Guidance for Fabricated Equipment Costs

The purpose of this Guidance is to define criteria and procedures for the inclusion of Fabricated Equipment on research projects sponsored by the federal government, so that such charges are in compliance with federal regulations and University policies.

The UMS Administration Practice Letter defines Fabricated Equipment as “constructed equipment that cannot be purchased in final form. It does not include upgrades to existing equipment, only the construction of a new piece of equipment or system.”

2 CFR §200.68 defines Modified Total Direct Costs (MTDC, the basis on which University indirect costs, also known as “Facilities and Administration” or F&A, are calculated) as consisting all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each subaward (regardless of the period of performance of the subawards under the award).  Expenditures for capital equipment (i.e.,$5,000) required to carry out the research activity are excluded from the MTDC base on which the Indirect Cost Rate is applied.

From time to time for reasons of cost efficiency, timeliness of delivery, non-availability, or uniqueness of a particular piece of equipment, it may be necessary or advantageous for a research project to fabricate a piece of equipment rather than purchase the item. Such Fabricated Equipment is exempt from the Indirect Cost (F&A) Rate, subject to the following policy and procedure.

Criteria. An item shall be classified as Fabricated Equipment if:

  1. The total cost is $5,000 or more.
  2. The equipment is not expendable and has a usable life of more than one (1) year.
  3. The fabrication is based on a proven, available design. That is, the entire design of the equipment is known at the outset of the project and its use is legally permissible, e.g., there is no patent in force that prohibits the fabrication or a license from the patent holder is obtained.
  4. The Fabricated Equipment costs must be equal to or less than the cost of constructing subsequent units. That is, if subsequent units are constructed at a cost of $25,000, the initial Fabricated Equipment cost (i.e., the amount exempted from indirect cost calculations) cannot exceed $25,000.
  5. The Fabricated Equipment costs must not exceed the costs of commercially available units, unless the commercially available units cannot be procured in time to meet the needs of the project.
  6. The grant proposal and award explicitly include a budget for Fabricated Equipment.
  7. The sponsor stipulates that title to the equipment will be retained by UMaine. If the title will be provided to the sponsor or another party at the end of the project, it is considered a deliverable and not Fabricated Equipment.
  8. The equipment is to be used only for research and is needed to carry out a sponsored project.  This Fabricated Equipment Guidance does not apply when the purpose of the sponsored project is construction of experimental equipment or prototypes. Fabricated Equipment is a tool to conduct the research as opposed to being the focus of the research itself.
  9. There is a 1:1 correlation between a single fabrication and a single sponsored project. Only in rare circumstances and with explicit approval by the sponsor(s) can the costs of a single fabrication be charged to more than one sponsored project.
  10. The fabrication should be started and completed within a single award period.
  11. All fabricated equipment is located in the same physical space, normally a single room. Units which are not located in the same physical space are considered individually for capitalization.  Transfer of Fabricated Equipment to an offsite location requires sponsor approval of the transfer and the location. Such approval shall be requested and documented by ORA prior to any transfer occurring. The item(s) must be tagged before leaving the campus.
  12. The equipment is free-standing, movable as an entire unit, not permanently attached to a structure, and must not lose its identity when installed in anproperty.
  13. The costs for testing and redesign associated with getting an item to function, or the costs of equipment repairs, maintenance, or non-capitalized modifications are not part of the fabrication costs.