Would this represent an RDT&E cost and/or O&M? What regulation outlines determining the difference?
Based on the guidance provided in the Financial Management Regulation (FMR, DoDI 7000.14), Volume 2A, Chapter 1, RDT&E would be the appropriate appropriation to fund this product improvement/enhancement.
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FMR Volume 2A, Chapter 1, 010212. Budgeting for Information Technology and Automated Information Systems, says:
“RDT&E appropriations: Development, test and evaluation requirements, including designing prototypes and processes, should be budgeted in the RDT&E appropriations. The RDT&E funds should be used to develop major upgrades increasing the performance envelope of existing systems, purchase test articles, and conduct developmental testing and/or initial operational test and evaluation prior to system acceptance.”
Further, section 010213 of FMR Volume 2A, Chapter 1 titled Research, Development, Test and Evaluation (RDT&E) Definitions and Criteria, says the following about product improvement:
"Product improvement" of major end items and major components of major end items currently in production or in the operational inventory is subject to the following:
(1) Redesign of an item to increase the current performance envelope, including related development, test and evaluation effort, will be financed in RDT&E.”