Fluor 2007 Annual Report Download - page 46

civil penalties all of which would harm our reputation with the government or even debar us from future
government activities. The DCAA has the ability to review how we have accounted for cost under the FAR
and CAS, and if they believe that we have engaged in inappropriate accounting or other activities,
payments to us may be disallowed.
If one or more of our government contracts are terminated for any reason including for convenience,
if we are suspended from government contract work, or if payment of our cost is disallowed, we could
suffer a significant reduction in expected revenue and profits.
We maintain a workforce based upon current and anticipated workloads. If we do not receive future contract
awards or if these awards are delayed, significant cost may result.
Our estimates of future performance depend on, among other matters, whether and when we will
receive certain new contract awards. While our estimates are based upon our good faith judgment, these
estimates can be unreliable and may frequently change based on newly available information. In the case
of large-scale domestic and international projects where timing is often uncertain, it is particularly difficult
to predict whether and when we will receive a contract award. The uncertainty of contract award timing
can present difficulties in matching our workforce size with our contract needs. If an expected contract
award is delayed or not received, we could incur cost resulting from reductions in staff or redundancy of
facilities that would have the effect of reducing our profits.
Intense competition in the engineering and construction industry could reduce our market share and profits.
We serve markets that are highly competitive and in which a large number of multinational companies
compete. Among our competitors are U.S. companies such as Bechtel Group, Inc., Jacobs Engineering
Group, Inc., KBR Inc., Chicago Bridge and Iron Company N.V., CH2M Hill Companies Limited, the Shaw
Group and URS Corporation, and international companies such as Foster Wheeler Ltd., Technip,
WorleyParsons Limited and AMEC plc. In particular, the engineering and construction markets are highly
competitive and require substantial resources and capital investment in equipment, technology and skilled
personnel. Competition also places downward pressure on our contract prices and profit margins. Intense
competition is expected to continue in these markets, presenting us with significant challenges in our
ability to maintain strong growth rates and acceptable profit margins. If we are unable to meet these
competitive challenges, we could lose market share to our competitors and experience an overall reduction
in our profits.
The nature of our engineering and construction business exposes us to potential liability claims and contract
disputes which may reduce our profits.
We engage in engineering and construction activities for large facilities where design, construction or
systems failures can result in substantial injury or damage to third parties. In addition, the nature of our
business results in clients, subcontractors and vendors occasionally presenting claims against us for
recovery of cost they incurred in excess of what they expected to incur, or for which they believe they are
not contractually liable. We have been and may in the future be named as a defendant in legal proceedings
where parties may make a claim for damages or other remedies with respect to our projects or other
matters. These claims generally arise in the normal course of our business. When it is determined that we
have liability, we may not be covered by insurance or, if covered, the dollar amount of these liabilities may
exceed our policy limits. Our professional liability coverage is on a ‘‘claims-made’’ basis covering only
claims actually made during the policy period currently in effect. In addition, even where insurance is
maintained for such exposures, the policies have deductibles resulting in our assuming exposure for a layer
of coverage with respect to any such claims. Any liability not covered by our insurance, in excess of our
insurance limits or, if covered by insurance but subject to a high deductible, could result in a significant loss
for us, which claims may reduce our profits and cash available for operations.
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