FINANCIAL MANAGEMENT POLICY MANUAL

for the equipment/system. For ship construction or conversion,
development of individual equipment/system software will be
budgeted in RDT&E,N as outlined in this subparagraph. Integration of
fully developed equipment/system software into a new construction or
conversion ship will be budgeted in the Shipbuilding and Conversion,
Navy (SCN) appropriation. However, if the lead ship is budgeted as
an RDT&E,N prototype, software integration will also be budgeted in
RDT&E,N. The cost of initial software acquisition for procurement
financed equipment/systems which have not required a prior
RDT&E,N financed development program will be budgeted in the
applicable procurement appropriation using the guidance in par
075371.
b. Software Maintenance.
Expense items for life cycle maintenance of operational software will
be budgeted in operation and maintenance appropriations. Investment
items necessary for software maintenance will be budgeted in the
applicable procurement appropriation. Both expense and investment
costs related to software maintenance of tactical/strategic systems
which are not placed into production/operational use but retained for
further RDT&E effort will be budgeted in RDT&E,N.
c. Software Product Improvement.
The funding of product improvement of operational software is
governed basically by the "performance envelope" concept as defined
in paragraph 075403.2. In determining the proper funding source, the
performance envelope criterion is tempered by the scope and cost of
the effort involved. The following policy applies:
(1) software product improvement that expands the current
performance envelope will be budgeted in the RDT&E,N
appropriation. As a limited exception to this basic funding policy,
minor improvements that expand the performance envelope may
be incorporated during regular operation and maintenance-funded
software maintenance (see paragraph 075001-4.L, technology
refresh (IT)). However, these improvements must be relatively
minor in scope/cost and must be capable of being accomplished
concomitant with normal "within performance envelope"
maintenance changes. Exercise of this exception is predicated on
the existence of a configuration control management system in
order to make the subjective review and decision that a
performance envelope change is minor in scope/cost and can be
incorporated during maintenance, and thereby qualify as an
exception to RDT&E,N funding;
(2) software product improvement within the current performance
envelope for an equipment/system currently in production will be
Financial Management Policy
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