12. COMMITMENTS AND CONTINGENCIES

U.S. Government Cost Claims

From time to time, the company is advised of claims by the U.S. government concerning certain potential disallowed costs, plus, at times, penalties and interest. When such findings are presented, the company and U.S. government representatives engage in discussions to enable the company to evaluate the merits of these claims, as well as to assess the amounts being claimed. Where appropriate, provisions are made to reflect the company’s estimated exposure for such potential disallowed costs. Such provisions are reviewed periodically using the most recent information available. The company believes it has adequately reserved for disputed amounts that are probable and reasonably estimable, and that the outcome of any such matters would not have a material adverse effect on its consolidated financial position as of December 31, 2018, or its annual results of operations and/or cash flows.

Environmental Matters

The table below summarizes management’s estimate of the range of reasonably possible future costs for environmental remediation, the amount accrued within that range, and the deferred costs expected to be recoverable through overhead charges on U.S. government contracts as of December 31, 2018 and 2017:



$ in millions	Range of Reasonably Possible Future Costs⁽¹⁾	Accrued Costs⁽²⁾		Deferred Costs⁽³⁾
December 31, 2018	$447 - $835	$	461	$	343
December 31, 2017	405 - 792	410		207


⁽¹⁾	Estimated remediation costs are not discounted to present value. The range of reasonably possible future costs does not take into consideration amounts expected to be recoverable through overhead charges on U.S. government contracts.


⁽²⁾	As of December 31, 2018, $159 million is recorded in Other current liabilities and $302 million is recorded in Other non-current liabilities.


⁽³⁾	As of December 31, 2018, $127 million is deferred in Prepaid expenses and other current assets and $216 million is deferred in Other non-current assets. These amounts reflect a $103 million increase during 2018 in our estimated recovery of certain environmental remediation costs and are evaluated for recoverability on a routine basis.

As a result of the Merger, we assumed certain environmental remediation liabilities that are included in the accrued costs above, along with the related deferred costs expected to be recoverable on U.S. government contracts.

Although management cannot predict whether new information gained as our environmental remediation projects progress, or as changes in facts and circumstances occur, will materially affect the estimated liability accrued, except with respect to Bethpage, we do not anticipate that future remediation expenditures associated with our currently identified projects will have a material adverse effect on the company’s consolidated financial position as of December 31, 2018, or its annual results of operations and/or cash flows. With respect to Bethpage, as described in Note 11, we cannot at this time estimate the range of reasonably possible additional future costs that could result from potential changes to remediation standards or requirements to which we are subject.

Financial Arrangements

In the ordinary course of business, the company uses standby letters of credit and guarantees issued by commercial banks and surety bonds issued principally by insurance companies to guarantee the performance on certain obligations. At December 31, 2018, there were $542 million of stand-by letters of credit and guarantees and $201 million of surety bonds outstanding.

Indemnifications

The company has provided indemnification for certain environmental, income tax and other potential liabilities in connection with certain of its divestitures. The settlement of these liabilities is not expected to have a material adverse effect on the company’s consolidated financial position as of December 31, 2018, or its annual results of operations and/or cash flows.

Operating Leases

Rental expense for operating leases was $375 million, $300 million and $298 million in 2018, 2017 and 2016, respectively. These amounts are net of immaterial amounts of sublease rental income. Minimum rental commitments under long-term non-cancelable operating leases as of December 31, 2018 are payable as follows:



$ in millions
Year Ending December 31
2019	$	312
2020	270
2021	221
2022	186
2023	152
Thereafter	939
Total minimum lease payments	$	2,080