Should OPN funding be used to procure an IT Media Storage Rack?
Answer: The Financial Management Regulation is very specific in addressing this issue. The key to this answer is the determination of whether the purchase makes up one or more total systems. The unit cost of the system determines which appropriation to use. If the system cost is less than $250K, then O&M is the appropriation to use. If the system cost exceeds $250K, then procurement is the correct appropriation. The references are below:
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FMR Volume 2 section 010201 D 1 f covers Expenses. Expenses are costs of resources consumed in operating and maintaining the Department of Defense. When costs generally considered as expenses are included in the production or construction of an investment item, they shall be classified as investment costs. Military personnel costs are an exception to this rule. The following guidelines shall be used to determine expense costs:
f. Assemblies, spares and repair parts, and other items of equipment that are not designated for centralized item management and asset control and which have a system unit cost less than the currently approved dollar threshold of $250,000 for expense and investment determinations. This criterion is applied on the basis of the unit cost of a complete system rather than on individual items of equipment or components that, when aggregated, become a system. The concept of a system must be considered in evaluating the procurement of an individual end item. A system is comprised of a number of components that are part of and function within the context of a whole to satisfy a documented requirement. In this case, system unit cost applies to the aggregate cost of all components being acquired as a new system.
Section 010201 D 2 defines Investments. Investments are costs to acquire capital assets such as real property and equipment. The following criteria shall be used to determine those costs to be classified as investments:
b. All equipment items that are not subject to centralized item management and asset control and have a system unit cost equal to or greater than the currently approved expense and investment dollar threshold of $250,000 (for working capital funds investment criteria see Volume 2B Chapter 9 section 090103C). The validated requirement may not be fragmented or acquired in a piecemeal fashion in order to circumvent the expense and investment criteria policy.
Section 010212 addresses IT and AIS systems. Budgeting for Information Technology and Automated Information Systems. ....
A. Information Technology and Automated Information Systems that are not embedded in weapons systems and/or major end item procurements are budgeted according to the investment and expense criteria (see 010201) and the appropriation or fund’s purpose.
B. The correct appropriation for budgeting an IT effort is dependent on the activity and the underlying tasks that make up the IT effort. RDT&E activities and Working Capital Fund activities follow unique procedures as noted in the following paragraphs. All other activities budget for IT efforts based solely on the underlying purpose for the IT effort.
1. An IT effort may require funding for more than one appropriation. The underlying purpose for each discrete task within an IT effort determines the correct appropriation for budgeting of that task. An effort that is so broadly defined that it contains separate tasks appropriate to budgeting in different appropriations should be separated into discrete tasks, each of which is budgeted in the correct appropriation.
2. The following guidelines are provided to help determine which appropriation to use:
4. Procurement appropriations: Acquiring and deploying a complete system with a cost of $250,000 or more is an investment and should be budgeted in a Procurement appropriation. Complete system cost is the aggregate cost of all components (e.g., equipment, integration, engineering support and software) that are part of, and function together, as a system to meet an approved documented requirement.
As always, check with your legal office or local comptroller office to ensure there is not a local policy that is more restrictive.