46. Definition of Deficiency

Comment: A respondent stated that clarification of materiality in regard to system deficiencies continues to be inadequate. The interim rule indicates that a single significant deficiency in an EVMS guideline may result in withdrawal of EVMS approval for a company and subsequent implementation of the 5 percent payment withholding clause. The respondent stated that industry continues to maintain that this does not allow for tempering of findings based on risk, the degree of potential harm to the Government that could result from the identified deficiency, or any other factor that would indicate whether the deficiency is material in nature. The respondent suggested an incremental process for withholding of payments and withdrawal of EVMS system approval that takes materiality of deficiencies into consideration and incorporates DCMA's Corrective Action Request process and definitions for severity of findings of EVMS deficiencies.

Response: All significant deficiencies pose risks to the Government and may lead to harm that may not be readily calculated when the deficiencies are discovered. The intent of the rule is to withhold payments when there is a shortcoming in the system that materially affects the ability of DoD officials to rely on information produced by the system for management purposes, i.e., significant deficiency. In the case of EVM, a disapproval would mean the system has one or more significant deficiencies due to the contractor's failure to comply with the system criteria in the clause at DFARS 252.234-7002, Earned Value Management System, and the contracting officer would be required to apply a withhold in accordance with the clause at DFARS 252.242-7005, Contractor Business Systems.