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    What color of funds should be used for the AED testing? APA or RDTE


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    It must be recognized that even though the Background of this AAP question states that the reason for this effort is to determine the viability of the USMC T408 engine as a second source for CH-47 propulsion, this effort should in fact be treated as an Army CH-47 modification.  When determining the correct type of appropriation to use for any modification, the DoD Financial Management Regulation 7000.14-R (FMR), Volume 2A, Chapter 1, paragraph 010213, section C.7 provides guidance for finding the answer.  However, since FMR, Volume 2A, Chapter 1, paragraph 010213, section C.7 uses words to describe the funding determination for a modification, it can be rather difficult to navigate.  Therefore, this section of the FMR has been translated into an easy to follow Product Improvement Funding Decision Tree by the Defense Acquisition University (DAU).  That Decision Tree can be found in the middle of the right column of Page 2 of the DAU Funds Management Platinum Card.  The Platinum Card can be quickly accessed on the DAU website at https://www.dau.edu/tools/t/Funds-Management-Platinum-Card

    The Product Improvement Funding Decision Tree breaks down FMR, Volume 2A, Chapter 1, paragraph 010213, section C.7 into three questions.  A program’s answers to those questions will be very instructive as to the correct appropriation to be used for the development of a weapon system modification.  However, after modification development, per FMR, Volume 2A, Chapter 1, paragraph 010213, section C.7.c, “Costs of fully developed and tested modification kits and associated installation costs should be financed from Procurement appropriations.” 

    The first of the three modification development questions is: Is the purpose of the modification to increase performance?  From FMR, Volume 2A, Chapter 1, paragraph 010213, section C.7.a.(1), if the answer to this first question is yes, then the modification “related development, test and evaluation effort, will be financed in RDT&E.”  The Background of this AAP question clearly indicates that the answer to this first modification development question is a resounding no!  Since the answer to the first modification development question is no, the Product Improvement Funding Decision Tree leads to the second question.

    The second of the three modification development questions is: Is developmental testing (DT) or operational test and evaluation (OT&E) by an independent operational test agency required?  If the answer to this question is yes, FMR, Volume 2A, Chapter 1, paragraph 010213, section C.7.a.(2) states, “If DT or OT&E by an independent test agency is required, RDT&E finances the improvement.”  The Background of this AAP question does not clearly indicate whether, or not, AED is an independent operational test agency.  Therefore, it must be noted that FMR, Volume 2A, Chapter 1, paragraph 010213, section C.7.a.(4) directly says, “In both cases (2) and (3) above, the determination that the improvement is “within the current performance envelope” and that “no development testing (DT) or operational test and evaluation (OT&E) by an independent operational test and evaluation agency is required” should be determined after formal coordination with the Director, Operational Test and Evaluation.”

    If no DT or OT&E by an independent operational test and evaluation agency is required, the Product Improvement Funding Decision Tree leads to the third and final modification development question. That final question is: Is the weapon system still in production?  FMR, Volume 2A, Chapter 1, paragraph 010213, section C.7.a.(3) states, “Engineering services or related manufacturing efforts applied to an out-of-production, but still operational item to extend its useful military life within the current performance envelope should be financed by O&M appropriations as long as no development testing (DT) or operational test and evaluation (OT&E) by an independent operational test and evaluation agency is required.”  The Background of this AAP question clearly indicates that the answer to this third modification development question is yes, the CH-47 is still in production!

    Conclusion: Since the answer to the first modification development question is clearly no and the answer to the third question is clearly yes, the answer for this AAP question revolves entirely around the second modification development question.  The issue of whether, or not, the Aviation Engineering Directorate (AED) is an independent operational test agency.  If AED is NOT an independent operational test agency then APA would be the correct appropriation for this effort.  However, if AED IS an independent operational test agency, then RDT&E would be the correct appropriation.

    Note:  Peculiar to aircraft engines, FMR, Volume 2A, Chapter 1, paragraph 010213, section C.7.d.(2).(a). would require any “Component Improvement” following this current AED effort to verify/validate T408 compliance with Army CH-47 requirements, be developed with the RDT&E appropriation.

    Suggestions:  Read DoD Financial Management Regulation 7000.14-R, Volume 2A, Chapter 1, paying particular attention to paragraph 010213, section C.7.   In addition, it is most strongly recommended that you contact the Director, Operational Test and Evaluation, your local comptroller organization, and legal counsel for more information and their policy interpretation of this issue.

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