Buy Lines | Government veers off course with EVM mandates

Stan Soloway

The Office of Management and Budget now requires earned value management (EVM) systems for all programs with annual IT investments of $500,000 or more. The Defense Department recently issued a regulation requiring EVM use on all services acquisitions greater than $20 million, a threshold the department is considering lowering.

No one questions the value of EVM as a project management tool for estimating how a project is faring on budget and schedule. It is deeply rooted in the commercial world, found in major weapons systems programs and helpful in balancing program cost and technical trade-offs.

But the new mandates take EVM application to new levels, and raise questions about the mandates and the general direction of government procurement.

In too many cases, the government is levying EVM requirements where they are inappropriate, such as on fixed-price and performance-based contracts. Often, they are imposed by acquisition personnel who have had little or no EVM training.

At the Defense Department, where most government expertise on EVM resides, implementation has been a bit more measured. In the civilian agencies, however, the EVM requirement is quickly becoming almost automatic. Further, the Defense Contract Audit Agency is developing audit guidance to assess the cost elements of contractor EVM systems, raising the specter that EVM requirements could become compulsory for all government services contractors.

None of this suggests that EVMs do not have a place, particularly on large, complex production programs conducted in a cost-plus environment. And knowledgeable EVM experts recognize that it is not the only tool through which programs can be managed. However, that is not how EVM mandates are being perceived or implemented.

It's helpful to look at the policies surrounding capability maturity model (CMM) standards, developed by the Software Engineering Institute, to assess company software capabilities. The Defense Department's policies regarding CMM certification were carefully crafted to recognize that there are other equivalent standards. CMM requirements also at times are overused, but EVM mandates do not appear to contemplate alternatives.

The EVM issue also raises larger questions about the direction of government services contracting. Combined with CMM standards for software, evolving CMM standards for broader services acquisitions, increasing attention to Lean Six Sigma initiatives and more, it is not hard to envision a services acquisition environment in which government mandated standards increasingly supplant judgment, creativity and innovation.

In such an environment, industry, especially (if not solely) small and midsized companies, will face the daunting twin challenges of higher costs to meet predetermined standards and struggling to remain competitive in an environment in which their usual discriminators ? agility, creativity and innovation ? might be less valued.

Ultimately, of course, the fallout lands on to the government customer and the taxpayer.

Those charged with EVM application and other efforts to improve performance must first be given the predicate tools, which are found in training and experience, to understand how and where they work best, as well as the flexibility to make those judgments.

If this rings familiar, it may be because it feels like we may be revisiting the archaic world of military specifications. Canceling military specifications for new programs was one of the Defense Department's first acquisition reforms in the 1990s. The agency canceled them because it recognized the cost, performance and other quality and market problems created by overspecification.

The department's lesson remains a valuable one.

Stan Soloway is president of the Professional Services Council; his e-mail is soloway@pscouncil.org.

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