Revisions in Estimates

Our profit recognition related to construction contracts is based on estimates of costs to complete each project. These estimates can vary significantly in the normal course of business as projects progress, circumstances develop and evolve, and uncertainties are resolved. We recognize revenue on affirmative claims when we have a signed agreement and recognize revenue associated with unapproved change orders to the extent the related costs have been incurred, the amount can be reliably estimated and recovery is probable, which is often when the owner has agreed to the change order in writing. We recognize costs associated with affirmative claims and unapproved change orders as incurred and revisions to estimated total costs as soon as the obligation to perform is determined. Approved change orders and affirmative claims, as well as changes in related estimates of costs to complete, are considered revisions in estimates. We use the cumulative catch-up method applicable to construction contract accounting to account for revisions in estimates. Under this method, revisions in estimates are accounted for in their entirety in the period of change. There can be no assurance that we will not experience further changes in circumstances or otherwise be required to further revise our profitability estimates.

Revenue in an amount equal to cost incurred is recognized until there is sufficient information to determine the estimated profit on the project with a reasonable level of certainty. The gross profit impact from projects that reached initial profit recognition is not included in the tables below. During the years ended December 31, 2014, 2013, and 2012, the gross profit impact from projects reaching initial profit recognition was $74.7 million, $9.1 million, and $16.4 million, respectively.

Construction

Increases



Years Ended December 31,		2014		2013		2012
Number of projects with upward estimate changes		7		6		6
Range of increase in gross profit from each project, net	$	1.0 - 1.8	$	1.1 - 3.7	$	1.0 - 1.7
Increase on project profitability	$	9.2	$	16.1	$	8.1

The increases during the year ended December 31, 2014 were due to owner-directed scope changes and lower costs than anticipated. The 2013 increases were due to owner-directed scope changes and production at a higher rate than anticipated, and the 2012 increases were due to lower than anticipated costs and the settlement of outstanding issues with contract owners.

Decreases



Years Ended December 31,		2014		2013		2012
Number of projects with downward estimate changes		6		5		9
Range of reduction in gross profit from each project, net	$	1.6 - 4.1	$	1.2 - 7.4	$	1.0 - 6.6
Decrease on project profitability	$	16.5	$	17.8	$	26.2

The decreases during the year ended December 31, 2014 were due to higher costs than originally anticipated and outstanding claims and change orders. Five of the projects that had downward estimate changes were complete or substantially complete at December 31, 2014. The other project was 56.8% complete and constituted 2.4% of Construction contract backlog as of December 31, 2014. The 2013 decreases were due to lower productivity than originally anticipated. The 2012 decreases were due to lower productivity than anticipated and unanticipated rework costs.

Large Project Construction

The net changes in project profitability from revisions in estimates, both increases and decreases, that individually had an impact of $1.0 million or more on gross profit were net increases of $46.9 million, $25.5 million and $64.6 million for the years ended December 31, 2014, 2013 and 2012, respectively. Amounts attributable to non-controlling interests were $9.5 million, $5.6 million and $3.1 million for the years ended December 31, 2014, 2013 and 2012, respectively. The projects are summarized as follows (dollars in millions):

Increases



Years Ended December 31,		2014		2013		2012
Number of projects with upward estimate changes		12		7		10
Range of increase in gross profit from each project, net	$	1.0 - 15.2	$	2.6 - 41.3	$	1.1 - 24.5
Increase on project profitability	$	66.8	$	77.5	$	92.0

The increases during the year ended December 31, 2014 were due to higher productivity than originally anticipated, owner-directed scope changes and the settlement of outstanding claims with contract owners. The increases during the year ended December 31, 2013 were due to the settlement of outstanding issues with a contract owner and owner-directed scope changes. The increases during the year ended December 31, 2012 were due to owner-directed scope changes and lower than anticipated construction costs.

Decreases



Years Ended December 31,		2014		2013		2012
Number of projects with downward estimate changes		3		5		1
Range of reduction in gross profit from each project, net	$	1.1 - 16.8	$	1.9 - 26.8	$	27.4
Decrease on project profitability	$	19.9	$	52.0	$	27.4

The decreases during the years ended December 31, 2014, 2013 and 2012 were primarily due to additional costs, lower productivity than originally anticipated and outstanding claims and change orders.