VOLUME 2A, CHAPTER 1

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VOLUME 2A, CHAPTER 1: “GENERAL INFORMATION”

SUMMARY OF MAJOR CHANGES

Changes are identified in this table and also denoted by blue font.

Substantive revisions are denoted by an * symbol preceding the section, paragraph,

table, or figure that includes the revision.

Unless otherwise noted, chapters referenced are contained in this volume.

Hyperlinks are denoted by bold, italic, blue, and underlined font.

The previous version dated August 2007 is archived.

PARAGRAPH

EXPLANATION OF CHANGE/REVISION

PURPOSE

Overall

Formatting and room location changes

Revision

1.7

(010107)

Paragraph 1.7.2.28 – Expanded explanation of the full

funding policy

Addition

2.2

(010202)

Expanded explanation of full funding of procurement Addition

2.24

(010224)

Glossary of Terms – Expanded explanation of full funding Addition

3.6

(010306)

Disaster Situations and Management of

Disaster/Contingency Supplemental funds

Addition

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Table of Contents

VOLUME 2A, CHAPTER 1: “GENERAL INFORMATION” .................................................... 1

1.0 GENERAL POLICIES (0101) .......................................................................................... 7

1.1 Purpose (010101) .................................................................................................... 7

1.2 Organization (010102) ............................................................................................ 7

1.3 Changes to Volume 2 (010103) .............................................................................. 7

1.4 Reports Control Symbol (010104) .......................................................................... 7

1.5 Requests for Exceptions to OMB Circular A-11 (010105) .................................... 7

1.6 Proposed Changes in Budget Structure and Appropriation Language (010106) .... 8

1.7 Budget Terminology/Definitions (010107) ............................................................ 9

1.8 Security Classifications (010108) ......................................................................... 18

1.9 Budget and Performance Integration (010109) ..................................................... 19

1.10 Combatant Command Business Rules (Joint Task Assignment Process (JTAP))

(010110) ……………………………………………………………………………………19

2.0 FUNDING POLICIES (0102) ......................................................................................... 20

2.1 Criteria for Determining Expense and Investment Costs (010201) ...................... 20

*2.2 Full Funding of Procurement Programs (010202) ................................................ 26

2.3 Multiyear Procurement (010203) .......................................................................... 29

2.4 Buy-to-Budget for Acquisition of End Items (010204) ........................................ 32

2.5 Transportation (010205) ....................................................................................... 32

2.6 Engineering Change Orders (010206) .................................................................. 34

2.7 Factory Training (010207) .................................................................................... 34

2.8 Interim Contractor Support (010208) ................................................................... 34

2.9 Commercial Off-the-Shelf (COTS) and Non-Developmental Item (NDI)

Procurement (010209) ............................................................................................................ 34

2.10 Spares and Repair Parts (010210) ......................................................................... 35

2.11 Direct and Reimbursable Budget Plans (010211) ................................................. 35

2.12 Budgeting for Information Technology and Automated Information Systems

(010212) ……………………………………………………………………………………37

2.13 Research, Development, Test and Evaluation (RDT&E) - Definitions and Criteria

(010213) ……………………………………………………………………………………39

2.14 RDT&E - Incremental Programming and Budgeting Basis (010214) .................. 50

2.15 Defense Working Capital Funds - Operating Budget (010215) ........................... 52

2.16 Defense Working Capital Funds - Mobilization/Surge Costs (010216) ............... 52

2.17 Defense Working Capital Funds - War Reserve Materiel (010217) ..................... 52

2.18 Defense Working Capital Funds - Military Personnel Costs (010218) ................ 52

2.19 Defense Working Capital Funds - Full Recovery of Costs/Setting Prices (010219)

……………………………………………………………………………………53

2.20 Defense Working Capital Funds - Capital Budgeting (010220) ........................... 55

2.21 Defense Working Capital Funds - Base Support (010221) .................................. 56

2.22 Defense Working Capital Funds - Dual Funded Organizations (010222) ............ 56

2.23 Defense Working Capital Funds - Customer Mandated Schedule (010223) ........ 57

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Table of Contents (Continued)

2.24 Glossary of Terms – Procurement (010224) ......................................................... 57

2.25 Glossary of Terms – RDT&E (010225)................................................................ 59

2.26 Prohibition on Parking of Funds (010226) ........................................................... 60

2.27 Use of Operation and Maintenance Funds under Contingency Construction

Authority (CCA) (010227) ..................................................................................................... 61

3.0 PROGRAM AND BUDGET REVIEW SUBMISSION (0103) ..................................... 61

3.1 General (010301) .................................................................................................. 61

3.2 Distribution (010302)............................................................................................ 64

Table 1. Justification Material Supporting the OSD/OMB Budget Submission Summary 67

Table 2. Justification Material Supporting the OSD/OMB Budget Submission Operation

and Maintenance, and Military Personnel Budget Material ................................................... 68

Table 3. Justification Material Supporting the OSD/OMB Budget Submission Procurement

Account Budget Material ....................................................................................................... 69

Table 4. Justification Material Supporting the OSD/OMB Budget Submission Research,

Development Test & Evaluation Account Budget Material .................................................. 70

Table 5. Justification Material Supporting the OSD/OMB Budget Submission Revolving

and Management Fund Budget Material ................................................................................ 71

Table 6. Justification Material Supporting the OSD/OMB Budget Submission Military

Construction & Family Housing Account Budget Material .................................................. 72

Table 7. Justification Material Supporting the OSD/OMB Budget Submission Special

Interest Requirements Budget Material.................................................................................. 73

3.3 Preparation of the Biennial Budget Estimates (010303) ....................................... 74

3.4 Second Year of the Department’s Two-year Budget Review Cycle - Budget

Material. (010304) .................................................................................................................. 77

3.5 Budget Estimates Summaries and Transmittal (010305)...................................... 78

*3.6 Supplemental Appropriations Submissions (010306) .......................................... 79

3.7 Additional Budget Submissions (ABS) (010307)................................................. 81

3.8 Major Budget Issues (MBIs) (010308) ................................................................. 82

3.9 Budget Review Procedures (010309) ................................................................... 82

4.0 CONGRESSIONAL JUSTIFICATION/PRESENTATION (0104) ............................... 84

4.1 General (010401) .................................................................................................. 84

4.2 Supplemental and Amended Appropriations Requests (010402) ......................... 89

4.3 Distribution/Internet Posting of Budget Material (010403) .................................. 91

Table 8. Justification Material Supporting The President’s Budget Request Military

Personnel Accounts ................................................................................................................ 95

Table 9. Justification Material Supporting the President’s Budget Request Operation and

Maintenance Accounts ........................................................................................................... 97

Table 10. Justification Material Supporting the President’s Budget Request All Military

Department Procurement Accounts ..................................................................................... 100

Table 11. Justification Material Supporting the President’s Budget Request Procurement

Accounts - Army .................................................................................................................. 101

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Table of Contents (Continued)

Table 12. Justification Material Supporting the President’s Budget Request Classified

Procurement Accounts -Navy .............................................................................................. 102

Table 13. Justification Material Supporting the President’s Budget Request Procurement

Accounts - Navy. .................................................................................................................. 103

Table 14. Justification Material Supporting the President’s Budget Request Procurement

Accounts - Air Force ............................................................................................................ 104

Table 15. Justification Material Supporting The President’s Budget Request Procurement

Accounts - Other .................................................................................................................. 106

Table 16. Justification Material Supporting the President’s Budget Request Procurement

Accounts - Defense-Wide .................................................................................................... 107

Table 17. Justification Material Supporting the President’s Budget Request Research,

Development Test & Evaluation Accounts .......................................................................... 108

Table 18. Justification Material Supporting the President’s Budget Request Research,

Development Test & Evaluation Accounts .......................................................................... 109

Table 19. Justification Material Supporting the President’s Budget Request All Military

Department Working Capital Fund Accounts ...................................................................... 110

Table 20. Justification Material Supporting the President’s Request Revolving and

Management Funds .............................................................................................................. 111

Table 21. Justification Material Supporting the President’s Budget Request All Military

Department Military Construction, Family Housing and BRAC Accounts......................... 112

Table 22. Justification Material Supporting the President’s Request Military Construction &

Family Housing Accounts .................................................................................................... 113

Table 23. Justification Material Supporting the President’s Request Base Realignments And

Closures (BRAC) ................................................................................................................. 115

Table 24. Justification Material Supporting The President’s Request Other Account

Requirements ........................................................................................................................ 116

Table 25. Justification Material Supporting the President’s Request Special Interest

Requirements ........................................................................................................................ 117

Table 26. Justification Material Supporting The President’s Request Special Interest

Requirements ........................................................................................................................ 118

4.4 Witness Statements (010404) ............................................................................. 120

4.5 Transcript Processing (010405) .......................................................................... 121

4.6 Appeal Process on Congressional Actions (010406) .......................................... 123

5.0 BUDGET AUTOMATION REQUIREMENTS (0105) ............................................... 125

5.1 Automated Military Personnel Programs Database (010501) ............................ 125

5.2 Automated Operation and Maintenance Programs Databases (010502) ............ 126

5.3 Automated Procurement Programs Database (010503) ...................................... 129

5.4 Automated RDT&E Programs Database (010504)............................................. 132

5.5 Automated Construction Program Database (010505) ....................................... 133

5.6 CIS Automation Requirements for the Biennial Program and Budget Review

Submission (010506)............................................................................................................ 136

5.7 CIS Budget Structure Listing (BSL) (010507) ................................................... 138

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Table of Contents (Continued)

6.0 UNIFORM BUDGET AND FISCAL ACCOUNTING CLASSIFICATIONS (0106) 141

6.1 General (010601) ................................................................................................ 141

6.2 Functional Titles – Military Functions (010602) ................................................ 141

6.3 Definitions of Functional Titles and Subdivisions – Military (010603) ............. 142

6.4 Functional Titles and Definitions – Other Defense Civil Programs (010604) ... 154

7.0 AUTOMATED FUTURE YEARS DEFENSE PROGRAM (FYDP) DATABASES

(0107)....................................................................................................................................... 155

7.1 Standard Data Collection System (SDCS) (010701) .......................................... 155

7.2 FYDP Resource Structure Management (RSM) System (010702) .................... 158

8.0 AUTOMATED BUDGET, INTELLIGENCE, AND RELATED DATABASE (BIRD)

(0108)....................................................................................................................................... 159

9.0 SELECT AND NATIVE PROGRAMMING (SNaP) DATA INPUT SYSTEM (0109)

…………………………………………………………………………………………159

9.1 Select and Native Programming (SNaP) Data Collection System (010901) ...... 159

10.0 GENERAL GUIDANCE SUBMISSION FORMATS (0110)................................... 161

10.1 Purpose (011001) ................................................................................................ 161

10.2 Exhibits in Support of Section 3.0 – Program and Budget Review Submission

(011002) …………………………………………………………………………………..161

10.3 Exhibits in Support of Section 4.0 – Congressional Justification/Presentation

(011003) …………………………………………………………………………………..161

10.4 Exhibits in Support of Section 5.0 (011004) ...................................................... 162

10.5 Exhibits in Support of Section 7.0 (011005) ...................................................... 162

Exhibit PB-1A. Fiscal Guidance Track ................................................................................ 163

Exhibit PB-3. Reprogramming/Transfers Between Appropriations ..................................... 164

Exhibit PB-4. Schedule of Civilian and Military Personnel ................................................. 166

Exhibit PB-8. FY 20CY. Supplemental Appropriation Requirements ................................ 170

Exhibit PB-10. Additional FY 20BY Budget Estimates ....................................................... 172

Major Budget Issue Format ..................................................................................................... 174

Exhibit PB-37A. Justification of Supplemental Requirements ............................................. 175

Exhibit PB-37R. Budget Amendment Summary .................................................................. 176

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Table of Contents (Continued)

Exhibit PB-37S. Program and Financing Schedule (Abbreviated) ....................................... 177

Exhibit PB-37T. Narrative Justification ............................................................................... 178

Exhibit PB-39A-1. Format - Appeal Input (Program Adjustments) ..................................... 179

Exhibit PB-39A-2. Format - Appeal Input (Language Items) .............................................. 180

Exhibit DD 1587. Record of Congressional Transcript Review ........................................... 181

Exhibit DD 1790. Prepared Testimony Review ................................................................... 182

HAC QFR ................................................................................................................................ 183

HASC QFR .............................................................................................................................. 184

SAC QFR ................................................................................................................................. 185

SASC QFR .............................................................................................................................. 186

INSERT - ALL COMMITTEES ............................................................................................. 187

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CHAPTER 1

GENERAL INFORMATION

1.0 GENERAL POLICIES (0101)

1.1 Purpose (010101)

1.1.1. Volume 2 of the Financial Management Regulation (FMR) provides general

guidance on the formulation and submission of the budget requests to the Office of the Secretary

of Defense for the program and budget review submission and the presentation and justification of

the budget requests to the Congress. This volume is established under the authority of

DoD Instruction 7000.14.

1.1.2. Volume 2 is intended as a comprehensive reference book on budget matters of the

Department of Defense. Budget policy memoranda issued throughout the year will provide any

necessary changes or revisions to this standing document, as well as special instructions and

nonrecurring requirements unique to that year’s budget cycle.

1.1.3. The provisions of Volume 2 apply to all military and specified civil functions of the

Department of Defense.

1.1.4. An introduction to the total Financial Management Regulation, DoD 7000.14-R can

be found in Volume 1.

1.2 Organization (010102)

Volume 2B is organized into 19 chapters that provide specific guidance, required budget

exhibits and formats along with instructions for their preparation, and automated submission

requirements.

1.3 Changes to Volume 2 (010103)

1.3.1. Changes to Volume 2 will be issued biennially, prior to the program and budget

review of the initial biennial budget cycle. Pen and ink changes will not be issued.

1.3.2. Generally, significant changes on a page will be indicated by  preceding the

paragraph or section containing a change and the changed material will be printed in blue ink.

1.4 Reports Control Symbol (010104)

Data requirements established by this volume are exempt from the requirement for

assignment of a Report Control Symbol.

1.5 Requests for Exceptions to OMB Circular A-11 (010105)

1.5.1. Each year the Office of Management and Budget (OMB) issues Circular No. A-11,

which addresses the preparation and submission of budget estimates for all Federal agencies.

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1.5.2. Federal agencies are allowed to request exceptions to the requirements of

Circular A-11 by submitting in writing to OMB all required exceptions by August 1. Exceptions

approved by OMB are valid only for 1 year.

1.5.3. Each year the USD(Comptroller) requests certain exceptions to

OMB Circular A-11. Generally, these exceptions concern special situations that are unique to the

Department of Defense.

1.5.3.1. Subsequent to the issuance of Circular A-11 by OMB each year, any

DoD Component requiring an exception to the requirements of Circular A-11 should submit in

writing the specific section for which an exception is required and provide adequate rationale to

justify the exception. The memorandum addressing the requested exceptions should be submitted

directly to the Office of the USD(Comptroller), Program/Budget, Program and Financial Control

Directorate (Room 3C689, telephone (703) 697-0021) no later than July 15 of each year.

1.5.3.2. If the requested exception is acceptable to the USD(Comptroller), these

proposals will be consolidated and forwarded to OMB for approval. Components will be advised

of any exceptions approved by OMB.

1.5.3.3. All DoD Components are required to comply with any requested

exceptions not approved and to properly reflect the information in the budget submissions.

1.6 Proposed Changes in Budget Structure and Appropriation Language (010106)

1.6.1. Under the provisions of OMB Circular A-11, the following types of changes must

be cleared with OMB:

1.6.1.1. Changes in the appropriation pattern, including proposed new accounts

and changes in the titles and sequence of existing accounts.

1.6.1.2. Changes in the methods of funding a program.

1.6.1.3. Changes in program or budget activity classifications for the program and

financing schedules for all appropriation accounts and funds.

1.6.2. Any proposed changes on the items listed above must be submitted by memorandum

to the Office of the USD(Comptroller) that explains the proposal and the rationale for the changes.

If acceptable to the USD(Comptroller), these proposals will be forwarded to OMB for approval.

1.6.3. Proposed changes in the wording of appropriation language should be submitted to

the Office of the Deputy General Counsel (Fiscal) (Room 3B688, telephone (703) 697-7228) as

soon as possible after the passage of the current year’s appropriations acts. ODGC(Fiscal) will

coordinate changes with OMB.

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1.7 Budget Terminology/Definitions (010107)

1.7.1. Standard Government-wide definitions of budget terminology are provided in the

Office of Management and Budget’s issuances, most notably Circular A-11 (Section 20).

1.7.2. For the Department of Defense, some of the more common budget concepts

applicable to budget formulation follow:

1.7.2.1. Accrual Basis of Accounting. A method of accounting in which revenues

are recognized in the period earned and costs are recognized in the period incurred, regardless of

when payment is received or made. There have been many initiatives over the years to convert

the Federal Budget to an accrual accounting basis. Although the budget is on a cash basis, DoD

accounting is on the accrual basis.

1.7.2.2. Advance Procurement. Authority provided in an appropriations act to

obligate and disburse during a fiscal year before that in which the related end item is procured.

The funds are added to the budget authority for the fiscal year and deducted from the budget

authority of the succeeding fiscal year. Used in major acquisition programs for advance

procurement of components whose long-lead-times require purchase early in order to reduce the

overall procurement lead-time of the major end item. Advance procurement of long lead

components is an exception to the DoD “full funding” policy and must be part of the President’s

budget request.

1.7.2.3. Appeal. A request for reconsideration of an action taken to adjust, reduce,

or delete funding for an item during the congressional review of the Defense budget (authorization

and appropriation). This process is discussed in Section 4.6.

1.7.2.4. Apportionment. A distribution by the Office of Management and Budget

of amounts available for obligation in appropriation or fund accounts of the Executive Branch.

The distribution makes amounts available on the basis of specified time periods, programs,

activities, projects, or combinations thereof. The apportionment system is intended to achieve an

effective and orderly use of funds. The amounts so apportioned limit the obligations that may be

incurred.

1.7.2.5. Appropriations. A provision of legal authority by an act of the Congress

that permits Federal agencies to incur obligations and to make payments out of the Treasury for

specified purposes. An appropriation usually follows enactment of authorizing legislation. An

appropriation act is the most common means of providing budget authority

(see Budget Authority). Appropriations do not represent cash actually set aside in the Treasury

for purposes specified in the appropriation act; they represent limitations of amounts which

agencies may obligate during the time period specified in the respective appropriation acts.

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1.7.2.6. Authorization (Authorizing Legislation). Basic substantive legislation

enacted by the Congress which sets up or continues the legal operation of a Federal program or

agency either indefinitely or for a specific period of time or sanctions a particular type of obligation

or expenditure within a program. Such legislation is normally a prerequisite for subsequent

appropriations or other kinds of budget authority to be contained in appropriation acts. It may

limit the amount of budget authority to be provided subsequently or may authorize the

appropriation of “such sums as may be necessary.”

1.7.2.7. Biennial Budget. The FY 1986 Department of Defense Authorization Act

required the submission of two-year budgets for the Department of Defense and related agencies

beginning with FY 1988/FY 1989. The Department has fully institutionalized a biennial cycle for

the Planning, Programming, Budgeting and Execution (PPBE) Process, including the Strategic

Planning Guidance (SPG), the Program Objective Memorandum (POM), Volume 2 of the

Financial Management Regulation (FMR) and budget formulation memoranda. A biennial budget,

as currently structured, represents program budget estimates for a two-year period in which fiscal

year requirements remain separate and distinct.

1.7.2.8. Budget Activity. Categories within each appropriation and fund account

which identify the purposes, projects, or types of activities financed by the appropriation or fund.

1.7.2.9. Budget Amendment. A formal request submitted to the Congress by the

President, after his formal budget transmittal but prior to completion of appropriation action by

the Congress, that revises previous requests, such as the amount of budget authority.

1.7.2.10. Budget Authority. The authority becoming available during the year to

enter into obligations that result in immediate or future outlays of Government funds.

1.7.2.11. Budget Deficit. The amount by which the Government’s budget outlays

exceed its budget receipts for any given period. Deficits are financed primarily by Treasury

borrowing from the public.

1.7.2.12. Budget Receipts. Amounts received by the Federal Government from the

public that arise from the exercise of governmental or sovereign power (primarily tax revenues,

but also receipts from premiums of compulsory social insurance programs, court fines, license

fees, etc.); premiums from voluntary participants in Federal social insurance programs; and gifts

and contributions. Excluded from budget receipts are collections resulting from business-type

transactions and payments between government accounts as a result of intragovernmental

transactions.

1.7.2.13. Change Proposal. Components use this mechanism to revise programs

and approved budgets in the second year of the 2-year program and budget cycle, in lieu of

submitting a Program Objective Memorandum and a Budget Estimate Submission with complete

documentation. A format will be provided with the annual program and budget guidance.

See “Two-year Program and Budget Cycle.”

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1.7.2.14. Closed (Canceled) Appropriations. An appropriation that is no longer

available for the adjustment or payment of obligations. Appropriation accounts are closed

(canceled) after being in the expired status for five years. A Comptroller General opinion has

provided the DoD with authority to make disbursement adjustments to closed appropriations to

correct errors only. (See Expired Appropriation.)

1.7.2.15. Concurrent Resolution. A resolution passed by both Houses of Congress,

but not requiring the signature of the President, setting forth, reaffirming, or revising the

congressional budget for the United States Government for a fiscal year. A concurrent resolution

on the budget, due by April 15, must be adopted before legislation providing new budget authority,

new spending authority, new credit authority or changes in revenues or the public debt limit is

considered. Other concurrent resolutions for a fiscal year may be adopted at any time following

the first required concurrent resolution for that fiscal year.

1.7.2.16. Constant Dollars. A dollar value adjusted for changes in prices. Constant

dollar series are derived by dividing current dollar estimates by appropriate price indices, a process

generally known as deflating. The result is a time series as it would presumably exist if prices

were the same throughout as in the base year - in other words, as if the dollar had constant

purchasing power. Any changes in such a series would reflect only changes in the real (physical)

volume of output. Constant dollar figures are commonly used for gross national product and its

components.

1.7.2.17. Continuing Resolution. Legislation enacted by the Congress to provide

budget authority for specific ongoing activities in cases where the regular fiscal year appropriation

for such activities has not been enacted by the beginning of the fiscal year. The continuing

resolution usually provides formulas which the agency uses to compute amounts available for

continuing programs at minimum levels. Formulas typically include obligation rates of the prior

year, the President’s budget request, or an appropriation bill passed by either or both Houses of

the Congress.

1.7.2.18. Current Services Estimates. Estimated budget authority and outlays for

the upcoming fiscal year based on continuation of existing levels of service, i.e., assuming that all

programs and activities will be carried on at the same level as in the fiscal year in progress and

without policy changes in such programs and activities. These estimates of budget authority and

outlays, accompanied by the underlying economic and programmatic assumptions upon which

they are based (such as the rate of inflation, the rate of real economic growth, pay increases, etc.),

are required to be transmitted by the President to the Congress.

1.7.2.19. Deferral of Budget Authority. Any action or inaction by any officer or

employee of the United States that withholds, delays, or effectively precludes the obligation or

expenditure of budgetary resources, including the establishment of reserves under the

Antideficiency Act, as amended by the Impoundment and Control Act. Section 1013 of the

Impoundment Control Act of 1974 requires a special message from the President to the Congress

reporting a proposed deferral of budget authority. Deferrals may not extend beyond the end of the

fiscal year in which the message reporting the deferral is transmitted and may be overturned by

the passage of an impoundment resolution by either House of Congress.

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1.7.2.20. Disbursements. In budgetary usage, gross disbursements represent the

amount of checks issued, cash, or other payments made, less refunds received. Net disbursements

represent gross disbursements less income collected and credited to the appropriation or fund

account, such as amounts received for goods and services provided.

1.7.2.21. Discretionary Authority. Budgetary resources (except those provided to

fund mandatory spending) provided in appropriations acts.

1.7.2.22. Emergency Appropriations. Appropriations that have been designated by

the Congress and the President as an emergency requirement under the Balanced Budget and

Emergency Deficit Control Act of 1985, as amended.

1.7.2.23. End Strength. In general, strength at the end of a fiscal year. Single point

strengths for other points in time must be specified, such as end first-quarter strength.

1.7.2.24. Expenditures/Disbursements. A term generally used interchangeably

with outlays (See outlays).

1.7.2.25. Expired Appropriation. An appropriation whose period of availability

for incurring new obligations has expired but the appropriation is not closed (canceled). During

this period, the appropriation is available for adjustment to, or payment of, existing obligations.

Appropriations remain in an expired status for 5-years as shown in the table below. At the end of

the five-year expiration period, the appropriation is closed (canceled) and is no longer available

for the payment of unliquidated obligations. (See Closed (Canceled) Appropriations.)

Normal Life Cycle of Appropriations:

Approp

Years For

New

Obligations

Unexpired

Years For

Obligation

Adjust. &

Disburse.

Expired

Years For

Closed

End of

Year

Canceled

MilPers

2-6

O&M.

2-6

RDT&E

3-7

Proc.

4-8

SCN

6-10

*10

Mil. Con.

6-10

* Extended to 15-years under certain circumstances.

1.7.2.26. Federal Debt. Federal debt consists of public debt and agency debt.

Public debt is that portion of the Federal debt incurred when the Treasury Department or

Federal Financing Bank (FFB) borrows funds directly from the public or another fund or account.

Agency debt is that portion of the Federal debt incurred when a Federal agency authorized by law,

other than Treasury or the Federal Financing Bank, borrows funds directly from the public or

another fund or account.

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1.7.2.27. Fiscal Year. Any yearly accounting period without regard to its

relationship to a calendar year. The fiscal year for the Federal Government begins on October 1

and ends on September 30. The fiscal year is designated by the calendar year in which it ends.

Fiscal years are further designated as follows:

Past Year-1: Also referred to as Prior Year-1, the fiscal year immediately preceding the

past year

Past Year (PY): Also referred to as Prior Year, the fiscal year immediately preceding the

current year; the last completed fiscal year.

Current Year (CY): The fiscal year in progress. Immediately precedes the budget year.

Budget Year (BY): The next fiscal year for which estimates are submitted if not a biennial

budget.

Budget Year 1 (BY1): In a biennial budget submission (Department of Defense), the first

fiscal year of a 2-year period for which the budget is being considered.

Budget Year 2 (BY2): In a biennial budget submission (Department of Defense), the

second fiscal year of a 2-year period for which the budget is being considered.

Budget Year(s)+1 (BY(s)+1): The fiscal year immediately following the budget year(s).

This format continues through Budget Year +5 (BY+5), the fifth fiscal year following the budget

year(s).

* 1.7.2.28. Full Funding Policy. The practice of funding the total cost of major

procurement and construction projects in the fiscal year in which they will be initiated. The full

funding policy requires the total estimated cost of a complete, military useable end item or

construction project funded in the year in which the item is procured. If a future year’s

appropriation is required for delivery of an end item, the end item is not fully funded. It prevents

funding programs incrementally and provides a disciplined approach for program managers to

execute their programs within cost. See Section 2.2 for further information.

1.7.2.29. Full-time Equivalent (FTE). Reflects the total number of regular straight-

time hours (i.e., not including overtime or holiday hours) worked by employees divided by the

number of compensable hours applicable to each fiscal year. Annual leave, sick leave and

compensatory time off and other approved leave categories are considered to be “hours worked”

for purposes of defining full-time equivalent employment.

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1.7.2.30. Future Years Defense Program (FYDP). The Future Years Defense

Program is the program and financial plan for the Department of Defense as approved by the

Secretary of Defense. The FYDP arrays cost data, manpower and force structure over a 6-year

period (force structure for an additional 3 years), portraying this data by major force program for

DoD internal review for the program and budget review submission. It is also provided to the

Congress in conjunction with the President’s budget.

1.7.2.31. Impoundment. Any action or inaction by an officer or employee of the

United States that precludes the obligation or expenditure of budget authority provided by the

Congress.

1.7.2.32. Impoundment Resolution. A resolution of the House of Representatives

or the Senate disapproving a deferral of budget authority set forth in a special message ordinarily

transmitted by the President under section 1013 of the Impoundment Control Act of 1974. Passage

of an impoundment resolution by either House of Congress has the effect of overturning the

deferral and requires that such budget authority be made available for obligation.

1.7.2.33. Incremental Funding. The phasing of total funding of programs or

projects over two or more fiscal years based upon levels and timing of obligational requirements

for the funds. Differs from full funding concept where total funds for an end item, program or

project are provided in the fiscal year of program or project initiation, regardless of the obligational

requirement for the funds.

1.7.2.34. Mandatory Authority. (Also known as Entitlement Authority) Authority

controlled by laws other than appropriations.

1.7.2.35. Management Initiative Decision (MID). A decision document similar to

a Program Budget Decision, but designed to institutionalize management reform decisions.

A MID may be issued at any time during the year. The Comptroller will incorporate any funding

adjustments into the next President’s Budget.

1.7.2.36. Multiyear Procurement. Procurement of a particular end item or system

under a multiyear contract approved by specific provision of law. For the Department of Defense,

multiyear procurement contracting of military hardware or systems must generally be specifically,

and individually, approved by the Congress (see 10 U.S.C. 2306b(1).

1.7.2.37. Object Classification. A uniform classification identifying the

transactions of the Federal Government by the nature of the goods or services purchased without

regard to the agency involved or the purpose of the programs for which they are used.

1.7.2.38. Obligations. Binding agreement that will result in outlays immediately

or in the future.

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1.7.2.39. Offsetting Collections. Payments to the Government that are credited

directly to the expenditure account and deducted from gross budget authority and outlays of the

expenditure account. They result from business-type or market oriented activities with the public

and intragovernmental transactions with other government accounts (commonly called

reimbursable transactions).

1.7.2.40. Outlays. The amount of checks issued or other payments made

(including advances to others), net of refunds and reimbursements collected. Outlays are net of

amounts that are adjustments to obligational authority. The terms “expenditure” and “net

disbursement” are frequently used interchangeably with the term “outlay.” Gross outlays are

disbursements and net outlays are disbursements (net of refunds) minus reimbursements collected.

1.7.2.41. President’s Budget. The budget for a particular fiscal year transmitted to

the Congress by the President in accordance with the Budget and Accounting Act of 1921, as

amended. Some elements of the budget, such as the estimates for the legislative branch and the

judiciary, are required to be included without review by the Office of Management and Budget or

approval by the President.

1.7.2.42. Program Budget Decision (PBD). A budget decision document issued

during the joint review of Service budget submissions by analysts of the Office of the Secretary of

Defense (OSD) and the Office of Management and Budget (OMB). PBDs reflect the decisions of

the Secretary of Defense as to appropriate program and funding to be included in the annual

Defense budget request which, in turn, is included in the President’s Budget.

1.7.2.43. Program Decision Memorandum (PDM). A document containing the

decisions by the Secretary of Defense reflecting broad strategic trades related to the program and

resource levels identified in the Program Objectives Memorandum.

1.7.2.44. Program Objectives Memorandum (POM). The final product of the

programming process within the Department of Defense, the Components Program Objectives

Memorandum (POM) displays the resource allocation decisions of the Military Departments in

response to and in accordance with Strategic Planning Guidance (SPG) and Joint Programming

Guidance (JPG).

1.7.2.45. Program Year. The fiscal year in which authorization was provided and

in which funds were appropriated for a particular program, regardless of the fiscal year in which

funds for that program might be obligated.

1.7.2.46. Reapportionment. A revision by the Office of Management and Budget

of a previous apportionment of budgetary resources for an appropriation or fund account.

A revision would ordinarily cover the same period, project, or activity covered in the original

apportionment.

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1.7.2.47. Reappropriation. Congressional action to restore the obligational

availability, whether for the same or different purposes, of all or part of the unobligated portion of

budget authority that has expired or would otherwise expire in an annual or multi-year account.

Obligational authority in a current appropriation may also be extended by a subsequent

appropriation act.

1.7.2.48. Reconciliation Process. A process used by the Congress to reconcile

amounts determined by tax, spending, and debt legislation for a given fiscal year with the ceilings

enacted in the second and required concurrent resolution on the budget for that year. Section 310

of the Congressional Budget and Impoundment Control Act of 1974 provides that the second

required concurrent resolution on the budget, which sets binding totals for the budget, may direct

committees to determine and recommend changes to laws, bills, and resolutions, as required to

conform with the binding totals for budget authority, revenues, and the public debt.

1.7.2.49. Recovery of Prior Year Obligations. Amounts made available for

obligation in no-year and unexpired multi-year accounts through downward adjustment of prior

year obligations.

1.7.2.50. Reimbursable Obligation. Obligation financed by offsetting collections

credited to an expenditure account in payment for goods and services provided by that account.

See Offsetting Collection.

1.7.2.51. Reprogramming. Utilization of funds in an appropriation account for

purposes other than those contemplated at the time of appropriation. Reprogramming is generally

accomplished pursuant to consultation with and approval by appropriate congressional

committees. Instructions are contained in Volume 3.

1.7.2.52. Rescission. The consequence of enacted legislation which cancels

budgetary resources previously provided by the Congress prior to the time when the authority

would otherwise lapse. Section 1012 of the Impoundment Control Act of 1974 requires a special

message from the President to the Congress reporting any proposed rescission of budgetary

resources. These proposals may be accepted in whole or in part through the passage of a rescission

bill by both Houses of the Congress.

1.7.2.53. Rescission Bill. A bill or joint resolution that provides for cancellation,

in whole or in part, of budgetary resources previously granted by the Congress. Under Section

1012 of the Impoundment Control Act of 1974, unless Congress approves a rescission bill within

45 days of continuous session after receipt of the proposal, the budgetary resources must be made

available for obligation.

1.7.2.54. Revolving Fund. A fund established to finance a cycle of operations

through amounts received by the fund. Within the Department of Defense, such funds include the

Defense Working Capital Fund, as well as other working capital funds.

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1.7.2.55. Sequestration. The reduction or cancellation of new budget authority;

unobligated balances, new loan guarantee commitments or limitations; new direct loan obligations,

commitments, or limitations; spending authority; and obligation limitations. OMB Circular A-11,

section 20 provides additional information on sequestration rules of the Budget Enforcement Act

of 1990 (BEA).

1.7.2.56. Supplemental Appropriation. An act appropriating funds in addition to

those in an annual appropriation act. Supplemental appropriations provide additional budget

authority beyond original estimates for programs or activities (including new programs authorized

after the date of the original appropriation act) for which the need for funds is too urgent to be

postponed until enactment of the next regular appropriation act.

1.7.2.57. Total Obligational Authority (TOA) Availability. The sum of

(1) all budget authority granted (or requested) from the Congress in a given year,

(2) amounts authorized to be credited to a specific fund, (3) budget authority transferred from

another appropriation, and (4) unobligated balances of budget authority from previous years which

remain available for obligation. In practice, this term is used primarily in discussing the

Department of Defense budget, and most often refers to TOA as “direct program” which equates

to only (1) and (2) above.

1.7.2.58. Transfer Authorities. Annual authorities provided by the Congress via

annual appropriations and authorization acts to transfer budget authority from one appropriation

or fund account to another.

1.7.2.59. Two-year Program and Budget Cycle. For the budget review, this cycle

coincides with the biennial budget process required by law. It is part of the Department’s internal

2-year Planning, Programming, Budgeting, and Execution (PPBE) process. The first year of the

cycle includes a full review of the budget for the following two years. Full budget documentation

is required. The end result is a budget baseline for the next two years. The second year of the

cycle limits changes to the baseline program. It focuses on fact-of-life changes to include

congressional action and program execution. Components will request adjustments to the baseline

through Change Proposals (CP). However, while the second year of the process will require only

limited budget documentation for the internal review, full budget documentation is still required

for the President’s budget submission.

1.7.2.60. User Fee. A fee, charge, or assessment levied on those directly benefiting

from, or subject to regulation by, a Federal government program or activity, to be utilized solely

to support the program or activity. Collections from other Federal accounts are not user fees. (See

OMB Circular A-11, section 20.7)

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1.8 Security Classifications (010108)

1.8.1. General

1.8.1.1. Instructions concerning premature disclosure of budget information prior

to presentation to the Congress are contained in OMB Circular A-11.

1.8.1.2. Instructions concerning security classification of the program and budget

review submissions to OSD are contained in Section 3.5.

1.8.1.3. Paper copies of the P-1 and R-1 exhibits must be submitted by

DoD Components with a certification signed by the Security Office confirming that all line items

are classified properly.

1.8.1.4. Instructions concerning security classification of congressional

justification material are contained in Section 4.1.

1.8.2. Classification of Military Personnel M-1 line items, Operation and Maintenance O-1

line items, Procurement Exhibit P-1 line items, RDT&E Exhibit R-1 line items, and the

Construction Programs (C-1):

1.8.2.1. The Military Personnel Programs (M-1) is designed to be an unclassified

document. See Section 5.1 for instructions.

1.8.2.2. The Operation and Maintenance Exhibit O-1 line items will be unclassified

to the maximum extent possible. Classify only those line items for which the program’s Security

Classification Guide so dictates or when conditions in paragraph C. (below) apply.

1.8.2.3. Procurement Exhibit P-1 line items: P-1 line items will be unclassified to

the maximum extent possible. Classify only those line items for which the program’s

Security Classification Guide so dictates or when conditions in paragraph C. (below) apply.

1.8.2.4. RDT&E Exhibit R-1 line items: R-1 line items will be unclassified to the

maximum extent possible. Classify only those line items for which the program’s

Security Classification Guide so dictates or when conditions in paragraph C. (below) apply.

1.8.2.5. The Construction Programs (C-1) is designed to be an unclassified

document. See Section 5.5 for instructions.

1.8.3. Security classification instructions for Intelligence Programs/Activities Resource

Information are contained in Chapter 16.

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1.9 Budget and Performance Integration (010109)

1.9.1. The President’s Management Agenda (PMA) targets the most apparent deficiencies

in the government where the opportunity to improve performance is the greatest. The Office of

Management and Budget (OMB) developed standards for success in the government-wide Budget

and Performance Integration Initiative of the PMA. As a result, the OMB requires federal agencies

to use performance measures in managing and justifying program resources.

1.9.2. Components shall use performance measures to justify 100 percent of the resources

requested in the Budget Year. The Components shall comply with the performance measure

requirements that are included in other chapters. Additionally, OMB has directed the use of the

Program Assessment Rating Tool (PART) for some programs. The PART is a diagnostic tool that

formalizes performance evaluation. The Components shall comply with PART taskings and

suspense dates. For those programs that have been assessed using the PART, the Components

shall include OMB’s PART Summary (published in February each year) in congressional budget

justification materials, press releases, testimony, and briefings to congressional committee staffs.

OMB Circular A-11, section 26 – Summary of Performance Information Requirements, and the

OMB PART Web site (www.whitehouse.gov/omb/part), provide additional information about the

PART and the PART process. Absent a PART or performance measures prescribed in other

chapters, the Components may use existing, or create new, performance measures.

1.10 Combatant Command Business Rules (Joint Task Assignment Process (JTAP)) (010110)

1.10.1. The following business rules will be followed to govern the financial management

arrangements between Combatant Command Support Agents (CCSAs) and Combatant

Commands (COCOM). The CCSA assignments are as follows:

1.10.1.1. Initial funding for new COCOM missions will be established by OSD.

Funding for new missions assigned by the Secretary or Deputy Secretary will be established and

provided for by OSD as part of the JTAP process and in conjunction with the

Planning, Programming, Budgeting and Execution (PPBE) processes.

1.10.1.2. It is the responsibility of the Combatant Command Support Agent

(CCSA) to maintain funding for the directed COCOM missions.

1.10.1.2.1. CCSAs will adjust COCOM accounts across the FYDP

consistent with the OSD/OMB approved inflation indices.

1.10.1.2.2. COCOMs will be subjected to a proportionate share

(on a percentage basis) of total CCSA reductions from undistributed congressional and/or OSD

general reductions.

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1.10.1.3. All Service business and efficiency reductions require prior COCOM or

OSD approval to ensure they do not impede the conduct of directed missions.

CCSAs will pre-coordinate any Service-initiated reductions to COCOM resources

with the COCOMs during each phase of the PPBE process for all years in the FYDP, and Service-

initiated reductions will not be applied to any COCOM funds without the prior approval of the

COCOM or the OSD staff.

1.10.1.4. OUSD(C), PA&E, Joint Staff, Combatant Commands and Combatant

Command Support Agents will meet annually to validate, and adjudicate as necessary, all

adjustments to COCOM resources.

OUSD(C) will review and coordinate CCSA budget exhibits that specifically pertain to COCOM

resources with COCOMS prior to approval and publication to ensure that CCSA’s have fully

complied with Program Budget Decision or Program Decision Memorandum direction.

1.10.2. Combatant Command Support Agents must ensure adequate visibility of COCOM

directed missions and other costs for each O&M funded COCOM. A minimum of two Sub

Activity Groups (SAG)s within each Military Department’s active components’ Operation and

Maintenance Appropriation will be established as follows:

1.10.2.1. Mission Funding (one or more SAGs);

1.10.2.2. Headquarters (HQ) and Headquarters Support Funding: (single SAG)

1.10.3. Budget and execution structure for USTRANSCOM will continue to follow the

normal Working Capital Fund business area structure.

1.10.4. USSOCOM budget structure is not governed by this guidance as USSOCOM

resources are already visible in Major Force Program-11 (MPF-11).

2.0 FUNDING POLICIES (0102)

2.1 Criteria for Determining Expense and Investment Costs (010201)

2.1.1. Appropriation accounts form the structure for the President’s budget request and are

the basis for congressional action. The appropriations are further organized into budget activities

of appropriations with programs, projects or activities of similar purposes. To support

management of the Department of Defense’s programs, projects or activities, resource

requirements should be organized and categorized consistently within the appropriation and budget

activity structure. The following sections provide guidance for categorizing resource requirements

into the various appropriations.

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2.1.2. Basic Distinctions Between Expense and Investment Costs. The criteria for cost

definitions consider the intrinsic or innate qualities of the item such as durability in the case of an

investment cost or consumability in the case of an operating cost and the conditional circumstances

under which an item is used or the way it is managed. In all cases where the definitions appear to

conflict, the conditional circumstances will prevail. The following guidance is provided to

determine whether a cost is either an expense or an investment. All costs are classified as either

an expense or an investment.

2.1.2.1. Expenses are the costs incurred to operate and maintain the organization,

such as personal services, supplies, and utilities.

2.1.2.2. Investments are the costs that result in the acquisition of, or an addition to,

end items. These costs benefit future periods and generally are of a long-term character such as

real property and personal property.

2.1.3. Policy for Expense and Investment Costs

2.1.3.1. DoD policy requires cost definition criteria that can be used in determining

the content of the programs and activities that comprise the Defense budget. The primary reasons

for these distinctions are to allow for more informed resource allocation decisions and to establish

criteria for determining which costs are appropriate to the various defense appropriations.

2.1.3.2. The cost definition criteria contained in this policy are only applicable to

the determination of the appropriation to be used for budgeting and execution. Cost definitions

for accounting purposes are contained in Volume 1.

2.1.3.3. Costs budgeted in the Operation and Maintenance (O&M) and

Military Personnel appropriations are considered expenses. Costs budgeted in the

Procurement and Military Construction appropriations are considered investments. Costs

budgeted in the Research, Development, Test and Evaluation (RDT&E), Base Realignment and

Closure (BRAC), and Family Housing appropriations include both expenses and investments.

Definitions for costs within the Defense Working Capital Funds are provided in Chapter 9 and in

Section 2.14.

2.1.3.4. Items procured from the Defense Working Capital Funds will be treated

as expenses in all cases except when intended for use in weapon system outfitting, government

furnished material (GFM) on new procurement contracts, or for installation as part of a weapon

system modification, major reactivation, or major service life extension.

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2.1.4. Procedures for Determining Expenses Versus Investments. The following criteria

will be used to distinguish those types of costs to be classified as expenses from those to be

classified as investments for budgeting purposes:

2.1.4.1. Expenses. Expenses are costs of resources consumed in operating and

maintaining the Department of Defense. When costs generally considered as expenses are

included in the production or construction of an investment item, they shall be classified as

investment costs. Military personnel costs are an exception to this rule. The following guidelines

shall be used to determine expense costs:

2.1.4.1.1. Labor of civilian, military, or contractor personnel.

2.1.4.1.2. Rental charges for equipment and facilities.

2.1.4.1.3. Food, clothing, and fuel.

2.1.4.1.4. Supplies and materials designated for supply management of the

Defense Working Capital Funds.

2.1.4.1.5. Maintenance, repair, overhaul, rework of equipment.

2.1.4.1.6. Assemblies, spares and repair parts, and other items of equipment

that are not designated for centralized item management and asset control and which have a system

unit cost less than the currently approved dollar threshold of $250,000 for expense and investment

determinations. This criterion is applied on the basis of the unit cost of a complete system rather

than on individual items of equipment or components that, when aggregated, become a system.

The concept of a system must be considered in evaluating the procurement of an individual end

item. A system is comprised of a number of components that are part of and function within the

context of a whole to satisfy a documented requirement. In this case, system unit cost applies to

the aggregate cost of all components being acquired as a new system.

2.1.4.1.7. Cost of incidental material and items that are not known until the

end item is being modified are conditional requirements and are considered expenses because the

material is needed to sustain or repair the end item.

2.1.4.1.8. Engineering efforts to determine what a modification will

ultimately be or to determine how to satisfy a deficiency are expenses.

2.1.4.1.9. Facilities sustainment, O&M-funded restoration and

modernization projects. 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.

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2.1.4.2. Investments. Investments are costs to acquire capital assets such as real

property and equipment. The following criteria shall be used to determine those costs to be

classified as investments:

2.1.4.2.1. All items of equipment, including assemblies, ammunition and

explosives, modification kits (the components of which are known at the outset of the

modification), spares and repair parts not managed by the Defense Working Capital Funds, that

are subject to centralized item management and asset control.

2.1.4.2.2. All equipment items that are not subject to centralized item

management and asset control and have a system unit cost equal to or greater than the currently

approved expense and investment dollar threshold of $250,000 (for working capital funds

investment criteria see Volume 2B, Chapter 9, Section 090103C). The validated requirement may

not be fragmented or acquired in a piecemeal fashion in order to circumvent the expense and

investment criteria policy.

2.1.4.2.3. Construction, including the cost of land and rights therein

(other than leasehold). Construction includes real property equipment installed and made an

integral part of such facilities, related site preparation, and other land improvements.

(See paragraph 2.1.4.2.6 below for special guidance concerning real property facilities.)

2.1.4.2.4. The costs of modification kits, assemblies, equipment, and

material for modernization programs, ship conversions, major reactivations, major remanufacture

programs, major service life extension programs, and the labor associated with incorporating these

efforts into or as part of the end item are considered investments. All items included in the

modification kit are considered investment even though some of the individual items may

otherwise be considered as an expense. Components that were not part of the modification content

at the outset and which are subsequently needed for repair are expenses. The cost of labor for the

installation of modification kits and assemblies is an investment.

2.1.4.2.5. Supply management items of the Defense Working Capital

Funds designated for weapon system outfitting, government-furnished material on new

procurement contracts, or for installation as part of a weapon system modification or

modernization, major reactivation or major service life extension.

2.1.4.2.6. Also considered as investments are support elements such as

data, factory training, support equipment and interim contractor support (ICS), which are required

to support the procurement of a new weapon system or modification.

2.1.4.3. Conditional Cases. The following are conditional cases that take

precedence over the criteria contained in paragraphs 2.1.4.1 and 2.1.4.2 above:

2.1.4.3.1. A major service-life extension program, financed in

procurement, extends the life of a weapon system beyond its designed service life through

large-scale redesign or other alteration of the weapon system.

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2.1.4.3.2. Depot and field level maintenance is the routine, recurring effort

conducted to sustain the operational availability of an end item. Depot and field level maintenance

includes refurbishment and overhaul of end items, removal and replacement of secondary items

and components, as well as repair and remanufacturing of reparable components. The maintenance

effort may be performed by a depot maintenance activity in the Defense Working Capital Fund,

by a direct funded DoD activity, by another government agency, or by a contractor.

2.1.4.3.3. Maintenance, repair, overhaul, and rework of equipment are

funded in the operation and maintenance appropriations. However, maintenance of equipment

used exclusively for research, development, test, and evaluation efforts will be funded by the

RDT&E appropriations. Continuous technology refreshment is the intentional, incremental

insertion of newer technology to improve reliability, improve maintainability, reduce cost, and/or

add minor performance enhancement, typically in conjunction with depot or field level

maintenance. The insertion of such technology into end items as part of maintenance is funded by

the operation and maintenance appropriations. However, technology refreshment that

significantly changes the performance envelope of the end item is considered a modification and,

therefore, an investment (See section on “Product Improvement” 2.13.3.7). 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

Department.

2.1.4.3.4. Initial outfitting of an end item of investment equipment, such as

a ship or aircraft, with the furnishings, fixtures, and equipment necessary to make it complete and

ready to operate is a part of the initial investment cost. Material procured through the Defense

Working Capital Funds for initial outfitting will be financed by procurement appropriations when

drawn from the supply system. This concept includes changes to the allowance lists of ships,

vehicles, and other equipment. Changes to allowance lists will be budgeted as investment costs.

Procurement appropriations are not required to satisfy initial outfitting requirements if assets are

available for issue through reuse/redistribution programs, such as the Navy's Consumable Asset

Reutilization Program.

2.1.4.3.5. Initial outfitting of a facility construction project financed by a

Military Construction appropriation is financed as either expense or investment based on the

general criteria. Collateral equipment and furnishings are not considered construction costs since

these items are movable and are not installed as an integral part of the facility.

2.1.4.3.6. When family housing is initially outfitted with kitchen

equipment to include refrigerator, shades, carpeting, etc., these items are considered part of the

construction costs.

2.1.4.3.7. Construction program costs, associated with construction

management in general, as distinguished from supervision of specific construction projects, are

expenses. Costs incident to the acquisition (i.e., design, direct engineering, technical

specifications) and construction of a specific project are investments. The cost of administering

the facilities sustainment program is an expense at all levels.

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2.1.4.3.8. Costs of facilities restoration and modernization projects, not

financed by Military Construction appropriations, meeting the current criterion for funding from

appropriations available for operation and maintenance are considered expenses. However, this

definition does not abrogate the prohibition against the planned acquisition of, or improvements

to, a real property facility through a series of minor construction projects (i.e., incremental

construction).

2.1.4.3.9. The cost of civilian personnel compensation and other direct

costs (i.e., travel, office equipment leasing, maintenance, printing and reproduction) incurred in

support of procurement and/or production programs by departmental headquarters staff,

contracting offices, contract audit offices, system project offices, and acquisition managers are

expenses. Procurement and/or production direct support costs such as production testing, quality

assurance, production engineering, and equipment assembly, whether performed under contract or

by in-house personnel funded on a reimbursable basis are investments.

2.1.4.3.10. When investment equipment is to be installed in a real property

facility, the costs of both the equipment and its installation are considered investments.

2.1.5. Special Guidance Concerning Real Property Facilities

2.1.5.1. Construction includes real property equipment (often called installed

equipment) which is affixed and built into a facility as an integral part of a facility. The cost of

this equipment and its installation is part of the construction cost.

2.1.5.2. Items of equipment that are movable in nature and not affixed as an

integral part of a facility are not normally considered construction costs, except for initial outfitting

of family housing, as detailed in paragraph D3 above. This equipment includes all types of

production, processing, technical, information systems, communications, training, servicing and

RDT&E equipment. The cost of this equipment is an expense or an investment according to the

policy criteria above. In addition, modifications to an existing facility required to support the

installation of movable equipment, such as the installation of false floors or platforms,

prefabricated clean rooms, or utilities, will be considered an integral part of the equipment costs.

As such, the costs are either expense or investment, as long as the modifications do not include

structural changes to the building. If the modifications include structural changes, they will be

considered investment costs and budgeted as construction.

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2.1.6. Expense/Investment Cost Determination

Expense/Investment Cost Determination

Is the item a

Then

Centrally

Managed/Asset

Controlled

Item?

Yes

Is the item

purchased from

DWCF?

Yes

Is the item part of

a full funding

effort? *

Yes

Classify as

Investment

Centrally

Managed/Asset

Controlled

Item?

Yes

Is the item

purchased from

DWCF?

Yes

Is the item part of

a full funding

effort? *

Classify as

Expense

Centrally

Managed/Asset

Controlled

Item?

Yes

Is the item

purchased from

DWCF?

Classify as

Investment

Blank

Centrally

Managed/Asset

Controlled

Item?

Is the unit cost

more than

$250,000?

Yes

Classify as

Investment

Blank

Centrally

Managed/Asset

Controlled

Item?

Is the unit cost

more than

$250,000?

Classify as

Expense

Blank

* When intended for use in weapon system outfitting, government furnished material on new

procurement contracts or for installation as part of a weapon as part of a weapon system

modification, major reactivation or major service life extension.

*2.2 Full Funding of Procurement Programs (010202)

2.2.1. General. A budgeting rule that requires the total estimated cost of a, military useable

end item, be funded in the fiscal year in which the item is procured. Under the full funding policy,

the entire procurement cost of a weapon or piece of military equipment is to be funded in the year

in which the item is budgeted. An end item budgeted in a fiscal year cannot depend upon a future

years funding to complete the procurement. Regulations governing the full funding policy are

found in Office of Management and Budget (OMB) Circular A-11 and DoD Directive 7000.14-R.

2.2.1.1. The full funding policy is intended to prevent the use of incremental

funding, under which the cost of a weapon system is divided into two or more annual portions or

increments. Thus, full funding provides disciplined approach for program managers to execute

their programs within cost and available funding.

2.2.1.2. There are two general exceptions to the full funding policy: one permits

the use of Advance Procurement (AP) funding for components or parts of an item that have long

production lead times; the other permits advance procurement funding for economic order quantity

(EOQ) procurement, which normally occurs in programs that have been approved for multiyear

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procurements (MYP). Advance Procurement funding is used routinely and extensively in the

procurement of components for major end items due to manufacturing and production lead times.

The use of MYP has to be approved by the Congress on a program-by-program basis.

Congressional approval permits DoD to use a single contract to procure multiple copies of a given

item that are scheduled to be procured across a series of years. MYP arrangements are governed

by 10 USC 2306(b). EOQ procurement involves procuring multiple copies of a key component

of a weapon covered by an MYP at the start of the MYP period in order to achieve significantly

reduced costs on that component.

2.2.2. Policy for Full Funding. The total estimated cost of a complete, military useable

end item or construction project must be fully funded in the year it is procured. There are 2 basic

policies concerning full funding.

2.2.2.1. To provide funds in the budget for the total estimated cost of a complete,

military usable end item to document the dimensions and cost of a program.

2.2.2.2. Exceptions to this policy are advance procurement for long lead-time

items and advance economic order quantity (EOQ) procurement. EOQ may be used only in

connection with multiyear procurements. Both efforts must be identified in an Exhibit P-10,

Advance Procurement, for the Budget Estimate Submission and the President’s Budget request.

2.2.3. Procedures for Full Funding

2.2.3.1. Cost Estimates. Full funding applies to an initial estimate and can exist

only at a point in time because estimates change. However, the Future Years Defense Program

(FYDP) shall be a consistently reliable foundation for stating the total cost of acquiring defense

systems. Thus, the FYDP shall reflect a DoD Component’s best estimate at completion of the

program. The estimate should reflect the most likely cost of a procurement. Program estimates

shall be kept current and fully financed through the Planning, Programming, Budgeting and

Execution (PPBE) System process and established reprogramming procedures.

2.2.3.2. Time-Phased Procurement. Within defense system acquisition programs,

nonrecurring costs and costs of certain production items related to, but not integral to, the end item

of equipment are considered part of the overall acquisition cost. DoD Components shall plan and

budget in a manner to ensure completion of the nonrecurring effort or delivery of such production

items consistent with the planned delivery of the associated end items. That is, the programming

and budgeting shall be on a time-phased "lead-time away" or "need to commit" basis. The Funded

Delivery Period is part of the process to determine the quantities required to be budgeted in a

particular fiscal year. DoD Components may not budget funds for obligation for items such as

support, trainers, or data before the design or specifications of such items are essentially complete.

These items shall be budgeted on an "ability to contract" basis as well as on a "lead-time away"

basis.

2.2.3.3. Advance Procurement (Long Lead-time Items). Advance procurement

requests for long lead-time items shall be limited to the end items in major procurement

appropriations. Long lead-time procurements shall be for components, parts, and material whose

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lead-times are greater than the life of the appropriation (3-5 years). In some circumstances,

Advance Procurement is also warranted when items have significantly longer lead-times than other

components, parts, and material of the same end item or when efforts must be funded in an advance

procurement timeframe in order to maintain a planned production schedule. For new development

programs, the planned production schedule should be based on a full funding basis without the use

of long lead material. Planning the program content this way provides additional flexibility should

development delays arise. When advance procurement is part of the program, however, the cost

of components, material, parts, and effort budgeted for advance procurement shall be relatively

low compared to the remaining portion of the cost of the end item. Each budget request for

advance procurement shall represent, at a minimum, the termination liability associated with the

total cost of the long lead-time components, material, parts, and effort for which the advance

procurement request is being made. The termination liability should not cover the cost of the end

item budgeted in the following fiscal year(s). The full cost of components, material, parts, and

effort included in the advance procurement request should be budgeted in the FYDP consistent

with full funding procedures. The budget requests will properly debit and credit advance

procurement budget requests as defined in Exhibits P-1, P-5, P-10 and P-40 instructions.

2.2.3.4. Economic Order Quantity (EOQ) Procurement. EOQ may be used only in

connection with multiyear procurement. It is the general policy of the Department of Defense not

to create unfunded contract liabilities for EOQ procurements. Rather, funding for EOQ

procurements shall be included in advance procurement budget requests unless an exception to the

general policy is granted by the USD(Comptroller). The EOQ procurement may satisfy

procurement requirements for no more than the number of program years covered by the multiyear

procurement contract. Unless it would be more effective to fully fund the EOQ, or the

USD(Comptroller) has granted an exception to the general policy to allow inclusion of EOQ costs

in a cancellation clause, the advance procurement funding for an EOQ procurement shall cover, at

a minimum, the estimated termination liability of the EOQ procurement.

2.2.3.5. Relationship of Budgeting and Contracting. An end item is fully funded

only when funds are budgeted, programmed and available to cover the total estimated cost of the

item at the time the procurement action is begun. Contracting, on the other hand, is a part of the

execution phase or acquisition process within the framework of a program. The number of

contracts required to procure a defense system, the type of contract awarded, and the timing of the

award have no bearing upon whether or not an item is fully funded. In executing a program, no

procurement of material or equipment, or work or services, therefore, shall be directed or

implemented unless the full program amount is available, except for authorized economical order

quantity (EOQ) and advance procurement. Similarly, the value of existing contracts for the

procurement of material or equipment shall not be increased (through contract modifications)

unless the funds are available to fully fund the new contract price. Limitations of funds clauses

shall not be used as a mean of avoiding the requirement to fully fund procurement programs.

(Note that this guidance does not affect the proper use of limitations of funds clauses in

incrementally funded development contracts.) For multiyear contracts, the test of full funding

does not include the cancellation ceiling associated with items in the FYDP to be procured in fiscal

years not yet funded (that is, beyond the budget year). Multiyear contracts may not be awarded

unless the contract and the multiyear program are fully funded within the approved FYDP funding.

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2.3 Multiyear Procurement (010203)

2.3.1. Multiyear procurement (MYP). This is a generic term describing the process,

planning, and contract under which the government may contract for the purchase of supplies or

services for more than one, but not more than five, program years. Such a contract may provide

that performance during the second and subsequent years of the contract is contingent upon the

appropriation of funds, and may provide for a cancellation payment to be made to the contractor

if such appropriations are not made. Multiyear procurements are budgeted and funded annually.

2.3.2. Statutory Requirements. Section 2306b of title 10 of the United States Code and

section 8008 of the annual DoD Appropriations Act, require that approval, initiation, and

execution of a multiyear contract follow certain guidelines.

2.3.2.1. MYP approval is predicated on:

2.3.2.1.1. Substantial Savings. The use of a multiyear contract will result

in substantial savings of the total anticipated costs of carrying out the program through annual

contracts.

2.3.2.1.2. Stability of Requirement. The minimum need for the property to

be purchased is expected to remain substantially unchanged during the contemplated contract

period in terms of production rate, procurement rate, and total quantities.

2.3.2.1.3. Stability of Funding. There is a reasonable expectation that

throughout the contemplated contract period, the head of the agency will request funding for the

contract at the level required to avoid contract cancellation.

2.3.2.1.4. Stable Design. There is a stable design for the property to be

acquired and the technical risks associated with such property are not excessive.

2.3.2.1.5. Realistic Cost Estimates. The estimates of the cost of the contract

and the anticipated cost avoidance through the use of a multiyear contract are realistic.

2.3.2.1.6. National Security. Use of a multiyear contract will promote the

national security of the United States.

2.3.2.2. In addition to the approval criteria, Congress requires that:

2.3.2.2.1. MYP contracts cannot be initiated for any system or component

thereof if the value of the MYP contract would exceed $500.0 million unless specifically provided

for in an Appropriations Act and an Act other than an Appropriations Act.

2.3.2.2.2. Proposed legislation and funding must accompany the MYP

request in the President's budget submission; or the MYP request must be formally submitted as a

budget amendment.

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2.3.2.2.3. Funds appropriated for the purchase of an end item under a

multi-year contract may only be used for a complete and usable end item.

2.3.2.2.4. Funds appropriated for advanced procurement under a multi-year

contract may only be used to fund the long lead items necessary for a complete and usable end

item planned and budgeted for a subsequent fiscal year. Advanced procurement funds may also

be used for economic order quantity procurements in connection with a multi-year contract when

authorized by law.

2.3.2.2.5. Congressional defense committees must be notified at least

30 days in advance of a proposed contract award that: employs economic order quantity

procurements in excess of $20.0 million in any one year of the contract; employs advance

procurement leading to a multi-year procurement contract that employs economic order quantity

procurement in excess of $20.0 million in any one year; or includes an unfunded contingent

liability in excess of $20.0 million.

2.3.2.2.6. A multi-year procurement contract cannot be initiated for which

the economic order quantity advance procurement is not funded at least to the limits of the

government’s liability.

2.3.2.2.7. A multi-year procurement contract must provide for production

at not less than the minimum economic rate given the existing tooling and facilities.

2.3.2.2.8. A present value analysis must be used to determine the present

value, or real worth, of the multi-year savings. Comparing the multi-year contracting approach to

a conventional annual-buy approach derives the savings (see section 8008 for additional (new)

requirements.

2.3.2.2.9. The Secretary of Defense must certify to the Congress that the

support costs associated with the multiyear procurement with a value greater than $500 million are

fully funded within the Future Years Defense Program (FYDP). The Secretary of Defense in a

March 23, 1998 memorandum delegated this certification to the USD Comptroller. Components

must submit the certification letter to the USD Comptroller at least 30 days prior to the anticipated

contract award for approval, signature, and transmittal to the congressional defense committees.

2.3.2.2.10. Multi-year procurement contracts may provide for cancellation

provisions to the extent that such provisions are necessary and in the best interests of the

United States. The cancellation provisions may include consideration of both recurring and

nonrecurring costs of the contractor associated with the production of the items to be delivered

under the contract, but may not include recurring costs associated with unfunded units.

The Agency Head and the USD(C) must approve the inclusion of recurring costs in a cancellation

ceiling (see paragraph 2.2.3 below).

2.3.2.2.11. Before any multiyear procurement contract that contains a

clause setting forth a cancellation ceiling in excess of $100.0 million may be awarded, the head of

the agency concerned shall give written notification of the proposed contract and of the proposed

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cancellation ceiling for that contract to the congressional defense committees. The contract may

not be awarded until the end of a 30-day waiting period beginning on the date of such notification.

2.3.2.2.11.l. MYP contracts cannot be terminated without a 10-day

prior notification to the congressional defense committees.

2.3.3. DoD Requirements.

2.3.3.1. The item should be technically mature, normally having completed

RDT&E (including development testing, or equivalent) and Initial Operational, Test and

Evaluation (IOT&E), with relatively few changes in item design anticipated. Deliveries of

production items will indicate that the underlying technology is stable. This does not mean that

changes will not occur but that the estimated cost of such changes is not anticipated to drive total

costs beyond the proposed funding profile.

2.3.3.2. Estimates should be based on prior cost history for the same or similar

items or proven cost estimating techniques. Normally, production assets should have been

delivered in order to obtain actual costs for the comparisons (exceptions include satellites and

ships).

2.3.3.3. With the exception of funding for economic order quantity (EOQ)

procurement and advance procurement for long lead-time items as defined in section 2.2,

multi-year procurement contracts will comply with full funding. The full funding policy shall

apply to each individual year of the multiyear contract. Multi-year contracts shall not be used as

a vehicle for incrementally funding the items across the fiscal years covered by the contract.

The production lots on the contract shall be the same as those described in the budget and advance

procurement shall not be used to achieve a higher production rate for the end item. Funds shall

not be “borrowed” from the amounts budgeted for items in the early fiscal years of a multi-year

contract to begin work on items not budgeted until later fiscal years of the contract.

2.3.3.4. The inclusion of recurring costs in cancellation ceilings is an exception to

normal contract financing arrangements and requires approval by the Agency Head

(FAR 17.106-3(e)) and the USD Comptroller.

2.3.3.5. An exception, to be approved by the USD Comptroller, is needed to

structure a contract with an unfunded cancellation ceiling. Justification explaining why an

unfunded cancellation ceiling is the chosen acquisition strategy should be provided. This

justification should specify what costs comprise the unfunded cancellation ceiling and why these

costs are not funded under the full funding policy.

2.3.3.6. In keeping with the DoD policy of not relying upon industry to finance the

cost of Defense programs, even on a temporary basis, the use of unfunded cancellation ceilings on

multi-year contracts shall be rare and shall not be unreasonably large relative to the total budget

for any individual fiscal year.

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2.3.3.7. Funds obligated for multiyear contracts must be sufficient to cover any

potential termination costs. The costs of cancellation or termination may be paid from

(1) appropriations originally available for the performance of the contract concerned;

(2) appropriations currently available for procurement of the type of property concerned, and not

otherwise obligated; or (3) funds appropriated for those payments.

2.4 Buy-to-Budget for Acquisition of End Items (010204)

2.4.1. In accordance with United States Code Title 10, Section 2308, the head of an agency

making the acquisition may acquire a higher quantity of the end item than the quantity specified

in applicable Appropriations Acts if the following conditions are met:

2.4.1.1. The agency has an established requirement for the end item that is

expected to remain substantially unchanged throughout the period of the acquisition.

2.4.1.2. It is possible to acquire the higher quantity of the end item without

additional funding because of production efficiencies or other cost reductions.

2.4.1.3. The amount of the funds used for the acquisition of the higher quantity of

the end item will not exceed the amount provided under that law for the acquisition of the end

item.

2.4.1.4. The amount provided is sufficient to ensure that each unit of the end item

acquired within the higher quantity is fully funded as a complete end item.

2.4.2. For noncompetitive acquisitions, the acquisition of additional quantities is limited

to not more than 10 percent of the quantity approved in the justification and approval prepared in

accordance with United States Code Title 10, Section 2304, and Federal Acquisition Regulation

Part 6.

2.4.3. The agency head must notify the congressional defense committees of a decision to

buy more items than specified in an Appropriations Act not later than 30 days after the date of the

decision.

2.5 Transportation (010205)

2.5.1. First Destination Transportation (FDT) is that transportation required to deliver

new, an upgraded model, or recapitalized production items from the manufacturer’s plant or source

of procurement to the first point of delivery where the Military Service or Defense Agency takes

possession and/or ownership of that item. The procurement source, as used herein, is any supplier

outside the DoD supply system or any DoD industrial activity that fabricates new materiel. The

procurement source or the first point of delivery may be in the Continental United States (CONUS)

or overseas. FDT is not applicable to components or items reworked by an industrial activity. In

the case where the Government accepts the production item at the manufacturer’s plant or source

of production and legally owns the item, FDT extends to the first point of delivery for either use

or storage by the Military Service or Defense Agency. For shipments destined to overseas

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locations that will enter the Defense Transportation System, FDT terminates at the port of

embarkation (CONUS or overseas).

2.5.2. Second Destination Transportation (SDT) is any transportation other than FDT

2.5.3. Budgeting Responsibilities for Transportation

2.5.3.1. Transportation of Supply Management Materiel of the Defense Working

Capital Funds. Transportation among the 50 states is financed by the supply management business

area responsible for the shipment. Transportation of supply management standard items overseas

is financed by the appropriation or fund ordering the materiel if within the definition of FDT,

otherwise it is financed as SDT. Transportation of DWCF nonstandard items overseas is financed

in the same manner as transportation of standard items overseas except for items that are shipped

on a free-on-board (FOB) destination basis. In this case, the overseas shipment transportation cost

is included in the cost of the nonstandard item and no additional transportation charges should be

incurred for the overseas shipment.

2.5.3.2. Transportation of Items Procured by Other Than Procurement and O&M

Appropriations, or Defense Working Capital Funds. In general, FDT is financed by the

appropriation, which financed acquisition of the item, i.e., RDT&E appropriations for RDT&E

materiel and Military Construction appropriations for items that are shipped to support such

construction projects. All over-ocean shipment of subsistence items financed by the

Military Personnel appropriations is considered as an exception and is financed as SDT.

2.5.3.3. Transportation of Items Procured by Procurement Appropriations. FDT is

normally financed by the Procurement appropriation that financed acquisition of the item. SDT is

normally financed by the Operation & Maintenance (O&M) appropriations. The following

additional guidance applies:

2.5.3.3.1. Transportation costs integral to production contract price such as

FOB destination charges are considered part of the end item unit price and are financed by the

procurement appropriation that financed acquisition of the item.

2.5.3.3.2. All transportation of government furnished equipment (GFE)

and government furnished materiel (GFM) prior to installation into an end item is considered FDT

and is financed by the procurement appropriation that financed acquisition of the item.

2.5.3.3.3. The transportation of items that are not owned by DoD - such as

nuclear materials and warheads that DOE provides to DoD but DOE retains ownership - is

considered FDT and is financed by the procurement appropriation that financed the acquisition of

the end item into which the item will be incorporated.

2.5.3.4. Transportation of Items Procured by O&M Appropriations.

Transportation is financed by the O&M appropriation according to the FDT and SDT definitions.

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2.6 Engineering Change Orders (010206)

Engineering change orders should be funded commensurate with the level of risk in the

program.

2.7 Factory Training (010207)

Factory training course costs for initial cadre training are considered investment costs and

should be budgeted and funded in the investment appropriation and the specific program used to

procure the development, acquisition, or modification of the related end item. Temporary Duty

(TDY) travel costs of military or civilian personnel attending factory training courses are funded

in the Operation and Maintenance appropriations. Factory training courses acquired for end items

no longer in production are to be funded in the Operation and Maintenance appropriations.

2.8 Interim Contractor Support (010208)

Interim contractor support (ICS) is the maintenance and support of a new weapon system

provided by a commercial vendor pending transition to organic support. Because ICS is a major

component of the initial logistics support of a newly fielded system and integral to program

acquisition, ICS funding requirements should be budgeted in the Procurement appropriations.

However, ICS is intended to provide support for the brief period between initial item deployment

and the permanent organic support. All acquisition strategies should attempt to minimize ICS

requirements and duration. ICS will only be funded in Procurement appropriations until the

organic support date specified in the acquisition program baseline is achieved. Continued funding

of ICS after the baseline support transition date will be approved on an exception basis.

2.9 Commercial Off-the-Shelf (COTS) and Non-Developmental Item (NDI) Procurement

(010209)

Items purchased directly from a commercial source that can be utilized without alteration

or modification are classified as COTS or NDI. All COTS and NDIs, including the first article

and associated first article acceptance testing should be funded in the Procurement or O&M

appropriations, as determined by the Expense and Investment criteria. If an end item requires

design and development in order to accept the COTS or NDI, or if Operational Test & Evaluation

(OT&E) is required to determine military suitability and effectiveness; or if Live Fire Test &

Evaluation (LFT&E) is required to determine whether the COT/NDI possesses survivability and

lethality characteristics needed by operational forces, then the entire effort is not COTS or NDI,

and funding for that effort should be budgeted in RDT&E. If a COTS or NDI is required for

RDT&E test purposes, the cost is funded in RDT&E.

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2.10 Spares and Repair Parts (010210)

2.10.1. This Section provides instructions applicable to funding requests for spares and

repair parts procured with direct appropriations in the Procurement Title.

2.10.1.1. Initial Spares and Repair Parts. Initial spares and repair parts will include

those repairable components, assemblies, and subassemblies required as initial stockage at all

levels including the pipeline to permit fielding of new end items. Whole spare engines will be

classified as initial spares through the life of system. Funding will be budgeted based on a first

year obligation rate of 92 percent.

2.10.1.2. War Reserve Spares and Repair Parts. War reserve material (WRM)

spares and repair parts for initial stockage will be budgeted in replenishment except for whole

spare engines in accordance with the above definitions. See Section 2.17, Defense Working

Capital Funds - War Reserve Materiel, for additional budgeting WRM policies.

2.10.2. The Operation and Maintenance (O&M) accounts will finance the purchase of

depot level repairables (DLRs) and consumable repair parts, primarily through the

Defense Working Capital Fund (DWCF), for maintenance of all Class IX equipment

(excluding medical peculiar repair parts).

2.10.3. Spares budgeting can be aggregated by weapon system except for

Selected Acquisition Report (SAR) systems.

2.11 Direct and Reimbursable Budget Plans (010211)

2.11.1. Direct Budget Plan. This plan includes those items of materiel to be purchased for

delivery to service inventory and those procurement programs that support the acquisition of

materiel for US forces. Financing for the direct budget plan is derived from: new budget authority

provided by the Congress, the transfer of resources from other appropriations, and reimbursements.

When dealing with reimbursements involving the sale of materiel, three situations can arise:

2.11.1.1. Replacement-in-Kind. In this situation an item of materiel is sold and

will require replacement with an item of the identical type, model, and series or modified version

of the same basic model (i.e., the sale of C-130E aircraft and purchase of C-130E aircraft). In this

situation the reimbursement from the sale will be included in reimbursable financing and the

buy-back of the item in the reimbursable program. There will be no reflection of this transaction

in the Direct Budget Plan. For an ammunition item, the replacement-in-kind policy permits

replacement of a round with any round that provides the same warfighting mission capability,

providing the round to be purchased has been previously approved by the Congress for

procurement, and the inventory objective presented to the Congress is not exceeded.

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2.11.1.2. Replacement. In this situation an item of materiel is sold and will require

replacement to compensate DoD inventories for the resultant loss of capability or readiness.

Because of one or more circumstances, the replacement item will not be identical to the item sold.

It must, however, be a later series or modified version of the same basic model (e.g., sale of a

C-130A aircraft and purchase of a C-130E aircraft) or an acceptable substitute item used in the

requirements computations (e.g. sale of an M-48 tank and purchase of an M-60 tank). In this

situation the reimbursement from the sale will be included under reimbursable financing but the

buy-back of the replacement item must be shown under the Direct Budget Plan and must comply

with reprogramming requirements.

2.11.1.2.1. Items sold from inventory with a unit cost less than $5,000 will

be treated as a replacement-in-kind if an improved model of the same end item is being procured,

it provides the same warfighting capability, and the inventory objective presented to Congress is

not exceeded.

2.11.1.2.2. If an item is eligible for replacement or replacement-in-kind and

is not replaced, the reimbursement should be treated as a "free asset."

2.11.1.3. Free Assets. In this situation an item of materiel is sold and will not

require replacement. All free assets from FMS transactions are required to be deposited into the

Miscellaneous Receipts of the US Treasury in accordance with 10 U.S.C. 114(c)(2).

2.11.2. Reimbursable Budget Plan. This plan includes those items of materiel to be

purchased for delivery to and use by customers. Financing for the reimbursable budget plan is

derived from:

2.11.2.1. Anticipated reimbursement based upon customer orders received for

items (not stocked by or purchased for procuring service use) to be purchased for direct delivery

to a customer. (Direct citation of customer funds for procurement against this type of order is

encouraged where common components and/or common assembly with service production of

similar items are not involved.)

2.11.2.2. Anticipated reimbursement based upon customer orders received or to be

received for items common to the procuring service and customer, for direct delivery to the

customer.

2.11.2.3. Where the materiel item is to be made available from on-order quantities

under an existing contract of a Military Department, the sales transactions will be reflected as

reimbursable transactions. The quantities and costs of the replacement procurement will be

included in the reimbursable program.

2.11.2.4. Where the materiel item is to be made available directly from a contract

awarded after the date of the sales agreement and the contract includes a particular quantity of the

item to fulfill the sales agreement, the transaction will be reflected as a direct cite transaction.

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2.11.2.5. In "Replacement-in-Kind" situations, the proceeds from the sale will be

included under reimbursable financing and the buy-back program will be included in the

Reimbursable Budget Plan.

2.11.2.6. In "Replacement" situations, the proceeds from the sale will be included

under reimbursable financing but the buy-back program will be included under the Direct Budget

Plan (not the Reimbursable Budget Plan).

2.11.2.7. Reimbursements from customer orders for secondary items, because of

the nature of such commodities and the way they must be managed, will always be treated as a

generic category requiring, by definition, "replacement-in-kind." Accordingly, the proceeds from

such transactions will be included under reimbursable financing and the buy-back of an equivalent

value of such commodities will be included in the Reimbursable Budget Plan.

2.12 Budgeting for Information Technology and Automated Information Systems (010212)

2.12.1. Information Technology and Automated Information Systems that are not

embedded in weapons systems and/or major end item procurements are budgeted according to the

investment and expense criteria (see 2.1) and the appropriation or fund’s purpose.

2.12.2. The correct appropriation for budgeting an IT effort is dependent on the activity

and the underlying tasks that make up the IT effort. RDT&E activities and Working Capital Fund

activities follow unique procedures as noted in the following paragraphs. All other activities

budget for IT efforts based solely on the underlying purpose for the IT effort.

2.12.2.1. An IT effort may require funding for more than one appropriation. The

underlying purpose for each discrete task within an IT effort determines the correct appropriation

for budgeting of that task. An effort that is so broadly defined that it contains separate tasks

appropriate to budgeting in different appropriations should be separated into discrete tasks, each

of which is budgeted in the correct appropriation.

2.12.2.2. The following guidelines are provided to help determine which

appropriation to use:

2.12.2.3. RDT&E appropriations: Development, test and evaluation requirements,

including designing prototypes and processes, should be budgeted in the RDT&E appropriations.

The RDT&E funds should be used to develop major upgrades increasing the performance envelope

of existing systems, purchase test articles, and conduct developmental testing and/or initial

operational test and evaluation prior to system acceptance. In general, all developmental activities

involved in bringing a program to its objective system are to be budgeted in RDT&E.

2.12.2.3.1. Reaching the objective system, as defined in the requirements

documents, is a critical determinate. Some software programs, particularly those following a spiral

or incremental development pattern, may be approved for initial fielding even though the early

capability is below the objective system requirements. The follow-on development and test

activities required to reach the objective system performance will be budgeted in RDT&E.

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2.12.2.3.2. Commercial-off-the-shelf (COTS) systems that require

engineering design, integration, test, and evaluation to achieve the objective performance will be

budgeted in RDT&E.

2.12.2.3.3. The acquisition, operation and maintenance of IT systems that

are used exclusively to support RDT&E activities will be budgeted and funded within an RDT&E

appropriation.

2.12.2.4. Procurement appropriations: Acquiring and deploying a complete system

with a cost of $250,000 or more is an investment and should be budgeted in a Procurement

appropriation. Complete system cost is the aggregate cost of all components (e.g., equipment,

integration, engineering support and software) that are part of, and function together, as a system

to meet an approved documented requirement. For modification efforts, only the cost of the

upgrade (e.g., new software, hardware, and technical assistance) is counted towards the investment

threshold. The total cumulative cost of the system is not considered when deciding what

appropriation to use to fund modernization.

2.12.2.4.1. Procurement of fully developed and tested modification kits and

associated installation, including technical assistance is financed from Procurement

appropriations. Equipment purchased after successful system testing and a favorable fielding

decisions is funded with procurement dollars.

2.12.2.4.2. Proprietary software carries a copyright from the vendor that

prohibits duplication or modification. Essentially, the purchaser is buying a license from the

vendor to use the software on a particular system. Proprietary software is an investment, subject

to the expense-investment criteria, unless it is financed on an "annual fee" basis. In the latter case,

it is an expense item properly financed in RDT&E or O&M.

2.12.2.5. O&M appropriations: Expenses incurred in continuing operations and

current services are budgeted in the O&M appropriations. Modernization costs under $250,000

are considered expenses, as are one-time projects such as developing planning documents and

studies.

2.12.2.5.1. Software releases categorized as iterations on the basic release

and not involving significant performance improvements or extensive testing are considered a

maintenance effort. Minor improvements in software functionality which are accomplished during

routine maintenance may also be O&M funded.

2.12.2.5.2. Items purchased from a commercial source that can be used

without modification (e.g., COTS and nondevelopmental items) will be funded in either the

Procurement or O&M appropriations, as determined by the expense and investment criterion.

2.12.2.6. The IT systems developed and acquired through the

Defense Working Capital fund will be reflected in the Capital Budget if the system is $100,000 or

more. Systems costing less than $100,000 are funded through the Operating Budget.

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2.12.2.7. Capitalization of Software Cost. For accounting purposes, the total cost

of software should be capitalized when the total cost of the system exceeds the Department’s

capitalization threshold amount, which is currently $100,000. Capitalization of software is not

dependent on the appropriation used to fund its purchase or development. Further information on

capitalization may be found in the DoD FMR, Volume 4, Chapter 6, paragraph 060210.

2.13 Research, Development, Test and Evaluation (RDT&E) - Definitions and Criteria (010213)

2.13.1. Definitions. The term "research and development (R&D)" is intended broadly to

include the work performed by a government agency or by private individuals or organizations

under a contractual or grant arrangement with the government. It includes R&D in all fields,

including the physical sciences, engineering, etc.

2.13.1.1. Research is systematic study directed toward fuller scientific knowledge

or understanding of the subject studied.

2.13.1.2. Development is systematic use of the knowledge and understanding

gained from research, for the production of useful materials, devices, systems, or methods,

including the design and development of prototypes and processes.

2.13.2. General Criteria. When, after consideration of the following criteria, there is doubt

as to the proper assignment of costs between appropriations, the issue should be resolved in favor

of using RDT&E funding. In general, the types of costs to be financed by RDT&E and related

appropriations are:

2.13.2.1. RDT&E Appropriations.

2.13.2.1.1. RDT&E will finance research, development, test and evaluation

efforts performed by contractors and government installations, including procurement of end

items, weapons, equipment, components, materials and services required for development of

equipment, material, or computer application software; its Development Test and Evaluation

(DT&E); and its Operational Test and Evaluation (OT&E) as provided for in paragraph 2.13.3.5

(Test Articles and Test Support) below.

2.13.2.1.2. The operation of R&D installations and activities engaged in

the conduct of R&D programs, including direct and indirect efforts, expense and investment costs.

2.13.2.1.3. The acquisition or construction of industrial facilities costing

less than $750,000 at government owned, government operated (GOGO) facilities under the

criteria of DoD Directive 4275.5 as provided for under 10 U.S.C. 2805 (unspecified minor

construction). Use of RDT&E funds for acquisition and construction at contractor owned or

contractor operated government facilities is authorized under 10 U.S.C. 2353, Contracts;

Acquisition, Construction, or Furnishings of Test Facilities and Equipment.

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2.13.2.2. Related Appropriations

2.13.2.2.1. All construction at R&D installations and activities other than

that covered above will be funded in the Military Construction appropriations.

2.13.2.2.2. Equipment and material approved for production and intended

for operational use or inventory upon delivery will be funded in the Procurement appropriations.

Product improvement within the current performance envelope on systems in production, will be

funded in the Procurement appropriations as long as no development or operational tests by an

independent operational test agency are required.

2.13.2.2.3. Family housing construction, operation and maintenance at

R&D installations and activities will be funded in the Family Housing appropriations.

2.13.2.2.4. Expenses of Headquarters R&D management, organizational

management analyses, test and evaluation for system sustainment personnel and command

support, and product improvement within the current performance envelope for systems out of

production will be funded in the Operation and Maintenance (O&M) appropriations.

2.13.3. Specific Determinations. Additional details on the determination of proper

funding for specific items or efforts are provided in the following paragraphs.

2.13.3.1. Organizational Funding Criteria.

2.13.3.1.1. The RDT&E appropriation will finance expenses and

investments for the operation and maintenance of R&D organizations, equipment (including R&D

aircraft, ships and ship-type vehicles), installations and activities (including those operated by

contract).

2.13.3.1.2. Expenses for the support of tenant activities will be funded in

accordance with the following:

2.13.3.1.2.1. Expenses for the support of tenant activities at R&D

installations and activities will be RDT&E funded by the host activity, pending the establishment

of reimbursable arrangements. Subsequent to the establishment of reimbursable arrangements,

expenses for the support of the tenant will be funded by the tenant or as mutually agreed with the

host.

2.13.3.1.2.2. Where reimbursable arrangements exist, expenses for

the support of R&D activities or organizations that are tenant activities at installations having a

primary function other than research, development, test and evaluation will be funded by RDT&E.

2.13.3.1.2.3. Expenses for the support of R&D activities or

organizations which are tenant activities at installations having a primary function other than R&D

will be funded by the host, pending the establishment of reimbursable arrangements.

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2.13.3.1.3. Expenses of R&D management and administrative

organizations at major systems commands, headquarters organizations and administrative

organizations at DoD component departmental headquarters levels (except for the Defense

Advanced Research Projects Agency and the Missile Defense Agency) will be financed in the

Operation and Maintenance (O&M) appropriations.

2.13.3.1.4. Expenses and investments for the operation and maintenance of

major range and test facilities, as defined under DoD Directive 3200.11, that conduct

developmental and operational testing as a primary mission as determined by workload, will be

financed by the RDT&E appropriation. Major range and test facilities that primarily support

testing after system acceptance for operational use or training exercises will be financed in the

O&M appropriations.

2.13.3.1.5. Costs of evaluating organizational structure and distribution of

function, administrative operating policies, procedures, methods and systems

(management studies) and applications of the management sciences to improve effectiveness in

carrying out assigned functions are financed in the O&M appropriations.

2.13.3.1.6. Expenses of operational military forces having a primary

mission other than R&D and not specifically assigned to R&D that may, from time to time, be

engaged in or support R&D activities, will be funded in the O&M appropriations.

2.13.3.2. Facilities Construction and Modification. When it is determined that

DoD financing of real property projects is required, the projects shall be programmed, budgeted,

and financed as follows:

2.13.3.2.1. Government-Owned, Government-Operated (GOGO) Facility

on Government Land. When GOGO property is to be constructed on government-owned land,

such construction will normally be financed as a Military Construction project. Construction of

facilities for RDT&E costing $750,000 or less may be funded with RDT&E appropriations. Such

expenditures are authorized under 10 U.S.C. 2805 (unspecified minor construction). All minor

construction must result in a complete and usable facility. In no event are two or more construction

projects or minor and major construction projects to be contrived to be a usable facility.

Construction projects at R&D installations and activities whose costs are greater than $750,000

will be financed by the Military Construction appropriation in accordance with Chapter 6.

2.13.3.2.2. Government-Owned, Contractor-Operated (GOCO) Facility

2.13.3.2.2.1. When the GOCO facility is on a military installation

(post, camp or station) the primary funding is the Military Construction appropriation. However,

if the facilities are contractor-operated, and the contractor is solely responsible for the complete

and total operation and maintenance of the facility complex, construction may be financed in

Procurement or RDT&E in accordance with DoD Directive (DoDD) 4275.5 and 10 U.S.C. 2353

criteria. New construction or improvements having general utility are not authorized under

10 U.S.C. 2353.

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2.13.3.2.2.2. When GOCO facilities are constructed on government

property other than a military installation, the Procurement or RDT&E appropriation will finance

the construction in accordance with DoDD 4275.5 criteria.

2.13.3.2.3. Contractor-Owned, Contractor-Operated Facility. Under

10 U.S.C. 2353, a research or development contract may provide for the acquisition, construction,

or furnishing of facilities and equipment that are necessary for the performance of the contract to

the contractor. Improvements having general utility or new construction are not authorized under

10 U.S.C. 2353. Facilities that would not be readily removable or separable without unreasonable

expense may not be installed or constructed on property not owned by the government, unless the

contract contains:

2.13.3.2.3.1. A provision to reimburse the government for the fair

value of the facilities;

2.13.3.2.3.2. An option for the government to acquire the

underlying land; or

2.13.3.2.3.3. An alternative provision that protects the interests of

the United States in the facilities.

2.13.3.2.4. All proposed RDT&E real property facilities will be identified

to Congress in accordance with Chapter 5, Section 050402.

2.13.3.2.5. The Family Housing appropriation will provide for

Family Housing construction and Family Housing O&M at R&D installations and activities.

2.13.3.3. Equipment. RDT&E appropriations will finance the development,

design, purchase, installation, and acceptance testing of equipment or instrumentation required to

support RDT&E activities. Costs of specialized equipment and instrumentation required for the

support of research, development, test and evaluation contractor effort at government-owned,

contractor-operated (GOCO) activities will be financed in RDT&E. DoD Directive 4275.5

applies. Installation costs include directly related foundations, shielding, environmental control,

weather protection, structural adjustments, utilities and assets. Installation costs are excluded from

RDT&E financing if the effort is accomplished concurrently with a military construction project,

and in these instances, the military construction appropriation finances the installation cost. To

the extent that the equipment installation occurs at a government activity and the cost exceeds

$500,000, no new facility or physical outer dimension expansion to an existing facility shall result

from an RDT&E-funded equipment installation project.

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2.13.3.4. Establishment of Pilot Line and Tooling Requirements

2.13.3.4.1. The costs associated with establishing an initial pilot line, which

are necessary to acquire a limited number of representative items for test purposes, including the

test items, will be financed by RDT&E. All items and costs associated with maintaining the initial

pilot line beyond the quantity sufficient to test for operational acceptability will be financed from

other appropriations.

2.13.3.4.2. When an end item under development has also been approved

for procurement, operational use, or included in the force structure, then hard tooling requirements

common to both the development and procurement phases will be financed by Procurement

appropriations. When an end item under development has not been approved for procurement,

operational use, or included in the force structure, then tooling and other preliminary production

facilities required to produce realistic development items for test and evaluation will be financed

by RDT&E, even though such tooling and facilities might later be used for production.

2.13.3.5. Test Articles and Test Support

2.13.3.5.1. As a general rule, the procurement of test articles and test

support, including "Special Support" costs and "Command Support" costs (see Glossary), for all

RDT&E tests preceding and leading to acceptance for operational use will be RDT&E funded.

Test articles and components or materials to be assembled into test articles shall be budgeted in

accordance with the need for them in the development and test program. Purchases of fully

configured or near fully configured test articles (e.g., off-the shelf drones) should be budgeted in

accordance with the need for full units to test.

2.13.3.5.1.1. Development and preproduction prototypes

(RDT&E financed) will be used for Developmental Test and Evaluation (DT&E), including

scientific, technical and weapons effects tests. DT&E programs must provide complete and

reliable data that can be used to estimate the military utility of new items as a basis for considering

decisions to continue engineering development. To this end, it is essential to plan, program, budget

and fund for an adequate number of R&D articles for development, test and evaluation that will

be fabricated, manufactured or produced in a realistic preliminary production manner and thus

provide such data.

2.13.3.5.1.2. Development and preproduction prototypes

(RDT&E financed) will be used for OT&E. When so used, they must be sufficiently representative

of the expected production items’ to provide from OT&E a valid estimate of production items

operational effectiveness and suitability (including compatibility, interoperability, reliability,

maintainability, and logistic and training requirements).

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2.13.3.5.1.3. Low Rate Initial Production (LRIP) assets. LRIP, as

defined in DoD 5000.2-R, is to provide production configured or representative articles for

operational test (RDT&E funded, see paragraph (2)); establish an initial production base for the

system (procurement funded); and permit an orderly increase in production rate for the system

(procurement funded). If the asset will be used for developmental or operational testing by an

independent operational test agency, then it should be procured with RDT&E funds. The LRIP

quantity will be determined as part of the Production and Deployment approval (Milestone C).

RDT&E funds will be budgeted to procure the items required for operational test to facilitate the

testing of LRIP assets. LRIP test articles must be specifically identified in the budget

documentation. Should LRIP items beyond the test quantity be required, they would need to be

included in the Milestone C decision and a determination made at that time. Ships and space

systems do not have LRIP periods like other systems. Special guidance relating to the transition

of ships and space systems from RDT&E to Procurement is provided in paragraph 2.13.3.9 of this

section.

2.13.3.5.2. Conduct of testing that is not associated with RDT&E, or testing

conducted after fielding or acceptance for operational use, such as the examples noted below, will

be financed in the Procurement or O&M appropriations, as appropriate.

2.13.3.5.2.1. Acceptance, quality control and surveillance testing of

articles obtained for other than RDT&E purposes.

2.13.3.5.2.2. Routine testing in connection with logistic support.

2.13.3.5.2.3. Testing related to the operation and maintenance of

equipment and material acquired for use under appropriations other than RDT&E.

2.13.3.5.2.4. Testing required to prove the capability of facilities to

produce items which have been approved for production will be funded by procurement as part of

the initial acquisition cost.

2.13.3.5.3. The acquisition of commercial or nondevelopmental items for

testing and operational evaluation that do not require RDT&E engineering, design or integration

effort will be financed by O&M or Procurement appropriations (as determined by the Expense and

Investment criteria). O&M appropriations will finance personnel and command support costs for

test and evaluation of commercial and nondevelopmental items by field units for doctrine,

operational, or organizational purposes. If the commercially available item is modified and

requires testing prior to approval for service use or inventory it is to be funded in RDT&E as are

all developmental items.

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2.13.3.5.4. Articles (including end items, weapons, equipment, major test

vehicles such as ballistic missile boosters or upper stages, components and materials) of types

regularly procured to meet established general requirements such as operational training,

operational use, or inventory which are assigned or allocated on a priority basis for use in support

of approved R&D programs and which are not consumed in testing, may be financed by

Procurement or O&M appropriations using the expense and investment criteria. In addition,

excess items that can be made available on a priority basis from existing inventory will be

reassigned for use in R&D test and evaluation programs without reimbursement. However, all

items, expected to be consumed in R&D test and evaluation will be financed by RDT&E

appropriations.

2.13.3.5.5. Consumable rounds of ammunition or rounds of similar tactical

missiles otherwise procured in quantity for inventory under existing procedures, may be issued on

a priority basis for use in R&D testing without reimbursement.

2.13.3.5.6. The acquisition of test articles will be financed by O&M or

Procurement appropriations (as determined by the Expense and Investment criteria), and personnel

and command support costs will be financed by O&M appropriations for all test and evaluation

(T&E) subsequent to acceptance for operational use and T&E to demonstrate the operational

employment or develop operational tactics (i.e., subsequent to RDT&E efforts).

2.13.3.6. Modification and Refurbishment of Test Articles.

2.13.3.6.1. Costs associated with modifying or reconfiguring an existing

item for R&D test purposes will be funded in RDT&E. When an item that has been diverted from

another use is not consumed in R&D testing, any costs necessary to return the item to serviceable

condition or to its pre-existent configuration will be financed in RDT&E.

2.13.3.6.2. If an article initially acquired with RDT&E funds as part of an

RDT&E test effort is still available at the completion of the test program, it may be reassigned for

operational use or inventory. The cost to modify such an article for operational use would be borne

by the Procurement and O&M appropriations, as appropriate.

2.13.3.7. Product Improvement.

2.13.3.7.1. "Product improvement" of major end items and major

components of major end items currently in production or in the operational inventory, is subject

to the following:

2.13.3.7.1.1. Redesign of an item to increase the current

performance envelope, including related development, test and evaluation effort, will be financed

in RDT&E.

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2.13.3.7.1.2. Engineering services or related manufacturing efforts

applied to an item currently in production to extend its useful military life within the current

performance envelope should be funded by Procurement appropriations as long as no

developmental testing (DT) or operational test and evaluation (OT&E) by an independent

operational test agency is required. If DT or OT&E by an independent operational test agency is

required, RDT&E finances the improvement. The phrase "an item currently in production" implies

that the item has end item procurement funding in the year the product improvement effort is to

take place.

2.13.3.7.1.3. Engineering services or related manufacturing efforts

applied to an out-of-production, but still operational item to extend its useful military life within

the current performance envelope should be financed by O&M appropriations as long as no

developmental testing (DT) or operational test and evaluation (OT&E) by an independent

operational test agency is required. If DT or OT&E is required by an independent operational test

agency, RDT&E finances the improvement.

2.13.3.7.1.4. In both cases (2) and (3) above, the determination that

the improvement is “within the current performance envelope” and that “no development testing

(DT) or operational test and evaluation (OT&E) by an independent operational test and evaluation

agency is required” should be determined after formal coordination with the Director,

Operational Test and Evaluation.

2.13.3.7.2. While existing off-the-shelf equipment may be procured with

Procurement funds, items that require engineering design, integration, test, or evaluation effort

shall be procured with RDT&E funds in sufficient numbers to support such effort.

2.13.3.7.3. Costs of fully developed and tested modification kits and

associated installation costs should be financed from Procurement appropriations. If DT or OT&E

by an independent operational test agency is required, RDT&E finances the RDT&E effort and the

kits required for RDT&E testing. Procurement funds would then be used to procure the follow-on

kits.

2.13.3.7.4. Aircraft engine component improvement costs are budgeted in

the RDT&E appropriations to provide for continuing improvements in the aircraft engines in the

areas of reliability, maintainability, durability, correction of Service-revealed deficiencies, safety

of flight, time-between-overhaul, etc. "Component Improvement" is established at the point in

time when:

2.13.3.7.4.1. There has been a Government acceptance of the first

procurement funded engine, and

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2.13.3.7.4.2. The engine has successfully completed stringent

qualification or verification testing to demonstrate initial production suitability subject to:

2.13.3.7.4.2.1. Compliance with contractual specifications,

performance guarantees and military specifications, as applicable to individual Service

requirements;

2.13.3.7.4.2.2. Completion of endurance testing

representative of the anticipated Service use to include completion of specified post test

inspections, certification, and penalty runs;

2.13.3.7.4.2.3. Demonstration of prescribed performance

capability; and

2.13.3.7.4.2.4. Accomplishment of prescribed durability,

reliability, and environmental testing.

2.13.3.8. Ships and Ship-type Vehicles.

2.13.3.8.1. An experimental test bed type of ship or an experimental ship

will be financed by RDT&E appropriations. This will include all such experimental ships required

to support an approved R&D program or for the purpose of experimenting with new or radical ship

concepts or to demonstrate the military usefulness of new ship designs, configurations or

fabrication techniques, when the ship-type test vehicle itself can be predicted to be consumed or

expended in testing, or to have little or no operational usefulness in the force structure. Prototype

ships, when designated by the Secretary of Defense, are included.

2.13.3.8.2. A ship of demonstrated, conventional concept and design

having a high probability of military usefulness and inclusion in the force structure, even though

first of a class, will be constructed using procurement funds. A ship of demonstrated conventional

concept and design temporarily or permanently assigned from inventory to support R&D effort

will be furnished without reimbursement, but the cost of providing all R&D types of equipment or

instrumentation, the cost of "nonstandard" modifications of the ship required to make the ship

suitable for R&D support, as well as the cost of any related restoration to conventional or

operational ship conditions upon release from assignment to R&D, will be financed by RDT&E

appropriations.

2.13.3.8.3. Preliminary or contract design for new ship construction will be

financed by RDT&E appropriations, including contractor and "field activity" effort costs. Detail

design for ships appropriate for procurement funding will be funded by procurement accounts.

2.13.3.8.4. Land-based or sea-based combat system test installations will

be financed by RDT&E appropriations.

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2.13.3.9. Space Systems. The following guidance describes the circumstances in

which RDT&E funds may be used for the acquisition of operational space systems.

2.13.3.9.1. Expendable launch vehicles. The first rocket of a new design is

normally used to launch an operational satellite into orbit. This rocket may be financed with either

RDT&E or Procurement appropriations. The second and subsequent expendable launch vehicles

shall in all cases be financed with Procurement appropriations. The full funding policy shall apply

to all expendable launch vehicles budgeted in Procurement appropriations.

2.13.3.9.2. Satellites. The first satellite of a new design is normally placed

into operational use. For programs in which satellites are launched individually, the first two

satellites may be financed with either RDT&E or Procurement appropriations. The third and

subsequent satellites shall in all cases be financed with Procurement appropriations. For programs

in which multiple satellites are launched with a single rocket, the satellites comprising the first

launch may be financed with either RDT&E or Procurement appropriations depending upon which

budgetary approach is most consistent with the contract structure. Satellites for the second and

subsequent launches shall in all cases be financed with Procurement appropriations. The full

funding policy shall apply to all satellites budgeted in Procurement appropriations. It is expected

that satellite programs will make frequent use of advance procurement, combined parts buys, and

multiyear contracts to efficiently use funds within the context of the full funding policy. To

achieve these efficiencies, advance procurement funding may be budgeted two years (and, in rare

instances, three years) prior to the year of full funding. The total advance procurement funding

for a satellite should not exceed 20 percent of the unit cost of the satellite.

2.13.3.9.3. Ground Control and Ground Processing Systems. The design

and implementation of ground control and ground processing systems is an integral part of the

development of new satellite systems. The entire cost of the primary ground system (including

off-the-shelf workstations, power supplies, etc., but not including military construction) shall

normally be financed with RDT&E appropriations. The cost of backup ground systems shall be

financed with Procurement appropriations, and the full funding policy shall apply.

2.13.3.9.4. User Terminals. User terminals for space systems shall

transition from RDT&E to Procurement in the same manner as non-space-related communications

and electronics equipment.

2.13.3.10. Training Devices. A training device is composed of components and

software that have been designed or modified to demonstrate or illustrate a concept or simulate an

operational circumstance or environment. The initial or prototype training device and all its

support costs through service acceptance for operational use will be funded in RDT&E. RDT&E

will not fund beyond the initial system unless more than one full system is required to demonstrate

the training device performance. The initial or prototype training device that employs new or

off-the-shelf computers and system components, but has training system unique software and

interface components, will be developed and procured with RDT&E funds. Typically, these

training devices have small quantity requirements and the initial or prototype device is used for

operational training. Modifications or updates to existing training devices will normally be funded

in the applicable Procurement or O&M appropriation, subject to the expense and investment

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criteria. Any necessary development effort for these modifications or updates will be funded in

RDT&E.

2.13.3.11. Joint Test and Evaluation.

2.13.3.11.1. The Joint Test and Evaluation (JT&E) program provides

quantitative information used for analyses of joint military capabilities and to develop potential

options for increasing military effectiveness. The program is complimentary to, rather than part

of the acquisition process. A JT&E project brings two or more Military Services or other

Components together to: assess Service system interoperability in joint operations; evaluate joint

technical and operational concepts, and recommend improvements; increase joint mission

capability, using quantitative data for analysis; validate testing methodologies that have joint

applications; improve modeling and simulation validity with field exercise data; provide feedback

to the acquisition and joint operations communities; and improve joint tactics, techniques, and

procedures. JT&E projects focus on improving the warfighter’s capability to conduct joint military

operations with existing equipment. DOT&E manages the JT&E program and coordinates with

Combatant Commanders, the Joint Staff, and the Services to ensure warfighter involvement.

2.13.3.11.2. The JT&E program is financed in the Operational Test and

Evaluation (OT&E), Defense appropriation (program element 0605804D). DOT&E funds the

costs incurred for the direction, supervision, and performance of activities that are unique to the

needs of the JT&E projects. When directed as Executive Agent for a particular JT&E project, the

Component, Service or COCOM is responsible for ensuring that all resources necessary for the

successful accomplishment of the JT&E project are available to the Joint Test Director (JTD).

This includes administrative, management and facilities support for the JTD. The Executive Agent

support costs (O&M, Procurement, and RDT&E) are to be programmed and budgeted in

accordance with established procedures.

2.13.3.12. Manufacturing Technology. The Department of Defense

Manufacturing Technology program, which demonstrates factory application of new or improved

technology in producing defense items, will be financed in the RDT&E appropriations.

2.13.3.13. Development Efforts Related to Future Leased Services. When the

provider of a leased service that will ultimately be financed in O&M requires initial funding in

order to design or develop major changes or improvements to meet the government’s requirement

for that service, then the costs of such development efforts will be financed in RDT&E.

2.13.3.14. Subsystem Integration into Weapon Systems. Research and

development necessary for the integration of subsystems into weapon systems should be financed

from the weapon system program. For example, the R&D cost of integrating an electronic warfare

black box into an aircraft should be borne by the aircraft R&D program.

2.13.3.15. Engineering change orders should be funded commensurate with the

level of risk in the program.

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2.14 RDT&E - Incremental Programming and Budgeting Basis (010214)

2.14.1. Purpose.

This Chapter specifies the principles to be followed, and establishes the criteria and

definitions to be used, in the preparation of the annual Research, Development, Test and

Evaluation (RDT&E) budget estimates on an incrementally funded basis. The incremental

budgeting policy provides that only those funds required for work in a given fiscal year shall be

included in the RDT&E budget request for that fiscal year for most classes of effort.

2.14.2. Policy.

The annual budget estimates for Research, Development, Test and Evaluation (RDT&E)

projects and programs, including developmental and operational test and evaluation programs, are

to be prepared on an incrementally programmed basis (as opposed to the fully funded program

basis used in preparing procurement budget estimates.)

2.14.3. Guidance.

2.14.3.1. The budget request for DoD projects and programs will be developed and

presented in accordance with the following principles:

2.14.3.1.1. Annual estimates of initial financing needed for new major

weapon systems and other development programs and projects requiring several years to complete,

and which involve contracts spanning more than one year, should be formulated to cover costs

expected to be incurred during each fiscal year. Generally this will represent a 9-month or lesser

period for the initial, first year increment of a new start program due to the nature and timing of

the congressional budget approval. The second and succeeding increments will be programmed

and financed for the entire fiscal year. However, the Service or Defense Agency Comptroller must

approve extensions of up to 3 months beyond the end of the fiscal year for which funds are

requested. In this regard, DoD components should make every effort to align subsequent years’

funding requirements on an annual basis coincident with the fiscal year, although it is recognized

that there may be circumstances where this will not be feasible. The estimate of the financing

required in the budget year to continue development projects must always take into account any

changes (such as slippage’s) that have occurred. RDT&E funding requirements should be based

on forecasted obligations that consider costs and timelines for each milestone and other

programmatic event.

2.14.3.1.2. There are requirements in which there is no logical way to

divide the work; it is clearly unfeasible to limit the contract to a shorter period; or the planned

technical effort is such that no responsible contractor can be found who will accept a contract for

a less-than-completion increment. For these type efforts that take longer than 12 months but less

than 18 months, the Service or Defense Agency Comptroller may approve financing the total

requirement in one fiscal year.

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2.14.3.1.3. While it is intended that the foregoing guidelines will be

applicable to program execution as well as program formulation, there may be circumstances that

could delay the start of an annual increment (such as legal, administrative, or technical problems).

The 2-year availability of funds authorized for the Research, Development, Test and Evaluation

appropriation provides the necessary flexibility for program execution in those circumstances.

2.14.3.1.4. Engineering change orders should be funded commensurate

with the level of risk in the program.

2.14.3.2. Budgeting for Termination Liability on Incrementally Funded RDT&E

Contracts. The legal requirements of the Anti-Deficiency Act and the long-standing policy of not

committing a successor Congress to a course of action both make it necessary that the unliquidated

obligation for an incrementally-funded, multiple-year contract be sufficient at all times to cover

the cost of terminating that contract for the convenience of the Government. Budgeting to cover

termination liability will not increase the total amount budgeted for the program. It will require

that the distribution of funds by fiscal year be shifted more towards the earlier years of the contract

than if funds had been budgeted only to cover the actual bill to be paid in each year. The

distribution of funds by fiscal year shall be such that, if a contract is terminated at any point during

the fiscal year, all termination costs can be financed from the unliquidated obligation on the

contract without recourse to reprogramming of funds, supplemental appropriations, or awaiting

the appropriation of funds for the succeeding fiscal year’s funding increment. All programs shall

adhere to this policy with the following two exceptions, both of which are to be used rarely.

2.14.3.2.1. Special Termination Cost Clause (STCC). DoD FAR Parts

249.50170 and 252.249-7000 permit the use of STCC in fixed-price incentive contracts and

incrementally funded cost reimbursement contracts. If contracts containing an STCC are

terminated before completion, the special termination charges are covered by the unobligated

balance of the applicable appropriation, subject to any congressional approval required for

reprogramming. The extent to which the STCC can be used is limited to the ability of the Service

or Agency to cover expected termination costs from unobligated balances. A recordable obligation

under the STCC arises when the contract is actually terminated. If a proposed STCC would require

an above threshold reprogramming action when a program is terminated, the approval to use the

STCC shall be obtained from the USD (Comptroller) before the contract or contract modification

is awarded. All STCCs, regardless of dollar amount, require prior notification of the House and

Senate Appropriations Committees.

2.14.3.2.2. Statutory Waivers. The Department is not required to budget

for, or obligate funds sufficient to cover, termination liability in connection with an

incrementally-funded RDT&E contract if Congress has expressed exempted the program or

contract from that requirement. When this situation arises, however, the budget exhibits for the

program shall clearly indicate the value of the unfunded termination liability by year for the current

year, budget year, and the outyears covered by the FYDP.

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2.15 Defense Working Capital Funds - Operating Budget (010215)

The operating budget represents the annual operating costs of an Activity or Component,

including depreciation and amortization expenses. Detailed requirements and guidance can be

found in Chapter 9.

2.16 Defense Working Capital Funds - Mobilization/Surge Costs (010216)

2.16.1. Separate funding is provided for those costs related to mobilization and wartime

surge capacity that would not otherwise be incurred to meet peacetime requirements. The prices

of services and products provided to peacetime customers exclude these costs to more

appropriately reflect consistent pricing between competing activities. Similarly, better visibility

of surge or readiness requirements is provided to decision makers at every level. These

“mobilization” costs, although funded and justified as direct appropriations to Component budgets,

are elements of business area costs and must be fully justified on the SM-3 and/or Fund-30

schedules. Detailed requirements and guidance can be found in Chapter 9, section 090103.

2.16.2. Unutilized capacity that is associated with the ability to satisfy a projected surge

capability is considered a mobilization requirement that is to be funded by appropriated funds

provided by the DoD Component having management responsibility for the Fund activity. Costs

applicable to unutilized plant and equipment, such as depreciation, or maintenance, are not to be

charged to the customers of the Fund activity.

2.16.3. The justification for costs related to mobilization and wartime surge capacity must

identify the scenario assumptions or other basis for the requirement under which these costs were

calculated. Additionally, a description of how these costs will be collected and accounted for in

execution must be provided. The UPC Funding Exhibit Fund-30 will be used to support the request

for UPC Funding.

2.16.4. Chapter 9 provides additional guidance and instructions associated with

mobilization/surge requirements.

2.17 Defense Working Capital Funds - War Reserve Materiel (010217)

War reserves are procured and maintained to meet wartime requirements as determined by

the Strategic Planning Guidance (SPG). These costs will be funded with direct Working Capital

Fund appropriations in the Components’ budgets, not through customer rates. However, since the

war reserve materiel will be under the management of supply management businesses, war reserve

requirements will also be described and justified on the SM-3. In addition, exhibit

SM-6 War Reserve Material, will be prepared by the Components to justify WRM Requirements.

Detailed requirements and guidance can be found in Chapter 9.

2.18 Defense Working Capital Funds - Military Personnel Costs (010218)

2.18.1. Military personnel costs have been included in revolving funds since FY 1991.

This change was made to ensure that the total costs of the business were being captured. The cost

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of military personnel assigned to DWCF activities will be included in the total cost of operations

of DWCF activities at civilian equivalent rates and reflected in the stabilized rates charged to

customers. This policy is based on the concept of total costing, which is designed to ensure that

the total cost of producing products and services is being identified to both DWCF activities and

customers.

2.18.2. The amount expensed for military personnel by DWCF activities and the amount

reimbursed to the appropriate military personnel will be the same as the amount budgeted. The

budget amount will equal the average end strength multiplied by the civilian equivalency rate for

each grade. The average end strength for the budget year(s) will be calculated using the average

fill rate for the three prior years. The fill rate is calculated by dividing actual average strength by

the authorized end strength for each grade. No adjustments will be made to the DWCF cost of

operations to reflect the actual cost of military personnel employed by DWCF activities.

2.18.3. See Chapter 9; section 090103G, for budget formulation, execution, and

reimbursement procedures.

2.19 Defense Working Capital Funds - Full Recovery of Costs/Setting Prices (010219)

2.19.1. General Guidelines.

2.19.1.1. All business areas in the Fund are required to set their prices based upon

full cost recovery, including all general and administrative support provided by others. Prices are

established through the budget process. Except for Depot Maintenance Groups, and under special

circumstances as specified in Volume 2B, Chapter 9, 090103H, prices remain fixed during the year

of execution; actual costs are evaluated against revenue generated by workload at established

prices; and the financial condition of the business assessed accordingly. Volume 2B, Chapter 9,

paragraph 090105, specifies pricing guidance for sales by DoD depot maintenance activities to

private sector entities as part of depot maintenance public-private partnership agreements.

Subparagraph C. below summarizes that guidance. Profits or losses will be determined at the end

of the year and will be employed as a basis for evaluating operating efficiency.

2.19.1.2. Prices for every Defense Component business activity are established for

each fiscal year. Once established, these prices are held constant (stabilized) through program

execution unless fund balances require an out-of-cycle rate change. This stabilized rate policy

serves to protect customers from unforeseen inflationary increases and other cost uncertainties and

better assures customers that they will not have to reduce programs to pay for potentially higher

than anticipated prices. In turn, this policy allows activities to execute the budgeted program level

and permits a more effective utilization of Fund resources.

2.19.1.3. Prices for the budget year(s) will be set to recover costs over the long run.

This means that prices will be set to achieve an Accumulated Operating Result (AOR) of zero.

During budget execution, business areas will have either a positive or negative Net Operating

Result. Accordingly, prices in the budget year will be set to either make up actual/projected losses

or to give back actual/projected gains in the budget year(s).

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2.19.1.4. An activity group may request that AOR variances be recovered outside

the budget year. This request must be included in the budget submission, and must demonstrate

that the delay in the recovery of variances will not adversely affect the cash balance of the activity

group. A phased recovery schedule must be provided with the budget. The Director for Revolving

Funds will provide final approval for any extended AOR variances recovery plans.

2.19.1.5. In the supply management businesses, the price setting process will be

consistent with the rate changes approved during the budget review.

2.19.2. Unplanned Gains/Losses.

2.19.2.1. Under Special Circumstances the DWCF rules for pricing and operating

loss recovery or gain distribution may be waived if one or more of the following conditions exist.

2.19.2.1.1. Fund Liquidity. Fund managers are expected to maintain a

monthly total fund cash balance between 7-10 days of operations (plus 6 months outlay for capital

purchases). However, several factors could cause the Funds to operate outside the target area.

Therefore, in order to prevent the build-up of excess cash balances, or ensure fund solvency the

Director for Revolving Funds or Fund Managers, with the written permission of the

Director for Revolving Funds, may direct out of cycle rate adjustments at any time during the fiscal

year.

2.19.2.1.2. Depot Maintenance Additional Requirements. As long as Fund

cash balances are within 10% of targeted levels depot maintenance activities will recoup losses

and return gains in the budget year. However, if cash balances are outside the target areas the

Director for Revolving Funds or Service Fund Managers, with the written permission of the

Director for Revolving Funds, may direct out of cycle rate adjustments or surcharges at any time

during the fiscal year to restore cash to the targeted levels. Also unplanned depot losses recouped

in subsequent years may be financed with prior year funds provided all other criteria associated

with prior year upward obligations are met.

2.19.2.1.3. Contingency or Emergency Operations. DWCF pricing and

financing requirements may be waived by Fund managers in order to facilitate Department

operations during times of war or other national emergencies. Notification of Fund Managers

actions must be provided in writing to the Director for Revolving Funds within 30 days of the

event.

2.19.3. Public-Private Partnerships at Defense Working Capital Fund Depot Maintenance

Activities.

2.19.3.1. Pricing guidance for sales of goods and services by DoD depot

maintenance activities to private entities engaged in public-private partnerships is set forth in

Volume 2B, Chapter 9, paragraph 090105. In general, such prices are subject to the requirements

of Chapter 9, with the exception that the prices may be based upon the most recent actual and

projected costs applicable to the workload, rather than upon approved stabilized billing rates.

Rates and prices to private entity partners may also be tailored to include only those direct and

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indirect production overhead costs that contribute to the finished product or service. However,

full General and Administrative (G&A) costs shall continue to be allocated on the same basis as

for DoD customers.

2.19.3.2. Fixed pricing of sales to private party entity partners, including multiyear

fixed price agreements, is authorized when production costs can be reasonably predicted and the

risk of future operating losses is not significant. Such fixed prices may include provisions for

adjustments to accommodate the effect of scope-of-work changes, annual inflation, and specified

contingencies. When future production costs or risks cannot be reasonably predicted, cost

reimbursable pricing is more appropriate.

2.19.4. Detailed requirements and guidance can be found in Chapter 9.

2.20 Defense Working Capital Funds - Capital Budgeting (010220)

2.20.1. Budgetary resources for capital investments will be separately identified in an

approved capital budget. Beginning in FY 2007, the Capital Budget will have two thresholds. For

Real Property (Land, Buildings, and Minor Construction), capital assets with a useful life of two

years or more, the capital threshold is $100,000 and above. For all other capital assets including

depreciable plant, equipment, and software developed, manufactured, transferred or acquired

during a fiscal year with a useful life of two years or more, the capital threshold is $250,000 or

more. Once assets are capitalized by the DWCF activity, they will continue to be reported as a

capital asset and depreciated until the book value of the asset reaches zero or its salvage value, as

appropriate. Changes in the capitalization threshold will not impact assets already capitalized

unless directed by higher authority. These limits are consistent with accounting guidance published

in Volume 4, Chapter 6.

2.20.2. Minor Construction.

2.20.2.1. Minor Construction projects costing $100,000 but less than or equal to

$750,000 will be funded through the capital budget and depreciated.

2.20.2.2. In the year of execution the Director of OUSD (Comptroller) Revolving

Funds may approve a capital investment reprogram request for Minor Construction projects

costing up to $1,500,000 if the project is required to correct a deficiency that is life-threatening,

health threatening, or safety threatening.

2.20.2.3. Project planning and design costs are considered a capital investment cost

that is capitalized by the DWCF activity and financed in the minor construction portion of the

capital budget. Planning and design costs are not included as part of the statutory threshold for

minor construction projects.

2.20.2.4. See Chapter 9, section 090103, for budget formulation and execution

procedures.

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2.20.3. Depreciation.

All capital assets owned by activities in the Fund will be depreciated or amortized by the

individual Component business area. Depreciation will be on a straight-line basis and based on

the acquisition cost, less residual value when residual value is expected to be 10 percent or more

of the acquisition cost, including installation and related costs. Depreciation schedules may be

found in Volume 4, Chapter 6, paragraph 060206I.

2.21 Defense Working Capital Funds - Base Support (010221)

2.21.1. Interservice and intragovernmental support, as identified in DoDI 4000.19, is

reimbursable by the DWCF activity to the extent that the specified support for the DWCF activity

increases the host activity’s direct costs (i.e., incremental direct cost). Costs associated with

common use infrastructure are non-reimbursable, except for support provided solely for the benefit

of one or more tenants. Support costs that are charged to a tenant DWCF activity

(i.e., reimbursable cost) must be measurable and directly attributable to the DWCF activity.

Indirect costs will not be included in reimbursement charges, except those included in stabilized

rates charged for DWCF mission products and services. Host activities (suppliers of base support)

are permitted to waive reimbursement from tenants who use or benefit from available support

without appreciably increasing the host activities’ costs (i.e., revenues would be less than the

anticipated expense of billing and disbursing funds).

2.21.2. DWCF activities that use any of the common base support functions identified in

DoDI 4000.19 (Interservice and Intragovernmental Support) are to reimburse host activities for

this support. Reimbursement for DWCF mission products and services (e.g., depot supply, depot

maintenance, public works center services, information processing, communications, and software

development) shall be based on the approved stabilized rate. Other support incidental to the

DWCF activity’s primary mission or purpose is to be budgeted and reimbursed based on direct

costs measurable and directly attributable to the DWCF activity. Only the incremental change in

cost attributable to the DWCF activity (incremental direct cost) shall be chargeable to the DWCF

activity. Indirect costs are not to be included as a cost to the DWCF activity.

2.21.3. Chapter 9 provides budget formulation and execution procedures.

2.22 Defense Working Capital Funds - Dual Funded Organizations (010222)

2.22.1. A dual funded organization is an organization that is funded (including

reimbursable funding) by both the DWCF and other appropriations or accounts. In those instances

where a function is funded with a combination of both DWCF and appropriated funds, the function

initially will be funded in its entirety either by the DWCF or by appropriated funds. The

determination of whether the particular function initially is to be funded by the DWCF or

appropriated funds will be based on the predominance of definable units of measure for the

function. Examples of definable units of measure include work load, productive hours, outputs,

or ultimate use. The appropriation or account initially funding the function shall be reimbursed by

the other account(s) at the same unit of measure as was used to determine the initial funding source.

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The amount of reimbursement shall be determined based on the relative portion of that unit of

measure attributable to each part of the organization (or funding source) involved.

2.22.2. This policy does not change the policy for reimbursement for base support services

provided by the DWCF to tenant activities. The DoDI 4000.19 and sections 0102021 and 090103K

provide guidance for funding base support services.

2.23 Defense Working Capital Funds - Customer Mandated Schedule (010223)

2.23.1. When a job order is canceled or reduced in scope, after a DWCF activity has

commenced work or incurred costs on the order, the costs incurred plus the applied overhead

(that is indirect and other normally allocated overhead (G&A) costs)) plus costs associated with

the cancellation or reduction shall be charged to the customer.

2.23.2. Examples of directly associated cancellation or reduction costs to be charged to

customers are advance planning costs, non-creditable direct material, special test equipment,

necessary preservation and/or shipment effort, and any additional effort necessitated by the

cancellation and/or reduction (e.g., salvaging of material). In addition, costs charged to customers

should include the costs of salaries payable to employees hired specifically to work on the canceled

order until the employees are or could have been separated through a reduction in force or other

appropriate action (taking into account appropriate administrative lead time), or reassigned to other

direct jobs. Costs which are indirectly associated with the cancellation or reduced customer orders,

under-applied overhead costs that may result in a DWCF activity as a whole from a reduced work

load base shall not be charged to the customer canceling or reducing their order but shall be

recorded against the net operating results of the performing DWCF activity.

2.24 Glossary of Terms – Procurement (010224)

Term

Meaning/Funding Connotation

Advance

Procurement (Long

Lead Items)

A pre-approved exception to the full funding policy that allows

procurement of long lead-time components, material, parts, and effort in a

fiscal year before that in which the related end item is to be procured.

Cancellation

Cancellation means the cancellation (within a contractually specified time)

of the total requirements of all remaining program years. Cancellation

results when the contracting officer notifies the contractor of

nonavai

lability of funds for contract performance for any subsequent

program year or fails to notify the contractor that funds are available for

performance of the succeeding program year requirement.

Cancellation

Ceiling

The maximum cancellation charge that the contractor can receive in the

event of cancellation (reference Federal Acquisition Regulation

(FAR) 17.103).

Cancellation

Charge

The amount of unrecovered costs that would have been recouped through

amortization over the full term of the contract, including the term canceled.

Contingent Liability

As a budgetary term, contingent liability represents variables that cannot be

recorded as valid obligations. Such variables include: (1) outstanding fixed

price contracts containing escalation, price redeter

mination, potential

liability under incentive clause; or (2) contracts authorizing variations on

quantities to be delivered; or (3) contracts where allowable interest may

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Term

Meaning/Funding Connotation

become payable by the U.S. government on contractor claims supported by

written appeals pursuant to the DISPUTES clause contained in the contract.

Construction

The erection, installation, or assembly of a new facility; the addition,

expansion, extension, alteration, conversion, or replacement of an existing

facility; the acquisition of a facility; or the relocation of a facility from one

installation to another.

Detail Design Costs

The final design effort on ships normally performed in conjunction with

lead ship construction, is called "detail design." This effort is procurement

funded (SCN).

Economic Order

Quantity (EOQ)

Procurement

An exception to the full funding policy that allows the use of advance

procurement to purchase more than one fiscal year’s program increment of

components, materials, and parts in order to obtain the economical

advantages, sustain a production line, etc.

Facility

Modernization

The alteration or replacement of facilities solely to implement new or higher

standards, to accommodate new functions, or to replace building

components that typically last more than 50 years (such as the framework

or foundation).

Facility Restoration

The restoration of real property to such a condition that it may be used for

its designated purpose. Restoration includes repair or replacement work to

restore facilities damaged by inadequate sustainment, excessive age, natural

disaster, fire accident, or other causes

Facility

Sustainment

The maintenance and repair activities necessary to keep an inventory of

facilities in good working order. Examples include regular roof

replacement, refinishing of wall surfaces, repair and replacement of heating

and cooling systems, and replacement of tile and carpeting.

Full Funding

Requires the total estimated cost of a complete, military useable end item

or construction project funded in the year in which the item is procured. If

a future year’s appropriation is required for delivery of an end item, the end

item is not fully funded.

It prevents funding programs incrementally and

provides a disciplined approach for program managers to execut

e their

programs within cost.

Funded Delivery

Period (FDP)

A funded delivery period encompasses a 12-month period that begins when

the contractor delivers the first item of a fiscal year procurement.

Confusion exists regarding this time period

because, in many instances,

accurate administrative and production lead-

times (ALT/PLT) have not

been included in the calculation. The calculation should begin with

October

1. From this point in time, the ALT and PLT should be added.

This amount of time

plus the next 12 months are included in the funded

delivery period. When excessive lead-times are included in the calculation,

additional quantities are procured that could have been funded in the

following fiscal year with no change in the delivery schedule.

Maintenance

The routine, recurring effort conducted to maintain an end item of

investment equipment at its intended capability or designed performance

level.

Nonrecurring Costs

Nonrecurring costs are generally incurred on a one-time basis. Costs may

include: plant or equipment relocation; plant rearrangement; special tooling

and test equipment; preproduction engineering; initial spoilage and rework;

pilot runs; allocable portions of the costs of facilities acquired or established

to conduct the work; costs incurred for the assembly, training, and

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Term

Meaning/Funding Connotation

transportation of a specialized work force to and from the job site; and

unrealized labor learning.

Production Rates

Minimum Sustaining Rate is the production rate for each budget year that

is necessary t

o keep production lines open while maintaining a base of

responsive vendors and suppliers; the quantity that will preclude start-up

costs in the case of a production break; or the quantity that the contractor is

willing to accept and produce at a reasonable cost. Economical Production

Rate is the most efficient production rate for each budget year at which the

item can be produced with existing or planned plant capacity and tooling,

with one shift a day running for eight hours a day and five days a week

(1-8-5). Maximum Production Rate is the maximum capacity rate that a

contractor can produce with extant or prior year funded tooling.

Recurring Costs

Production costs that vary with the quantity being produced, such as labor

and materials.

System

The combination of a number of components that are functioning with the

context of a whole to satisfy a documented requirement.

Termination

The right of the government to terminate the performance of work in whole

or part under a contract as specified by the contract's Termination for

Convenience or Default provisions. Unlike cancellation, which is effected

between fiscal years and must apply

to all subsequent fiscal years’

quantities of items, termination may be effected at any time during the life

of a contract and may apply to the total quantity or to a partial quantity of

items.

2.25 Glossary of Terms – RDT&E (010225)

Term

Meaning/Funding Connotation

Accepted for

Service Use

This is the major milestone in a development program that represents the

formal acceptance of an item for operational use by the Service. In some

instances items are approved for Service use with qualifying restrictions or

provisions pending completion of

specific development deficiencies. In

such instances the appropriation to fund the correction and test must be

determined on a case-by-

case basis, according to the expense and

investment criteria. Typically, all post-

Service acceptance effort will be

funded in Procurement appropriations.

Command Support

Costs

This term also is used in the context of the T&E programs. It refers to the

"people-

related" costs of the command and operational units providing

collateral support to the T&E effort. These are a

dditional costs incurred

because of this test support. Examples are per diem pay, travel allowances,

overtime, etc.

Contract Design

Costs

The contract design phase of shipbuilding programs follows the preliminary

design phase and results in a design that

carries the equipment

specifications necessary to meet the Navy requirements. These costs are

RDT&E-funded.

Developmental Test

and Evaluation

(DT&E)

DT&E is that test and evaluation conducted to assist the engineering design

and development process and to verify attainment of technical performance

specifications and objectives.

Government

Acceptance of the

First Procurement-

Funded Engine

This term, which is one of the two minimum requirements for initiation of

engine component improvement funding, refers to the date the Government

formally accepts delivery (DD Form 250) of the first engine funded under

procurement appropriations.

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Term

Meaning/Funding Connotation

Initial Operational

Test and Evaluation

(IOT&E)

It is DoD policy that there shall be conducted, before commitment of a

system to production, at least an initial phase of operational test and

evaluation (OT&E) adequate to provide a valid estimate of expected system

operational effectiveness and suitability (including compatibility,

interoperability, reliability, maintainability, and logistic and training

requirements). This early phase of the normally longer, overall OT&E

program is known as IOT&E.

Operational Test

and Evaluation

(OT&E)

OT&E is that test and evaluation conducted to estimate a system’s

operational suitability, identify needed modifications, and provide

information on tactics, doctrine, organization, and personnel requirements.

Performance

Envelop

The demonstrated capability of a system, system components, and special

purpose software to perform its mission in relation to essential

characteristics such as: speed, range, payload, altitude, rate of fire, etc.

Preliminary Design

Costs

This term refers to those costs incurred in shipbuilding programs in the early

stages of the cycle. They should result in a design that, on a performance

or requirement basis, approaches the Navy’s goal. These costs are RDT&E

funded.

Product

Improvement

This term embraces all efforts of a research, development, design, or

engineering nature that have the objective of improving major end items or

major components of major end items. The improvement may involve

expanding the useful life of the end item or component, or it may increase

the performance capability.

Prototype

This term connotes an item from an R&D program and also connotes

RDT&E financing.

R&D Installation or

Activity

This term refers to those installations or activities whose support and

operating costs are financed predominantly with RDT&E funds.

Special Support

Costs

This term, as used in the context of test and evaluation programs, refers to

those acquisition or hardware costs, other than those associated with the

item that is the subject of the test, which are incurred in direct support of

the T&E effort. A good example would be special range instrumentation

costs.

Test Article

A system representative prototype designed to obtain, verify or provide data

for the evaluation of research and development or evaluate progress in

accomplishing development objectives.

Unique Joint Test

and Evaluation

(JT&E) Costs

This refers to costs such as: feasibility determinations of proposed joint

tests; the provision for test design and planning support for joint tests

selected; the development, procurement, in

stallation, and operation of

special instrumentation; transportation, travel, and per diem costs for the

Test Director’s staff; the modification of test articles as surrogates and to

permit obtaining test data; transportation of equipment from permanent

ses to the test site and return; and the provision for data

collection/collectors, data reduction, analysis, and test reporting services.

Transportation and per diem of participating personnel and maintenance

and supply costs are not considered unique.

2.26 Prohibition on Parking of Funds (010226)

Section 1053 of the National Defense Authorization Act (NDAA) for Fiscal Year

(FY) 2007, to be codified in title 10, United States Code, specifically prohibits an officer or

employee of the Department of Defense (DoD) from directing the designation of funds for a

particular purpose in the President’s budget submission, or in the budget justification materials

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submitted in support of the budget, with the knowledge or intent that such funds will not be used

for the designated purpose. Further, violation of this prohibition will be treated as a violation of

the Anti-Deficiency Act (section 1341(a)(1)(A) of title 31, United States Code).

2.27 Use of Operation and Maintenance Funds under Contingency Construction Authority

(CCA) (010227)

The criteria and procedures for the use of O&M funds under CCA (also known as Section

2808 Authority) are listed in Volume 3, Chapter 17, Section 170102(L).

3.0 PROGRAM AND BUDGET REVIEW SUBMISSION (0103)

3.1 General (010301)

3.1.1. This section provides guidance for the development and submission of the biennial

budget estimates to OSD as part of the program and budget review process. The internal 2-year

Planning, Programming, Budgeting, and Execution (PPBE) process will guide the Department’s

strategy development, identification of needs for military capabilities, program planning, resource

estimation and allocation, acquisition, and other decision processes. The Quadrennial Defense

Review (QDR) will continue to serve as the department’s major statement of defense strategy and

business policy. It also will continue to be the single link throughout DoD that integrates and

influences all internal decision processes.

3.1.1.1. The first year of the 2-year cycle will include the Strategic Planning

Guidance (SPG), a Joint Programming Guidance (JPG), a Program Objective Memorandum

(POM), and a Budget Estimate Submission (BES). Program Decision Memoranda (PDMs) will

implement POM decisions; Program Budget Decisions (PBDs) will implement BES decisions.

3.1.1.2. The second year of the internal Defense Department 2-year cycle, or the

off-year, will include an SPG, if the Secretary of Defense decides an SPG is necessary. If an

off-year SPG is issued, it will not introduce major changes to the defense program, except as

specifically directed by the Secretary or Deputy Secretary of Defense. Rather than a POM during

the off-year, the Components will submit Change Proposals to accommodate real world changes,

and as part of the continuing need to align the defense program with the defense strategy. Instead

of full budget documentation, the change proposals will accommodate fact-of-life changes

(e.g., cost increases, schedule delays, management reform savings, workload changes, etc.) as well

as changes resulting from congressional actions. The off-year also includes execution reviews that

will provide the opportunity to make assessments concerning current and previous resource

allocations and whether the Department achieved its planned performance goals. Performance

metrics will be the analytical underpinning to ascertain whether an appropriate allocation of

resources exists in current budgets.

3.1.2. The USD(Comptroller) guidance memorandum, transmitted in June of each year

will provide specialized instructions such as program basis for the estimates, key assumptions to

be used, and special supporting material requirements. In addition, "supplementary instructions"

memoranda issued on an "as needed" basis (usually in July/August) will be limited to specific

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instructions which amplify guidance included in the OUSD (Comptroller) memorandum and in

this volume. The use of other memoranda to transmit program and budget guidance will be

restricted to new or nonrecurring requirements.

3.1.3. Guidance for development of the National Intelligence Program and budget review

submission will be issued by the Director of National Intelligence. Additional detail is found in

Chapter 16.

3.1.4. The instructions for submitting certain summary schedules are provided in

Section 3.5. The instructions for back-up material tailored to each appropriation or fund category

are provided in subsequent chapters. Materials required by OMB Circular A-11, which are not

otherwise required by this manual, will be submitted in accordance with that Circular, unless

specific exception is granted by the OMB. This is covered in Section 1.5.

3.1.5. A budget work schedule will be forwarded by a separate memorandum at the

beginning of each budget formulation cycle. This schedule will show the dates to be used for

planning the various phases involved in the formulation process.

3.1.6. Common Program and Budget Review Exhibits – a number of exhibits will be

identified subsequent chapters and in the annual call memorandum that will be common to both

the program and budget review. In most cases this will involve Web based input through the

Select and Native Programming (SNaP) data Input System. The process is addressed in

section 9.0.

3.1.7. Budget Material

3.1.7.1. As stated in section 3.2, limited paper copies of unclassified budget

documents will be provided to the primary OUSD (Comptroller) reviewing Directorate and to

OMB. This section also provides detailed distribution guidance on classified material as well as

certain summary material.

3.1.7.2. All budget material required in a paper format for the budget submission

will be prepared in the formats prescribed in this section. Also, while the unclassified material is

to be posted on the Internet, the format size/margins described below should be adhered to.

Material submitted in accordance with OMB Circular A-11 will follow the format prescribed by

that Circular. All material, with the exception of fold-in charts and tables which may be included,

will be prepared on 8.5" x 11" paper. Material fulfilling Circular A-11 requirements will be bound

on the left side. All exhibit books, except for Military Construction, Family Housing, Base

Closure, and Information Technology, will be printed horizontally (landscape) on 11” x 8½” paper.

Addressees will reduce all larger pages to the standard 11” x 8.5” size. All pages in each book are

to be consistent in size. The following identifies specific requirements:

3.1.7.2.1. Military Personnel - Material to be printed on both sides of the

page with a maximum range of 600-650 pages where possible (300-325 sheets of paper printed on

both sides.) Print horizontally (landscape) on 11”x8.5” paper using a 1” margin on the side to be

bound and 1/2” for other edges. Use at least font size 10. All material will be printed head to toe

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with 3 holes punched across the top margin with staples, screw posts or ACCO fasteners. Use of

adhesive binding (glue or tape) is discouraged because it may prevent recycling.

3.1.7.2.2. Operation and Maintenance (to include the Defense Health

Program) - Material to be printed on both sides of the page with a maximum range of 600-650

pages where possible (300-325 sheets of paper printed on both sides.) Print horizontally

(landscape) on 11”x8.5” paper using a 1” margin on the side to be bound and 1/2” for other edges.

Use at least font size 10. All material will be printed head to toe with 3 holes punched across the

top margin with staples, screw posts or ACCO fasteners. Use of adhesive binding (glue or tape)

is discouraged because it may prevent recycling.

3.1.7.2.3. Research, Development, Test and Evaluation - Material to be

printed on both sides of the page with a maximum range of 600-650 pages where possible (300-325

sheets of paper printed on both sides.) Begin each program element on a facing page. Print

horizontally (landscape) on 11”x8.5” paper using a 1” margin on the side to be bound and 1/2” for

other edges. All material will be printed head to toe with 3 holes punched across the top margin

with staples, screw posts or ACCO fasteners. Use of adhesive binding (glue or tape) is discouraged

because it may prevent recycling.

3.1.7.2.4. Procurement. Material to be printed on both sides of the page

with a maximum range of 600-650 pages where possible (300-325 sheets of paper printed on both

sides.) Print horizontally (landscape) on 11”x8.5” paper using a 1” margin on the side to be bound

and 1/2” for other edges. All material will be printed head to toe with 3 holes punched across the

top margin with staples, screw posts or ACCO fasteners. Use of adhesive binding (glue or tape)

is discouraged because it may prevent recycling.

3.1.7.2.5. Military Construction. The justification material for Military

Construction will be provided on 8.5” x 11” paper, typed across the short dimension of the paper

(portrait) with 3 holes punched on the left margin and bound with screw posts or Acco fasteners.

Material is to be printed on both sides of the page using 1” margins. Use of adhesive binding

(glue or tape) is not acceptable because it may prevent recycling.

3.1.7.2.6. Family Housing. The justification material for Family Housing

will be provided on 8.5” x 11” paper, typed across the short dimension of the paper (portrait) with

3 holes punched on the left margin and bound with screw posts or Acco fasteners. Material is to

be printed on both sides of the page using 1” margins. Use of adhesive binding (glue or tape) is

not acceptable because it may prevent recycling.

3.1.7.2.7. Base Closure. The justification material for Base Closure will be

provided on 8.5” x 11” paper, typed across the short dimension of the paper (portrait) with 3 holes

punched on the left margin and bound with screw posts or Acco fasteners. Material is to be printed

on both sides of the page using 1” margins. Use of adhesive binding (glue or tape) is not acceptable

because it may prevent recycling.

3.1.7.2.8. Facility Sustainment, Restoration and Modernization (FSRM).

Provide justification material in accordance with Chapter 8.

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3.1.7.2.9. Revolving Funds. Material submitted for the budget estimate

submission for revolving funds is to be submitted by business area on 8.5”x 11” paper, with 3

holes punched along the 11 inch side to fit standard three-hole binders. Capital Investment

Program exhibits will be prepared in landscape format. Budget submitting offices should ensure

that all narrative type is consistent. Revolving funds justification books prepared by the

Components are to be unclassified. Classified exhibits will be submitted under separate cover.

3.1.7.2.10. Information Technology. Provide justification material in

accordance with Chapter 18, Section 180202.

3.1.7.3. Whenever revisions or correction sheets are necessary, the revised pages

showing the date of the change will be inserted in each budget book by a staff member of the

DoD Component submitting the change. OUSD (Comptroller) Program/Budget staff will instruct

the DoD Component’s staff member as to the location of the budget books. Corrections should be

held to a minimum and are not necessary for minor typographical errors which make no material

difference in the analysis and evaluation of the estimates.

3.1.8. Second Year of the Department’s Two-year Budget Review Cycle - Budget

Material. Budget documentation will be limited in the second year of the 2-year cycle. The

primary budget document is the Change Proposal. Other budget exhibit requirements will be

determined as this review process evolves. The specific requirements will be identified in the

annual Program and Budget Review call memorandum.

3.2 Distribution (010302)

Limited paper copies of unclassified budget documents will be provided to the primary

OUSD (Comptroller) reviewing Directorate and to OMB. Additionally, classified budget exhibits,

the transmittal memorandum with attachments to the Secretary of Defense, and the budget

overview booklets, will be provided in paper format. Submitting Components will also post all

unclassified budget material to an access controlled Internet site unless provided for otherwise in

the annual budget call memorandum. This will allow all OSD staff offices access to Component

budgets while minimizing the need for hard copies of the submissions. Under current procedures,

each submitting Component will individually post unclassified budget justification material on an

OUSD (Comptroller) hosted NIPRNET site. Additional guidance on accessing this site and

content guidance and restrictions will be provided annually. Paper copy distribution of

classified/unclassified program and budget review submission material will be made in accordance

with the charts on the following pages for the first year of the 2-year budget cycle. Guidance for

distribution of paper copies of Component BCPs in the second year of the 2-year budget review

cycle will be provided in the annual call memorandum. All required copies will be delivered

directly by each Military Department/Defense Agency to the appropriate offices at the room

numbers listed on the following page unless guidance elsewhere in this volume or in the annual

call memorandum indicates otherwise. However, because of numerous room changes during the

Pentagon Renovation and building access changes at non-Pentagon locations, call the listed office

prior to delivery of budget material:

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* Distribution Delivery Points

Organization

Room

Phone Number

SecDef (OSD Correspondence Control)

3A1066

USD(Comptroller)

Budget & Appropriations Affairs (BAA)

3D755

(703) 697-1101

Operations

3C710

(703) 697-2609

Investment (INV)

3C749

(703) 695-2235

Military Personnel & Construction (MPC)

3C654

(703) 697-9198

Revolving Funds (REV FUNDS)

3D755

(703) 697-4210

Program & Financial Control (P&FC)

3C689

(703) 697-0021

Office of the Deputy Chief Financial Officer

3C653A

(703) 695-7000

Director, PA&E

2D309

(703) 697-0395

USD(Acquisition, Technology & Logistics) Mail

Room

3C136

(703) 695-4060

USD(Policy)

5E635

(703) 571-9248

ASD(NII)/DoD CIO) Resource Program Budget

Office

3D228

(703) 695-3937

USD(Intelligence) Requirements and Resources

2E258

(703) 692-5186

USD(Personnel & Readiness)

3D258

(703) 614-5133

ASD(Health Affairs)

3E1082

(703) 697-2111

ASD(Reserve Affairs)

2E195

(703) 693-7495

The Joint Staff (J-8)

1E963

(703) 695-7066

DOT&E

Attn: Resource Manager

4850 Mark Center Dr

Suite 1000

Alexandria, VA 22301

(703) 681-4012/13

OIG, DoD

Attn: Comptroller Room 470

400 Army Navy Drive

Arlington, VA 22202-2884

(703) 604-9761 /62

DARPA

Comptroller

3701 North Fairfax Drive., 9th Floor

Arlington, VA 22203-1714

(703) 696-2393

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Executive Office of the President

Office of Management and Budget (OMB)

National Security Division

NEOB, Room 10001

725 17

Washington, D.C. 20503

(202) 395-3777

Office of the Director of National Intelligence

Chief Financial Officer (CFO)

Washington, D. C. 20511

(202) 201-1835

Because of numerous room changes during the Pentagon Renovation and building access

changes at non-Pentagon locations, call the listed office prior to delivery of budget material.

Because of mail handling procedures, many offices require courier delivery/pickup in lieu of

U.S. Postal Service delivery. Please call offices prior to mailing any material to the above

organizations.

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Table 1. Justification Material Supporting the OSD/OMB Budget Submission Summary

* JUSTIFICATION MATERIAL SUPPORTING THE OSD/OMB BUDGET SUBMISSION

SUMMARY DATA REQUIREMENTS

USD(Comptroller)

Other Organizations

(P)

(I)

S 3

E A

C 9

D 4

E 8

Transmittal Memorandum to SecDef with

each of the following attachments:

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 6 22

Fiscal Guidance Track- TOA in Millions of

Dollars (PB-1A)

Current Year

Reprogrammings/Transfers (PB-3)

Schedule of Military and

Civilian Personnel (PB-4),

Supplemental Appropriation

Requirements (PB-8)

Overview Booklets

Additional Budget Submission

(PB-10)

Automation Submission Requirements

** See Section 1.5 for the Budget Automation Submission requirements.

Not

e: Defense Agencies material must be packaged in sets with the originating agency clearly identified on each page of each exhibit.

Based on exhibit requirements, it is expected that all submissions will be unclassified, “For Official Use Only” with the exception of

submissions by CIFA, NGA, NSA, and DIA

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Table 2. Justification Material Supporting the OSD/OMB Budget Submission Operation and Maintenance, and Military Personnel

Budget Material

JUSTIFICATION MATERIAL SUPPORTING THE OSD/OMB BUDGET SUBMISSION

OPERATION AND MAINTENANCE, AND MILITARY PERSONNEL BUDGET MATERIAL

Appropriation

USD(Comptroller)

Other Organizations

(P)

(I)

MilPers Title Appropriations

Classified budget material

Unclassified budget material

O&M Title Appropriations

3/8

Classified budget material

Unclassified budget material

Drug Interdiction & Counterdrug

Activities

Classified budget material

Unclassified budget material

Overseas Contingencies Operations

Transfer Fund

Classified budget material

Unclassified budget material

Note: Defense Agencies material must be packaged in sets with the originating agency clearly identified on each page of each exhibit.

Classified exhibits should be submitted only when adequate information cannot be provided in an unclassified format to support budget estimates

Based on exhibit requirements, it is expected that all submissions will be unclassified, “For Official Use Only” with the exception of submissions for Drug

Interdiction and Counterdrug Activities, Overseas Contingencies Operations Transfer Fund, and Defense Agency submissions by CIFA, NGA, NSA, and

DIA.

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Table 3. Justification Material Supporting the OSD/OMB Budget Submission Procurement Account Budget Material

JUSTIFICATION MATERIAL SUPPORTING THE OSD/OMB BUDGET SUBMISSION

PROCUREMENT ACCOUNT BUDGET MATERIAL

Appropriation

USD(Comptroller)

Other Organizations

)

(I)

Procurement Title Appropriations 4

Classified budget material

1 2 1 1 1 1 1 1 1 1 1 1 13

Unclassified budget material

2 1 3

Classified submissions should include all associated exhibits for an individual P-1 line item whether associated exhibit is classified or

unclassified.

Defense Agencies classified material must be packaged in sets with the originating agency clearly identified on each page of each exhibit.

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Table 4. Justification Material Supporting the OSD/OMB Budget Submission Research, Development Test & Evaluation Account

Budget Material

JUSTIFICATION MATERIAL SUPPORTING THE OSD/OMB BUDGET SUBMISSION

RESEARCH, DEVELOPMENT TEST & EVALUATION ACCOUNT BUDGET MATERIAL

Appropriation

USD(Comptroller)

Other Organizations

(P)

(I)

RDT&E Appropriation Title

Classified budget material

Unclassified budget material

Classified submissions should include all associated exhibits for an individual R-1 line item whether associated exhibit is classified or

unclassified.

Defense Agencies material must be packaged in sets with the originating agency clearly identified on each page of each exhibit.

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Table 5. Justification Material Supporting the OSD/OMB Budget Submission Revolving and Management Fund Budget Material

JUSTIFICATION MATERIAL SUPPORTING THE OSD/OMB BUDGET SUBMISSION

REVOLVING AND MANAGEMENT FUND BUDGET MATERIAL

Appropriation

USD(Comptroller)

Other Organizations

(P)

(I)

Revolving Fund Title 9

Classified budget material

Unclassified budget

material

3 1 1 5

Defense Agencies material must be packaged in sets with the originating agency clearly identified on each page of each exhibit.

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Table 6. Justification Material Supporting the OSD/OMB Budget Submission Military Construction & Family Housing Account

Budget Material

JUSTIFICATION MATERIAL SUPPORTING THE OSD/OMB BUDGET SUBMISSION

MILITARY CONSTRUCTION & FAMILY HOUSING ACCOUNT BUDGET MATERIAL

Appropriation

USD(Comptroller)

Other Organizations

(P)

(I)

Revolving Fund Title 6

Classified budget material

1 2 1 1 1 1 1 1 1 1 1 1 13

Classified submissions should include all associated exhibits for an individual C-1 line item/family Housing Projects whether associated

exhibit is classified or unclassified.

Defense Agencies material must be packaged in sets with the originating agency clearly identified on each page of each exhibit.

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Table 7. Justification Material Supporting the OSD/OMB Budget Submission Special Interest Requirements Budget Material

JUSTIFICATION MATERIAL SUPPORTING THE OSD/OMB BUDGET SUBMISSION

SPECIAL INTEREST REQUIREMENTS BUDGET MATERIAL

PROGRAM

USD(Comptroller)

Other Organizations

(P)

(I)

Intelligence Programs

(NIP & MIP) (IP-1)

Special Interest Exhibits

Chapter 19

Classified budget

material

Unclassified budget

material

Note: Defense Agencies material must be packaged in sets with the originating agency clearly identified on each page of each exhibit.

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3.3 Preparation of the Biennial Budget Estimates (010303)

3.3.1. General Guidance

3.3.1.1. The Office of the Under Secretary of Defense (Comptroller) (OUSD(C))

will send, in June or July, a budget guidance memorandum establishing submission requirements

not included in this volume. Included in this guidance will be budget material due dates and

instructions for preparing estimates for the prior year (PY), current year (CY), budget years BY1,

and BY2 (in the biennial budget year), and the outyears.

3.3.1.2. Estimates for the biennial budget years and outyears will be based upon

the force levels, program decisions, and the TOA levels contained in the Program Objective

Memorandums (POMs). The current review schedule provides for concurrent program and budget

reviews. If the program review ever precedes the budget review, the TOA levels should reflect

the POM levels as modified by any Program Decision Memorandums (PDMs).

3.3.1.3. At various organizational levels throughout the Department of Defense, a

systematic cost-benefit analysis of proposed expenditures can be of significant value in program

formulation. Investments and expenditures in each appropriation category will normally be

supported by an analysis which matches estimated costs with benefits (outputs), subject to the

following criteria:

3.3.1.3.1. Funding is, for the first time, shown as required in the period

covered by the fiscal guidance, or

3.3.1.3.2. Previously established funding requirements in these years are

significantly altered by changed program or project plans.

3.3.1.3.3. The criteria in DoDI 7041.3, "Economic Analysis for

Decisionmaking," will apply. Budget submissions will, as a minimum, be accompanied by a

statement that (1) the submission is supported by an economic analysis, or (2) an economic analysis

is not required, citing the reason. Submission of detailed backup information to OSD will be on

"as requested" basis.

3.3.1.4. Transfers of functions between DoD Components will not be reflected in

the program and budget review submissions unless they have been approved by the Component

Head and the dollar amounts and personnel spaces to be transferred in the current year are fully

decided upon by all DoD Components concerned when the estimates are prepared. Under these

circumstances, both the gaining and losing Components will reflect the decisions in their estimates

with equal and offsetting manpower and dollar amounts. The gaining DoD Component is

responsible to confirm that this is the case. If this cannot be confirmed, then neither Component

will reflect the transfer in their budget estimates. The exhibit PB-14, Functional Transfers, found

in Chapter 19 will identify all functional transfers included in the budget. Each Component will

also notify OUSD (Comptroller) Program/Budget of the planned functional transfers not reflected

in the budget.

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3.3.1.5. Adjustments necessary to properly reflect functional transfers agreed upon

by the parties, but not included in the Program and budget review submission, may be

accomplished in the budget review process. Functional transfers not submitted in the program and

budget review submission or incorporated during the budget review process will be financed by

transfer in the current year and the budget year. Necessary exceptions to this general rule will be

authorized on a case-by-case basis. Functional transfers during the budget review process should

be kept to a minimum.

3.3.1.6. Material should be “Unclassified” and “For Official Use Only” unless

contents otherwise require a higher classification. All Program and budget review submission

material is subject to DoD 5400.7-R, DoD Freedom of Information Act Program, Chapter II,

Exemptions and in particular exemption number 5. Hard copy revised Procurement (P-1 exhibit)

and RDT&E Program (R-1 exhibit) must be submitted by the DoD Components with a

certification, signed by the Security Officer, confirming that all line items are classified properly.

3.3.2. Pricing in the Biennial Budget Estimates

3.3.2.1. It is DoD policy to reflect the most likely or expected full costs (including

military and civilian personnel pay) for the current year, the biennial budget years, and outyear

estimates for all appropriations.

3.3.2.2. Estimated price level changes will be based on data provided by OUSD

(Comptroller). These indices, which will be updated as economic conditions warrant, will be used

to (1) determine the amount of price escalation for a procurement line item, major RDT&E system,

or construction item over a given time period, and (2) project inflation in other noncompensation

areas of all other appropriations.

3.3.2.3. Military and civilian personnel compensation will be fully funded in the

biennial budget estimates using the rates provided by the OUSD (Comptroller).

3.3.2.4. Biennial budget estimates for goods and services will in all cases reflect

the following considerations:

3.3.2.4.1. Cost-quantity relationships as they affect unit prices -- e.g., the

unit price forecast in the biennial budget estimates will be higher or lower than the unit price

current when the estimates are prepared, if differences in the quantities involved are

price-significant.

3.3.2.4.2. The state of development or production and the learning curve.

3.3.2.4.3. Specific price changes, to take effect at a future date -- e.g., a

specific and authoritative rate or tariff schedule to take effect on a definite future date, which may

involve higher or lower prices than those in effect at the time estimates are prepared.

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3.3.2.4.4. Predictable cost increases due to risk.

3.3.3. Preparation of Biennial Budget Estimates - Multiple Appropriations

3.3.3.1. Section 10.0 contains formats for those exhibits applicable to more than

one appropriation.

3.3.3.2. In addition to those exhibits identified in Section 10.0, there are exhibits

required by other chapters which require identification of budget estimates/requirements for more

than one appropriation. This is particularly true of requirements discussed in Chapter 19 and

personnel exhibits required in Chapter 3. Offices responsible for budget submissions must ensure

that all such exhibits reflect total requirements for all appropriations.

3.3.4. Preparation of Biennial Budget Estimates - Operations

3.3.4.1. Separate identification and justification (including cost- benefit studies) is

required for management actions such as data automation and systems engineering. The

development, implementation and expansion of automated data systems will be based on an

economic analysis which should show that the proposed management action will produce an early

and demonstrably high return on investment or result in substantial increases in mission

performance and effectiveness. Savings from previously approved investments and management

actions will be separately identified.

3.3.4.2. The Dependents’ Education Program in the budget years would be based

on the best estimate of student load and planned at the current year program level in accordance

with the criteria for the regular school program established by USD(P&R).

3.3.5. Preparation of Biennial Budget Estimates - Procurement

3.3.5.1. In development of requirements for procurement of modern equipment to

offset consumption or attrition of older items, all assets of the older items, as well as acceptable

substitutes, will be applied against gross requirements in determining net procurement

requirements.

3.3.5.2. Administrative lead-time requirements in the budget years for any

principal item should not exceed the lead-time used in the development of the current year budget

program.

3.3.5.3. Production lead-times utilized in preparation of estimates for the budget

years should be based on the latest contract experience and current conditions, and generally

should not be greater than those used for the same item in the development of the current year

budget program. Any increases should be clearly identified and accompanied by an explanation

of the reason along with an identification of the pricing components/manufacturers used causing

the increase.

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3.3.5.4. Use of long lead-time component procurement will be consistent with the

full funding policy expressed in OMB Circular A-11. In this regard, long lead-time component

procurement will be limited to those few critical components whose lead-times exceed the

obligation availability of the appropriation or are significantly longer than other components of the

same end item.

3.3.5.5. Budget estimates will reflect economic production rates, unless there is

strong justification (other than funding constraints) for the use of other rates.

3.3.6. Preparation of Biennial Budget Estimates - Research, Development, Test and

Evaluation

3.3.6.1. In the development and review of RDT&E programs, special attention will

be devoted to the numbers of civilian and military personnel required for support of those

programs.

3.3.6.2. Increased emphasis will be placed on application of standards and austere

limitations to housekeeping and support activities including facilities sustainment, facilities

operations, equipment replacement and maintenance, and supply inventory levels.

3.3.7. Preparation of Biennial Budget Estimates - Revolving Funds

3.3.7.1. Revolving fund programs and biennial budget estimates will be consistent

with, and justified by, related support requirements; that is, program and budget estimates will be

based on anticipated customer needs for associated supplies, equipment, and services, loan

purchase requirements for production guarantee accounts, scope of operations to be financed

through management funds, etc. Biennial budget estimates will be consistent with the anticipated

customer needs that can be financed by the related program included in the customers’ budget

estimates. Increased emphasis should be directed toward assuring that customers are getting

maximum value for their appropriated funds.

3.3.7.2. Appropriations funded requirements for the Defense Working Capital

Fund will be computed under the same guidance as outlined above for the specific appropriations.

3.4 Second Year of the Department’s Two-year Budget Review Cycle - Budget Material.

(010304)

Budget documentation will be limited in the second year of the 2-year cycle. The specific

requirements will be identified in the annual Program and Budget Review call memorandum.

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3.5 Budget Estimates Summaries and Transmittal (010305)

3.5.1. Budget Estimates Transmittal

3.5.1.1 The budget estimates will be transmitted by memorandum to the

Secretary of Defense from the Secretary of each Military Department, the Director of each

Defense Agency, the Under Secretary, Assistant Secretary or Deputy Assistant Secretary of

Defense submitting a Defense-wide budget estimate, and the Director, The Joint Staff. While it is

mandatory that the exhibits below be submitted in the precise formats specified, any explanations

or highlight information that the submitting official considers appropriate may accompany the

transmittal. Exhibits PB-1A, PB-3, PB-4, and PB-8 include budget estimates summary data and

will be “Unclassified” “For Official Use Only” unless the contents otherwise require a higher

classification.

PB-1A. Fiscal Guidance Track – TOA in Millions of Dollars. (FY 20BY1

thru 20BY2+4) [Section 10.0]

PB-3. Current Year Reprogramming/Transfers Between Appropriations –

TOA in Thousands of Dollars [Section 10.0]

PB-4 FY 20BY1and 20BY2 Budget Estimates – Schedule of Civilian and

Military Personnel (FY 20PY through 20BY2+4) [Section 10.0]

PB-8. FY 20CY Supplemental Appropriation Requirements (Described in

Section 3.6) [Section 10.0]

3.5.1.2. The specified exhibits, transmittal memorandum to the Secretary of

Defense, and other explanatory or highlight information will be submitted as follows:

3.5.1.2.1. Secretary of Defense transmittal memorandum, with exhibits

PB-1A, PB-3, PB-4, and PB-8 attached. Deliver six copies to OSD Correspondence Control,

Room 3A948. Other copy requirements are identified in Section 3.2.

3.5.1.2.2. Overview booklets, such as the Air Force "Highlights," Navy

"Blue Book," etc. Copy requirements are identified in Section 3.2.

3.5.1.3. Budget estimates for the Defense portion of the National Intelligence

Program will be submitted as prescribed by the Director of National Intelligence (DNI). In

addition to budget exhibits specified by the DCI, the Office of the Secretary of Defense requires

certain other materials as outlined in Chapter 16.

3.5.1.4. Electronic data will be submitted to support Exhibit PB-4 (see Section

5.5). Extreme care must be exercised to assure that the submission and the exhibits are identical

in data content. As described in Section 5.6, the electronic data submissions are the basis for the

OSD budget review.

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3.5.2. Program and Financing (P&F) Schedules

3.5.2.1. The P&F schedule consists of a budget plan, obligations by object class,

and an expenditure tail. For multi-year accounts, the P&F schedule will also include an obligation

plan. See Section 5.6, CIS Automation Requirements for the Biennial Budget Submission, for

guidance on submitting a P&F schedule.

3.5.2.2. Program data will be presented in the Program and Financing schedule on

an obligation basis consistent with the presentation in the President’s Budget of previous years,

unless other directions are transmitted by separate memorandum.

3.5.2.3. Components will not submit prior year data in the program and budget

review submission. Components will submit an actual prior year object class and manpower data

update when available in accordance with specific update instructions issued separately.

3.5.2.4. Special Program Categories will be shown on Program and Financing

schedules in all cases as they appear in the CIS Budget Structure Listing referenced in Section 5.7.

3.5.2.5. Special care should be taken to assure that data presented in the object

classification schedule (Section 5.7) is consistent with information required on special exhibits.

For example, object class data provided for advisory and assistance services (CIS Object Class

Direct/Reimb. 25110) is the basis for Exhibit PB-15 (Chapter 19).

*3.6 Supplemental Appropriations Submissions (010306)

3.6.1. Budget Estimates Transmittal

3.6.1.1. Supplemental appropriations are normally allowed to meet unforeseen

contingencies or national emergencies of a magnitude that cannot be absorbed or accommodated

through reprogrammings and transfers. Specific guidance on this will be provided on a

case-by-case basis.

3.6.1.2. OMB Circular A-11 provides additional policy guidance on supplemental

estimates.

3.6.2. Supplemental appropriation requirements will be submitted on a schedule in the

format of Exhibit PB-8, provided in Section 10.0 or as prescribed in specific or separate guidance.

This exhibit will be transmitted in the same manner as the budget estimate summaries (see Section

3.5).

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3.6.3. Material Included for Informational Purposes

3.6.3.1. Under the 41 U.S. Code authorizations (formerly Section 3732 of the

revised statute), the law provides that the President may exempt appropriations, funds, and contract

authorizations which are available for military functions under the Department of Defense from

the antideficiency provisions of 31 U.S. Code 1517 (formerly Section 3679 of the revised statute)

whenever he deems such action necessary in the interests of national defense. Upon determination

by the President, that such action is necessary, the Secretary of Defense is authorized to provide

for the cost as an accepted expense. For example, if the President determines that it is necessary

to increase the number of military personnel on active duty beyond the number for which funds

are provided in the annual appropriation act, the Secretary of Defense is authorized to provide for

the cost of such increased military personnel as an accepted expense. Obligations are then

authorized to be incurred in excess of amounts appropriated. After substantially all obligations

have been liquidated, an appropriation is requested to liquidate any unfinanced balances.

3.6.3.2. The law provides essentially that, notwithstanding the balances available,

revolving funds may incur obligations to provide for making issues through the production

lead-time period (10 U.S.C. 2210(b)). As a technical matter, this constitutes a form of contract

authority, and is so displayed in the President’s Budget.

3.6.4. Disaster Situations and Management of Disaster/Contingency Supplemental Funds

3.6.4.1. In the event of a disaster or emergency situation, Components will notify

OUSD(C), as soon as possible, of needs resulting from the event. Components must be able to

quantify the need for disaster relief by providing the OUSD(C) with adequate information for

determining that funds are needed to protect people, restore facilities, and/or save lives. If

required, OUSD(C) will issue specific guidance and instruction for collecting requirements

information. OUSD(C) will review cost and requirements data submitted by the Components to

determine if the Department requires additional funding and/or if the appropriate spending

authorities are available to support the emergency situation.

3.6.4.2. Supplemental appropriations provided to the Department for war-related

costs, and/or costs associated with international or domestic disasters will often have unusual

periods of availability for a particular appropriation (for example, Operation and Maintenance

appropriations may have a period of availability of more than one year). The emergency funds

may be provided in a transfer account that would have an extended period of availability (for

example, a three year transfer account). Funds control issuing agents and appropriation managers

should ensure that the period of availability of the funds is optimized, to include obligating the

amounts in a timely manner, and returning unused or unneeded funds to a transfer account

immediately upon becoming available. For example, funds transferred from a three year transfer

account to an Operation and Maintenance appropriation will take on the period of availability of

the account where transferred, which is one year for Operation and Maintenance. If the funds are

not used before the end of the period of availability and if statutory transfer authority is available,

the Component’s funds control agent should initiate a reprogramming action to transfer those funds

back to the transfer account where they, once again, take on the remainder of the three-year period

of availability. This practice ensures the funds provided by the Congress are optimized and are

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available to support the disaster or emergency event in subsequent years in accordance with

Congressional intent.

3.7 Additional Budget Submissions (ABS) (010307)

3.7.1. General Guidance. Following the initial program and budget review submission

(initial submit), Additional Budget Submissions may be made, where warranted by specific

changes in circumstances, within approved TOA control totals established by the

USD(Comptroller) and under the following restrictions:

3.7.1.1. Additional Budget Submissions must be submitted as adjustments to, not

substitutes for, the initial submit.

3.7.1.2. Unless otherwise directed by the USD(Comptroller), Additional Budget

Submissions must be offset with equal or greater cost tradeoffs, and must clearly indicate the areas

of increase and decrease consistent with the justifications submitted as part of the initial submit.

3.7.1.3. Proposed decreases may not consist of reductions already effected or

imminently planned to be effected as part of the budget review.

3.7.1.4. Additional Budget Submissions may not be used to compensate for

incomplete or inadequate initial submits.

3.7.1.5. Additional Budget Submissions may not be used to appeal budget

decisions.

3.7.1.6. If an additional budget submission results in an impact on revolving funds,

those related requirements must be incorporated in the additional budget submission.

3.7.2. Submission Requirements. In order to be considered during the budget review, all

additional budget submissions must be received no later than the date specified in the annual

guidance. Additional budget estimates for the biennial years 1 and 2 will be accompanied by

Exhibit PB-10, provided in Section 10.2, plus the necessary justification material. This should

take the form of a complete narrative justification and may be included on the transmittal

memorandum or as an attachment to Exhibit PB-10. The applicable out-year impact of the

Additional Budget Submission will also be shown on Exhibit PB-10. The additional estimates

will be transmitted in two copies (plus two additional copies for each appropriation affected) by

memorandum to the USD(Comptroller) and signed by the same official who submitted the initial

budget estimates or his appointed deputy. All Additional Budget Submissions will be hand carried

to the Office of the USD(Comptroller), Directorate for Program and Financial Control,

Room 3C689, for OSD processing. The Additional Budget Submission will be addressed in

subsequent budget decision document(s).

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3.8 Major Budget Issues (MBIs) (010308)

Near the end of the budget review process, the Secretary of Defense and the

Deputy Secretary of Defense may provide for the review of Component major policy or budget

issues that have not yet been resolved. Resolution of these issues may displace other programs

within the fixed DoD topline. Copy requirements of Component issues will be provided if an MBI

review is scheduled. A general format is provided in Section 10.2.

3.9 Budget Review Procedures (010309)

3.9.1. Comptroller Information System (CIS). The automated CIS is the official OSD

record of the budget estimates as submitted by the DoD Components and adjusted by

Secretary of Defense decisions known as Program Decision Memorandums (PDMs) and

Program Budget Decisions (PBDs). The data contained in the CIS is the base for data required for

the OMB MAX Budget System, as required by OMB Circular No. A-11. CIS data is electronically

transmitted to OMB for preparation of the President’s Budget. In addition, CIS is used to prepare

a comprehensive set of management information summaries to support the budget press release,

statements to the Congress and other information requirements. Financial data, military end

strength, and civilian full time equivalent (FTE) data are provided. Program and Budget Review

Submissions are entered into the system through electronic submissions from the

DoD Components or through on-line interaction with the system. During the joint OMB/OSD

Program and Budget Review, program and budget decision documents are recorded into CIS and

the current status of the program and budget review is readily available soon after the data are

processed.

3.9.2. Development of Out-year Data During the Program and Budget Review

3.9.2.1. Throughout the Program and Budget Review a continuing update of the

out-year TOA and manpower is performed to reflect the extension of CY, BY1, and BY2 decisions

made during the budget review.

3.9.2.2. TOA, military end strength and civilian FTE data for the initial out-year

database are provided by each of the DoD Components. During the program and budget review,

as program and budget decision documents are approved and recorded into CIS, the TOA and

manpower out-year impact of each decision is addressed on the decision document and is also

entered into CIS. The program and budget decision document will contain one of the following

descriptors of out-year impact:

3.9.2.2.1. The estimated out-year impact for each year in thousands of

dollars and full-time equivalents/end strength.

3.9.2.2.2. Substantive program direction for the out-years as a basis for

DoD Component determination of dollar amounts and manpower involved (to be used if out-years

are not specifically addressed in a budget decision document).

3.9.2.2.3. No known out-year impact

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3.9.2.3. As with the CY, BY1, and BY2 decisions, the out-year adjustments

approved in the Secretary of Defense decisions are entered into the CIS. TOA adjustments are

recorded at the appropriation account level, Budget Activity/Special Program Category, and by

Program Budget Decision number. Manpower data is recorded at the appropriation account level,

by Program Budget Decision number and special program code with active military manpower

detailed by officer, enlisted and cadets; selected reserve manpower detailed by officer and enlisted

personnel category; and civilian FTE detailed by U.S. direct hire (direct and reimbursable), foreign

national direct hire (direct and reimbursable), and foreign national indirect hire (direct and

reimbursable).

3.9.2.4. The CIS produces Out-year Impact Status Reports on a recurring basis

throughout the program and budget review. These reports, which are available to the applicable

DoD Components, show TOA & manpower data by appropriation, special program code and

personnel category for the budget submission base and all adjustments to the base resulting from

decisions made during the budget review. The final reports at the conclusion of the budget review

reflect the out-year numbers (TOA and manpower) which are the control numbers for the

President’s Budget update of the Future Years Defense Program (FYDP). It is essential that the

Out-year Impact Status Reports be reviewed by the DoD Components on a recurring basis during

the budget review so the out-year numbers are under continuous scrutiny and the President’s

Budget update for the FYDP may proceed in a timely manner.

3.9.3. Printing Schedule for Budget Material

3.9.3.1. OMB Circular No. A-11 prescribes the requirements for materials to be

included in the President’s Budget document. Annually, the ODC(P/B), OUSD (Comptroller)

publishes instructions on the procedures to be followed during the budget review. These

instructions detail the sequence of events necessary to finalize the budget review and complete the

printing phase of the budget. All actions concerning printing of budget material will be

accomplished in accordance with these references and the following paragraphs.

3.9.3.2. Electronic galleys

3.9.3.2.1. The OMB will provide OUSD (Comptroller) and Office of the

Deputy General Counsel (Fiscal) within the OSD, General Counsel with an electronic copy of the

galleys based on the previous year’s President’s Budget document. The OMB electronic galley

version is divided into two parts, Appropriation Language and Narrative Language. The OSD,

General Counsel is responsible for all Appropriation Language galleys (except for the dollar

amounts); the OUSD (Comptroller) is responsible for all Narrative Language galleys. The

Narrative Language galleys include any “text tables” such as Active/Reserve End Strength Forces

tables and Defense Health Program Eligible Beneficiary Category tables.

3.9.3.2.2. The dollar amounts contained in the Appropriation Language

galleys such as the amount to be appropriated are the responsibility of the OUSD (Comptroller),

Program and Financial Control Directorate. In most cases, these dollar amounts are generated

electronically from the Comptroller Information System (CIS) and loaded directly into OMB

budget system. However, amounts for Emergencies and Extraordinary Expenses need to be posted

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to the electronic galleys. The Program and Financial Control Directorate (P&FC) will identify

these items, coordinate with other OUSD (Comptroller) Directorates, and ensure that accurate

dollar amounts are reflected in the OSD, General Counsel version submitted to OMB.

3.9.3.2.3. Both Appropriation Language and Narrative Language galleys

are updated and submitted electronically to OMB. The Appropriation Language galleys will be

electronically updated by the OSD, General Counsel and coordinated with the OUSD

(Comptroller) around mid-December. The Narrative Language galleys are updated within OUSD

(Comptroller) in the same timeframe. New accounts, accounts with supplementals requiring

separate schedules, rescission proposals and other material to be presented in the President’s

Budget document will also be accomplished electronically. The submission of electronic galleys

is intended to fill technical budget preparation needs (i.e., determine that all lines, account titles,

text, and appropriation language are correct and that all required schedules are in print). The OMB

will post the electronic submission along with OMB-initiated changes for OSD, General Counsel,

and OUSD (Comptroller) review until the Department has made the final submission to OMB’s

MAX system in early January.

4.0 CONGRESSIONAL JUSTIFICATION/PRESENTATION (0104)

4.1 General (010401)

4.1.1. Purpose

4.1.1.1. This section provides instructions for the preparation of justification

material for presentation to congressional committees. Justification material should be developed

using the guidelines established herein as the minimum requirements to be included in the

Justification Books. Any exception to these minimum requirements must be cleared with

OUSD (Comptroller) Program/Budget.

4.1.1.2. Justification of proposed supplemental appropriations and budget

amendments are covered in OMB Circular A-11 and Section 4.2; however, separate instructions

will be issued by OUSD (Comptroller) Program/Budget as the need arises.

4.1.1.3. General preparation and submission instructions pertaining to individual

appropriations, Intelligence Programs and Communications, Command and Control (C

) Programs

are contained in Chapters 2 thru 7, 9, 10, 12, 13, 16 and 19.

4.1.1.4. All congressional budget/presentation material is subject to

DoD 5400.7-R, DoD Freedom of Information Act (FOIA) Program requirements. Chapter 3,

Exemptions, should be reviewed carefully before denial of any FOIA request. Exemptions will

generally fall into exemption 5. Use of For Official Use Only (FOUO) must meet the requirements

of DoD 5400.7-R, Chapter 4.

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4.1.2. Preparation of Material

4.1.2.1. Separate Justification Books will be furnished for each appropriation

relating to each Military Department. Material prepared by individual Defense Agencies and

Office of the Secretary of Defense organizations will be consolidated by OUSD (Comptroller)

Program/Budget into a single Justification Book for each appropriation. Material for the Operation

and Maintenance, Defense-wide; U.S. Court of Appeals for the Armed Forces, Defense;

Environmental Restoration, Defense; Office of the Inspector General; Overseas Humanitarian

Disaster and Civic Aid; and other operation and maintenance type appropriations will be

consolidated into a single Justification Book. The OUSD (Comptroller) Program/Budget will also

develop an O&M Overview book as well as a consolidated overview of Multiyear Procurement

programs based on submissions of the Military Departments and Defense-wide components.

Additionally, information technology budget material prepared by the Military Departments and

other DoD Components will be consolidated by the Office of the ASD(NII)/DoD CIO Resource

Management Directorate into a single Justification Book. Combating Terrorism budget material

prepared by DoD Components will be consolidated into a single justification book by the assistant

secretary of Defense for Special Operations and Low Intensity Conflict (SO/LIC). The

Department of the Army will prepare a justification book for Chemical Demilitarization programs

and will consolidate material for the Army Family Housing and Homeowners’ Assistance Fund,

Defense appropriations into a single Justification Book. Each Department will prepare a

Justification Book for each Base Closure Account. In addition, separate Justification Books will

be prepared for Intelligence-Related Activities and the Defense portion of the National Intelligence

Program, the latter as prescribed by the Director of National Intelligence. All other Justification

Books will be annotated as appropriate to indicate items and resources supported in Intelligence

Program Justification Books. Also, separate Justification Books will be prepared for NIP/MIP

program aggregations as prescribed in Chapter 16.

4.1.2.2. Classified and unclassified data will be included in the single volume or

set of volumes for each appropriation with the classified pages bearing the appropriate security

classification, except that all materials contained in the Military Personnel and Operation and

Maintenance justification books will be unclassified. Classified exhibits will be submitted

separately and explanation provided for their being classified. Fiscal data pertaining to explicitly

identified portions of the National Intelligence Program shall be classified in accordance with

instructions in Chapter 16.

4.1.2.3. The highest security classification of data included in Justification Books

will be SECRET. Information requiring a higher classification will be discussed with OUSD

(Comptroller) Program/Budget on an individual situation basis. All classified data will be

bracketed by pencil [ ] to permit the congressional committees to publish an unclassified version.

Data not bracketed will be assumed to be unclassified. In bracketing classified columnar data,

each column will be individually bracketed. Care must be taken to assure that unclassified data

are not bracketed. Security classification markings should be centered at the top and bottom of

applicable pages to assure clarity. The appropriate automatic downgrading notation will be used

in accordance with DoD 5200.1-R, Information Security Regulation. The appropriate

classification cover sheet must be utilized.

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4.1.2.4. Military Departments and Defense Agencies will be responsible for

clearing the justification material with the Washington Headquarters Services, Directorate for

Freedom of Information and Security Review, prior to transmittal to OMB and the congressional

committees.

4.1.2.5. The Program and Financing, Object Classification and Personnel

Summary schedules will reflect current year program supplemental appropriation requirements as

directed by OMB.

4.1.2.6. Reports of the Program and Financing and Object Classification Schedules

will be available from OUSD (Comptroller) Comptroller Information System (CIS) and will be

used in the Justification and Backup Books as specified for each appropriation title in the following

chapters.

4.1.2.7. Printing of Congressional Budget Material:

4.1.2.7.1. General. Tabs will be used only where specified by OSD;

McCall (edge) indexing will be used as appropriate. Justification material should be printed on

both sides of the page wherever feasible. Headings for an appropriation or budget activity will

appear on the initial page of the subdivision and will not be repeated on subsequent pages, except

RDT&E Program Element Listings. The Components will work with Defense Automation and

Production Service (DAPS) to determine the most appropriate and quickest method of printing and

fastening each of the books subject to the guidance by appropriation title below.

4.1.2.7.2. Military Personnel. Material to be printed on both sides of the

page with a maximum range of 600-650 pages where possible (300-325 sheets of paper printed on

both sides.) Print horizontally (landscape) on 11”x8.5” paper using a 1” margin on the side to be

bound and 1/2” for other edges. All material will be printed head to toe with 3 holes punched

across the top margin with staples, screw posts or ACCO fasteners. Use of adhesive binding

(glue or tape) is discouraged because it may prevent recycling. Font size must be at least size 10.

4.1.2.7.3. Operation and Maintenance. Material to be printed on both sides

of the page with a maximum range of 600-650 pages where possible (300-325 sheets of paper

printed on both sides.) Print horizontally (landscape) on 11”x8.5” paper using a 1” margin on the

side to be bound and 1/2” for other edges. All material will be printed head to toe with 3 holes

punched across the top margin with staples, screw posts or ACCO fasteners. Use of adhesive

binding (glue or tape) is discouraged because it may prevent recycling. Font size must be at least

size 10.

4.1.2.7.4. Research, Development, Test and Evaluation. Material is to be

printed horizontally (landscape) on both sides of the page on 11" x 8.5" paper using a 1” margin

on the side to be bound and 1/2” for other edges. Components will request DAPS to reduce all

larger pages to the standard 11" x 8.5" size so that all of the pages in each book are consistent in

size. The material will be printed head to toe with 3 holes punched across the top margin. The

following is the fastening preference: staples, screw posts, ACCO fasteners, etc. Use of adhesive

binding (glue or tape) is discouraged because it may prevent recycling. Books are to be a

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maximum range of about 600-650 pages where possible (300-325 sheets of paper printed both

sides).

4.1.2.7.4.1. Since the justification material is printed double sided,

then each PE package must begin on the front side of a new page. When the last page of a PE

package does not end on the backside of the paper, then a blank page must be inserted with the

wording “This page intentionally left blank” in bold letters, centered on the page. The reason for

this is so that the justification material can be easily broken apart and sorted by PE with all of the

pertinent exhibits.

4.1.2.7.4.2. For those Components that have a large number of PEs

and printing the material all in one volume is impractical, it is preferred that the justification

material be submitted by budget activity with the Science and Technology budget activities

(BA 1 through BA 3) printed in one volume and the remaining budget activities printed in a

separate volume or in individual volumes. Each separate book should include an R-1 listing and

a table of content indicating which volume and page the applicable program element can be found.

4.1.2.7.5. Procurement. Material to be printed on both sides of the page

with a maximum range of 600-650 pages where possible (300-325 sheets of paper printed on both

sides.) Print horizontally (landscape) on 11”x8.5” paper using a 1” margin on the side to be bound

and 1/2” for other edges. All material will be printed head to toe with 3 holes punched across the

top margin with staples, screw posts or ACCO fasteners. Use of adhesive binding (glue or tape)

is discouraged because it may prevent recycling.

4.1.2.7.6. Military Construction. The justification material for

Military Construction will be provided on 8.5” x 11” paper, typed across the short dimension of

the paper (portrait) with 3 holes punched on the left margin and bound with screw posts or Acco

fasteners. Material is to be printed on both sides of the page using 1” margins. All exhibits will

be printed utilizing white paper. Use of adhesive binding (glue or tape) is not acceptable because

it may prevent recycling.

4.1.2.7.7. Family Housing. The justification material for Family Housing

will be provided on 8.5” x 11” paper, typed across the short dimension of the paper (portrait) with

3 holes punched on the left margin and bound with screw posts or Acco fasteners. Material is to

be printed on both sides of the page using 1” margins. Use of adhesive binding (glue or tape) is

not acceptable because it may prevent recycling.

4.1.2.7.8. Base Closure. The justification material for Base Closure will be

provided on 8.5” x 11” paper, typed across the short dimension of the paper (portrait) with 3 holes

punched on the left margin and bound with screw posts or Acco fasteners. Material is to be printed

on both sides of the page using 1” margins. Use of adhesive binding (glue or tape) is not acceptable

because it may prevent recycling.

4.1.2.7.9. Revolving Funds. Justification books for revolving funds are to

be submitted in one volume with 3 sections: Component Overview; Operating Budget and Capital

Budget. Component Overview and Operating Budget sections are to be printed in portrait format

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

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1-88

(vertically) on 8.5” x 11” paper head to head on 2 sides. Capital budget exhibits are to be printed

in landscape format (horizontally) on 11” x 8.5” paper head to toe on 2 sides. Budget submitting

offices should ensure that all narrative type is consistent. All justification material will be punched

to fit standard three-hole binders. Use of adhesive binding (glue or tape) is not acceptable because

it may prevent recycling.

4.1.2.7.10. Intelligence Programs. Instructions for these books are

contained in Chapter 16.

4.1.2.7.11. Information Technology. Provide material in accordance with

guidance contained in Chapter 18.

4.1.2.8. Justification book cover inserts will be 220 index stock using the following

colors: Army - green; Navy - buff; Air Force - blue; Defense-wide justification material

(Agencies, Office of the Secretary of Defense, Defense Health Program, and Commander In

Chiefs to include the U.S. Special Operations Command) - white. Covers will bear the

appropriate security markings, title of the volume as specified herein, the phrase "Submitted to

Congress February 20...," and the appropriations included.

4.1.2.9. The use of acronyms and abbreviations in the justification material should

be held to a minimum. However, where acronyms and abbreviations are used, they must be

identified on the page on which they appear.

4.1.2.10. The exhibit numbers used in this section are for reference purposes only

and should not be used in the Justification Books.

4.1.3. Submission of Justification Books for Review

4.1.3.1. Before the justification material can be released to the Congress, it must

be reviewed by the appropriate OUSD (Comptroller) or OASD(NII) /DoD CIO to ensure that

policies and decisions made by the President and Secretary of Defense are fully reflected.

Accordingly, three advance sets of Justification Books will be forwarded to the appropriate OUSD

(Comptroller) Directorate for review or for Information Technology exhibits as directed by

OASD(NII)/DoD CIO. The following is a list of the directorates:

Directorate

Room

Phone Number

Directorate for Operations

3C710

697-2609

Directorate for Military Personnel and

Construction

3C654

697-6359

Directorate for Investment

3C749

695-2235

Directorate for Revolving Funds

3D755

697-4210

Office of the ASD(NII)/DoD CIO Resource

Management Directorate

3D228

695-3937 (For IT

Justification)

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

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4.1.3.1.1. In addition, one set of the Military Personnel and Operation and

Maintenance Justification Books for the Reserve Components will be delivered to OASD(RA),

Room 2E195.

4.1.3.1.2. The Military Departments should also send two copies of

advance sets of justification books to Washington Headquarters Services, Directorate for Freedom

of Information and Security Review ((703) 696-4538) for clearance. Clearing material through

this Directorate should be accomplished piecemeal to expedite the final review. Clearance by

OUSD (Comptroller) P/B will be evidenced by an approval from the applicable Program/Budget

Directorate designated official, initialed on one of the advance copies of each Justification Book

and returned to the applicable service. The OUSD (Comptroller) Directorate having cognizance

over the budget material will obtain any necessary clearance from the Office of Management and

Budget (OMB). Upon advice from OUSD (Comptroller) P/B and Washington Headquarters

Services, Directorate for Freedom of Information and Security Review that the advance sets of

justification books are acceptable, the DoD Components will complete preparation and assembly

of Justification Books.

4.1.3.1.3. Under no circumstances will justification material be released to

congressional committees or the public prior to receipt of these clearances.

4.1.3.2. Except as specified herein, submission dates will be provided in separate

correspondence from OUSD (Comptroller) Program/Budget.

4.2 Supplemental and Amended Appropriations Requests (010402)

4.2.1. Organization of Supplemental Appropriations Requests Justification Books

4.2.1.1. Justification Books in support of supplemental appropriations requests will

be prepared by OUSD (Comptroller) P/B, based on material furnished by the DoD Components.

Justification materials will be addressed in separate correspondence from OUSD (Comptroller)

P/B.

4.2.1.2. The Justification Book will generally be arranged as follows:

4.2.1.2.1. Table of Contents and Summaries. These items will be prepared

by OUSD (Comptroller), P/B.

4.2.1.2.2. Section 1 – Narrative Justification. This section will contain

narrative justifications, and any special exhibits in support of program supplemental requests.

Supplemental appropriation requests related to all program supplementals will be supported by a

narrative justification.

4.2.1.2.3. Section 2 – Appropriation Act language. This section will

contain required appropriation act language. The appropriation language will be extracted by

OUSD (Comptroller) P/B from the Budget Appendix.

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

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1-90

4.2.2. Organization of Amended Appropriations Requests Justification Books

4.2.2.1. A separate abbreviated Justification Book will be prepared by OUSD

(Comptroller) and/or each Military Department for each affected appropriation title; e.g.,

Operation and Maintenance; Procurement; RDT&E; etc. (Additional justification materials

required of Defense Agencies and for Defense-wide accounts will be identified in separate

correspondence from OUSD (Comptroller). Related Justification Books will be prepared by

OUSD (Comptroller) P/B.) Justification books will be organized by supplemental category

(e.g., contingencies, natural disasters, etc.) Each Book should be stapled but must contain holes

punched to fit existing Justification Book binders. (NOTE: Depending on the magnitude of a

particular budget amendment; i.e., number of DoD components and appropriation accounts

affected, single Justification Books may be prescribed for each DoD Component, or a single

Justification Book may be prepared by OUSD (Comptroller) P/B with input from the affected DoD

Components.)

4.2.2.2. Each Justification Book will contain the following, as a minimum:

4.2.2.2.1. A single Table of Contents

4.2.2.2.2. By individual appropriation account:

4.2.2.2.2.1. Revised appropriation language (retyped from Budget

Appendix to reflect revised request).

4.2.2.2.2.2. Budget Amendment Summary, in the format of

Exhibit PB-37R (see Section 10.0), highlighting changes to the pending request.

4.2.2.2.2.3. Program and Financing Schedule (abbreviated) in the

format of Exhibit PB-37S (see Section 10.0). Both the Budget Plan and Obligation Plan will be

shown for multi-year accounts.

4.2.2.2.2.4. Narrative Justification by Budget Activity in the format

of Exhibit PB-37T (see Section 10.0). Narrative will discuss dollar, quantity, personnel changes,

etc., at least at the level of changes indicated on the Budget Amendment Summary

(Exhibit PB-37R).

4.2.2.2.2.5. Existing P-1 and R-1 Exhibits will be marked up to

indicate changes resulting from the proposed amendment.

4.2.2.2.2.6. Procurement and RDT&E Justification material will be

retyped, where applicable, to encompass changes resulting from the proposed amendment.

4.2.2.3. When prepared by a Military department, three advance sets of materials

will be forwarded to the Directorate for Budget and Appropriations Affairs, OUSD (Comptroller),

Room 3D755. Two copies should also be submitted at that time to Washington Headquarters

Services, Directorate for Freedom of Information and Security Review, (703) 696-4538, for

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

*October 2008

1-91

security clearance. Other appropriate provisions of Section 4.1 pertain. Military Departments will

make the same distribution of above Books as for regular congressional justification materials.

4.2.3. References. Additional instructions are contained in OMB Circular A-11.

4.3 Distribution/Internet Posting of Budget Material (010403)

4.3.1. Copies of OSD-generated justification materials for congressional distribution will

be delivered to OUSD (Comptroller), Budget & Appropriations Affairs, Room 3D755 for delivery

to the congressional committees.

4.3.2. Each Military Department will deliver copies of its justification material to

congressional committees, GAO, Library of Congress, CBO, and OMB, etc. The OUSD

(Comptroller) (P/B) will distribute copies of the consolidated Defense-wide justification material

unless assigned to a Military Department. The Office of the ASD(NII)/DoD CIO Resource

Management Directorate will distribute copies of the consolidated Information Technology

Justification.

4.3.3. Copies of classified material and other backup documentation for OSD will be

delivered directly by each Military Department to the offices listed. Total distribution including

the number of copies is also provided on the following tables. Advance books (40) are required

to be produced by the due dates so that immediate distribution may be made to the congressional

committees. The remaining quantities will be delivered/distributed 3 to 5 days thereafter.

4.3.4. Internet Posting of Unclassified Budget Justification Material

4.3.4.1. Justification material for the President’s budget will have limited paper

copy distribution as shown on the distribution charts. No internal DoD distribution will be made

of unclassified justification material that is provided to the Congress, OMB and other non-DoD

organizations. This justification material will be available solely through posting to Component

Internet sites.

4.3.4.2. However, classified budget justification and budget backup material as

identified in the distribution tables will be provided in paper copy to the organizations listed.

Appropriate OUSD (Comptroller) directors should be consulted prior to distribution of material

not listed.

4.3.4.3. Internet posting on Component Web Sites.

4.3.4.3.1. Web pages presenting Defense budget documents must be

designed to facilitate user discovery of the information. These pages will be used extensively by

Congressional staffs, the media, and the public, and the presentation of material reflects upon the

organization sponsoring the site. Budget documentation should be logically grouped, and link

names should be clear and concise, to allow the user to rapidly navigate to the document of interest.

Graphical content should be limited, to allow reasonable download times when accessed via

modem. The Military Departments must ensure that established web pages meet these criteria.

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

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1-92

4.3.4.3.2. Defense Agencies and managers of Defense-wide accounts will

be provided separate guidance for the submission of budget justification in an electronic format.

OUSD (Comptroller) will consolidate Defense-wide justification and distribute/post to the

Comptroller Internet site.

4.3.4.3.3. Posting of justification material on Component web pages should

occur no later than 5 working days after delivery of the paper copies to the Congress, but not prior

to delivery to the Congress.

4.3.4.3.4. As a reminder, for Freedom of Information requests received

prior to posting the unclassified budget material on the Internet , it is the responsibility of the DoD

component to comply with the request in accordance with DoD 5400.7-R.

4.3.5. CD-ROM Production. Upon completion of the posting of budget justification

material to the Component Internet site, a CD-ROM containing all of this material will be produced

and distributed in accordance with the distribution tables that follow. This CD-ROM should be

distributed not later than 45 days after the Budget of the United States Government is presented to

the Congress. This process will make budget material available for those that lack Internet access

and for historical purposes.

* Distribution Delivery Points

Office

Room

Phone Number

SecDef (OSD Correspondence Control)

3A1066

USD(Comptroller)

Budget & Appropriations Affairs (BAA)

3D755

(703) 697-1101

Operations

3C710

(703) 697-2609

Investment (INV)

3C749

(703) 695-2235

Military Personnel and Construction (MPC)

3C654

(703) 697-6359

Revolving Funds (REV FUNDS)

3D755

(703) 697-4210

Program & Financial Control (P&FC)

3C689

(703) 697-0021

Office of the Deputy Chief Financial Officer

3C653A

(703) 695-7000

Director, PA&E

2D309

(703) 697-0395

USD(Acquisition, Technology & Logistics)

Mail Room

3C136

(703) 695-4060

USD(Policy)

5E635

(703) 571-9248

ASD(NII)/DoD CIO) Resource Program

Budget Office

3D228

(703) 695-3937

USD(Intelligence) Requirements and

Resources

2E258

(703) 692-5186

USD(Personnel & Readiness)

3D258

(703) 614-5133

ASD(Health Affairs)

3E1082

(703) 697-2111

ASD(Reserve Affairs)

2E195

(703) 693-7495

The Joint Staff (J-8)

1E963

(703) 695-7066

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

*October 2008

1-93

DOT&E

Attn: Resource Manager

4850 Mark Center Dr

Suite 1000

Alexandria, VA 22301

(703) 681-4012/13

OIG, DoD

Attn: Comptroller Room 470

400 Army Navy Drive

Arlington, VA 22202-2884

(703) 604-9761/62

DARPA

Comptroller

3701 North Fairfax Drive., 9th Floor

Arlington, VA 22203-1714

(703) 696-2393

Executive Office of the President

Office of Management and Budget (OMB)

National Security Division

NEOB, Room 10001

725 17

Washington, D.C. 20503

(202) 395-3777

GAO

U.S. Government Accountability Office

NSIAD/TIC

Attn: Nadine Furr (DCM, Room 4035) (Unclassified Material)

Backup: Sharon Pickup (DCM Director, Room 4033)

US GAO

441 G Street, NW

Washington, DC 20548

(202) 512-4361

(202) 512-9619

NSIAD Document Control Office

Attn: Wanda Beasley (Classified Material)

441 G Street, NW --Room 4035

Washington, DC 20548

(202) 512-5810

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

*October 2008

1-94

Congressional Budget Office (CBO)

Ford House Office Building

Rm. 428 (Attn: Sarah Jennings)

and D Streets, S.W.

Washington D.C. 20515

(202) 226-2840

(202) 225-3185 (FAX)

Library of Congress

Rm. LM-208 (stop 7500)

Attn: Bruce Krafte

James Madison Library Bldg.

101 Independence Ave., S.E.

Washington, D.C. 20540

(202) 707-8845

Because of numerous room changes during the Pentagon Renovation, call the listed office

prior to delivery of budget material.

Because of mail handling procedures, many offices require courier delivery/pickup in lieu of

U.S. Postal Service delivery. Please call offices prior to mailing any material to the above

organizations.

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

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1-95

Table 8. Justification Material Supporting The President’s Budget Request Military Personnel Accounts

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S BUDGET REQUEST

MILITARY PERSONNEL ACCOUNTS

Appropriation

USD(Comptroller)

Other Organizations

E T

F O

E T

N T

S A

E L

(I)

Military Personnel, Active, Guard and

Reserve

In-house Backup Exhibits (MP/MPR)

Justification Book

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

*October 2008

1-96

Table 8. Justification Material Supporting the President’s Budget Request Military Personnel Accounts (Continued)

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S BUDGET REQUEST

MILITARY PERSONNEL ACCOUNTS

Appropriation

Blank

HAC

SAC

Blank

L O

I N

B G

R R

A E

R S

Y S

Military Personnel, Army

Justification Book

Military Personnel, Navy

Justification Book

Military Personnel, MC

Justification Book

Military Personnel, AF

Justification Book

Reserve Personnel, Army

Justification Book

Reserve Personnel, Navy

Justification Book

Reserve Personnel, MC

Justification Book

Reserve Personnel, AF

Justification Book

Nat’l Guard Personnel, Army

Justification Book

Nat’l Guard Personnel, AF

Justification Book

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

*October 2008

1-97

Table 9. Justification Material Supporting the President’s Budget Request Operation and Maintenance Accounts

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S BUDGET REQUEST

OPERATION AND MAINTENANCE ACCOUNTS

Appropriation

USD(Comptroller)

Other Organizations

E T

F O

E T

N A

S L

(I)

O&M, Active, Guard & Reserve

In-house Exhibits

All Justification Book Volumes

(Volumes 1, 2, and 3)

O&M, Defense-wide

In-house Exhibits

Classified Justification Book

Volumes 1

(Classified DIA/NSA/DISA)**

** Required distribution will be made by USD(Comptroller). Components should provide required exhibits directly

to the appropriate USD(Comptroller) Directorate for consolidation and subsequent distribution.

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

*October 2008

1-98

Table 9. Justification Material Supporting the President’s Budget Request Operation and Maintenance Accounts (Continued)

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S BUDGET REQUEST

OPERATION AND MAINTENANCE ACCOUNTS

Appropriation

Blank

HAC

SAC

Blank

L O

I N

B G

R R

A E

R S

Y S

O&M, Army

Justification Book (Vol. 1)

Data Book (Vol. 2)

Facilities Sustainment, Restoration

and Modernization (Vol. 3)

O&M, Navy

Justification Book (Vol. 1)

Data Book (Vol. 2)

Facilities Sustainment, Restoration

and Modernization (Vol. 3)

O&M, Marine Corps

Justification Book (Vol. 1)

Data Book (Vol. 2)

Facilities Sustainment, Restoration

and Modernization (Vol. 3)

O&M, Air Force

Justification Book (Vol. 1)

Data Book (Vol. 2)

Facilities Sustainment, Restoration

and Modernization (Vol. 3)

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

*October 2008

1-99

Table 9. Justification Material Supporting the President’s Budget Request Operation and Maintenance Accounts (Continued)

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S BUDGET REQUEST

OPERATION AND MAINTENANCE ACCOUNTS

Appropriation

Blank

HAC

SAC

Blank

L O

I N

B G

R R

A E

R S

Y S

O&M, Defense-wide

Justification Book (Vol. 1)-

Unclassified**

Justification Book (Vol. 1)-

Classified**

Data Book (Vol. 2)**

Facilities Sustainment, Restoration

and Modernization (Vol. 3)**

O&M, Army Reserve

Justification Book

O&M, Navy Reserve

Justification Book

O&M, Marine Corps Reserve

Justification Book

O&M, Air Force Reserve

Justification Book

O&M, Army National Guard

Justification Book

O&M, Air National Guard

Justification Book

Operation & Maintenance

Overview**

3 10 3 5 1 5 1 10 10 1 2 48

** Required distribution will be made by USD(Comptroller). Components should provide required exhibits directly to the

appropriate USD(Comptroller) Directorate for consolidation and subsequent distribution.

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

*October 2008

1-100

Table 10. Justification Material Supporting the President’s Budget Request All Military Department Procurement Accounts

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S BUDGET REQUEST

ALL MILITARY DEPARTMENT PROCUREMENT ACCOUNTS

Appropriation

USD(Comptroller)

Other Organizations

E V

F U

N D

(I)

E T

F O

E T

N T

S A

E L

ALL Procurement Accounts

Unclassified Committee Staff Procurement Backup Book

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

*October 2008

1-101

Table 11. Justification Material Supporting the President’s Budget Request Procurement Accounts - Army

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S BUDGET REQUEST

PROCUREMENT ACCOUNTS - ARMY

Appropriation

Blank

HAC

SAC

Blank

Aircraft Procurement, Army

Committee Staff Procurement Backup

Book

Missile Procurement, Army

Committee Staff Procurement Backup

Book

Proc of W&TCV, Army

Committee Staff Procurement Backup

Book

Proc of Ammunition, Army

Committee Staff Procurement Backup

Book

Other Procurement, Army

Committee Staff Procurement Backup

Book

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

*October 2008

1-102

Table 12. Justification Material Supporting the President’s Budget Request Classified Procurement Accounts -Navy

JUSTIFICATION MATERIAL SUPPORTING

THE PRESIDENT’S BUDGET REQUEST

CLASSIFIED PROCUREMENT ACCOUNTS -NAVY

Appropriation

USD(Comptroller)

Other Organizations

E T

F O

E T

N A

S L

(I)

Aircraft Procurement, Navy

Classified Committee Staff Proc. Backup Book

Other Procurement, Navy

Classified Committee Staff Proc. Backup Book

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

*October 2008

1-103

Table 13. Justification Material Supporting the President’s Budget Request Procurement Accounts - Navy.

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S BUDGET REQUEST

PROCUREMENT ACCOUNTS – NAVY

Appropriation

Blank

HAC

SAC

Blank

L C

I O

B N

R G

A R

R E

Y S

Aircraft Procurement, Navy

Committee Staff Proc. Backup Book

Weapons Procurement, Navy

Committee Staff Proc. Backup Book

Shipbuilding & Conversion, Navy

Committee Staff Proc. Backup Book

Proc of Ammunition, Navy and MC

Committee Staff Proc. Backup Book

Other Procurement, Navy

Committee Staff Proc. Backup Book

Procurement, MC

Committee Staff Proc. Backup Book

National Defense Sealift Fund

Committee Staff Proc. Backup Book

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

*October 2008

1-104

Table 14. Justification Material Supporting the President’s Budget Request Procurement Accounts - Air Force

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S BUDGET REQUEST

PROCUREMENT ACCOUNTS - AIR FORCE

Appropriation

USD(Comptroller)

Other Organizations

E T

F O

E T

N A

S L

(I)

Aircraft Procurement, AF

Classified Committee Staff Proc. Backup Book

Missile Procurement, AF

Classified Committee Staff Proc. Backup Book

Proc of Ammunition, AF

Classified Committee Staff Proc. Backup Book

Other Procurement, AF

Classified Committee Staff Proc. Backup Book

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

*October 2008

1-105

Table 14. Justification Material Supporting The President’s Budget Request Procurement Accounts - Air Force (Continued)

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S BUDGET REQUEST

PROCUREMENT ACCOUNTS - AIR FORCE

Appropriation

Blank

HAC

SAC

Blank

C O

U T

M A

L O

I N

B G

R R

A E

R S

Y S

Aircraft Procurement, AF

Committee Staff Procurement Backup Book

Missile Procurement, AF

Committee Staff Procurement Backup Book

Proc of Ammunition, AF

Committee Staff Procurement Backup Book

Other Procurement, AF

Committee Staff Procurement Backup Book

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

*October 2008

1-106

Table 15. Justification Material Supporting The President’s Budget Request Procurement Accounts - Other

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S BUDGET REQUEST

PROCUREMENT ACCOUNTS - OTHER

Appropriation

USD(Comptroller)

Other Organizations

E T

F O

E T

N A

S L

(I)

Procurement, Def-wide**

Classified Committee Staff Proc. Backup Book

Classified P-1, Procurement Programs**

** Required distribution will be made by USD(Comptroller). Components should provide required exhibits directly to the appropriate USD(Comptroller) Directorate for

consolidation and subsequent distribution.

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

*October 2008

1-107

Table 16. Justification Material Supporting the President’s Budget Request Procurement Accounts - Defense-Wide

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S BUDGET REQUEST

PROCUREMENT ACCOUNTS - DEFENSE-WIDE

Appropriation

Blank

HAC

SAC

Blank

L O

I N

B G

R R

A E

R S

Y S

Procurement, Def-wide

Committee Staff Procurement Backup

Book**

Chemical Agents & Munitions

Destruction

Committee Staff

Procurement Backup

Book

Nat’l Guard & Reserve Eq

Justification Book**

Defense Production Act

Justification Book

Multiyear Procurement

Justification Book**

P-1, Procurement Programs**

122

P-1, Classified **

P-1R**

Program Acquisition Costs by Weapon

System **

112

** Required distribution will be made by USD(Comptroller). Components should provide required exhibits directly to the appropriate USD(Comptroller) Directorate

for consolidation and subsequent distribution.

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

*October 2008

1-108

Table 17. Justification Material Supporting the President’s Budget Request Research, Development Test & Evaluation Accounts

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S BUDGET REQUEST

RESEARCH, DEVELOPMENT TEST & EVALUATION ACCOUNTS

Appropriation

USD(Comptroller)

Other Organizations

E T

F O

E T

N A

S L

(I)

RDT&E, Army

Classified Budget Item Justification

Book

Project Listing

Unclassified Budget Item

Justification Book

RDT&E, Navy

Classified Budget Item Justification

Book

Project Listing

Unclassified Budget Item

Justification Book

RDT&E, AF

Classified Budget Item Justification

Book

Project Listing

Unclassified Budget Item

Justification Book

RDT&E, Defense Agencies

Classified Budget Item Justification

Book**

Project Listing

Classified R-1, RDT&E

Programs**

** Required distribution will be made by USD(Comptroller). Components should provide required exhibits directly to the appropriate USD(Comptroller) Directorate for consolidation and subsequent

distribution.

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Table 18. Justification Material Supporting the President’s Budget Request Research, Development Test & Evaluation Accounts

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S BUDGET REQUEST

RESEARCH, DEVELOPMENT TEST & EVALUATION ACCOUNTS

Appropriation

Blank HAC SAC Blank T

L O

I N

B G

R R

A E

R S

Y S

RDT&E, Army

Budget Item Justification Book

RDT&E, Navy

Budget Item Justification Book

RDT&E, AF

Budget Item Justification Book

RDT&E, Defense Agencies

Budget Item Justification Book**

R-1, RDT&E Programs**

122

R-1, Classified

** Required distribution will be made by USD(Comptroller). Components should provide required exhibits directly to the appropriate USD(Comptroller) Directorate for consolidation and subsequent

distribution.

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Table 19. Justification Material Supporting the President’s Budget Request All Military Department Working Capital Fund

Accounts

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S BUDGET REQUEST

ALL MILITARY DEPARTMENT WORKING CAPITAL FUND ACCOUNTS

Appropriation

USD(Comptroller)

Other Organizations

E T

F O

E T

N A

S L

(I)

Defense Working Capital Funds

Justification Book -Army, Navy, Air Force

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Table 20. Justification Material Supporting the President’s Request Revolving and Management Funds

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S REQUEST

REVOLVING AND MANAGEMENT FUNDS

Appropriation

Blank HAC SAC Blank T

L C

I O

B N

R G

A R

R E

Y S

Defense Working Capital Funds

Justification Book -Army, Navy, Air Force,

Defense-wide

Public Enterprise, Management Fund,

and Trust Fund

Justification Book

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Table 21. Justification Material Supporting the President’s Budget Request All Military Department Military Construction, Family

Housing and BRAC Accounts

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S BUDGET REQUEST

ALL MILITARY DEPARTMENT MILITARY CONSTRUCTION, FAMILY HOUSING AND BRAC ACCOUNTS

Appropriation

USD(Comptroller)

Other Organizations

E T

F O

E T

N A

S L

(I)

Military Construction/Family

Housing/BRAC

Justification Book -Army, Navy, Air Force

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Table 22. Justification Material Supporting the President’s Request Military Construction & Family Housing Accounts

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S REQUEST

MILITARY CONSTRUCTION & FAMILY HOUSING ACCOUNTS

Appropriation

Blank

HAC SAC

Blank

L O

I N

B G

R R

A E

R S

Y S

MilCon, Family Hsg, Homeowners Assist,

Army - Justification Book

6 2 3 1 1 1 1 7 2 1 1 2 2 2 1 27

Mil Const & Family Housing, N & MC

Justification Book

6 2 3 1 1 1 1 7 2 1 1 2 2 2 1 27

Mil Const & Family Housing, AF

Justification Book

6 2 3 1 1 1 1 7 2 1 1 2 2 2 1 27

Mil Const & Family Housing, Defense-wide

- Justification Book **

6 2 2 2 1 1 1 7 5 2 1 24

Military Construction, Army Reserve

Justification Book

6 2 2 1 1 1 1 7 2 1 1 2 2 2 1 26

Military Construction, N & MC Reserve -

Justification Book

6 2 2 1 1 1 1 7 2 1 1 2 2 2 1 26

Military Construction, AF Reserve

Justification Book

6 2 2 1 1 1 1 7 2 1 1 2 2 2 1 26

Military Const, Army National Guard

Justification Book

6 2 2 1 1 1 1 7 2 1 1 2 2 2 1 26

Military Const, Air National Guard

Justification Book

6 2 2 1 1 1 1 7 2 1 1 2 2 2 1 26

Chemical Demilitarization Construction,

Defense

Justification Book

6 2 2 1 1 1 1 7 2 1 1 2 2 2 1 26

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Table 22. Justification Material Supporting the President’s Request Military Construction & Family Housing Accounts (Continued)

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S REQUEST

MILITARY CONSTRUCTION & FAMILY HOUSING ACCOUNTS

Appropriation

Blank HAC SAC Blank T

L O

I N

B G

R R

A E

R S

Y S

NATO Security Investment Program

Justification Book

6 2 1 1 1 3 1 9

C-1, Construction Program

** Required distribution will be made by USD(Comptroller). Components should provide required exhibits to the appropriate USD(Comptroller) Directorate for consolidation and subsequent

distribution.

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Table 23. Justification Material Supporting the President’s Request Base Realignments And Closures (BRAC)

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S REQUEST

BASE REALIGNMENTS AND CLOSURES (BRAC)

Appropriation

Blank

HAC SAC

Blank

L O

I N

B G

R R

A E

R S

Y S

BRAC - Army

Justification Book

7 2 2 1 2 1 2 1 1 1 8 10 3 1 35

BRAC - Navy

Justification Book

7 2 2 1 2 1 2 1 1 1 8 10 3 1 35

BRAC - Air Force

Justification Book

7 2 2 1 2 1 2 1 1 1 8 10 3 1 35

BRAC - DLA

Justification Book

7 2 2 1 2 1 2 1 1 1 8 10 3 1 35

BRAC - DISA

Justification Book

7 2 2 1 2 1 2 1 1 1 8 10 3 1 35

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Table 24. Justification Material Supporting The President’s Request Other Account Requirements

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S REQUEST

OTHER ACCOUNT REQUIREMENTS

PROGRAM

USD(Comptroller)

Other Organizations

E T

F O

E T

N A

S L

(I)

Intelligence Programs (NIP/MIP)

Classified Justification

16 1 1 2 1 1 1 1 1 1 1 11

Drug Interdict. & Counter-drug Actys

Classified Justification Book

14 1 2 1 1 1 1 1 1 1 1 1 12

CD-ROM: All unclassified budget material that

has been posted to Internet site

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 15

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Table 25. Justification Material Supporting the President’s Request Special Interest Requirements

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S REQUEST

SPECIAL INTEREST REQUIREMENTS

PROGRAM

Blank

HAC SAC

Blank

L O

I N

B G

R R

A E

R S

Y S

Information Technology

Distribution made by NII/DOD CIO

Justification Book

18 2 1 1 1 1 6

Intelligence Programs (NIP/MIP)

(IP-1)

Justification Book

16 1 1 1 1 2 2 1 1 1 1 12

Defense Health Programs

Justification Book

12 2 2 1 2 1 3 1 12

Drug Interdiction & Counter-drug Actys -

Justification Book

14 2 2 1 2 1 3 1 12

Overseas Cost Report (OP-53)

Report**

15 2 3 1 3 1 10 5 3 1 29

Overseas Contingency Operations

17 2 2 1 2 1 2 2 3 1 16

Advisory and Assistance Services (PB-15)

Exhibit (incl. in O&M Data Book, Vol. II)

Military Department Overview Booklets

Army, Navy, and Air Force

Combating terrorism

Justification Book

CD-ROM: All unclassified budget material that

has been posted to Internet site

** Required distribution will be made by USD(Comptroller). Components should provide required exhibits to the appropriate USD(Comptroller) Directorate for consolidation and subsequent

distribution.

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Table 26. Justification Material Supporting The President’s Request Special Interest Requirements

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S REQUEST

SPECIAL INTEREST REQUIREMENTS

PROGRAM

USD(Comptroller)

Other Organizations

E T

F O

E T

N A

S L

R E

F U

N D

P A

P &

(I)

Functional Transfers (PB-14)

In-house Backup Exhibit

19 1 1 1 3

Advisory and Assistance Services

(PB-15)

In-house Backup Exhibit

Legislative Proposals (PB-16)

In-house Backup Exhibit

19 1 1 1 1 4

Employee Relocation Expenses

(PB-17)

In-house Backup Exhibit

19 1 2 1 4

Foreign Currency Exch. Data (PB-18)

In-house Backup Exhibit

Major DoD HQ Activities (PB-22)

In-house Backup Exhibit

AT&L Workforce Transformation Prg.

(PB-23)

In-house Backup Exhibit

Professional Military Education

(PB-24)

In-house Backup Exhibit

Host Nation Support Costs (PB-25)

In-house Backup Exhibit

19 1 3 1 1 1 1 8

Environmental Quality/Security/Mgt

(PB-28/28A/28B)

In-house Backup Exhibit

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Table 26. Justification Material Supporting The President’s Request Special Interest Requirements (Continued)

JUSTIFICATION MATERIAL SUPPORTING THE PRESIDENT’S REQUEST

SPECIAL INTEREST REQUIREMENTS

PROGRAM

USD(Comptroller)

Other Organizations

R E

V F

U N

P A

& E

P &

D (I)

E T

F O

E T

N A

S L

Competition and Privatization (PB-42)

In-house Backup Exhibit

19 1 2 1 1 2 1 1 10

Administrative Motor Vehicle Operations

(PB-41)

In-house Backup Exhibit

19 1 2 1 1 1 1 1 9

Child Dev., School Age Care, Family Centers, and

Family Advocacy Programs (PB-50)

In-house Backup Exhibit

19 1 2 1 2 1 1 9

Aeronautical & Space Programs

(PB-52A/B)

In-house Backup Exhibit

19 1 2 1 1 1 1 1 8

Budgeted Mil & Civilian Pay Raise (PB-53)

In-house Backup Exhibit

19 1 1 1 1 2 1 1 10

Civilian Personnel Hiring Plan

(PB-54)

In-house Backup Exhibit

19 1 2 1 4

International Military Headquarters (PB-55)

In-house Backup Exhibit

Combatant Command Direct Funding (PB-58)

In-house Backup Exhibit

DoD Overseas Staffing Report (PB-59)

In-house Backup Exhibit

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4.4 Witness Statements (010404)

4.4.1. Purpose. This section provides instructions for preparation of witness statements

for testimony at hearings before congressional committees.

4.4.2. Preparation

4.4.2.1. Each witness statement should contain a cover page that includes the

name, grade/rank, and position title of the witness; the full title of the congressional committee or

subcommittee before which the witness is to appear; the date the witness is to testify; the subject

of the hearing; and an embargo statement “Not for Publication Until Released by the Committee”

(or Subcommittee, if applicable).

4.4.2.2. The various congressional committees publish instructions for preparation

of witness statements for their committee. These instructions, unique to each committee, are

available from the following offices:

4.4.2.2.1. House and Senate Defense, House Military Quality of Life and

Veterans Affairs and Related Agencies, and Senate Military Construction Appropriations

Subcommittees – Budget and Appropriations Affairs Directorate, USD(Comptroller) and Service

Budget Liaison offices.

4.4.2.2.2. House and Senate Armed Services Committees and House and

Senate Budget Committees - Office of the Assistant Secretary of Defense (Legislative Affairs) and

Service Legislative Affairs offices.

4.4.2.2.3. Other congressional committees - Instructions are normally

included in the letter requesting the hearing. First time before the committee.

4.4.3. Security Review

4.4.3.1. DoD Directive 5400.4 calls for DoD witnesses to submit their prepared

statements to Washington Headquarters Services, Office of Security Review, (703) 696-4538, for

clearance.

4.4.3.2. This should be done as far in advance of the required date of transmittal to

a congressional committee as possible, usually 5 or more working days prior to the date clearance

is desired.

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4.4.4. Number of Copies

4.4.4.1. Upon completion of the security review process, the originating office

should ensure that 75 copies of unclassified statements are delivered to the Directorate for Defense

Information, Office of the Assistant to the Secretary of Defense (Public Affairs), Room 2E565,

Pentagon. This should be done at least 24 hours in advance of the scheduled appearance of the

witness before the congressional committee. Be prepared to provide additional copies on short

notice.

4.4.4.2. These procedures will allow the Office of the Assistant Secretary of

Defense (Public Affairs) to meet news media requirements as soon as statements are released by

the congressional committee or subcommittee.

4.4.4.3. A chart identifying the various oversight committees’ copy requirements

for witness statements and the date that the statements are due to the committee is republished

periodically by the Budget and Appropriations Affairs Directorate, USD(Comptroller), as

committee requirements change. Be careful to use the most recent chart.

4.4.4.4. Special care should be exercised to ensure that specified due dates are met.

The committees use the witness statement in preparing for the hearing and so suspense dates are

important. Committees will routinely predicate cooperation in discussing or releasing possible

hearing questions or topics on the timely delivery of these statements.

4.4.4.5. Offices responsible for arranging the attendance of principal and

supporting witnesses at a hearing normally prepare a listing of witnesses known as the Witness

List. These offices will contact all involved parties to obtain the names and positions of the

witnesses for the Witness List.

4.5 Transcript Processing (010405)

4.5.1. Purpose. This section provides instructions for processing transcripts of witness

testimony at hearings before congressional committees.

4.5.2. Initial Receipt

4.5.2.1. The House and Senate Appropriations Subcommittees on Defense, the

House Subcommittee on Military Quality of Life and Veterans Affairs and Related Agencies, and

the Senate Military Construction Appropriations Subcommittee provide hearing transcripts

directly to Budget Liaison offices of the Services and to the Director for Budget and

Appropriations Affairs, Under Secretary of Defense (Comptroller). All other hearing transcripts

are provided directly to the Legislative Affairs office of the Services and to the Office of the

Assistant Secretary of Defense (Legislative Affairs).

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4.5.2.2. The original copy of the transcript is then provided to the office of the

principal witness utilizing DD Form 1587, Record of Congressional Transcript Review, as the

transmittal document. To meet committee requirements and allow time for final review by

Washington Headquarters Services, Security Review, each element in the review process must

give cooperative consideration to the time requirements of all elements in meeting due out dates.

DoD Directive 5400.4 provides guidance in utilizing DD Form 1587. Instructions are also printed

on DD Form 1587.

4.5.2.3. The various committees publish instructions for processing transcripts for

their committee hearings. These instructions, unique to each committee, are available from the

following offices:

4.5.2.3.1. House and Senate Defense, House Military Quality of Life and

Veterans Affairs and Related Agencies, and Senate Military Construction Appropriations

Subcommittees - Directorate for Budget and Appropriations Affairs, USD(Comptroller) and

Service Budget Liaison offices.

4.5.2.3.2. House and Senate Armed Services Committees and House and

Senate Budget Committees - Office of the Assistant Secretary of Defense (Legislative Affairs) and

Service Legislative Affairs offices.

4.5.2.3.3. Other congressional committees - Instructions are normally

included in the letter requesting the hearing.

4.5.3. Processing Procedures

4.5.3.1. Upon receipt of the transcript in the office of the primary witness, that

office will review and edit the transcript and prepare the necessary inserts including questions for

the record. At the same time, those staff offices required to provide input to the transcript should

be tasked, in writing, for their specific portion. Page and line number/question number should be

referenced when tasking inserts for the record.

4.5.3.2. Offices providing input to transcripts should clear their internal security

review office prior to providing their input to the principal witness' office. After consolidation of

the edit/review of the transcript and inclusion of necessary inserts, the office of the principal

witness will then need to obtain the proper security clearance for the transcript and inserts from

Washington Headquarters Services, Directorate for Freedom of Information and Security Review.

A DD 1790, Prepared Testimony Review must be used. DoD Directive 5400.4 provides

instructions to be followed in processing the transcript through the security review process.

4.5.3.3. Plain bond (8.5” x 11.0” with left and right margins of 1.5”) Insert for the

Record, will be utilized for all inserts to congressional testimony and questions/answers for the

record. Formats for completing these for the four oversight committees are provided in Section

10.0.

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4.5.3.4. After completing the security review process and required coordination’s,

the completed transcript should be returned to the office from which the transcript was received

(Transcript Action Monitor) for final review and delivery to the congressional committee.

4.5.3.5. Special care should be exercised to ensure that transcript processing

suspense dates are met. The committees emphasize that the deadline dates imposed by them must

be met. As the committees approach mark-up, the importance of meeting deadlines becomes even

more critical. Transcripts should not be unduly delayed while gathering information for the record.

If a delay is encountered, a note that the data will be furnished at some specified date should

accompany the transcript and processing should proceed.

4.5.4. Congressional Hearings and Reporting Requirements Tracking System

(CHARRTS). CHARRTS is an OUSD (Comptroller) web based application for tasking Hearing

transcripts, inserts for the record, and questions for the record. Components will be notified by

email for each tasking for which they are responsible to complete. CHARRTS is a controlled site

accessed through https://charrts.osd.mil/ and requires an access password for each user.

Components will input all responses to both inserts and questions for the record directly into

CHARRTS. Formats have been established within CHARRTS for each Committee for these

responses and must be used. Input that does not follow the established standards will be rejected

by the system. Contact the OUSD (Comptroller), Budget and Appropriations Affairs Directorate

at (703) 697-1101 for all questions related to CHARRTS.

4.5.5. Page Proofs/Galleys. Often committees allow DoD to review page proof/galleys of

congressional testimony to ensure that changes have been incorporated and that if classified data

has been included that it be deleted from the version that will be made public. Extreme care must

be exercised to ensure that all classified data have been excised.

4.6 Appeal Process on Congressional Actions (010406)

4.6.1. Purpose. Each year the actions taken by congressional committees during

consideration of the DoD authorization and appropriation bills are reviewed by DoD components.

This Section provides policy guidance and procedures for appealing such congressional actions.

4.6.2. Scope of Material

4.6.2.1. DoD appeals to congressional committees may be in the form of a letter to

the appropriate committee chairman (or chairmen in the case of appeals to joint conferees), which

sets forth the Department’s position on the most significant programs/items impacted by

congressional actions. This letter is prepared for the signature of the Secretary of Defense. Only

the Secretary will provide the Department’s position on appeal items.

4.6.2.2. DoD appeals also may be in the form of an appeal package consisting of

one page for each action being appealed. This package is submitted to the appropriate committee

by the USD(Comptroller). It is not submitted as an enclosure to an appeal letter, but may be

referred to in the letter.

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4.6.2.3. The submission of appeal material can vary each year and is primarily

dependent upon the timing of each committee’s actions on the budget request. The preparation of

appeal items begins when the actions of the committees become known, usually with release of

the committee’s report. Normally, appeal material will be modified to reflect final floor action

since amendments adopted on the floor can significantly change positions reported out by the

committees. In most cases, the process is as follows:

4.6.2.3.1. To Authorization Conferees. This appeal is based on the actions

of both the House and Senate Armed Services Committees, as modified by House and Senate floor

action.

4.6.2.3.2. To Appropriations Conferees. This appeal is based on the actions

of both the House and Senate Appropriations Committees, as modified by House and Senate floor

actions.

4.6.3. Preparation of Appeals

4.6.3.1. Once the actions of an oversight committee become known, DoD

components normally will be requested to provide input on high priority items for incorporation

into the Secretary’s appeal letter or appeal package. Appeal input will be submitted in the general

format of Exhibit PB-39A-1 and PB-39A-2 (provided in Section 10.0) in both hard copy and by

e-mail in Microsoft Word format (with no graphics). Components may be asked to assign a

priority to the actions they want appealed.

4.6.3.2. All appeal materials must be unclassified. Verification that materials are

entirely unclassified must be obtained by the DoD component from the component’s security

review prior to submission to OSD. USD(Comptroller) will obtain clearance of the consolidated

appeal package from the Washington Headquarters Services, Directorate for Freedom of

Information and Security Review, (703) 696-4538.

4.6.4. Policy Guidance, Preparation and Coordination of Budget Appeals

4.6.4.1. By memorandum of May 27, 1983, Subject: "Congressional Justification

of the President’s Annual Defense Budget," the Secretary of Defense charged the Comptroller with

the responsibility to coordinate all justification actions for his consideration that may be interpreted

as reprogramming, supplementals, amendments, or appeals to the Defense budget. Therefore, in

order to ensure that the Department speaks to the Congress in this area with one voice and remains

consistent with the Secretary’s policy direction, all appeals to congressional committees will be

prepared by the USD(Comptroller).

4.6.4.2. The Directorate for Budget and Appropriations Affairs, within the Office

of the USD(Comptroller) (Program/Budget), will issue instructions for submission of appeal input.

Along with other Comptroller directorates, Budget and Appropriations Affairs will review the

input and prepare a draft appeal letter and appeal package. Normally, these drafts will be sent for

comments to the appropriate DoD offices. Clearance on all appeal materials will be requested

from the Office of Management and Budget.

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4.6.4.3. While responsibility for consolidation and coordination of appeal

materials resides with the USD(Comptroller), all offices are responsible for ensuring that the

materials they submit remain up to date. Submitting components, e.g. The Joint Staff, should

provide only one position on each issue submitted.

4.6.5. Classified Appeals. Actions of congressional committees documented in classified

annexes (such as by the Intelligence Committees) to reports or classified letters may be addressed

in classified appeals prepared by the OUSD(I). Further guidance is contained in Chapter 16.

5.0 BUDGET AUTOMATION REQUIREMENTS (0105)

5.1 Automated Military Personnel Programs Database (010501)

5.1.1. Purpose and Objectives. The purpose of the Military Personnel Programs database

is to provide supporting budgetary documentation to the Congress, OMB and the public with each

year’s President’s Budget. Data submission is through the Program Resources Collection Process

(PRCP) System. The Military Personnel Programs database supports, and must be consistent with,

other budgetary data in the Comptroller Information System (CIS). This section provides for the

maintenance of the Military Personnel Programs as an automated database that is the primary

structure for budget activity and budget subactivity level of detail. The Military Personnel

Programs (M-1) (unclassified) is produced from the Military Personnel Programs database.

5.1.2. Applicability. The provisions of this section apply to the Office of the Secretary of

Defense (OSD) and the Military Departments.

5.1.3. Reporting Requirements. The automated database was established for the FY 2005

President’s budget. Subsequent updates will be required coincident with the (1) Program and

Budget Review and (2) the President’s Budget. Specific guidance relative to approved changes,

due dates and special requirements is provided in a memorandum from the Office of the

Under Secretary of Defense (Comptroller) announcing each update.

5.1.4. General Instructions - Preparing the Detailed Military Personnel Programs (M-1).

The Military Personnel Programs provide resources in a budget activity and budget subactivity

line item level of detail with appropriation identification consistent with other budgetary data in

the CIS database. A detailed description of line item entries is listed in Volume 2A, Chapter 2.

The minimum information required in the Military Personnel Programs is as follows:

5.1.4.1. A summary by appropriation account with subtotals for DOD

Components.

5.1.4.2. A summary of each appropriation account by budget activity/budget

subactivity with budget activity subtotals and an appropriation total.

5.1.4.3. Entries for the individual line items should be on the same basis as that

used for program and budget submissions.

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5.1.4.4. Costs of prior year programs will be adjusted annually to reflect actual

obligations, including deobligations, recoveries of prior year obligations, upward obligation

adjustments, transfers, and rescissions, as appropriate, and must match prior year values in the

Comptroller Information System.

5.1.4.5. The OUSD(C) P/B Military Personnel and Construction Directorate will

obtain the Security classification review certification.

5.1.5. General Instructions - Preparing the Military Personnel Programs (M-1). The M-1

document is derived from and consistent with other budgetary data in the CIS database. The M-1

is provided annually to the DoD oversight committees of the Congress coincident with the

transmittal of the President’s Budget. The minimum information required in the M-1 is as follows:

5.1.5.1. Identification codes and a detailed description of line item entries are

explained in paragraph F below.

5.1.5.2. The line item data provided is PY, CY, BY1 (and BY2 if biennial

submission).

5.1.5.3. The security classification will be in accordance with the criteria set forth

in Section 1.8.

5.1.6. Military Personnel Data Elements and Record Formats

5.1.6.1. Appropriation codes, Component codes, and budget activity codes are as

specified in the Budget Structure Listing which can be viewed on the SIPRNet home page of the

OUSD (Comptroller).

5.1.6.2. Other Military Personnel Data Elements and Record Formats.

Components must follow the guidance and use the data elements and record layouts for submission

of updates to the Military Personnel Programs database as prescribed in the instructions on the

SIPRNet home page of the OUSD (Comptroller).

5.2 Automated Operation and Maintenance Programs Databases (010502)

5.2.1. Purpose and Objectives. The purpose of the Operation and Maintenance Programs

databases are to provide supporting budgetary documentation to the Congress, OMB and the public

with each year’s President’s Budget. Data submission is through the Program Resources

Collection Process (PRCP) System. The Operation and Maintenance Programs databases support,

and must be consistent with, other budgetary data in the Comptroller Information System (CIS).

This section provides for the maintenance of the Operation and Maintenance Programs as an

automated database that is the primary structure for budget activity and activity group cost at the

Program Element and expense aggregate level of detail. The O-1 reports are produced from the

Operation and Maintenance Programs database. Operation and Maintenance Programs data

extracts are provided to the Office of the Director, Program Analysis and Evaluation (hereafter

referred to as "OD,PA&E”) to update the Future Years Defense Program database. In addition,

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the Civilian Personnel Costs and O&M Summary of Price and Program Changes automated

exhibits are processed through this system. The Civilian Personnel Costs exhibit is required for

each appropriation/fund, not limited to O&M appropriations, in which civilian personnel are

funded. Updates and documents produced include:

5.2.1.1. Operation and Maintenance Programs (O-1) (classified)

5.2.1.2. Operation and Maintenance Programs (O-1) (unclassified)

5.2.1.3. Future Years Defense Program Update Data for OD,PA&E

5.2.1.4. Civilian Personnel Costs (OP-8) (classified)

5.2.1.5. Civilian Personnel Costs (OP-8) (unclassified)

5.2.1.6. Summary of Price and Program Changes (OP-32) (classified)

5.2.1.7. Summary of Price and Program Changes (OP-32) (unclassified)

5.2.2. Applicability. The provisions of this section apply to the Office of the Secretary of

Defense (OSD), the Military Departments, the Defense Agencies, and any other DoD Component

that contribute data to the Operation and Maintenance Programs.

5.2.3. Reporting Requirements. The initial Operation and Maintenance Programs

automated database was established for the FY 2005 President’s budget. Subsequent updates will

be required coincident with the (1) Program and Budget Review and (2) the President’s Budget.

Specific guidance relative to approved changes, due dates and special requirements is provided in

a memorandum from the Office of the Under Secretary of Defense (Comptroller) announcing each

update.

5.2.4. General Instructions - Preparing the Detailed Operation and Maintenance Programs.

The Operation and Maintenance Programs provide resources in a budget activity and activity group

line item level of detail with appropriation identification consistent with other budgetary data in

the CIS database. A detailed description of line item entries is listed in Volume 2B, Chapter 3,

Section 030402. The minimum information required in the Operation and Maintenance Programs

is as follows:

5.2.4.1. A summary by appropriation account with subtotals for DOD

Components.

5.2.4.2. A summary of each appropriation account by budget activity/activity

group/sub-activity group with budget activity/activity group subtotals and an appropriation total.

5.2.4.3. A detailed sub-activity group by program element and expense aggregate

listing in budget activity/activity group sequence.

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5.2.4.4. Entries for the individual line items should be on the same basis as that

used for program and budget submissions.

5.2.4.5. Costs of prior year programs will be adjusted annually to reflect actual

obligations, including deobligations, recoveries of prior year obligations, upward obligation

adjustments, transfers, and rescissions, as appropriate, and must match prior year values in the

Comptroller Information System.

5.2.4.6. Security classification of line items is determined by the submitting

Component subject to OSD Security review. DoD Components must provide a security

classification review certification to OUSD(C) P/B P&FC. Except for information published in

the unclassified version of the O-1 Report, data contained in the Operation and Maintenance

Programs may not be released outside the DoD without the expressed written consent of the

Under Secretary of Defense (Comptroller).

5.2.5. General Instructions - Preparing the Operation and Maintenance Programs (O-1).

The O-1 document is derived from and consistent with other budgetary data in the CIS database.

The O-1 is provided annually to the DoD oversight committees of the Congress coincident with

the transmittal of the President’s Budget. An unclassified version is provided to OASD(PA) for

use by non-DoD activities. The minimum information required in the O-1 is as follows:

5.2.5.1. Identification codes and a detailed description of line item entries are

explained in paragraph 5.2.6 below.

5.2.5.2. The line item data provided is PY, CY, BY1 (and BY2 if biennial

submission) for the O-1 production, and outyears for the FYDP update.

5.2.5.3. The security classification will be in accordance with the criteria set forth

in Section 1.8.

5.2.6. Operation and Maintenance Data Elements and Record Formats

5.2.6.1. Appropriation codes, Component codes, and budget activity codes are as

specified in the Budget Structure Listing which can be viewed on the SIPRNet home page of the

OUSD (Comptroller).

5.2.6.2. Program element codes and titles are as prescribed by DoD 7045.7-H

(FYDP Program Structure Handbook. This publication is available at

http://www.dtic.mil/whs/directives under “Publications,” and in approved decision documents

posted to the FYDP Resource Structure Management (RSM) web site (see Section 7.2) but not yet

reflected in DoD 7045.7-H. A listing of expense aggregate codes is available at the SIPRNET

home pages of the OUSD (Comptroller) and OD, PA&E.

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5.2.6.3. Other Operation and Maintenance Program Data Elements and Record

Formats. Components must follow the guidance and use the data elements and record layouts for

submission of updates to the Operation and Maintenance Programs database as prescribed in the

instructions on the SIPRNet home page of the OUSD (Comptroller).

5.2.7. Instructions on OP-32 and OP-8 are at Section 030201.G. Automated Submission

and 0304 Operation and Maintenance Appropriation Submission Formats. Detailed guidance on

the automated submission is provided on the OUSD (Comptroller) home page of the SIPRNET at

http://cisweb.ousdc.osd.smil.mil.

5.3 Automated Procurement Programs Database (010503)

5.3.1. Purpose and Objectives. The purpose of the Procurement Programs database is to

provide supporting budgetary documentation to the Congress, OMB and the public with each

year’s President’s Budget. Data submission is through the Program Resources Collection Process

(PRCP) System. The Procurement Programs database supports, and must be consistent with, other

budgetary data in the Comptroller Information System (CIS). This section provides for the

maintenance of the Procurement Programs as an automated database that is the primary structure

for quantity and program cost at the line item and Program Element level of detail for a number of

related Procurement Program documents. The following are produced from the Procurement

Programs database:

5.3.1.1. Detailed Procurement Programs (classified)

5.3.1.2. Procurement Programs (P-1) (classified)

5.3.1.3. Procurement Programs (P-1/P-1R) (unclassified)

5.3.1.4. Program Acquisition Costs by Weapon System (unclassified)

5.3.1.5. P-1/P-1R database for the Senate Appropriations Committee, the House

Appropriations Committee, the Senate Armed Services Committee, and the House Armed Services

Committee.

5.3.1.6. Future Years Defense Program Update Data for OD,PA&E

5.3.1.7. Data for USD(AT&L), USD(I), ASD(NII)/DoD CIO, Director, PA&E,

The Joint Staff, OMB, and GAO.

5.3.2. Applicability. The provisions of this section apply to the Office of the Secretary of

Defense (OSD), the Military Departments, the Defense Agencies, and any other DoD Component

that contribute data to the Procurement Programs.

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5.3.3. Reporting Requirements. The initial automated database was established consistent

with the procurement data submitted to the Congress in support of the FY 1974 Budget. Since that

time subsequent updates have been required coincident with submission of the (1) Program and

Budget Review and (2) the President’s Budget. Specific guidance relative to approved changes,

due dates and special requirements is provided in a memorandum from the Office of the Under

Secretary of Defense (Comptroller) announcing each update.

5.3.4. General Instructions - Preparing the Detailed Procurement Programs. The

Procurement Programs provide resources in a line item level of detail with appropriation

identification consistent with other budgetary data in the CIS database. A detailed description of

line item entries is listed in Volume 2B, Chapter 4, Section 0402. The minimum information

required in the Procurement Programs is as follows:

5.3.4.1. A summary by appropriation account with subtotals for DOD

Components.

5.3.4.2. A summary of each appropriation account by budget activity with an

appropriation total.

5.3.4.3. A detailed line item listing in budget activity/budget subactivity sequence.

5.3.4.4. Entries for the individual line items should be on the same basis as that

used for budget submissions. Multiyear procurements (MYP) are identified for P-1 line items with

MYP as defined in Section 2.3. Advance procurement entries should be used as specified in

Volume 2B, Section 040502. Initial spares listed with the procurement item (post-delivery and

outfitting costs for Shipbuilding and Conversion, Navy) should be shown immediately following

the line as a memorandum entry--non-add to the budget activity total.

5.3.4.5. Costs of prior year programs will be adjusted annually to reflect actual

obligations, including deobligations, recoveries of prior year obligations, upward obligation

adjustments, transfers, and rescissions, as appropriate.

5.3.4.6. The cost to complete column provides the data necessary to obtain the total

procurement cost for acquisition of weapon items. It is necessary to estimate the cost of

completing the approved program for major weapon systems included in the Selected Acquisition

Report (SAR) reporting system and for multiyear contracts utilizing economic order quantity

advance procurement. Such costs will be entered in the “cost to complete” column of the

Procurement Programs. Entries in the “cost to complete” column are not required for other

procurement line entries. The “cost to complete” estimate will include: (1) the portion of the

“approved quantity” to be procured beyond the FYDP, and (2) costs to complete acquisition of

units procured in prior years such as outfitting and post-delivery requirements for ships which will

not deliver during the FYDP.

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5.3.4.7. Security classification of line items is determined by the submitting

Component subject to OSD Security review. DoD Components must provide a security

classification review certification to OUSD(C) P/B P&FC. Except for information published in

the unclassified version of the P-1 Report, data contained in the Procurement Programs may not

be released outside the DoD without the expressed written consent of the Under Secretary of

Defense (Comptroller).

5.3.5. General Instructions - Preparing the Procurement Programs (P-1). The P-1

document is derived from and consistent with other budgetary data in the CIS database. The P-1

is provided annually to the DoD oversight committees of the Congress coincident with the

transmittal of the President’s Budget. An unclassified version is provided to OASD(PA) for use

by non-DoD activities. The minimum information required in the P-1 is as follows:

5.3.5.1. Identification codes and a detailed description of line item entries are

explained in paragraph 5.3.6 below.

5.3.5.2. The line item data provided is PY, CY, BY1 (and BY2 if biennial

submission).

5.3.5.3. The security classification will be in accordance with the criteria set forth

in Section 1.8.

5.3.6. Procurement Data Elements and Record Formats

5.3.6.1. Appropriation codes, Component codes, and budget activity codes are as

specified in the Budget Structure Listing which can be viewed on the SIPRNet home page of the

OUSD (Comptroller).

5.3.6.2. Program element codes and titles are as prescribed by DoD 7045.7-H

(FYDP Program Structure Handbook. This publication is available at

http://www.dtic.mil/whs/directives under “Publications,” and in approved decision documents

posted to the FYDP Resource Structure Management (RSM) web site (see Section 7.2) but not yet

reflected in DoD 7045.7-H.

5.3.6.3. Other Procurement Program Data Elements and Record Formats.

Components must follow the guidance and use the data elements and record layouts for submission

of updates to the Procurement Programs database as prescribed in the instructions on the SIPRNet

home page of the OUSD (Comptroller).

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5.4 Automated RDT&E Programs Database (010504)

5.4.1. Purpose and Objectives. The purpose of the RDT&E Programs database is to

provide supporting budgetary documentation to the Congress, OMB and the public with each

year’s President’s Budget. Data submission is through the Program Resources Collection Process

(PRCP) System. The RDT&E Programs database supports, and must be consistent with, other

budgetary data in the Comptroller Information System (CIS). This section provides for the

maintenance of the RDT&E Programs as an automated database that will be the primary structure

for program element and project level detail for a number of related RDT&E Program documents.

The following are produced from the RDT&E Programs database:

5.4.1.1. Detailed RDT&E Programs (classified)

5.4.1.2. RDT&E Programs (R-1) (classified)

5.4.1.3. RDT&E Programs (R-1) (unclassified)

5.4.1.4. R-1 database for the Senate Appropriations Committee, the

House Appropriations Committee, the Senate Armed Services Committee, and the House Armed

Services Committee.

5.4.1.5. Future Years Defense Program Update Data for OD,PA&E

5.4.1.6. Data for USD (AT&L), USD(I), ASD (NII)/DoD CIO, Director, PA&E,

The Joint Staff, OMB, and GAO.

5.4.2. Applicability. The provisions of this section apply to the Office of the Secretary of

Defense (OSD), the Military Departments, the Defense Agencies, and any other DoD Component

that contribute data to the Procurement Programs.

5.4.3. Reporting Requirements. The initial automated database was established consistent

with the RDT&E data submitted to the Congress in support of the FY 1976/197T Budget. Since

that time subsequent updates have been required coincident with submission of the (1) Program

and Budget Review, and (2) President’s Budget. Specific guidance relative to approved changes,

due dates and special requirements is provided in a memorandum from the Office of the

Under Secretary of Defense (Comptroller) announcing each update.

5.4.4. General Instructions - Preparing the Detailed RDT&E Programs. The RDT&E

Programs is consistent with the program element identification of resources contained in the Future

Years Defense Program Summary and Program Element Detail. Data in the RDT&E Programs is

summarized by appropriation account with recaps by budget activity and FYDP programs.

Security classification of line items is determined by the submitting Component subject to OSD

Security review. DoD Components must provide a security classification review certification to

OUSD(C) P/B P&FC.

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5.4.5. General Instructions - Preparing the R-1 Document. The R-1 document is derived

from, and consistent with, other budgetary data in the CIS database. The R-1 is provided annually

to the DoD Oversight Committees of the Congress coincident with the transmittal of the

President’s Budget. An unclassified version is provided to OASD(PA) for use by non-DoD

activities. The unclassified R-1 is the only document from the RDT&E Programs database

available for public distribution. The minimum information required in the R-1 is as follows:

5.4.5.1. The program element line item data provided is PY, CY, BY1 (and BY2

if biennial submission).

5.4.5.2. The security classification shall be in accordance with the criteria set forth

in Section 1.8.

5.4.5.3. A detailed program element listing in budget activity sequence.

5.4.6. RDT&E Data Elements and Record Formats

5.4.6.1. Appropriation codes, Component codes, and budget activity codes are as

specified in the Budget Structure Listing which can be viewed on the SIPRNet home page of the

OUSD (Comptroller).

5.4.6.2. Other RDT&E Program Data Elements and Record Formats. Components

must follow the guidance and use the data elements and record layouts for submission of updates

to the RDT&E Programs database as prescribed in the instructions on the SIPRNet home page of

the OUSD (Comptroller).

5.5 Automated Construction Program Database (010505)

5.5.1. Purpose and Objectives. This section provides guidelines for the Automated

Construction Program Database to supplement the Defense Components’ military construction

justification materials. Data submission is through the Program Resources Collection Process

(PRCP) System. The Construction Program also will be used to track Program Budget Decisions

at the project level, track congressional action on the President’s Budget submission, and provide

the baseline data required for special analysis such as the facilities recapitalization metric.

5.5.2. Applicability. The provisions of this section apply to all requirements financed by

the Military Construction, NATO Security Investment Program, Base Realignment and Closure,

Family Housing, DoD Family Housing Improvement Fund and Homeowners Assistance

appropriations of the DoD Components as applicable.

5.5.3. Responsibilities. The DoD Components will submit Construction Program data for

their Active, Guard and Reserve Forces construction projects, their portions of the Family

Housing, DoD Family Housing Improvement Fund and Homeowners Assistance programs.

DoD Components will also submit Construction Programs data for multi-service or national level

projects for which they are the executive agent as described in Volume 2B, Chapter 6, Section

060301.

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5.5.4. Reporting Requirements. Update submissions will coincide with the

Program and Budget Review submissions and the January budget presentation. Detailed

requirements not contained herein will be specified by memorandum for all update submissions.

Data will be consistent with budgetary data in the CIS database.

5.5.5. Construction Data Elements and Record Formats

5.5.5.1. Appropriation codes, Component codes, and budget activity codes are as

specified in the Budget Structure Listing which can be viewed on the SIPRNet home page of the

OUSD (Comptroller).

5.5.5.2. Program element codes and titles are as prescribed by DoD 7045.7-H

(FYDP Program Structure Handbook. This publication is available at

http://www.dtic.mil/whs/directives under “Publications,” and in approved decision documents

posted to the FYDP Resource Structure Management (RSM) web site (see Section 7.2) but not yet

reflected in DoD 7045.7-H.

5.5.5.3. Other Construction Program Data Elements and Record Formats.

Components must follow the guidance and use the data elements and record layouts for submission

of updates to the Construction Programs database as prescribed in the instructions on the SIPRNet

home page of the OUSD (Comptroller).

5.5.6. Level of Detail

5.5.6.1. Data will be reported at the level specified for the justification material

[(DD Form 1391) in Volume 2B, Chapters 6 and 7]. A summary of the levels required follows:

5.5.6.2. Military Construction 1

5.5.6.2.1. Major Construction - project detail

5.5.6.2.2. Minor Construction - lump-sum for exigent minor construction

5.5.6.2.3. Planning and Design - lump-sum

5.5.6.2.4. Supporting Activities - project detail

5.5.6.2.5. Program Element

5.5.6.3. NATO Security Investment Program - lump-sum 1

5.5.6.4. Base Realignment and Closure - lump-sum 1

5.5.6.5. Family Housing Construction 1

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5.5.6.5.1. Construction of new housing - project detail. A separate data

element will be used to identify the number of units being constructed for each project.

5.5.6.5.2. Construction Improvements - lump-sum.

5.5.6.5.3. Planning and Design - lump-sum.

5.5.6.6. Family Housing, Operation & Maintenance 1/ Lump-sum for each budget

activity except the Operating Expenses budget activity will be reported by subaccount. The Family

Housing Operation and Maintenance entries are shown below:

5.5.6.6.1. Management Account

5.5.6.6.2. Services Account

5.5.6.6.3. Furnishings Account

5.5.6.6.4. Miscellaneous Account

5.5.6.6.5. Utilities Account

5.5.6.6.6. Leasing

5.5.6.6.7. Maintenance of Real Property

5.5.6.6.8. Interest Payments

5.5.6.6.9. Mortgage Insurance Premiums

5.5.6.6.10. Housing Privatization Support

5.5.6.7. Homeowners Assistance Fund 1/

5.5.6.7.1. Payment to Homeowners

5.5.6.7.2. Other Operating Costs

5.5.6.7.3. Acquisition of Real Property

5.5.6.7.4. Mortgages Assumed

5.5.6.8. DoD Family Housing Improvement Fund - lump sum 1/

5.5.6.8.1. Nomenclature records for all lump-sum values will be generated

by the automated Construction Programs database system; DoD Components should not submit

nomenclature records for lump-sum values.

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5.5.7. Security Classification. A project may be classified due to the nature of the project,

the location of the project, or both. Since the Construction Programs (C-1) is an unclassified

document generated from an unclassified database, use the conventions provided in the

instructions for submission of updates to the Construction Programs database on the SIPRNet

home page of the OUSD (Comptroller).

5.6 CIS Automation Requirements for the Biennial Program and Budget Review Submission

(010506)

5.6.1. Purpose. Electronic data are the basis for the OSD budget review. Components’

program and budget review submission form the baseline from which all Program Budget Decision

dollar and manpower deltas are made. The program and budget review submission is entered into

Comptroller Information System (CIS) by the Military Departments and Defense Agencies. This

chapter outlines the requirements for submission of the data.

5.6.2. Requirement for the CIS Budget Structure. DoD must comply with the budget

submission requirements in OMB Circular A-11, “Preparation, Submission, and Execution of the

Budget,” which applies to all Executive Branch agencies. OMB’s MAX budget system provides

the structure for the data that must be submitted to OMB for each appropriation and receipt

account. The data is published annually in the Budget of the United States Government, commonly

referred to as the President’s Budget. OMB publishes detailed account data for each Federal

agency in a separate “Appendix” of the Budget. The OUSD (Comptroller)’s CIS database is

designed to satisfy the annual submission of Defense Budget data to OMB’s automated MAX

budget system. The CIS budget structure for an account is the Program and Financing (P&F)

Schedule. The P&F Schedule consists of a budget plan, object class, and expenditure tail for all

accounts, except for multi-year accounts that also have a separate obligation plan in addition to the

budget plan.

5.6.3. Submission Requirements:

5.6.3.1. Submission of Budget Estimates for Budget Years (BY1) and BY2:

5.6.3.1.1. Budget Submission (Dollars). Military Departments and

Defense Agencies, as applicable, will submit budget plan, and object class data entries for all

applicable appropriation and receipt accounts which are consistent with and reconcilable to hard

copy submission of budget estimates exhibits required by other sections of the

Financial Management Regulation. Budget plan data must be submitted for all years by period of

obligational availability. Object class entries will be at the summary level (not by period of

obligational availability) and exclude the outyears. Detailed data entries only will be submitted

since subtotals and summary totals are CIS computer generated. All TOA values by Component

by fiscal year will agree with budget submission TOA dollars on Exhibit PB-1A.

5.6.3.1.2. Budget Submission (Personnel Data). Budget submission of

on-board year end personnel data entries for military end strength and civilian full-time equivalents

(FTEs) will be in exact agreement with the PB-4 exhibit.

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5.6.3.1.3. Budget Submission for Prior Year (PY). The Directorate for

Program and Financial Control, OUSD (Comptroller)(P/B) will replicate PY from the CY column

of the previous year’s budget. Components may make limited changes as part of the program and

budget review submission. The PY will be updated once accounting and manpower actuals are

available.

5.6.3.1.4. Obligation Plan Data for Multi-Year Accounts. Obligation plans

for the program and budget review submissions will be computer generated in CIS once PY

accounting actuals are input and as budget adjustments are recorded in CIS. Components will be

asked to review obligations by budget activity after the updated rates have been implemented in

CIS.

5.6.3.1.5. Expenditure Tail Data. Components are not required to submit

expenditure tail data. Expenditure tail data for the program and budget review submissions will

be computer generated in CIS. Outlay rates used in the previous year’s Defense Budget will

generate outlays as part of the baseline submission. The Directorate for Program and Financial

Control will adjust outlay rates later in the budget review process once PY accounting actuals are

available.

5.6.3.2. Submission of Outyear Estimates:

5.6.3.2.1. Budget Submission (Dollars). The submission of TOA

(Direct Program) for appropriation accounts (general fund and revolving fund) and concept

obligations for trust revolving fund, trust fund, special fund, and receipt accounts for BY2+1

through BY2+4 will be made at the same time as the budget submission. Input to the database for

the outyears will be formatted in accordance with the CIS Budget Structure, by appropriation

account at the budget activity/special program category level. Budget plan outyear entries for

TOA for applicable appropriation accounts and concept obligations for trust revolving fund, trust

fund, special fund, and receipt accounts are the only dollar data to be submitted by Components

for the outyears. TOA dollars must agree with Exhibit PB-1A.

5.6.3.2.2. Budget Submission (Personnel Data). Budget estimates for

BY2+1 through BY2+4 military end strength and civilian full-time equivalents (FTEs) will be

made coincident with the budget submission. Input to the database for the outyears will be

formatted in accordance with the CIS Budget Structure Listing and will be in exact agreement with

the PB-4 exhibit.

5.6.3.3. Account Data Elements and Account Structure. Program and budget

review submissions will be in thousands of dollars for all data elements for each account’s budget

plan, obligation plan, and object classification schedules and must be submitted in accordance with

the CIS Budget Structure Listing. (Expenditure tail for CY through the outyears will be computer

generated in CIS.) Personnel data for applicable accounts will be submitted for all years in

accordance with the detail prescribed by the CIS Budget Structure Listing. The Budget Structure

Listing may be generated by running the BATF1 through BATF6 reports from the CIS Report

Processor subsystem. Questions and changes to the CIS Budget Structure Listing should be

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directed to the Directorate for Program and Financial Control, OUSD (Comptroller)(P/B), phone

703-697-7564.

5.6.3.4. Data Submission. Guidance is provided on the SIPRNET home page of

the OUSD (Comptroller) on “Coding CIS Transactions for FY BY1/BY2 Budget.” Components

must use the record layouts and file formats prescribed in this guidance.

5.7 CIS Budget Structure Listing (BSL) (010507)

5.7.1. Purpose. The BSL reflects the official Department of Defense budget account

structure for Component submission of the budget estimates in machine readable form. The BSL

contains the following sections:

5.7.1.1. Appropriation Account Names/Codes. This section lists all the valid and

active codes in the CIS database. Appropriation accounts have four-digit to six-digit numeric plus

one-digit Treasury agency alpha account code. Receipt accounts have six-digit numeric plus one-

digit Treasury agency alpha account code. Account coding in CIS agrees with codes used in

OMB’s MAX automated budget system for compatibility in the Department’s electronic

submission of the Defense Budget to OMB.

5.7.1.2. Budget Plan and Obligation Plan Name Codes. This section provides the

detailed budget structure for data elements in the budget plan and obligation plan of all

appropriation and receipt accounts in CIS. In this section of the BSL, the presence of a “P” and/or

“$” in the “PER/$$ Inputs” column indicates those budget activities/special program codes against

which resources ($ or personnel) may be entered in the CIS database. Requests to add “P” or a

“$” to an existing line may be made to the Directorate for Program and Financial Control, OUSD

(Comptroller)(P/B), through the respective Program/Budget Directorate responsible for that

appropriation.

5.7.1.3. Financing, Budget Authority, and Expenditure Tail Name/Codes. This

section lists the financing (FIN), budget authority breakout (BAB), and expenditure tail (EXP)

codes used in the Program and Financing Schedule for each appropriation and receipt account.

5.7.1.4. Object Classification Codes. OMB Circular A-11 requires agencies to

report account obligations by object class for PY, CY, BY1 and BY2. This section aligns

Program and Financing Schedule obligations with the object class codes in OMB Circular A-11.

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5.7.2. Input Requirements

5.7.2.1. Input coding for all budget estimates will be entered in accordance with

guidance provided on the SIPRNET OUSD (Comptroller) home page. Features that should be

considered in the preparation of data are:

5.7.2.1.1. Military Personnel Accounts:

5.7.2.1.1.1. The Military Departments will prepare and submit the

military personnel account data (see Budget Structure Listing on the SIPRNET home page of the

OUSD (Comptroller)). Input for military personnel dollars should not be submitted by Defense

Agencies.

5.7.2.1.1.2. The Military Departments will prepare and submit end

strength data on a Component basis; i.e., Army submits data on personnel assigned to Army as

well as Army personnel assigned to each Defense Agency (see Budget Structure Listing on the

SIPRNet home page of the OUSD (Comptroller)). The Defense Agencies must coordinate their

end strength requirements with the Military Departments prior to the Military Departments’ data

submissions.

5.7.2.1.2. Input coding for Working Capital Fund must include the

appropriate three-position special program code assigned to each business area for operating and

capital expenses, civilian full-time equivalents (FTEs), and military end strengths.

5.7.3. Object Classification Schedules

5.7.3.1. Object class definitions are provided in OMB Circular A-11, Section 83.

The major object class categories are:

5.7.3.1.1. 10 Personnel compensation and benefits

5.7.3.1.2. 20 Contractual services and supplies

5.7.3.1.3. 30 Acquisition of assets

5.7.3.1.4. 40 Grants and fixed charges

5.7.3.1.5. 90 Other

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5.7.3.2. DoD-unique object class major/minor codes include:

5.7.3.2.1. 12.210 Military – accrued retirement benefits

5.7.3.2.2. 12.220 Military – other personnel benefits

5.7.3.2.3. 12.230 Military – accrued health care Military benefit

categorization guidance for the three above is provided in Chapter 2, Section 020202.

5.7.3.2.4. 25.320 Payments to foreign national indirect hire

5.7.3.2.5. 25.330 Purchases from revolving funds. Obligations for

purchases from Defense Working Capital Funds and other DoD revolving and management

accounts. Differentiate from object class 25.310 purchases of goods and services from other

government agencies (examples include non-revolving fund support agreement obligations).

5.7.3.3. The object classification codes specified in OMB Circular A-11 are

augmented in CIS by type that identifies Direct Obligations (type = “1”), Reimbursable

Obligations (type = “2”), Allocation Accounts (type = “3”), and Receipt Obligations (type = “4”).

5.7.3.4. All revolving and management accounts will be coded in the reimbursable

(type = “2”) object class series followed by the appropriate object class number.

5.7.3.5. Object class data will be submitted for all accounts (including concept

obligations) in the Program and Financing schedules in the PY, CY, BY1 or BY2.

5.7.3.6. Object Class Default Major/Minor Codes. When an obligation adjustment

occurs in CIS and an object class is not specified for the obligation change, CIS will automatically

make an adjustment in the amount of the obligation to the default object class for the account. For

example, if a TOA delta is made to an annual account in a Program Budget Decision (PBD) and if

an object class obligation delta is not coded and included as part of the PBD transaction, CIS will

automatically generate an object class delta in the default object class code for the account.

Components must redistribute obligations by object class for each of their accounts after PY

actuals are available, and before the budget review process has been completed, to provide

consistent and explainable object class amounts from PY through BY2. A chart displaying CIS

object class default Major/Minor code for each account is available on the SIPRNet home page of

the OUSD (Comptroller).

5.7.4. CIS P&F Schedule Diagnostics Rules and Report. CIS Report 22 has been

developed to provide diagnostic and balancing checks for appropriation and receipt accounts.

Report 22 provides a listing of balance diagnostic errors and warnings for each appropriation

account and supplemental account as well as for each defense agency within a defense-wide

account where appropriate. An example of a balancing requirement checked in this report is: Total

Direct Program (Total Obligational Authority (TOA)) in the P&F section must equal total Direct

Obligations in the Object Classification section for each year within a defense agency or

appropriation account (for annual accounts).

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5.7.5. Update of the PY Column

5.7.5.1. OMB Circular A-11 requires agencies to submit PY data to OMB’s MAX

budget system which is based on Treasury certified accounting actuals. The update of PY dollars

in CIS is accomplished using data from the SF Form 133 and the DD Comp 1002 plus AR 1307

for Revolving Funds. PY amounts must reconcile to Treasury’s yearend annual report called the

Treasury Alignment Statement.

5.7.5.2. Components will be requested to validate budget activity data and update

object class obligations and manpower actuals once accounting data has been certified by Treasury

for each Defense account. All PY actuals updates for budget plans, obligations plans and

expenditure tail data will be done electronically by the Directorate for Program and Financial

Control. Business rules used by CIS for updating PY actuals for an account’s budget plan,

obligation plan and expenditure tail are available on the SIPRNet home page of the OUSD

(Comptroller).

6.0 UNIFORM BUDGET AND FISCAL ACCOUNTING CLASSIFICATIONS (0106)

6.1 General (010601)

6.1.1. This Section establishes the functional title classifications and subdivisions by

which appropriation and fund accounts of the Department of Defense are required to be arranged,

grouped, or classified in budgetary and fiscal presentations. These classifications are designed to

permit consolidation of budget and fiscal data for the several Components of the Department of

Defense into over-all Departmental summaries.

6.1.2. These instructions cover all appropriation and receipt accounts for military

functions of the Department of Defense. Detailed DoD budget account structure used in the

Comptroller Information System is displayed in the Budget Structure Listing available on the

SIPRNet home page of the OUSD (Comptroller).

6.2 Functional Titles – Military Functions (010602)

The following functional titles are to be used in appropriate budgetary and fiscal

presentations:

6.2.1. Military Personnel

6.2.2. Operation and Maintenance

6.2.3. Procurement

6.2.4. Research, Development, Test, and Evaluation

6.2.5. Military Construction

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6.2.6. Family Housing

6.2.7. Revolving and Management Funds

6.2.8. Defense-Wide Contingencies

6.2.9. Offsetting Receipts

6.2.10. Trust and Trust Revolving Funds

6.2.11. Interfund Transactions

6.3 Definitions of Functional Titles and Subdivisions – Military (010603)

This Section lists currently active appropriations within each functional title. Budget

activities for Procurement and RDT&E titles are also listed. Budget activities for other

appropriations are displayed in the Budget Structure Listing available on the SIPRNet home page

of the OUSD (Comptroller).

6.3.1. Functional Title - Military Personnel

6.3.1.1. The functional title "Military Personnel" for military functions is defined

as comprising the accounts listed below.

6.3.1.1.1. Active Forces

21_2010 Military Personnel, Army

21_1004 Medicare-Eligible Retiree Health Fund Contribution, Army

17_1453 Military Personnel, Navy

17_1000 Medicare-Eligible Retiree Health Fund Contribution, Navy

17_1105 Military Personnel, Marine Corps

17_1001 Medicare-Eligible Retiree Health Fund Contribution,

Marine Corps

57_3500 Military Personnel, Air Force

57_1007 Medicare-Eligible Retiree Health Fund Contribution, Air

Force

6.3.1.1.2. Reserve and Guard Forces

21_2070 Reserve Personnel, Army

21_1005 Medicare-Eligible Retiree Health Fund Contribution,

Reserve Personnel, Army

17_1405 Reserve Personnel, Navy

17_1002 Medicare-Eligible Retiree Health Fund Contribution,

Reserve Personnel, Navy

17_1108 Reserve Personnel, Marine Corps

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17_1003 Medicare-Eligible Retiree Health Fund Contribution,

Reserve Personnel, Marine Corps

57_3700 Reserve Personnel, Air Force

57_1008 Medicare-Eligible Retiree Health Fund Contribution,

Reserve Personnel, Air Force

21_2060 National Guard Personnel, Army

21_1006 Medicare-Eligible Retiree Health Fund Contribution,

National Guard Personnel, Army

57_3850 National Guard Personnel, Air Force

57_1009 Medicare-Eligible Retiree Health Fund Contribution,

National Guard Personnel, Air Force

97 0041 Concurrent Receipt Accrual Payments to the Military

Retirement Fund

6.3.1.2. Lower level subdivisions susceptible to consolidation are available under

the uniform budget and accounting structure prescribed for these appropriations in Chapter 2 of

Volume 2A.

6.3.2. Functional Title - Operation and Maintenance

The functional title "Operation and Maintenance" for military functions is defined

as comprising the accounts listed below:

21_2020 Operation and Maintenance, Army

17_1804 Operation and Maintenance, Navy

17_1106 Operation and Maintenance, Marine Corps

57_3400 Operation and Maintenance, Air Force

97_0100 Operation and Maintenance, Defense-Wide

21_2080 Operation and Maintenance, Army Reserve

17_1806 Operation and Maintenance, Navy Reserve

17_1107 Operation and Maintenance, Marine Corps Reserve

57_3740 Operation and Maintenance, Air Force Reserve

21_2065 Operation and Maintenance, Army National Guard

57_3840 Operation and Maintenance, Air National Guard

97_0104 United States Court of Appeals for the Armed Forces

97_0105 Drug Interdiction and Counter-Drug Activities, Defense

97_/_0107 Office of the Inspector General

97X0118 Overseas Contingency Operations Transfer Fund

97_/_0130 Defense Health Program

97_/_0134 Former Soviet Union Threat Reduction

97_0141 Iraq Freedom Fund

97_/_0143 Strategic Reserve Readiness Fund

97X0801 Foreign Currency Fluctuations, Defense

21X0810 Environmental Restoration, Army

17X0810 Environmental Restoration, Navy

57X0810 Environmental Restoration, Air Force

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97X0810 Environmental Restoration, Defense

97X0811 Environmental Restoration, Formerly Used Defense Sites

97_/_0819 Overseas Humanitarian, Disaster and Civil Aid

97X0833 Emergency Response Fund

97X0838 Support for International Sporting Competitions

97_/_0839 Quality of Life Enhancements

97X0840 OPPLAN 34A - 35 P.O.W. Payments

97X0842 Defense Vessels Transfer Program Account

17X1236 Payment to Kaho’olawe Island Conveyance, Remediation, and

Environmental Restoration Fund

21_/_2091 Afghanistan Security Forces Fund

21_/_2092 Iraq Security Forces Fund

97X4965 Emergency Response Fund

21X5098 Restoration of the Rocky Mountain Arsenal

17X5185 Kaho’Olawe Island Conveyance Remediation, and

Environmental Restoration Fund

97X5187 Defense Cooperation Account

97X5188 Disposal of Department of Defense Real Property

97X5189 Lease of Department of Defense Real Property

97X5193 Overseas Military Facility Investment Recovery Account

21X5194 DoD 50

Anniversary of World War II Commemoration

97X5195 Use of Proceeds from the Transfer or Disposal of Commissary

Facilities

21X5286 National Science Center, Army

97X5394 Use of Proceeds from Cash Equalization Payments from Acquisition

of Facilities

97X5441 Burdensharing Contribution

6.3.3. Functional Title - Procurement

The functional title "Procurement" for military functions is defined as comprising the

following appropriations and budget activities:

21_/_2031 Aircraft Procurement, Army

-Aircraft

-Modification of Aircraft

-Spares and Repair Parts

-Support Equipment and Facilities

21_/_2032 Missile Procurement, Army

-Other Missiles

-Modification of Missiles

-Spares and Repair Parts

-Support Equipment and Facilities

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21_/_2033 Procurement of Weapons and Tracked Combat Vehicles, Army

-Tracked Combat Vehicles

-Weapons and Other Combat Vehicles

-Spares and Repair Parts

21_/_2034 Procurement of Ammunition, Army

-Ammunition

-Ammunition Production Base Support

21_/_2035 Other Procurement, Army

-Tactical and Support Vehicles

-Communications and Electronics Equipment

-Other Support Equipment

-Spares and Repair Parts

21_/_2093 Joint Improvised Explosive Device Defeat Fund

17_/_1506 Aircraft Procurement, Navy

-Combat Aircraft

-Airlift Aircraft

-Trainer Aircraft

-Other Aircraft

-Modification of Aircraft

-Aircraft Spares and Repair Parts

-Aircraft Support Equipment and Facilities

17_/_1507 Weapons Procurement, Navy

-Ballistic Missiles

-Other Missiles

-Torpedoes and Related Equipment

-Other Weapons

-Other Ordnance

-Spares and Repair Parts

17_/_1508 Procurement of Ammunition, Navy and Marine Corps

-Procurement of Ammunition, Navy

-Procurement of Ammunition, Marine Corps

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6.3.4. Functional Title - Procurement (Continued)

17_/_1611 Shipbuilding and Conversion, Navy

-Fleet Ballistic Missile Ships

-Other Warships

-Amphibious Ships

-Mine Warfare and Patrol Ships

-Auxiliaries, Craft and Prior-Year Program Costs

17_/_1810 Other Procurement, Navy

-Ships Support Equipment

-Communications and Electronics Equipment

-Aviation Support Equipment

-Ordnance Support Equipment

-Civil Engineering Support Equipment

-Supply Support Equipment

-Personnel and Command Support Equipment

-Spares and Repair Parts

17_/_0380 Coastal Defense Augmentation

-Coast Guard Support

17_/_1109 Procurement, Marine Corps

-Weapons and Combat Vehicles

-Guided Missiles and Equipment

-Communications and Electronics Equipment

-Support Vehicles

-Engineer and Other Equipment

-Spares and Repair Parts

57_/_3010 Aircraft Procurement, Air Force

-Combat Aircraft

-Airlift Aircraft

-Trainer Aircraft

-Other Aircraft

-Modification of In-Service Aircraft

-Aircraft Spares and Repair Parts

-Aircraft Support Equipment and Facilities

57_/_3011 Procurement of Ammunition, Air Force

-Procurement of Ammunition, Air Force

-Weapons

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57_/_3020 Missile Procurement, Air Force

-Ballistic Missiles

-Other Missiles

-Modification of In-Service Missiles

-Spares and Repair Parts

-Other Support

-Munitions and Related Equipment

57_/_3080 Other Procurement, Air Force

-Munitions and Associated Equipment

-Vehicular Equipment

-Electronics and Telecommunications Equipment

-Other Base Maintenance and Support Equipment

-Spares and Repair Parts

97_/_0300 Procurement, Defense-Wide

-Major Equipment

-Special Operations Command

-Chemical/Biological Defense

97_/_0303 Rapid Acquisition Fund

97_/_0350 National Guard and Reserve Equipment

-Reserve Equipment

-National Guard Equipment

97_/_0360 Defense Production Act Purchases

97_/_0390 Chemical Agents and Munitions Destruction, Defense

-Operation and Maintenance

-Research, Development, Test, and Evaluation

-Procurement

6.3.5. Functional Title – Research, Development, Test and Evaluation

The functional title "Research, Development, Test and Evaluation" for military functions

is defined as comprising the following accounts and budget activities:

21_/_2040 Research, Development, Test, and Evaluation, Army

17_/_1319 Research, Development, Test, and Evaluation, Navy

57_/_3600 Research, Development, Test, and Evaluation, Air Force

97_/_0400 Research, Development, Test, and Evaluation, Defense-Wide

97_/_0460 Operational Test and Evaluation, Defense

57_/_3024 Tanker Replacement Transfer Fund, Air Force

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Budget Activities for RDT&E Accounts

01 - Basic Research

02 - Applied Research

03 - Advanced Technology Development

04 - Advanced Component Development and Prototypes

05 - System Development and Demonstration

06 - RDT&E Management Support

07 - Operational System Development

6.3.6. Functional Title – Military Construction

6.3.6.1. The functional title "Military Construction" for military functions is

defined as comprising the accounts listed below.

21_/_2050 Military Construction, Army

17_/_1205 Military Construction, Navy

57_/_3300 Military Construction, Air Force

97_/_0500 Military Construction, Defense-Wide

97X0510 Base Realignment and Closure Account, Part II, Defense

051001 Base Realignment and Closure Account, Army

051002 Base Realignment and Closure Account, Navy

051003 Base Realignment and Closure Account, Air Force

051004 Base Realignment and Closure Account, Defense

97X0512 Base Realignment and Closure Account, 2005

051201 Base Realignment and Closure Account, 2005, Army

051202 Base Realignment and Closure Account, 2005, Navy

051203 Base Realignment and Closure Account, 2005, Air Force

051204 Base Realignment and Closure Account, 2005, Defense

97X0803 Foreign Currency Fluctuations, Construction, Defense

97X0804 North Atlantic Treaty Organization Security Investment Program

21_/_2085 Military Construction, Army National Guard

57_/_3830 Military Construction, Air National Guard

21_/_2086 Military Construction, Army Reserve

17_/_1235 Military Construction, Naval Reserve

57_/_3730 Military Construction, Air Force Reserve

97_/_0391 Chemical Demilitarization Construction, Defense

6.3.6.2. Lower level subdivisions susceptible to consolidation are available under

the uniform accounting classifications prescribed for these appropriations in Chapter 6, Section

0602, and Chapter 7, Section 0702.

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FUNCTIONAL TITLE - FAMILY HOUSING

The functional title "Family Housing" for military functions is defined as comprising

the accounts listed below:

97X0834 Department of Defense Family Housing Improvement Fund

97X0836 Department of Defense Military Unaccompanied Housing

Improvement Fund

21_/_0720 Family Housing, Construction, Army

21_0725 Family Housing, Operation and Maintenance, Army

17_/_0730 Family Housing, Construction, Navy and Marine Corps

17_0735 Family Housing, Operation and Maintenance, Navy and Marine

Corps

57_/_0740 Family Housing, Construction, Air Force

57_0745 Family Housing, Operation and Maintenance, Air Force

97_/_0760 Family Housing, Construction, Defense-Wide

97_0765 Family Housing, Operation and Maintenance, Defense-Wide

97X4090 Homeowners’ Assistance Fund, Defense

97X4166 Family Housing Improvement Fund, Direct Loan, Financing

Account

97X4167 Family Housing Improvement Fund, Guaranteed Loan, Financing

Account

FUNCTIONAL TITLE - REVOLVING AND MANAGEMENT FUNDS

The functional title "Revolving and Management Funds" for military functions is defined

as comprising the accounts listed below. Since each account, in its entirety, is classified within a

single first level subdivision of the functional title, the accounts are grouped by the subdivisions.

Public Enterprise Funds

97X4555 National Defense Stockpile Transaction Fund

97X4950 Pentagon Reservation Maintenance Revolving Fund

17X4557 National Defense Sealift Fund

21X4275 Arms Initiative, Guaranteed Loan Financing Account, Army

97X4282 Defense Coalition Support Fund

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Intragovernmental Funds

97X493001 Defense Working Capital Fund, Army

97X493002 Defense Working Capital Fund, Navy

97X493003 Defense Working Capital Fund, Air Force

97X493004 Defense Working Capital Fund, Defense Agencies

97X493005 Defense Working Capital Fund, Defense Commissary Agency

97X4179 Reserve Mobilization Income Insurance Fund

21X4528 Army Conventional Ammunition Working Capital Fund *

97X4931 Buildings Maintenance Fund

*Closing after existing orders are completed

FUNCTIONAL TITLE - DEFENSE-WIDE CONTINGENCIES

The functional title "Defense-Wide Contingencies" for military functions is defined

as comprising the accounts listed below:

97 9912 Other Legislation (including Management Improvements)

97 9918 General Transfer Authority Outlay Allowance

FUNCTIONAL TITLE - OFFSETTING RECEIPTS

The functional title "Offsetting Receipts" for military functions is defined as

comprising the accounts listed below:

General Fund Proprietary Offsetting Receipts

184000A Offsetting Receipts, Rent of Equipment and Other Personal

Property, Army

184000N Offsetting Receipts, Rent of Equipment and Other Personal

Property, Navy

184000F Offsetting Receipts, Rent of Equipment and Other Personal

Property, Air Force

184000D Offsetting Receipts, Rent of Equipment and Other Personal

Property, Defense

246200A Offsetting Receipts, Deposits for Survivors Annuity Benefits, Army

246200N Offsetting Receipts, Deposits for Survivors Annuity Benefits, Navy

246200F Offsetting Receipts, Deposits for Survivors Annuity Benefits, Air

Force

246200D Offsetting Receipts, Deposits for Survivors Annuity Benefits,

Defense

223600D Sales of Certain Material in National Defense Stockpile

264400D Defense Vessels Transfer Receipt Account

265100D Sale of Scrap and Salvaged Materials, Defense

262100D Sale of Lands, Etc., Mil Post Construction Fund

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301900A Offsetting Receipts, Recoveries for Government Property Lost or

Damaged, Army

301900N Offsetting Receipts, Recoveries for Government Property Lost or

Damaged, Navy

301900F Offsetting Receipts, Recoveries for Government Property Lost or

Damaged, Air Force

301900D Offsetting Receipts, Recoveries for Government Property Lost or

Damaged, Defense

304100A Offsetting Receipts, Recoveries Under FMS Program, Army

304100N Offsetting Receipts, Recoveries Under FMS Program, Navy

304100F Offsetting Receipts, Recoveries Under FMS Program, Air Force

304100D Offsetting Receipts, Recoveries Under FMS Program, Defense

321000A Offsetting Receipts, General Fund Propriety Receipts, Army

321000N Offsetting Receipts, General Fund Propriety Receipts, Navy

321000F Offsetting Receipts, General Fund Propriety Receipts, Air Force

321000D Offsetting Receipts, General Fund Propriety Receipts, Defense

Special Fund Proprietary Offsetting Receipts

509810A Rocky Mountain Arsenal Offsetting Receipts

518510N Offsetting Receipts, Kaho’ Olawe Island Fund

518710D Defense Cooperation Receipts

518720D Earnings on Investments, Defense Cooperation Account (Non-051)

518821D Offsetting Receipts, Disposal of DoD Real Property, Army

518817D Offsetting Receipts, Disposal of DoD Real Property, Navy

518857D Offsetting Receipts, Disposal of DoD Real Property, Air Force

518897D Offsetting Receipts, Disposal of DoD Real Property, Defense

Agencies

518921D Offsetting Receipts, Lease of DoD Real Property, Army

518917D Offsetting Receipts, Lease of DoD Real Property, Navy

518957D Offsetting Receipts, Lease of DoD Real Property, Air Force

518997D Offsetting Receipts, Lease of DoD Real Property, Defense Agencies

519321D Deposits, DoD Overseas Military Facility Investment Recovery

Account, Army

519317D Deposits, DoD Overseas Military Facility Investment Recovery

Account, Navy

519357D Deposits, DoD Overseas Military Facility Investment Recovery

Acct, Air Force

519397D Deposits, DoD Overseas Military Facility Investment Recovery

Account

519410A Royalties for Use of DoD Military Insignia and Trademarks

519510D Proceeds from the Transfer or Disposition of Commissary Facilities

528610A Fees Collected for the Use of the National Science Center

539421A Cash Equalization Proceeds from Acquisition of Facilities, Army

539417N Cash Equalization Proceeds from Acquisition of Facilities, Navy

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539457F Cash Equalization Proceeds from Acquisition of Facilities, Air

Force

539497D Cash Equalization Proceeds from Acquisition of Facilities, Defense

544110D Burdensharing Contribution, Defense, Kuwait

544130D Burdensharing Contribution, Defense, Japan

544140D Burdensharing Contribution, Defense, South Korea

544150D Burdensharing Contribution, Defense, Qatar

544210D Proceeds DoD Korean War Commemoration Account

556210N Ford Island Improvement Account, Net Sale of Assets

Trust Fund Receipts (Non-Function 051)

806310A Bequest of Major General Fred C. Ainsworth, Library, Walter Reed

General Hospital Trust Fund

806320A Earnings on Investments, Ainsworth Library Trust Fund

817410A Collections for the National Science Center Gift Fund

892710A Deposits, Dept. of the Army General Gift Fund

892720A Earnings on Investments, Dept. of the Army General Gift Fund

873310N Contributions to U.S. Naval Academy Gift and Museum Fund

873320N Earnings on Investments, U.S. Naval Academy Gift and Museum

Fund

871610N Deposits, Dept. of the Navy General Gift Fund

871620N Earnings on Investments, Dept. of the Navy General Gift Fund

892810F Deposits, Dept. of Air Force General Gift Fund

892820F Earnings on Investments, Dept. of Air Force General Gift Fund

833710D Contributions from Kuwait, Host Nation Support for U.S.

Relocation Activities

833720D Earnings on Investments, Host Nation Support for U.S. Relocation

Activities

833730D Contributions from Japan, Host Nation Support for U.S. Relocation

Activities

833740D Contributions from S. Korea, Host Nation Support for U.S.

Relocation Activities

833750D Contributions from Qatar, Host Nation Support for U.S. Relocation

Activities

816310D Contributions to the DoD General Gift Fund

835810D Contributions from Japan, Support for U.S. Relocation to Guam

Activities

835820D Earnings on Investments, Support for U.S. Relocation to Guam

Activities

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FUNCTIONAL TITLE - TRUST AND TRUST REVOLVING FUNDS

The functional title "Trust Funds" for military functions is defined as comprising the

accounts listed below:

21X8063 Ainsworth Library (Trust)

97X8335 Voluntary Separation Incentive Fund

21X8927 Army General Gift Fund

17X8733 USN Academy Gift and Museum Fund

17X8716 Navy General Gift Fund

17X8723 Ships Stores Profit, Navy

57X8928 Air Force General Gift Fund

17X8423 Midshipmen’s Store, USN Academy (Trust Revolving)

57X8418 Air Force Cadet Fund (Trust Revolving)

97X8164 Surcharge Collections, Sales of Commissary Stores, Defense (Trust

Revolving)

97X8165 Foreign National Employees Separation Pay, Defense

97X8168 National Security Education Trust Fund, Defense

21X8174 National Science Center Gift Fund, Army

97X8337 Host Nation Support for U.S. Relocation Activities, Defense

97X8163 Department of Defense General Gift Fund

97X8358 Support for U.S. Relocation to Guam Activities

FUNCTIONAL TITLE - INTERFUND TRANSACTIONS

The functional title "Interfund Transactions" for military functions is defined

as comprising the accounts listed below:

872310N Interfund Transactions, Profits from Sales of Ship Stores, Navy

816810D Interfund Transactions, Payment from General Fund, National

Security Education Trust Fund, Defense

816820D Interfund Transactions, Earnings on Investments, National Security

Education Trust Fund, Defense (Non-051)

816830D Interfund Transactions, Recoveries, National Security Education

Trust Fund, Defense

816510D Interfund Transactions, Employing Agency Contributions, Foreign

National

Employee Separation Pay, Defense

833510D Interfund Transactions, Employing Agency Contributions,

Voluntary Separation

Incentive, Defense

833520D Interfund Transactions, Earnings on Investments, Voluntary

Separation

Incentive Trust Fund, Defense (Non-051)

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6.4 Functional Titles and Definitions – Other Defense Civil Programs (010604)

FUNCTIONAL TITLE – OTHER DEFENSE CIVIL PROGRAMS

The function title “Other Defense Civil Programs” is defined as comprising the accounts

listed below:

97X8097 Military Retirement Fund

97 0040 Payments to Military Retirement Fund, Defense

97 0041 Concurrent Receipt Accrual Payments to the Military Retirement

Fund

97X8098 Education Benefits Fund

97X5472 Uniformed Services Retiree Health Care Fund

97 0850 Payment to DoD Medicare Eligible

21X5095 Wildlife Conservation, etc., Military Reservation, Army

17X5095 Wildlife Conservation, etc., Military Reservation, Navy

57X5095 Wildlife Conservation, etc., Military Reservation, Air Force

21X5285 Department of Defense, Forest Products Program, Army

Trust Fund Receipts and Special Fund Offsetting Receipts include:

809710D Employing Agency Contributions, DoD Military Retirement Fund

809720D Earnings on Investments, DoD Military Retirement Fund

809730D Federal Contribution, DoD Military Retirement Fund

809740D Offsetting Receipts, Payment to Military Retirement Fund

809810D Employing Agency Contribution, DoD Education Benefits Fund

809820D Earnings on Investments, DoD Education Benefits Fund

547210D Employing Agency Contributions, DoD Retiree Health Care Fund

547220D Earnings on Investment, DoD Retiree Health Care Fund

547230D Federal Contribution, DoD Retiree Health Care Fund

509510A Sale of Hunting and Fishing Permits, Military Reservations, Army

509510N Sale of Hunting and Fishing Permits, Military Reservations, Navy

509510F Sale of Hunting and Fishing Permits, Military Reservations, Air

Force

528510A Reserve Account, Department of Defense, Forest Products Program,

Army

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7.0 AUTOMATED FUTURE YEARS DEFENSE PROGRAM (FYDP) DATABASES (0107)

7.1 Standard Data Collection System (SDCS) (010701)

7.1.1. Purpose and Objectives.

7.1.1.1. This Section provides for the maintenance of the FYDP. The FYDP is a

series of reports that record and display resource decisions made during the biennial

Planning, Programming, Budgeting and Execution (PPBE) cycle. The FYDP contains defense

resources—people, forces (equipment and organizations), and dollars—categorized by programs

and related to the budget’s appropriation structure. The FYDP provides a record of past decisions

that assists senior leaders in deciding on future issues such as operations tempo, force structure

size and composition, and investment strategies.

7.1.1.2. Data are entered into the FYDP through the SDCS system. SDCS allows

all DoD organizations to submit FYDP data electronically, receiving real-time feedback on their

inputs. SDCS is a web-based application hosted on the Secret Internet Protocol Router Network

(SIPRNet). It allows users to update, correct, and view their organization’s portion of the FYDP.

7.1.1.3. The OUSD (Comptroller) maintains databases consisting of Operation and

Maintenance TOA data, Procurement TOA data, RDT&E TOA data and Military Construction

TOA data at a more detailed level than used in the FYDP. All DoD organizations reporting FYDP

data will submit these appropriations through the OUSD (Comptroller) automated programs

databases as outlined in sections 5.2, 5.3, 5.4, and 5.5. The SDCS will rollup up these

appropriations to the proper level for inclusion in the FYDP report. Formats for Operation and

Maintenance TOA, Procurement TOA data, RDT&E TOA data and Military Construction TOA

data are the same as required for the automated programs databases, covered in sections 5.2, 5.3,

5.4, and 5.5.

7.1.1.4. Amounts entered for TOA, military endstrength, and civilian

Full-Time Equivalents (FTE’s) by Program Element must agree with the amounts submitted for

the budget. POM submissions for TOA must adhere to controls established by Fiscal Guidance or

other controls as announced in subsequent guidance.

7.1.2. Applicability and Scope.

The provisions of this Section apply to the Office of the Secretary of Defense (OSD), the

Military Departments, the Combatant Commands and the Defense Agencies/Field Activities

(hereafter referred to as “DoD Components”) that contribute data to the FYDP. The Office of the

Director, Program Analysis and Evaluation (hereafter referred to as “OD, PA&E”) administers

updating and general management of the FYDP. OD, PA&E controls access to SDCS, for the

purpose of providing data.

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7.1.3. Reporting Requirements.

Updates to the FYDP are required coincident with the (1) Program and Budget Review and

(2) the President’s Budget (PB), and (3) for major restructures of the FYDP itself when directed

by the OD, PA&E. Specific guidance relative to approved changes, due dates, and special

requirements is provided in a memorandum from OD, PA&E announcing each update. In the

Program and Budget Review FYDP submissions, acceptable update years are normally limited to

the budget years and programming years (generally six years for TOA and manpower, and nine

years for forces). In the PB FYDP submission, acceptable update years include the most recent

prior year of the budget cycle to the end of the programming cycle (generally eight years for TOA

and manpower, and 11 years for forces). Since some appropriations—procurement, RDT&E, and

military construction—are authorized for obligation over multiple years, it is periodically

necessary to update historical years (the years prior to the first year of a PB FYDP update).

Historical changes will be accepted once during the PPBE cycle—usually during the President's

Budget FYDP update—but only when explicitly directed by OD, PA&E. These updates enable

the FYDP to reflect transfers, rescissions, supplemental appropriations, reappropriations, and other

authorized adjustments to total obligational authority, which might occur in multi-year

appropriations, as well as to reflect actual accounting data. Particular instructions for conducting

historical-year updates will be issued by OD, PA&E as required.

7.1.4. Publication of FYDP Related-Information.

7.1.4.1. Section 221 of Title 10 of the United States Code (U.S.C.) requires that:

7.1.4.2. “The Secretary of Defense shall submit to Congress each year, at or about

the time that the President’s budget is submitted to Congress that year under section 1105(a) of

title 31, a future-years defense program (including associated annexes [now called "programs"])

reflecting the estimated expenditures and proposed appropriations included in that budget.”

7.1.4.3. In accordance with the U.S.C., OD, PA&E will prepare the President's

Budget FYDP Summary and Program Element Detail for transmission to the Congress. In

addition, OD PA&E will provide FYDP-related information at all other updates for within DoD.

Historical updates, if collected at the time of the President's Budget FYDP update, will be issued

with the subsequent PPBE cycle.

7.1.5. Other Databases Related to the FYDP. Consistent with the FYDP are separate but

related databases and documents constituting, the Operation and Maintenance Program, the

Procurement Program, the RDT&E Program and the Military Construction Program. These

databases produce the Operation and Maintenance programs Report (O-1), the Procurement

Programs Report (P-1), the RDT&E Programs Report (R-1) and the Military Construction

Programs report (C-1). Detailed information regarding these databases is provided in section 5.0.

The FYDP Resource Structure Management (RSM) database maintains information about the

program elements and other related attributes critical to the production of the FYDP. Detailed

information regarding this database is provided in Section 7.2.

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7.1.6. Instructions for Updating the FYDP.

7.1.6.1. General.

7.1.6.1.1. FYDP Forces, Manpower, Military Pay Rates, and remaining

appropriations data not elsewhere submitted shall be submitted by DoD Components to the

Programming and Fiscal Economics Division, OD, PA&E, over the SIPRNet, as directed.

7.1.6.1.1.1. Operation and Maintenance, Procurement, RDT&E,

and Military Construction appropriations data included in the FYDP will be submitted to OUSD

(Comptroller) and forwarded to OD, PA&E for inclusion in the FYDP. Reference section 5.0 for

further instructions.

7.1.6.1.1.2. All FYDP data provided directly to OD, PA&E will be

input into the SDCS system on the SIPRNet. The following file formats may be used to submit

data to SDCS. Specific information and examples of these formats may be found on the SDCS

web page located on the SIPRNet at https://dpd.pae.osd.smil.mil.

7.1.6.1.1.2.1. Standard ASCII text file, fixed record length,

with either single year per row or multiple years per row.

7.1.6.1.1.2.2. Excel spreadsheet file with either single year

per row or multiple years per row.

7.1.6.1.2. All resource changes to the data file shall be on a net change

basis; that is, data currently in the file shall be revised (plus or minus) by an incremental amount

to reflect the new approved position.

7.1.6.1.3. Program element codes and titles, resource identification codes,

and DoD Component identifier codes are as prescribed by DoD 7045.7-H (FYDP Program

Structure Handbook). This publication is available at http://www.dtic.mil/whs/directives under

“Publications,” and in approved decision documents posted to the FYDP Resource Structure

Management (RSM) web site (see Section 7.2) but not yet reflected in DoD 7045.7-H.

7.1.6.2. Submission of Changes. Changes submitted for net change/add record

resource data (Data Format as prescribed in Section 7.1.6.1) must provide specific identification

of quantitative resource information by program element, resource identification code, and fiscal

year.

7.1.6.3. Military Pay Rates. Submission of each FYDP update should include

average annual military pay rates which shall include permanent change of station (PCS) data,

rounded to the nearest dollar for each fiscal year for each military personnel end-strength category

identified in the FYDP. Pay rates are used in updating the FYDP, and are also a FYDP data

end-product in their own right. It is the intent of OD, PA&E to reflect the most accurate pay rates

available in each update to the FYDP.

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7.2 FYDP Resource Structure Management (RSM) System (010702)

7.2.1. Purpose and Objectives. This section provides for the maintenance of the automated

database of the FYDP’s structure, and describes the procedures used for requesting changes to the

FYDP’s structure, such as establishing new program element codes and definitions or changing

program element titles and definitions. The primary information resource in the DoD for FYDP

structure is the FYDP Resource Structure Management (RSM) website

https://rsm.pae.osd.smil.mil/RSM located on the SIPRNet.

7.2.2. Applicability and Scope. The provisions of this section apply to the Office of the

Secretary of Defense (OSD), the Military Departments, the Combatant Commands and the

Defense Agencies/Field Activities (hereafter referred to as "DoD Components") that contribute

data to the FYDP. Updating and general management of the FYDP structure is administered by

OD, PA&E.

7.2.3. Reporting Requirements. New program elements must be created when PPBE

decisions shift resources among DoD Components or fund new programs. It is the responsibility

of the DoD Components and the OUSD (Comptroller), Program/Budget to recommend changes to

the FYDP structure via the RSM web site as the need arises. In addition, OUSD (Comptroller),

Program/Budget will work with OD, PA&E in the establishment of new TOA

Resource Identification Codes (RICs) to coincide with new Treasury Codes created by the

Office of Management and Budget, or as otherwise required by PPBE decisions.

7.2.4. Update and Publication of FYDP Structure Management Handbook,

DoD 7045.7-H. DoD 7045.7-H will be revised periodically (typically two times a year or with

each update of the FYDP), as specified in DoDI 7045.7, Implementation of the Planning,

Programming, and Budgeting System (PPBS), May 23, 1984. The RSM and DefenseLink web

site will contain the most recent version to 7045.7-H, updated to reflect the Program and Budget

Review, and President’s Budget phases of the PPBE. FYDP Structure Coordination Documents

(which are approved and placed on the RSM web site) should be used to supplement the most

recent version of DoD 7045.7-H; they reflect the latest approved changes to the FYDP’s structure.

7.2.5. Other Databases Related to RSM. The FYDP report, which is managed by

OD, PA&E and updated by the components via the SDCS system, is referenced in Section 7.1.

The Operation and Maintenance Program, the Procurement Program, the RDT&E Program and

the Military Construction Program are referenced in Section 5.0.

7.2.6. Instructions for Making Changes to the FYDP Structure on RSM. Requests for

changes to the FYDP's program structure, such as establishing new program element codes and

definitions or clarifying program element titles and definitions, shall be submitted to OD, PA&E

for coordination with the DoD Components. The primary instrument for submitting change

requests is the RSM web site. The RSM web site provides instructions for formatting and

submitting change requests. Each DoD Component has a designated representative authorized to

submit change requests. Coordination cycles run continually throughout the year. Approved

changes are reported periodically in the FYDP Structure Coordination Documents. These

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documents are posted on the RSM web site, and the approved structure changes are incorporated

in the RSM database.

8.0 AUTOMATED BUDGET, INTELLIGENCE, AND RELATED DATABASE (BIRD)

(0108)

The Budget, Intelligence, and Related database (BIRD) maintained by OUSD(I) is the most

complete, automated source of resource data for Intelligence and related activities for use by the

Office of the Secretary of Defense and the Joint Staff. The BIRD database is essential to the

preparation of the Military Intelligence Program (MIP) justification books. It facilitates functional

analyses for OSD and the Joint Staff, and is compatible with the NIP resources database used by

the Director of National Intelligence. It is also fully consistent with data contained in the FYDP,

R&D and Procurement Annexes, and budget databases, and is electronically matched to relevant

data in these databases prior to use. OUSD(I) collects MIP narrative data to support

Program Budget Review and publication of the MIP Congressional Justification Book (CJB).

Specific instructions for the update of the BIRD database are contained in Chapter 16, Volume 2B.

9.0 SELECT AND NATIVE PROGRAMMING (SNaP) DATA INPUT SYSTEM (0109)

Basic guidance for input through SNaP of programming detail data and selected budget

exhibits for joint use of the program and budget review.

9.1 Select and Native Programming (SNaP) Data Collection System (010901)

9.1.1. Purpose. This section provides the instructions for electronic submission of all

programming detail data; and certain budget data requirements that have been combined with the

corollary programming requirement. The combined program/budget requirements are identified

in the FMR issued by the OUSD (Comptroller), and the Programming and Budgeting Data

Requirements (PBDR) instruction issued by the Office of the Director, Program Analysis and

Evaluation, (OD, PA&E). SNaP is a web based data collection and review system designed to

collect and validate designated data for the combined Program and Budget review, and in some

cases it is used to update the program and budget detail for the President’s Budget. SNaP is

available on the SIPRNet at https://SNaP.pae.osd.smil.mil; and the unclassified NIPRNet at

https://SNaP.pae.osd.mil.

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9.1.2. Applicability and Scope. The provisions of this section apply to the Office of the

Secretary of Defense (OSD), the Military Departments, the Combatant Commands, and the

Defense Agencies/Field Activities (here after referred to as “DoD Components”) that provide

either a POM or a Budget to OSD. Updating and general management of the data collected through

SNaP is administered by the OD, PA&E. OD, PA&E, Program Resources and Information

Systems Management (PRISM) Division controls access to SNaP, for the purpose of submitting

data.

9.1.3. Reporting Requirements. Updates to SNaP are required coincident with the

Program and Budget Review, and for some requirements the President’s Budget (PB). Specific

guidance relative to approved changes, due dates, and special requirements is provided in a

memorandum announcing each update. In all submissions, acceptable update years may include

the two most recent prior years of the budget cycle to the end of the programming cycle

(generally nine years for TOA and manpower, and 12 years for forces).

9.1.4. Instructions for submitting designated programming and budgeting data in SNaP.

9.1.4.1. System and Software Requirements. To interface with SNaP, users must

have access to the NIPRNet and the SIPRNet (If the DoD Components’ submission is classified).

Windows 95 or higher, and either the Microsoft Internet Explorer 4.x or Netscape Communicator

4.x or higher browser. All narrative files must be in Microsoft Word format. Any supporting files

such as the cover letter or executive summary must be in Microsoft Word, Excel, or PowerPoint.

9.1.4.2. Submission. SNaP will be available through password and user id to all

those designated by the Primary Point of Contact (POC) from your organization. You may submit,

edit, and share your data with other members of your organization for a set period of time prior to

the Program/Budget due date. Once your data requirements are complete, (or by the due date) the

Primary POC for your organization is responsible for making the submission official. This action

is completed on-line.

9.1.4.3. Your work-in-progress. Your work-in-progress is only available to your

organization. Programming and Budgeting Data requiring edits after the official due date will

occur through permission granted by the system administrator.

9.1.4.4. Preparing Data Structure and Format. SNaP provides pre-formatted

Microsoft Excel data files and on-line standard formats to assist you in building your data

submission. Wherever possible you are given a standard option menu to describe the data you are

providing. Each SNaP data requirement outlined in the PBDR and FMR identifies the data

elements, and provides data definitions, instructions and business rules that will assist you in filling

out the data tables accurately. All required narrative is submitted as Microsoft Word documents,

unless an alternative is specified in the specific data requirement.

9.1.4.5. Each of the data requirements collected. SNaP has specific formats that

will be used throughout this information management process. Use of the pre-formatted data tables

and on-line upload minimizes error. Data ownership is created as soon as you log in and upload a

file or submit data on-line.

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9.1.4.6. Review & Edit. SNaP validates and verifies the information and rejects

incorrect records. A transaction summary is available for each batch upload submitted and an

instant message is provided for each on-line transaction. Once data is submitted it is instantly

available for review in the format in which it will be displayed. This may include any necessary

data calculations or regroupings. Users can go back and edit any part of their submission prior to

official submission, and other members of the organization can also review it.

9.1.4.7. Final Displays. Official Program/Budget submissions through SNaP are

available for the Program and Budget Review in the password protected Defense Programming

Database Warehouse (DPD DW).

10.0 GENERAL GUIDANCE SUBMISSION FORMATS (0110)

10.1 Purpose (011001)

The formats provided on the following pages reflect guidance presented in previous sections.

Unless modified in a submission budget call, these formats should be adhered to.

10.2 Exhibits in Support of Section 3.0 – Program and Budget Review Submission (011002)

Exhibit PB-1A. Fiscal Guidance Track ................................................................................. 163

Exhibit PB-3. Reprogramming/Transfers Between Appropriations........................

.............164

Exhibit PB-4. Schedule of Civilian and Military Personnel .............................................

..... 166

Exhibit PB-8. FY 20CY. Supplemental Appropriation Requirements....................................170

Exhibit PB-10. Additional FY 20BY Budget Estimates .......... ..............................................172

Major Budget Issue Format ......................................................................................................

174

10.3 Exhibits in Support of Section 4.0 – Congressional Justification/Presentation (011003)

PB-37A Justification of Supplemental Requirements .......................................................... 175

PB-37R Budget Amendment Summary .............................................................................. 176

PB-37S Program and Financing Schedule (Abbreviated) ................................................... 177

PB-37T Narrative Justification............................................................................................ 178

PB-39A-1 Format - Appeal Input (Program Adjustments) ................................................. 179

PB-39A-2 Format - Appeal Input (Language Items) .......................................................... 180

DD 1587 Record of Congressional Transcript Review ........................................................ 181

DD 1790 Prepared Testimony Review................................................................................. 182

HAC QFR ............................................................................................................................. 183

HASC QFR .......................................................................................................................... 184

SAC QFR ............................................................................................................................. 185

SASC QFR ........................................................................................................................... 186

Insert - All Committees ........................................................................................................ 187

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10.4 Exhibits in Support of Section 5.0 (011004)

Budget Automation Requirements (See Section 5.0)

10.5 Exhibits in Support of Section 7.0 (011005)

Automated FYDP Databases Requirements (See Section 7.0)

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Exhibit PB-1A. Fiscal Guidance Track

Notes:

1. Must be identified by appropriation and totals must agree with PB-14.

2. Use of this entry must be fully explained. Use “Other” to identify Military Personnel Appropriations

3. Totals must agree with TOA in PB-1 Exhibit. Totals should be separately displayed by Appropriation.

4. This exhibit not required for President’s Budget submission.

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Exhibit PB-3. Reprogramming/Transfers Between Appropriations

Appropriation

Program (Identify each program by P-1, R-1, O-1, M-1, C-1 line item. For Procurement programs identify the applicable quantities; for the RDT&E programs

identify the applicable project; for personnel programs include military and civilian end strength, military average strength, and civilian full-time equivalents; for

O&M programs include applicable force data, etc.)

ustification for Increase: Provide a detailed explanation as to why the increase is required and include an impact statement on the program if reprogramming

is not approved.

rogram

ustification for Increase:

Total for Appropriation

Appropriation

Program

ustification for Increase:

Program

ustification for Increase:

Total for Appropriation

TOTAL PROPOSED REPROGRAMMING INCREASES

* Use financing code 42000 for proposed budget authority transfer to an appropriation (increase)

(Page 1 of 2)

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Exhibit PB-3. Reprogramming/Transfers Between Appropriations (Continued)

Appropriation

Program (Identify each program by P-1, R-1, O-1, M-1, C-1 line item. For Procurement programs identify the applicable quantities; for the RDT&E programs

identify the applicable project; for personnel programs include military and civilian end strength, military average strength, and civilian full-time equivalents; for

O&M programs include applicable force data, flying hours, etc.)

ustification for Decrease: Provide a detailed explanation as to why the reduction is possible.

Program

ustification for Increase:

Total for Appropriation

Appropriation

Program

ustification for Decrease:

Program

ustification for Decrease:

Total for Appropriation

TOTAL PROPOSED REPROGRAMMING DECREASES

For these proposed reprogrammings/transfers, Components must also update the OUSD (Comptroller) automated budget system database with the necessary

adjustments to include financing adjustments.

** Use financing code 41000 for proposed budget authority transfers from an appropriation (decrease)

(Page 2 of 2)

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Exhibit PB-4. Schedule of Civilian and Military Personnel

(page 1 of 4)

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Exhibit PB-4. Schedule of Civilian and Military Personnel (Continued)

(page 2 of 4)

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Exhibit PB-4. Schedule of Civilian and Military Personnel (Continued)

(page 3 of 4)

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Exhibit PB-4. Schedule of Civilian and Military Personnel (Continued)

(page 4 of 4)

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Exhibit PB-8. FY 20CY. Supplemental Appropriation Requirements

INSTRUCTIONS

Column (1): Stub lines will be the same as those on Exhibit PB-1 on a budget basis. Three lines of data (BA, outlays and military/civilian personnel

impacts) are required for each account included in the supplemental proposal.

Column (2): The dollar amounts in this column for BA and outlays must agree with FY 20CY amounts submitted in the automated Comptroller

Information System (CIS) database for the Program and budget review submission. Likewise, civilian FTE and Military E/S data must agree

with amounts reported in the Component’s automated CIS for the Program and budget review submission.

(Page 1 of 2)

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Exhibit PB-8. FY 20CY Supplemental Appropriation Requirements (Continued)

Columns (3), ......................................................................................................................... Show supplemental requirements (BA, military E/S, and civilian

(4) and (5): ............................................................................................................................ FTE) by program.

Column (6): Represents the sum of Columns (3), (4) and (5). The BA, outlay, military E/S and civilian FTE amounts in these columns represent the total

supplemental request impacting FY 20CY.

TOTALS

BA ($)

Outlays ($)

Mil E/S

Civ FTE

(Page 2 of 2)

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Exhibit PB-10. Additional FY 20BY Budget Estimates

Notes:

ES = Military end-strengths

FTE = Civilian full time equivalents

$ = Dollars in thousands

(page 1 of 2)

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Exhibit PB-10. Additional FY 20BY Budget Estimates (Continued)

INSTRUCTIONS FOR PREPARATION

OF EXHIBIT PB-10

The following instructions apply to all appropriations and funds:

Indicate in the heading the name of the submitting component, subject, date, and component submission control number. Leave "USD

(Comptroller) Serial No." blank.

Column (1): List the appropriation or fund and the Budget Subactivity Number. For the procurement appropriations, P-1 line items will be

shown. For the RDT&E appropriations, program elements will be shown.

Columns (2), (3) and (4): List the TOA changes. If there are also changes in financing adjustments, show these separately and then show the

change in budget authority. The military personnel amount to be used here will be the sum of the products of the workyears/$ rates shown to the

right, using the standard rate.

Column (5): List the military or civilian personnel categories affected by the change. Military personnel change will be in end-strength (E/S)

and civilian personnel change in full time equivalent (FTE). Use the categories illustrated in Exhibit PB-4.

Columns (6), (7), (9), (l0), (l2) and (l3): List the military end strength and workyear changes, by activity. Likewise, list civilian FTE changes

by activity.

Columns (8), (11) and (14): Show the average salary at which these changes were priced.

If there are no personnel changes, Columns (5) through (14) will be left blank.

Show a total for increases and decreases.

The outyear impact of the additional budget submission will be included at the end of Exhibit PB-10. This will show the net change by

appropriation budget subactivity number for each of the applicable outyears.

Narrative justification must also accompany Exhibit PB-10.

Exhibit PB-10 (page 2 of 2)

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Major Budget Issue Format

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Exhibit PB-37A. Justification of Supplemental Requirements

Budget Activity: Subsistence of Enlisted Personnel

Justification of Supplemental Requirements.

For increased feeding costs resulting from rising food prices. Ration rates increased from $x.xx to $x.xx in CONUS, and from $x.xx to

$x.xx Overseas.

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Exhibit PB-37R. Budget Amendment Summary

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Exhibit PB-37S. Program and Financing Schedule (Abbreviated)

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Exhibit PB-37T. Narrative Justification

Budget Activity: Other Missiles

Justification of proposed amendment.

AGM-69B SRAM.

Deletes the $xx,xxx,xxx FY BY requirement. Due to the recent evolution of the Air Launch Cruise Missile (ALCM) as an effect weapon system and the continued ability to use the

B-52 bomber well into the 1980’s, the President directed the B-1 production be halted. With the decision to not deploy the B-1, the Air Force requirement for the SRAM-B which was to be used on the

B-1 is no longer valid.

Air Launched Cruise Missile. T

he Air Launched Cruise Missile (ALCM) is an aerodynamic air-to-ground strategic missile propelled by a turbo-fan engine. It has a high degree of accuracy through the

combination of inertial guidance and terrain correlation update. The missile is designed to be carried internally and/or externally on the B-52. The ALCM is to be employed from a stand-off position

against a wide variety of pre-selected lightly or undefended ground hard targets. This budget amendment requests an additional $xx,xxx,xxx to accelerate the ALCM Initial Operating Capability (IOC).

DEPARTMENT OF AIR FORCE

WEAPONS PROCUREMENT, AIR FORCE

NARRATIVE JUSTIFICATION

(Dollars in Thousands)

FY BY Pending Request

FY BY Proposed Amendment

FY BY Revised Request

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Exhibit PB-39A-1. Format - Appeal Input (Program Adjustments)

Department of Defense Appeal

FY ____ Defense (Authorization or Appropriation) Bill

Appeal

Subject:

Appropriation(s):

Summary:

Briefly describe the congressional action and the apparent reasons behind it.

Budget Authority

(Dollars in Millions)

Item Request House Senate Appeal

DoD Position:

The Department urges…

Concise description of our rationale for restoration.

Continuations and supplements are not necessary and will not be used.

Comptroller Internal Control Notes

Submitter:

Page/Section References:

Reviewing Directorate/Analyst:

Director’s Recommendation:

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Exhibit PB-39A-2. Format - Appeal Input (Language Items)

Department of Defense Appeal

FY ____ Defense (Authorization or Appropriation) Bill

Subject:

Language/Provision:

Briefly describe language or general provision and its apparent intent.

DoD Position:

The Department opposes…

The Department urges the exclusion of this provision.

Concise description of our rationale for revision or removal of language/general provision item

as proposed.

Comptroller Internal Control Notes

Submitter:

Page/Section References:

Reviewing Directorate/Analyst:

Director’s Recommendation:

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

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Exhibit DD 1587. Record of Congressional Transcript Review

HEARING DATE AND SUBJECT

DESCRIPTION OF DOCUMENT

COMMITTEE/SUBCOMMITTEE

PAGES

THRU

EDITORIAL

SECURITY

A. GENERAL. Review must be accomplished by officials

competent to judge the security aspects of the subjects involved

and to provide a consistent and defensible security position.

B. MARKING

1. Use black lead pencil.

2. Enclose with brackets [ ] information to be deleted.

3. Make deletions as limited as possible, considering

whether the total context may contain clues to the information deleted.

RECORD OF CONGRESSIONAL TRANSCRIPT REVIEW

DATE RECEIVED FROM CONGRESS

To: (In turn)

DATE ACTION MUST BE COMPLETED

CLASSIFICATION

The attached transcript of testimony is forwarded for editorial and security review in accordance with DoD Directive 5400.4. To meet committee

requirements and allow time for final review by the Directorate for Freedom of Information and Security Review, OASD(PA), your action must be

completed as indicated. Each element in the review process must give cooperative consideration to the time requirements of all elements in meeting due

out dates. An advance copy of this DD Form has been sent to DFOISR, OASD(PA).

GUIDELINES

A. GENERAL. Edit to correct inaccuracies.

B. MARKING.

1. Use black lead pencil.

2. Line through all words or figures for which substitute

language or figures are entered. Do not use brackets.

3. Print or write all entries legibly.

4. Use standard proofreaders markings.

5. Do not change statements by committee members. Note

inaccuracies in the margin.

TO: Director, Freedom of Information and Security Review Date:

FORWARDING CERTIFICATE

Portions of the attached transcript which require deletion in the interests of national security before publication have been

bracketed. This action represents the considered judgement of this department/agency that the information so marked warrants

the protection of security classification.

SIGNATURE

OFFICE

DD Form 1587, MAR 78

REPLACES DD FORM 1587, 1 APR 74, WHICH IS OBSOLETE.

DD 1587 Record of Congressional Transcript Review

TRANSCRIPT ACTION MONITOR

(

Name, agency and telephone number)

HEARING:

REMARKS

DIRECTOR, FREEDOM OF INFORMATION

AND SECURITY REVIEW

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

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1-182

Exhibit DD 1790. Prepared Testimony Review

DESCRIPTION OF DOCUMENT

PREPARED TESTIMONY REVIEW

TO:

DIRECTOR, FREEDOM OF INFORMATION AND SECURITY REVIEW

DATE

The attached document is forwarded for review in accordance with paragraph D.2.a.(2), DoD Directive 5400.4.

WITNESS

COMMITTEE/SUBCOMMITTEE

HEARING DATE AND SUBJECT

PAGE COUNT

THIS DOCUMENT IS FOR CLASSIFIED UNCLASSIFIED PRESENTATION (Check applicable term)

UPON COMPLETION NOTIFY (Name, agency and telephone number)

DIRECT QUESTIONS TO (Name, agency and telephone number)

REQUEST CLEARANCE NLT (Date)

The attached material has department/agency approval for the purpose specified. Any portions requiring security protection have been

appropriately marked.

ATTACHMENT

SIGNATURE

DD Form 1790, MAR 78

REPLACES DD FORM 1790, JAN 71, WHICH IS OBSOLETE

DD 1790 Prepared Testimony Review

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

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1-183

HAC QFR

Committee: HAC Defense Subcommittee

Hearing Date:

Hearing:

Member:

Witness:

Question #:

Subtitle

Question:

Answer:

All input is via CHARRTS

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

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HASC QFR

Committee: House Armed Services

Hearing Date:

Subject:

Member:

Witness

Question #:

Question:

Answer:

All input is via CHARRTS

when tasked by OUSD (Comptroller)

2BDoD 7000.14-R Financial Management Regulation Volume 2A,

Chapter 1

*October 2008

1-185

SAC QFR

Committee: SAC, Defense Subcommittee

Hearing Date:

Hearing:

Member:

Witness:

Question #

[Subject]

Question.

Answer.

All input is via CHARRTS

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

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1-186

SASC QFR

Committee: Senate Armed Services

Hearing Date:

Subject:

Question #:

Senator:

Witness:

All input is via CHARRTS

when tasked by OUSD (Comptroller)

2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1

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INSERT - ALL COMMITTEES

Insert - All Committees

Committee:

Hearing Date:

Hearing:

Member:

Witness:

Insert (Page#, Line#):

The information follows:

All input is via CHARRTS