Contracts in Process

6 Months Ended

Jun. 30, 2017

6. Contracts in Process

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

	June 30, 2017			December 31, 2016
	(in millions)
Unbilled contract receivables, gross	$	1,930		$	2,020
Unliquidated progress payments		(720	)		(827	)
Unbilled contract receivables, net		1,210			1,193
Inventoried contract costs, gross		1,113			1,065
Unliquidated progress payments		(123	)		(203	)
Inventoried contract costs, net		990			862
Total contracts in process	$	2,200		$	2,055

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 30, 2017			June 24, 2016			June 30, 2017			June 24, 2016
	(in millions)
Amounts included in inventoried contract costs at beginning of the period	$	178		$	157		$	173		$	137
Contract costs incurred:
IRAD and B&P		79			72			157			137
Other G&A		230			216			452			410
Total		309			288			609			547
Amounts charged to cost of sales		(313	)		(282	)		(608	)		(521	)
Amounts included in inventoried contract costs at end of the period	$	174		$	163		$	174		$	163

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 included in cost of sales on the unaudited condensed consolidated statements of operations.

	Second Quarter Ended				First Half Ended
	June 30, 2017		June 24, 2016		June 30, 2017		June 24, 2016
	(in millions)
Selling, general and administrative expenses	$	63	$	59	$	134	$	111
Research and development expenses		17		13		32		24
Total	$	80	$	72	$	166	$	135