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NASA Issued a New Ruling to NOT Use EVM on Firm Fixed Price (FFP) Contracts

July 8, 2011 4 comments

In Federal Register Volume 76, Number 131 (Friday, July 8, 2011)

“NASA is issuing a final rule to delete the requirement in the NASA FAR Supplement (NFS) for contractors to establish and maintain an Earned Value Management System (EVMS) for firm-fixed-price (FFP) contracts. The final rule recognizes the reduction in risk associated with FFP contracts and intends to relieve contractors of an unnecessary reporting burden.”

Effective Date: July 8, 2011.

This is interesting in that most agencies do not require EVM on FFP contracts.  So this is of interest to NASA contractors primarily.

During the open comment period, NDIA supported this rule but made three suggestions.  Only one was partially accepted (you can read about all comments and responses in the article:  http://www.gpo.gov/fdsys/pkg/FR-2011-07-08/html/2011-17116.htm)

That one NDIA recommendation was that NASA consider applying the change to existing contracts, NASA said it would not require, but might consider, implementing the change on existing contracts on a case-by-case basis.

How do yo feel about EVM on FFP contracts?  I am old school in that if a practice is good, it should be used all the time.  But I agree that making a contractor go through a validation and surveillance on a FFP contract is additional cost that is not usually justified.

Should You Plan LOE Tasks In Your CPM Schedule?

I was recently supporting an EPC (engineering, procurement and construction) contractor on a huge project (average over $400 million per year for several years).  Their CPM schedule was maintained in one database of approximately 60,000 activities that are fully linked and resource loaded. They can easily create levels of schedule by coding & filtering.  This is an excellent approach.  There is no way that a lower level schedule does not support higher level milestones as it is all one schedule and they require all activities to be linked (or justified and approved).

While reviewing the EVM system it was clear that they do not include their LOE (level of effort) work in the scheduling system. I struggled with whether this was bad.  I concluded that it was not bad, and here is my reasoning.

This project is so large that there is a lot of direct charge work that is usually overhead (e.g., accounting, HR, security, contracts, purchasing, etc.).  This work is all direct on this contract and is planned correctly as LOE.  None of these activities will add any creditability to the schedule.  In fact all LOE activities would have to be planned as start-to-start successors and finish-to-finish successors (a hammock) as they will exist as long as the contract continues.  To me this means there is no scheduling reason for these activities to be in the schedule.

Considering the EVM system, there is another side to the story.  This company does what many contractors do for EVM.  They resource plan in a scheduling tool and electronically transfer that information to an EVM tool.  If the LOE activities are not in the schedule, they must be planned in the EVM tool separately.  How do they keep things linked?  What happens if the schedule stretches out and the LOE task needs to stretch out to support the direct tasks?  How do you make sure that the EAC for the LOE task considers that schedule slip?

If you put all activities in the schedule and resource load them, I think it makes the job easier.  For several reasons, this contractor does not do that.

What this company has done is write a software routine that runs a series of over 40 checks/tests on the schedule and EVM databases every week.  For instance, they check that the start and end date of an activity in the schedule match the start and end dates for the work package it supports in the EVM tool (for both baseline and ETC).  If any of these checks/tests fail, the software routine sends an email to the responsible party with the error (with a copy to the scheduler).  If that is not fixed by the time the check is run next week, a reminder email is sent with a copy to the person’s supervisor.  If it is not fixed the next week, it goes to the PM’s status log for discussion at the regular project status meetings. It will get fixed!

This process is repeated for every one of the checks which include such issues as: resource loading in the schedule does not match BCWS; cost incurred with activity showing 100% complete; activities with no successor; ACWP greater than EAC, etc.   But what of the LOE activities that are not in the schedule?  Those have a series of checks also.

This company is doing a great job of assuring that all the ANSI Guidelines and all best practice rules are followed, so I think there is no need to include LOE activities in the schedule.

Do you think LOE should be in the CPM Schedule?

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