“Equipment fabrication” is the building of a unique individual piece of equipment, or scientific instrument by Stanford personnel (not a vendor or subcontractor).

A fabrication must meet all of the following criteria:

1. The item has unique specifications and is described in the research proposal or award.  Details are specified in a dimensioned engineering drawing.  When design changes occur, the engineering drawing should be subsequently updated.
2. The total cost for acquired materials, supplies, and components must be $5,000 or greater. All items acquired for a fabrication must be permanently integrated into the resulting discrete item.
3. The completed fabrication has an estimated useful life of one (1) year or more.  (Note:  If the fabrication is owned or funded by NASA, the useful life must be two (2) years or more.)
4. When completed, the item will not be affixed permanently to a building or structure.
5. The fabrication results in a unique, stand-alone, tangible item capable of specific identification and continuous control through tagging and periodic physical inventory. Components should be designed to remain at one position in the fabrication; they are not to be removed and replaced throughout the useful life of the fabrication.
6. It must be completed in ample time to directly benefit the funding project and used for its intended purpose.  If it is a contract-deliverable item, it must be completed in time to meet the delivery schedule as outlined in the funding sponsored project.

Definition – Notes for Clarification:

1. Modifying equipment to achieve a desired effect, researching a technique, or developing a new piece of equipment with an untested design are all processes that do not constitute a fabrication.
2. Simply connecting components into a system, either physically or “virtually,” does not constitute an equipment fabrication, e.g., when individual computers and servers are joined to create a network, or when accessories are added to experimental test beds (e.g. optical tables).
3. Equipment costing $5,000 or more that is not permanently integrated into the fabrication, should be purchased and tagged separately as capital equipment.  It is not considered part of the fabrication.
4. Software development (the writing of code) does not constitute an equipment fabrication. Additional information regarding software capitalization can be found in Section 2.2-Acquisition in the Property Management Manual.
5. Stanford labor, though not included in the capitalized cost, may be included in the cost reported to Federal sponsors.  The terms and conditions of individual agreements apply.
6. Once completed, subsequent modifications of fabricated equipment do not qualify for an indirect exemption unless the modification meets all of the following criteria:

• It increases the original capabilities of the item.
• The modification itself costs $5,000 or more; and
• It extends the useful life of the fabricated equipment by at least one year.

The following principles and guidance are provided to ensure accurate administration, accounting, classification, stewardship, and reporting of equipment fabrications:

Allowable and Unallowable Costs

Allowable Costs

The following costs may be charged to a capital fabrication Project-Task-Award (PTA):

• Fabrication components (raw materials and parts)
• Reasonable start-up supplies and parts to be incorporated in or otherwise consumed in the research and development of the fabrication
• Freight and handling
• Third party installation charges (i.e.: vendor or manufacturer)

Unallowable Costs

The following costs may not be charged to a fabrication PTA:

• Documentation
• Repair or maintenance to retain existing functionality or capacity
• Warranty
• Administrative support equipment
• General purpose equipment, tools, and other material that is not integrated into the fabrication
• Enhancements to equipment that is not integrated into the fabrication
• Stanford Service center charges
• For technical services for parts provided directly to a vendor. (e.g. precision machining, polishing, plating, annealing).  Contact the Property Management Office (PMO) for specific guidance.
• Any other costs not directly allocable to the fabrication

There are specific accounting protocols for capturing the fabrication cost that will be capitalized.   Fabrication expenses are charged to a capital Project-Task-Award (PTA) in Oracle Grants Accounting.

1. Each fabrication requires a separate Project and Task setup in Oracle Grants Accounting.  In addition:

1. For NASA contracts only, the cost of all labor associated with the fabrication is tracked in a separate Task, using the same Task number appended with an “L” (e.g. 4000L) and is included in the acquisition cost reported to the sponsor.
2. If a fabrication includes cost sharing or multiple awards, one Project and one Task should be set up for all awards funding the fabrication. Complete information on cost sharing can be found in the Research Policy Handbook (RPH) Section 15.3.

2. Fabrication expenditures for materials, supplies and components must be charged to the following expenditure types (ETs):

For purchases from outside vendors, use

• 53195  (SU Owned Cap Fabrication) or
• 55095  (Non-SU Owned Cap Fabrication)

For purchases from Stanford Stores, use:

• 58671  (Intra-Dept SU Owned Cap Fabrication) or
• 58676  (Intra-Dept Non-SU Owned Cap Fabrication)

3. Quantities of goods acquired must be reasonable and directly allocable to the specific fabrication.
4. Reimbursement transactions are not allowed.
5. PCARD transactions are not allowed when title (ownership) to the fabrication will vest with the sponsor. PCARD transactions on Stanford-owned fabrications have strict requirements and are subject to additional audit scrutiny.  Contact your University Property Administrator (UPA) for information and guidance. 
6. A fabrication should be completed in ample time for it to benefit the funding project; for those that are not, costs will be reclassified as expense.
7. Completed fabrications must be in use for one year or more (two years, if NASA funded).  Disassembly prior to meeting the useful life requirements will result in the re-categorization of costs as expense and indirect costs will apply per University policy.
8. In-process fabrications are subject to periodic review and verification for allowability, allocability and reasonableness.

A realistic completion date for each fabrication is very important. It should be completed in ample time to benefit the funding project.  Completion is normally recognized as the date that the fabrication was first used for its intended purpose.

Requests to extend the fabrication period from that originally proposed require written justification from the researcher and may require a physical verification of progress and the original budget by PMO.  Fabrications that extend past their scheduled completion dates with no significant progress will be disallowed and expensed.

Unused material remaining after the completion of the fabrication should be accounted for and reported according to University policies, applicable federal regulations and/or the terms and conditions of the sponsored award. 

The residual material is subject to regulations found in OMB Circular A-110, Section 35-Supplies and other Expendable Property, OMB Uniform Guidance Section 200.34-Supplies (*See Note) or the specific terms of the contract. For Sponsor-owned fabrications, approvals from the sponsor should be obtained prior to the disposal of all residual material, regardless of aggregate value. 

*NOTE:  For grants awarded prior to 12/26/2014, OMB A-110 and A-21 will apply unless the grant has been modified.  For grants awarded on 12/26/2014 or later, OMB A-81 Uniform Guidance will apply.  A-81 will supersede  A-110, A-21, A-133 (and others not directly applicable to our property management processes.)

In order to be in compliance with all applicable regulations and University policies, it is important to notify your UPA as soon as possible of any residual material remaining at the completion of a fabrication.

Disposition of fabrications is primarily accomplished through disposal as excess, by cannibalization, or by meeting deliverable terms of a contract.

Contact your UPA prior to any disposal action, including cannibalization, so appropriate approvals can be obtained.

The following procedure details the steps of what needs to be done and who is responsible during the initiation, work-in-progress and completion of a fabrication.