Revenue
 9 Months Ended
Sep. 29, 2023
Revenue from Contract with Customer [Abstract]  
Revenue
REVENUE
Performance Obligations
Performance obligations represent firm orders by the customer and excludes potential orders under indefinite delivery and indefinite quantity (IDIQ) contracts, unexercised contract options and contracts awarded to us that are being protested by competitors with the U.S. Government Accountability Office (GAO) or in the U.S. Court of Federal Claims (COFC). The level of order activity related to programs can be affected by the timing of government funding authorizations and their project evaluation cycles. Year-over-year comparisons could, at times, be impacted by these factors, among others.
Contracts are often modified to account for changes in contract specifications and requirements. If the modification either creates new enforceable rights and obligations or changes the existing enforceable rights and obligations, the modification will be treated as a separate contract. Contract modifications, except for those to exercise option years, have historically not been distinct from the existing contract and have been accounted for as if they were part of that existing contract.
The Company's performance obligations are satisfied over time as services are provided throughout the contract term. Revenue is recognized over time using the input method (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress. Over-time recognition is reinforced by the fact that the Company's customers simultaneously receive and consume the benefits of its services as they are performed. For most U.S. government contracts, this continuous transfer of control to the customer is supported by contract terms that allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and take control of any work in process. This continuous transfer of control requires that progress towards completion of performance obligations is tracked to measure and recognize revenue.
The Company's contracts are multi-year contracts and typically include an initial period of one year or less with annual one year (or less) option periods. The number of option periods varies by contract, and there is no guarantee that an option period will be exercised. The right to exercise an option period is at the sole discretion of the U.S. government when the Company is the prime contractor or of the prime contractor when the Company is a subcontractor. The Company expects to recognize a substantial portion of its performance obligations as revenue within the next 12 months. However, the U.S. government or the prime contractor may cancel any contract at any time through a termination for convenience or for cause. Substantially all the Company's contracts have terms that would permit recovery of all or a portion of the Company's incurred costs and fees for work performed in the event of a termination for convenience.
Performance obligations are presented in the following table:
September 29,December 31,
(In millions)20232022
Performance Obligations$3,463 $2,997 
As of September 29, 2023, the Company expects to recognize approximately 10% and 90% of these performance obligations as revenue in 2023 and 2024, respectively.
Contract Estimates
The impact of adjustments in contract estimates on the Company's operating income can be reflected in either revenue or cost of revenue. Cumulative catch-up adjustments for the three and nine months ended September 29, 2023 increased operating income by $5.0 million and $27.2 million, respectively. For the three and nine months ended September 30, 2022, the adjustments decreased operating income by $1.5 million and increased operating income by $5.9 million, respectively.
For the three and nine months ended September 29, 2023, the cumulative catch-up adjustments to operating income increased revenue by $10.3 million and $33.8 million, respectively. For the three and nine months ended September 30, 2022, the cumulative catch-up adjustments to operating income decreased revenue by $1.7 million and increased revenue by $6.1 million, respectively.
Revenue by Category
Generally, the sales price elements for the Company's contracts are cost-plus, cost-reimbursable or firm-fixed-price, all of which are commonly identified with a single contract. On a cost-plus contract, the Company is paid allowable incurred costs plus a profit, which can be fixed or variable depending on the contract’s fee arrangement, up to funding levels predetermined by the Company's customers.
On cost-plus contracts, the Company does not bear the risks of unexpected cost overruns, provided that incurred costs do not exceed the predetermined funded amounts. Most of the Company's cost-plus contracts also contain a firm-fixed-price element. Cost-plus contracts with award and incentive fee provisions are primary variable contract fee arrangements. Award fees provide for a fee based on actual performance relative to contractually specified performance criteria. Incentive fees are based on the relationship between total allowable and target cost.
Most of the Company's contracts include a cost-reimbursable element to capture costs of consumable materials required for the program. Typically, these costs do not bear fees.
On a time-and-materials contract, the Company is reimbursed for labor at fixed hourly rates and generally reimbursed separately for allowable materials, costs and expenses at cost. For this contract type, the Company bears the risk that labor costs and allocable indirect expenses are greater than the fixed hourly rate defined within the contract.
On a firm-fixed-price contract, the Company agrees to perform the contractual statement of work for a predetermined contract price. A firm-fixed-price contract typically offers higher profit margin potential than a cost-plus contract, which is commensurate with the greater levels of risk assumed on a firm-fixed-price contract. Although a firm-fixed-price contract generally permits retention of profits if the total actual contract costs are less than the estimated contract costs, the Company bears the risk that increased or unexpected costs may reduce profit or cause the Company to sustain losses on the contract. Although the overall scope of work required under the contract may not change, profit may be adjusted as experience is gained and as efficiencies are realized or costs are incurred.
The following tables present various revenue disaggregations.
Revenue by contract type is as follows:
Three Months EndedNine Months Ended
September 29,September 30,%September 29,September 30,%
(In thousands)20232022Change20232022Change
Cost-plus and cost-reimbursable$570,402 $505,743 12.8 %$1,589,619 $1,172,397 35.6 %
Firm-fixed-price402,219 416,618 (3.5)%1,237,110 672,970 83.8 %
Time-and-materials28,886 35,795 (19.3)%96,090 67,326 42.7 %
Total revenue$1,001,507 $958,156 $2,922,819 $1,912,693 
Revenue by geographic region in which the contract is performed is as follows:
Three Months EndedNine Months Ended
September 29,September 30,%September 29,September 30,%
(In thousands)20232022Change20232022Change
United States$571,405 $582,817 (2.0)%$1,698,689 $908,271 87.0 %
Middle East305,918 261,997 16.8 %866,122 747,310 15.9 %
Asia63,259 50,673 24.8 %193,109 113,265 70.5 %
Europe60,925 62,669 (2.8)%164,899 143,847 14.6 %
Total revenue$1,001,507 $958,156 $2,922,819 $1,912,693 
Revenue by contract relationship is as follows:
Three Months EndedNine Months Ended
September 29,September 30,%September 29,September 30,%
(In thousands)20232022Change20232022Change
Prime contractor$945,669 $886,415 6.7 %$2,740,908 $1,781,961 53.8 %
Subcontractor55,838 71,741 (22.2)%181,911 130,732 39.1 %
Total revenue$1,001,507 $958,156 $2,922,819 $1,912,693 
Revenue by customer is as follows:
Three Months EndedNine Months Ended
September 29,September 30,%September 29,September 30,%
(In thousands)20232022Change20232022Change
Army$412,841 $352,923 17.0 %$1,196,843 $959,792 24.7 %
Navy311,088 270,071 15.2 %896,976 410,173 118.7 %
Air Force134,728 165,085 (18.4)%418,710 295,015 41.9 %
Other142,850 170,077 (16.0)%410,290 247,713 65.6 %
Total revenue$1,001,507 $958,156 $2,922,819 $1,912,693 
Contract Balances
The timing of revenue recognition, billings, and cash collections results in billed and unbilled accounts receivable (contract assets) and customer advances and deposits (contract liabilities) on the Condensed Consolidated Balance Sheets. Amounts are billed as work progresses in accordance with agreed-upon contractual terms at periodic intervals (e.g., biweekly or monthly). Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, the Company may receive advances or deposits from its customers before revenue is recognized, resulting in contract liabilities. These advance billings and payments are not considered significant financing components because they are frequently intended to ensure that both parties are in conformance with the primary contract terms. These assets and liabilities are reported on the Condensed Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period.
As of September 29, 2023 and December 31, 2022, the Company had contract assets of $570.9 million and $487.8 million, respectively. Contract assets primarily consist of unbilled receivables which represent rights to consideration for work completed but not billed as of the reporting date. The balance of unbilled receivables consists of costs and fees that are: (i) billable immediately; (ii) billable on contract completion; or (iii) billable upon other specified events, such as the resolution of a request for equitable adjustment. Refer to Note 5, Receivables for additional information regarding the composition of the Company's receivable balances. As of September 29, 2023 and December 31, 2022, contract liabilities, included in other accrued liabilities in the Condensed Consolidated Balance Sheets, were $62.0 million and $76.4 million, respectively.