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  • Question

    We will need the DOD guidance pertaining to the 51% rule as it relates to production environment in the Working Capital Fund world.


    Answer

    DoD guidance pertaining to the 51% rule can be found in DoD Financial Management Regulation 7000.14-R, Volume11A, Chapter 2, Project Orders:
     
    020515. Ability to Perform. Project orders shall be issued only to those DoD-owned establishments that are capable of performing substantially the work ordered. “Substantially,” as used in this paragraph, means that the project order recipient shall incur costs of not less than 51 percent of the total costs attributable to rendering the work or services ordered. Total costs to render the work or services ordered include the costs of goods or services obtained from or provided by contractors.
     
    Other guidance pertaining to Project Orders is found throughout said Chapter.
     
    DoD guidance regarding the Working Capital Funds, in general, can be found in DoD Financial Management Regulation 7000.14-R, Volume 11B, Reimbursable Operations, Policies and Procedures - Working Capital Funds.
     
    In your situation involving production and Working Capital Funds, it would seem that the 51% rule would be applicable.  The production stoppage issue is a unique problem that is not addressed specifically in the regulations.  As always, you should consult with your local financial management personnel for interpretation of the policies within your activity.
     
    Also, there is another Ask a Professor Q/A titled: “51/49 Rule interpretations for Project Orders” that might be helpful.

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