CONTRACTS

12 Months Ended

Dec. 31, 2022

CONTRACTS

CONTRACTS

NOTE 6 – CONTRACTS

Costs, estimated earnings, and billings on uncompleted contracts consist of the following as of December 31, 2022 and December 25, 2021 (amounts in thousands):

	2022			2021
Costs incurred on uncompleted contracts	$	59,298		$	36,429
Estimated earnings on uncompleted contracts		4,464			4,866
Earned revenues		63,762			41,295
Less: billings to date		59,784			39,172
Net costs in excess of billings on uncompleted contracts	$	3,978		$	2,123
Costs and estimated earnings in excess of billings on uncompleted contracts	$	4,934		$	4,177
Billings in excess of costs and estimated earnings on uncompleted contracts		(956	)		(2,054	)
Net costs in excess of billings on uncompleted contracts	$	3,978		$	2,123

Revenue on fixed-price contracts is recorded primarily using the percentage-of-completion (cost-to-cost) method. Revenue and gross margin on fixed-price contracts are subject to revision throughout the lives of the contracts and any required adjustments are made in the period in which the revisions become known. To manage unknown risks, management may use contingency amounts to increase the estimated costs, therefore, lowering the earned revenues until the risks are better identified and quantified or have been mitigated. We had $1.0 million in contingency amounts as of December 31, 2022 and had $0.2 million in contingency amounts as of December 25, 2021. Losses on contracts are recorded in full as they are identified.

We recognize service revenue as soon as the services are performed. For clients that we consider higher risk, due to past payment history or history of not providing written work authorizations, we have deferred revenue recognition until we receive either a written authorization or a payment. We had $0.2 million in deferred revenue for the year ended December 31, 2022 and $0.0 million for the year ended December 25, 2021. This deferred revenue represents work on not to exceed contracts that has been performed but has not been billed or been recorded as revenue due to our revenue recognition policies as the work was performed outside the contracted amount without obtaining proper work order changes. It is uncertain as to whether these revenues will eventually be recognized by us or the proceeds collected. The costs associated with these billings have been expensed as incurred.