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Department of Defense INSTRUCTION


DoDI 5000.02, January 7,

DoDI 5000.02, January 7, 2015 APB serves as the basis for reporting to the MDA through the DoD management information system. c. Earned Value Management (EVM). Program Managers will employ EVM unless its use is waived by the CAE. EVM is one of DoD’s and industry’s most powerful program planning and management tools. It is normally used in conjunction with cost plus and fixed-price incentive contracts with discrete work scope. The purpose of EVM is to ensure sound planning and resourcing of all tasks required for contract performance. It promotes an environment where contract execution data is shared between project personnel and government oversight staff and in which emerging problems are identified, pinpointed, and acted upon as early as possible. EVM provides a disciplined, structured, objective, and quantitative method to integrate technical work scope, cost, and schedule objectives into a single cohesive contract baseline plan called a Performance Measurement Baseline for tracking contract performance. (Table 8 in Enclosure 2 summarizes EVM requirements.) Table 8 in Enclosure 1 summarizes EVM applicability and Table 9 summarizes EVM reporting requirements. d. Risk Management (1) The Program Manager is responsible for implementing effective risk management and tracking to include the identification of all known risks, key assumptions, probability of occurrence, consequences of occurrence (in terms of cost, schedule, and performance) if not mitigated, analysis of mitigation options, decisions about actions to mitigate risk, and execution of those actions. Risk management is proactive and should be focused on the actions that will be taken and resources that will be allocated to reduce both the likelihood and consequences of risks being realized. Effective risk management is not just risk identification and tracking. (2) Program Managers are responsible for prioritizing programmatic risks and mitigating them within program constraints. Most of program management is about the process of eliminating programmatic risk over the life of the program. Formal risk management is one tool to accomplish that objective. Top program risks and associated risk mitigation plans will be detailed in the program acquisition strategy and presented at all relevant decision points and milestones. At a minimum, the Program Manager will consider the following risk management techniques: (a) Prototyping at the system, subsystem, or component level; and competitive prototyping, where appropriate. (b) Modeling and simulation (detailed in section 9 in Enclosure 3), to include the need for development of any new modeling and simulation tools to support a comprehensive risk management and mitigation approach. (c) Technology demonstrations and decision points to discipline the insertion of planned technologies into programs or the selection of alternative technologies (sections 3 through 8 in Enclosure 3 provide additional discussions of technical management activities). (d) Multiple design approaches. Change 2, 02/02/2017 90 ENCLOSURE 2

DoDI 5000.02, January 7, 2015 (e) Alternative designs, including designs that meet requirements but with reduced performance. (f) Phasing program activities or related technology development efforts to address high-risk areas early. (g) Manufacturability (section 10 in Enclosure 3 addresses manufacturing and producibility in more detail). (h) Industrial base availability and capabilities (further discussed in section 8 of this enclosure). (i) Independent risk assessments by outside subject matter experts. (j) Providing schedule and funding margins for identified risks. e. Cost Baseline Control and Use of “Should Cost” Management (1) For MDAPs and MAIS programs, it is DoD policy to budget to the Director of Cost Assessment and Program Evaluation DCAPE Independent Cost Estimate (ICE) unless an alternative estimate is specifically approved by the MDA. However, program managers will develop a Should Cost estimate as a management tool to control and reduce cost. Program managers should not allow the ICE to become a self-fulfilling prophecy. Should Cost is a management tool designed to proactively target cost reduction and drive productivity improvement into programs. Should Cost management challenges managers to identify and achieve savings below budgeted most-likely costs. Should Cost analysis can be used during contract negotiations (particularly for sole source procurements), and throughout program execution including sustainment. Program managers are to proactively seek out and eliminate low-value-added or unnecessary elements of program cost, to motivate better cost performance wherever possible, and to reward those that succeed in achieving those goals. Should Cost estimates used in contract negotiations will be based on the government’s reasonable expectation of successful contractor performance, consistent with the contractor’s previous experience and other relevant data. Realized Should Cost savings will be retained at the lowest organizational level possible and applied to priority needs. Should Cost applies to programs in all ACATs, in all phases of the product’s life cycle, and to all elements of program cost. (2) Program management will develop, own, track, and report against Should Cost targets. Estimates and results will be provided at milestone reviews and at specified decision points. For MDAPs and MAIS programs, Program Managers will report progress against Should Cost goals at Defense Acquisition Executive Summary reviews. Change 2, 02/02/2017 91 ENCLOSURE 2

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