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1 [1] (February 10, 2017)

handle is hein.crs/crsmthmbbzy0001 and id is 1 raw text is: Congressional Research Service ~Info rming te Veslat've debate s nce 1914 February 10, 2017 Defense Primer: Procurement Though the common use of the word procurement implies the buying of all things, within the defense community procurement refers to the appropriations title by that name. Procurement is the DOD appropriations title that provides funds to purchase major equipment. DOD classes procurement appropriations as nonconstruction-related investment costs, or the costs to acquire capital assets, such as an F-35 Joint Strike Fighter or a Virginia-class submarine. Investment costs are distinguished from expenses, which are consumed in the operating of the Department. At over $100 billion of annual funding in recent years, the procurement title represents about 20% of the base defense budget. DOD uses these funds to buy several different types of materiel, including * new items easily recognizable as military hardware, such as aircraft, ships and armored vehicles, but also other major equipment (e.g., radios and satellites); * upgrades to existing equipment, including extending their lives or remanufacturing existing vehicles; * support equipment and components for major systems; * weapons and ammunition, ranging from air-to-air missiles to rounds for individual rifles; * spare parts, particularly those that are centrally managed; and * classified programs. These categories are reflected in the major accounts within the procurement title (see Table 1). Classified programs account for the bulk of the Department of the Air Force Other Procurement account, which makes it the largest single account within the procurement title over time. Procurement funding authorized in a given fiscal year can usually be obligated over a period of three years. The largest exception is U.S. Navy Shipbuilding and Conversion funding, which is available for five years. What are special cases of procurement? In general, the U.S. government pursues a policy of full funding for procurement, meaning that the total estimated cost of each unit must be funded in the year it is budgeted. In a handful of cases, programs are procured using incrementalfunding. Incremental funding provides only a portion of the total cost of a system at a time. Usually, incremental funding is used to mitigate peaks and valleys in annual budgets caused by the cost of one item significantly changing the funding level of the account. It has principally been used to procure certain ships and satellites. Table I. Top 10 Procurement Appropriation Subtitles, by Average Enacted Amounts, FY2012-2016 in unadjusted U.S. dollars U.S. $ Procurement Category (billions) Dept. of the Air Force - Other $19.9 Dept. of the Navy - Aircraft $16.6 Dept. of the Navy - Shipbuilding and Conversion $15.7 Dept. of the Air Force - Aircraft $12.2 Dept. of the Army- Other $6.6 Dept. of the Navy - Other $5.9 Dept. of the Army - Aircraft $5.8 Defensewide - Procurement $4.9 Dept. of the Air Force - Missile $4.6 Dept. of the Navy - Weapons $3.0 Remaining twelve titles $12.3 Total $1073 Source: CRS analysis of FY201 7 Public Budget Authority Database, from OMB website at https://www.whitehouse.gov/sites/default/files/ omb/budget/fy20 I 7/assets/budauth.xls. Congress sometimes authorizes multiyear procurement (MYP) for programs. MYP can achieve savings by committing to buy items over multiple years from a contractor for a reduced price per unit. Title 10, Section 2306b of the United States Code, the statute authorizing MYP, requires significant savings and stable funding and design, among other standards. Recent examples include Virginia-class submarines, DDG-51 destroyers, UH-60 Blackhawk helicopters, MV-22 tilt-rotor Ospreys, and C- 130J cargo aircraft. More commonly, programs receive advance procurement, which is funding for components of a unit that need to be purchased long before the unit itself is purchased. For programs using MYP, advance procurement may also be used to achieve economic order quantity, which is buying enough to minimize the total cost. The FY2017 budget request included advance procurement for 24 programs, including the Columbia-class submarine and TOW 2 anti- tank missile. www crs.gov 17-5700 0

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