A component system is comprised of individual equipment or material items connected together to operate as a system, such as when individual computers and servers are joined together to create a network. Component systems are distinguished from fabricated equipment in that they do not generally require extensive construction or assemblage, as provided by an internal or external shop. For guidance regarding proper treatment of fabricated equipment costs, refer to the Fabricated Equipment Policy.
When system components are purchased, the individual items that cost $5,000 or more should be treated as capital equipment (expense object 75xx) and exempted from the Facilities & Administrative (F&A) rate assessment. The individual items that cost less than $5,000 should be treated as capital equipment and charged to a 75xx object when: (1) those items could not operate on a stand-alone basis, and (2) they will be included on the same purchase requisition as the other system components. Both conditions must be met in order to qualify for F&A rate exemption. If those items less than $5,000 do not meet these criteria, they should be charged to non-capital expense objects and will be assessed the F&A rate.