or the incorporation of 
major modifications. The objectives of the integrated baseline 
review are for the Government and the Contractor to jointly assess 
areas, such as the Contractor's planning, to ensure complete 
coverage of the statement of work, logical scheduling of the work 
activities, adequate resourcing, and identification of inherent 
risks.
    (e) The Contractor shall provide access to all pertinent 
records, company procedures, and data requested by the ACO, or 
authorized representative, to--
    (1) Show proper implementation of the procedures generating the 
cost and schedule information being used to satisfy the M/CPR 
contractual data requirements to the Government; and
    (2) Ensure continuing application of the accepted company 
procedures in satisfying the M/CPR data item.
    (f) The Contractor shall submit any substantive changes to the 
procedures and their impact to the ACO for review.
    (g) The Contractor shall require a subcontractor to furnish M/
CPR in each case where the subcontract is other than firm-fixed-
price, time-and-materials, or labor-hour, is 12 months or more in 
duration, and has critical or significant tasks related to the prime 
contract. Critical or significant tasks shall be identified by 
either the Government or the Contractor. Each subcontractor's 
reported cost and schedule information shall be incorporated into 
the Contractor's M/CPR.

(End of clause)


1852.242-77  Modified Cost Performance Report Plans.

    As prescribed in 1842.7003(c), insert the following provision;

[[Page 63657]]

Modified Cost Performance Plans

(XXX)

    (a) The offeror shall submit in its proposal a written summary 
of the management procedures it will establish, maintain, and use in 
the performance of any resultant contract to comply with the 
requirements of the clause at 1852.242-74 Modified CostPerformance 
Report.
    (b) If the offeror proposes to use a cost/schedule control 
system that has been recognized by the cognizant Administrative 
Contracting Officer as complying with the earned value management 
system criteria of NASA Policy Directive 9501.3, Earned Value 
Management, or DoD 5000.2-R, Mandatory Procedures for Major Defense 
Acquisition Programs and Major Automated Information Systems 
Acquisition Programs, the offeror may submit a copy of the 
documentation of such recognition instead of the written summary 
required by paragraph (a) of this provision.

(End of provision)

[FR Doc. 98-30554 Filed 11-13-98; 8:45 am]
BILLING CODE 7510-01-P