CHAPTER 8: REVISIONS AND ACCESS TO DATA

8.1 INTRODUCTION
8.1.1 General. The Revisions Criteria are concerned principally with maintaining the integrity of the performance measurement baseline and the timely and orderly incorporation of change. The final Criterion requires that data be made available to Defence for review and surveillance.

8.2 CONTRACT CHANGES
8.2.1 Revision - Timeliness. Changes to the contract can impact on virtually all aspects of the contractor's internal planning and control system, such as work authorisations, budgets, schedules, and estimated final costs. Revisions required to incorporate authorised changes to contractual effort should be made in a timely manner.

8.2.2 Contract Change Guidelines. Where a contract amendment has been negotiated, budget revisions are based on the cost components of the amended contract price which reflects the change. If work is authorised before the contract amendment is negotiated, appropriate change order planning may be accomplished with budgets based on the contractor's cost estimate for the change where:

a. The adjustment of budgets to reflect contract amendments is normally accomplished by revising undistributed budgets, management reserves, budgets established for work not yet started, or a combination of these. The use of undistributed budgets or management reserve generally has the least impact since it does not change budgets already issued and agreed to by the responsible organisation.

b. The formal negotiation of a contract in respect of completed tasks may result in an agreed upon value different from that used to establish BCWS for these tasks. In this situation, it may be appropriate to adjust BCWS and BCWP retroactively to reflect the final contract values of those completed tasks.

c. Because budgets associated with near term work should be well planned, retroactive changes to budgets for completed work associated with the change should not be necessary.

8.2.3 Adequate records of all budgeting changes should be maintained to provide, as a minimum, the basis for full audit and reconciliation with original budgets at the priced product and service level and for subsidiary budgets at the lowest level of the summary CWBS.

8.2.4 Internal Replanning. It may be necessary to perform replanning actions within the scope of the authorised contract (Contract Budget Base (CBB) or Total Allocated Budget (TAB)) to compensate for cost, schedule, and technical problems which have caused the original plan to become unrealistic; which require a reorganisation of work or people to increase efficiency of operations; or which require different engineering or manufacturing approaches. Internal replanning is intended for in-scope changes to future budgets. "Future budgets" means budgets for any accounting period following the current accounting period. The objective of internal replanning is to reflect a revised program plan which is within the authority of the contractor's program management. Changes to near term effort (approximately 30 days) should be minimised.

8.2.5 Each contractor should maintain a performance measurement baseline that best represents the contractor's actual plan to achieve the remaining contract objectives. During the course of a contract, the future contract plans may significantly vary from the original baseline and the contractor may choose to realign scope, schedule or budget. Some examples of when it may be appropriate to do internal replanning (ie., within the CBB and approved TAB) are a result of:

a. a Preliminary Design Review (PDR) or a Critical Design Review (CDR);

b. a comprehensive Estimate at Completion (EAC);

c. funding restrictions or modifications; or

d. labour, overhead, or other rate changes that are significant enough to warrant replanning of future budgets. Internal replanning of remaining portions of the performance measurement baseline to account for significant changes in the anticipated rates is desirable, but not mandatory.

8.2.6 Due to the importance of maintaining a valid baseline for performance measurement, replanning must be accomplished in a systematic and timely manner and must be carefully controlled. Replanning should not be used as an alternative to proper initial planning, nor should it be used to mask legitimate variances. The following should be considered:

a. Many replanning changes can be handled within the existing budget and schedule constraints of cost accounts. Other changes may require transfers of management reserve to or from cost accounts and may require budget rephasing consistent with replanned schedules as a result of the changes.

b. All replanning changes must be authorised, documented, and controlled in accordance with the contractor's revision procedures. Whatever the contractor's replanning procedures and methods are, the contractor's management control system remains accountable for compliance with all replanning related criteria.

c. Changes in BCWS which impact the time-phased PMB or the reporting elements of the CWBS must be brought to the attention of the Project Authority in Format 5 of the CPR. This requirement is not intended to reduce contractors' resource management flexibility, but is intended to assist all users of the contractor's management system's data to understand and interpret it correctly.

8.2.7 Work in Process Guidelines. It is recognised that internal replanning (or implementation of contractual changes) may involve changes to work in process prior to its completion. If replanning of open work packages or LOE is necessary, the following methods are acceptable:

a. Close an incomplete work package by setting BCWS equal to the BCWP earned to date and subtract BCWP from the work package budget at completion (BAC) to determine the remaining budget which is then handled in accordance with normal replanning guidance.

b. Replan future work and adjust the work package budget at completion (BAC) to reflect the change in accordance with normal replanning guidance. The contractor will replan the remaining work of the in-process work package from no earlier than the next accounting period forward. The contractor must have controls to ensure that:

(1) replanning is restricted to the future portion of open work packages (except as authorised in 8.2.7.c below);

(2) changes are minimised and are consistent with contractually required schedule milestones (except as authorised in 8.2.7.c below); and

(3) changes are authorised and documented in accordance with the contractor's control procedures.

c. Replan future LOE to correlate to the changes in work. LOE, whether planned in separate cost accounts or as part of predominantly discrete cost accounts, has additional flexibility and may be adjusted within the current accounting period, without Commonwealth approval, provided no actual costs (ACWP) have been charged to the LOE.

8.2.8 The process for replanning of open work is depicted in FIGURE 8-1.

8.3 APPROVAL
8.3.1 Approval Requirements. For most internal replanning, no prior notification or Project Authority approval is required to replan discrete or LOE work if the replanning is applicable to the next accounting period onward, does not cause the TAB to exceed the CBB, and does not cause or constitute a slippage of a contractually required milestone; or if the replanning is below the work package level. Prior Project Authority approval is required for the following conditions.

a. Changes to open work packages that affect or change performance measurement data (BCWS, BCWP) in the current or prior accounting periods.

b. Changes to LOE data in prior accounting periods or changes to current period LOE when the accounts have incurred charges (ACWP).

c. Any internal replanning within the CBB (or approved TAB) which will result in a performance measurement baseline schedule inconsistent with the contractually required schedule milestones.

8.3.2 Prior to authorising changes to a performance measurement baseline, the Project Authority should evaluate the impact of the change. Approval must specify the changes authorised and the timing for implementation.

8.3.3 Before authorisation of a change that results in a PMB becoming inconsistent with contractual milestones, there must be a clear, written understanding, that the replanning approval is for performance measurement purposes and does not constitute a change in contractual requirements; eg., "This approval authorises the contractor to manage to the attached schedule for the sole purpose of performance measurement. This does not authorise the contractor to revise the contractual schedule requirements." Where CPR reporting is used, all subsequent CPR submittals must clearly state in Format 5 that the reported performance measurement baseline schedule exceeds contractually required schedule milestones or deliveries and must identify the schedule difference(s).

8.4 FORMAL REPROGRAMMING
8.4.1 Requirements. Situations may arise whereby available contract budgets for the remaining work are decidedly insufficient. Under these circumstances performance measurement against the available budgets becomes unrealistic, it may be necessary for the total allocated budget to exceed the contract budget base, and formal reprogramming may be necessary. Formal reprogramming by the contractor may entail: replanning future work; replanning in-process work; or adjusting variances (that is, cost or schedule or both). Such reprogramming allows the contractor to increase the amount of budget for the remaining work to a more realistic amount, adequate to provide reasonable budget objectives, work control and performance measurement.

8.4.2 A thorough analysis of contract status by the contractor is necessary before the implementation of a revised total allocated budget in excess of the contract budget base. The contractor must perform a detailed estimate of all costs necessary to complete the contract. Factors to consider in developing the estimate are: the amount of authorised work remaining, the estimated cost of the resources required to accomplish the remaining work and the budget (including management reserve, if any) available for reallocation to the remaining work. If the difference between the estimated cost to complete and the remaining budget is significant, the contractor will notify the Project Authority of the need to increase the remaining budgets and measure subsequent performance against a total contract goal higher than the contract budget base and request the Project Authority's permission to do so. It is emphasised that such reprogramming does not necessarily imply any alteration to the contract price.

8.4.3 Before entertaining a request for a baseline in excess of the contract budget base, the Project Authority should consider the following:

a. The primary consideration should be an analysis of the work remaining and the budget remaining. The fact that a contract is overrun to date and is projecting an overrun at completion is not the most important factor in the decision. Changing a baseline merely to compensate for variances already experienced is inappropriate. The reprogramming action should improve the quality of the contract performance measurement for both the Project Authority and the contractor.

b. The contract should have a least six months of substantial work remaining after reprogramming.

c. Reprogramming should not be implemented more frequently than annually and should be limited to those situations required to future cost and schedule performance measurement. Ideally, this extraordinary procedure would be necessary only once or twice during the life of a contract.

8.4.4 When the Project Authority is satisfied that the new baseline represents a reasonable plan for completing the contract, the new baseline should be formally recognised as a basis for future contract performance measurement. Timeliness is essential in making this determination. Therefore, the Project Authority shall take immediate action to evaluate the:

a. impact on contract status reporting, such as the effect on cost and schedule variances and the change in the relationship of BCWP to the contract value;

b. method to be employed by the contractor in implementing the change; for example, adjustment to variances applicable to completed work, and/or adjustments to work in process.;

c. estimated amount of time required to accomplish the reprogramming and the guidelines for performance measurement during that time; and

d. effect on other contractual requirements; for example, the status of contractually specified program milestones, the contract share ratio, and the liquidation rates for progress payments.

8.4.5 In formal reprogramming, the changes to baseline budgets must be fully documented and traceable. Internal records and reports should be revised expeditiously and provide appropriate visibility to account for the manner in which contract budgets were changed. If variances are adjusted, the BCWS and BCWP values before adjustment will be retained to ensure traceability. Establishment of management reserve for the reprogrammed effort is acceptable in most circumstances.

8.5 BASELINE MAINTENANCE
8.5.1 Revisions - Requirements. To maintain the validity of the performance measurement baseline, contractor discipline is mandatory throughout the organisation, particularly in regard to budgetary control. Contractors' written internal procedures should clearly delineate acceptable and unacceptable budget practices. These should include the following:

a. Budgets are assigned to specified segments of work (CWBS elements, cost accounts, planning packages, and work packages).

b. Work responsibility should not be transferred from one performing organisation to another, or from one cost account to another, without transferring the associated budget.

c. A budget assigned to future specific tasks should not be used to perform another task, regardless of the CWBS level involved.

d. When management reserves are used, records should clearly indicate when and where they were applied.

e. When undistributed budgets exist, records should clearly identify their amount, purpose, and level at which they are held.

f. Budgets which are assigned to work packages should not be changed (except noted earlier in this CHAPTER) unless the scope of work is affected by contract amendment, price and exchange rate variations, if applicable, or other reasons agreed to by the contracting parties.

g. Retroactive changes to budgets or costs for completed work or to schedules are not made except for correction of errors or normal accounting adjustments (including revisions to budgets to reflect the value of contract amendments in respect of completed tasks).

h. Retroactive adjustments to BCWP based on substantiated work status to more correctly reflect actual accomplishment may be appropriate. However, widespread use of such adjustments due to erroneous BCWP would indicate unacceptable problems in the contractor's planning and control methods. Such widespread adjustments will require the contractor to review internal techniques for establishing BCWS and BCWP to minimise future requirements for such adjustments.

8.6 ACCESS TO DATA
8.6.1 Access to Data. For the purposes of conducting a demonstration review or readiness assessment, it may be necessary for the contractor to disclose details of budgetary and actual cost data that may not otherwise be required by Defence. These data are required to demonstrate that the management control systems are actually implemented, are used by the contractor for performance monitoring, and that the data form the basis for reporting to the Project Authority.

8.6.2 Access may be required to data not directly related to the contract in order to facilitate demonstration of the management of overheads. In certain circumstances, access to particularly sensitive data of this nature may be restricted to a limited number of review team personnel, so long as the extent of the limitation does not preclude completion of the review process.

8.6.3 Data Confidentiality. Review Team members are required to not divulge sensitive information or use it for purposes other than for which it is made available. Review Team personnel should be formally reminded of the restriction on the use of data. Sensitive data will not be included in reports of reviews nor divulged in any other fashion without the prior agreement of the contractor.

8.6.4 Data Access for Surveillance. Access by Defence to actual cost and other information considered sensitive by the contractor during surveillance reviews should be treated in the same manner as was access during the demonstration review.

8.7 CRITERIA
8.7.1 General. The remainder of this CHAPTER is devoted to discussion of the Criteria. The objective is to clarify the requirements of the Criteria as an aid to interpretation for both Review Teams and contractors. Further amplification is found in the Evaluation/Documentation Review Checklist in ANNEX D which contains check-list questions used by Review Teams to evaluate performance measurement systems.

REVISIONS AND ACCESS TO DATA 1

INCORPORATE CONTRACTUAL CHANGES IN A TIMELY MANNER, RECORDING THE EFFECTS OF SUCH CHANGES IN BUDGETS AND SCHEDULES. IN THE DIRECTED EFFORT BEFORE NEGOTIATION OF A CHANGE, BASE SUCH REVISIONS ON THE AMOUNT ESTIMATED AND BUDGETED TO THE FUNCTIONAL ORGANISATIONS.

This Criterion mandates two major requirements. First, the contractor must incorporate scope of work, budget, and schedule changes within a short period of time. This incorporation is intended to extend down to the cost account level of planning. Adherence to this standard helps ensure that budget and work remain associated even when initiated by a contract change. In addition, it minimises the length of time in which budget may remain classified as Undistributed Budget. It also ensures that the addition of budget and work by a contract change be time-phased as soon as practicable. It is imperative when a contract change is received, that the contractor adhere to all the same requirements of planning, budgeting, and scheduling as was done when the original contract was planned, budgeted, and scheduled. This Criterion seeks to establish this same requirement of thoroughness for contract changes as the Organisation and Planning and Budgeting criteria did for the original contracted effort.

The second requirement implicit in this Criterion is that when an unpriced change order (here defined by the Criterion as directed effort before negotiation) is issued to the contractor by the Project Authority, the contractor should develop a "best estimate" of the cost of that change. This estimated budgetary amount should then be used in lieu of the budget that is normally associated with a negotiated change for planning and budgeting purposes. The intent here is to ensure that, even in the case of unpriced change orders, a budgetary amount be assigned to each increment of work planned. No work should be held up because of the unnegotiated status of an "unpriced" change order, nor should such authorised but unnegotiated work be distributed for accomplishment without a budgetary target for performance measurement purposes.

REVISIONS AND ACCESS TO DATA 2

RECONCILE ORIGINAL BUDGETS FOR THOSE ELEMENTS OF THE CWBS IDENTIFIED AS PRICE LINE ITEMS IN THE CONTRACT, AND FOR THOSE ELEMENTS AT THE LOWEST LEVEL OF THE DEFENCE PROJECT SUMMARY CWBS, WITH CURRENT PERFORMANCE MEASUREMENT BUDGETS IN TERMS OF CHANGES TO THE AUTHORISED WORK AND INTERNAL REPLANNING IN THE DETAIL NEEDED BY MANAGEMENT FOR EFFECTIVE CONTROL.

The contractor's system must allow for complete traceability of all budget changes for those items that are reported to the Project Authority. This is normally accomplished by the contractor's establishment of budget control logs that record the receipt and distribution of all budget transactions with reference to the source and application of funds. Each budget and work authorisation should reference a transaction number recorded in these budget control logs. Normally, subsidiary records are also maintained for each contract change to help ensure timely and complete distribution of the budget associated with each contract change. Separate records should also be kept for control of Management Reserves and Undistributed Budget.

REVISIONS AND ACCESS TO DATA 3

PROHIBIT RETROACTIVE CHANGES TO RECORDS PERTAINING TO WORK PERFORMED THAT WILL CHANGE PREVIOUSLY REPORTED AMOUNTS FOR DIRECT COSTS, INDIRECT COSTS, OR BUDGETS, EXCEPT FOR CORRECTION OF ERRORS AND ROUTINE ACCOUNTING ADJUSTMENTS.

The need for this Criterion is fairly obvious. The contractor may not permit records of any type of performance measurement data to be changed retroactively. Performance data is essential in reflecting contractor progress in:

a. achieving the budgetary target;

b. staying within schedule parameters; and

c. completing the scope of work to the technical specifications required in the contract.

Monthly data reflects such progress; cumulative plotting of such data can be translated into performance trends. Together this monthly and cumulative data combine to provide a history of contract achievement. Any retroactive change to this data will have drastic effects on the progress reports and possibly on the program. A retroactive change to monthly data will not only recall work that was previously thought to have been accomplished but will also impact the cumulative trend that was previously reflected. If ACWP and/or BCWP data is retroactively changed, the progress payments that were previously paid to the contractor could also have been in error. Historically, the data would become unrepresentative of the actual progress.

REVISIONS AND ACCESS TO DATA 4

PREVENT REVISIONS TO THE CONTRACT BUDGET BASE EXCEPT FOR COMMONWEALTH-DIRECTED CHANGES TO THE CONTRACTUAL EFFORT.

The Contract Budget Base (CBB) represents two things on a contract:

a. the total amount of work authorised on the contract; and,

b. the total amount of budget targeted to accomplish this work.

When this Criterion requires a prohibition against changes to the CBB, it is addressing both of these facets. The contractor may not arbitrarily change the amount of work authorised on the contract and the contractor may not arbitrarily alter the amount of budget targeted to accomplish this amount of work.

REVISIONS AND ACCESS TO DATA 5

DOCUMENT, INTERNALLY, CHANGES TO THE PERFORMANCE MEASUREMENT BASELINE AND NOTIFY DEFENCE EXPEDITIOUSLY THROUGH PRESCRIBED PROCEDURES.

Since the PMB is the yardstick by which contractor progress is measured, any change to the PMB must be formally documented by the contractor organisations involved. Further, it is paramount that any alterations of the PMB be reported to the Project Authority; this ensures that both the Project Authority and the contractor are measuring progress by the same "yardstick". Some specific guidelines by which the contractor may internally replan and thereby effect the PMB are listed.

The contractor may:

a. use Management Reserve to change cost account budgets of unopened work packages;

b. replan unopened work packages within the confines of cost account budgets; or

c. transfer work and associated budgets between costs accounts.

The contractor may not:

a. make retroactive changes to budgets, work performance, or costs of completed work;

b. transfer work or budgets independently of one another; or

c. replan closed packages.

REVISIONS AND ACCESS TO DATA 6

PROVIDE THE COMMONWEALTH'S REPRESENTATIVES WITH ACCESS TO THE INFORMATION AND SUPPORTING DOCUMENTS NECESSARY TO DEMONSTRATE COMPLIANCE WITH THE CRITERIA.

Defence contractually requires access to all pertinent management/control system records in the implementation/demonstration reviews and surveillance of a contractor's performance measurement system. If the contractor does not comply with a Review Team's or surveillance representative's reasonable request for access to pertinent data, the contractor is in violation of his contract. Access to data is necessary in order to assess a contractor's compliance to the Criteria. However, it must be noted that this Criterion is to ensure data access, not necessarily physical transfer of internal records. Especially where data is claimed by the contractor to be of a "proprietary" nature, the contractor is not required to provide copies of such data to all Defence representatives. He must merely provide access to such data for review/audit purposes. Restrictions on access may be addressed in a MOU between the Contractor and Defence.