Thoughts on the NDAA 2024 EVMS Changes

If you work program management on US defense contracts and have been following the National Defense Authorization Act (NDAA) for 2024, you may have noticed some modifications to Earned Value Management System (EVMS) requirements that were added to section 827 of H.R. 2670, signed by President Biden on December 22, 2023.

Let’s start with the easy ones, which are 827.a.2 and 827.a.3. These two seemingly contradictory lines were apparently a translation error. Lawmakers are not subject matter experts, and in a rush to get the bill completed, these entries did not go through a thorough review and edit process. This is not uncommon in large bills such as this one. The intent, according to ADA, was to raise the lower limit of the EVMS threshold from $20M to $50M. This is expected to be corrected on the next NDAA. Given this information, we can expect to see a change in the DFAR EVMS threshold sometime next year.

And now for the big one that seems to have everyone’s attention – exempting software contracts from EVMS requirements. So much has been written on Agile vs. Predictive vs. Hybrid development methodologies that I don’t need to re-hash all of that here. But suffice it to say that many practitioners of Agile software development feel that Earned Value Management only works for predictive (i.e. “Waterfall”) development methodologies and it is not compatible with Agile software development. I think most EVM practitioners would disagree with this notion, and much work has been done to develop methodologies to successfully implement EVMS on Agile projects. If you are interested in the topic, a good place to start is the Agile and EVM Program Manager’s Desk Guide, published by the Department of Defense or the Industry Practice Guide for Integrating Agile and Earned Value Management on Programs, published by NDIA. I suspect this statement was inserted at the urging of defense contractors that were not happy doing EVM on Agile software development projects.

My biggest issue with this legislative action is the ambiguity. Many DoD development contracts contain scope for systems engineering, hardware, software, integration, testing, deployment, logistics, and other types of work. Software is just one component of a project (albeit, often a significant part of it). With or without EVM, defense projects must have an Integrated Master Schedule (IMS) with milestones to track deliverables, even when the software portion of the contract is being developed using agile methods. DoD program offices need to know when needed capabilities will be delivered, as often those capabilities must be integrated with other systems. The IMS is the preferred tool for forecasting delivery dates, and it is the IMS that drives an Earned Value Management System. In other words, eliminating EVMS from a contract doesn’t really solve the problem of choosing between agile and predictive methodologies. A hybrid approach will be required on many contracts regardless.

827.a.1 doesn’t just exempt software contracts, but subcontracts as well. Exempting software subcontracts makes this issue even more complex. An aerospace manufacturer designing and building a next generation weapons system may subcontract out the avionics or targeting systems – both of which are considered software subcontracts. This law, as written, forbids the flow down of the prime contractor’s EVMS requirements. That could create quite a challenge when trying to integrate performance data for the total contract.

ADA’s position on this has been made clear. The department believes that “Agile EVM” or “Agile IPM” is a valid performance management technique to apply to software development contracts, and their response to congress will be a letter explaining how they use Agile EVM to manage software contract performance. I cannot predict what will come of this, but there is speculation that the law could be revised to remove the software exemption.

So, what does this mean for you and your contract? In short, nothing. As of the date of this article’s publication, the DFAR has not been updated. Any existing contract requirements remain in effect until a contract modification is issued. If you have a software contract over $100M in value with a DCMA validation requirement, DCMA will continue to perform surveillance on your program using their existing business practices. According to ADA, deviations from EVMS requirements are risk-based decisions, and the existence of this language in the NDAA is not justification for having EVMS requirements waived on a contract. If you are responding to an RFP with an EVMS requirement, you should expect that the requirement will remain and respond accordingly.

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