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Revenue from Contracts with Customers
 9 Months Ended
Sep. 30, 2021
Revenue from Contract with Customer [Abstract]  
Revenue from Contracts with Customers Revenue from Contracts with Customers
The Company generates revenue principally from fixed-price construction contracts to deliver HVAC, plumbing, and electrical construction services to its customers. The duration of its contracts generally ranges from six months to two years. Revenue from fixed price contracts is recognized on the cost-to-cost method, measured by the relationship of total cost incurred to total estimated contract costs. Revenue from time and materials contracts is recognized as services are performed. The Company believes that its extensive experience in HVAC, plumbing, and electrical projects, and its internal cost review procedures during the bidding process, enable it to reasonably estimate costs and mitigate the risk of cost overruns on fixed price contracts.
The Company generally invoices customers on a monthly basis, based on a schedule of values that breaks down the contract amount into discrete billing items. Costs and estimated earnings in excess of billings on uncompleted contracts are recorded as a contract asset until billable under the contract terms. Billings in excess of costs and estimated earnings on uncompleted contracts are recorded as a contract liability until the related revenue is recognizable. The Company classifies contract assets and liabilities that may be settled beyond one year from the balance sheet date as current, consistent with the length of time of the Company’s project operating cycle.
Contract assets
Contract assets include costs in excess of billings and estimated earnings and amounts due under retainage provisions. The components of the contract asset balances as of the respective dates were as follows:
(in thousands)September 30, 2021December 31, 2020Change
Contract assets
   Costs in excess of billings and estimated earnings$39,772 $31,894 $7,878 
   Retainage receivable32,421 35,204 (2,783)
      Total contract assets$72,193 $67,098 $5,095 
Retainage receivable represents amounts invoiced to customers where payments have been partially withheld, typically 10%, pending the completion of certain milestones, satisfaction of other contractual conditions or the completion of the project. Retainage agreements vary from project to project and balances could be outstanding for several months or years depending on
a number of circumstances such as contract-specific terms, project performance and other variables that may arise as the Company makes progress towards completion.

Contract assets represent the excess of contract costs and profits (or contract revenue) over the amount of contract billings to date and are classified as a current asset. Contract assets result when either: 1) the appropriate contract revenue amount has been recognized over time in accordance with ASC Topic 606, but a portion of the revenue recorded cannot be currently billed due to the billing terms defined in the contract, or 2) costs are incurred related to certain claims and unapproved change orders. Claims occur when there is a dispute regarding both a change in the scope of work and the price associated with that change. Unapproved change orders occur when a change in the scope of work results in additional work being performed before the parties have agreed on the corresponding change in the contract price. The Company routinely estimates recovery related to claims and unapproved change orders as a form of variable consideration at the most likely amount it expects to receive and to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Claims and unapproved change orders are billable upon the agreement and resolution between the contractual parties and after the execution of contractual amendments. Increases in claims and unapproved change orders typically result from costs being incurred against existing or new positions; decreases normally result from resolutions and subsequent billings.
The current estimated net realizable value on such claims and unapproved change orders as recorded in contract assets and contract liabilities in the condensed consolidated balance sheets was $39.2 million and $33.6 million as of September 30, 2021 and December 31, 2020, respectively. The Company anticipates that the majority of such amounts will be approved or executed within one year. The resolution of those claims and unapproved change orders that may require litigation or other forms of dispute resolution proceedings may delay the timing of billing beyond one year.
Contract liabilities
Contract liabilities include billings in excess of costs and estimated earnings and provisions for losses. The components of the contract liability balances as of the respective dates were as follows:
(in thousands)September 30, 2021December 31, 2020Change
Contract liabilities
   Billings in excess of costs and estimated earnings$36,517 $46,020 $(9,503)
   Provisions for losses486 628 (142)
      Total contract liabilities$37,003 $46,648 $(9,645)
Billings in excess of costs and estimated earnings represent the excess of contract billings to date over the amount of contract costs and profits (or contract revenue) recognized to date. The balance may fluctuate depending on the timing of contract billings and the recognition of contract revenue.
Provisions for losses are recognized in the condensed consolidated statements of operations at the uncompleted performance obligation level for the amount of total estimated losses in the period that evidence indicates that the estimated total cost of a performance obligation exceeds its estimated total revenue.
The net overbilling position for contracts in process consist of the following:
(in thousands)September 30, 2021December 31, 2020
Revenue earned on uncompleted contracts$718,366 $752,564 
Less: Billings to date(715,111)(766,690)
   Net underbilling (overbilling)$3,255 $(14,126)
(in thousands)September 30, 2021December 31, 2020
Costs in excess of billings and estimated earnings$39,772 $31,894 
Billings in excess of costs and estimated earnings(36,517)(46,020)
   Net underbilling (overbilling)$3,255 $(14,126)
Revisions in Contract Estimates
For the three and nine months ended September 30, 2021 and 2020, the Company recorded revisions in its contract estimates for certain GCR and ODR projects.
For the three months ended September 30, 2021, total net gross profit write-ups were $1.2 million compared total net gross profit write-downs of $0.8 million for the three months ended September 30, 2020. For projects having a material gross profit impact of $0.25 million or more for the three months ended September 30, 2021, this resulted in material gross profit write-downs on three GCR segment projects of $1.4 million. Of the material GCR segment write-downs, one project was within the New England region for $0.6 million, and two projects were within the Southern California region for a total of $0.8 million. The Company also recorded material gross profit write-ups on three GCR segment projects of $1.2 million. Of the material GCR segment write-ups, one project was within the New England region for $0.6 million and two were within the Florida region for a total of $0.6 million. For the three months ended September 30, 2020, the Company recorded material revisions in its contract estimates on five GCR projects which resulted in gross profit write-downs of $2.4 million. Three of these projects were within the Southern California region for a total of $1.8 million. The Company also recorded a $0.4 million material project revision resulting in a gross profit write-up on one GCR project within the Southern California region for the three months ended September 30, 2020.
For the nine months ended September 30, 2021 and 2020, total net gross profit write-downs were $1.3 million and $4.2 million, respectively. For projects having a material gross profit impact of $0.25 million or more, the Company recorded gross profit write-downs on nine GCR segment projects of $5.3 million and one ODR project for $0.3 million. Of the material GCR segment write-downs, three projects were within the Southern California region for a total of $1.8 million, two projects were within the Michigan region for a total of $1.3 million, two projects were within the Eastern Pennsylvania region for a total of $1.2 million, one project was within the New England region for $0.7 million, and one project was within the Mid-Atlantic region for $0.3 million. The Company also materially wrote-down one ODR segment project within the Eastern Pennsylvania region for $0.3 million. The Company also recorded material GCR segment gross profit write-ups of $2.9 million on seven GCR segment projects. Of the material GCR segment write-ups, two projects were within the Florida region for a total of $0.9 million, one project was within the Michigan region for $0.7 million, two projects were within the Ohio region for a total of $0.6 million, one project was within the New England region for $0.4 million and one project was within the Mid-Atlantic region for $0.3 million. For the nine months ended September 30, 2020, the Company recorded eleven material gross profit write-downs and three gross profit write-ups on material GCR projects, resulting in aggregate revisions of $7.5 million and $1.6 million, respectively.
Remaining Performance Obligations
Remaining performance obligations represent the transaction price of firm orders for which work has not been performed and exclude unexercised contract options. The Company’s remaining performance obligations includes projects that have a written award, a letter of intent, a notice to proceed or an agreed upon work order to perform work on mutually accepted terms and conditions.
As of September 30, 2021, the aggregate amount of the transaction prices allocated to the remaining performance obligations of the Company's GCR and ODR segment contracts were $345.5 million and $52.8 million, respectively. The Company estimates that 25% and 37% of its GCR and ODR remaining performance obligations as of September 30, 2021, respectively, will be recognized as revenue during the remainder of 2021. The substantial majority of remaining performance obligations to be recognized within 24 months, although the timing of the Company's performance is not always under its control.
Additionally, the difference between remaining performance obligations and backlog is due to the exclusion of a portion of the Company’s ODR agreements under certain contract types from the Company’s remaining performance obligations as these contracts can be canceled for convenience at any time by the Company or the customer without considerable cost incurred by the customer.