On September 1, 2015 the Office of the Under Secretary for Defense announced a raising of the threshold for Earned Value Management compliance validation from $50 Million to $100 Million. The threshold for executing a compliant system remained at $20 Million.
So how does this impact you? Well if you work for a big government contractor then it probably doesn’t change all that much in regards to how you execute a program. You’re still going to run your earned value process across all programs that exceed $20 Million the same way.
However, this does mean you could have potentially less surveillance activities across those programs that have values below the $100M threshold. It’s important to understand that does not mean you will not have surveillance on these programs. Surveillance will be done based on a series of metrics and will be performance-based, but it will no longer be done on a periodic basis regardless of performance.
Where this can have a big impact, is for smaller and midsize companies mostly operating on contracts in the $20-$75M range. Those companies will be able to more aggressively pursue opportunities within this range without the added costs of supporting and walking through a customer-directed independent third party validation review.
The time period from the start of the validation process to the completion typically lasts a year and sometimes longer. The review itself can run for two weeks and, on many occasions, results in following through on corrective actions for weeks afterward. The time and money associated with this process is significant.
With that said, it’s important to note that any contractor executing within this environment is still expected to operate in a certified environment, meeting the intent of the ANSI 748 32 criteria. However, the oversight and time constraints to implement a certified system and validate will be alleviated. An organization will have more flexibility to learn, grow and adjust its culture to accommodate the benefits of Earned Value Management.
You can download the announcement letter from the Office of the Under Secretary for Defense here.