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    What appropriation do we use to purchase the equipment and installation? Do we use O&M for both the equipment and installation because they are on two separate contracts both under $250K? Or do we use Procurement funds because the two contracts together exceeds $250K? I have seen guidance both ways from different services. One says that installation is treated as an expense, no matter how much it cost, since it is not being done by the primary contract and therefore it is O&M. The other says the full funding would require the installation to be included in the cost of the procurement and that an end item is fully funded only when funds are budgeted, programmed and available to cover the total estimated cost of the item at the time the procurement action is begun. The number of contracts required to procure a defense system, the type of contract awarded, and the timing of the award have no bearing upon whether or not an item is fully funded. If there is no guidance, does an agency have a choice of which funds to use and would we be safe from an ADA as long as once we established the guidance we consistently applied it?


    Answer

    The following information may be found in Financial Management Regulation 7000-14R Vol 2A Chapter 1 Oct 2008 Paragraph 010212. 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.
    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.
     
    Since the total cost for a complete useable system, which must be installed in order to be useable, to meet an approved documented requirement is $270K, the procurement appropriation is recommended. You are encouraged to discuss this issue with your command comptroller  to determine any additional command or service specific direction.
     

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