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Procurement Funds

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Procurement Funds

DAU GLOSSARY DEFINITION

Alternate Definition

The Procurement appropriation is used to finance investment items and generally includes all costs necessary to deliver a useful end item intended for operational use or inventory. Items classified as investments and financed with Procurement appropriations include those whose system unit cost exceeds $350,000 (the Expense/Investment Threshold), all centrally managed end items not purchased from Defense Working Capital Funds (regardless of unit cost (e.g., handguns)), and purchases from the Defense Working Capital Fund furnished as part of a system acquisition, system modification, major service life extension program and initial spares. With certain limited exceptions, the cost of fabricating and installing additions or modifications to existing end items is also funded with procurement appropriations.

General Information

Procurement appropriations are used to finance non-construction-related investment items. This includes:

- Equipment items not subject to centralized item management and asset control whose system unit cost meets or exceeds the Expense/Investment Threshold (currently $350,000). 

- Equipment items subject to central item management and asset control, but not managed by Defense Working Capital Funds, regardless of system unit cost. 

- Initial outfitting of an end item of investment equipment, such as a ship or aircraft, to make it complete and ready to operate. 

Examples of non-construction investment items funded by procurement appropriations include: 

- Support elements, such as data, factory training, support equipment, and interim contractor support required to support procurement of a new weapon system

- Procurement and/or production direct support costs such as production testing, quality assurance, production engineering and equipment assembly

- Modification kits and material for modernization programs

- Major service life extension programs, including the labor associated with incorporating these efforts as part of the end item

- Items purchased from the Defense Working Capital Fund for use in initial fielding of an end item or as part of a weapon system modernization or major service life extension. 

- Initial spares and repair parts for the supply system upon initial fielding of a new weapon system

An exception to the funding of repair by the use of Operation and Maintenance (O&M) funds involves certain ship overhauls which are funded with procurement appropriations. Further detail on the criteria for funding efforts with Procurement Appropriations, as well as Procurement Budget Activities, can be found in DoD Financial Management Regulation 7000.14-R, Volume 2A, Chapter 1.