Appropriated Funds

To execute an acquisition program, budget authority provided by Congress is needed in order to incur obligations and make payments. Budget authority is most commonly provided by an appropriations act, in which Congress specifies the purpose(s) for which each particular appropriation may be used as well as the amount of budget authority provided under each appropriation.

There are five (5) major Department of Defense appropriation categories that Congress has established:

1. Research, Development, Test and Evaluation (RDT&E);
2. Procurement;
3. Operation and Maintenance (O&M);
4. Military Personnel (MILPERS); and
5. Military Construction (MILCON).

Types of Funds

Research, Development, Test and Evaluation (RDT&E)

Appropriation accounts generally finance research, development, test and evaluation efforts performed by contractors and government installations to develop equipment, material, or computer application software; its Development Test and Evaluation (DT&E); and its Initial Operational Test and Evaluation (IOT&E). These efforts may include purchases of end items, weapons, equipment, components, and materials as well as performance of services – whatever is necessary to develop and test the system. This applies to automated information systems as well as weapon systems. RDT&E funds are also used to pay the operating costs of dedicated activities engaged in the conduct of Research and Development programs. RDT&E funds are used for both investment-type costs (e.g., sophisticated laboratory test equipment) and expense-type costs (e.g., salaries of civilian employees at R&D-dedicated facilities). There is an RDT&E appropriation for each service (Army, Navy, and Air Force) as well as one to cover other Defense agencies and separate ones for both operational test and developmental test activities.

Procurement

The Procurement appropriation accounts consists of a number of procurement appropriations account titles, such as Shipbuilding and Conversion Navy, Aircraft Procurement Air Force, Missile Procurement Army, Procurement Marine Corps, etc. Procurement appropriations are used to finance investment items, and should cover all costs necessary to deliver a useful end item intended for operational use or inventory. Items classified as investments and financed with Procurement appropriations include those who's system unit cost exceeds the current expense/investment threshold ($350K); all centrally managed end items not purchased from Defense Working Capital Funds, regardless of unit cost (e.g., handguns); purchases from the Defense Working Capital Fund furnished as part of a system acquisition, system modification, major service life extension program and initial spares. With certain limited exceptions, the cost of fabricating and installing additions or modifications to existing end items is also funded with procurement appropriations.

Operations and Maintenance

The Operations and Maintenance (O&M) appropriation accounts are also composed of many appropriation account titles, e.g., Operation and Maintenance Army, Operation and Maintenance Marine Corps Reserve, Operation and Maintenance Air National Guard, etc. O&M appropriations traditionally do not finance investments, but rather those things whose benefits are derived for a limited period of time, i.e., expenses. Examples of costs financed by O&M funds are headquarters operations, civilian salaries and awards, travel, fuel, minor construction projects less than $4M, expenses of operational military forces, training and education, recruiting, depot maintenance, purchases from Defense Working Capital Funds (e.g., spare parts), base operations support, and assets with a system unit cost less than the current expense/investment threshold ($350K).

Military Personnel

Military Personnel (MILPERS) appropriation accounts are similar in nature to those of O&M in that both are considered expense accounts. However, MILPERS appropriations are used to fund the costs of salaries and compensation for active military and National Guard personnel as well as personnel-related expenses such as costs associated with permanent change of duty station (PCS), training in conjunction with PCS moves, subsistence, temporary lodging, bonuses, and retired pay accrual.

Military Construction

Military Construction (MILCON) appropriation accounts receive considerable attention from Congress, and are enacted separately from the Defense Appropriations Act. These appropriations fund the costs of major construction projects such as bases, facilities, military schools, etc. Project costs include architecture and engineering services; construction design; real property acquisition costs; and land acquisition costs necessary to complete the construction project. MILCON is considered an investment account. Examples of projects properly financed in the MILCON appropriations include missile storage facilities, intermediate maintenance facilities, medical/dental clinics, technical libraries, and physical fitness training centers. MILCON funds are used to fund major construction projects costing greater than $4M.