Fluor 2004 Annual Report Download - page 34

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Another type of fixed price contract is a so-called unit price contract under which we are paid a set amount for every
‘‘unit’’ of work performed. In some fixed price contracts, we can benefit from some of the cost savings depending
upon whether the client is willing to bear some of the risk if the actual cost exceeds the contract award. As a result, if
we perform well, we can benefit from cost savings; however, if the project does not proceed as originally planned, we
cannot recover for cost overruns except in certain limited situations.
Competition
We are one of the world’s larger providers of engineering, procurement and construction services. The markets
served by our business are highly competitive and for the most part require substantial resources, particularly highly
skilled and experienced technical personnel. A large number of companies are competing in the markets served by
the business, including U.S.-based companies such as the Bechtel Group, Inc., Jacobs Engineering Group,
Halliburton’s Kellogg Brown & Root, CB&I, CH2M Hill Companies, Parsons Engineering and Washington Group
International, and international companies such as Foster-Wheeler, Technip and AMEC.
In the engineering and construction arena, our competition is primarily centered on performance and the ability
to provide the design, engineering, planning, management and project execution skills required to complete complex
projects in a safe, timely and cost-efficient manner. Our engineering, procurement and construction business derives
its competitive strength from our diversity, reputation for quality, technology, cost-effectiveness, worldwide
procurement capability, project management expertise, geographic coverage and ability to meet client requirements
by performing construction on either a union or an open shop basis, ability to execute projects of varying sizes,
strong safety record and lengthy experience with a wide range of services and technologies.
The various markets served by the Global Services segment, while containing some similarities, tend also to have
discrete issues particularly impacting that unit. Each of the markets we serve has a large number of companies
competing in its markets. In the equipment sector, which operates in numerous markets, the equipment industry is
highly fragmented and very competitive, with most competitors operating in specific geographic areas. The
competition for larger capital project services is more narrow and limited to only those capable of providing
comprehensive equipment, tool and management services. Temporary staffing is a highly fragmented market with
over 1,000 companies competing nationally. The key competitive factors in this business line are price, service,
quality, breadth of service, and the ability to identify and retain qualified personnel and geographical coverage. The
barriers to entry in operations and maintenance are both financially and logistically low with the result that the
industry is highly fragmented with no single company being dominant. Competition is generally driven by
reputation, price and the capacity to perform.
Key competitive factors in our Government segment are primarily centered on performance and the ability to
provide the design, engineering, planning, management and project execution skills required to complete complex
projects in a safe, timely and cost-efficient manner.
Significant Customers
For 2004, 2003 and 2002, revenues earned directly or indirectly from agencies of the United States Federal
Government accounted for 24%, 16%, and 10%, respectively, of our total revenues. However, we are not dependent
on any single federal agency or upon any other single customer on an on-going basis, and the loss of any single
customer would not have a material adverse effect on our business. Except for the United States Federal
Government, no other single customer accounted for over 10% of our revenues in either of the last two years.
Raw Materials
The principal raw materials we use in our business include structural steel, metal plate and concrete. These and
the other raw materials and the components we use and which are necessary for the conduct of our business are
generally available from numerous sources. We do not foresee any unavailability of raw materials and components
that would have a material adverse effect on our business in the near term. However, the price and availability of
these raw materials and components may vary significantly from year to year due to various factors including
customer demand, producer capacity, market conditions and material shortages and costs.
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