UW Home > UWIN > Admin Gateway 

Acquisition of Equipment – Fabrication

Included on this page:

• Introduction
• Definition
• Allowable Costs
• Unallowable Costs
• Procedure
• Forms Required
• Frequently Asked Questions
• Regulations
• Contacts

Introduction

Occasionally, there is a need to build a piece of equipment for functionality that doesn't currently exist.  The equipment is built at the University.  Many different categories of costs go into creating the equipment and in order to represent the true cost of the asset, these costs need to be moved to the proper equipment object code by Journal Voucher (JV).  This allows for the full cost of the asset to be depreciated over its useful life and the costs to be excluded from indirect cost.

Definition

Equipment fabrication  –  The transformation of salaries, benefits, supplies and materials, services, equipment, maintenance, and/or travel into one or more items of customized capital equipment for University of Washington use.

The need to fabricate an asset comes about when the equipment does not already exist or additional functionality needs to be added to an existing piece of equipment.  The following criteria must be met:

• Equipment fabrication is University titled (not a deliverable or agency owned)
• Equipment fabrication is either:
• Documented in the research proposal;
• Approved by the sponsor in writing (if necessary to comply with Grant and Contract terms and conditions or to inform of changed statement of work); or 
• Noted in the Grant and Contract file as to why the fabrication was not included in the original proposal and why sponsor approval is not required.  
• Equipment fabrication meets the equipment definition:
• Estimated total cost is greater than $2,000 and
• Estimated useful life of at least one year.

As the costs to build (fabricate) the equipment are incurred, they are charged accordingly as salaries, benefits, supplies and materials, services, etc.  These costs are subsequently reclassified to equipment through the fabrication JV process.  Indirect cost is automatically adjusted when each fabrication JV is processed.

Note regarding Machinery & Equipment (M&E) Tax Exemption:  M&E expenses that are originally coded M&E at the time of purchase can be included in a fabrication.  Costs such as salaries, benefits, and design costs, etc. do not qualify for the exemption.

Allowable Costs

Allowable costs to be included in a fabrication are detailed out by activity below:

• Design Costs - including development/procurement of drawings and schematics, development of component specifications and development/production of operating documents and flow charts:
• 01-XX Salaries and 07-XX Benefits (including graduate student tuition, if applicable - not common)
• 03-XX Recharge services and supplies internal to the University (i.e. Facilities services Fabrication Shop charges such as welding/constructing a framework to house electronic components)
• 03-XX Services external to the University (Service contracts)
• 05-XX Supplies and Materials

• Construction Costs - if it meets the fabrication criteria and is to be used for its designed purpose only or if it does not meet the fabrication criteria, but contributes directly to the design of another item that does meet the fabrication criteria:
• Same costs as those listed above in "Design Costs"
• 05-40 Equipment 
• Note:  If over $2,000, in order for equipment to be purchased outside of the 06-XX object code categories, a note must accompany the purchase request that the item is being acquired on a fabrication budget.  Please add "Fabrication" or "FABR" to the order's Item Description (PAS) or Comments (eProcurement) so that Equipment Inventory can properly approve the purchase.
• 05-40 or 03-64 Maintenance contract (first year only) on a sub-component (if in place at the time the asset is initially put into use)
• Note:  If maintenance contract is purchased with equipment, it may be coded as equipment.  If purchased alone, it should be coded as 03-64.
• 05-45 Software
• If sole use is for the fabricated item, or 
• If it is a critical part of the equipment (i.e. Equipment wouldn't function without it, and its development is performed only because it is directly associated with the equipment)
• Note:  If over $2,000, in order for equipment to be purchased outside of the 06-XX object code categories, a note must accompany the purchase request that the item is being acquired on a fabrication budget.  Please add "Fabrication" or "FABR" to the order's Item Description (PAS) or Comments (eProcurement) so that Equipment Inventory can properly approve the purchase.

• Modification Costs of Existing Equipment (if adding new functionality):
• Same costs as those listed above in "Construction Costs"
• Note:  Adding new functionality involves something other than expanding on an existing functionality.

• Testing Costs (to confirm proper assembly):
• Same costs as those listed above in "Construction Costs"
• 04-XX Travel (if travel supports both testing and research, the travel costs should be prorated between the two types of effort)
• Note:  Testing to see if an item produces intended results or whether it works in a specific environment is an R&D event and is not allowable.

• Modification Costs of Fabricated Equipment (only if prior to initial use or deployment for research):
• Same costs as those listed above in "Design Costs"

• Installation Costs (if necessary to make sure the fabricated equipment is functioning properly prior to initial use and if directly related to the installation)
• Same costs as those listed above in "Design Costs"
• 04-XX Travel (if travel supports both testing and research, the travel costs should be prorated between the two types of effort)

Unallowable Costs

Unallowable costs in a fabrication include:

• Cannibalized parts (parts removed from an existing asset that has already been recorded, capitalized, and fully depreciated)
• Maintenance contracts (other than first year or if not in place at the time the asset is initially put into use)
• Modification Costs of Existing Equipment (if not adding new functionality)
• Modification Costs of Fabricated Equipment (if after initial use or deployment for research)
• Repair and Maintenance
• Replacement parts
• Replacement supplies
• Research and Development (R&D) 
• Note:  If the fabricated item has not been built before and may require significant testing and redesign/modification before an actual working item is obtained, the costs up to the point that there is a proven design are likely R&D and should not be included in the cost of the fabrication.  The cost of building the original fabricated asset should not be significantly different than the cost of building subsequent assets.
• Spare parts
• Supplies (that do not become an actual part of the item, e.g. books, tools, paper towels, test equipment, etc.)
• Testing (if data gathered is to be used in research)
• Travel (if it just supports research or to discuss design issues)

Procedure

Department:

• Determines need to fabricate equipment.
• Includes fabrication in proposal with separate budget.  Typicially, there will be one budget number established for the fabrication and a second budget number for non-fabrication.
• If fabrication is not in proposal, requests sponsor approval, if required.
• Notifies Grant and Contract Accounting (GCA) to establish a fabrication sub-budget (with budget type and class of 05-49) to accumulate costs associated with the fabrication.
• As soon as fabrication work begins, works with departmental inventory contact to:
• Obtain an equipment tag for the item.  The tag number is needed for the next steps though it may not be affixed to the equipment at this time.  The tag should be placed on the fabricated equipment item as soon as it is feasible.
• Enter the asset information into OASIS as a "T" status asset or submit information to Equipment Inventory on a UW Equipment Information (Orange) Card.  The item should be treated the same as a newly purchased piece of equipment.  Information to be entered should include:

• UW Tag Number (contact your departmental inventory person)
• Description
• Manufacturer
• Model
• Serial Number
• Custodian/User
• Building
• Wing
• Room Number
• Status (enter - T)
• Requisition Number (enter - 000000)
• Accountable Budget
• Total Cost (enter - $1)
• Class Code
• Date Received (Estimated date fabrication will be functional and should begin depreciating)
• Acquisition Method (enter - FB for Fabrication)

• Starts building equipment.
• On an annual basis:
• Sends fabrication Journal Voucher (JV) request to transfer allowable costs to the asset and supporting BARs or MyFinancial.desktop screen prints to Equipment Inventory at UW box 351121.  Please use the fabrication JV request form or similar form of supporting spreadsheet that totals equipment related expenditures by object code and includes the same information requested on the fabrication JV request form.
• Works with departmental inventory contact to update the Date Received field in OASIS, if the original estimate has changed.

Note:  A sub-budget for fabricated equipment does not eliminate the need to submit an annual fabrication JV request to Equipment Inventory to move the costs over to the appropriate equipment object code.

Note:  At this time, fabrication JVs cannot be done electronically through MyFinancial.desktop.

Grant and Contract Accounting:

• Upon notification from department to establish a fabrication sub-budget (with budget type and class of 05-49), verifies equipment ownership code to make sure equipment is properly coded (University, Federal, or Agency owned) and establishes sub-budget.
• Upon receipt of approved fabrication JV request and JV from Equipment Inventory, submits the JV for processing.  

Equipment Inventory:

• Upon initial fabrication asset set up in OASIS, reviews the entry for complete information.
• Upon receipt of annual fabrication JV request from department, reviews it to ensure that an asset is correctly established in OASIS.
• If asset is:
• Correctly established, approves the fabrication JV request, creates JV, and forwards both JV request and JV to GCA's CATS team for processing.
• Incorrectly established, works with department to get asset correctly established, then approves the fabrication JV request, creates JV, and forwards both JV request and JV to GCA's CATS team for processing. 

Note:  The JV debits the appropriate equipment object code (06-10, 06-11, 06-90, or 06-91) and credits the cost transfer object code 21-50 instead of the original cost category.  This results in an F&A cost reduction while retaining the identity of the original transactions.

• After JV processes:
• Adds the new 06-XX expenditures to OASIS;
• Adjusts the total cost of the fabrication asset; and 
• Approves the asset (if 1st JV).

Forms Required

• Fabrication JV request

Frequently Asked Questions

For frequently asked questions related to this topic, please visit our FAQ page.

Regulations

State Administrative and Accounting Manual (SAAM), Chapter 30: Capital Assets

University of Washington Administrative Policy Statements:

• Section 50 – Services 
• Section 60 – Equipment Inventory 

Federal Regulations:

• OMB Circular A-110
• OMB Circular A-21
• Federal Acquisitions Register 

Contacts

State/University Titled Equipment:    206-543-4663 or eio@u.washington.edu
Federally Titled Equipment:              206-543-4640 or 206-616-4047

GCA Staff Contact by School/College