Guest Blog

THOUGHTS ON THE NDAA 2024 EVMS CHANGES

Stay updated on the latest changes to Earned Value Management System (EVMS) requirements in US defense contracts. The 2024 National Defense Authorization Act (NDAA) introduced modifications in section 827 of H.R. 2670, signed by President Biden on December 22, 2023. Learn how these changes impact your projects.

This blog post was originally published on the Pinnacle Management website. It is being republished here with the permission of the author.  

If you work program management on US defense contracts and have been following the National Defense Authorization Act (NDAA) for 2024, you may have noticed some modifications to Earned Value Management System (EVMS) requirements that were added to section 827 of H.R. 2670, signed by President Biden on December 22, 2023. 

SEC. 827. MODIFICATIONS TO EARNED VALUE MANAGEMENT SYSTEM REQUIREMENTS. 

(a) In General – Not later than 180 days after the date of the enactment of this Act, the Department of Defense Supplement to the Federal Acquisition Regulation shall be revised to – 

(1) exempt all software contracts and subcontracts of the Department of Defense from earned value management system requirements;  

(2) Impose earned value management system requirements for cost contracts or incentive contracts with a value greater than or equal to $20,000,000 and less than $50,000,000; and 

(3) require a defense contractor to use an earned value management system for contracts awarded with a value greater than or equal to $50,000,000 and less than $100,000,000. 

 (b) Implementation - If the Department of Defense Supplement to the Federal Acquisition Regulation is not revised as described in subsection (a) before the deadline specified in such subsection, the Under Secretary of Defense for Acquisition and Sustainment shall provide to the Committees on Armed Services of the Senate and the House of Representatives a briefing on the timeline for such revisions. 

Within the Earned Value Management (EVM) practitioner community, this law has been quite the topic of discussion, as much for its obscure and contradictory language as the impact it may have on contracts. Opinions and interpretations have been varied, but I have been holding off writing anything about this until Acquisition Data and Analytics (ADA), the focal point for DoD EVM policy and guidance, weighed in on it. I just came back from the NDIA IPMD Tools and Services Forum where Harold “Hal” Hickman, Acting Deputy Director for ADA Integrated Program Management, provided some insight into how the DoD is addressing the law (see Hal’s full presentation here). 

Let’s start with the easy ones, which are 827.a.2 and 827.a.3. These two seemingly contradictory lines were apparently a translation error. Lawmakers are not subject matter experts, and in a rush to get the bill completed, these entries did not go through a thorough review and edit process. This is not uncommon in large bills such as this one. The intent, according to ADA, was to raise the lower limit of the EVMS threshold from $20M to $50M. This is expected to be corrected on the next NDAA. Given this information, we can expect to see a change in the DFAR EVMS threshold sometime next year. 

And now for the big one that seems to have everyone’s attention – exempting software contracts from EVMS requirements. So much has been written on Agile vs. Predictive vs. Hybrid development methodologies that I don’t need to re-hash all of that here. But suffice it to say that many practitioners of Agile software development feel that Earned Value Management only works for predictive (i.e. “Waterfall”) development methodologies and it is not compatible with Agile software development. I think most EVM practitioners would disagree with this notion, and much work has been done to develop methodologies to successfully implement EVMS on Agile projects. If you are interested in the topic, a good place to start is the Agile and EVM Program Manager’s Desk Guide, published by the Department of Defense or the Industry Practice Guide for Integrating Agile and Earned Value Management on Programs, published by NDIA. I suspect this statement was inserted at the urging of defense contractors that were not happy doing EVM on Agile software development projects. 

My biggest issue with this legislative action is the ambiguity. Many DoD development contracts contain scope for systems engineering, hardware, software, integration, testing, deployment, logistics, and other types of work. Software is just one component of a project (albeit, often a significant part of it). With or without EVM, defense projects must have an Integrated Master Schedule (IMS) with milestones to track deliverables, even when the software portion of the contract is being developed using agile methods. DoD program offices need to know when needed capabilities will be delivered, as often those capabilities must be integrated with other systems. The IMS is the preferred tool for forecasting delivery dates, and it is the IMS that drives an Earned Value Management System. In other words, eliminating EVMS from a contract doesn’t really solve the problem of choosing between agile and predictive methodologies. A hybrid approach will be required on many contracts regardless. 

827.a.1 doesn’t just exempt software contracts, but subcontracts as well. Exempting software subcontracts makes this issue even more complex. An aerospace manufacturer designing and building a next generation weapons system may subcontract out the avionics or targeting systems – both of which are considered software subcontracts. This law, as written, forbids the flow down of the prime contractor’s EVMS requirements. That could create quite a challenge when trying to integrate performance data for the total contract. 

ADA’s position on this has been made clear. The department believes that “Agile EVM” or “Agile IPM” is a valid performance management technique to apply to software development contracts, and their response to congress will be a letter explaining how they use Agile EVM to manage software contract performance. I cannot predict what will come of this, but there is speculation that the law could be revised to remove the software exemption. 

So, what does this mean for you and your contract? In short, nothing. As of the date of this article’s publication, the DFAR has not been updated. Any existing contract requirements remain in effect until a contract modification is issued. If you have a software contract over $100M in value with a DCMA validation requirement, DCMA will continue to perform surveillance on your program using their existing business practices. According to ADA, deviations from EVMS requirements are risk-based decisions, and the existence of this language in the NDAA is not justification for having EVMS requirements waived on a contract. If you are responding to an RFP with an EVMS requirement, you should expect that the requirement will remain and respond accordingly. 

If you need help responding to an RFP with EVMS requirements, Give Us a Call or Send Us an Email. 

Michael is President of Pinnacle Management Systems. Since joining the company in 2000, he has performed in a variety of consulting and management roles affecting transformative change within federal agencies and suppliers, IT organizations, Engineering & Construction, Aerospace, Finance, and other industries that desire to improve project and program performance. Michael is a Microsoft Certified Professional and certified Primavera trainer and consultant. He is also an AACE certified Earned Value Professional (EVP), and an APMG certified trainer for IPPM. He currently serves as the Dean of Scheduling for the College of Performance Management (CPM) and is an active participant with the NDIA Integrated Program Management Division (IPMD) and the Civilian Agency Industry Working Group (CAIWG). As part of his contribution to the industry, he helped author the NDIA EVMS Scalability Guide.