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Commitments and Contingencies | 3 Months Ended
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Dec. 31, 2016
Commitments and Contingencies |
Commitments and Contingencies | 14.Commitments and Contingencies The Company records amounts representing its probable estimated liabilities relating to claims, guarantees, litigation, audits and investigations. The Company relies in part on qualified actuaries to assist it in determining the level of reserves to establish for insurance-related claims that are known and have been asserted against it, and for insurance-related claims that are believed to have been incurred based on actuarial analysis, but have not yet been reported to the Company’s claims administrators as of the respective balance sheet dates. The Company includes any adjustments to such insurance reserves in its consolidated results of operations. The Company’s reasonably possible loss disclosures are presented on a gross basis prior to the consideration of insurance recoveries. The Company does not record gain contingencies until they are realized. In the ordinary course of business, the Company may not be aware that it or its affiliates are under investigation and may not be aware of whether or not a known investigation has been concluded. In the ordinary course of business, the Company may enter into various arrangements providing financial or performance assurance to clients, lenders, or partners. Such arrangements include standby letters of credit, surety bonds, and corporate guarantees to support the creditworthiness or the project execution commitments of its affiliates, partnerships and joint ventures. Performance arrangements typically have various expiration dates ranging from the completion of the project contract and extending beyond contract completion in certain circumstances such as for warranties. The Company may also guarantee that a project, when complete, will achieve specified performance standards. If the project subsequently fails to meet guaranteed performance standards, the Company may incur additional costs, pay liquidated damages or be held responsible for the costs incurred by the client to achieve the required performance standards. The potential payment amount of an outstanding performance arrangement is typically the remaining cost of work to be performed by or on behalf of third parties. Generally, under joint venture arrangements, if a partner is financially unable to complete its share of the contract, the other partner(s) may be required to complete those activities. At December 31, 2016 and September 30, 2016, the Company was contingently liable in the amount of approximately $464.9 million and $474.5 million, respectively, in issued standby letters of credit and $3.6 billion and $3.3 billion, respectively, in issued surety bonds primarily to support project execution. In the ordinary course of business, the Company enters into various agreements providing financial or performance assurances to clients on behalf of certain unconsolidated partnerships, joint ventures and other jointly executed contracts. These agreements are entered into primarily to support the project execution commitments of these entities. In addition, in connection with the investment activities of AECOM Capital, the Company provides guarantees of certain obligations, including guarantees for completion of projects, repayment of debt, environmental indemnity obligations and acts of willful misconduct. DOE Deactivation, Demolition, and Removal Project Washington Group International, an Ohio company (WGI Ohio), an affiliate of URS, executed a cost-reimbursable task order with the Department of Energy (DOE) in 2007 to provide deactivation, demolition and removal services at a New York State project site that, during 2010, experienced contamination and performance issues and remains uncompleted. In February 2011, WGI Ohio and the DOE executed a Task Order Modification that changed some cost-reimbursable contract provisions to at-risk. The Task Order Modification, including subsequent amendments, requires the DOE to pay all project costs up to $106 million, requires WGI Ohio and the DOE to equally share in all project costs incurred from $106 million to $146 million, and requires WGI Ohio to pay all project costs exceeding $146 million. Due to unanticipated requirements and permitting delays by federal and state agencies, as well as delays and related ground stabilization activities caused by Hurricane Irene in 2011, WGI Ohio has been required to perform work outside the scope of the Task Order Modification. In December 2014, WGI Ohio submitted claims against the DOE pursuant to the Contracts Disputes Acts seeking recovery of $103 million, including additional fees on changed work scope. Due to significant delays and uncertainties about responsibilities for the scope of remaining work, final project completion costs and other associated costs may exceed $100 million over the contracted amounts. In addition, WGI Ohio assets and liabilities, including the value of the above costs and claims, were also measured at their fair value on October 17, 2014, the date AECOM acquired WGI Ohio’s parent company, see Note 3, which has been reevaluated to account for developments pertaining to this matter. WGI Ohio can provide no certainty that it will recover the DOE claims and fees submitted in December 2014, as well as any other project costs after December 2014 that WGI Ohio may be obligated to incur including the remaining project completion costs, which could have a material adverse effect on the Company’s results of operations. DOE Hanford Nuclear Reservation URS Energy and Construction, Washington River Protection Solutions LLC and Washington Closure Hanford LLC (collectively the URS Affiliates) perform services under multiple contracts (including under the Waste Treatment Plant contract, the Tank Farm contract and the River Corridor contract) at the DOE’s Hanford nuclear reservation that have been subject to various government investigations or litigation matters:
| · |  | Waste Treatment Plant government investigation and litigation: The federal government has conducted an investigation into the Company’s affiliate, URS Energy & Construction, a subcontractor on the Waste Treatment Plant, regarding contractual compliance and various technical issues in the design, development and construction of the Waste Treatment Plant. On November 23, 2016, a qui tam civil lawsuit entitled United States ex rel. Brunson, Busche, and Tamosaitis v. Bechtel National, Inc., Bechtel Corp., URS Corp., and URS Energy & Construction was unsealed against Bechtel and URS Energy & Construction in the U.S. District Court for the Eastern District of Washington alleging false statements and claims related to the design, development and construction of the Waste Treatment Plant from January 2001 until June 2013, a period which occurred before AECOM’s acquisition of URS Corporation and its affiliates in October 17, 2014. URS Energy & Construction is a subcontractor to Bechtel, the prime contractor of the Waste Treatment Plant contract. On November 22, 2016, Bechtel and URS Energy & Construction settled with the federal government to fully resolve the dispute without admitting liability, with URS Energy & Construction agreeing to pay $57.5 million (plus accrued interest and the relators attorneys’ fees). As a result of this settlement, the Company recorded a net benefit of approximately $35 million, which is reflected as a reduction in cost of revenue.
| · |  | Tank Farms government investigation: The federal government conducted an investigation of the Company’s joint venture, Washington River Protection Solutions LLC, regarding the failure to comply with time keeping and internal audit requirements. On January 23, 2017, Washington River Protection Solutions LLC settled this matter without admitting liability for $5.3 million, which did not have a material impact to the financial statements.
| · |  | River Corridor litigation: The federal government has partially intervened with a relator in a qui tam complaint filed in the Eastern District of Washington in December 2013 against the Company’s joint venture, Washington Closure Hanford LLC, alleging that its contracting procedures under the Small Business Act violated the False Claims Act. On October 2015, Washington Closure Hanford LLC’s motion to dismiss the claim was partially denied. Prior to the commencement of discovery, the matter was stayed pending the United States Supreme Court’s decision in Universal Health Services v. United States ex rel. Escobar, which was rendered in June 2016. The matter resumed in November of 2016, and is now in discovery.
The URS Affiliates periodically reevaluate the estimated fair value of liabilities assumed from URS Corporation, including the legal related liabilities described above and in Note 3, to account for developments related to the Hanford matters. Washington Closure Hanford LLC disputes the River Corridor matter and intends to continue to defend this ongoing matter vigorously. Washington Closure Hanford LLC cannot provide assurances that it will be successful in its defense efforts. The potential range of loss and any difference from the current accrual cannot be reasonably estimated at this time, primarily because the matter involves complex and unique regulatory issues; the matter contains multiple parties; the matter involves conflicts of law between local, state and federal regulations; there is substantial uncertainty regarding any alleged damages; and the matter is in an intermediary stage of litigation. Securities Litigation Matter On September 1, 2016, an AECOM stockholder, filed a securities class action complaint in the United States District Court for the Central District of California alleging that the Company and its senior executives made materially false and misleading statements in violation of the federal securities laws. The Company believes the complaint is without merit and intends to vigorously defend against it. While no assurance can be given as to the ultimate outcome of this action, the Company believes that the final resolution of this action will not have a material adverse effect on its consolidated financial position, results of operations, cash flows or ability to conduct business. World Bank Review - Asia The World Bank has conducted inspections of the accounts and records of two of our affiliates in connection with World Bank-financed contracts awarded to those affiliates in Asia. The affiliates have provided information and cooperation to the World Bank and are engaged in discussions with the World Bank to resolve issues arising out of the inspections. No assurance can be given as to the outcome of this matter, and it could result in sanctions against our affiliates.

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