Military Privatization
Each Military Utility Privatization Subsidiary has entered into a service contract with the U.S. government to operate and maintain, as well as perform construction activities to renew and replace the water and/or wastewater systems at a military base or bases. The amounts charged by each Military Utility Privatization Subsidiary for these services are based upon the terms of the 50-year contract between the Military Utility Privatization Subsidiary and the U.S. government. Under the terms of each of these agreements, the Military Utility Privatization Subsidiaries agreed to operate and maintain the water and/or wastewater systems for: (i) a monthly net fixed-price for operation and maintenance, and (ii) an amount to cover renewals and replacements. Under the terms of each of these contracts, prices are to be redetermined at the end of the initial two year period and every three years thereafter. In addition, these contracts may also include firm, fixed-priced initial capital upgrade projects to upgrade the existing infrastructure.
Prices may be equitably adjusted for changes in law and other circumstances. These adjustments can be retrospective and/or prospective. The Military Utility Privatization Subsidiaries have experienced delays in obtaining price redeterminations as required by the terms of these contracts. Interim rate increases have, at times, been implemented pending the outcome of these price redeterminations. In addition, contract modifications may be issued for other necessary capital upgrades to the existing infrastructure approved by the U.S. government. Each of the contracts may be subject to termination, in whole or in part, prior to the end of the 50-year term for convenience of the U.S. government or as a result of default or nonperformance by the applicable Military Utility Privatization Subsidiary.
The receivable from the U.S. government represents amounts billed to the U.S. government that have not yet been collected. Unbilled receivables from the U.S. government represent revenue recognized on completed construction work but not yet billed pursuant to the terms of the 50-year contracts with the U.S. government that are expected to be billed.
The asset, “Costs and estimated earnings in excess of billings on uncompleted contracts,” represents revenues recognized in excess of amounts billed. The liability, “Billings in excess of costs and estimated earnings on uncompleted contracts,” represents billings in excess of revenues recognized for renewal and replacement work. Costs and estimated earnings on uncompleted contracts and amounts due from the U.S. government as of December 31, 2013 and 2012 are as follows: |
| | | | | | | | |
(dollars in thousands) | | 2013 | | 2012 |
Revenues (costs and estimated earnings) recognized on uncompleted contracts | | $ | 78,741 |
| | $ | 62,902 |
|
Less: Billings to date | | (32,262 | ) | | (37,335 | ) |
| | $ | 46,479 |
| | $ | 25,567 |
|
| | | | |
Included in the accompanying balance sheets under the following captions: | | |
| | |
|
Costs and estimated earnings in excess of billings on uncompleted contracts | | $ | 53,331 |
| | $ | 38,139 |
|
Billings in excess of costs and estimated earnings on uncompleted contracts | | (6,852 | ) | | (12,572 | ) |
| | $ | 46,479 |
| | $ | 25,567 |
|
Receivables from the U.S. government: | | |
| | |
|
Billed receivables from the U.S. government | | $ | 7,106 |
| | $ | 12,913 |
|
Unbilled receivables from the U.S. government | | 3,104 |
| | 4,535 |
|
Less: allowance for doubtful accounts | | — |
| | (8 | ) |
Total | | $ | 10,210 |
| | $ | 17,440 |
|
