Meaning
One-time payments made to a supplier for the design and testing of a new product or component. Such non-recurring engineering charges cover the costs of custom circuit design, antenna tuning and the creation of firmware for a specific hardware platform. These fees are separate from the unit price of the finished goods and are usually invoiced during the development phase.
The payment is complete once the prototype meets the performance specifications defined in the statement of work.
Development Cost
Allocation of resources for specialized engineering tasks is the primary driver of these expenses. This includes the time spent by RF engineers to optimize the signal strength of a new connectivity module. When non-recurring engineering charges are agreed upon, they often include the cost of creating the initial test fixtures and calibration software.
This investment ensures that the production line can verify the functionality of every unit before it ships.
Ownership Right
Intellectual property ownership of the resulting designs and code is a key point of negotiation in the contract. Some agreements specify that the buyer owns the output while others grant a license for its use. Because non-recurring engineering charges represent a significant upfront cost, they are often used to justify long term supply commitments.
Payment Schedule
Costs are typically tied to the successful completion of specific stages like the design freeze or the first article inspection.
