Can I fund First Article Test (FAT) and Low Rate Initial Production (LRIP) and LRIP Long Lead Items (LLI) from RDTE?
Can I fund them all from Proc?
Can I mix funding for these items (some with RDTE some with Proc)?
There are two specific areas from your question: 1) appropriation type for funding LRIP articles and/or test articles, and 2) appropriation type for funding system upgrades/modifications (improvements).
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First, the use of RDT&E or Procurement funds for LRIP articles and/or test articles is defined by the DoD FMR (Vol. 2A, Ch. 1). It is critical to understand there are specific circumstances for the use of each appropriation type and the requirement should simply not be funded by an appropriation that is currently available to the program. The general rule is that all research and development-related tests/activities preceding and leading to acceptance of the system for operational use (prior to Full Rate Production Decision Review) should be funded with RDT&E funds. This is driven by the fact that RDT&E is the default appropriation type for programs' development and pre-production efforts for Development Test and Evaluation (DT&E) and Operational Test and Evaluation (OT&E). However, there are further areas of consideration prior to executing RDT&E funds for such activities.
Procurement funds can be used for LRIP articles and/or test articles if, post operational test purposes, the articles will be placed into operational inventory (whether to establish an initial production base or to permit an orderly increase in production rate). If the articles will remain "test-related" articles or no longer be of use post testing, RDT&E funds should be used. Although RDT&E funding is the general rule, we recommend you review your program's budget exhibits (R-forms or P-forms) to see how the program planned to fund the articles per decisions made at Milestone B and as a part of the Production/Deployment approval decision review (Milestone C). Hopefully the budget exhibits shed some light as to how the program planned to fund the articles based on use of the articles.
Second, various appropriations may be used when funding system upgrades/modifications. The DoD FMR (Vol. 2, Ch. 1) defines the various uses for such appropriations. Similar to the point made above, requirements should not be driven by what funding is available to the program. The program must realize funding of product improvements must be made for funding the development and test portion, funding the acquisition of mod kits, and funding the installation of mod kits. The program should make the determination for funding the development and test portion by the following three step below. First step relates to performance. If the product improvement increases performance or extends the product's useful military life, the program should fund the development and test efforts with RDT&E funds. If no performance increase or extended useful life, you must determine if DT&E or OT&E is required. This is the second step. If required, program should fund development and test efforts with RDT&E funds. If not required, program must determine if the system is still in production or not. This is the third step. If in production, program should fund development and test efforts with Procurement funds. It not in production, program should fund development and test efforts with O&M funds.
After this three step process is completed (development and test funded portion), the program should also determine funding amount needed for acquisition of mod kits and installation of mod kids. For both efforts, the program should fund with Procurement funds.
Please contact us if you need further information or support. We strongly recommend you discuss this action with your BFM and Comptroller to avoid potential fiscal law or execution issues.