Material support division, working capital fund - Air Force Link
Material support division, working capital fund - Air Force Link
Material support division, working capital fund - Air Force Link
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CHAPTER 7<br />
MATERIAL SUPPORT DIVISION, WORKING CAPITAL FUND<br />
Section 7A—GENERAL AND ADMINISTRATIVE<br />
7.1. Purpose.<br />
7.1.1. This chapter provides policies and procedures for operation of the Materiel Support Division<br />
(MSD). MSD is a <strong>division</strong> of the Supply Management Activity Group (SMAG) of the Defense<br />
Working Capital Fund (DWCF). The DWCF consolidates all Services' revolving <strong>fund</strong> business areas.<br />
7.1.2. The SMAG operates under a revolving <strong>fund</strong> or <strong>working</strong> <strong>capital</strong> <strong>fund</strong> concept whereby inventories<br />
are held and sold to customers. <strong>Air</strong> <strong>Force</strong> assets stocked at depots and bases belong to the SMAG<br />
until sold to the customer. This includes Readiness Spares Package (RSP) assets. Income derived<br />
from sales is used to maintain inventory either through depot level repair or procurement action.<br />
7.1.3. To bridge the gap between sales and the repair or procurement of assets, the Under Secretary of<br />
Defense (USD(C)) approves a unit cost (total cost divided by total sales) that authorizes cost authority<br />
(CA) based on anticipated sales.<br />
7.1.4. In the <strong>Air</strong> <strong>Force</strong>, AF-managed reparable and consumable assets fall under the umbrella of<br />
MSD. MSD embraces a multitiered pricing framework to recover the cost of acquisition, repair, and<br />
related wholesale overhead expenses. MSD prices are established annually. The intent of the MSD<br />
pricing methodology is to neither lose money nor make a profit. Out year adjustments are made to<br />
return profits or recover losses.<br />
7.1.4.1. Business Operations, previously known as the Cost of Operations Division, <strong>fund</strong>s the<br />
day-to-day operating costs of the MSD.<br />
7.1.4.2. The Operational Cost Recovery pays for Inventory Control Point (ICP) and Headquarters<br />
operations expenses related to MSD.<br />
7.2. Authority.<br />
7.2.1. AFPD 23-4 establishes policies and outlines general responsibilities for managing the SMAG.<br />
The policies and procedures in this chapter that detail the operation of the MSD have been developed<br />
within the guidelines of DOD 7000.14R, Vol. llB; DOD 7420.13R; AFI 65-601, Vol. l; AFPD 23-4:<br />
AFMAN 23-110, and DFAS-DE Field Sites and Departmental Accounting Critical Processes, Flowcharts,<br />
Internal Management Controls, Responsibilities and Procedures (Chapter 6 (https://<br />
dfas4DOD.dfas.mil/library/opr/acct-smag/smagsop6-10.htm#6)). This chapter supersedes the <strong>Air</strong><br />
<strong>Force</strong> Implementation Plan: Working Capital Funding of Depot Level Reparables (DLR), 13 Jan 93.<br />
7.3. Scope.<br />
7.3.1. Assets included in MSD:<br />
7.3.1.1. Assets with:<br />
7.3.1.1.1. Expendability, Recoverability, Reparability Category (ERRC) Designator XD1,<br />
ERRC Code “C”, Serialized Control and Reporting System (SCARS), which are reparable at<br />
the Depot<br />
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7.3.1.1.2. ERRC Designator XD2, ERRC Code “T”, <strong>Air</strong> <strong>Force</strong> Recoverable Assembly Management<br />
System (AFRAMS), which are reparable at the Depot. The XD1 or XD2 assets are<br />
also referred to as line replaceable units (LRU) and shop replaceable units (SRUs). They are<br />
further identified as budget code (BC) 8 and <strong>fund</strong> code (FC) 64. (Refer to AFMAN 23-110,<br />
Volume I, Part Four, Chapter 1, Attachment 27 for an explanation of ERRC codes)<br />
7.3.1.1.3. ERRC Designator XB3 Not Reparable - throwaway consumable ERRC Code “N”<br />
7.3.1.1.4. ERRC Designator XF3 field level reparable consumable ERRC Code “P”.<br />
Table 7.1. ERRC Designator Codes.<br />
Designator Code Explanation<br />
XD1 C Depot Reparable SCARS Assets<br />
XD2 T Depot Reparable AFRAMS Assets<br />
XB3 N Throwaway or Consumable<br />
XF3 P Field Reparable or Consumable<br />
7.3.1.2. Previous Reparable Support Division Central Procurement items are now designated as<br />
MSD budget code 8 items (e.g. electronics and telecommunication spares (non <strong>Air</strong> <strong>Force</strong> Intelligence<br />
Analysis Agency (AFIAA))); aircraft spares; missile spares; other base maintenance and<br />
<strong>support</strong> equipment spares; and vehicular spares).<br />
7.3.2. Assets excluded from MSD:<br />
7.3.2.1. Certain assets have been excluded from MSD because of the special management procedures<br />
associated with them. Central procurement accounts continue to finance these assets. All<br />
requests for program exclusion from MSD are processed through HQ <strong>Air</strong> <strong>Force</strong> Materiel Command<br />
(AFMC)/FMR to SAF/FMBM for approval. The request for exclusion is separate from<br />
requesting free issue (see paragraph 7.10.) or loans (see paragraph 7.14.7.). Excluded assets are:<br />
7.3.2.2. Classified Program Reparables. These assets have a budget code “@" (Note: This does<br />
not include assets that may be part of a program that is intended to be managed in a nonclassified<br />
logistics <strong>support</strong> environment.)<br />
7.3.2.3. Assets Managed in the <strong>Air</strong> <strong>Force</strong> Combat Ammunition System. This includes Federal<br />
Supply Groups 11 (nuclear ordinance) and 13 (ammunition and explosives assets).<br />
7.3.2.4. All Federal Supply Class 1377 assets. These are cartridge and propellant actuated<br />
devices and components.<br />
7.3.2.5. All <strong>Material</strong> Management Aggregation Code (MMAC) "CM," Nuclear Ordinance. These<br />
are managed in the Advanced Nuclear Ordinance Logistics System.<br />
7.3.2.6. All BC “H” or “U” assets, which are budget program (BP) 35, otherwise referred to as<br />
munitions assets.<br />
7.3.2.7. All BC “B” assets, which are BP 17, otherwise referred to as war consumable spares.<br />
These include auxiliary fuel tanks, missile launchers, pylons, ejector racks, and adapters that are<br />
consumed during contingency operations and peacetime operations.<br />
7.3.2.8. All BC “K” assets which are BP 83, otherwise referred to as cryptographic/cryptologic<br />
assets managed by AFIAA.
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7.3.2.9. Spares for government furnished re-competition <strong>support</strong> packages associated with contractor<br />
logistics <strong>support</strong>.<br />
7.3.2.10. <strong>Air</strong>craft whole engine spares (BP 16 only).<br />
7.3.2.11. Missile/drone whole turbojet engine spares (BP 26 only).<br />
7.3.2.12. Missile whole rocket engine spares (BP 25).<br />
7.3.2.13. <strong>Air</strong> Interceptor Missiles (AIM) and <strong>Air</strong>-to-Ground Missiles (AGM) All-Up-Round<br />
component (D191) LRUs, to include subindenture assets (SRUs), with the following MMACs.<br />
Table 7.2. Exempted MMAC.<br />
MDS Weapon MMAC<br />
AIM-4 Super Falcon AA<br />
AIM-7D Sparrow III BL<br />
AIM-9B Sidewinder AB<br />
AGM-45A Shrike SK<br />
AGM-65A Maverick JB<br />
AGM-78A Standard ARM CH<br />
AIM-84 Harpoon HR<br />
AGM-120 AMRAAM AL<br />
AGM-130 Powered GBU-15 JG<br />
AGM-142A HAVE NAP HN<br />
7.3.2.14. Missile Telemetry packages that are not recovered for repair (BP 25 only).<br />
7.3.2.15. Quick Engine Change kits.<br />
7.3.2.16. Pods that are cataloged for control purposes only. These assets were procured with program<br />
<strong>fund</strong>s, not replenishment spares <strong>fund</strong>s, and will not be stocked, stored or issued.<br />
7.3.2.17. Minuteman and Peacekeeper Missile Guidance Sets.<br />
7.3.2.18. Contractor Inventory Control Point budget code “S” assets.<br />
7.4. Organization.<br />
7.4.1. Within an approved staffing document, each level of operation establishes the necessary organizational<br />
structure to adequately perform the responsibilities in paragraph 7.5.<br />
7.5. Responsibilities. Responsibilities for operation of the MSD are primarily identified in AFPD 23-4,<br />
along with those regulations and directives identified in this and other paragraphs throughout this chapter.<br />
7.5.1. HQ USAF/ILPY:<br />
7.5.1.1. Responsible for determining and implementing DWCF, <strong>Air</strong> <strong>Force</strong> SMAG functional<br />
requirement and policy.<br />
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7.5.2. SAF/FMBM:<br />
7.5.2.1. Is responsible for determining and implementing the financial policies of the DWCF, <strong>Air</strong><br />
<strong>Force</strong> SMAG.<br />
7.5.2.2. Serves as DWCF manager for the <strong>Air</strong> <strong>Force</strong> and as such, is tasked with the consolidation<br />
of MSD financial data, requirements, and budgets with other SMAG <strong>division</strong>s to form the DWCF<br />
budget for the <strong>Air</strong> <strong>Force</strong>.<br />
7.5.2.3. Is the direct liaison between the <strong>Air</strong> <strong>Force</strong> and the USD(C) staff.<br />
7.5.2.4. Delegates financial authority to HQ AFMC/FM.<br />
7.5.3. HQ AFMC/FM:<br />
7.5.3.1. Responsible for MSD financial management to include recommending to SAF/FMBM<br />
and HQ USAF/ILPY cash requirements and price escalation based upon analyses of buy/repair<br />
requirements and <strong>fund</strong> allocation strategies.<br />
7.5.3.2. HQ AFMC/FMR is the designated office within HQ AFMC/FM to manage the MSD.<br />
7.5.3.2.1. Prepares cash and price escalation exhibits; consolidates MSD budget exhibits;<br />
reviews budget content for compliance with USD(C), SAF/FMBM, and HQ USAF/ILPY<br />
direction and submits this consolidated input to SAF/FMBM.<br />
7.5.3.2.2. Responsible for <strong>fund</strong>s control of AFMC SMAG MSD cost authority based upon<br />
financial authority delegated by SAF/FMBM.<br />
7.5.3.2.3. Re-delegates <strong>fund</strong>s based upon cash availability and strategies recommended by<br />
SAF/FMBM, HQ USAF/ILPY, and functional offices in HQ AFMC.<br />
7.5.3.3. Issues MSD unit cost goals to subordinate activities. Through this cost authority, which<br />
includes specific limitations on obligations for each category of <strong>fund</strong>s, program execution is controlled<br />
and the framework for financial decisions is formed.<br />
7.5.4. HQ AFMC/LGI:<br />
7.5.4.1. HQ AFMC/LGI is the office within HQ AFMC/LG responsible for the business operation<br />
of the MSD.<br />
7.5.4.2. Responsible for the generation and validation of MSD prices.<br />
7.5.4.3. Responsible for developing, validating, and tracking the execution of the DWCF SMAG<br />
functional requirement.<br />
7.5.4.4. Focal point for asset free issue, credit override, loan, and price change requests and policy.<br />
7.5.4.5. Establishes overall policy for wholesale processing of materiel issues, requisitions,<br />
receipts, storage and distribution of MSD assets.<br />
7.5.4.6. Office of responsibility for Contract Depot Maintenance (CDM).<br />
7.5.4.7. Establishes policy and procedures for the computation of worldwide requirements for<br />
MSD items.<br />
7.5.4.8. Chairs the SRRB.
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7.5.4.9. Management responsibility of Item Managers, setting policy for establishing and changing<br />
acquisition and repair costs used in MSD pricing.<br />
7.5.5. DFAS-ADSZ/DE:<br />
7.5.5.1. Responsible for implementation of financial policies and the data systems required to<br />
record and report wholesale and retail supply financial transactions.<br />
7.5.5.2. Provide information to major command (MAJCOM) <strong>working</strong> <strong>capital</strong> <strong>fund</strong> and financial<br />
managers, and to the Defense Finance and Accounting Center-Denver (DFAS-DE) for consolidation<br />
and further reporting.<br />
7.5.5.3. Responsible for standard retail financial operations at AFMC and other commands.<br />
7.5.6. Operating Commands and Activities:<br />
7.5.6.1. Adequately forecast requirements in the out years and include them in their <strong>fund</strong>ed budgets<br />
to make sure they are meeting requirements as the out years unfold. Consumers of MSD<br />
assets, Operating Commands, must make sure their resource advisors keep abreast of their organization's<br />
MSD asset usage.<br />
7.5.6.1.1. The mechanism to obtain <strong>fund</strong>s for flying hour programs is the Spares Requirements<br />
Review Board (SRRB) for depot level reparables (DLRs). Annually, using the March<br />
D200A computation, the MAJCOMs and AFMC develop and approve for POM submission<br />
the MAJCOM spares requirement (also known as the sales based requirement because it is<br />
based on MAJCOM Not Reparable This Station (NRTS) and depot condemnations). This<br />
requirement is priced and then converted to a cost per flying hour requirement by HQ USAF/<br />
ILPY.<br />
7.5.6.1.2. The mechanism for the MAJCOMs to obtain <strong>fund</strong>s for nonflying hour DLRs is<br />
through the Program Objective Memorandum (POM) process.<br />
7.5.6.2. Improper <strong>fund</strong>s forecasting and management could impair the Operational Command<br />
from meeting its mission. The Operational Command’s organizational commanders, accountable<br />
officers, and the comptrollers should develop a forum, as needed, to discuss MSD issues and<br />
resolve problems at the lowest level.<br />
7.5.6.3. MAJCOM <strong>working</strong> <strong>capital</strong> <strong>fund</strong> managers and/or the local financial community, as<br />
applicable, should be apprised of MSD issues identified by the Operational Commander’s organizational<br />
commanders and the accountable officers.<br />
7.5.6.4. Each <strong>capital</strong>ized account that stocks, stores and issues MSD assets is considered an outlet.<br />
The accountable officer of the stock record account monitors and controls the MSD inventory<br />
of these <strong>capital</strong>ized activities.<br />
Section 7B—INVENTORY AND CAPITAL CONTROL<br />
7.6. General.<br />
7.6.1. The <strong>Air</strong> <strong>Force</strong> finances materiel <strong>support</strong> inventories using a revolving <strong>fund</strong> concept. When a<br />
customer orders and receives a SMAG asset, customer <strong>fund</strong>s are used to reimburse the SMAG. These<br />
<strong>fund</strong>s are used to finance the replenishment of assets either through the repair of existing assets or the<br />
procurement of new assets. With each purchase, the customer returns cash to the <strong>fund</strong> and the process<br />
revolves. Although the SMAG operates along business lines, it is designed to break even.<br />
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7.6.2. The SMAG operates on the premise of self-replenishment without periodic appropriations. An<br />
exception is new weapon or operating systems/new mission RSPs that require cash infusion, through<br />
initial appropriations.<br />
7.6.2.1. The SMAG self-replenishes through the sale of inventory. However, if the cash flow is<br />
impeded--for example, loans and free issue--additional appropriations may become necessary.<br />
7.6.3. The SMAG consists of cash and inventory balanced against customer <strong>fund</strong>ing. Two basic elements<br />
of the SMAG are inventory management and <strong>capital</strong> control. Each <strong>Air</strong> Logistics Center (ALC)<br />
has responsibility in carrying out these elements for their specific center. Likewise, the accountable<br />
officers and their customers at base level have a role in ensuring these elements are carried out in their<br />
daily practices.<br />
7.6.3.1. Inventory management means getting the right part, to the right place, at the right time,<br />
and under precepts of the SMAG, at the minimum cost. Inventory management includes inventory<br />
control to ensure visibility of all assets in the logistics pipeline as assets are stocked, stored, and<br />
issued.<br />
7.6.3.2. Capital control involves no more than balancing the books. Since inventory actions go<br />
hand-in-hand with accounting actions, effective inventory management coupled with accurate<br />
accounting practices ensures adequate cash flow and effective <strong>capital</strong> control. There is a corollary<br />
between degradation of inventory management and loss of <strong>capital</strong> control.<br />
7.7. MSD Working Capital Fund Prices and Costs.<br />
7.7.1. MSD uses a multi-tiered pricing and cost structure. Prices and costs are normally computed<br />
for all MSD items once a year utilizing the March Secondary Item Requirements System (D200A)<br />
computation cycle. There is one price and two costs for <strong>Air</strong> <strong>Force</strong> managed ERRC code “N” and “P”<br />
consumable items. There are four prices and six costs for ERRC code “C” and “T” reparable items.<br />
7.7.1.1. The various computed prices and costs are effective 1 Oct each year and remain constant<br />
throughout the fiscal year except for approved Zero-Overpricing challenges and/or significant<br />
cost updates/increases.<br />
7.7.1.2. MSD prices and costs are computed within the Item Pricing System (D200N). The following<br />
data is furnished to the D200N: Latest Acquisition Cost (LAC) from the Acquisition and<br />
Due-in System (J041); Source of Supply (SOS) from the D200A; and the End-Item Sales Price<br />
(EISP) from the Job Order Production Master System (G004L) and the Contract Depot Maintenance<br />
Production and Cost System (G072D), BOCR and <strong>Material</strong> Cost Recovery (MCR) factors.<br />
7.7.1.3. Annually, Headquarters AFMC/FMRS develops the Business Overhead Cost Recovery<br />
(BOCR) factors and MCR factors (BOCR and MCR factors are applied as a flat percentage to the<br />
LAC and LRC). These factors are provided to LGI. AFMC/LGIF develops the LRC adjustment<br />
factor and inputs these factors including BOCR and MCR factors into D200N.<br />
7.7.1.4. The D200N uses the LAC, LRC, SOS, BOCR factor, MCR factor and LRC adjustment<br />
factor to compute the Standard Price, Exchange Price, Unserviceable Asset Price (UAP), Mark-<br />
Up Price (MUP), BOCR, MCR, and the Carcass Cost.<br />
7.7.1.5. The computed prices and costs are passed from the Item Pricing System (D200N) to the<br />
Master Item Identification Control System (D043). The D043 distributes price and cost data to<br />
Operating Commands and Activities via the Stock Number User Directory (SNUD) D071, the
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Base Accounting Screening Exercise (D046) and various direct data system interfaces for distribution<br />
to the stock number users with an effective date of 1 Oct.<br />
7.7.1.6. The prices and costs are accessible via interrogation of D200N, the Master Item Identification<br />
Data Base (D043A) or the Federal Logistics Data on Compact Disc. The prices and costs<br />
are expressed in dollars and cents.<br />
7.7.2. Prices (Figure 7.1. provides an outline of the prices/costs, and Figure 7.2.provides the pricing<br />
data flow):<br />
7.7.2.1. Standard Price. The Standard Price is the price charged to customers who will not return<br />
an unserviceable asset for depot repair. The Standard Price is the LAC (see paragraph 7.7.3.2.)<br />
plus the BOCR@LAC (see paragraph 7.7.3.4.), for all MSD budget code 8 ERRC “N”, “P”,<br />
“C”, and “T” items.<br />
Figure 7.1. Price and Operating Cost Recovery Schema.<br />
7.7.2.2. Exchange Price. The Exchange Price is the LRC (see paragraph 7.7.3.3.) plus the<br />
BOCR@LRC (see paragraph 7.7.3.4.) plus the MCR (see paragraph 7.7.3.6.) for all MSD<br />
ERRC CODE “C” and “T” items.<br />
7.7.2.3. Unserviceable Asset Price (UAP). The UAP is the Standard Price (see paragraph<br />
7.7.2.1.) minus the LRC (see paragraph 7.7.3.3.) for all MSD ERRC CODE “C” and “T” items.<br />
7.7.2.4. Mark-Up Price (MUP). The Mark-Up Price is the Standard Price (see paragraph<br />
7.7.2.1.) minus the Exchange Price (see paragraph 7.7.2.2.) for all MSD ERRC CODE “C” and<br />
“T” items.<br />
7.7.2.5. New items are cataloged as “NC” (Noncataloged) items and are forwarded to the supply<br />
systems (D035A/K/J) where temporary prices are established. Once a National Stock Number<br />
(NSN) is assigned within the cataloging systems the items are sent to the D200N for price/cost<br />
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computations. The D200N prices/costs are then forwarded out via the normal Stock List Change<br />
process to overwrite the temporary prices/costs in the supply systems.<br />
7.7.2.6. Secondary Inventory Control Activity (SICA). The computation for SICA items occurs<br />
within the Master Item Identification Control System (D043).<br />
7.7.2.6.1. Where the <strong>Air</strong> <strong>Force</strong> is the SICA, the Standard Price is set by the other service,<br />
which is the Primary Inventory Control Activity (PICA). For SICA items the Standard Price<br />
will be the PICA’s Standard Price. The LAC will be equal to the Standard Price and the<br />
BOCR@LAC will be zero.<br />
7.7.2.6.2. The Exchange Price and LRC will be 35 percent of the Standard Price and the<br />
BOCR@LRC and the MCR will be zero.<br />
7.7.2.6.3. The MUP will be 65 percent of the Standard Price.<br />
7.7.2.6.4. The UAP and Carcass Cost will be 65 percent of the Standard Price. The BOCR<br />
will be zero.<br />
Figure 7.2. Pricing Data Flow Chart.
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Secondary Item Requirements System (D200A)<br />
Item Pricing System (D200N)<br />
Job Order Production Master System (G004L)<br />
MISTR Requirements Scheduling and Analysis System (G019C)<br />
Contract Depot Maintenance Production and Cost System (G072D/I)<br />
Requirements Item Notification Data (D200E)<br />
Acquisition and Due in System (J041)<br />
Federal Logistics Information System (FLIS)<br />
Master Item Identification Control System (D043)<br />
Stock Number User Directory (D071)<br />
Item Manager Wholesale Requisition Process (D035A)<br />
Financial Inventory Accounting and Billing System (D035J)<br />
Standard Base Supply System (D002A)<br />
Standard Materiel Accounting System (H118)<br />
7.7.3. Costs.<br />
7.7.3.1. Background.<br />
7.7.3.1.1. There are six cost elements in MSD. The first two are the LAC and LRC. The next<br />
three cost recovery elements (formerly called surcharges) are the BOCR@LAC, the<br />
BOCR@LRC, and the MCR. The sixth cost is the Carcass Cost. Costs are included in the<br />
Standard Price, Exchange Price and UAP to recover buy/repair costs and operating expenses<br />
incurred by MSD.<br />
7.7.3.2. LAC. The LAC is the price paid for an item the last time it was procured from a supplier.<br />
The LAC is generally the latest representative contract price obtained from the Acquisition and<br />
Due-In System (J041) and does not include any cost recovery or inflation. The LAC is used to<br />
develop the BOCR@LAC (see paragraph 7.7.3.4.) and the Standard Price (see paragraph<br />
7.7.2.1.) for all MSD items.<br />
7.7.3.3. LRC. The LRC is a representative average of the latest repair costs from Depot Maintenance<br />
and Contractor repair facilities. The LRC is developed in D200N by using the G004L and<br />
G072D EISPs and developing a weighted average repair cost by NSN. The LRC is then adjusted<br />
to reflect Depot Maintenance costs and the Program Budget Decisions. The LRC is used to<br />
develop the BOCR@LRC (see paragraph 7.7.3.4.) and the Exchange Price (see paragraph<br />
7.7.2.2.) for all MSD items.<br />
7.7.3.3.1. When a new item with no reparable history is established, the LRC is calculated at<br />
twenty-five percent of the forecast unit price (FUP) in the D200N. If no FUP is available,<br />
D200N will compute the LRC based on twenty-five percent of the LAC. D200N is the Stratification<br />
and Item Pricing System (IPS). IPS is a set of sub programs to the stratification process.<br />
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7.7.3.4. BOCR. BOCR@LAC/LRC is the portion of the cost recovery element that represents<br />
indirect and direct overhead costs.<br />
7.7.3.4.1. Examples are various Supply Operations Costs, Defense Logistic Service Center<br />
(DLSC), DLA Transaction Service Center, Defense Reutilization and Marketing Service<br />
(DRMS), Defense Information Systems Agency (DISA), Defense Finance and Accounting<br />
Service (DFAS), <strong>Material</strong> Inflation, Accumulated Operating Results (AOR), DLA distribution<br />
issue/receipts costs, and transportation costs.<br />
7.7.3.4.2. The BOCR factor is determined by dividing the total BOCR expenses for a FY by<br />
the total expected sales at LAC and LRC. The BOCR factor is applied as a flat surcharge factor,<br />
to the LAC and the LRC, across all NSNs. The D200N computes the BOCR by multiplying<br />
the LRC and LAC times the BOCR factor to obtain the BOCR costs.<br />
7.7.3.5. Carcass Cost. The value of an asset when the LRC and the BOCR have been removed<br />
from the Standard Price of the item. (NOTE: Also equates to LAC minus LRC).<br />
7.7.3.6. MCR. The portion of each Exchange Price sale that will pay for the delivery of new<br />
items purchased to <strong>support</strong> the customer (buy deliveries program). The MCR represents the total<br />
constrained Budget Year buy requirement minus the expected sales at LAC (the constraint being<br />
that it cannot be more than what the customer is <strong>fund</strong>ed). The MCR factor is calculated by dividing<br />
the total constrained Budget Year buy requirement minus the expected sales at LAC by the<br />
expected sales at LRC. The MCR factor is applied as a flat surcharge factor across all reparable<br />
NSNs. The D200N computes the MCR by multiplying the LRC times the adjusted MCR factor to<br />
obtain the MCR costs.<br />
7.7.4. Cost Elements. The following elements are based on prior history and future projections of<br />
budget data from the Surcharge (cost) Calculation worksheet (SM 5A):<br />
7.7.4.1. Supply Operations Costs include Payroll, Service Contracts, Sustaining Engineering/<br />
Unit Under Test, Real Property Maintenance, Depreciation and other Base Operating Services.<br />
7.7.4.2. Distribution Depot Costs including line item receipts, issues and storage.<br />
7.7.4.3. DLSC, DLA Transaction Service Center, DRMS, DISA and DFAS costs.<br />
7.7.4.4. Transportation Costs, including first and second destination transportation costs.<br />
7.7.4.5. Process improvement investment costs (e.g., Lean Logistics, Materiel Support Division,<br />
etc.).<br />
7.7.4.6. The Loss/Damage/Spoilage Costs, including wholesale and retail.<br />
7.7.4.7. Accumulated Operating Result Adjustment. The AOR is a balancing element to make up<br />
for all actual/projected losses or to give back actual/projected gains in a subsequent year. The<br />
AOR can be negative or positive.<br />
7.7.4.8. Cash Adjustment Costs. A surcharge element included in the business operations surcharge<br />
to allow MSD the ability to build cash if necessary to ensure the WCF maintains the 7-10<br />
day cash-on-hand requirement set by law.<br />
7.7.5. MSD Process Flow:<br />
7.7.5.1. Customers:<br />
7.7.5.1.1. “Standard” Price customer:
AFMAN 23-110 Volume 1<br />
Part 3, Chapter 7<br />
7.7.5.1.1.1. Deals with MSD solely on the basis of Standard Price transactions.<br />
7.7.5.1.1.2. Generally those customers that deal directly with the AFMC wholesale supply<br />
system bypassing the Standard Base Supply System (SBSS), such as Foreign Military<br />
Sales and other DOD and government agencies.<br />
7.7.5.1.2. “Exchange” Price customer:<br />
7.7.5.1.2.1. Deals with the MSD on the basis of Exchange Price transactions, but under<br />
certain unique circumstances may engage in Standard Price transactions.<br />
7.7.5.1.2.2. To be an Exchange Price customer, the customer and the MSD must have: (1)<br />
an exchange agreement, and (2) a mechanism to track the exchange transactions.<br />
7.7.5.1.2.3. Generally, all SBSS users are authorized “Exchange” Price customers, as are<br />
the organic depot maintenance activities because they have Due In From Maintenance<br />
(DIFM) tracking systems in place.<br />
7.7.5.2. Process Flow.<br />
7.7.5.2.1. The Standard Price is what all customers see in the stock list. It is the price “Standard”<br />
Price customers pay for all issues and “Exchange” Price customers pay for an initial<br />
issue of an MSD asset or if they do not close a DIFM detail within sixty days.<br />
Standard Price=LAC + BOCR@LAC<br />
7.7.5.2.2. “Standard” Price customers will be charged the Standard Price for all serviceable<br />
materiel issued and the UAP for all unserviceable materiel issued. This policy is based on the<br />
presumption that, in the absence of an exchange agreement and exchange tracking system,<br />
each transaction with a “Standard” Price customer is a one-time transaction and that the <strong>fund</strong><br />
will have to replenish the asset sold. If a “standard” price customer returns a serviceable asset,<br />
the credit granted will be determined based on the asset needs of the SMAG. Credit return policy<br />
is fully explained in paragraph 7.9..<br />
7.7.5.2.3. The Exchange Price includes the cost to repair the asset and the overhead cost (surcharge)<br />
to maintain the reparable logistics pipeline. When an “Exchange” Price customer<br />
requests a reparable, the DIFM cycle is initiated, and the customer is charged the Exchange<br />
Price.<br />
Exchange Price=LRC + BOCR@LRC + MCR<br />
7.7.5.2.4. If the “Exchange” Price customer can repair the broken asset within sixty days,<br />
they are credited (paid) the Exchange Price for the repair. However, if they return an unserviceable<br />
asset within sixty days, the customer gets zero credit.<br />
7.7.5.2.5. If the “Exchange” Price customer does not return the asset either serviceable or<br />
unserviceable within sixty days, then MUP is added to the Exchange Price. This brings the<br />
cost to the customer up to the Standard Price. The logic is that, if a customer does not return<br />
either a serviceable or an unserviceable asset, then MSD will charge the full cost (Standard<br />
Price) to replace the asset. The “Exchange” Price customer can still turn in an asset after sixty<br />
days and recover their cost based on the supply condition code on turn-in transaction.<br />
7.7.5.3. Repair of MSD assets at other than the depot will be according to applicable <strong>Air</strong> <strong>Force</strong><br />
technical orders. If the customer cannot repair the asset according to applicable <strong>Air</strong> <strong>Force</strong> techni-<br />
7–11
7–12<br />
AFMAN 23-110 Volume 1<br />
Part 3, Chapter 7<br />
cal orders, then they must ship the asset to the depot for repair, or through coordination with the<br />
wholesale item manager, condemn the asset locally.<br />
7.7.5.3.1. While the MSD incentivizes local repair, this does not authorize the unit to repair<br />
over and above applicable <strong>Air</strong> <strong>Force</strong> technical order limitations or current <strong>Air</strong> <strong>Force</strong> requirements.<br />
Specifically, the customer should not obtain additional resources or issue contracts to<br />
give them the capacity to repair or attempt to develop a unique skill base that would mirror<br />
existing resources at the depot without prior approval of the wholesale inventory manager.<br />
The net effect of those two scenarios would be to increase the overhead cost of the reparable<br />
logistics pipeline, distort available repair capacity, and/or possibly corrupt repair standardization<br />
and asset configuration management.<br />
7.7.6. Price Stabilization:<br />
7.7.6.1. Price stabilization is the policy wherein the Standard Price of each cataloged asset<br />
remains constant throughout each fiscal year. MSD Standard Prices established in the budget are<br />
fixed during execution to protect the customer <strong>fund</strong>s from unforeseen fluctuations that would<br />
affect their ability to purchase the programs approved by Congress. The prices established for<br />
MSD assets are the responsibility of the SMAG and, as such, they are set on an annual basis to<br />
recover the cost of doing business.<br />
7.7.6.1.1. The Standard Price, Exchange Price, and UAP are computed once a year during the<br />
March D200A Computation Cycle. All prices are updated annually through the D071 to the<br />
bases with a 1 Oct effective date. The Standard Price, Exchange Price, and UAP are part of the<br />
stocklist records that are provided to the customer.<br />
7.7.6.1.2. New assets that enter the supply system during the year have all prices computed<br />
and distributed through the next available monthly stock list change cycle. These changes for<br />
assets entering the inventory after the 1 Oct effective date along with significant price error<br />
changes are authorized deviations from the stabilized pricing concept of the SMAG (see<br />
paragraph 7.7.5.). All prices are passed to the SBSS through SNUD.<br />
7.7.7. Interchangeability & Substitutability Group (I&S). Each price and cost is computed once a<br />
year for each MSD I&S Subgroup Master (SGM) stock number. If the subgroup is one-way interchangeable,<br />
each one-way interchangeable stock number will have its own price, unless someone<br />
(usually the Item Manager) changes them to be the same. If it is a two-way interchangeable, all items<br />
in the group will have the same price as the SGM that heads the two-way interchangeable group.<br />
7.7.8. Price Corrections:<br />
7.7.8.1. Under certain very narrowly defined circumstances, HQ AFMC/LGI/FMR can authorize<br />
immediate Standard/Exchange Price reductions/increases on specific NSNs to promote better<br />
overall supply management and reduce excess inventory, which is consistent with overall DWCF<br />
SMAG financial objectives. Due to existing price stabilization policy, only extreme circumstances<br />
will warrant execution year price changes. There is not a specific dollar criteria; however, the<br />
erroneous price must have a significant impact on ALC Net Operating Results or on the customer<br />
<strong>fund</strong>ing to warrant the price change.<br />
7.8. Point of Sale.<br />
7.8.1. In an oversimplified model of the point of sale (Figure 7.3.), assets are transferred at no cost<br />
from wholesale stock inventories at the ALCs (ICP) to retail stock inventories at base supply. These
AFMAN 23-110 Volume 1<br />
Part 3, Chapter 7<br />
assets are then subsequently sold to retail level customers who buy them with customer <strong>fund</strong>s. These<br />
sales, in turn, replenish the revolving <strong>fund</strong> (MSD) at the wholesale level. In actuality sales occur in<br />
three scenarios<br />
7.8.1.1. Wholesale/retail to non<strong>capital</strong>ized customers (i.e., other services/agencies).<br />
7.8.1.2. Depot supply to depot maintenance.<br />
7.8.1.3. Base supply to base maintenance and tenant organizations.<br />
7.8.2. Customer <strong>fund</strong>s are obligated at the time an order is placed with base or depot supply. The<br />
customer is billed and customer <strong>fund</strong>s are only expended when the asset is delivered. Since this can<br />
span fiscal years, and USD(C) does not allow MSD to guarantee prices from FY to FY, customers<br />
must reserve sufficient <strong>fund</strong>s in the prior FY to pay the difference between prior year obligations and<br />
current year expenditures. This is normally an end-of-FY adjustment.<br />
Figure 7.3. Point of Sale.<br />
7.9. Sales and Credits.<br />
7.9.1. MSD credit return policy: All items in MSD will have a budget code of “8”. This will allow<br />
all items to be budgeted for and executed with a fully flexible cost authority. This credit policy uses<br />
the ERRC code to provide breakout of items and credit received.<br />
7.9.1.1. All XF3 and XB3 items are sold at Standard Price, and must have a serviceable condition<br />
code of “A”, “B”, “C”, or “D”. Returns in “Q,” quality deficient condition, are determined by the<br />
customer. Where possible in the SBSS, XF3 items are sold with a DIFM transaction status. XD2<br />
sales are recorded with the price at which the item is to be sold.<br />
7.9.1.2. All assets returned in condition code “Q” and “W” (warranted condition), will receive<br />
full price paid credit return. Specific guidance for processing Quality Deficiency Reports is found<br />
in TO-00-35D-54. Specific guidance for processing warranties is found in AFMAN 23-110, Volume<br />
I, Part One, Chapter 10 and Volume II, Part Two, Chapters 11, 13, and 14.<br />
7–13
7–14<br />
AFMAN 23-110 Volume 1<br />
Part 3, Chapter 7<br />
7.9.1.3. Credit indicator “A” means credit is allowed; whereas “D” means credit is disallowed<br />
(see paragraph 7.9.5.3.). A practice of manually changing the credit indicator (Y override) has<br />
allowed “forced credits” to occur. DODR 7000.14 does not recognize nor authorize this practice.<br />
Policy for forced credit, as applicable in paragraph 7.9.5.3.1. should be followed.<br />
7.9.2. XF3 Retail (SBSS) DIFM/NO DIFM and wholesale DIFM/NO DIFM, ERRC Code “P”.<br />
Table 7.3. Retail/Wholesale “P”Codes.<br />
ERRC Asset Return<br />
From Customer<br />
2.a. XF3 Retail (SBSS)<br />
DIFM<br />
Sales Price Return<br />
Condition<br />
Standard<br />
Price<br />
Credit<br />
Indicator<br />
MSD Credit<br />
Serv A, Y Full price credit (Standard<br />
Price)<br />
2.b. Serv D Full price credit (Standard<br />
Price)<br />
2.c. Unsv A, Y, D No credit<br />
2.d. Retail (SBSS) no<br />
DIFM<br />
Serv A, Y LAC<br />
2.e. Serv, D No credit<br />
2.f. D035K (Depot Mx,<br />
FX,) DIFM<br />
Unsv A, Y, D No credit<br />
2.g. D035K (Depot Mx,<br />
FX,) DIFM<br />
Serv A, Y Full price credit (Standard<br />
Price)<br />
2.h. Serv D Full price credit (Standard<br />
Price)<br />
2.i. Unsv A, Y, D No credit<br />
2.j. D035 (Depot Mx,<br />
FX,) no DIFM<br />
Serv A Y LAC<br />
2.k. Serv, D No credit<br />
2.l. Unsv A, Y, D No credit<br />
2.m D035K (All other) Serv A, Y LAC<br />
2.n. Serv D No credit<br />
2.o. Unsv A, Y, D No credit
AFMAN 23-110 Volume 1<br />
Part 3, Chapter 7<br />
7.9.3. XB3 retail (SBSS) and wholesale, ERRC Code “N”.<br />
Table 7.4. Retail/Wholesale “N”Codes.<br />
ERRC Asset Return<br />
From Customer<br />
Sales Price Return<br />
Condition<br />
7.9.4. XD2 retail (SBSS) DIFM/NO DIFM wholesale DIFM and NO DIFM, ERRC Code “C” and<br />
“T”<br />
7–15<br />
Credit<br />
Indicator<br />
MSD Credit<br />
3.a. XB3 Retail (SBSS) St a ndard<br />
Price<br />
Serv A, Y LAC<br />
3.b. Serv D No credit<br />
3.c. Unsv A, Y, D No credit<br />
3.d. D035K (Depot<br />
Mx, FX, )<br />
Serv A,Y LAC<br />
3.e. Serv D No credit<br />
3.f. Unsv A, Y, D No credit<br />
3.g. D 035K<br />
other)<br />
( All<br />
Serv A,Y LAC<br />
3.h. Serv D No credit<br />
3.i. Unsv A, Y, D No credit
Table 7.5. Retail/Wholesale “C”Codes.<br />
ERRC Asset Return<br />
From Customer<br />
4.a. XD2 Retail (SBSS)<br />
DIFM<br />
Sales Price Return<br />
Condition<br />
Exchange<br />
Price<br />
4.b. Exchange<br />
price MUP<br />
4.c. Exchange<br />
Price<br />
4.d. Exchange<br />
Price and<br />
MUP<br />
4.e. Retail (SBSS) no<br />
DIFM<br />
7–16<br />
Credit<br />
Indicator<br />
Serv A, Y, D<br />
AFMAN 23-110 Volume 1<br />
Part 3, Chapter 7<br />
MSD<br />
Credit<br />
Full price credit (Less<br />
than 60 days Exchange<br />
Price)<br />
Full price credit<br />
(Greater than 60 days-<br />
Exchange Price and<br />
MUP)<br />
Unsv A, Y, D No credit (Less than 60<br />
days)<br />
MUP greater than 60<br />
days<br />
Unknown Serv A, Y Carcass Cost<br />
4.f. Unknown Serv,<br />
Unsv<br />
D No credit<br />
4.g. Unknown Unsv A, Y Carcass Cost<br />
4.h. Retail no DIFM<br />
(SBSS) received<br />
on detail record<br />
(SPRAM, Bench<br />
Mockup)<br />
Standard<br />
Price<br />
Serv A, Y Carcass Cost<br />
4.i. Serv,<br />
Unsv<br />
D No credit<br />
4.j. Unsv A, Y Carcass Cost<br />
4.k. D035K (Depot<br />
Mx) DIFM<br />
Exchange<br />
Price<br />
4.l. Exchange<br />
Price and<br />
MUP<br />
4.m XD2 Exchange<br />
Price<br />
4.n. Exchange<br />
Price and<br />
MUP<br />
Serv A, Y, D Full price credit (Less<br />
than 60 days Exchange<br />
Price)<br />
Full price credit<br />
(Greater than 60 days<br />
Exchange Price and<br />
MUP)<br />
Unsv A, Y, D No credit (Less than 60<br />
days)<br />
MUP (Greater than 60<br />
days)
AFMAN 23-110 Volume 1<br />
Part 3, Chapter 7<br />
ERRC Asset Return<br />
From Customer<br />
4.o. D035K (Depot<br />
Mx,) no DIFM See<br />
Note 2<br />
Sales Price Return<br />
Condition<br />
Standard<br />
Price<br />
4.p. Standard<br />
Price<br />
4.q. XD2 Standard<br />
Price<br />
4.r. D035K no DIFM<br />
(Other -received<br />
on detail record<br />
SPRAM, Bench<br />
Mockup)<br />
See Note 2<br />
Standard<br />
Price<br />
4.s. Standard<br />
Price<br />
4.t. Standard<br />
Price<br />
4.u. D035 (All other) Standard<br />
Price<br />
4.v. Standard<br />
Price<br />
4.w. D035K Standard<br />
Price<br />
7–17<br />
Credit<br />
Indicator<br />
MSD<br />
Credit<br />
Serv A, Y Carcass Cost<br />
Serv,<br />
Unsv<br />
D No credit<br />
Unsv A, Y Carcass Cost<br />
Serv A, Y Carcass Cost<br />
Unsv A, Y Carcass Cost<br />
Serv,<br />
Unsv<br />
D No Credit<br />
Serv A, Y Carcass Cost<br />
Unsv A, Y Carcass Cost<br />
Serv,<br />
Unsv<br />
D No credit
ERRC Asset Return<br />
From Customer<br />
4.x. XD2 Contract DMAG<br />
(EZ) Production<br />
Contractor (EY)<br />
D7RJ/D6RJ<br />
See Note 1<br />
Note: This will<br />
change with CDM<br />
Sales Price Return<br />
Condition<br />
Exchange<br />
Price<br />
4.y. See Note 1 Exchange<br />
Price<br />
4.z. GFM Initial<br />
Install<br />
D7H<br />
4.a.a XD2 <strong>Air</strong> <strong>Force</strong> Black<br />
World (FX) D7R<br />
& D6R only See<br />
Notes 1, 3, and 4<br />
(For additional<br />
customers See<br />
Note 5.<br />
7–18<br />
Credit<br />
Indicator<br />
Serv A,Y, D Full price<br />
credit -<br />
Exchange<br />
Price<br />
Unsv A, Y, D No credit<br />
AFMAN 23-110 Volume 1<br />
Part 3, Chapter 7<br />
MSD<br />
Credit<br />
G009&D03<br />
5A will<br />
need to<br />
develop a<br />
tracking<br />
capability<br />
for carcass<br />
return or<br />
the SMAG<br />
will lose<br />
(MUP or<br />
cost of carcasses<br />
if<br />
they are<br />
never<br />
returned);<br />
may be<br />
covered in<br />
Commercial<br />
Asset<br />
Visibility to<br />
be determined.Follow<br />
4.r. to<br />
4.w.<br />
See Note 1 Follow 4.r<br />
to 4.w<br />
Exchange<br />
Price effective<br />
FY98<br />
Serv A, Y, D Full price<br />
Credit<br />
Exchange<br />
Price<br />
A Software<br />
Change<br />
Request<br />
(SCR) is<br />
needed for<br />
D035A,
AFMAN 23-110 Volume 1<br />
Part 3, Chapter 7<br />
ERRC Asset Return<br />
From Customer<br />
4.a.b. See Notes 1, 3, 4,<br />
and 5<br />
4.a.c. See Notes 1, 3, 4,<br />
and 5<br />
4.a.d. See Notes 1, 3, 4,<br />
and 5<br />
4.a.e. XD2 NIMSC 5 (Army,<br />
Navy, Marines)<br />
See Note 6<br />
Sales Price Return<br />
Condition<br />
Exchange<br />
Price and<br />
(after 60<br />
days) MUP<br />
Exchange<br />
Price<br />
Exchange<br />
Price and<br />
(after 60<br />
days)MUP<br />
Standard<br />
Price<br />
7–19<br />
Credit<br />
Indicator<br />
Serv A,Y, D Full price<br />
credit<br />
Exchange<br />
Price and<br />
MUP<br />
MSD<br />
Credit<br />
An SCR is<br />
needed for<br />
D035A.<br />
Develop a<br />
tracking<br />
capability<br />
for carcass<br />
return or<br />
the SMAG<br />
will lose<br />
MUP or<br />
cost of carcasses<br />
if<br />
they are<br />
never<br />
returned<br />
Unsv A, Y, D No credit An SCR is<br />
needed for<br />
D035A<br />
Unsv A, Y, D MUP An SCR is<br />
needed for<br />
D035A.<br />
Develop a<br />
tracking<br />
capability<br />
for carcass<br />
return or<br />
the SMAG<br />
will lose<br />
(MUP or<br />
cost of carcasses<br />
if<br />
they are<br />
never<br />
returned)<br />
Serv,<br />
Unsv<br />
A, Y, D Carcass<br />
Cost<br />
Requires<br />
change in<br />
D6 logic in<br />
D035A and<br />
K, DOD<br />
7000.14R<br />
takes precedence.
APPROVED MSD Credit Policy Date TBD.<br />
NOTES:<br />
ERRC Asset Return<br />
From Customer<br />
4.a.f. XD2 See Note 6 Standard<br />
Price<br />
4.a.g. XD2 FMS<br />
H coded requisition<br />
D7E See Note<br />
7<br />
Sales Price Return<br />
Condition<br />
Exchange<br />
Price<br />
7–20<br />
Credit<br />
Indicator<br />
Serv Unsv A,Y, D Carcass<br />
Cost<br />
Unsv A,Y, D No Credit<br />
Requisition<br />
D6E<br />
AFMAN 23-110 Volume 1<br />
Part 3, Chapter 7<br />
MSD<br />
Credit<br />
Requires<br />
change in<br />
D6 logic in<br />
D035A and<br />
K<br />
See 4.a.a.<br />
and 4.b.b.<br />
above<br />
1. Under MSD, EZ/EY customers (e.g., Black World Programs, CDM, etc.) are considered<br />
Exchange Price customers. See 4.x. through 4.a.d.<br />
2. Customers that deal with the <strong>Air</strong> <strong>Force</strong> on an exchange basis, but do not have an SBSS and/or<br />
approved DIFM process (e.g. NASA buys items for T-38 aircraft, and then returns reparables)<br />
are charged Standard Price, and do not get credit for the return unless the credit flag is set. For<br />
non<strong>capital</strong>ized customers refer to credit policy 4.o. and 4.p.<br />
3. The return of an unserviceable asset requires a DIFM transaction. The depot customer is<br />
required to return a carcass to a specified SOS. Refer to Credit Policy 4.a.a., 4.a.b, 4.a.c, and<br />
4.a.d.<br />
4. The authorized number of days between sale of asset at Exchange Price and penalty charge of<br />
MUP is sixty days. Refer to Credit Policy 4.a.a, 4.a.b, 4.a.c, and 4.a.d.<br />
5. Other customers that could be treated like the base miscellaneous accounts (FX accounts)<br />
would be National Aeronautics and Space Administration (NASA), Coast Guard, Federal Aviation<br />
Administration, Defense Logistics Agency (DLA) or other Department of Defense<br />
(DOD)/Federal agency customers that make arrangements to use document number control<br />
for the issue and return. Otherwise 4.o., 4.p., and 4.q. apply (Standard Price and Carcass<br />
Cost). All other Document Identifiers follow standard pricing policy. Refer to Credit policy<br />
4.a.a, 4.a.b, 4.a.c, and 4.a.d.<br />
6. Nonconsumable Item Materiel Support Code (NIMSC) 5 includes document identifier D6R<br />
condition “F”, D6B condition “A, B, C, D”. Refer to Credit policy 4.a.e.<br />
7. Foreign Military Sales (FMS) When the FMS country ships an unserviceable carcass, and the<br />
carcass is received at an SOS, a “D6” receipt transaction is created. Refer to Credit policy<br />
4.a.g.<br />
7.9.5. Credit Indicator Codes.<br />
7.9.5.1. The credit indicator code identifies internally to the supply system (retail and wholesale)<br />
whether or not credit can be given for a turn-in of an asset without an established DIFM. In a<br />
broader context, it communicates to the customer, and the wholesale item manager, whether the
AFMAN 23-110 Volume 1<br />
Part 3, Chapter 7<br />
asset is or is not in a buy position based on worldwide needs. Further, the credit indicator code<br />
provides a means to control inventory to make sure that the right balance of assets is on hand or<br />
flowing through the logistics pipeline.<br />
7.9.5.2. Credit is allowed if an asset is in a projected buy in the apportionment year, budget year,<br />
or extended year. This means that credit is allowed if an asset is in a buy position projected from<br />
the current point in time to three years out. Obviously, the projected buy position could vary with<br />
each quarterly computation. Therefore, all players in the repair cycle process must be aware that<br />
what was allowed for credit in the past may not be allowed in the future. The policy of credit for<br />
turn-ins strives for a balanced and stabilized inventory.<br />
7.9.5.3. The credit indicator A (allowed) indicates the asset is in a buy position projected from<br />
the current point in time to three years out. On the other hand, the D (disallowed) indicator shows<br />
that the asset is not in a buy position or is coded obsolete. At base level, it may be expedient and<br />
good for customer relations to help customers through use of credit override Y (forced credit), but<br />
local managers must consider the effect on MSD. <strong>Force</strong>d credit procedures skew the overall buy<br />
computation process and create imbalances in MSD. To ensure integrity of the process, it is<br />
imperative that the <strong>Air</strong> <strong>Force</strong> Working Capital Fund manager in base supply not use forced credit<br />
procedures unless approved as outlined below.<br />
7.9.5.3.1. <strong>Force</strong>d credit, using credit override “Y”, will only be allowed for turn in of an item<br />
issued in error. This pertains only if base supply made the error and cannot reverse post the<br />
transaction. The use of credit override “Y” will be approved by the base-level SMAG Stock<br />
Fund Manager for the above situation at the SBSS. At depot level retail (D035K) approval<br />
authority is the MSD budget office. Under all other circumstances, use of credit override “Y”<br />
must be approved by HQ AFMC/LGIF.<br />
7.9.5.4. While the assignment of the credit indicator is under program control, it can be file maintained<br />
by the wholesale item manager through the Item Pricing System (IPS) D200N in the<br />
Requirements Management System. The wholesale item manager should use this method on a<br />
limited basis, striving rather for a policy of credit that is both balanced and stable. These revised<br />
credit indicators are passed to the AFMC cataloging systems for update during the next available<br />
weekly stock list change cycle; however, D043 only updates once a month.<br />
7.10. Free Issue.<br />
7.10.1. A nonreimbursable or free issue of an asset could potentially result in a lost sale that has a<br />
significant impact on the ability of MSD to stock, store, and issue material for all customers. To this<br />
end, non-reimbursable issues of assets should be made only in exceptional circumstances. The <strong>working</strong><br />
<strong>capital</strong> <strong>fund</strong> manager at the local level does not have the authority to free issue MSD assets unless<br />
previously authorized by HQ AFMC/LGI. New free issue requests must be sent to HQ AFMC/LGI,<br />
4375 Chidlaw Road, Room B101, Wright-Patterson AFB OH 45433-5006, for approval. HQ AFMC/<br />
LGI will review the request for free issue to see if it meets the criteria in paragraph 7.10.3 and/or is in<br />
the best interest of the SMAG. If it fails to meet those criteria, and/or is not in the best interest of the<br />
SMAG, the request will be denied unless the circumstances warrant further consideration at which<br />
time the request will be sent to SAF/FMBM for approval consideration.<br />
7.10.2. The <strong>working</strong> <strong>capital</strong> <strong>fund</strong> manager must submit the free issue request to the approving authority.<br />
At <strong>Air</strong> <strong>Force</strong> bases using SBSS, the General Support Division <strong>working</strong> <strong>capital</strong> <strong>fund</strong> manager is<br />
responsible for monitoring and submitting MSD free issue requests. At the ALCs, the MSD <strong>working</strong><br />
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<strong>capital</strong> <strong>fund</strong> manager is responsible for monitoring and submitting MSD free issue requests. The<br />
request must provide the circumstance the customer feels warrants a free issue, the type and quantity<br />
of assets involved, the dollar amount of the request and the asset position from the most recent file<br />
maintenance cycle. Figure 7.4 below contains a screen shot of the free issue template that is located<br />
at AFMC/FREEISSUE@WPAFB.AF.MIL or on the web at https://www.afmc-mil.wpafb.af.mil/<br />
HQ-AFMC/LG/lgi-page/home/links/lgif_links.htm.<br />
Figure 7.4. Free Issue Template.<br />
7.10.3. The following circumstances are the only exceptions approved by USD(C) for free issue. For<br />
exceptions identified in paragraphs 7.10.3.1. 7.10.3.2. and 7.10.3.3., the SMAG must establish controls<br />
to ensure tracking of the asset issued and the accomplishment of the billing when appropriate.<br />
See also paragraph 7.12.4.2.1.3..<br />
7.10.3.1. If action is being taken to provide civil emergency relief assistance to control a civil disturbance,<br />
or when a certified military emergency exists. The SMAG will be reimbursed for any<br />
outstanding accounts receivable when <strong>fund</strong>ing is made available to cover the costs associated<br />
with the emergency situation.<br />
7.10.3.2. If there is a foreign disaster according to the Foreign Assistance Act of 1961.
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7.10.3.3. If the issue is to a North Atlantic Treaty Organization (NATO) country under a replacement<br />
in-kind arrangement. Such issues will be changed to a reimbursable issue if not replaced by<br />
the NATO country within twelve months.<br />
7.10.3.4. Items in excess to the needs of the ICP may be issued without reimbursement to a DOD<br />
<strong>fund</strong>ed customer to satisfy deficiencies in mobilization reserve requirements or when authorized<br />
by the comptroller of the <strong>Air</strong> <strong>Force</strong> (SAF/FM). Additionally, the transfer of an excess asset from<br />
one activity to another when directed and controlled by the wholesale item manager shall be made<br />
without reimbursement. Excess, in this context, applies to Potential Reutilization Stock. These are<br />
assets above all authorized retention levels but for which a final determination to dispose has not<br />
been made.<br />
7.10.3.5. Transfers to a Defense Reutilization and Marketing Office (DRMO) when authorized<br />
by the wholesale item manager. Likewise, any DOD <strong>fund</strong>ed activity may obtain an asset from a<br />
DRMO without reimbursing the SMAG.<br />
7.10.3.6. Assets that are totally excess to all United States military needs may be issued to allied<br />
nations without reimbursement under the Foreign Assistance Act of 1961. To be eligible for such<br />
a transfer, the asset position must be in excess of the Approved Acquisition Objective, Economic<br />
Retention, and Contingency Retention Stock. It must be retained for special consideration or<br />
potential use in specific contingencies. It must have been screened for utilization, and it must not<br />
adversely impact United States military readiness, if disposed.<br />
7.10.4. In order to avoid erroneous free issues on normal requisitions, please refer to the Military<br />
Standard Requisition and Issue Procedure (MILSTRIP) coding procedures for requisitioning in<br />
AFMAN 23-110, Volume 1, Part 1, Chapter 25. Specifically reference paragraph 25.17.2.10 to<br />
ensure input of the proper signal code (which indicates bill to) and paragraph 25.17.2.11 to ensure<br />
input of the proper FC.<br />
7.11. Inventory Valuation.<br />
7.11.1. Serviceable and unserviceable assets are valued at Moving Average Cost, which is included<br />
in the asset record in the retail and wholesale supply systems. Table 7.6. provides condition codes<br />
used to stratify the serviceable and unserviceable inventory.<br />
Table 7.6. Condition Codes Used for Inventory Valuation.<br />
SERVICEABLE UNSERVICEABLE<br />
E F G H<br />
A B C D J K L M<br />
P Q R S<br />
X (D035A ONLY)<br />
Refer to AFMAN 23-110, Volume 1, Part, 4 for an explanation of the codes.<br />
7.12. MSD and Depot Repair.<br />
7.12.1. Background.<br />
7.12.1.1. The AFMC depot maintenance function is financed under the Depot Maintenance<br />
Activity Group (DMAG) of the DWCF. DMAG finances depot and contract repair services for its<br />
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customers. DMAG is both a customer of and a supplier to the MSD. Specific guidance on depot<br />
maintenance supply management processes is found in AFMCI 21-130.<br />
7.12.2. DMAG as Customer.<br />
7.12.2.1. As an MSD customer, DMAG buys serviceable spares for the repair of higher assemblies.<br />
Organic depot maintenance normally requisitions MSD parts through depot supply using<br />
the DIFM process.<br />
7.12.2.1.1. DIFM Process. DMAG pays the Exchange Price for the issue of a serviceable<br />
asset contingent upon the turn in of an unserviceable/condemned asset. If after sixty days of<br />
receipt of a serviceable asset by depot maintenance, no unserviceable like asset has been<br />
turned in to depot supply, DMAG will be charged the MUP for the asset. This increases the<br />
cost to DMAG to the full Standard Price for the asset. This additional charge to DMAG will<br />
be returned if the unserviceable asset is subsequently turned in and matches the requisition.<br />
The cost of MSD material is the quantity times the Exchange Price (assuming an unserviceable<br />
will be turned in for each serviceable drawn out).<br />
7.12.2.1.2. Non-DIFM Process. If depot maintenance requisitions MSD material outside of<br />
regular DIFM procedure, DMAG will be charged the full Standard Price. Any turn-ins will be<br />
given credit according to the condition of the asset and the credit indicator code (see paragraph<br />
7.9.).<br />
7.12.2.2. For each I&S grouping; DMAG will be charged the Exchange Price of the master asset.<br />
If the master has a sub group master, the sub group master will have a separate price from the<br />
master asset. All assets grouped into the sub group master will be charged the Exchange Price of<br />
the sub group master asset. If the MUP is required due to the sixty-day rule, the additional charge<br />
will also be at either the master or sub group master level. In either situation of the master or sub<br />
group master grouping, this policy will apply regardless of the combination of asset(s) returned<br />
and asset(s) received from the I&S grouping.<br />
7.12.2.3. The cost to DMAG to buy MSD assets during repair is included in the material portion<br />
of DMAG EISPs.<br />
7.12.3. CDM.<br />
7.12.3.1. <strong>Air</strong> <strong>Force</strong> contract depot level repair is currently managed within DMAG. Effective 1<br />
Oct 04 the management of new contracts, under CDM will reside in SMAG (Reference AFMCI<br />
21-113). Specifically, contract repair means SMAG uses private industry to satisfy <strong>fund</strong>ed customer<br />
requirements. Contractual repair carries a LRC. Segments of the contract repair price are<br />
labor and material. All the costs projected to be incurred by SMAG in contract repair actions are<br />
passed on to the customer. CDM LRCs include the amount of MSD material consumed in any<br />
given workload.<br />
7.12.3.2. CDM contracts will be <strong>fund</strong>ed through MSD or O&M (Depot Procured Equipment<br />
Maintenance) <strong>fund</strong>s. When a decision is made to provide MSD assets on a DPEM-<strong>fund</strong>ed repair<br />
contract as government furnished material (GFM), the SMAG must be reimbursed at Exchange<br />
Price. MSD absorbs the cost of GFM when the contract is for MSD repair workload. This cost<br />
will be recovered at the time the asset is sold.<br />
7.12.3.2.1. The wholesale item manager must approve release of MSD asset for use as GFM.
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7.12.3.2.1.1. The wholesale item manager will first determine whether assets are in an<br />
excess position. Excess, in this context, applies to Potential Reutilization Stock. Potential<br />
Reutilization Stock is defined in paragraph 7.10.3.4..<br />
7.12.3.2.1.2. The wholesale item manager will not procure to fill a GFM requirement<br />
unless it is on an existing approved Appendix B GFM list.<br />
7.12.3.2.1.3. Any changes to the approved Appendix B GFM list must be provided to the<br />
wholesale item manager. If the change is for additional requirements, the additions must<br />
meet the requirements of paragraph 7.12.3.2.1..<br />
7.12.3.3. Besides the above, consideration must be given for two categories of returned GFM.<br />
7.12.3.3.1. Serviceable GFM Returns. These returns go through the normal issue and return<br />
process.<br />
7.12.3.3.2. Excess GFM or Asset Removals. Excess GFM or asset removals, as a result of<br />
100 percent replacement or modification, will be returned following the guidance of AFMCI<br />
21-113.<br />
7.12.4. Missing Assets.<br />
7.12.4.1. It is <strong>Air</strong> <strong>Force</strong> policy that <strong>Air</strong> <strong>Force</strong> activities will not return end items to the depot for<br />
repair with missing components or parts unless an exception has been negotiated with the AFMC<br />
end item manager before movement of the end item from the activity to the depot. It is the responsibility<br />
of the activity returning the end item to ensure that components or parts are not missing.<br />
Likewise, it is <strong>Air</strong> <strong>Force</strong> policy that the <strong>Air</strong> <strong>Force</strong> depot repair activities will not return end items<br />
with missing components or parts to operational <strong>Air</strong> <strong>Force</strong> activities unless an exception has been<br />
negotiated with the AFMC end item manager and the affected MAJCOM. It is the responsibility<br />
of the depot repair activities to ensure the components or parts are not missing.<br />
7.12.4.2. Depot repair is accomplished through the DWCF DMAG. DOD DWCF policy requires<br />
that the DMAG recover all costs associated with work performed including materiel expenses.<br />
While the DMAG repair prices contain normal materiel expenses to affect repair of the end items,<br />
they do not normally contain materiel costs for missing items since <strong>Air</strong> <strong>Force</strong> policy directs that<br />
all components and parts will be returned with the end item. As a consequence, replacement of<br />
missing parts is considered a change to the negotiated work requirements and the DMAG is<br />
authorized to negotiate a change to the stabilized end item sale price.<br />
7.12.4.2.1. If a SMAG MSD managed asset arrives at a depot repair activity (for MISTR<br />
repair) missing components or parts the following should occur:<br />
7.12.4.2.1.1. DMAG will process Standard Form 364, Shipment Discrepancy Report<br />
(SDR), through the end item manager to the shipping activity requesting either to be reimbursed<br />
for the missing asset or to obtain the missing components or parts, whichever is<br />
appropriate.<br />
7.12.4.2.1.2. SMAG end item manager will coordinate on the Standard Form 364 and be<br />
the focal point on the SDR.<br />
7.12.4.2.1.3. If the SMAG end item manager can-not reasonably determine the consignor<br />
of the asset or if it is missing parts because of supply <strong>support</strong> problems, the wholesale item<br />
manager will authorize DMAG to requisition a replacement for the missing item using<br />
cost code “M.” This will allow depot maintenance to order the missing component without<br />
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incurring a Standard Price charge. The Item Manager will then notify the MSD Stock<br />
Fund Manager that a cost code “M” free issue of the asset took place due to missing parts.<br />
The SMAG will absorb the cost during the year of execution as a loss. This loss will be<br />
reflected in subsequent year's prices to SMAG customers, through the SMAG surcharges.<br />
Reference AFMCI 21-130, Section 1H, 1.51.5.1.<br />
7.12.4.2.2. If a principal item (e.g., aircraft, engines, or missiles) arrives at a depot repair<br />
activity (for program depot maintenance (PDM)) missing MSD components or parts, the following<br />
should occur:<br />
7.12.4.2.2.1. DMAG will notify the AFMC SM of the principal item.<br />
7.12.4.2.2.2. The AFMC SM of the principal item will notify the owning MAJCOM that<br />
it is required to provide either (1) additional <strong>fund</strong>ing to pay for the added cost of the<br />
replacement materiel; or (2) a replacement part.<br />
7.12.4.2.2.3. The owning MAJCOM has sixty days from notification to exercise one of<br />
the above options. If the DMAG receives neither the <strong>fund</strong>ing nor the part within sixty<br />
days it will unilaterally bill the customer for the cost.<br />
7.12.4.2.3. If the principal item was sent to PDM with missing components or parts because<br />
of supply <strong>support</strong> problems, DMAG will negotiate with the MAJCOM on who should absorb<br />
the cost of the replacement. If DMAG is to absorb the cost, DMAG will absorb it during the<br />
year of execution as a loss. This loss will be reflected in subsequent years' prices to DMAG<br />
customers, through the DMAG PDM sales rates.<br />
7.12.4.3. These policies will be tailored to fit actual circumstances as required. For example, a<br />
component is missing, but it cannot be determined if the asset was missing before or after induction<br />
at the depot; then the DMAG, SMAG, and MAJCOM customer should negotiate a mutually<br />
acceptable settlement on a case-by-case basis. This should be consistent with the general principles<br />
outlined in this manual and the financial policies governing the operation of the appropriations<br />
involved and the DWCF.<br />
7.13. Stock Funding of Initial Spares.<br />
7.13.1. The stock <strong>fund</strong>ing of initial spares begins when the SM identifies the initial spares requirements<br />
in conjunction with developing the cost estimate for the program.<br />
7.13.1.1. The SM must identify the initial spares requirement along with the rest of the system<br />
acquisition <strong>fund</strong>ing requirements to the lead MAJCOM for the weapon system, modification, or<br />
equipment. This should be included in the program objective memorandum, budget estimate submission,<br />
presidential budget (PB) submission.<br />
7.13.1.2. If the MAJCOM is successful in obtaining <strong>fund</strong>ing for the weapon system, modification,<br />
or equipment, including the initial spares through the POM process, the SM must request <strong>Air</strong><br />
<strong>Force</strong> SMAG cost authority through AFMC to SAF/FMB and HQ USAF/ILG during the SMAG<br />
BES process.<br />
7.13.1.3. Cost authority is only included in the SMAG BES to the extent that the MAJCOM has<br />
identified appropriated <strong>fund</strong>ing in the POM/BES. The procurement budget authority (BA) programmed<br />
by the MAJCOMs is requested based on the anticipated outlay rate over five years.
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7.13.2. Formal submission of all initial spares requirements and appropriated budget justification<br />
documentation must be made to HQ AFMC/FMR, then to SAF/AQ (all requirements) and SAF/FMB<br />
(SMAG only).<br />
7.13.2.1. After the SMAG budget is approved, SAF/FMB issues a unit cost document to HQ<br />
AFMC/FMR. HQ USAF/ILPY/ILPR provides a CA sub-allocation breakout document to HQ<br />
AFMC/FMR matched to the available procurement <strong>fund</strong>s.<br />
7.13.2.2. SAF/AQ and SAF/FMB provide program authority/budget authority (PA/BA) to<br />
AFMC conveying the appropriated <strong>fund</strong>ing matched to the CA allocation based on the scheduled<br />
outlays.<br />
7.13.3. HQ AFMC/FMR issues the appropriate CA/BA to the ALC/FMs who in turn issue the appropriate<br />
CA to the single system manager (SSM). NOTE: that this deviates from the original plan due<br />
to data system limitations that preclude issuance of CA directly to SMs not located on an ALC. The<br />
BA is held by the ALC/FM to reimburse SMAG as deliveries occur.<br />
7.13.3.1. SMs have the final decision making authority on where and how the CA for their programs<br />
will be executed. The SM/SSM obligates the CA on a provisioning order.<br />
7.13.3.2. When the materiel is received, the SMAG pays the contractor bill and generates a bill to<br />
the appropriated account to cover the SMAG's cash disbursement. The appropriated account reimburses<br />
the SMAG.<br />
7.14. Other Policies.<br />
7.14.1. MAJCOM Centralized Intermediate Level Maintenance.<br />
7.14.1.1. Bases without Intermediate Level Maintenance (1LM) capability operate under the normal<br />
sale guidelines. Issue of the serviceable asset from supply to maintenance results in a sale at<br />
Exchange Price. Since there is no 1LM capability, the reparable asset is turned in to supply and no<br />
credit occurs. The turned-in unserviceable asset is shipped to either a depot under two-level maintenance<br />
(2LM) or another base with a MAJCOM controlled Consolidated Repair Facility (CRF)<br />
capability.<br />
7.14.1.2. 2LM assets are ordered at depot level as any other depot repaired MSD asset.<br />
7.14.1.3. At a MAJCOM consolidated intermediate level site, issue of the unserviceable asset<br />
from the CRF base supply to the CRF maintenance shop results in no sale with a DIFM attached.<br />
The unserviceable asset is issued using activity code “C” to establish DIFM control of the asset.<br />
Initially, the CRF repair activity will not be charged for the issue of the unserviceable asset. However,<br />
after sixty days the repair activity will be charged the MUP. The CRF repair activity has two<br />
options for processing unserviceable assets. One option is the CRF can repair the asset and turn<br />
the serviceable asset into supply for credit at Exchange Price. The other option is not to accomplish<br />
repair on the asset (NRTS). The asset would then be sent to the depot for repair. Under the<br />
second option the CRF would receive no credit for the turn-in. If the first option is elected, it is up<br />
to MAJCOM discretion to decide how to distribute the excess O&M <strong>fund</strong>s gained by the CRF.<br />
7.14.2. Aerospace Maintenance and Regeneration Center (AMARC) Assets.<br />
7.14.2.1. The removal or reclamation of reparable assets from AMARC to satisfy valid requirements<br />
is accomplished only through the wholesale item manager in conjunction with the Single<br />
Manager (SM).<br />
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7.14.2.2. Once a reparable asset has been identified at AMARC as a possible candidate, a condition<br />
determination is made by the maintenance activity at AMARC. After the AMARC maintenance<br />
activity turns in the asset, the reparable asset is shipped to the base as directed by the<br />
wholesale item manager. The indicative data of that particular stock number is applied to the<br />
turned-in asset. The reparable asset shipped will only match the condition requested by the wholesale<br />
item manager. It is important to understand that AMARC reparable assets are not free issue.<br />
7.14.2.3. If the AMARC provided asset is an “A” condition asset, then the receiving base treats it<br />
as a normal reparable asset and issues the asset to the customer under DIFM processing. If the<br />
asset is “R” condition, the asset must be checked and tested before use by the customer.<br />
7.14.2.3.1. The asset is issued to the base level repair activity using activity code “C” so that<br />
they will check and test the asset before installation. Initially, the base-level repair activity<br />
will not be charged for the issue of the asset. However, if either a serviceable or unserviceable<br />
asset is not returned to base supply within sixty days, the repair activity will be charged the<br />
MUP.<br />
7.14.2.3.2. If the check and test asset is found to be serviceable, the repair activity turns in the<br />
asset to base supply. The asset is then issued to the organization with the backorder. The<br />
receiving organization pays the Exchange Price.<br />
7.14.2.3.3. If the check and test asset is found unserviceable, the repair activity returns the<br />
asset to base supply and owes nothing. If it is returned after sixty days, the repair activity will<br />
have their MUP returned.<br />
7.14.3. Contractor Logistics Support (CLS).<br />
7.14.3.1. CLS systems are characterized by low density, nonstocklisted, contractor maintained<br />
parts. CLS spare parts are budgeted and <strong>fund</strong>ed within the central procurement accounts, or as an<br />
alternative, can be replenished from Fund 3400, EEIC 578. The AFMC CLS Manager and SM<br />
need to advise MAJCOMs of increased costs needed to cover those DLRs currently being issued<br />
under CLS.<br />
7.14.3.2. There are two types of CLS requirements:<br />
7.14.3.2.1. Stocklisted assets managed by AFMC that are used on CLS systems. Generally,<br />
this would be an asset common to both a CLS and non-CLS weapon system. The contractor<br />
uses customer <strong>fund</strong>s to buy these CLS assets from the SMAG.<br />
7.14.3.2.2. Nonstocklisted assets bought as spares packages that are government owned<br />
materiel used by contractors in performance of CLS contracts. These requirements are <strong>fund</strong>ed<br />
with central procurement <strong>fund</strong>s.<br />
7.14.4. Foreign Military Sales (FMS).<br />
7.14.4.1. FMS customers can participate in the <strong>Air</strong> <strong>Force</strong> logistics system through the Cooperative<br />
Logistics Supply Support Agreement (CLSSA). The <strong>Air</strong> <strong>Force</strong> also provides <strong>support</strong> for<br />
requirements that are not part of a CLSSA. The <strong>Air</strong> <strong>Force</strong> primarily uses a Repair and Replace<br />
concept where the country returns a reparable carcass and is issued a serviceable asset from the<br />
normal supply system.<br />
7.14.4.2. For CLSSA cases, the country/<strong>Air</strong> <strong>Force</strong> approved stock levels are input to the requirements<br />
data system by the Security Assistance Management Information System (SAMIS)<br />
(W001). These levels are included in the asset computation process as an additive. The country
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pays 5/17th of the LAC value of this stock level as an up-front investment to cover the cost of<br />
acquiring assets in <strong>support</strong> of these levels.<br />
7.14.4.3. Nonprogrammed requisitions are satisfied from <strong>Air</strong> <strong>Force</strong> stock if the assets are not<br />
required for an <strong>Air</strong> <strong>Force</strong> requirement. When assets are not available, the wholesale item manager<br />
procures assets to fill these FMS requirements. In this case, the entire process is worked outside<br />
the MSD and the costs are directly billed (direct cite) to the customer. In this case, the SMAG has<br />
no involvement.<br />
7.14.4.4. Repair and Replace requirements are worked through the MSD. SAMIS maintains the<br />
financial records of all FMS sales. The FMS customers are charged the SAMIS repair price/<br />
Exchange Price for a serviceable asset. If there is not an Exchange Price in D043, SAMIS then<br />
goes through three calculations, in order, based on the available information, to determine a repair<br />
price.<br />
7.14.4.4.1. First, if the item is USAF managed, is a reparable (C/T ERRC Code), has a budget<br />
code of 8, has a Standard Price greater than zero, and has a MUP greater than zero: the<br />
SAMIS repair price is computed to be the Standard Price minus the MUP.<br />
7.14.4.4.2. Second, if the item is USAF managed, is a reparable, has a budget code of 8, the<br />
Standard Price is greater than zero, the MUP is equal to zero, and the Fleet Materiel Support<br />
Office (FMSO)-I Price is greater than zero: the SAMIS repair price is computed to be the<br />
Standard Price minus a Pseudo-MUP where the Pseudo-MUP is computed as the FMSO-I-<br />
Price times (1 minus the Table-Repair-Cost-Factor).<br />
7.14.4.4.3. Third, if no other computations can be made, a Base-Repair-Cost is computed by<br />
multiplying the Standard Price by the Table-Repair-Cost-Factor.<br />
7.14.4.5. FMS Excess Materiel Returns program, customers may identify FMS purchased articles<br />
as excess to their requirements and offer them to the United States <strong>Air</strong> <strong>Force</strong> for return with<br />
credit. Returns without payment are not authorized; therefore, the wholesale item manager<br />
directs return of the assets only if the credit indicator is “A”. MSD <strong>fund</strong>s are used for the credit. A<br />
serviceable AFMC managed consumable (ERRC N/P) or reparable (ERRC C/T) asset is credited<br />
at LAC; an unserviceable asset is credited at UAP. See volume 9, chapter 14, section 14B for<br />
more detailed information.<br />
7.14.4.6. For FMS shipments supplied from MSD <strong>fund</strong>s, the DWCF pays transportation costs of<br />
material to a CONUS location, normally the country's freight forwarder or other CONUS port of<br />
embarkation. DWCF is reimbursed through the BOCR.<br />
7.14.5. Host-Tenant Support. Base supply and maintenance organizations operated by the host base<br />
provide <strong>support</strong> to tenant organizations. All Host-Tenant Support Agreements (HTSA) must include<br />
associated reparable asset costs and address control and <strong>fund</strong>ing of reparable assets in shared use<br />
maintenance facilities.<br />
7.14.5.1. Overall, the tenant is charged the Exchange Price and a DIFM is created for the serviceable<br />
asset issued from base supply. The tenant receives no credit for the unserviceable asset turned<br />
in to the host base supply, but the DIFM is cleared. The host base maintenance will not be charged<br />
for the unserviceable asset when issued, but a DIFM is created by the host base supply. The asset<br />
will be issued to Host Base Maintenance using Activity Code “C” (Contract Maintenance/In-<br />
House Repair/Unsatisfactory Report Exhibits). If the asset is turned-in as serviceable, the Host<br />
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Base Maintenance will receive Exchange Price. If it is not repaired, the Host Base Maintenance<br />
will not receive exchange or MUP.<br />
7.14.5.2. There are two options for incorporating MSD issues into HTSAs:<br />
7.14.5.2.1. Option One. Tenant units <strong>support</strong>ed by host base repair shops turn in all MSD<br />
assets unserviceable and receive no credit. If the host base maintenance function has the capability<br />
to repair the asset, it obtains the asset for repair at no cost using either activity code C<br />
(Contract Maintenance/In-House Repair/Unsatisfactory Report Exhibits) or R (routine maintenance)<br />
procedures found in volume 2, part 2. After completing the repair, the repair facility<br />
turns in the serviceable asset and receives Exchange Price.<br />
7.14.5.2.2. Option Two. The tenant unit establishes accounts that the host repair shops could<br />
charge repair costs against. The tenant routes all MSD assets through the host base repair<br />
shops with all repair costs billed to the tenant's account. When the asset is turned in against the<br />
original document number, the tenant is credited based on the asset's condition.<br />
7.14.5.3. HTSAs must indicate the <strong>fund</strong>ing appropriation for MSD issues. Host and tenant<br />
project <strong>fund</strong> management record and organization cost center records are set up accordingly.<br />
7.14.6. Interim Contractor Support (ICS).<br />
7.14.6.1. The MSD does not pay for the cost of depot repair of assets under ICS, nor does the<br />
MSD collect repair cost from the customer for assets under ICS. The MSD does not need to earn<br />
cash to pay for depot repair of these assets since there are no associated organic depot repair costs.<br />
Until the assets transition to organic depot repair, the Carcass Cost for these assets is computed<br />
assuming a depot repair cost of zero. This prevents MSD from collecting repair <strong>fund</strong>s that are not<br />
required. Therefore, only the operational costs are recovered by MSD. Given this, D043 shows<br />
the LAC and Carcass Cost as equal until the asset transitions to organic depot repair. If any portion<br />
of an asset's repair is <strong>fund</strong>ed by ICS, the asset is treated as 100 percent ICS. If an ICS item is<br />
scheduled to transition to organic repair during a given fiscal year the LRC is established as a percentage<br />
of the contractor’s repair cost (dependent on when the item transitions).<br />
7.14.6.2. ICS assets should eventually transition to depot repair. The assets will transition from<br />
ICS to depot organic repair only when it is organically <strong>support</strong>able (with technical orders, <strong>support</strong><br />
equipment, etc.). The requirements data system has visibility of the date this transition is to occur<br />
on an asset-by-asset basis.<br />
7.14.6.3. When the asset transitions to organic depot repair, the Carcass Cost is computed using<br />
LAC minus the LRC. To equitably distribute a repair cost during transition, a time-phased depot<br />
repair cycle is used to determine how much of the repair is considered depot and how much is<br />
considered ICS. This leads to a partial depot repair cost as the asset transitions. The Carcass Cost<br />
for the fiscal year after ICS assets transition reverts to the organic depot repair cost instead of<br />
zero.<br />
7.14.7. Loans.<br />
7.14.7.1. An MSD asset may only be loaned to activities for the purposes specified in DOD<br />
7000.14R, Volume 2B, Chapter 55, and volume 1, part, 1, chapter 10 (Soon to be Volume 3,<br />
Part 1, chapter 9, Section 9G). Loans must be for reverse engineering, sample parts, and/or if in<br />
the best interest of the SMAG. Each loan shall be approved by the accountable officer, wholesale<br />
item manager, and the Source of Supply Loan Control Office and forwarded to HQ AFMC/LGI<br />
for final approval consideration. A loan shall not exceed one year from date of approval. At the
AFMAN 23-110 Volume 1<br />
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end of a year, if the loaned asset is needed for longer, another waiver request must be sent to HQ<br />
AFMC/LGI for approval.<br />
7.14.7.1.1. Each request shall include a description of the asset, asset position on the latest<br />
computation cycle, intended purpose of the loan, price, condition, and anticipated return date.<br />
Also, a certification must be included with the request that declares the loan of the asset will<br />
not jeopardize the capability of MSD to fully <strong>support</strong> national defense requirements. This certification<br />
should be obtained from the wholesale item manager of the asset.<br />
7.14.7.1.2. At the time of the return of the asset, the recipient shall be required to pay any<br />
transportation, packing, crating, and handling costs associated with the return of the loaned<br />
asset to government custody as well as any costs necessary to restore the asset to its original<br />
condition or to pay for any asset the recipient does not return within the approved period of<br />
the loan.<br />
7.14.7.2. Any contract or loan agreement providing for loan of AFMC-managed, stocklisted,<br />
nonexcess property must contain a provision for the delivery and return of the asset. The asset<br />
due-in should be detailed in the J041 system and also shown on the asset computation as a due-in.<br />
It also should appear as an on-loan quantity in the Item Manager Wholesale Requisition Processing<br />
(IMWRP) D035A system.<br />
7.14.7.3. MSD will not buy any assets specifically for the purpose of lending to a contractor or<br />
DOD <strong>fund</strong>ed activity. The rationale for this is that a sale will not take place at any time, and<br />
DWCF cash is depleted. Only those assets already available in supply may be loaned to a contractor<br />
or DOD <strong>fund</strong>ed activity.<br />
7.14.7.4. Affected wholesale item managers must consider the impact of loaning an asset versus<br />
having one available to sell. While on loan the asset shall be counted as an MSD inventory asset<br />
on loan to others.<br />
7.14.7.5. When it is determined that an asset already on loan is needed for an additional period or<br />
for use on another contract, the originator of the initial loan must resubmit a new loan package.<br />
There will be no cross-loaning between contracts without prior approval from HQ AFMC/LGI.<br />
7.14.8. Local Purchase/Local Repair.<br />
7.14.8.1. These options are not considered standard business practices within the SMAG. If these<br />
options are elected, they must follow the guidance of volume 1, part 1, chapter 8, section 8A.<br />
The wholesale item manager must provide an MSD <strong>fund</strong>s cite. There will be no circumstances<br />
where customer <strong>fund</strong>s will be used for these actions.<br />
7.14.9. Product Improvement.<br />
7.14.9.1. The Improved Item Replacement Program (IIRP) combines the preferred spares and<br />
100 percent replacement program into one integrated effort. IIRP offers the <strong>Air</strong> <strong>Force</strong> a way to<br />
correct deficiencies, replace obsolete assets, and/or introduce, through technology insertion, stateof-the-art<br />
components such as LRUs and SRUs that are stocked, stored, and issued as assets of<br />
supply. The IIRP covers both installs and spares in <strong>support</strong> of the installed assets. IIRP assets<br />
must be a form, fit, and function replacement for the old asset.<br />
7.14.9.2. Replacement of assets under an IIRP effort is done on an attrition basis either at the base<br />
or during depot maintenance. Capability upgrades or improvements that require structural (Group<br />
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A) changes to weapon systems are not candidates for IIRP programs. This type of requirement is<br />
<strong>fund</strong>ed through the <strong>Air</strong> <strong>Force</strong> modification program. The SMAG finances only IIRPs.<br />
7.14.9.3. The IIRP documentation must show ultimate benefit in some form of payback, such as<br />
an overall decrease in demands, reduction to mission capable (MICAP)/RSP problems, or lower<br />
overall cost to the <strong>Air</strong> <strong>Force</strong>. IIRP programs should result in a positive financial benefit; however,<br />
the IIRP program may also be used to replace obsolete or unreliable assets that are causing<br />
MICAP or Weapon System Management Information System limitations at unit level without<br />
regard to financial payback.<br />
7.14.9.4. The following actions are required of all organizations involved in the IIRP process.<br />
7.14.9.4.1. HQ AFMC, ALC and MAJCOM agree on the requirement. ALC will work with<br />
MAJCOM to develop IIRP package including cost analysis.<br />
7.14.9.4.2. The MAJCOM requesting an IIRP must request <strong>fund</strong>ing through the SRRB process<br />
to ensure <strong>fund</strong>ing is included in their baseline.<br />
7.14.9.4.3. HQ AFMC/FMR/LGI requests SMAG cost authority in the budget estimate submission<br />
(BES) to match the MAJCOM O&M submitted in SRRB.<br />
7.14.9.4.4. HQ AFMC identifies cost authority to the ALCs to <strong>fund</strong> approved IIRPs. This<br />
<strong>fund</strong>ing is part of the requirements validation by HQ AFMC/LGIF during the MSD budget<br />
review. IIRP <strong>fund</strong>ing is a subset of the overall <strong>fund</strong>ing requirement for spares in any given<br />
fiscal year. IIRP <strong>fund</strong>s are fenced and must be executed in <strong>support</strong> of the approved IIRP.<br />
7.14.9.5. The customer will pay for the cost of the product improvement asset in one of three<br />
ways:<br />
7.14.9.5.1. If the replaced asset has a potential for reuse and the product improvement asset is<br />
installed at the base level repair facility, the wholesale item manager will establish an I&S<br />
group relationship between the replaced asset and the product improvement asset. This will<br />
allow the customer to buy the product improvement asset at the Exchange Price and be credited<br />
with the Exchange Price when they turn in the replaced serviceable asset. If the replaced<br />
asset is unserviceable, the customer receives zero credit for the turn-in.<br />
7.14.9.5.2. If the replaced asset has no potential for reuse and the product improvement asset<br />
is installed at the base level repair facility, the customer will buy the asset at Standard Price<br />
from base supply. In turn, credit for the replaced asset will follow non-DIFM guidelines with<br />
the credit based on the condition and credit indicator of the replaced asset.<br />
7.14.9.5.3. Via indirect costs through the repair of a weapon system or major end item that<br />
occurs when the product improvement asset is installed at the depot, as part of the normal<br />
depot repair process of the weapon system or major end item.<br />
7.14.10. RSP. The following procedures apply to deployed weapon/ operating systems and their<br />
associated RSP assets.<br />
7.14.10.1. RSP Requirement and Funding Policy.<br />
7.14.10.1.1. The RSP requirement is divided into two segments: 1) initial requirements tied to<br />
new acquisition (e.g., new systems, modifications, <strong>support</strong> equipment, and other production)<br />
or mission changes; and, (2) replenishment requirements tied to changes to the readiness level<br />
due to changes in usage factors or reliability rates.
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7.14.10.1.2. The portion of the readiness requirement tied to new acquisition or new mission<br />
is <strong>fund</strong>ed in the initial spares appropriations, (i.e., 3010-BP 16 and 3080, BP 82, 83, and 84).<br />
The MAJCOM(s) affected by the new system or mission RSP requirement must request <strong>fund</strong>ing<br />
through the MAJCOM Planning, Programming and Budgeting System process.<br />
7.14.10.1.3. Changes in the RSP requirement for existing system (replenishment) due to RSP<br />
factor changes will be justified, approved, and file maintained into D087 for processing in the<br />
D200A system. RSP requirements are purchased through the SMAG operating program as an<br />
MSD buy.<br />
7.14.11. Sixty Day Rule.<br />
7.14.11.1. Exchange customers are charged the Exchange Price in anticipation that the customer<br />
will return an unserviceable asset for repair within sixty days. After sixty days the customer is<br />
charged an additional amount, the MUP, if either a serviceable or unserviceable asset is not turned<br />
in. The MUP represents the difference between the Standard Price and the Exchange Price. The<br />
MUP will be reimbursed to the customer upon receipt of a reparable asset after sixty days to clear<br />
the DIFM detail. A delay in the sixty-day clock occurs for Awaiting Parts when the asset status<br />
changes from “in work” to “awaiting parts”. This capability is programmed into the supply system<br />
to operate in an automatic mode. When the item status changes back to “in work”, the sixtyday<br />
clock resumes. The intent of this policy is to allow the customer time, based on the status of<br />
the item, before the full price of the item is charged. Other DIFMs status codes are exempt from<br />
the sixty-day rule. For a list of these codes refer to the volume. 2, part 2, chapter 24.<br />
7.14.11.2. Exemptions for the sixty-day rule found in SBSS (retail level) do not apply to depot<br />
maintenance.<br />
7.14.12. Special Cases - Repair.<br />
7.14.12.1. Services in <strong>support</strong> of MSD assets are <strong>fund</strong>ed by MSD. These services include: first<br />
article testing, condition checks, technical order verification and validation, reclamation, on-site<br />
test station refurbishment, and other services as approved on a case-by-case basis.<br />
7.14.13. Special Purpose Recoverables Authorized Maintenance (SPRAM).<br />
7.14.13.1. Initial/Increased SPRAM Requirement.<br />
7.14.13.1.1. The initial issue of SPRAM will be provided free of charge by the SM. For the<br />
purposes of this manual, initial issue of SPRAM is defined using the concept of new <strong>support</strong>.<br />
The following provide examples of the concept of new <strong>support</strong>.<br />
7.14.13.1.1.1. The requirement is <strong>support</strong>ing a new aircraft.<br />
7.14.13.1.1.2. New mission. The using organization is converting from one weapon system<br />
to another, or the unit’s mission changes, requiring a change in the SPRAM mix.<br />
7.14.13.1.1.3. New requirement. The technical order has changed requiring a change in<br />
the mix.<br />
7.14.13.1.2. The SM will <strong>fund</strong> the SPRAM buy requirement using initial MSD cost authority<br />
based on the end item (e.g., aircraft <strong>support</strong> or electronics and telecommunications) that the<br />
SPRAM is <strong>support</strong>ing. To accomplish the free-of-charge issue, the SM will work with the<br />
wholesale item manager to acquire the necessary SPRAM assets and have them direct delivered<br />
to the using base. Once the assets are received at the using base, the base supply receiv-<br />
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ing function will not process a receipt for the asset, but will place the asset directly on the<br />
customer's SPRAM detail (K detail).<br />
7.14.13.1.3. Required initial SPRAM could be satisfied through on-hand supply balances, if<br />
the asset is in an excess position.<br />
7.14.13.1.3.1. If the assets are at bases other than the requesting base, the SM, <strong>working</strong><br />
with the wholesale item manager, will process redistribution orders (RDO) for those<br />
assets. The receiving base supply will take the necessary action to place the asset on the<br />
customer's SPRAM detail. The SM will use O&M <strong>fund</strong>s to <strong>support</strong> all RDO actions.<br />
7.14.13.1.3.2. If the assets are at the base requesting the SPRAM, the requesting base supply<br />
will issue the asset to the requesting activity, which will pay Standard Price for the<br />
transaction. In turn, the SM will work with their FM offices to reimburse the base requesting<br />
the SPRAM using O&M <strong>fund</strong>s.<br />
7.14.13.2. Replacement/Replinishment SPRAM Requriements. For aircraft maintenance/Cost<br />
per Flying Hour (CPFH) programs, replacement, replinishment SPRAM requirements will be<br />
<strong>fund</strong>ed by the appropriate Funds Holder. The Centralized Asset Management (CAM) office is the<br />
Funds Holder for most active duty CPFH programs (excludes <strong>Air</strong> Mobility Command (AMC)<br />
strategic airlift and <strong>Air</strong> <strong>Force</strong> Special Operations Command (AFSOC). The <strong>Air</strong> National Guard,<br />
<strong>Air</strong> <strong>Force</strong> Reserve Command, AFSOC and AMC (C-5 and C-17) are responsible for their individual<br />
SPRAM/Flying Programs. All other (i.e., non-flying hour) replacement/replinishment<br />
SPRAM requirements will be paid for by the owning MAJCOM or using organization. Replinishment<br />
is defined as any asset that does not meet the criteria in paragraph 7.12.13.1.1. MSD<br />
charges Exchange Price if a carcass is returned, otherwise the Standard Price will be charged.<br />
7.14.13.3. Reference volume 1, part 1, chapter 11, section 11AG and volume 2, part 2, chapter<br />
22, section L for additional guidance on SPRAM.<br />
7.14.14. Time Compliance Technical Orders (TCTOs).<br />
7.14.14.1. When in-stock MSD assets (e.g., Peacetime Operating Stock, RSP, and Supply Points)<br />
require modification, the asset is issued using activity code C to the repair shop and the accompanying<br />
TCTO kit is free issued, one TCTO kit for each installed MSD asset requiring modification.<br />
7.14.14.2. MSD is not responsible for <strong>fund</strong>ing the installation of modification kits when completed<br />
as a separate maintenance action. The exception to this is when a modification kit is being<br />
installed during depot overhaul of a Management of Items Subject to Repair (MISTR) exchangeable<br />
asset. The reason for this exception is that the cost of installation cannot be separated from<br />
the cost of the MISTR overhaul.<br />
7.14.14.3. The MSD will not finance the replacement of modification kit components, which are<br />
MSD items that are lost or used for other purposes by a using organization. Replacement kits are<br />
financed by the modification account that originally procured the kit.<br />
7.14.14.4. For kits that are cannibalized, the activity responsible for cannibalization is responsible<br />
for replacing the assets in the kit. As an example, if the base has a kit and needs to withdraw<br />
an asset to <strong>support</strong> a MICAP requisition, that base must order the asset at its expense to satisfy the<br />
kit shortage. If a wholesale item manager directs the shipment of a kit asset to <strong>support</strong> a MICAP,<br />
then the wholesale item manager must replace the asset in the kit.<br />
7.14.15. Transient <strong>Air</strong>craft Support.
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7.14.15.1. Transient <strong>Air</strong>craft Support for USAF aircraft (to include <strong>Air</strong> National Guard and <strong>Air</strong><br />
<strong>Force</strong> Reserve Command). Transient <strong>support</strong> from the CSAG Supply for DLRs and SMAG Supply<br />
Retail GSD is managed by the transient base. Parts will be backordered or issued from base<br />
supply at the transient base, regardless of cost and source of supply, and normal sales and credit<br />
policies apply. The exception to this procedure is en route maintenance units that are <strong>fund</strong>ed and<br />
operated by <strong>Air</strong> Mobility Command for strategic airlift aircraft.<br />
7.14.15.1.1. Issuance and billings of reparable assets are managed the same as assigned aircraft<br />
maintenance. The transient base will <strong>support</strong> all transient aircraft using a Type Organization<br />
Code 3 organization cost center record (OCCR), preferably via a dedicated transient<br />
alert or “TA” OCCR. Naturally, the transient base has an opportunity to repair the asset if a<br />
repair shop is loaded on the repair cycle record. The repair shop turns in serviceable assets at<br />
Exchange Price and unserviceable assets receive no credit.<br />
7.14.15.1.1.1. If there is no repair shop loaded on the repair cycle record for that reparable<br />
asset at the transient base, the asset is tagged NRTS by maintenance. It is then shipped by<br />
supply directly to the depot maintenance facility for repair, or the CRF for those units<br />
under the alternate maintenance concept.<br />
7.14.15.1.1.2. If the transient base has a repair shop, the unserviceable asset is transferred<br />
to that shop using the original document number of the asset that was issued. The original<br />
issue document number should be used through the entire repair cycle until turned in. The<br />
repair shop has the option to either NRTS the asset and receive no credit or it can repair<br />
the item and turn the serviceable asset into supply for credit at Exchange Price. The transient<br />
base repair activity pays for the cost of SRU/bits and pieces used from its organizational<br />
<strong>fund</strong>s.<br />
7.14.15.1.2. If the transient base has a repair shop, the unserviceable asset is transferred to<br />
that shop using the original document number of the asset that was issued. The original issue<br />
document number should be used through the entire repair cycle until turned in. The repair<br />
shop has the option to either NRTS the asset and receive no credit or it can repair the item and<br />
turn the serviceable asset into supply for credit at Exchange Price. The transient base repair<br />
activity pays for the cost of SRU/bits and pieces used from its organizational <strong>fund</strong>s.<br />
7.14.15.2. Transient <strong>Air</strong>craft Support for other Services (US Navy, Army, etc.) and Agencies<br />
(NASA, Department of Homeland Security, etc.).<br />
7.14.15.2.1. Transient aircraft <strong>support</strong> from the CSAG is managed by the transient base. If<br />
parts are issued from base supply at the transient base, normal sales and credit policies apply,<br />
except other services or agencies will always pay Standard Price for assets issued.<br />
7.14.15.2.2. The home base is responsible for reparable <strong>support</strong> for its aircraft, which require<br />
repair at a transient location when EITHER of the following conditions occur: (1) the spare<br />
part is not available at the transient location OR (2) the Exchange Price for the reparable is<br />
greater than $20,000.<br />
7.14.15.2.3. The two options available to home bases are:<br />
7.14.15.2.3.1. Lateral <strong>support</strong> from the nearest location, enabled by the home base providing<br />
a <strong>fund</strong>ing document to the <strong>support</strong> location. This allows standard MICAP procedures<br />
to occur, or maintenance-to-maintenance channels.<br />
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7.14.15.2.3.2. Using maintenance-to-maintenance procedures, the serviceable and reparable<br />
part originates and returns to the home base. This allows for DIFM control and associated<br />
financial transactions to be processed at the home base.<br />
7.14.16. Initial Issue of Depot Level Reparables (DLR) in Support of the Flying Hour Program.<br />
7.14.16.1. Justification letters for the initial issue of DLRs are required to validate the requirement<br />
and ensure <strong>fund</strong>ing is available to cover the requirement.<br />
7.14.16.2. Requesting organizations will coordinate Justification Letters through the organization's<br />
commander, then route them to their MAJCOM’s Cost Per Flying Hour (CPFH) office.<br />
7.14.16.2.1. For organizations whose CPFH <strong>fund</strong>ing is centrally managed under Centralized<br />
Asset Management (CAM), the MAJCOM CPFH office will forward the justification letters<br />
to the CAM office at WPAFB for approval/disapproval.<br />
7.14.16.2.2. As Funds Holders, <strong>Air</strong> Mobility Command (Transportation Working Capital<br />
Fund), <strong>Air</strong> National Guard, <strong>Air</strong> <strong>Force</strong> Reserve Command, and <strong>Air</strong> <strong>Force</strong> Special Operations<br />
Command will approve/disapprove initial issue requests.<br />
7.14.16.3. The Fund Holders will notify the <strong>support</strong>ed Command and/or base organization of<br />
approval/disapproval within 5 business days of receipt.
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ATTACHMENT 7A-1<br />
GLOSSARY OF REFERENCES AND SUPPORTING INFORMATION<br />
7A1.1. Acronyms<br />
AFIAA—<strong>Air</strong> <strong>Force</strong> Intelligence Analysis Agency<br />
AFMC—<strong>Air</strong> <strong>Force</strong> Materiel Command<br />
AFRAMS—<strong>Air</strong> <strong>Force</strong> Recoverable Assembly Management System<br />
AGM—<strong>Air</strong>-To-Ground Missile<br />
AGMC—Aerospace Guidance and Metrology Center<br />
AIM—<strong>Air</strong> Interceptor Missile<br />
ALC—<strong>Air</strong> Logistics Center<br />
AMARC—Aerospace Maintenance and Regeneration Center<br />
AOR—Accumulated Operating Result<br />
BA—Budget Authority<br />
BC—Budget Code<br />
BES—Budget Estimate Submission<br />
BOCR—Business Overhead Cost Recovery<br />
BP—Budget Program<br />
CA—Cost Authority (AKA Obligation Authority)<br />
CDM—Contract Depot Maintenance<br />
CLS—Contractor Logistics Support<br />
CLSSA—Cooperative Logistics Supply Support Agreement<br />
CRF—Consolidated Repair Facility<br />
DFAS—Defense Finance and Accounting Center<br />
DIFM—Due In From Maintenance<br />
DISA—Defense Information Systems Agency<br />
DLA—Defense Logistics Agency<br />
DLR—Depot Level Reparable<br />
DLSC—Defense Logistics Service Center<br />
DMAG—Depot Maintenance Activity Group<br />
DOTM—Due Out To Maintenance<br />
DPEM—Depot Procured Equipment Maintenance<br />
DRMO—Defense Reutilization and Marketing Office<br />
DRMS—Defense Reutilization and Marketing Service<br />
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DWCF—Defense Working Capital Fund<br />
EISP—End Item Sales Price<br />
ERRC—Expendability, Recoverability, Reparability Category<br />
FC—Fund Code<br />
FMS—Foreign Military Sales<br />
FMSO—Fleet Materiel Support Office<br />
FUP—Forecast Unit Price<br />
GFM—Government Furnished <strong>Material</strong><br />
HTSA—Host-Tenant Support Agreement<br />
ICP—Inventory Control Point<br />
ICS—Interim Contractor Support<br />
IIRP—Improved Item Replacement Program<br />
ILM—Intermediate Level Maintenance<br />
IPS—Item Pricing System<br />
I&S—Interchangeability and Substitutability<br />
LAC—Latest Acquisition Cost<br />
LRC—Latest Repair Cost<br />
LRU—Line Replaceable Unit<br />
MAJCOM—Major Command<br />
MCR—<strong>Material</strong> Cost Recovery<br />
MICAP—Mission Capable<br />
MISTR—Management of Items Subject to Repair<br />
MMAC—<strong>Material</strong> Management Aggregation Code<br />
MUP—Mark-Up Price<br />
MSD—Materiel Support Division<br />
MSL—Mater Stock Number List<br />
NASA—National Aeronautics and Space Administration<br />
NATO—North Atlantic Treaty Organization<br />
NIMSC—Nonconsumable Item Materiel Support Code<br />
NRTS—Not Reparable This Station<br />
NSN—National Stock Number<br />
PA—Program Authority<br />
PB—President’s Budget<br />
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PDM—Program Depot Maintenance<br />
PICA—Primary Inventory Control Activity<br />
POM—Program Objective Memorandum<br />
RDB—Requirements Data Bank<br />
RDO—Redistribution Order<br />
RSP—Readiness Spares Package<br />
SAMIS—Security Assistance Management Information System<br />
SBSS—Standard Base Supply System<br />
SCARS—Serialized Control and Reporting System<br />
SCR—Software Change Request<br />
SDR—Shipment Discrepancy Report<br />
SGM—Subgroup Master<br />
SICA—Secondary Item Control Activity<br />
SM—Single Manager<br />
SMAG—Supply Management Activity Group<br />
SNUD—Stock Number User’s Directory<br />
SOS—Source of Supply<br />
SPRAM—Special Purpose Recoverables Authorized Maintenance<br />
SRRB—Spares Requirement Review Board<br />
SRU—Shop Replaceable Unit<br />
SSM—Single System Manager<br />
TCTO—Time Compliance Technical Order<br />
UAP—Unserviceable Asset Price<br />
WSMIS—Weapon System Management Information System<br />
1LM—Intermediate Level Maintenance<br />
2LM—Two-Level Maintenance<br />
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7A1.2. Terms<br />
Business Overhead Cost Recovery (BOCR)—BOCR@LAC/LRC is the portion of the cost recovery<br />
element that represents indirect and direct overhead costs. Examples are various Supply Operations Costs,<br />
Defense Logistic Service Center, Defense Automatic Addressing Center, Defense Reutilization and Marketing<br />
Service, Defense Information Systems Agency, Defense Finance and Accounting Service, <strong>Material</strong><br />
Inflation, Accumulated Operating Results, DLA distribution issue/receipts costs, and transportation costs.<br />
BOCR is applied as a flat percentage, to the LAC and the LRC, across all NSNs.<br />
Carcass Cost (CC)—The value of an asset when the LRC plus BOCR have been removed from the Standard<br />
Price of the item. Carcass Cost is also equal to the LAC minus the LRC.<br />
Exchange Price— The price charged to customer’s exchanging a reparable item for a serviceable one.<br />
This price is the LRC plus BOCR@LRC plus MCR.<br />
Latest Acquisition Cost (LAC)—The price paid for an item the last time it was procured from a supplier.<br />
The LAC is generally the latest representative contract price obtained from the Acquisition and Due-In<br />
System (J041). However, it can be based on an earlier buy if that latest procurement is considered nonrepresentative.<br />
The LAC does not include any cost recovery or inflation.<br />
Latest Repair Cost (LRC)—The current year depot repair EISP. The LRC is either obtained from the<br />
Depot Maintenance pricing systems or is a value adjusted by the Inventory Manager or Production Manager<br />
based on updated information. When a new item with no reparable history is established, the LRC is<br />
systemically calculated at 25% of the LAC.<br />
Mark-Up Price (MUP)—The difference between the Standard Price and the Exchange Price that is<br />
added to the Exchange Price customer account if an unserviceable asset is not returned to the supply<br />
inventory. This price is a penalty paid by a customer if a Due-In From Maintenance (DIFM) asset is not<br />
returned within sixty days. The MUP will be reimbursed upon receipt of a reparable asset to clear the<br />
DIFM detail record after sixty days.<br />
<strong>Material</strong> Cost Recovery (MCR)—The portion of each Exchange Price sale that will pay for items<br />
needed to be purchased for customer <strong>support</strong>. The MCR represents the constrained Extended Year buy<br />
portion; the constraint being that it cannot be more than the customer is <strong>fund</strong>ed.<br />
Standard Price (SP)—The price customers are charged which, for DOD ICP managed items (excluding<br />
subsistence), remains constant throughout a fiscal year except for the correction of significant errors. This<br />
price includes the LAC plus the BOCR@LAC.<br />
Unserviceable Asset Price (UAP)—The price charged to a customer to purchase an unserviceable asset<br />
from the ICP. It includes the Carcass Cost of the unserviceable asset plus the BOCR. UAP is also equal<br />
to the Standard Price minus the LRC.