Sign In
  • Question

    What appropriation should be used to fund shipping cost


    Answer

    Your question revolves around the correct appropriation to use for shipping cost of procured units (OPN).  The Financial Management Regulation (FMR) 7000.14-R Volume 2A Chapter 1 Section 010202 explains full funding policy in great detail (see below).
     
    *010202. Full Funding of Procurement Programs
     
    A. General. A budgeting rule that requires the total estimated cost of a, military useable end item, be funded in the fiscal year in which the item is procured. Under the full funding policy, the entire procurement cost of a weapon or piece of military equipment is to be funded in the year in which the item is budgeted. An end item budgeted in a fiscal year cannot depend upon a future years funding to complete the procurement. Regulations governing the full funding policy are found in Office of Management and Budget (OMB) Circular A-11 and DoD Directive 7000.14-R
     
    1. The full funding policy is intended to prevent the use of incremental funding, under which the cost of a weapon system is divided into two or more annual portions or increments. Thus, full funding provides disciplined approach for program managers to execute their programs within cost and available funding.
     
    2. There are two general exceptions to the full funding policy: one permits the use of Advance Procurement (AP) funding for components or parts of an item that have long production lead times; the other permits advance procurement funding for economic order quantity (EOQ) procurement, which normally occurs in programs that have been approved for multiyear procurements (MYP). Advance Procurement funding is used routinely and extensively in the procurement of components for major end items due to manufacturing and production lead times. The use of MYP has to be approved by the Congress on a program-by-program basis. Congressional approval permits DoD to use a single contract to procure multiple copies of a given item that are scheduled to be procured across a series of years. MYP arrangements are governed by 10 USC 2306(b). EOQ procurement involves procuring multiple copies of a key component of a weapon covered by an MYP at the start of the MYP period in order to achieve significantly reduced costs on that component.
     
    B. Policy for Full Funding. The total estimated cost of a complete, military useable end item or construction project must be fully funded in the year it is procured. There are 2 basic policies concerning full funding.
     
    1. To provide funds in the budget for the total estimated cost of a complete, military usable end item to document the dimensions and cost of a program.
     
    2. Exceptions to this policy are advance procurement for long lead-time items and advance economic order quantity (EOQ) procurement. EOQ may be used only in connection with multiyear procurements. Both efforts must be identified in an Exhibit P-10, Advance Procurement, for the Budget Estimate Submission and the President’s Budget request.
     
    C. Procedures for Full Funding
     
    1. Cost Estimates. Full funding applies to an initial estimate and can exist only at a point in time because estimates change. However, the Future Years Defense Program (FYDP) shall be a consistently reliable foundation for stating the total cost of acquiring defense systems. Thus, the FYDP shall reflect a DoD Component’s best estimate at completion of the program. The estimate should reflect the most likely cost of a procurement. Program estimates shall be kept current and fully financed through the Planning, Programming, Budgeting and Execution (PPBE) System process and established reprogramming procedures.
     
    2. Time-Phased Procurement. Within defense system acquisition programs, nonrecurring costs and costs of certain production items related to, but not integral to, the end item of equipment are considered part of the overall acquisition cost. DoD Components shall plan and budget in a manner to ensure completion of the nonrecurring effort or delivery of such production items consistent with the planned delivery of the associated end items. That is, the programming and budgeting shall be on a time-phased "lead-time away" or "need to commit" basis. The Funded Delivery Period is part of the process to determine the quantities required to be budgeted in a particular fiscal year. DoD Components may not budget funds for obligation for items such as support, trainers, or data before the design or specifications of such items are essentially complete. These items shall be budgeted on an "ability to contract" basis as well as on a "lead-time away" basis.
     
    The budget exhibits that support this program would be a good start to ensure that shipping costs were included for the program.  Full Funding policy requires funding for all costs associated with the procurement and delivery of a complete, military usable end item. 
     
    It is strongly recommended that you contact your local Comptroller/BFM for additional guidance or service specific guidance.

    Open full Question Details