Is there any regulation against converting/upgrading a weapon system trainer into a full mission capable weapon system that will still be used as a trainer?
The simple answer is that there are no regulations that preclude upgrading an article (hereafter referred to as the Trainer) that was procured using RDT&E funding. The services do this on a regular basis. For example, if a service had RDT&E funded units that originally were to be used for testing but the testing went so well that the units were not required, those units could be made available to the warfighter. And, if modifications, or upgrades, were required to make them fielded units, that can be done.
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The only real question is what will the Trainer be used for? The reason why that is relevant is because the answer will determine what type of appropriation (“color” of money) will be required to pay for the upgrade.
DoD Financial Management Regulation (FMR) 7000.14-R, Volume 2A, Chapter 1, Paragraph 010213, Section C.6.a and C.6.b say:
C.6. Modification and Refurbishment of Test Articles
a. Costs associated with modifying or reconfiguring an existing item for R&D test purposes will be funded in RDT&E. When an item that has been diverted from another use is not consumed in R&D testing, any costs necessary to return the item to serviceable condition or to its pre-existent configuration will be financed in RDT&E.
b. If an article initially acquired with RDT&E funds as part of an RDT&E test effort is still available at the completion of the test program, it may be reassigned for operational use or inventory. The cost to modify such an article for operational use would be borne by the Procurement and O&M appropriations, as appropriate.
Conclusion: Doing the upgrade to the Trainer is not a problem, but determining how to pay for that upgrade could be slightly more interesting. Once the Trainer arrives at the Program Office, will it continue to be an RDT&E test article or will it become an operational asset? If the Trainer will continue to be a an RDT&E test article, then per FMR, Volume 2A, Chapter 1, Paragraph 010213, Section C.6.a, the upgrade MUST be paid for using RDT&E funds. Conversely, if the Trainer will become an operational asset, FMR, Volume 2A, Chapter 1, Paragraph 010213, Section C.6.b is quite clear that the upgrade MUST be paid for using Procurement funds.
Suggestion: First, review FMR Volume 2A, Chapter 1, paragraphs 010213 and 010214 for a full discussion of the uses of RDT&E and the concept and policies involved in incremental funding. Finally, since your e-mail address indicates that you work for the Air Force, we most strongly recommend that you contact your local Air Force comptroller organization for more information and their policy interpretation of this issue.