Of \$104.7 billion in backlog, only four tenths is funded — why contract values and actual spending diverge

1The backlog measure

Defense companies disclose backlog in their quarterly reports: the total already ordered but not yet recognized as sales. It matters because sales are a record of the past, while backlog indicates how many years of work is already in hand.

2Funded and unfunded

Backlog divides in two: the funded portion, where Congress has authorized and appropriated the money, and the unfunded portion, where a contract exists but funding has not yet been provided. Of $104.7 billion, $45,945 million is funded — around four tenths. The remaining six tenths presupposes future appropriations.

3Why contract values and spending diverge

In the federal contract data this site holds, a large share of records carry a contract value with outlays still at zero. That is not missing data. A contract value is a ceiling, and spending follows as funding is provided and performance proceeds. The company-side disclosure of funded against unfunded backlog shows the same structure from the other direction.

A contract existing, funding being appropriated, and money actually being paid are three separate stages.

4What backlog excludes

The report states that unexercised contract options and indefinite delivery indefinite quantity contracts are not included in backlog until an option is exercised or a task order awarded. A contract announced with a large ceiling does not put that whole amount into backlog — a definition that governs how such figures should be read.

5By segment, and what converts

Defense Systems carries the highest unfunded proportion and grew 25 percent from year end. The company expects to recognize about 35 percent of backlog as revenue over the next 12 months and 55 percent over 24 months. Second quarter net awards were $20.0 billion, including $7.6 billion for Sentinel, $4.3 billion for restricted programs and $1.0 billion for F-35.