The KC-135 SPO at Tinker AFB received a requirement for a commodities level
modification affecting a system specific blackbox/LRU. The requirement
specifically calls for the LRU to be removed from the air frame and shipped
to the OEM to be modified. The question is what color of money would be
applied to complete this modification; this is not an aircraft modification
which would use 3010 and it is not form, fit and function which would use
MSD? What organization would be responsible, the 135 SPO, GLSC etc.? In
addition, the same question for an engine modification opposed to an LRU
If this requirement does not turn out to be the responsibility of the KC-135
SPO, what is the procedure for moving the requirement to the proper office
You should query through your center and Air Force Material Command (AFMC) "chain-of-command" as to whose is responsible for managing/executing these modifications. Normally, the system program office (KC-135 SPO, in your case) would have management responsibility for modifications to "their" platform/system (including components of the system).
The appropriate DoD reference for budget policy is DoD Regulation 7000.14-R (FMR), Volume 2A, Chapter 1 (link: http://comptroller.defense.gov/fmr/02a/02a_01.pdf). Specifically, section 010212 C. 7. (page 1-38) addresses modifications to end items (otherwise referred to as product improvements). Based on the description of your situation, it appears that no significant design and testing is required for your black box/LRU modification so the discussion in this section regarding how to budget for design and test is likely not relevant. This actually simplifies the answer. Per the policy stated, the purchase and installation of the modification hardware (or "kits") (i.e., actually executing the modification) is always to be budgeted in the same procurement appropriation as that funding the end item. If the black box/LRU being modified is a component of the KC-135 then the KC-135 aircraft is the "end item." This means that the modification should be budgeted in the Aircraft Procurement, Air Force appropriation. As for aircraft engine improvements, paragraph 010212 C. 7. d. (page 1-39) provides the specific policy. All aircraft engine improvements (design and test portion) are always to be budgeted in and Research, Development, Test & Evaluation (RDT&E) appropriation (RDT&E, Air Force in your case). The resulting modification kit hardware (purchase and installation) would, again, be budgeted in the Aircraft Procurement, Air Force appropriation.
In either case, this FMR policy dictates in which appropriations we are to request budget authority (in advance). This means we must request budget authority for these modifications through the POM/budget process to include a justification of these requirements in the appropriate Procurement and/or RDT&E budget exhibits (P- and R-forms) that ultimately are submitted to Congress in the President's Budget (PB). If your requirements have not been justified in a previous PB submission then you likely do not have budget authority to execute either modification (LRU or engine) at this time.
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