5. Contracts in Process

The components of contracts in process are presented in the table below.


	June 28, 2013			December 31, 2012
	(in millions)
Unbilled contract receivables, gross	$	2,691		$	2,874
Unliquidated progress payments		(1,034	)		(1,265	)

Unbilled contract receivables, net		1,657			1,609

Inventoried contract costs, gross		1,069			1,111
Unliquidated progress payments		(62	)		(68	)

Inventoried contract costs, net		1,007			1,043

Total contracts in process	$	2,664		$	2,652

Inventoried Contract Costs. In accordance with contract accounting standards, the Company’s U.S. Government contractor businesses account for the portion of their general and administrative (G&A), independent research and development (IRAD) and bids and proposal (B&P) costs that are allowable and reimbursable indirect contract costs under U.S. Government procurement regulations on their U.S. Government contracts (revenue arrangements) as inventoried contract costs. G&A, IRAD and B&P costs are allocated to contracts for which the U.S. Government is the end customer and are charged to costs of sales when sales on the related contracts are recognized. The Company’s U.S. Government contractor businesses record the unallowable portion of their G&A, IRAD and B&P costs to expense as incurred, and do not include them in inventoried contract costs.

The table below presents a summary of G&A, IRAD and B&P costs included in inventoried contract costs and the changes to them, including amounts charged to cost of sales by the Company’s U.S. Government contractor businesses for the periods presented.


	Second Quarter Ended						First Half Ended
	June 28, 2013			June 29, 2012			June 28, 2013			June 29, 2012
	(in millions)
Amounts included in inventoried contract costs at beginning of the period	$	113		$	100		$	110		$	91
Add: IRAD and B&P costs		80			89			153			171
Other G&A costs		232			221			437			434

Total contract costs incurred		312			310			590			605

Less: Amounts charged to cost of sales		(310	)		(305	)		(585	)		(591	)

Amounts included in inventoried contract costs at end of the period	$	115		$	105		$	115		$	105

The table below presents a summary of selling, general and administrative expenses and research and development expenses for the Company’s commercial businesses, which are expensed as incurred and not included in inventoried contract costs.


	Second Quarter Ended				First Half Ended
	June 28, 2013		June 29, 2012		June 28, 2013		June 29, 2012
	(in millions)
Selling, general and administrative expenses	$	72	$	68	$	144	$	138
Research and development expenses		25		24		45		45

Total	$	97	$	92	$	189	$	183