Fluor's growth unfazed by cutbacks

Military support, infrastructure work drive new revenues

Budget cutbacks? What budget cutbacks? Fluor Corp., headquartered in Irving, Texas, doesn’t appear to be suffering from the American unease over federal outlays. The company is enjoying a record contracts backlog of more than $37 billion, a surge of some $11.5 billion over the comparable figure a year ago.

New project awards for the 2011 first quarter that ended March 31 totaled $6.2 billion, close to doubling $3.4 billion in new awards booked in the same period in 2010. This year’s first quarter included $3.9 billion worth of wins in Fluor’s industrial and infrastructure unit, $966 million in its oil and gas business, $882 million in the company’s government sector and $422 million in global services.

The company’s government sector helped it land at No. 19 on the Washington Technology 2011 Top 100 list with $1.8 billion in prime contracts.

“In any constrained financial environment, it makes customers more discerning and careful in spending,” said Bruce Stanski, president of the Fluor Government Group. “We feel that’s a differentiator for us. [Customers] will pick us over the other guys because we give the best value.”

In the company’s government sector, Stanski says Fluor has set up a portfolio that strikes a balance between the Defense and Energy departments. The company continues its support of the Army’s Logistics Civil Augmentation Program, known as LogCap. Fluor is one of three prime contractors (joining Dyncorp and KBR) authorized to bid on LogCap task orders large and small, ranging in scale from hundreds of thousands of dollars to several billion.

In 2010, the LogCap contract drove a 53 percent increase in revenue for the government sector, driven mainly by task orders awarded by the Army for projects in Afghanistan, according to Fluor’s filings with the Securities and Exchange Commission.

Fluor also saw an increase in work for the Savannah River Site Management and Operating Project funded by the economic stimulus law.

A civilian high-profile win feeding Fluor’s fortunes came last August, when the company was awarded a contract to clean up the Portsmouth Gaseous Diffusion Plant in Pike County, Ohio. The estimated value of the deal is $2.1 billion over 10 years, which includes an initial five-year period plus a potential five-year extension.

The Portsmouth site is a 3,778-acre federal reservation built in the early 1950s as part of the nation's nuclear weapons complex and enriched uranium from 1954 until 2001. Although limited cleanup has been underway since the 1990s, this is the first at the Portsmouth site to include decontamination and decommissioning of three massive uranium enrichment process buildings. The buildings each have a footprint of more than 30 acres, and contain thousands of stages of uranium enrichment equipment.

According to Stanski, Fluor is aligning itself with what it sees as the federal government’s continued emphasis on the purchasing of support services: competencies government agencies demand even when money is scarce.

“We in a unique position. We can reach back into a very broad commercial organization for what government needs,” he said. “That’s what’s fueling our growth and energizing us.”

Having a broad international reach doesn’t hurt. For example, Fluor has been a major player in Australia's engineering and construction industry for nearly 60 years, with three office locations on that continent – in Perth, Brisbane and Melbourne – and more than 1,300 employed in a variety of oil and gas, mining, industrial, maintenance and operations, and infrastructure projects.

“We’ve very much in a growth mode,” Stanski said. “That growth comes from having people that [customers] need – to bid them in and sell them. We’re very much in a hiring mode.”

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