2011-2756. Major System Acquisition; Earned Value Management

AGENCY:

National Aeronautics and Space Administration.

ACTION:

Proposed rule with request for comments.

SUMMARY:

NASA proposes to revise the requirements 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 proposal recognizes the reduction in risk associated with FFP contracts and intends to relieve contractors of an unnecessary reporting burden.

DATES:

Interested parties should submit comments on or before April 11, 2011 to be considered in formulation of the final rule.

ADDRESSES:

Interested parties may submit comments, identified by RIN number 2700-AD29, via the Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. Comments may also be submitted to Carl Weber (Mail stop 5K80), NASA Headquarters, Office of Procurement, Contract Management Division, Washington, DC 20546. Comments may also be submitted by e-mail to [e-mail].

FOR FURTHER INFORMATION CONTACT:

Carl Weber, NASA, Office of Procurement, Contract Management Division (Suite 5K80); [phone]; e-mail: [e-mail].

SUPPLEMENTARY INFORMATION:

A. Background

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.

Federal Acquisition Regulation (FAR) Subpart 34.2 and Office of Management and Budget (OMB) Circular A-11 require agencies to measure the cost and schedule performance of major investments with development activity using EVM. These policies are implemented by NASA through NASA Procedural Requirement (NPR) 7120.5, which requires program managers to perform appropriate EVM analyses of their investments, and NASA FAR Supplement 1834.201, which requires contractors to have an Earned Value Management System (EVMS) for major acquisitions with development or production work, including development or production work for flight and ground support systems and components, prototypes, and institutional investments (facilities, IT infrastructure, etc.).

Under the current NASA policy, contractors executing a firm-fixed-price (FFP) contract meeting specified thresholds are required to have an EVMS that complies with the guidelines in ANSI/EIA Standard 748. However, since the cost incurred by the government is fixed the requirement for ANSI compliance for performance under FFP contracts creates an unnecessary burden on contractors that may increase their costs and those passed on to the government. Accordingly, this proposed rule provides an exception to the requirement for an EVMS for contractors who perform under a FFP contract. However, the proposed rule does not change the requirements in the NASA NPR to apply EVM principles at the program/project level; nor is it intended or expected to materially alter NASA's ability to obtain the data the agency needs from a contractor performing under an FFP contract for an effective program/project level EVM analysis—including the program/project level generation of the Integrated Master Schedule (IMS), the Work Breakdown Structure (WBS) and the time-phased budget, with cost variance and schedule variance calculated using the performance measurement baseline—that is required for sound program, project, and contract management.

Finally, for cost or fixed-price incentive contracts and subcontracts valued at less than $20 Million, the proposed rule makes application of EVM an optional, risk-based decision at the discretion of the program/project manager.

This is not a significant regulatory action and, therefore, is not subject to review under Section 6(b) of Executive Order 12866, Regulatory Planning and Review, dated September 30, 1993. This proposed rule is not a major rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

NASA certifies that this proposed rule will not 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 it relaxes previous requirements in the NASA FAR Supplement and does not impose a significant economic impact beyond that previously required. Therefore, an Initial Regulatory Flexibility Analysis has not been performed. NASA will consider comments from small entities concerning the affected NFS Parts 1834 and 1852, in accordance with 5 U.S.C. 610. Interested parties should submit such comments separately and should cite 5 U.S.C. 601 in the correspondence.

C. Paperwork Reduction Act

This proposed rule does not impose any new information collection requirements that require the approval of the Office of Management and Budget (OMB) under 44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Parts 1834

• Government procurement

William P. McNally,

Assistant Administrator for Procurement.

Accordingly, 48 CFR part 1834 is proposed to be amended as follows:

PART 1834—MAJOR SYSTEM ACQUISITION

1. The authority citation for 48 CFR part 1834 continues to read as follows:

Authority: 42 U.S.C. 2455(a), 2473(c)(1).

2. Section 1834.003 is added to read as follows:

1834.003

Responsibilities.

(a) NASA's implementation of OMB Circular No. A-109, Major Systems Acquisition, and FAR Part 34 is contained in this Part and in NASA Procedures and Guidelines (NPR) 7120.5, “NASA Space Flight Program and Project Management Requirements.”

3. Section 1834.201 is revised to read as follows:

1834.201

Policy.

(a)(1) NASA requires use of an Earned Value Management System (EVMS) on acquisitions for development or production work, including development or production work for flight and ground support systems and components, prototypes, and institutional investments (facilities, IT infrastructure, etc.) as specified in paragraphs (a)(1)(i) through (iii) of this section:

(i) For cost or fixed-price incentive contracts and subcontracts valued at $50 Million or more the contractor shall have an EVMS that has been determined by the cognizant Federal agency to be in compliance with the guidelines in the American National Standards Institute/Electronic Industries Alliance Standard 748, Earned Value Management Systems (ANSI/EIA-748).

(ii) For cost or fixed-price incentive contracts and subcontracts valued at $20 Million or more but less than $50 Million, the contractor shall have an EVMS that complies with the guidelines in ANSI/EIA-748, as determined by the cognizant Contracting Officer.

(iii) For cost or fixed-price incentive contracts and subcontracts valued at less than $20 Million the application of EVM is optional and is a risk-based decision at the discretion of the program/project manager.

(2) Requiring earned value management for firm-fixed-price (FFP) contracts and subcontracts of any dollar value is discouraged; however, a schedule management system and adequate reporting shall be required to plan and track schedule performance for development or production contracts valued at $20 Million or more. In addition, for FFP contracts that are part of a program/project of $50 Million or more, the contracting officer shall collaborate with the government's program/project manager to ensure the appropriate data can be obtained or generated to fulfill program management needs and comply with the Agency program management requirements of NPR 7120.5.

(3) An EVMS is not required on non-developmental contracts for engineering support services, steady state operations, basic and applied research, and routine services such as janitorial services or grounds maintenance services.

(4) Contracting officers shall request the assistance of the cognizant Defense Contract Management Agency (DCMA) office in determining the adequacy of proposed EVMS plans and procedures and system compliance.

(b) Notwithstanding the EVMS requirements above, if an offeror proposes to use a system that has not been determined to be in compliance with the American National Standards Institute/Electronics Industries Alliance (ANSI/EIA) Standard-748, Earned Value Management Systems, the offeror shall submit a comprehensive plan for compliance with these EVMS standards, as specified in 1852.234-1, Notice of Earned Value Management System. Offerors shall not be eliminated from consideration for contract award because they do not have an EVMS that complies with these standards.

4. In section 1834.203-70 revise the introductory text to read as follows:

1834.203-70

NASA solicitation provision and contract clause.

Except for firm-fixed price contracts and the contracts identified in 1834.201(a)(iii), the contracting officer shall insert—

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