Operation and Maintenance (O&M) appropriations are used to finance “expenses” not related to military personnel or Research, Development, Test, and Evaluation (RDT&E) efforts. Types of expenses funded by O&M appropriations generally include: DoD civilian salaries, supplies and materials, maintenance of equipment, certain equipment items, real property maintenance, rental of equipment and facilities, food, clothing, and fuel.
When considering O&M appropriations, it is important to adhere to the established expense/investment dollar thresholds. The expense/investment criteria evolve around cost, purpose and whether the item is considered a “centrally managed/controlled item.” Generally, items costing less than the current expense/investment threshold ($250K) and not designated for centralized management and asset control, are considered “expenses” and are funded with O&M funds (under some circumstances, these same items can be funded with RDT&E funds). Normally, these items are consumed in routine operations, but, more importantly, their cost is relatively low. Investment items, on the other hand, are those that cost more than $250k and/or are designated for centralized management and asset control; generally, investment items are not consumed in routine operations and are funded with procurement, military construction (MILCON) or RDT&E (depending on the item, purpose and dollar amount of the cost) appropriations. In addition, the FY 2018 National Defense Authorization Act (NDAA), Section 2802, and 10 U.S.C. 2805 (c) permits minor construction projects costing less than $2M to be funded with O&M appropriations.
Examples in depth:
DoD Civilian Salaries - Most DoD civilian salaries, including those of personnel supporting or managing acquisition programs, are funded with O&M. Exceptions to this rule include personnel employed at R&D facilities (funded with RDT&E) and personnel involved in direct support of production activities, such as quality assurance, production engineering, equipment assembly (which are funded with procurement appropriations).
Supplies and Materials - Supplies and Materials whose unit cost falls under the expense/investment threshold are funded with O&M. Additionally, supplies and materials designated for management by the Defense Working Capital Funds are funded with O&M regardless of system unit cost. For example, replenishment spares stocked by a Working Capital Fund (WCF) activity are purchased by the end-used from the Working Capital Fund activity using O&M funds.
Maintenance of Equipment - maintenance, repair, overhauled and rework of equipment are funded with O&M (excluding certain ship overhauls, which are funded with procurement appropriations).
Most O&M appropriations are subdivided into the following budget activities (BAs): BA-1 Operating Forces; BA-2 Mobilization; BA-3 Training and Recruiting; BA-4 Administrative and Service-wide Activities.