Backlog

Definition

Work a contractor has won and not yet built, measured in dollars.

Why It Matters

It is the closest thing a project business has to recurring revenue, and it is the number most often quoted without the two facts that give it meaning. The first is how change orders are handled, because the original bid is a guess and the changes are where a disciplined shop recovers cost; signatures beat verbal agreements. The second is what the work is worth at completion, not at bid. A shop with almost no change orders is either bidding generously or absorbing scope, and one with a great many on every job may be underbidding to win. Ask to see the last ten completed jobs at bid and at final before you price a backlog at all.

In numbers: A $3,000,000 backlog is worth less than a $2,000,000 one if the first bids at 8% margin and finishes at 2% while the second holds.