OUSD(AT&L)DPAPEVM Status and Issues

Michael PelkeyOUSD(AT&L) Defense Procurement & Acquisition Policy

4 February 2010

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Agenda

EVM Status Update

DFARS Proposed Rule on Business Systems

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EVM Status Update

27 Aug 09 – Dick Ginman, Dep. Dir. DPAP, designated DoD Ombudsman for EVM Issues

2 Nov 09 – DoD EVM Report transmitted to Congress

4 Jan 10 – Gary Bliss designated Director, Performance Assessments & Root Cause Analyses

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DFARS Proposed Rule

Business Systems-Definition and Administration(DFARS Case 2009-D038)

» Applies to any contract, of any type, with a requirement to maintain an approved system for Subcontracts, Government Property, Cost Estimating, EVM, MMAS, or Accounting system.

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Background

Aug 09 - Commission on Wartime Contracting (CWC) hearing on the adequacy of contractor business systems

Sep 09 – CWC published Special Report on Contractor Business Systems, “Defense agencies must improve their oversight of contractor business systems to reduce waste, fraud, and abuse.”

Nov 09 - CWC found that contractual mechanisms to enforce compliance with FAR and DFARS through payment withholding are inconsistent and, in some cases, completely lacking for key business systems.

15 Jan 10 – DFARS Proposed Rule published for public comment.

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Business Areas/Systems

DCAA internal control audit Business Areas Control Environment and Overall

Accounting System Controls Purchasing (subcontracting)

Controls Indirect and Other Direct Cost

Controls Compensation System Controls Billing System Controls Budget and Planning System

Controls Estimating System Controls Material Management and

Accounting System Controls Labor System Controls IT General System Controls

DCMA-administered Business Systems Accounting System Purchasing System Estimating System Material Management and

Accounting System (MMAS) Earned Value Management

System (EVMS) Property Management System

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DFARS Proposed Rule

Adopts the 6 business systems defined in the FAR/DFARS

Makes changes to EVMS clause, new or revised clauses for other business systems

New “Business Systems” clause provides for payment withholding of 10% or 5% for deficiencies in each of 6 Business systems

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EVMS clause changes

Requires ACO notification of system deficiency

Requires contractor response within 30 days of notification

If ACO determines that the EVMS contains a deficiency, the ACO will withhold payments IAW the Business Systems clause.

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Payment Withholding

Upon determination that a deficiency in a Business System exists, ACO will withhold 10% of contract payments

Upon receipt of an acceptable corrective action plan (CAP) within 45 days, ACO will reduce withholding for that Business System deficiency to 5%

If the ACO determines that the contractor fails to follow the CAP, withholding reverts back to 10%

Cumulative withholding across all Business Systems shall not exceed 50% of payments due, except where deficiencies:» Are highly likely to lead to improper contract payments

being made, or » Represent an unacceptable risk of loss to the

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Questions?

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