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. When we experience significant changes in our estimates of costs to complete, we undergo a process that includes reviewing the nature of the changes to ensure that there are no material amounts that should have been recorded in a prior period rather than as revisions in estimates for the current period. In our review of these changes for the years ended December 31, 2015, 2014 and 2013, we did not identify any material amounts that should have been recorded in a prior period. 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 cost estimates.

Revenue in an amount equal to cost incurred is recognized if there is not 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 considered to be a change in estimate for purposes of the tables below, and is therefore excluded. During the years ended December 31, 2015, 2014, and 2013, the gross profit impact from projects reaching initial profit recognition was $25.8 million, $74.7 million, and $9.1 million, respectively.

Included within the revisions in estimates for the year ended December 31, 2015, is an increase in revenue of $9.7 million due to our change in accounting policy for affirmative claims for which there was no material associated cost during the year ended December 31, 2015. The remaining $38.8 million of the affirmative claims resulted from claim events during the year ended December 31, 2015 that also resulted in revisions to estimated total contract costs.

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 was a net increase of $19.9 million and net decreases of $7.3 million and $1.7 million for the years ended December 31, 2015, 2014 and 2013, respectively. The projects are summarized as follows (dollars in millions):

Increases



Years Ended December 31,		2015		2014		2013
Number of projects with upward estimate changes		14		7		6
Range of increase in gross profit from each project, net	$	1.1 - 6.6	$	1.0 - 1.8	$	1.1 - 3.7
Increase on project profitability	$	30.7	$	9.2	$	16.1

The increases during the year ended December 31, 2015 were due to settlements of outstanding issues with contract owners, lower costs than anticipated, owner directed scope changes, and estimated cost recovery from claims. The 2014 increases were due to owner-directed scope changes and lower costs than anticipated, and the 2013 increases were due to owner-directed scope changes and production at a higher rate than anticipated.

Decreases



Years Ended December 31,		2015		2014		2013
Number of projects with downward estimate changes		5		6		5
Range of reduction in gross profit from each project, net	$	1.0 - 3.3	$	1.6 - 4.1	$	1.2 - 7.4
Decrease on project profitability	$	10.8	$	16.5	$	17.8

The decreases during the year ended December 31, 2015 were due to additional costs and lower productivity than originally anticipated. Four of the five projects that had downward estimate changes were complete or substantially complete at December 31, 2015. The fifth project was 81.7% complete and constituted 0.9% of Construction contract backlog as of December 31, 2015. The 2014 decreases were due to higher costs than originally anticipated and outstanding claims and change orders, and the 2013 decreases were due to lower productivity than originally anticipated.

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 $7.6 million, $46.9 million and $25.5 million for the years ended December 31, 2015, 2014 and 2013, respectively. Amounts attributable to non-controlling interests were $3.0 million, $9.5 million and $5.6 million for the years ended December 31, 2015, 2014 and 2013, respectively. The projects are summarized as follows (dollars in millions):

Increases



Years Ended December 31,		2015		2014		2013
Number of projects with upward estimate changes		7		12		7
Range of increase in gross profit from each project, net	$	1.5 - 6.7	$	1.0 - 15.2	$	2.6 - 41.3
Increase on project profitability	$	27.9	$	66.8	$	77.5

The increases during the year ended December 31, 2015 were due to owner-directed scope changes and lower costs than anticipated, as well as estimated cost recovery from claims. 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.

Decreases



Years Ended December 31,		2015		2014		2013
Number of projects with downward estimate changes		6		3		5
Range of reduction in gross profit from each project, net	$	1.0 - 5.5	$	1.1 - 16.8	$	1.9 - 26.8
Decrease on project profitability	$	20.3	$	19.9	$	52.0

The decreases during the years ended December 31, 2015, 2014 and 2013 were primarily due to additional costs and lower productivity than originally anticipated.