Glossary · Activities & Property
Replacement
In short
Taking out something already there and putting in something that does the same work — or better. The upgrade still counts, and contract size does not matter.
In full
Taking out something that is already there and putting in something that performs the same function, or an upgraded one. The upgrade still counts as replacement, which surprises most people, and the contract size does not matter.
Defined as removal from service of a component, a system, or tangible personal property installed in existing property, including machinery or equipment, and installation of one providing the same, a similar or an upgraded design or functionality. The statute applies this regardless of the contract amount and regardless of whether the old item is physically removed from the existing property.
ADOR states the physical-removal point more narrowly than the statute does. The MRRA Contracting page allows the old item to stay in place only where it remains non-operational and removing it makes no sense or is not possible. The statute attaches no such condition. Where they diverge the statute governs, and the practical case that separates them is an item removed from service and left in place where removing it was entirely feasible.
One contract may contain more than one replacement. Because replacement carries no threshold, correctly identifying work as replacement rather than alteration removes the threshold question entirely.
A.R.S. § 42-5075(S)(11); ADOR MRRA Contracting page; ADOR Evaluating Mixed Construction Contracts worksheet, step 1a