The Defense Contract Management Agency (DCMA) Earned Value Management (EVM) System (EVMS) surveillance process is transitioning from regularly scheduled and planned on-site surveillance to an automated, data-driven surveillance process utilizing over 130 test metrics to identify potential compliance issues. The DCMA is currently piloting the risk-based surveillance process and plans to roll it out in late 2017.
If your EVMS is found to be deficient, your organization may be subject to contract payment holdbacks of up to 10 percent—potentially amounting to millions of dollars—under Defense Federal Acquisitions Regulations Supplement (DFARS) 252.242-7000, Contractor Business System Deficiencies.
Because the new system is in the final testing stages and will soon become standard across the board, aerospace and defense contractors should be considering the following questions:
- Will the new DCMA EVMS surveillance process apply to my organization?
- The new surveillance will apply if you have contract(s) that incorporate an EVM reporting requirement stipulated by reference to DFARS 252.234-7001, Notice of Earned Value Management System, and the total lifecycle value is greater than $100 million. The regulation requires the contractor to implement an EVMS that is compliant with the Electronic Industries Alliance (EIA) –748 standard, and the Office of Secretary of Defense EVMS Interpretation Guide (EVMSIG). However, the Government Program Office or the DCMA may also determine there is cause to conduct surveillance on your contract if it’s under the $100 million threshold.
- If you don’t currently have an EVM reporting requirement on any contracts, the process does not apply. However, this is something that should be considered if you are considering bidding on a contract with this requirement.
- How will my organization be impacted if it does apply?
- Most organizations still rely on tools like Microsoft Word and Excel. Disparate scheduling and EVM systems, as well as informal processes, increase the chances your organization may be impacted.
- The electronic format required for compliance is extensive and requires the integration of information from financial, scheduling and EVM systems. The data submitted will be at the Work Package level, which is more detailed than most current reporting requirements.
- The DCMA Earned Value Analysis System (EVAS) may trigger on-site surveillance. Surveillance may result in corrective action requests (CARs), for which your organization will be required to demonstrate compliance over at least a three-month reporting cycle.
- What does my organization need to do to prepare for the new EVMS surveillance process?
- Review current EVMS tools to identify sources of data and recommend enhancements, coding changes or new tools to address the EVAS reporting requirements.
- Identify potential EVMS compliance risks, and enhance or develop processes to address these risks.
- Update EVMS description documentation and provide training on new EVAS tools and processes.
- As recommended by DCMA, use the EVAS metrics for internal analysis before submitting your data to the government.
Ask yourself these questions ahead of the switch to ensure you’re set up for the greatest success once the new DCMA risk-based surveillance process is in place.
Dave Scott is a managing director and may be reached at firstname.lastname@example.org.
Warren Averett is an independent member of the BDO Alliance USA. This article was borrowed with permission from BDO USA, LLP