FINANCIAL MANAGEMENT POLICY MANUAL

udgeted in the procurement appropriations if the improvement is
prepared as an approved system change by the equipment/system
manufacturer. Software product improvement within the current
performance envelope for an equipment/system no longer in
production will be budgeted in the Operation and Maintenance
appropriations. In any case, level-of-effort software product
improvement within the current performance envelope by either inhouse
activities or contractors will be budgeted in Operation and
Maintenance appropriations as normal life cycle maintenance (see
subpar. b).
(Change 66)
075373 SHIP INVESTMENT, OVERHAUL AND
MODERNIZATION
1. GENERAL.
Normally, the Shipbuilding and Conversion, Navy (SCN) appropriation
funds the construction of new ships and the acquisition, major
reactivation, conversion, and service life extension of existing ships.
Generally, ship overhaul and modernization is funded by the Operation
and Maintenance appropriations for items classified as expenses and the
applicable Procurement appropriation for items classified as investments.
The classification of work performed on existing ships as either SCN or
overhaul/modernization is determined by the scope of the work involved.
When a ship program does not clearly fall within the category of
overhaul/modernization, it should be budgeted in the SCN appropriation.
There are specific instances where the Research, Development, Test and
Evaluation appropriation will finance both acquisition and maintenance
aspects of ships for use in research projects.
2. DEFINITIONS.
a. Construction.
Construction consists of that work necessary to build a new ship,
including all hull, mechanical and electrical equipment, electronics,
combat systems, communications systems, etc.
b. Acquisition.
Acquisition is the procurement of an existing ship, including the
addition of equipment and systems required to meet approved initial
operating characteristics.
c. Reactivation.
Reactivation is that work necessary to recommission a ship which was
previously in the active fleet. If the work is of such magnitude to
change the mission/characteristics or extend the useful life of a ship, it
Financial Management Policy
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