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Revenue from Contracts with Customers
 9 Months Ended
Sep. 30, 2020
Revenue from Contract with Customer [Abstract]  
Revenue from Contracts with Customers Revenue from Contracts with Customers
The Company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services by applying the following five step model:
(1) Identify the contract with a customer
A contract with a customer exists when: (a) the parties have approved the contract and are committed to perform their respective obligations, (b) the rights of the parties can be identified, (c) payment terms can be identified, (d) the arrangement has commercial substance, and (e) collectibility of consideration is probable. Judgment is required when determining if the contractual criteria are met, specifically in the earlier stages of a project when a formally executed contract may not yet exist. In these situations, the Company evaluates all relevant facts and circumstances, including the existence of other forms of documentation or historical experience with our customers that may indicate a contractual agreement is in place and revenue should be recognized. In determining if the collectibility of consideration is probable, the Company considers the customer’s ability and intention to pay such consideration through an evaluation of several factors, including an assessment of the creditworthiness of the customer and our prior collection history with such customer.
(2) Identify the performance obligations in the contract
At contract inception, the Company assesses the goods or services promised in a contract and identifies, as a separate performance obligation, each distinct promise to transfer goods or services to the customer. The identified performance obligations represent the “unit of account” for purposes of determining revenue recognition. In order to properly identify separate performance obligations, the Company applies judgment in determining whether each good or service provided is: (a) capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and (b) distinct within the context of the contract, whereby the transfer of the good or service to the customer is separately identifiable from other promises in the contract.
In addition, when assessing performance obligations within a contract, the Company considers the warranty provisions included within such contract. To the extent the warranty terms provide the customer with an additional service, other than assurance that the promised good or service complies with agreed upon specifications, such warranty is accounted for as a separate performance obligation. In determining whether a warranty provides an additional service, the Company considers each warranty provision in comparison to warranty terms which are standard in the industry.
Our contracts are often modified through change orders to account for changes in the scope and price of the goods or services we are providing. Although the Company evaluates each change order to determine whether such modification creates a separate performance obligation, the majority of our change orders are for goods or services that are not distinct within the context of our original contract, and therefore, are not treated as separate performance obligations.
(3) Determine the transaction price
The transaction price represents the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to our customers. The consideration promised within a contract may include fixed amounts, variable amounts, or both. To the extent the performance obligation includes variable consideration, including contract bonuses and penalties that can either increase or decrease the transaction price, the Company estimates the amount of variable consideration to be included in the transaction price utilizing one of two prescribed methods, depending on which method better predicts the amount of consideration to which the entity will be entitled. Such methods include: (a) the expected value method, whereby the amount of variable consideration to be recognized represents the sum of probability-weighted amounts in a range of possible consideration amounts, and (b) the most likely amount method, whereby the amount of variable consideration to be recognized represents the single most likely amount in a range of possible consideration amounts. When applying these methods, the Company considers all information that is reasonably available, including historical, current, and estimates of future performance. The expected value method is typically utilized in situations where a contract contains a large number of possible outcomes while the most likely amount method is typically utilized in situations where a contract has only two possible outcomes.
NOTE 3 Revenue from Contracts with Customers - (Continued)
Variable consideration is included in the transaction price only to the extent it is probable, in the Company’s judgment, that a significant future reversal in the amount of cumulative revenue recognized under the contract will not occur when the uncertainty associated with the variable consideration is subsequently resolved. This threshold is referred to as the variable consideration constraint. In assessing whether to apply the variable consideration constraint, the Company considers if factors exist that could increase the likelihood or the magnitude of a potential reversal of revenue, including, but not limited to, whether: (a) the amount of consideration is highly susceptible to factors outside of the Company’s influence, such as the actions of third parties, (b) the uncertainty surrounding the amount of consideration is not expected to be resolved for a long period of time, (c) the Company’s experience with similar types of contracts is limited or that experience has limited predictive value, (d) the Company has a practice of either offering a broad range of price concessions or changing the payment terms and conditions of similar contracts in similar circumstances, and (e) the contract has a large number and broad range of possible consideration amounts.
Pending change orders represent one of the most common forms of variable consideration included within contract value and typically represent contract modifications for which a change in scope has been authorized or acknowledged by our customer, but the final adjustment to contract price is yet to be negotiated. In estimating the transaction price for pending change orders, the Company considers all relevant facts, including documented correspondence with the customer regarding acknowledgment of and/or agreement with the modification, as well as historical experience with the customer or similar contractual circumstances. Based upon this assessment, the Company estimates the transaction price, including whether the variable consideration constraint should be applied.
Contract claims are another form of variable consideration which is common within our industry. Claim amounts represent revenue that has been recognized for contract modifications that are not submitted or are in dispute as to both scope and price. In estimating the transaction price for claims, the Company considers all relevant facts available. However, given the uncertainty surrounding claims, including the potential long-term nature of dispute resolution and the broad range of possible consideration amounts, there is an increased likelihood that any additional contract revenue associated with contract claims is constrained. The resolution of claims involves negotiations and, in certain cases, litigation. In the event litigation costs are incurred by us in connection with claims, such litigation costs are expensed as incurred, although we may seek to recover these costs.
For some transactions, the receipt of consideration does not match the timing of the transfer of goods or services to the customer. For such contracts, the Company evaluates whether this timing difference represents a financing arrangement within the contract. Although rare, if a contract is determined to contain a significant financing component, the Company adjusts the promised amount of consideration for the effects of the time value of money when determining the transaction price of such contract. Although our customers may retain a portion of the contract price until completion of the project and final contract settlement, these retainage amounts are not considered a significant financing component as the intent of the withheld amounts is to provide the customer with assurance that we will complete our obligations under the contract rather than to provide financing to the customer. In addition, although we may be entitled to advanced payments from our customers on certain contracts, these advanced payments generally do not represent a significant financing component as the payments are used to meet working capital demands that can be higher in the early stages of a contract, as well as to protect us from our customer failing to meet its obligations under the contract.
Changes in the estimates of transaction prices are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. Such changes in estimates can result in the recognition of revenue in a current period for performance obligations which were satisfied or partially satisfied in prior periods. Such changes in estimates may also result in the reversal of previously recognized revenue if the ultimate outcome differs from the Company’s previous estimate. For the three and nine months ended September 30, 2020, we recognized revenue of $4.4 million and $6.1 million, respectively, associated with the final settlement of contract value for two projects within our United States electrical construction and facilities services segment that were completed or substantially completed in prior periods. There were no significant amounts of revenue recognized during the three and nine months ended September 30, 2019 related to performance obligations satisfied in prior periods. In addition, for the three and nine months ended September 30, 2020 and 2019, there were no significant reversals of revenue recognized associated with the revision of transaction prices.
(4) Allocate the transaction price to performance obligations in the contract
For contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation based on a relative standalone selling price. The Company determines the standalone selling price based on the price at which the performance obligation would have been sold separately in similar circumstances to similar customers. If the standalone selling price is not observable, the Company estimates the standalone selling price taking into account all
NOTE 3 Revenue from Contracts with Customers - (Continued)
available information such as market conditions and internal pricing guidelines. In certain circumstances, the standalone selling price is determined using an expected profit margin on anticipated costs related to the performance obligation.
(5) Recognize revenue as performance obligations are satisfied
The Company recognizes revenue at the time the related performance obligation is satisfied by transferring a promised good or service to its customers. A good or service is considered to be transferred when the customer obtains control. The Company can transfer control of a good or service and satisfy its performance obligations either over time or at a point in time. The Company transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognizes revenue over time if one of the following three criteria are met: (a) the customer simultaneously receives and consumes the benefits provided by the Company’s performance as we perform, (b) the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or (c) the Company’s performance does not create an asset with an alternative use to us, and we have an enforceable right to payment for performance completed to date.
For our performance obligations satisfied over time, we recognize revenue by measuring the progress toward complete satisfaction of that performance obligation. The selection of the method to measure progress towards completion can be either an input method or an output method and requires judgment based on the nature of the goods or services to be provided.
For our construction contracts, revenue is generally recognized over time as our performance creates or enhances an asset that the customer controls as it is created or enhanced. Our fixed price construction projects generally use a cost-to-cost input method to measure our progress towards complete satisfaction of the performance obligation as we believe it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. For our unit price construction contracts, progress towards complete satisfaction is measured through an output method, such as the amount of units produced or delivered, when our performance does not produce significant amounts of work in process or finished goods prior to complete satisfaction of such performance obligations.
For our services contracts, revenue is also generally recognized over time as the customer simultaneously receives and consumes the benefits of our performance as we perform the service. For our fixed price service contracts with specified service periods, revenue is generally recognized on a straight-line basis over such service period when our inputs are expended evenly, and the customer receives and consumes the benefits of our performance throughout the contract term.
The timing of revenue recognition for the manufacturing of new build heat exchangers within our United States industrial services segment depends on the payment terms of the contract, as our performance does not create an asset with an alternative use to us. For those contracts for which we have a right to payment for performance completed to date at all times throughout our performance, inclusive of a cancellation, we recognize revenue over time. For these performance obligations, we use a cost-to-cost input method to measure our progress towards complete satisfaction of the performance obligation as we believe it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. However, for those contracts for which we do not have a right, at all times, to payment for performance completed to date, we recognize revenue at the point in time when control is transferred to the customer. For bill-and-hold arrangements, revenue is recognized when the customer obtains control of the heat exchanger, which may be prior to shipping, if certain recognition criteria are met.
For certain of our revenue streams, such as call-out repair and service work, outage services, refinery turnarounds, and specialty welding services that are performed under time and materials contracts, our progress towards complete satisfaction of such performance obligations is measured using an output method as the customer receives and consumes the benefits of our performance completed to date.
Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised in the near-term. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. When the current estimate of total costs for a performance obligation indicate a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident. For the three and nine months ended September 30, 2020 and 2019, there were no changes in total estimated costs that had a significant impact on our operating results. In addition, there were no significant losses recognized during the three and nine months ended September 30, 2020 and 2019.
NOTE 3 Revenue from Contracts with Customers - (Continued)
Disaggregation of Revenues
Our revenues are principally derived from contracts to provide construction services relating to electrical and mechanical systems, as well as to provide a number of building services and industrial services to our customers. Our contracts are with many different customers in numerous industries. Refer to Note 15 - Segment Information of the notes to consolidated financial statements for additional information on how we disaggregate our revenues by reportable segment, as well as a more complete description of our business.
The following tables provide further disaggregation of our revenues by categories we use to evaluate our financial performance within each of our reportable segments for the three and nine months ended September 30, 2020 and 2019 (in thousands):
For the three months ended September 30,
2020% of
Total		2019% of
Total
United States electrical construction and facilities services:
Commercial market sector$253,436 50 %$260,871 47 %
Institutional market sector38,135 7 %33,702 6 %
Hospitality market sector7,028 1 %2,243 1 %
Manufacturing market sector92,789 18 %121,488 22 %
Healthcare market sector18,876 4 %24,701 4 %
Transportation market sector58,765 12 %52,744 9 %
Water and wastewater market sector2,351 1 %3,709 1 %
Short duration projects (1)
27,321 5 %42,296 7 %
Service work11,978 2 %14,174 3 %
510,679 555,928 
Less intersegment revenues(1,816)(1,291)
Total segment revenues$508,863 $554,637 
For the three months ended September 30,
2020% of
Total		2019% of
Total
United States mechanical construction and facilities services:
Commercial market sector$346,911 39 %$293,202 33 %
Institutional market sector112,264 13 %94,886 11 %
Hospitality market sector12,570 1 %6,888 1 %
Manufacturing market sector93,919 11 %150,199 17 %
Healthcare market sector78,814 9 %84,418 10 %
Transportation market sector19,824 2 %7,855 1 %
Water and wastewater market sector45,255 5 %42,637 5 %
Short duration projects (1)
84,461 9 %91,897 10 %
Service work99,649 11 %100,196 12 %
893,667 872,178 
Less intersegment revenues(2,158)(2,990)
Total segment revenues$891,509 $869,188 
 ________
(1)Represents those projects which generally are completed within three months or less.
NOTE 3 Revenue from Contracts with Customers - (Continued)
For the three months ended September 30,
2020% of
Total		2019% of
Total
United States building services:
Commercial site-based services$147,768 27 %$133,179 25 %
Government site-based services44,664 8 %42,412 8 %
Mobile mechanical services336,320 61 %333,696 63 %
Energy services22,803 4 %22,835 4 %
Total segment revenues$551,555 $532,122 
For the three months ended September 30,
2020% of
Total		2019% of
Total
United States industrial services:
Field services$113,345 81 %$194,569 83 %
Shop services26,367 19 %39,597 17 %
Total segment revenues$139,712 $234,166 
Total United States operations$2,091,639 $2,190,113 
For the three months ended September 30,
2020% of
Total		2019% of
Total
United Kingdom building services:
Service work$55,594 51 %$49,098 50 %
Project work54,481 49 %48,530 50 %
Total segment revenues$110,075 $97,628 
Total worldwide operations$2,201,714 $2,287,741 
 
For the nine months ended September 30,
2020% of
Total		2019% of
Total
United States electrical construction and facilities services:
Commercial market sector$711,562 48 %$816,602 49 %
Institutional market sector113,994 8 %87,643 5 %
Hospitality market sector17,009 1 %11,930 1 %
Manufacturing market sector297,414 20 %338,448 20 %
Healthcare market sector57,218 4 %63,725 4 %
Transportation market sector150,911 10 %162,538 10 %
Water and wastewater market sector6,587 1 %14,342 1 %
Short duration projects (1)
90,218 6 %124,152 8 %
Service work38,467 2 %35,439 2 %
1,483,380 1,654,819 
Less intersegment revenues(3,407)(2,710)
Total segment revenues$1,479,973 $1,652,109 
 ________
(1)Represents those projects which generally are completed within three months or less.
NOTE 3 Revenue from Contracts with Customers - (Continued)
For the nine months ended September 30,
2020% of
Total		2019% of
Total
United States mechanical construction and facilities services:
Commercial market sector$925,035 37 %$874,512 36 %
Institutional market sector289,090 12 %232,843 9 %
Hospitality market sector29,382 1 %28,807 1 %
Manufacturing market sector310,109 12 %386,853 16 %
Healthcare market sector247,401 10 %220,445 9 %
Transportation market sector53,839 2 %22,880 1 %
Water and wastewater market sector131,374 5 %131,385 5 %
Short duration projects (1)
255,618 10 %273,001 11 %
Service work279,226 11 %282,094 12 %
2,521,074 2,452,820 
Less intersegment revenues(5,012)(8,137)
Total segment revenues$2,516,062 $2,444,683 
 ________
(1)Represents those projects which generally are completed within three months or less.

For the nine months ended September 30,
2020% of
Total		2019% of
Total
United States building services:
Commercial site-based services$423,284 27 %$420,078 27 %
Government site-based services126,000 8 %133,990 8 %
Mobile mechanical services922,676 60 %920,684 59 %
Energy services70,094 5 %93,147 6 %
Total segment revenues$1,542,054 $1,567,899 
For the nine months ended September 30,
2020% of
Total		2019% of
Total
United States industrial services:
Field services$560,462 85 %$664,188 84 %
Shop services101,447 15 %124,083 16 %
Total segment revenues$661,909 $788,271 
Total United States operations$6,199,998 $6,452,962 
For the nine months ended September 30,
2020% of
Total		2019% of
Total
United Kingdom building services:
Service work$161,839 51 %$160,561 51 %
Project work153,730 49 %157,148 49 %
Total segment revenues$315,569 $317,709 
Total worldwide operations$6,515,567 $6,770,671 
NOTE 3 Revenue from Contracts with Customers - (Continued)
Contract Assets and Contract Liabilities
Accounts receivable are recognized in the period when our right to consideration is unconditional. Accounts receivable are recognized net of an allowance for credit losses. A considerable amount of judgment is required in assessing the likelihood of realization of receivables.
The timing of revenue recognition may differ from the timing of invoicing to customers. Contract assets include unbilled amounts from our long-term construction projects when revenues recognized under the cost-to-cost measure of progress exceed the amounts invoiced to our customers, as the amounts cannot be billed under the terms of our contracts. Such amounts are recoverable from our customers based upon various measures of performance, including achievement of certain milestones, completion of specified units, or completion of a contract. In addition, many of our time and materials arrangements, as well as our contracts to perform turnaround services within the United States industrial services segment, are billed in arrears pursuant to contract terms that are standard within the industry, resulting in contract assets and/or unbilled receivables being recorded, as revenue is recognized in advance of billings. Also included in contract assets are amounts we seek or will seek to collect from customers or others for errors or changes in contract specifications or design, contract change orders or modifications in dispute or unapproved as to scope and/or price, or other customer-related causes of unanticipated additional contract costs (claims and unapproved change orders). Our contract assets do not include capitalized costs to obtain and fulfill a contract. Contract assets are generally classified as current within the Consolidated Balance Sheets.
Contract liabilities from our long-term construction contracts arise when amounts invoiced to our customers exceed revenues recognized under the cost-to-cost measure of progress. Contract liabilities additionally include advanced payments from our customers on certain contracts. Contract liabilities decrease as we recognize revenue from the satisfaction of the related performance obligation and are recorded as either current or long-term, depending upon when we expect to recognize such revenue. The long-term portion of contract liabilities is included in “Other long-term obligations” in the Consolidated Balance Sheets.
Net contract liabilities consisted of the following as of September 30, 2020 and December 31, 2019 (in thousands):
September 30, 2020December 31, 2019
Contract assets, current$187,313 $177,830 
Contract assets, non-current— — 
Contract liabilities, current(714,686)(623,642)
Contract liabilities, non-current(2,161)(2,142)
Net contract liabilities$(529,534)$(447,954)
The $81.6 million increase in net contract liabilities for the nine months ended September 30, 2020 was primarily attributable to an increase in net contract liabilities on our uncompleted long-term construction contracts, partially as a result of the timing of invoicing to our customers, which included advanced billings on several projects in the earlier stages of completion. Contract assets and contract liabilities increased by approximately $1.0 million and $10.9 million, respectively, as a result of acquisitions made by us in 2020. There was no significant impairment of contract assets recognized during either period presented.
NOTE 3 Revenue from Contracts with Customers - (Continued)
Transaction Price Allocated to Remaining Unsatisfied Performance Obligations     
The following table presents the transaction price allocated to remaining unsatisfied performance obligations (“remaining performance obligations”) for each of our reportable segments and their respective percentages of total remaining performance obligations as of September 30, 2020 (in thousands, except for percentages):
September 30, 2020% of Total
Remaining performance obligations:
United States electrical construction and facilities services$1,062,150 23 %
United States mechanical construction and facilities services2,633,017 58 %
United States building services625,756 14 %
United States industrial services75,662 2 %
Total United States operations4,396,585 97 %
United Kingdom building services133,566 3 %
Total worldwide operations$4,530,151 100 %
Our remaining performance obligations at September 30, 2020 were $4.53 billion. Remaining performance obligations increase with awards of new contracts and decrease as we perform work and recognize revenue on existing contracts. We include a project within our remaining performance obligations at such time the project is awarded and agreement on contract terms has been reached. Our remaining performance obligations include amounts related to contracts for which a fixed price contract value is not assigned when a reasonable estimate of the total transaction price can be made.
Remaining performance obligations include unrecognized revenues to be realized from uncompleted construction contracts. Although many of our construction contracts are subject to cancellation at the election of our customers, in accordance with industry practice, we do not limit the amount of unrecognized revenue included within remaining performance obligations for these contracts due to the inherent substantial economic penalty that would be incurred by our customers upon cancellation.
Remaining performance obligations also include unrecognized revenues expected to be realized over the remaining term of service contracts. However, to the extent a service contract includes a cancellation clause which allows for the termination of such contract by either party without a substantive penalty, the remaining contract term, and therefore, the amount of unrecognized revenues included within remaining performance obligations, is limited to the notice period required for the termination.
Our remaining performance obligations are comprised of: (a) original contract amounts, (b) change orders for which we have received written confirmations from our customers, (c) pending change orders for which we expect to receive confirmations in the ordinary course of business, (d) claim amounts that we have made against customers for which we have determined we have a legal basis under existing contractual arrangements and as to which the variable consideration constraint does not apply, and (e) other forms of variable consideration to the extent that such variable consideration has been included within the transaction price of our contracts. Such claim and other variable consideration amounts were immaterial for all periods presented.
NOTE 3 Revenue from Contracts with Customers - (Continued)
Refer to the table below for additional information regarding our remaining performance obligations, including an estimate of when we expect to recognize such remaining performance obligations as revenue (in thousands):
Within one yearGreater than one year
Remaining performance obligations:
United States electrical construction and facilities services$849,816 $212,334 
United States mechanical construction and facilities services1,988,913 644,104 
United States building services595,507 30,249 
United States industrial services75,662 — 
Total United States operations3,509,898 886,687 
United Kingdom building services99,827 33,739 
Total worldwide operations$3,609,725 $920,426 
We believe our reported remaining performance obligations are firm and contract cancellations have not historically had a material adverse effect on us. However, the extent to which the COVID-19 pandemic may impact our remaining performance obligations remains highly uncertain and will be affected by a number of factors that are difficult to predict. These include the duration and extent of the pandemic; limitations on the ability of our employees to perform their work due to illness caused by the pandemic or local, state, or federal orders requiring employees to quarantine; whether there is a significant resumption of shelter-in-place orders; the near-term impact of the pandemic on broader economic activity, including on construction projects and the oil and gas and related industrial markets; our customers’ demand for our services; and any prolonged delays or shutdowns of active projects or closures of our and our customers’ offices and facilities.