Friday, February 11, 2011

NASA Proposes to Remove EVMS Requirements from Firm Fixed Price Contracts

Here's something very rare - the Government is proposing to remove a regulation.

On February 9, 2011, NASA issued a proposed rule (with request for comment) that would eliminate the mandatory requirement for contractors to establish and maintain an Earned Value Management System (EVMS) for firm-fixed-price (FFP) contracts. NASA has finally recognized the inherently low risk to the Government associated with FFP contracts and intends to relieve contractors from unnecessary reporting burdens and unnecessary cost. We can only hope that other agencies take note and do likewise. This proposed rule would not affect cost-reimbursable or fixed-price-incentive contracts.

Under the revised rule, cost-reimbursable and fixed-price incentive contracts greater than $50 million must have an adequate EVMS system as determined by the cognizant federal agency (usually the Defense Contract Management Agency or DCMA). Cost-reimbursable and fixed price contracts between $20 and $50 million must have adequate EVMS systems as determined by the contracting officer. Cost-reimbursable and fixed-price-incentive contracts under $20 million need EVMS systems only when the contracting officer determines there is sufficient risk to justify the need. EVMS for fixed-priced contracts of any amount is "discouraged".

Earned Value Management (EVM) is a performance-based tool that gives agency managers an early warning of potential cost overruns and schedule delays during the execution of their investments. EVM requires agencies to integrate information about the scope of work with cost, schedule, and performance information so that they may compare planned spending with actual spending, isolate the source of performance problems, and take corrective actions in a timely manner.

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