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Program Management Systems Committee (PMSC)

Contractual Requirements/Issues Sub-Team

Update

7 August 2007

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Sub-Team

Team MembersMike Martin - P&W Rocketdyne (Team Lead)Beverly Solomon - Northrop Grumman Gay Infanti - Northrop GrummanEleanor Haupt - Consultant to the Institute for Defense AnalysesDave Muzio - MCRPeter Schwarz - MDAJeff Poulson - RaytheonLinda Nobel - RaytheonMike Pelkey – OSDRandy Steeno – BoeingDebbie Tomsic – OSDLarry Axtell – OSDIvan Bembers – NGAFred Meyer – DCMA EV Center

8 Meetings conducted to date / 1 Face to Face on 12 June

Reviewed all previously identified issues to focus efforts.

Selected highest payback issues.

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Issues List

Contracting Issue Application Issue

Title Issue #* Title Issue #*

Contract versus EVM System Order of Precedence

2 Flow down requirements 5a & 5b

Integrated and virtual team (badge less) subcontracting / teaming arrangements

5 Clarifying thresholds for contracting/subcontracting for follow-on options

5b

Subcontractor compliance, validation and surveillance

5 Application of reporting requirements

5a & 5b

Response time for final reports and system description reviews

5 Ownership and control of Management Reserve

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Communication between EVM and Contracting communities

6 IBR Timing 4

* See backup charts – pages 7 and 8

Currently working 4 issues.

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Suppliers have been contractually-directed by customers to depart from their validated EVM Systems to manage their contracts via

Section H – Special Provisions

Section C – Statement of Work requirements

In addition to inclusion of FAR or DFARs EVMS clauses in Section I

The central issue is whether and by what means and to what extent can a supplier be rightfully required to violate the requirements of its validated EVM System.

Issue could arise between Customer and Prime and may or may not be flowed down to the Subcontractors

Issue could also arise between Prime and Subcontractors

Issue RecommendationsExisting contracts:

Issues identified must be resolved, bilaterally, by the buyer and seller

PCO’s and ACO’s must agree with the resolution.

Resolution may involve adjustments to price and/or other changes to the T’s & C’s of the contract .

New acquisitions: Involve all stakeholders in decision-

making early in the acquisition process

Suppliers seek clarification of issues identified in RFPs using prescribed process

Issues identified after ATP must be resolved, bilaterally, by the buyer and seller

Conduct communication and training

Conduct RFP reviews within DoD / Primes and engage the EV Center for clarification when necessary

Impact DCMA issuing corrective action request (CAR) to

Supplier for failing to follow Supplier’s validated EVMS This finding appears inconsistent with the Contract

Order of Precedence Supplier cannot unilaterally resolve conflict in the

contract nor can Supplier fail to comply with contract requirements

Order of Precedence

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Part I – The Schedule

Part II – Contract Clauses

Part III – List of Documents, Exhibits, and

Other Attachments

Part IV – Representations and Instructions

(Solicitations only, excluded

from the Contract)

I) 252.242-7002

SuppliersEVM System Description

J) List of Documents,CDRLs/SDRLs

IMS or CPR DIDs

C) Description/specifications/statement of work

H) Special Contract Requirements

EVM SOW text(infrequent)

H) Special Provision clauses

Order of Precedence – T’s & C’s Contract Example

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The use of a single EVMS by all program participants to manage large programs involving major subcontractors may be viewed as non-compliant to the DFARS EVMS clause by the new DCMA EV Center

– This approach also referred to as badgeless, virtual, or gray badge

– Characterized by adoption of a single validated system to manage the effort (typically the prime’s EVMS), use of a common tool set, integrated schedules and performance reporting

Issue

Impact Potential of DCMA Corrective Action Request

(CAR)

The risk to the Subcontractors’ EVM System validation is still unclear at this time.

Recommendations Contracts Working Group define valid

options for EVMS flow down to subcontractors considering:

– Different subcontract types

– Roles and responsibilities

– Validation requirements for prime and subcontractors

– Reporting CDRLs (CPR and IMS)

Submit matrix for approval to the full PMSC

Submit for concurrence by OSD and DCMA EV Center

Conduct communication and training

Incorporate guidance into EVMIG

Incorporate modified guidance into NDIA Guides, as required

Integrated Subcontract EVMS Implementations

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Ownership and Control of Management Reserve

Direction has been given to prime contractors and subcontractors to use their Management Reserve (MR) for purposes other than the intent expressed in the ANSI/EIA-748 Standard.

– MR is sometimes viewed as a contingency to eliminate in negotiations or to use for out-of-scope work.

Government involvement in MR approval process

Issue

Recommendations

Discussion

Impact

Use of MR for out-of-scope work violates accepted contracting procedures and is tantamount to constructive change to the contract. Improper use of MR distorts the Performance Measurement Baseline (PMB) resulting in skewed data and indices.

Decisions for the use of MR have been the province of the contractor within the confines of its approved use in accordance with the ANSI Standard

Misuse of MR is on the DCMA EV Center “Watch List” as a serious concern.

Contractors should object to direction for the use of MR that deviates from accepted ANSI standard.

Contracting officers and prime should be alert to instances of improper contract direction.

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Issue

Recommendations

Discussion

Impact

Confusion between Prime and Subcontractors regarding oversight responsibilities. Implementation responsibility gaps could cause significant compliance issues to go unnoticed. May drive different implementation policies and procedures (e.g. DoD vs. Non DoD).

Current policy / guidance can be interpreted in a variety of ways.

DCMA’s position is that they are responsible. Industries position is that they are responsible. Represents a paradigm shift in the Prime /

Subcontracting relationship.

Subcontractor Compliance, Validation and Surveillance

There is confusion regarding the responsibility of subcontractor Compliance, Validation and Surveillance. Inconsistency between EVMIG , ANSI and DCMA Policy.DCMA? or

Prime Contractor?< $20M> $20M - < $50M> $50M

Conduct a formal workshop with DCMA EV Center and Industry Reps

Results of workshop would require the development and / or modification of policy / guidance.

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Path Forward

Understand stakeholders positions Include DCMA EV Center, DoD and Industry Contracting SMEs to

discuss our primary issues

Consider “Unintended Consequences”

Further Define and Prioritize Issues

Seek Corporate Guidance

Achieve consensus Communicate, Communicate, Communicate

Develop and publish articles

Personal presentations

Revise Requirements as needed