Backlog is the value of contracted work a company has been awarded but has not yet performed. It is a point-in-time measurement of future revenue that already sits under contract, and it should be separated from the two things it is most often confused with: pipeline, which is unawarded opportunity, and revenue, which is work already performed.
There is no GAAP definition of backlog, though public filers disclose remaining performance obligations under ASC 606. Private companies define backlog by internal convention. That flexibility is precisely why buyers test a company's definition alongside its reported number.
Funded backlog is the portion of awarded work for which the customer has obligated funding — a released purchase order, an executed task order, or, in federal contracting, an appropriated or obligated increment. Unfunded backlog is awarded work not yet funded: unexercised option years, future incrementally funded contracts, and remaining ceiling value on an IDIQ vehicle or master service agreement.
Diligence reviews four measures: coverage, or what share of the next twelve months of forecast revenue is supported by funded backlog; burn and timing; attrition through cancellations, de-scopes and funding lapses; and concentration or recompete exposure.
Backlog should be tracked monthly or quarterly at the contract level. Prospective buyers frequently ask for internal backlog reports spanning two to three years, and a reporting record that begins the month a process starts carries far less weight than one that predates it.
