Earned Value Management System (EVMS)

At a glance:

• The main takeaway: EVMS is a powerful program management tool that integrates the scope of work with cost, schedule and performance goals, and it’s important for government contractors to know how it works and when it applies. 
• The impact on your business: Understanding EVMS, its importance, how it works and why it exists is crucial for government contractors who want to succeed in tackling certain major projects.
• Next steps: Read and gain insights about EVMS in this piece, then schedule a consultation with Aprio’s GovCon team for more information and help implementing and complying with EVMS for your own projects.

Schedule a consultation with Aprio’s GovCon specialists today.

What is EVMS?

Earned Value Management System (EVMS) is one of the Department of Defense’s (DoD’s) and industry’s most powerful program management tools that effectively integrates the project scope of work with cost, schedule and performance elements. The operating characteristics of an acceptable EVMS are described in the Department of Defense EARNED VALUE MANAGEMENT SYSTEM INTERPRETATION GUIDE (EVMSIG) “Earned Value Management Systems,” (FAR 2.101 (b)(2)).

This standard establishes 32 guidelines spread over 5 functional areas that are required for an EVMS. These guidelines are contained in the Electronic Industries Alliance Standard-748 EVMS (EIA-748). In addition to a comprehensive written system description, contractors must integrate an EVMS cost-processor into their current accounting system. The EVMSIG is not a replacement for a contractor to develop and maintain formalized EVM system description documentation and processes.

Effective capital programming processes uses long range planning and a disciplined, integrated budget process as the basis for managing a portfolio of capital assets to achieve performance goals with the least risk and the lowest life-cycle costs. This process should provide agency management with accurate information on acquisition and life-cycle costs, schedules and performance of current and proposed assets.

The Federal Acquisition Streamlining Act of 1994 (Pub. L. No. 103-355) (FASA) requires that Agency Heads manage the agency portfolio of major acquisitions within 90 percent of the individual investment’s cost, schedule and performance goals. When developing the cost, schedule and performance goals on developmental projects with significant risk, project managers must provide the agency Executive Review Committee with risk adjusted, most likely cost, schedule and performance goals.

Without the knowledge of the risks involved, managers at all levels – Agency, Office of Management and Budget (OMB) and Congress – cannot make the best decisions for the allocation of resources among the competing investments.

When is EVMS required?

Per FAR Subpart 34.201, EVMS is required for all major programs as defined in OMB Circular A-11, Part 7, Capital Planning Guide Supplement. Agencies are permitted to require an EVMS on non-major programs at their discretion. In general, agencies must have a disciplined capital programming process that addresses project prioritization between new assets and maintenance of existing assets, risk management and cost estimating to improve the accuracy of cost, schedule and performance provided to management, and the other difficult challenges posed by asset management and acquisition.

RFPs for contracts that require an EVMS will contain the FAR provision 52.234-2 or 52.234-3 depending on whether the integrated baseline review (IBR) is to be done pre or post award. The primary purpose of the IBR is to determine if the EVMS effectively provides integrated technical, schedule and cost baseline planning and control.

The resulting contract will include FAR clause 52.234-4, which requires the contractor to utilize an EVMS on the contract. Please note that agencies such as DoD and NASA have developed their own EVMS provisions and clauses.

Contractors that do not have an EVMS that has been deemed adequate by the government may still submit a proposal, but their proposal must include a “plan” to implement an acceptable EVMS. That plan will become part of the contract.

What is proper EVMS Compliance?

A properly implemented EVMS will provide internal controls with documented, formal program management processes for managing any acquisition within the DoD. These controls and processes will ensure both contractor and government program managers, as well as other government stakeholders, receive contract performance data.

The contract performance data should include:

• Time-phased budgets to the corresponding scope of work
• Objective measurements for work progress
• Program objective achievements within budget, on schedule and within technical performance parameters
• Informed decisions and corrective actions
• Timely, accurate, reliable and auditable data
• Supplies managers at all levels with appropriate program status information
• The same EVMS the contractor uses to manage the contract
• Timely and reliable Estimate at Completion (EAC)

Aprio helps Government contractors comply with developing a compliant EVMS for Government contracts and ensure accurate and reliable financial reporting.

Connect with our dedicated Government Contract Compliance team today for help with your CAS compliance needs.

Additional Resources:

Cost Accounting Standards Decoded: CAS 401 Consistency in Estimating, Accumulating and Reporting Costs

The Four Horsemen of the Incurred Cost Audit

Unlocking the Mystery of Provisional Billing Rates: Why They Matter!