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  • Question

    The CCTV system costs more than $250k and the inherent labor is estimated more than $300k. Is the CCTV system alone considered an investment item? Is the labor included in the overall determination? According to DoD 7000.14-R, Volume 2A, Chapter 1, 010201(D)(1), it states, "When costs generally considered as expenses are included in the production or construction of an investment item, they shall be classified as investment costs." Does this mean both the CCTV and labor to install it are to be included in the overall costs? If so, what is the rationale hard evidence? thanks in advance.


    Answer

    Based upon the data provided, the CCTV system and its installation should be classified as an “investment cost” based upon 010201(D)(3), final bullet point – “When investment equipment is to be installed in a real property facility, the costs of both the equipment and its installation are considered investments.”

    The determination as to the equipment being an ‘investment cost’ is based upon the application of 010201(F) “Expense/Investment Cost Determination Chart”.

    Since the CCTV system is valued at over $250K, then it will most likely be a Centrally Managed/Asset Controlled Item (accounted for with serial number tracking), so if the answer is ‘Yes’, you would look to see if it was purchased from Defense Working Capital Funds (DWCF), if no, then it’s classified as an investment. If it’s not going to be a Centrally Managed/Asset Controlled Item, then since the item is over $250K, then the chart tells you to classify it as an investment.

    This doesn’t necessarily mean that the cost of the system and its installation are to be included in the overall construction cost (assuming you meant overall cost of the building). See 010201(E)(2), a CCTV system would normally not be considered to be an integral part of a facility, since the facility itself could be built, maintained and operated without this equipment. Normally, integral parts include, heating & A/C, plumbing, filtration systems.

    So while this is an ‘investment cost’ it’s not necessarily a ‘construction’ cost.

    This is basically a FMR question, so it’s highly recommended that you further consult with your local FM professional along with legal representation.

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