Fluor 2011 Annual Report Download - page 61

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inappropriate accounting or other activities, they may present their findings to the Defense Contract
Management Agency (‘‘DCMA’’). Should the DCMA determine that we have not complied with the terms
of our contract and applicable statutes and regulations, payments to us may be disallowed or we could be
required to refund previously collected payments. Furthermore, in this environment, if we have significant
disagreements with our government clients concerning costs incurred, negative publicity could arise which
could adversely effect our industry reputation and our ability to compete for new contracts.
Many of our federal government contracts require contractors to have security clearances. Depending
upon the level of required clearances, security clearances can be difficult and time-consuming to obtain. If
we or our employees are unable to obtain or retain necessary security clearances, we may not be able to
win new business, and our existing clients could terminate their contracts with us or decide not to renew
them. To the extent that we cannot obtain or maintain the required security clearance working on a
particular contract, we may not derive the revenue anticipated from the contract which could adversely
affect our revenues.
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.
Fluctuations and changes in the U.S. government’s spending priorities could adversely impact our business
expectations.
The Government segment’s revenue is generated largely from work we perform for the
U.S. government, including a significant amount generated from contracts with the Department of
Defense. Political instability, often driven by war, conflict or natural disasters, coupled with the U.S.
government’s fight against terrorism has resulted in increased spending from which we have benefitted,
including in locations such as Afghanistan, where we perform significant work under the LOGCAP IV
contract. Based on recent government pronouncements, the current level of Department of Defense
overall spending will likely decrease. More specifically, government services being provided in the Middle
East, including Afghanistan, will likely not continue at present levels indefinitely and we could see our
current level of services decline over time. Future levels of expenditures, especially with regard to foreign
military commitments, may decrease or may be shifted to other programs in which we are not a participant.
As a result, a general decline in U.S. defense spending or a change in priorities could reduce our profits or
revenue. Our ability to win or renew government contracts is conducted through a rigorous competitive
process and may prove to be unsuccessful.
Most federal government contracts are awarded through a rigorous competitive process. The federal
government has increasingly relied upon multiple-year contracts with pre-established terms and conditions
that generally require those contractors that have been previously awarded the contract to engage in an
additional competitive bidding process for each task order issued under the contract. Such processes
require successful contractors to anticipate requirements and develop rapid-response bid and proposal
teams as well as dedicated supplier relationships and delivery systems in place to react to these needs. We
face rigorous competition and significant pricing pressures in order to win these task orders. If we are not
successful in reducing costs or able to timely respond to government requests, we may not win additional
awards. Moreover, even if we are qualified to work on a government contract, we may not be awarded the
contract because of existing government policies designed to protect small businesses and under-
represented minority contractors. Our inability to win or renew government contracts during the
procurement processes could harm our operations.
We could suffer from a temporary liquidity crisis if the financial institutions who hold our cash and investments fail.
Our cash balances and short-term investments are maintained in accounts held by major banks and
financial institutions located primarily in North America, Europe, and Asia. Some of our accounts hold
deposits that exceed available insurance. Although none of the financial institutions in which we hold our
cash and investments have gone into bankruptcy or forced receivership, there remains the risk that this
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