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  • Question

    does EV principle/practice allow for reducing BCWS and BCWP so as to have "some budget and performance" throughout the new POP? how should a contractor properly address such time extensions? thank you,


    Answer

    That depends on why the new PoP is being added.  An important construct within EVM is maintaining the link between scope, schedule, and budget once it is established at the IBR.  The only way to move budget is to move the associated work.  The term "budget" in EVM is more of a target than a not to exceed value.  Some work will overrun and some will underrun and we want to maintain this visibility.  It tells us where are we having trouble executing the baseline and whether this is something new or an on-going problem.  It's only at the contract level that we start to get excited about overruns and underruns.  It's at this level that we see stop work if there is inadequate funding on the contract to continue working and eventually a requirement to increase our Budget Authority to pay for increased costs.  If the contractor misjudged the amount of effort it would take to  complete the work and that is why the Government agreed to the extension, the contractor would have to generate new budget for the additional effort.

    There are only 2 ways to do this.

     
    1.  One way would be to look at the specific circumstance to see if Management Reserve (MR) would be appropriate and if it is still available. MR is not part of the baseline so it doesn't factor into overruns/underruns. It sits on the side as a risk reserve.  MR can only be issued for work that is within the scope of the contract as it existed before this change.  If the extension also includes new scope, there should be an increase to the contract value as well.  The Government cannot do a no cost extension with the expectation that the new work will come from MR.  Having a variance is not sufficient reason to use MR.  If it historically takes 3 tests average and the CAM only plans for 1, the CAM eats the variance because he/she didn't plan adequately.  If 3  tests were planned and needed 7, need to see if our program experienced a problem we could not have been forseen. The contractor's EVM System Description should describe this process.

     2.  Another way is to do an Over Target Baseline (OTB).  This allows the
    contractor to continue spending well beyond the target values of the contract. OTBs do not change the contract target value so any incentives would still remain in effect.  You would not do this for a single element--would need to be a significant increase across the contract.  An
    OTB is a once in a contract event not one that should recur.  On fixed price contracts, it would not change the cost to be reimbursed.  If this is a cost type contract, the OTB would need to be paid by the Government so it requires government approval.

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