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Fabricated Equipment Policy

last updated Variable 'LAST_MODIFIED' cannot be evaluated

Definition & Policy Statement

Fabricated equipment is defined as an item of equipment that is built or assembled from individual parts by a PI and/or other sponsored project personnel, an internal shop, or an external shop. When a completed item of fabricated equipment has an aggregate cost of $5,000 or more and when that item will be recorded as capital equipment in the University's asset system, the individual component costs associated with the fabrication (regardless of the individual amounts) will not be assessed the Facilities & Administrative (F&A) rate. This policy became effective September 1, 1999.

Guidelines for Determining if This Policy Applies

The following guidelines apply in determining whether a given instance constitutes a fabrication:

  • This policy is intended for instances of original fabrication. Any subsequent modifications to the equipment or replacement of individual parts after the original fabrication do not qualify for F&A rate exemption under this policy, unless the subsequent modification/replacement itself costs $5,000 or more and extends the useful life of the equipment.
  • There should be a 1:1 correlation between a single fabrication and a single sponsored project. Only in rare circumstances, and with explicit disclosure to and approval by the sponsors, will the costs of a single fabrication be permitted to be charged to more than one sponsored project.
  • An original fabrication is expected to be started and completed within a single project period.
  • Except in extremely rare circumstances, the individual items in a fabrication are expected to be located in the same physical space (room).
  • The F&A rate exemption on fabrication costs applies only in instances where ownership of the completed item rests with the University. If the sponsor will retain ownership (title), the exemption does not apply.
  • The applicability of this policy is intended for instances where a single piece of equipment is created through extensive construction or assemblage, often involving shop services. An instance where components are simply connected together in a system, such as when individual computers and servers are joined to create a network, does not constitute a fabrication. Refer to the Component System Policy for guidance in these instances.


Fabricated equipment should be identified prior to the acquisition of component parts or services related to the fabrication. This identification can be made, initially, in the sponsored project proposal budget or, later, using an ORSP-2 form. In addition to identifying the fabrication in the proposal budget or ORSP-2 form, the Fabricated Equipment Form must be completed to provide specific information necessary to ensure that the circumstances constitute a fabrication and later to track the fabricated item. The Fabricated Equipment Form can be obtained on the Accounting Services Equipment Inventory website at or by contacting the Property Control Coordinator (847/491-4721).

Costs that should be budgeted and charged to a sponsored account include materials and supplies necessary for the fabrication, as well as any internal or external shop service fees. Although project personnel may participate in the fabrication, their salaries will not be exempt from the F&A rate assessment. Only labor costs that are implicit in the internal or external shop rates will be F&A exempt. Labor, travel and other costs associated with the services of an outside party in a fabrication should be incorporated in the external shop service fees.

Acquisitions related to the (F&A exempt) fabrication should be charged to: 5335 Fabricated Equipment-Work in Progress. Costs charged to object 5335 will not be assessed the F&A rate.

Once the Office for Sponsored Research (OSR) and the Property Control Coordinator have reviewed and approved the use of object 5335 for a fabrication, ORSP will open object 5335 on the sponsored project account. This object is to be used solely for the purpose of accumulating the individual charges associated with this fabricated equipment, regardless of the individual amounts. Most individual charges will be in amounts less than $5,000, but where an individual item in a fabrication costs $5,000 or more, that charge should be recorded against 5335 (and not a 75xx object). Once object code 5335 is opened on an account, it is only to be used for the specific fabrication project for which it was approved. No other project expenses should be recorded against 5335.

At the same time as 5335 is opened, the Property Control Coordinator will assign an inventory tag number and will provide the number to the PI. This number should be referenced in all acquisitions for the fabrication. When the fabrication is completed, the PI should alert the Property Control Coordinator and Accounting Services for Research and Sponsored Programs (ASRSP). ASRSP will initiate an accounting entry to transfer the individual costs to a capital equipment object code. The Property Control Coordinator will tag the fabricated item and record it in the University's asset system.

When the F&A Rate Exemption does not Apply

If a fabricated equipment item will have an aggregate cost of less than $5,000, the individual costs for all acquisitions should be budgeted and charged to the appropriate materials and shop object codes. Those object codes will be assessed the F&A rate. Object 5335 should not be used. In this case, an inventory tag number will not be assigned, as the fabricated item will not be recorded in the asset system.

If the individual costs of a fabrication are charged to 5335 under the presumption that the aggregate cost will reach $5,000 or more but, ultimately, the actual costs do not, the charges will be transferred off of 5335 to the appropriate object code(s) and F&A will be assessed. The sponsored project or a designated cost sharing account will be responsible for absorbing the F&A assessment on the cumulative charges.

If ownership of the final product is to transfer to the sponsor, the F&A rate exemption does not apply to the individual fabrication costs. In such cases, the costs associated with the fabrication should be classified under the appropriate materials and shop object codes and will be assessed the F&A rate. Object 5335 should not be used. Items purchased as part of the fabrication that individually cost $5,000 or more and would otherwise exist as stand-alone items of capital equipment should be charged to object code 7070-Government/Sponsor Titled Capital Equipment. The 7070 object code will be subject to F&A charges.

Questions regarding which policy is applicable in a given situation should be directed to OSR or ASRSP.

Questions related to the fabricated equipment policy should be directed to:
Proposal budgets: ORSP 847/491-3003 (Evanston) or 312/503-7955 (Chicago).
Sponsored project accounting: ASRSP 847/491-4710, or Cost Studies 847/491-4716.
Property Control Coordinator: 847/491-4721.