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  • Question

    Is the program office required to use O&M funds for this work or can they use Procurement or RDT&E funds? What are parameters that guide this decision?


    Answer

    According to FAR 2.101 a Commercial item is  (1) Any item, other than real property,…  Meaning that for those things that address changes to a facility cannot be accomplished using commercial rules in FAR Part 12.
    So what is real property? 

    The FAR defines the term “construction” as to mean “…construction, alteration, or repair (including dredging, excavating, and painting) of buildings, structures, or other real property.”  That is to say  non-commercial acquisition of NEW,  ALTERATION or REPAIR of real property and then goes on to give an extensive listing of the kinds of facilities to which this applies. 


    There are few possibilities not on the list. 


    This kind of work then requires the use of the rules found in
    FAR Part 36. Included in this regulatory definition are FAR implications that we will need to address Labor, OSHA, environmental protection, schedules, payments etc and the thresholds where these may come into play. 

    However the FAR is generally silent as to the funding stream.  31USC1301, 1502 and 1341 provide the guidance as to fiscal controls.


    The first threshold that provides specific guidance is Title 10USC2805 which specifically identifies the threshold of $750,000.  Up to that amount, new construction or alterations can be made using O&M.  Above this threshold requires MILCON (except in cases of life safety repairs whereupon the service secretary may have some discretion). 

    Repairs of existing facilities are not listed.  Repairs are generally accomplished using O&M or other annual appropriations and are not limited by this citation.

    To answer your question we have to look at the funding regulations and the DOD FMR provides the guidance as to what funding source would be appropriate. This document is also the basis of service specific planning guidance that defines a project scope based on type of work and funding stream appropriate to pay for that work.  

     
    The DOD FMR also adds to the terms in use and we now have:

    • construction (new) – MILCON rules;
    • Alteration (which changes the facility’s footprint or usage - sometimes called re-purposing) MILCON rules; 
    • “alteration 2”  or  Renovation (which is to bring the original building up to a current code with no corresponding change in footprint or purpose) ;
    • Repair; and finally
    • maintenance. 
    Each of these categories has a different set of rules, thresholds and funding types.

    Types of funds:

    Procurement funds are used for ships, planes and other personal property.  They are not appropriate for real property and with the rare exception of a crane or special equipment that goes IN a facility cannot be used for facility work.
    RDT&E funds are appropriate for research, development, test and evaluation.  We have built buildings before, to include research labs and clean rooms where that research is done.  The research and development WILL be done IN the facility, and should not be used in the constructing OF the facility. With the rare exception of constructing a facility which truly has never been done before, RDT&E funds are best left for their intended purpose.

    What you are describing is a facility alteration project – re-purposing an existing facility.  If the entire project and new vault can be accomplished in under the $750,000 threshold then O&M funds could be used.  If this is not possible,  then MILCON is the remaining choice.  NOTE: There is a constant tendency to want to phase or split the project into smaller pieces in order to fit this threshold.  That is patently illegal and called incrementation.  




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