Fluor 2008 Annual Report Download - page 48

Download and view the complete annual report

Please find page 48 of the 2008 Fluor annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 127

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127

additional investments and provide additional services to ensure the adequate performance and delivery of
the contracted services. These additional obligations could result in reduced profits or, in some cases,
significant losses for us with respect to the joint venture.
If we are unable to form teaming arrangements, our ability to compete for and win certain contracts may be
negatively impacted.
In both the private and public sectors, either acting as a prime contractor, a subcontractor or as a
member of team, we may join with other firms to form a team to compete for a single contract. Because a
team can offer stronger combined qualifications than any firm standing alone, these teaming arrangements
can be very important to the success of a particular contract bid process or proposal. The failure to
maintain such relationships in certain markets, such as the nuclear energy and government markets, may
impact our ability to win work.
Our government contracts may be terminated at any time. Also, if we do not comply with restrictions and regulations
imposed by the government, our government contracts may be terminated and we may be unable to enter into future
government contracts. The termination of our government contracts could significantly reduce our expected revenue
and profits.
We enter into significant government contracts, from time to time, such as those that we have with the
U.S. Department of Energy as part of a teaming arrangement at Savannah River Nuclear Solutions LLC
(‘‘Savannah River’’). Government contracts are subject to various uncertainties, restrictions and
regulations, including oversight audits by government representatives and profit and cost controls, which
could result in withholding or delay of payments to us. Government contracts are also exposed to
uncertainties associated with Congressional funding. The government is under no obligation to maintain
funding at any specific level and funds for a program may even be eliminated. Our government clients may
terminate or decide not to renew our contracts with little or no prior notice.
In addition, government contracts are subject to specific regulations. For example, we must comply
with the Federal Acquisition Regulation (‘‘FAR’’), the Truth in Negotiations Act, the Cost Accounting
Standards (‘‘CAS’’), the Service Contract Act and Department of Defense security regulations. We must
also comply with various other government regulations and requirements as well as various statutes related
to employment practices, environmental protection, recordkeeping and accounting. If we fail to comply
with any of these regulations, requirements or statutes, our existing government contracts could be
terminated, and we could be temporarily suspended or even debarred from government contracting or
subcontracting.
We also run the risk of the impact of government audits, investigations and proceedings, and so-called
‘‘qui tam’’ actions brought by individuals or the government under the Federal False Claims Act that, if an
unfavorable result occurs, could impact our profits and financial condition, as well as our ability to obtain
future government work. For example, government agencies such as the U.S. Defense Contract Audit
Agency (the ‘‘DCAA’’) routinely review and audit government contractors. If these agencies determine
that a rule or regulation has been violated, a variety of penalties can be imposed including criminal and
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 or debarred from government contract work, or if payment of our cost is disallowed,
we could suffer a significant reduction in expected revenue and profits.
14