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  • Question

    What's the difference between Non-recurring Costs and Non-recurring Engineering (NRC and NRE, respectively)?


    Answer

    From an overall perspective, in the context of both domestic and FMS acquisition efforts, Non-Recurring Costs (NRC) is the broader term, and Non-Recurring Engineering (NRE) is a narrower term that describes a specific type of non-recurring acquisition costs.

     

    Definitions

     

    The DAU Glossary contains the following definition of "NRCs" that pertains to domestic and FMS acquisition efforts:

     

    "Costs that will occur once or occasionally for a particular cost objective. NRCs include preliminary design effort, design engineering, and all partially completed reporting elements manufactured for tests"

     

    The Security Assistance Management Manual (eSAMM) has a different definition of "NRCs" that pertains to FMS:

     

    "Those costs funded by an RDT&E appropriation to develop or improve a product or technology either through contract or in-house effort. Also, those one-time costs incurred in support of previous production of a specified model and those costs incurred in support of a total projected production run."

     

    Key Differences:

     

    The domestic acquisition community considers RDT&E, Production Planning/Tooling, Sustainment Non-Recurring Investment and other similar non-recurring investments as "NRCs"

     

    The Security Assistance community (per DoD policy and the eSAMM) only considers PRIOR (pre-FMS case) RDT&E investment by the U.S. Government as "NRC."  Moreover, the SA community DOESN'T include production or sustainment non-recurring costs in its NRC calculations (see eSAMM C.9.4.5).  As you are probably aware, however, even though NRC is calculated per the eSAMM, it is usually waived and rarely collected.

     

    The Security Assistance community also determines if USG facilities or production tooling are used in performance of an FMS case.  If they are, a separate Asset Use charge (see eSAMM C.9.4.4) is calculated, assessed, and collected in the FMS case.

     

    NRE in FMS Cases

     

    As noted in the definitions above, engineering (of various types) is included in the DAU Glossary as one example of a specific type of NRC charge.  From an FMS perspective, there are two ways NRE may be assessed and charged in an FMS case:

     

    1) NRE funded by RDT&E that is performed PRIOR to the FMS case should be included in the FMS case NRC calculation (which, as noted above, is normally waived and not collected).

     

    2) NRE funded by FMS case funding (either national funds or Foreign Military Financing) as part of the FMS case effort should be charged to the FMS customer nation in the FMS case, normally (but not always) in a separate line item.  Note that NRE performed in furtherance of the FMS case by either in-house DoD and/or contractor personnel could be related to RDT&E, Production Planning/Tooling acquisition, or even Logistics/Sustainment non-recurring planning and investment activities.  The specific type(s) of NRE needed to perform the case should be defined in the Letter of Request (LOR) to Letter of Offer and Acceptance (LOA) process and included as part of the FMS case scope and cost estimate, as appropriate.  Consult your DoD Component Security Cooperation chain-of command organizations regarding the specific practices used in your DoD Component (USAF).

     

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