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Non-recurring engineering (NRE) refers to the one-time cost to research, develop, design and test a new product. When budgeting for a project, NRE must be considered to analyze if a new product will be profitable. Even though a company will pay for NRE on a project only once, NRE costs can be prohibitively high and the product will need to sell well enough to produce a return on the initial investment. NRE is unlike production costs, which must be paid constantly to maintain production of a product. It is a form of fixed cost in economics terms.
In a project-type company, large parts (possibly all) of the project represent NRE. In this case the NRE costs are likely to be included in the first project's costs. If the firm cannot recover these costs, it must consider funding part of these from reserves, possibly take a project loss, in the hope that the investment can be recovered from further profit on future projects.
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