[Federal Register Volume 70, Number 67 (Friday, April 8, 2005)]
[Proposed Rules]
[Pages 17945-17949]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-6864]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 2, 7, 34, 42, and 52

[FAR Case 2004-019]
RIN 9000-AJ99


Federal Acquisition Regulation; Earned Value Management System 
(EVMS)

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

[[Page 17946]]


ACTION: Proposed rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) are proposing to amend the 
Federal Acquisition Regulation (FAR) to implement earned value 
management system (EVMS) policy. FAR coverage is essential to help 
standardize the use of EVMS across the Government. The proposed rule 
specifically impacts contracting officers, program managers, and 
contractors with earned value management systems.

DATES: Interested parties should submit comments in writing on or 
before June 7, 2005 to be considered in the formulation of a final 
rule.

ADDRESSES: Submit comments identified by FAR case 2004-019 by any of 
the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Agency Web Site: http://www.acqnet.gov/far/ProposedRules/proposed.htm. Click on the FAR case number to submit comments.
     E-mail: [email protected]. Include FAR case 2004-
019 in the subject line of the message.
     Fax: 202-501-4067.
     Mail: General Services Administration, Regulatory 
Secretariat (VIR), 1800 F Street, NW., Room 4035, ATTN: Laurieann 
Duarte, Washington, DC 20405.
    Instructions: Please submit comments only and cite FAR case 2004-
019 in all correspondence related to this case.
    All comments received will be posted without change to http://www.acqnet.gov/far/ProposedRules/proposed.htm, including any personal 
information provided.

FOR FURTHER INFORMATION CONTACT: The FAR Secretariat at (202) 501-4755 
for information pertaining to status or publication schedules. For 
clarification of content, contact Ms. Jeritta Parnell, Procurement 
Analyst, at (202) 501-4082. Please cite FAR case 2004-019.

SUPPLEMENTARY INFORMATION: 

A. Background

    The proposed FAR changes are necessary to implement EVMS 
requirements in OMB Circular A-11, Part 7, Planning, Budgeting, 
Acquisition, and Management of Capital Assets, and the supplement to 
Part 7, the Capital Programming Guide. Title V of the Federal 
Acquisition Streamlining Act of 1994 (FASA) requires agency heads to 
approve or define the cost, performance, and schedule goals for major 
acquisitions and achieve, on average, 90 percent of the cost, 
performance and schedule goals established. The Clinger-Cohen Act of 
1996 requires the Director of OMB to develop, as part of the budget 
process, a process for analyzing, tracking, and evaluating the risks 
and results of all major capital investments for information systems 
for the life of the system. OMB Circular A-11, Part 7, Planning, 
Budgeting, Acquisition, and Management of Capital Assets and its 
supplement, Capital Programming Guide, were written to meet the 
requirements of FASA and the Clinger-Cohen Act. OMB Circular A-11, Part 
7, sets forth the policy, budget justification, and reporting 
requirements that apply to all agencies of the executive branch of the 
Government that are subject to executive branch review, for major 
capital acquisitions.
    This rule establishes standard EVMS provisions, a standard clause 
and a set of guidelines for Governmentwide use. The guidelines include 
the requirement and timing of an Integrated Baseline Review (IBR), 
whether prior to or post award. Due to the time and cost of performing 
IBRs, when IBRs are conducted prior to award, consideration should be 
given to limiting the competitive range. The concept of conducting the 
IBR before the contract is awarded is a change from the traditional 
approach of conducting IBRs only after contract award. We specifically 
request comments on the feasibility of conducting IBRs before award. 
Should all contracts require IBRs before award? If not, on what type of 
contracts should IBRs be conducted before award? Would a modified IBR 
be a better choice before award? What should be the down-select policy 
to limit the number of offerors subject to an IBR before award?
    This is not a significant regulatory action and, therefore, was not 
subject to review under Section 6(b) of Executive Order 12866, 
Regulatory Planning and Review, dated September 30, 1993. This rule is 
not a major rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

    The proposed changes to FAR Parts 2, 7, 34, 42, and 52 may have a 
significant economic impact on a substantial number of small entities 
within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et 
seq., because the rule requires contractors, and subcontractors 
identified by the contracting officer, to implement earned value 
management and set up earned value management systems within their 
organizations to plan and manage the work under major acquisitions. 
Thus, small businesses will be required to set up such systems if 
awarded a major acquisition contract or a large subcontract under a 
major acquisition. However, an analysis of data in the Federal 
Procurement Data System (FPDS) on actions and dollars on contracts 
above $20 million for supplies and equipments, IT services and 
construction, areas where EVMS is likely to be applied, indicated that 
small business only received 3.8 percent of the $36.8 billion and 5.8 
percent of the 345 actions. Because FPDS does not collect data on EVMS 
use, the data above is only an approximation of the effect on small 
business. The Councils are seeking comments on the potential impact of 
having to implement a program management system that meets the EVMS 
guidelines in ANSI/EIA Standard 748-A.
    An Initial Regulatory Flexibility Analysis (IRFA) has been prepared 
and will be provided to the Chief Counsel for Advocacy for the Small 
Business Administration. The analysis is summarized as follows:

    The proposed FAR changes are necessary to implement earned value 
management systems (EVMS) requirements in OMB Circular A-11, Part 7, 
Planning, Budgeting, Acquisition, and Management of Capital Assets, 
and the supplement to Part 7, the Capital Programming Guide. 
Currently, only DoD, NASA, and a few other agencies have developed 
EVMS clauses and policy. The Civilian Agency Acquisition Council and 
the Defense Acquisition Regulations Council (Councils) are therefore 
proposing revising FAR Parts 2, 7, 34, 42, and 52 to include 
guidance for EVMS. This rule establishes standard EVMS provisions, a 
standard clause and a set of guidelines for Governmentwide use.
    Title V of the Federal Acquisition Streamlining Act of 1994 
(FASA) requires agency heads to approve or define the cost, 
performance, and schedule goals for major acquisitions and achieve, 
on average, 90 percent of the cost, performance and schedule goals 
established. The Clinger-Cohen Act of 1996 requires the Director of 
OMB to develop, as part of the budget process, a process for 
analyzing, tracking, and evaluating the risks and results of all 
major capital investments for information systems for the life of 
the system. OMB Circular A-11, Part 7, Planning, Budgeting, 
Acquisition, and Management of Capital Assets and its supplement, 
Capital Programming Guide, were written to meet the requirements of 
FASA and the Clinger-Cohen Act. OMB Circular A-11, Part 7, sets 
forth the policy, budget justification, and reporting requirements 
that apply to all agencies of the executive branch of the Government 
that are subject to executive branch review, for major capital 
acquisitions. The proposed FAR changes are necessary to implement 
EVMS requirements in OMB Circular A-11, Part 7, Planning, Budgeting, 
Acquisition, and Management of Capital Assets, and the

[[Page 17947]]

supplement to Part 7, the Capital Programming Guide.
    The impact to small businesses by this rule will be dependent 
upon the thresholds established by the agencies or identified by OMB 
as the agencies' major acquisitions/investments. OMB does not expect 
EVMS on acquisitions at or below $20 million total cost. However, 
OMB or the agency may identify a lower dollar acquisition as a major 
acquisition for application of EVMS. Therefore the impact for this 
rule has not been ascertained across all agencies. Small businesses 
may be impacted by their lack of certification of an EVM System at 
time of award or the cost of the requirement for an IBR prior to 
award where an agency does not absorb the cost of the IBR. Likewise, 
agencies will be affected by the possible cost of IBRs for which 
they absorb the costs. Therefore, the number of small businesses 
with EVM Systems is uncertain, based on current information.
    This proposed FAR rule will not impose any additional reporting 
or recordkeeping requirements on offerors, contractors, or members 
of the public which require the approval of the Office of Management 
and Budget under 44 U.S.C. 3501, et seq. The rule provides for the 
standardization of EVMS across the Government. Contractors are 
required to maintain EVMS, where applicable. These systems are 
unique to the contractor. The reporting is specific to the 
contractor's system and is not the reporting of identical 
information collected for a public collection. There is no set of 
identical questions for 10 or more contractors. The rule allows 
contractors to use a standardized EVMS across Government. The 
requirements for these systems are usually imposed on high dollar 
acquisitions. Therefore, only a few small entities would be required 
to comply with the cost/schedule/performance requirements for these 
systems.
    There are no Federal rules that duplicate, overlap, or conflict 
with the proposed rule.

    The FAR Secretariat has submitted a copy of the IRFA to the Chief 
Counsel for Advocacy of the Small Business Administration. A copy of 
the IRFA may be obtained from the FAR Secretariat. The Councils will 
consider comments from small entities concerning the affected FAR Parts 
2, 7, 34, 42, and 52 in accordance with 5 U.S.C. 610. Comments must be 
submitted separately and should cite 5 U.S.C. 601, et seq. (FAR case 
2004-019), in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the proposed 
changes to the FAR do not impose information collection requirements 
that require the approval of the Office of Management and Budget under 
44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Parts 2, 7, 34, 42, and 52

    Government procurement.

    Dated: April 1, 2005.
Rodney Lantier,
Director, Contract Policy Division, General Services Administration.

    Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 2, 7, 
34, 42, and 52 as set forth below:
    1. The authority citation for 48 CFR parts 2, 7, 34, 42, and 52 are 
revised to read as follows:

    Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 2--DEFINITIONS OF WORDS AND TERMS

    2. Amend section 2.101 in paragraph (b) by adding, in alphabetical 
order, the definition ``Earned value management system'' to read as 
follows:


2.101  Definitions.

* * * * *
    (b) * * *
    Earned value management system means a project management tool that 
effectively integrates the project scope of work with cost, schedule 
and performance elements for optimum project planning and control. The 
qualities and operating characteristics of earned value management 
systems are described in American National Standards Institute (ANSI)/
Electronics Industries Alliance (EIA) Standard-748, Earned Value 
Management systems. (See OMB Circular A-11, Part 7.)
* * * * *

PART 7--ACQUISITION PLANS

    3. Amend section 7.105 by adding a sentence to the end of paragraph 
(b)(10) to read as follows:


7.105  Contents of written acquisition plans.

* * * * *
    (b) * * *
    (10) * * * If an earned value management system is to be used, 
discuss the methodology the Government will employ to analyze and use 
the earned value data to assess and monitor contract performance. In 
addition, discuss how the offeror's/contractor's EVMS will be verified 
for compliance with the American National Standards Institute/
Electronics Industries Alliance (ANSI/EIA) standard, and the timing and 
conduct of Integrated Baseline Reviews (whether prior to or post 
award). See 34.202.
* * * * *

PART 34--MAJOR SYSTEM ACQUISITION

    4. Revise section 34.000 to read as follows:


34.000  Scope of part.

    This part describes acquisition policies and procedures for use in 
acquiring major systems consistent with OMB Circular No. A-109; and the 
use of earned value management systems in acquisitions designated as 
major acquisitions consistent with OMB Circular A-11.
    5. Amend section 34.005-2 by adding paragraph (b)(6) to read as 
follows:


34.005-2  Mission-oriented solicitation.

* * * * *
    (b) * * *
    (6) Require the use of an earned value management system that meets 
the guidelines of ANSI/EIA Standard-748 (current version at time of 
solicitation) (see 42.1106) for earned value management systems and 
reporting requirements).
* * * * *
    6. Add subpart 34.X to read as follows:

Subpart 34.X--Earned Value Management Systems

Sec.
34.X01 Policy.
34.X02 Integrated Baseline Reviews.
34.X03 Solicitation provisions and contract clause.


34.X01  Policy.

    (a) Earned value management system (EVMS) is required in 
acquisitions designated, in accordance with agency procedures, as major 
acquisitions subject to OMB Circular A-11.
    (b) When EVMS is required, the agency shall consider the use of an 
Integrated Baseline Review (IBR).


34.X02  Integrated Baseline Reviews.

    (a) The Integrated Baseline Review (IBR) is meant to verify the 
technical content and the realism of the related performance budgets, 
resources, and schedules. It should provide a mutual understanding of 
the inherent risks in offerors'/contractors' performance plans and the 
underlying management control systems, and it should formulate a plan 
to handle these risks.
    (b) The IBR is a joint assessment by the offeror or contractor, and 
the Government, of the--
    (1) Ability of the project's technical plan to achieve the 
objectives of the scope of work;
    (2) Adequacy of the time allocated for performing the defined tasks 
to successfully achieve the project schedule objectives;
    (3) Ability of the Performance Measurement Baseline (PMB) to 
successfully execute the project and attain cost objectives, 
recognizing the relationship between budget resources, funding, 
schedule, and scope of work;

[[Page 17948]]

    (4) Availability of personnel, facilities, and equipment when 
required, to perform the defined tasks needed to execute the program 
successfully; and
    (5) The degree to which the management process provides effective 
and integrated technical/schedule/cost planning and baseline control.
    (c) Conduct the IBR in accordance with agency procedures.


34.X03  Solicitation provisions and contract clause.

    (a) The contracting officer shall insert a provision that is 
substantially the same as the provision at 52.234-X1, Notice of Earned 
Value Management System, in solicitations for contracts that require 
the contractor to use an earned value management system (EVMS) and for 
which the Government may require an Integrated Baseline Review (IBR) 
after contract award. When an offeror is required to provide an EVMS 
plan as part of its proposal, the contracting officer shall forward a 
copy of the plan to the cognizant Administrative Contracting Officer 
(ACO) or responsible Federal department or agency and obtain their 
assistance in determining the adequacy of the proposed EVMS plan.
    (b) The contracting officer shall insert a provision that is 
substantially the same as the provision at 52.234-X2, Notice of Earned 
Value Management System-Pre-Award IBR, in solicitations for contracts 
that require the contractor to use an EVMS and for which the Government 
will require an IBR prior to contract award. When an offeror is 
required to provide an EVMS plan as part of its proposal, the 
contracting officer shall forward a copy of the plan to the cognizant 
ACO or responsible Federal department or agency and obtain their 
assistance in determining the adequacy of the proposed EVMS plan.
    (c) The contracting officer shall insert a clause that is 
substantially the same as the clause at 52.234-X3, Earned Value 
Management System, in solicitations and contracts that require a 
contractor to use an earned value management system (EVMS).

PART 42--CONTRACT ADMINISTRATION AND AUDIT SERVICES

    7. Amend section 42.1106 by adding paragraph (d) to read as 
follows:


42.1106  Reporting requirements.

* * * * *
    (d) For major acquisitions contracting officers shall require 
contractors to submit earned value management system monthly reports 
(see subpart 34.2 and OMB Circular A-11, part 7, section 1H4, Exhibit 
300).

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    8. Add sections 52.234-X1, 52.234-X2, and 52.234-X3 to read as 
follows:


52.234-X1  Notice of Earned Value Management System.

    As prescribed in 34.X03(a) use the following provision:

Notice of Earned Value Management System (Date)

    (a) The offeror shall provide documentation that the cognizant 
Administrative Contracting Officer (ACO) or a Federal department or 
agency has recognized that the proposed earned value management 
system (EVMS) complies with the EVMS guidelines in ANSI/EIA 
Standard-748 (current version at time of solicitation).
    (b) If the offeror proposes to use a system that does not meet 
the requirements of paragraph (a) of this provision, the offeror 
shall submit a comprehensive plan for compliance with the EVMS 
guidelines.
    (1) The plan shall--
    (i) Describe the EVMS the offeror intends to use in performance 
of the contracts;
    (ii) Distinguish between the offeror's existing management 
system and modifications proposed to meet the guidelines;
    (iii) Describe the management system and its application in 
terms of the EVMS guidelines;
    (iv) Describe the proposed procedure for administration of the 
guidelines, as applied to subcontractors; and
    (v) Provide documentation describing the process and results of 
any third-party or self-evaluation of the system's compliance with 
the EVMS guidelines.
    (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 the offeror's plan for EVMS 
before contract award.
    (c) Offerors shall identify the major subcontractors, or major 
subcontracted effort if major subcontractors have not been selected, 
planned for application of the guidelines. The prime Contractor and 
the Government shall agree to subcontractors selected for 
application of the EVMS guidelines.
    (End of provision)


52.234-X2  Notice of Earned Value Management System--Pre-Award IBR.

    As prescribed in 34.X03(b), use the following provision:

Notice of Earned Value Management System, Pre-Award IBR (Date)

    (a) The offeror shall provide documentation that the cognizant 
Administrative Contracting Officer (ACO) or a Federal department or 
agency has recognized that the proposed earned value management 
system (EVMS) complies with the EVMS guidelines in ANSI/EIA 
Standard-748 (current version at time of solicitation).
    (b) If the offeror proposes to use a system that does not meet 
the requirements of paragraph (a) of this provision, the offeror 
shall submit a comprehensive plan for compliance with the EVMS 
guidelines.
    (1) The plan shall--
    (i) Describe the EVMS the offeror intends to use in performance 
of the contracts;
    (ii) Distinguish between the offeror's existing management 
system and modifications proposed to meet the guidelines;
    (iii) Describe the management system and its application in 
terms of the EVMS guidelines;
    (iv) Describe the proposed procedure for administration of the 
guidelines, as applied to subcontractors; and
    (v) Provide documentation describing the process and results of 
any third-party or self-evaluation of the system's compliance with 
the EVMS guidelines.
    (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 approve the offeror's plan 
for EVMS before contract award.
    (c) Offerors shall identify the major subcontractors, or major 
subcontracted effort if major subcontractors have not been selected 
subject to the guidelines. The prime Contractor and the Government 
shall agree to subcontractors selected for application of the EVMS 
guidelines.
    (d) The Government will conduct an Integrated Baseline Review 
(IBR), as designated by the agency, prior to contract award. The 
objective of the IBR is for the Government and the Contractor to 
jointly assess technical areas, such as the Contractor's planning, 
to ensure complete coverage of the contract requirements, logical 
scheduling of the work activities, adequate resources, methodologies 
for earned value (budgeted cost for work performed (BCWP)), and 
identification of inherent risks.
    (End of provision)


52.234-X3  Earned Value Management System.

    As prescribed in 34.X03(c), insert the following clause:

Earned Value Management System (Date)

    (a) In the performance of this contract the Contractor shall use 
an earned value management system (EVMS) to manage the contract that 
at the time of contract award has been recognized by the cognizant 
Administrative Contracting Officer (ACO) or a Federal department or 
agency as compliant with the guidelines in ANSI/EIA Standard-748 
(current version at time of award) and the Contractor will submit 
reports in accordance with the requirements of this contract.
    (b) If, at the time of award, the Contractor's EVMS has not been 
recognized by the cognizant ACO or a Federal department or agency as 
complying with EVMS guidelines (or the Contractor does not have an 
existing cost/schedule control system that is

[[Page 17949]]

compliant with the guidelines in ANSI/EIA Standard-748 (current 
version at time of award)), the Contractor shall apply the system to 
the contract and shall be prepared to demonstrate to the ACO that 
the EVMS complies with the EVMS guidelines referenced in paragraph 
(a) of this clause.
    (c) Agencies may conduct Integrated Baseline Reviews (IBR). If a 
pre-award IBR has not been conducted, such a review shall be 
scheduled as early as practicable after contract award, but not 
later than 180 days after award. The Contracting Officer may also 
require an IBR at (1) exercise of significant options or (2) 
incorporation of major modifications. Such reviews will normally be 
scheduled before award of the contract action.
    (d) Unless a waiver is granted by the ACO or Federal department 
or agency, Contractor proposed EVMS changes require approval of the 
ACO or Federal department or agency, prior to implementation. The 
ACO or Federal department or agency, 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 or Federal 
department or agency, the Contractor shall disclose EVMS changes to 
the ACO or Federal department or agency 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 Contracting Officer or a duly 
authorized representative. Access is to permit Government 
surveillance to ensure that the EVMS conforms, and continues to 
conform, with the performance 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.]
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[FR Doc. 05-6864 Filed 4-7-05; 8:45 am]
BILLING CODE 6820-EP-P