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  • Question

    If the working capital fund is only designed for replacing wholesale inventory and not purchasing initial supply chain lay in spares, then who is responsible for funding those lay in spares if a fielding plan is not completed until six years post MSD?


    Answer

    At both pre-MSD and post-MSD, the Program Office (Program of Record) is responsible for funding initial and outfitting spares using “procurement” dollars.  This “procurement” funding may be provided to a Working Capital Fund activity (e.g. NAVSUP) to leverage their contracting capabilities.  

    Specific DoD guidance is found in the DoD Financial Management Regulation (FMR) Vol 2a. Chapter 1. Section 2.1.4.3.4:

    “Initial outfitting of an end item of investment equipment, such as a ship or aircraft, with the furnishings, fixtures, and equipment necessary to make it complete and ready to operate is a part of the initial investment cost. Material procured through the Defense Working Capital Funds for initial outfitting will be financed by procurement appropriations when drawn from the supply system. This concept includes changes to the allowance lists of ships, vehicles, and other equipment. Changes to allowance lists will be budgeted as investment costs. Procurement appropriations are not required to satisfy initial outfitting requirements if assets are available for issue through reuse/redistribution programs, such as the Navy's Consumable Asset Reutilization Program.”

     

    Specific Department of Navy guidance is found SECNAVINST 5000.2G, Encl 11, para 21, Supply Chain Management:

    “All DON programs have the responsibility to manage supply chain activities throughout all phases of the life-cycle, including establishing a complete supply pipeline for initial spare part procurements, and shall implement materiel sourcing strategies and processes that yield the best value to maximize materiel readiness at the lowest total life-cycle cost. Accordingly, the PM shall implement an integrated supply chain team to ensure collaboration across all supply chain organizations and activities to establish a resilient supply chain that meets the operational readiness requirements of the weapon system.

    a. Initial spare parts are identified as the interim spares, installation and check-out spares, inventory augmentation, and onboard repair part spares for the associated repairable components, assemblies, or subassemblies in support of newly fielded, upgraded, and modernized weapon system end-items. Whole spare engines are classified as initial spare parts through the life of the system. The supply pipeline includes the required stockage levels for the wholesale supply management activity pipeline and retail operational outfitting requirements necessary to support ship, aircraft, weapon system, and equipment end-items. These spares investments are the responsibility of the commands budgeting for the acquisition of the end-item as well as reporting accountability.

    b. At the time of Material Support Date and/or Fielding of the weapon system, the Program Office will:

    (1) Initiate transfer of property accountability of all initial spare parts, excluding engines or other end items, required to support the wholesale and retail supply chain pipelines, without reimbursement, to the supply management activity.

    (2) Decapitalize the associated spare parts by removing from its accounting records.

    c. The supply management activity will capitalize the transferred spares to its working capital fund accounting records and placed into plant stock that is viewable, sourceable, and billable for all authorized requisitioning activities for the respective end-items. The transfer of all spares must be fully documented and the documentation must be retained. Refer to references (ao) and (fx).

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