Circular No. A-126
Standard Aircraft Program Cost Element Definitions
costs of operating aircraft are those costs that vary depending
on how much the aircraft are used. The specific variable cost elements
- variable - The crew costs which vary according to aircraft
usage consist of travel expenses (particularly reimbursement of
subsistence (i.e., per diem and miscellaneous expenses), overtime
charges, and wages of crew members hired on an hourly or part-time
costs - variable - Unscheduled maintenance and maintenance scheduled
on the basis of flying time vary with aircraft usage and, therefore,
the associated costs are considered variable costs. In addition
to the costs of normal maintenance activities, variable maintenance
costs shall include aircraft refurbishment, such as painting and
interior restora-tion, and costs of or allowances for performing
overhauls and modifications required by service bulletins and airworthiness
directives. If they wish, agencies may consider all of their maintenance
costs as variable costs and account for them accordingly. Otherwise,
certain maintenance costs will be considered fixed as described
in a subsequent paragraph. Variable maintenance costs include the
labor - variable - This includes all labor (i.e., salaries and
wages, benefits, travel, and training) expended by mechanics, technicians,
and inspectors, exclusive of labor for engine overhaul, aircraft
refurbishment, and/or repair of major components.
parts - variable - This includes cost of materials and parts
consumed in aircraft maintenance and inspections, exclusive of materials
and parts for engine overhaul, aircraft refurbishment, and/or repair
of major components.
contracts - variable - This includes all contracted costs for
unscheduled maintenance and for maintenance scheduled on a flying
hour basis or based on the condition of the part or component.
overhaul, aircraft refurbishment, and major component repairs
- These are the materials and labor costs of overhauling engines,
refurbishing aircraft, and/or repairing major aircraft components.
NOTE 1: In
general, the flight hour cost is computed by dividing the costs
for a period by the projected hours flown during the period. However,
when computing the flight hour cost factor for this cost category,
divide the total estimated cost for the activities in this category
(e.g., overhaul, refurbishment and major repairs) by the number
of flight hours between these activities.
NOTE 2: Separate
cost or reserve accounts for engine overhaul, aircraft refurbishment,
major component repairs, and other maintenance cost elements, may,
at the agency's discretion, be identified and quantified separately
for mission-pertinent information purposes. Reserve accounts are
generally used when the aircraft program is funded through a working
capital or revolving fund.
other fluids - The costs of the aviation gasoline, jet fuel,
and other fluids (eg. engine oil, hydraulic fluids and water-methanol)
consumed by aircraft.
- variable - When the cost of leasing an aircraft is based on
flight hours , the associated lease or rental costs are considered
and tie down fees - Landing fees and tie down fees associated
with aircraft usage are considered variable costs. Tie down fees
for storing an aircraft at its base of operations should be considered
part of operations overhead, a fixed cost.
costs of operating aircraft are those that result from owning and
support the aircraft and that do not vary according to aircraft
usage. The specific fixed cost elements include:
- fixed - The crew costs which do not vary according to aircraft
usage consist of salaries, benefits, and training costs. This includes
the salaries, benefits, and training costs of crew members who also
perform minimal aircraft maintenance. Also included in fixed crew
costs are the costs of their charts, personal protective equipment,
uniforms, and other personal equipment.
costs - fixed - This cost category includes certain maintenance
and inspection activities which are scheduled on a calendar interval
basis and take place regardless of whether or how much the aircraft
are flown. Agencies are encouraged to simplify their accounting
systems and account for all maintenance costs as variable costs.
However, if they wish, agencies may account for the following costs
as fixed costs:
labor - fixed - This includes all projected labor expended by
mechanics and inspectors associated with maintenance scheduled on
a calendar interval basis. This does not include variable maintenance
labor or work on items having a TBO or retirement life.
also includes costs associated with unallocated maintenance labor
expenses, i.e., associated salaries, benefits, travel expenses and
training costs. These costs should be evenly allocated over the
number of the aircraft in the fleet.
parts - fixed - This includes all parts and consumables used
for maintenance scheduled on a calendar basis.
contracts - fixed - This includes all contracted costs for maintenance
or inspections scheduled on a calendar basis.
- fixed - When the cost of leasing an aircraft is based on a
length of time (e.g., days, weeks, months, or years) and does not
vary according to aircraft usage, the associated leased costs are
considered fixed costs.
overhead - These include all costs, not accounted for elsewhere,
associated with direct management and support of the aircraft program.
Examples of such costs include: personnel costs (salaries, benefits,
travel, uniform allowances, training, etc.) for management and administrative
personnel directly responsible for the aircraft program; building
and ground maintenance; janitorial services; lease or rent costs
for hangers and administrative buildings and office space; communications
and utilities costs; office supplies and equipment; maintenance
and depreciation of support equipment; tie down fees for aircraft
located on base; and miscellaneous operational support costs.
overhead - These costs represent a pro-rated share of salaries,
office supplies and other expenses of fiscal, accounting, personnel,
management, and similar common services performed outside and the
aircraft program but which support this program. For purposes of
recovering the costs of operations, agencies should exercise their
own judgement as to the extent to which aircraft users should bear
the administrative overhead costs. Agencies may, for example, decide
to charge non-agency users a higher proportion of administrative
overhead than agency users. For purposes of A-76 cost comparisons,
agencies should compute the actual administrative costs that would
be avoided if a decision is made to contract out the operation under
costs - Aviation activity involves risks and potential casualty
losses and liability claims. Theses risks are normally covered in
the private sector by purchasing and insurance policy. The government
is self insuring; the Treasury's General Fund is charged for casualty
losses and/or liability claims resulting from accidents. For the
purposes of analyses, government managers will recognize a cost
for "self-insurance" by developing a cost based on rates published
in OMB Circular No. A-76.
- Depreciation represents the cost or value of ownership. Aircraft
have a finite useful economic or service life. Depreciation is the
method used to spread the cost of the purchase price, less residual
value, over an asset's useful life. A-76 provides guidance on computing
depreciation charges to be used in computing the fixed costs of
an aircraft or aircraft program. Although these costs are not direct
outlays in the sense of most other aircraft costs, it is important
to recognize them for A-76 cost comparison purposes and when replenishing
a working capital fund by recovering the full cost of aircraft operations.
Depreciation costs depend on aircraft acquisition or replacement
costs, useful life, and residual or salvage value. To calculate
the cost of depreciation that shall be allocated to each year, subtract
the residual value from the total of the acquisition cost plus any
capital improvements and, then, divide by the estimated useful life
of the asset.
certain other costs of the aircraft program which should be recorded
but are not appropriate for inclusion in either the variable or
fixed cost categories for the purposes of justifying aircraft use
or recovering the cost of aircraft operations. These costs include:
repair costs - These costs include all parts, materials, equipment
and maintenance labor related to repairing accidental damage to
airframes or aircraft equipment. Also included are all accident
costs - This is the basic aircraft inventory or asset account
used as the basis for determining aircraft depreciation charges.
These costs include the cost of acquiring aircraft and accessories,
including transportation and initial installation. Also included
are all costs required to bring aircraft and capitalized accessories
up to fleet standards.
Capital - The cost of capital is the cost to the Government
of acquiring the funds necessary for capital investments. The agency
shall use the borrowing rate announced by the Department of Treasury
for bonds or notes whose maturities correspond to the useful life
of the asset.
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