Major Changes for EVMS Coming in 2025

2025 is shaping up to be a year of big changes for Earned Value Management (EVM) within federal acquisition. While there has been a lot of speculation and uncertainty around these changes, we are beginning to see some clarity. Here are three big changes that will impact EVM on federal contracts this year.

DFARS EVMS Software Exemption

I previously wrote about the 2024 National Defense Authorization Act (NDAA) and some confusing and contradictory language that was added related to EVM. Since then, the 2025 NDAA has been introduced, and this version contains clarifications to the 2024 language. Once enacted, the Defense Federal Acquisition Regulation Supplement (DFARS) should be updated to implement the following:

1. Increase the contract value threshold for a non-validated EVMS from $20M to $50M. This change, when implemented in the DFARS, will result in the following contract thresholds for EVMS on defense contracts:
   1. Between $50M and $100M requires an EIA-748 compliant EVMS (no validation)
   2. Over $100M requires a validated EVMS (DCMA validation review)
2. Software contracts will be exempt from EVMS requirements

We have yet to see detailed policy responses from the DoD API IPM Division, but we do have some insight into where things may end up based on recent presentations given to NDIA. Some requirements we may see on software contracts are:

• Tailored IPMDAR submission (possibly schedule only)
• Integrated Master Schedule (IMS) with milestones and agile integration (see PASEG for best practices in this area)
• Some form of performance tracking and reporting (non-EVM)

Things that will be eliminated on software contracts that fall under the exemption:

• Full IPMDAR reporting
• EVMS validation reviews and surveillance

We expect that software contracts will still have program management reporting required, with schedules, resource plans, Estimates to Complete (ETC) and Estimates at Completion (EAC). Without a full EIA-748 compliance requirement, software contractors may have more flexibility in how they plan their work and manage change. Some organizations may choose to implement a system that integrates agile and EVM as best practice, but it seems unlikely that this will be required.

The big question that remains is, for purposes of the exemption, how is a software contract defined? Initially, API IPM asked that the exemption be limited to contracts that have gone through the software acquisition pathway. These are “software intensive systems” where rapid and iterative development is desired. But legal experts within the Defense Acquisition Regulation System (DARS) have advised that the language of the NDAA is broad enough to mean all contracts that perform primarily software, regardless of acquisition category, so I don’t see too many exceptions to the new rules. For contracts that have software mixed with other types of work (engineering, hardware, manufacturing, assembly, integration, testing, research, etc.), it is still unclear how these changes will apply. I suspect that EVM will be required, and contractors will need to use the waiver process if they don't believe it should apply. We will need to pay close attention to RFPs later this year to see how this shakes out.

It is also unclear how a prime contractor with an EVMS requirement will integrate performance data from a software subcontractor if the subcontract is exempt from EVMS reporting. I doubt the DFARS exemption will prevent prime contractors from writing EVMS reporting into their subcontracts, but it could become more difficult to ensure accurate and reliable data. This is something prime contractors need to start thinking about.

Please note that changes to the DFARS do not directly impact the Federal Acquisition Regulation (FAR) used by civilian agencies. For that, see below.

FAR streamlining for EVMS

On February 19, 2025, President Trump issued Executive Order 14219 directing agencies to review all regulations and rescind those that meet a wide range of criteria. Among the criteria are “(iii) regulations that are based on anything other than the best reading of the underlying statutory authority or prohibition.” There are many within the EVM practitioner community that have been wondering if this will include EVM contract requirements given that the source of these requirements comes from OMB capital planning guidance, individual agency policies, and Federal Acquisition Regulations (FAR), rather than explicit legislative statute.

Following this, on April 15, 2025, the President issued Executive Order 14275 aimed at significantly reducing and simplifying the FAR itself. Because EVMS requirements on federal contracts is driven by the FAR, there has been concern that a massive FAR update, especially one aimed at eliminating regulations, could be the death of EVMS in federal acquisitions.

The process of updating the FAR has now begun and it is happening quickly. Parts 1 and 34 are already complete and being implemented through the deviation process. Part 52 – Major System Acquisition, which includes EVMS, is in process.

Today, there are three versions of the EVMS clause that can be included in federal contracts. All three clauses require that a contractor have an EVMS that has been determined to be compliant with EIA-748 by the Cognizant Federal Agency (CFA) or submit a plan to achieve compliance that is approved by the Contracting Officer (CO). The clauses primarily differ in Integrated Baseline Review (IBR) requirements, surveillance, and subcontract flowdown. The three clauses are:

• 234-2 Notice of Earned Value Management System-Preaward Integrated Baseline Review
• 234-3 Notice of Earned Value Management System-Post Award Postaward Integrated Baseline Review
• 234-4 Earned Value Management System

As part of the administration’s FAR overhaul effort, the current proposal is to eliminate 52.234-2 and 52.234-3 and preserve 52.234-4 as currently written.

Of the three clauses, 52.234-4 is the most comprehensive, as it explicitly requires contractors to provide data for EVMS surveillance, requires contracting officer approval of any changes to the EVMS, and specifies contract flowdown of EVMS requirements to named subcontractors. A line-out version of the proposed changes is located here.

Of particular interest is the way in which 52.234-4 handles the Integrated Baseline Review (IBR).

(c) The Government will conduct an Integrated Baseline Review (IBR). If a pre-award IBR has not been conducted, a post award IBR shall be conducted as early as practicable after contract award.

(d) The Contracting Officer may require an IBR at-

(1) Exercise of significant options; or

(2) Incorporation of major modifications.

As you can see, this version of the EVMS contract requirement allows for either a pre-award IBR or post-award IBR and allows for additional IBRs after option exercises or other major modifications. This places a lot more emphasis on the IBR going forward, which should be a good thing for both the government and the contractor.

The bottom line is that it looks like EVMS requirements on major federal acquisitions are not going anywhere, and contract language will be consistent going forward, with emphasis on IBRs and surveillance.

748 E Update

Since 1998, the National Defense Industrial Association (NDIA) has written and published the EVMS guidelines that are a contract requirement on major federal acquisition programs. These guidelines, a derivation of the old Cost Schedule Control System Criteria (CS/CSC), have been published by NDIA through a national standards body, the Electronic Industries Association (EIA), which is now part of SAE International. The versions of the guidelines to date have been:

• EIA 748 (aka ANSI/EIA-748-1998), published June 1998
• EIA 748 A (aka ANSI/EIA-748-A, reaffirmed with no changes), published August 2002
• EIA 748 B (no longer an ANSI standard), published June 2007
• EIA 748 C, published March 2013
• EIA 748 D, published January 2019

Each of these versions have the same 32 guidelines. Some changes have been made over the years with versions B, C, and D, but these changes have mostly been to the informational sections of the document (definitions, references, and process discussion). Changes to the wording of the 32 guidelines have been limited to small word choice and punctuation changes. In short, we’ve had the same 32 guidelines for the last 27 years.

But all of that is about to change with the release of SAE 748 E this year. NDIA has completed a draft of 748 revision E, which will streamline the guidelines, reducing them from 32 to 27, re-ordering them, simplifying and clarifying the language and, in a few cases, eliminating some guidelines altogether.

The draft is now in the hands of the SAE G-47 System Engineering committee for final review and publication and can be accessed here (you must have an SAE login and register to become a member of the G-47 committee). For those who don’t have access, here is a summary of the new guidelines as currently drafted.

For the most part, the language within each of the guidelines above has been re-written to be clearer and, in some cases, more prescriptive than in previous versions. One thing you will see in the new guidelines is more specific emphasis on the schedule. For example, Guideline 6 now says

Identify in the schedule the physical products, milestones, technical performance goals, or other objective indicators that will be used to measure progress.

And Guideline 14 now says

Using predefined performance measurement criteria, status the schedule and assess physical progress to determine budget earned. . .

These changes place particular emphasis on using the schedule as part of the performance measurement process. This is already considered best practice, and most EVM Systems operate this way, but previous versions of 748 were not as explicit about the use and purpose of a schedule.

Several guidelines have been consolidated, but the following two guidelines have been eliminated from version E entirely:

• Guideline 4: Identify the organization or function responsible for controlling overhead (indirect costs).
• Guideline 20: Identify unit costs, equivalent unit costs, or lot costs when needed.

One of the more significant overhauls is the changes to the Revisions and Data Maintenance guidelines. First, customer-directed changes have been segregated from internal replanning (now guidelines 24 and 25 respectively). Former guideline 32 (“Document changes to the performance measurement baseline”) has been eliminated as a stand-alone guideline. The requirement to document changes has been rolled into the new guidelines 24 and 25.

Additionally, a new guideline 27 has been added to explicitly address Over-Target-Baseline (OTB)

When necessary, propose, document, and establish a total program budget greater than the contract budget base (over target budget) and/or a total program schedule exceeding the contractual period of performance (over target schedule) to support management of the remaining authorized work. Advance notification must be provided to the customer prior to implementation.

Along with that, Guideline 26, which addresses retroactive changes, adds language to allow for customer or management directed retroactive changes, as well as single-point adjustments.

Control retroactive changes to records pertaining to work performed that would change previously reported amounts for actual costs, earned value, or budgets. Adjustments are made only for correction of errors, routine accounting adjustments, or effects of customer or management directed changes, including implementation of a single point adjustment.

The public comment period has closed at the end of April. Those comments are being adjudicated by the NDIA IPMD 748 committee, and we expect that process to complete at the end of May, with final publication by SAE sometime in June.

So how will this change affect your organization? First, if you are operating an EIA-748 compliant EVMS on a contract today, you should not be required to make any changes to that system. Fundamentally, there are no changes to the underlying processes governing EVMS compliance. When SAE 748 E is published, however, there are many documents, guides, and tools that will need to be updated to align to the new format of 27 guidelines. Some of these include. . .

• NDIA Earned Value Management Intent Guide
• DoD EVMS Interpretation Guide (and similar guides from other agencies)
• DCMA Earned Value Compliance Metrics (DECM)
• DOE EVMS Metrics
• ASU IP2M Maturity and Environment Total Risk Rating (METRR)
• Any other EVMS maturity assessment or surveillance tools or guides built around the 32 EIA-748 guidelines

Organizations that have a validated Earned Value Management System will also need to update the guideline cross-reference in their System Description and will need to update any internal surveillance procedures, tools, business processes, or training that make specific reference to the guidelines. Software vendors that have built tools to assist with 748 compliance, such as automating DCMA DECM or DOE EVMS metrics, will need to update their software after the metrics are updated. And of course, consulting and training firms, like Pinnacle, must update their methodologies, tools, and training with respect to the guidelines. As a corporate member of NDIA and liaison members of the SAE G-47 committee, we are staying on top of these changes and already making the required adjustments.