Equipment is defined by ASU and CFR 200.439 as any piece of tangible personal property with a unit value of $5,000 or more, a life expectancy of more than one year, and which is not consumed in the normal course of operation, unless the sponsor specifies otherwise. Equipment includes both purchase and fabrication of equipment and vessels. (see Capital Equipment). Routine repair and maintenance of general-purpose equipment are normally treated as indirect costs. Service, repairs or warrantee costs for special purpose equipment dedicated to a sponsored project may be charged directly.
Best practices and reminders when budgeting capital equipment and related costs:
- Each piece of equipment should be listed on the budget with a description and cost of each item. List specific brand names and associated specifications that effect costing.
- Any vendor quotes or published catalog rates used for budgeting purposes should:
- include a detailed breakdown that allows the RA to budget capital equipment separately from related supplies and Other Direct Costs, including warranties, maintenance, and service plans (additional details below)
- be new or very recent (costs for construction and equipment have dramatically increased)
- The cost to have equipment (capitalized equipment) installed or built should be included with the equipment cost. Similarly, the following costs associated with purchase of capital equipment should be included in the capital equipment line:
- *In-state sales tax or out-of-state use tax
- *Customs fees
- *Freight and transportation fees
- *Note: In order to be considered capital equipment, the purchase price must meet the definition for capital equipment prior to the addition of tax/customs/freight (even though those costs are included in the capital equipment section of the proposal budget).
- Training costs related to equipment must be broken out under Other Direct Costs – training costs are expense items, not capitalized equipment.
- Software is not considered equipment unless the software purchase is $5 Million or more per package, or if the software is included in the purchase price of a capital computer acquisition. If software is listed as a separate item and the cost is under $5 Million, it should be budgeted as an expendable supply, not as capitalized equipment. (see Property Control System Manual- PCS 102: Equipment Acquisitions)
- Extended warranties on capital equipment cannot be capitalized and therefore are subject to Facilities and Administrative (F&A) Costs.
- Equipment leases are treated as an Other Direct Cost, with F&A applied.
- Equipment service contracts, and other equipment maintenance costs are treated as Other Direct Costs, with F&A applied.