contractor is directed to use earned value negative control accounts to mitigate the amount of the performance management baseline (PMB) and reduce the earned value budget at complete accordingly.
do the NDIA Earned Value Implementaton, DOD policy, and DOD Earned Value Implementaton Guide permit creation of an earned value technique/methodology that is un-precedented in EVM practice. FAR is a 'permissive' document (what is not specifically prohibited MAY be permissible if it doesn't violate other FAR provisions or public law/policy). Are the EVM policies/direction equally permissive?
In the question you mention that the buying agency contract directs contractor to employ/implement earned value negative control accounts into the contract WBS structure. Negative control accounts is not an earned value management term, so assuming that this means the buying agency is descoping the effort then the control account's budget should be reduced by the amount allocated to the descoped effort.
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Neither the DoD policy for Earned Value Management (EVM) (DoDI 5000.02) nor the Defense Federal Acquisition Regulation Supplement for EVM (DFARS 252.234-7001 and DFARS 252.234-7002) prescribe earned value techniques. The DoD policy and the DFARS clauses address that the contractor must be in compliance with the EVM system guidelines in ANSI/EIA-748, Earned Value Management Systems with validation required for contracts over $50M in then-year dollars.
The ANSI/EIA-748 Standard also does not prescribe earned value techniques. The standard has established the guidelines that the contractor's system needs to meet. To address negative entries the standard states:
"2.5 Revisions and Data Maintenance, c) Control retroactive changes to records pertaining to work performed that would change previously reported amounts for actual costs, earned value, or budgets. Adjustments should be made only for correction of errors, routine accounting adjustments, effects of customer or management directed changes, or to improve the baseline integrity and accuracy
performance measurement data."
As discussed in the NDIA Intent Guide for the ANSI/EIA-748 Standard, negative entries in the current period may happen but should only be there to correct previous data entries not to manage the performance management baseline (PMB).
While the practice you have described is not directly addressed in the policy or guidelines, it is something that does not pass the straight face standard and would be addressed via standard surveillance and/or validation of the Earned Value Management System if required.