Opening Request for Qualifications - SB Pinhook WTP Guaranteed Savings Contract - Reynolds Construction

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Reynolds Construction, LLC Notes to Financial Statements December 31, 2019 and 2018 Performance Obligations The Company recognizes revenue from construction contracts over time, as performance obligations are satisfied, due to the continuous transfer of control to the customer. Construction contracts are generally accounted for as a single unit of account (a single performance obligation) and are not segmented between types of services. The Company measures transfer of control utilizing an input method to measure progress based on contract cost incurred to date compared to total estimated contract cost (cost-to-cost method). The cost-to-cost method is the most faithful depiction of the Company’s performance because it directly measures the value of the services transferred to the customer. Cost of revenue includes an allocation of depreciation and amortization. The Company recognizes revenue, but not profit, on certain uninstalled materials that are not specifically produced, fabricated or constructed for a project. Revenue on these uninstalled materials is recognized when the cost is incurred (when control is transferred). Changes to total estimated contract cost or losses, if any, are recognized in the period in which they are determined as assessed at the contract level. Pre-contract costs are expensed as incurred unless they are expected to be recovered from the customer. Project mobilization costs are generally charged to project costs as incurred when they are an integrated part of the performance obligation being transferred to the customer. Variable Consideration The nature of the Company’s contracts gives rise to several types of variable consideration, including claims and unpriced change orders; awards and incentives; and liquidated damages and penalties. The Company recognizes revenue for variable consideration when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The Company estimates the amount of revenue to be recognized on variable consideration using the expected value, i.e., the sum of a probability-weighted amount or the most likely amount method, whichever is expected to better predict the amount. Factors considered in determining whether revenue associated with claims including, change orders in dispute and unapproved change orders in regard to both scope and price should be recognized include the following: The contract or other evidence provides a legal basis for the claim Additional costs were caused by circumstances that were unforeseen at the contract date and not the result of deficiencies in the company’s performance Claim-related costs are identifiable and considered reasonable in view of the work performed Evidence supporting the claim is objective and verifiable If the requirements for recognizing revenue for claims or unapproved change orders are met, revenue is recorded only when the costs associated with the claims or unapproved change orders have been incurred. Back charges to suppliers or subcontractors are recognized as a reduction of cost when it is determined that recovery of such cost is probable and the amounts can be reliably estimated. Disputed back charges are recognized when the same requirements described above for claims accounting have been satisfied. 12