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, 2016, 2015 and 2014, 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 revise our cost estimates in the future.

In the normal course of business, we have revisions in estimated costs associated with unresolved affirmative claims and back charges. The estimated or actual recovery related to these estimated costs may be recorded in future periods, which can cause fluctuations in the gross profit impact from revisions in estimates.

Revisions in estimates for the year ended December 31, 2016 and 2015 included increases in revenue of $37.3 million and $48.5 million, respectively, related to the estimated cost recovery of customer affirmative claims. Of these totals, $25.4 million and $37.3 million, were also affected by an increase in estimated contract costs that were in excess of the estimated recovery during the years ended December 31, 2016 and 2015, respectively. For the remaining $11.9 million and $11.2 million, estimated contract costs in excess of estimated cost recovery were recorded in prior periods.

Revisions in estimates for the year ended December 31, 2016 and 2015 included reduction of cost of revenue of $15.7 million and $7.0 million, respectively, related to the estimated recovery of back charges. Of these totals, $4.8 million and $0.5 million were also affected by an increase in estimated contract costs that were in excess of the estimated recovery during the years ended December 31, 2016 and 2015, respectively. For the remaining $10.9 million and $6.5 million, estimated contract costs in excess of estimated cost recovery were recorded in prior periods.

The impact to gross profit from significant revisions in estimates related to estimated and actual customer affirmative claims and recovery of back charges as well as the associated estimated contract costs are included in the tables below.

Construction

Increases



Years Ended December 31,		2016		2015		2014
Number of projects with upward estimate changes		7		14		7
Range of increase in gross profit from each project, net	$	1.1 - 4.8	$	1.1 - 6.6	$	1.0 - 1.8
Increase on project profitability	$	14.2	$	30.7	$	9.2

The increases during the years ended December 31, 2016, 2015 and 2014 were due to lower costs and higher productivity than originally anticipated and owner directed scope changes. The 2016 and 2015 increases were also due to estimated cost recovery from affirmative claims and settlements of outstanding issues with contract owners in 2015.

Decreases



Years Ended December 31,		2016		2015		2014
Number of projects with downward estimate changes		7		5		6
Range of reduction in gross profit from each project, net	$	1.0 - 3.9	$	1.0 - 3.3	$	1.6 - 4.1
Decrease on project profitability	$	12.9	$	10.8	$	16.5

The decreases during the years ended December 31, 2016, 2015 and 2014 were due to additional costs and lower productivity than originally anticipated. The 2014 decreases were also due to increases in estimated cost to complete from outstanding affirmative claims and change orders.

Large Project Construction

The net changes in project profitability from revisions in estimates, both increases and decreases, which individually had an impact of $1.0 million or more on gross profit were a net decrease of $13.5 million and net increases of $7.6 million and $46.9 million for the years ended December 31, 2016, 2015 and 2014, respectively. Amounts attributable to non-controlling interests were $4.3 million of the net decrease, $3.0 million and $9.5 million of the net increases for the years ended December 31, 2016, and 2015 and 2014, respectively. The projects are summarized as follows (dollars in millions):

Increases



Years Ended December 31,		2016		2015		2014
Number of projects with upward estimate changes		8		7		12
Range of increase in gross profit from each project, net	$	1.2 - 6.5	$	1.5 - 6.7	$	1.0 - 15.2
Increase on project profitability	$	27.2	$	27.9	$	66.8

The increases during the year ended December 31, 2016 were due to higher productivity and lower costs than anticipated, as well as estimated cost recovery from and settlement of affirmative claims and back charges. 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 affirmative 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 affirmative claims with contract owners.

Decreases



Years Ended December 31,		2016		2015		2014
Number of projects with downward estimate changes		5		6		3
Range of reduction in gross profit from each project, net	$	1.3 - 13.6	$	1.0 - 5.5	$	1.1 - 16.8
Decrease on project profitability	$	40.7	$	20.3	$	19.9

The decreases during the years ended December 31, 2016, 2015 and 2014 were primarily due to additional owner, subcontractor and designer related costs and lower productivity than originally anticipated.