FINANCIAL MANAGEMENT POLICY MANUAL

therefore, is funded as an investment cost (see supar. 075403.5c).
This definition applies equally to technology insertion by
commercial firms as part of contractor logistics support, prime
vendor, and similar arrangements and to technology insertion that
is performed internally by the DON. See paragraphs 075371 and
075372.
e. Construction Program Costs.
Construction program costs, such as program development,
procurement management, contracting offices, contract audit offices,
systems project offices, and other costs associated with construction
management in general, as distinguished from supervision of specific
construction projects, are considered expenses. Costs incident to the
acquisition (e.g., design, direct engineering, technical specifications)
and construction of a specific project are considered investments. The
costs of administering military district construction programs above
Corps of Engineer and Public Works levels are considered expenses,
except that the costs of the acquisition function performed at the
Headquarters, Naval Facilities Engineering Command are considered
investments. The costs of administering military construction
programs at district levels and below are considered investments. The
costs of administering the facilities sustainment program are
considered expenses at all levels.
f. Minor Construction.
Costs of facilities restoration and modernization projects meeting the
current criteria for financing with operating funds are considered
expenses. The planned acquisition of, or improvement to, a real
property facility through a series of minor construction projects, i.e.,
incremental construction, is prohibited. Planning and design costs are
excluded from the cost determination for purposes of determining
compliance with the amounts established in 10 U.S.C. 2805 for minor
construction projects; however, design costs are not excluded from
capitalization. Minor construction will continue to be reported and
reflected in the DoD real property inventory.
g. Sustainment and Restoration of Real Property.
Restoration or sustainment has the effect of merely keeping the facility
in its customary state of operating efficiency without the expectation
of added future benefits. Thus, restoration and sustainment of a real
property facility is classified as expense. This includes the replacement
of facility components, including that equipment which is installed or
built-in as an integral part of the facility (included within Class 2
property).
Financial Management Policy
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