Consumption As it pertains to Government property, consumption is the process of material into an end-item or otherwise consuming it in the performance of a contract. This process directly relates to the requirements of , Contracts with Commercial Organizations—Determining Reasonableness, which addresses the overall reasonableness of contractor incurred costs. Within this cost is context, “a reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person in the conduct of competitive business.” Consumption is driven by the environment—specifically, a contractor’s overhaul and maintenance, or research and development environment: In a production environment, consumption rates, including scrap, may be clearly spelled out in the contract or through the material contractor’s lists, bills of materials, spoilage rates, and master production schedules. In an overhaul and maintenance environment, consumption may be on an as-needed basis, driven by the scope of work specified in the contract and out-of-scope work disclosed after tear-down of the reparable. In a research and development environment, material requirements may be vague and driven largely by an individual program engineer’s interim engineering drawings, or testing parameters. The consumption process generally consists of four elements: The first element involves issuance of material in reasonable and proper quantities for the work being performed. Issuance generally can be through effective systems that ensure materials are issued only for authorized requirements and only to authorized personnel. Additional to be considered by the PA are: Shelf life, first processes, “First in, out”
Consumption As it pertains to Government property, consumption is the process of material into an end-item or otherwise consuming it in the performance of a contract. This process directly relates to the requirements of , Contracts with Commercial Organizations—Determining Reasonableness, which addresses the overall reasonableness of contractor incurred costs. Within this context, “a cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person in the conduct of competitive business.” Consumption is driven by the contractor’s environment—specifically, a overhaul and maintenance, or research and development environment: In a production environment, consumption rates, including scrap, may be clearly spelled out in the contract or through the contractor’s material lists, bills of materials, spoilage rates, and master production schedules. In an overhaul and maintenance environment, consumption may be on an as-needed basis, driven by the scope of work specified in the contract and out-of-scope work disclosed after tear-down of the reparable. In a research and development environment, material requirements may be vague and driven largely by an engineer’s individual program interim engineering drawings, or testing parameters. The consumption process generally consists of four elements: The first element involves issuance of material in reasonable and proper quantities for the work being performed. Issuance generally can be through effective systems that ensure materials are issued only for authorized requirements and only to authorized personnel. Additional to be considered by the PA are: Shelf life, “First in, first out” processes,