The DoW “Colors of Money”: What Industry Needs To Know Before Engaging
One-Year Money (e.g., O&M, MILPERS)
Funds must be obligated during the fiscal year in which they were appropriated. If O&M is appropriated for FY26, it must be obligated by September 30, 2026. After that, it expires for new obligations. This drives the well-known fourth quarter execution surge.
Two-Year Obligation Window (e.g., RDT&E)
RDT&E funding remains available for obligation for two fiscal years. For example, FY26 RDT&E can be obligated in FY26 and FY27. This provides more flexibility for development programs but still imposes defined timing boundaries.
Three-Year Obligation Window (e.g., Procurement)
Procurement funding typically remains available for obligation for three fiscal years. Major systems and production quantities must be planned years in advance to align with this window.
After the obligation period ends, funding does not immediately disappear. It enters a new phase.
Five-Year Availability (Expenditure Phase)
Once funds are obligated, the government has up to five additional years to disburse (outlay) those funds to pay invoices and close out contracts. During this phase, the appropriation is no longer available for new obligations but remains available for adjustments or payments tied to existing commitments. After that five-year expenditure phase, the funds are cancelled and no longer available for any purpose.
The Pentagon does not operate from a single pool of funding. It operates from five distinct appropriations, commonly referred to as the “colors of money.” Each color is governed by strict rules around purpose, time and amount. Understanding those rules is not optional for industry. It directly affects whether your opportunity can be funded.
The five primary appropriations are straightforward in structure, but complex in execution.
- Operations & Maintenance (O&M) is one-year money. It funds day-to-day operations, sustainment, licenses, training and services. If it keeps something running, it likely falls here.
- Research, Development, Test & Evaluation (RDT&E) carries a two-year obligation window. It funds development, prototyping and testing of new capabilities.
- Procurement carries a three-year obligation window. It funds the purchase of end items and systems once they move into production.
- Military Personnel (MILPERS) funds pay and healthcare for service members.
- Military Construction (MILCON) supports major construction projects and carries a five-year availability window.
For technology vendors and partners, friction most often lives between RDT&E, Procurement and O&M.
A capability may finish development earlier than expected, but if Procurement funding was not programmed years prior, it cannot move into production. RDT&E cannot legally fund production quantities. The result is delay. The funding may exist within the Department, but it is the wrong color.
Operational Test & Evaluation presents another example. Although it validates capability before fielding, it cannot be funded with RDT&E. It must compete within O&M accounts. That distinction can materially affect timing and strategy.
Each appropriation is further divided into Budget Activities (BAs). Procurement alone contains dozens of highly specific categories. There is no general “aircraft money.” There is fighter aircraft money, airlift aircraft money, missile modification money and spares money. The specificity drives how requirements are written and how funding is applied.
Moving funds between colors requires Congressional reprogramming approval. That process can take months and requires committee consensus. It is not a tactical solution for a stalled opportunity.
What this means for industry is simple.
Ask early what appropriation funds the requirement. Align your engagement to the lifecycle of that appropriation. Development-stage solutions align to RDT&E. Production quantities align to Procurement. Sustainment, licensing and services often align to O&M.
If you do not understand the funding color, you risk pursuing requirements that cannot legally pay for your solution.
The Department may have resources available. The differentiator is whether they are in the correct appropriation at the correct time.
Source used: The Merge Newsletter
To get more TD SYNNEX Public Sector Market Insight content, please visit our Market Intelligence microsite.
About the Author: Lloyd McCoy, Jr. is the Senior Director, Public Sector Marketing at TD SYNNEX Public Sector, where he leads efforts to deliver data-driven insights that guide strategic decisions and drive growth in the U.S. public sector market.
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