Fluor 2013 Annual Report Download - page 57

• changes in labor conditions and difficulties in staffing and managing international operations;
• U.S. government policy changes in relation to the foreign countries in which we or our clients
operate;
• international hostilities; and
• unrest, civil strife, acts of war, terrorism and insurrection.
Also, the lack of a well-developed legal system in some of these countries may make it difficult to
enforce our contractual rights or to defend ourself against claims made by others. We operate in countries
where there is a significant amount of political risk including Afghanistan, Iraq, Kazakhstan, Russia, China,
Guinea and Argentina. In addition, military action or continued unrest, especially in the Middle East and
in Africa, could impact the supply or pricing of oil, disrupt our operations in the region and elsewhere, and
increase our security costs. Our level of exposure to these risks will vary on each project, depending on the
location of the project and the particular stage of each such project. For example, our risk exposure with
respect to a project in an early development phase, such as engineering, will generally be less than our risk
exposure on a project that is in the construction phase. To the extent that our international business is
affected by unexpected and adverse foreign economic and political conditions and risks, we may experience
project disruptions and losses. Project disruptions and losses could significantly reduce our overall revenue
and profits.
Our project execution activities may result in liability for faulty engineering or similar professional services.
Because our projects are often technically complex, our failure to make judgments and
recommendations in accordance with applicable professional standards, including engineering standards,
could result in damages. Our business involves professional judgments regarding the planning, design,
development, construction, operations and management of industrial facilities and public infrastructure.
While we do not generally accept liability for consequential damages, and although we have adopted a
range of insurance, risk management and risk avoidance programs designed to reduce potential liabilities,
a catastrophic event at one of our project sites or completed projects resulting from the services we have
performed could result in significant professional or product liability, warranty or other claims against us as
well as reputational harm, especially if public safety is impacted. These liabilities could exceed our
insurance limits or the fees we generate, or could impact our ability to obtain insurance in the future. In
addition, clients, subcontractors or suppliers who have agreed to indemnify us against any such liabilities or
losses might refuse or be unable to pay us. An uninsured claim, either in part or in whole, if successful and
of a material magnitude, could have a substantial impact on our operations.
We are dependent upon suppliers and subcontractors to complete many of our contracts.
Much of the work performed under our contracts is actually performed by third-party subcontractors.
We also rely on third-party suppliers to provide much of the equipment and materials used for projects. If
we are unable to hire qualified subcontractors or find qualified suppliers, our ability to successfully
complete a project could be impaired. If the amount we are required to pay for subcontractors or
equipment and supplies exceeds what we have estimated, especially in a fixed-price type contract, we may
suffer losses on these contracts. If a supplier or subcontractor fails to provide supplies, equipment or
services as required under a contract for any reason, or provides supplies, equipment or services that are
not an acceptable quality, we may be required to source those supplies, equipment or services on a delayed
basis or at a higher price than anticipated, which could impact contract profitability. In addition, faulty
workmanship, equipment or materials could impact the overall project, resulting in claims against us for
failure to meet required project specifications. These risks may be intensified during the current economic
downturn if these suppliers or subcontractors experience financial difficulties or find it difficult to obtain
sufficient financing to fund their operations or access to bonding, and are not able to provide the services
or supplies necessary for our business. In addition, in instances where Fluor relies on a single contracted
supplier or subcontractor or a small number of suppliers or subcontractors, if a subcontractor or supplier
were to fail there can be no assurance that the marketplace can provide replacement equipment, materials
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