<PAGE>

                                                                   Exhibit 10.12

                       FLUOR CORPORATION AND SUBSIDIARIES
                                MANAGEMENT MANUAL

Section:          Human Resources             Directive:            460
                                                                    Page 1 of 8
Subject:          EXECUTIVE SEVERANCE PLAN    Effective:            10/27/03

Applies To:       Fluor Corporation           Supersedes:           12/31/02

OBJECTIVE

To provide severance compensation to eligible executives of Fluor Corporation
and designated subsidiaries collectively, the "company", who leave the company,
depending on the circumstances and conditions leading to termination.

ELIGIBILITY

Executives of Fluor Corporation and designated subsidiaries actively at work who
are participants in the Fluor Corporation and Subsidiaries Executive Incentive
Compensation Plan and who execute the required settlement and release agreement
in exchange for the severance.

DEFINITIONS

For the purpose of the Plan, the following definitions apply:

         A.       VOLUNTARY SEPARATION

                  Action taken by an executive for personal reasons, to seek
                  other employment, to accept another position, for failure to
                  return at conclusion of leave, or to voluntarily retire.

         B.       INVOLUNTARY SEPARATION

                  1.       Action taken by the company due to reduction in force
                           resulting from reorganization or reduced workload or
                           other similar circumstances whereby the executive's
                           services are no longer required on the job.
                           Executives involuntarily separated who meet the
                           retirement criteria may elect retirement.

                  2.       Action taken by the company when an executive has a
                           qualifying disability under the Americans with
                           Disabilities Act, or a similar disability statute,
                           and is unable to perform his/her essential job
                           functions with or without reasonable accommodation.

-------------------
This Fluor Corporation policy is subject to modification or revision in part or
in its entirety to reflect changes in conditions subsequent to the effective
date of this policy.

<PAGE>

                                                                   Exhibit 10.12

                       FLUOR CORPORATION AND SUBSIDIARIES
                                MANAGEMENT MANUAL

Section:          Human Resources             Directive:            460
                                                                    Page 2 of 8
Subject:          EXECUTIVE SEVERANCE PLAN    Effective:            10/27/03

Applies To:       Fluor Corporation           Supersedes:           12/31/02

         C.       INVOLUNTARY DISCHARGE

                  Action taken by the company for reasons other than stated in
                  Paragraph B. above including but not limited to absenteeism,
                  misconduct, insubordination, appearing at work under the
                  influence of a controlled substance or alcohol, unethical
                  behavior, disclosure of confidential information, sexual
                  harassment, employment discrimination, unsatisfactory
                  performance, or violation of any company policy.

         D.       OFFICER

                  An executive who is a vice president or above of Fluor
                  Corporation, Fluor Enterprises Inc., or Fluor Constructors,
                  Inc., who participates in the Fluor Corporation and
                  subsidiaries Executive Incentive Compensation Plan.

         E.       COMPLETED YEARS OF ACCUMULATED SERVICE

                  A period of accumulated service with the company, subject to
                  the limitation set forth under Procedure, A.4.c.

         F.       BENEFICIARY

                  The beneficiary designated by the executive under the Fluor
                  Corporation Employee's Retirement Plan, or, if no such
                  designation has been made, then as designated under the Group
                  Life/Health Insurance Plan unless the executive otherwise
                  makes a beneficiary designation on the form provided by the
                  executive's corporate employer, or, in the absence of any
                  designation, the administrator or executor of the executive's
                  estate.

PROCEDURE

         A.       SEVERANCE PAY

                  1.       Voluntary Separation

-------------------
This Fluor Corporation policy is subject to modification or revision in part or
in its entirety to reflect changes in conditions subsequent to the effective
date of this policy.

<PAGE>

                                                                   Exhibit 10.12

                       FLUOR CORPORATION AND SUBSIDIARIES
                                MANAGEMENT MANUAL

               The company will not provide severance pay nor prorated Incentive
               Compensation (Paragraph A under "Definitions").

Section:          Human Resources             Directive:            460
                                                                    Page 3 of 8
Subject:          EXECUTIVE SEVERANCE PLAN    Effective:            10/27/03

Applies To:       Fluor Corporation           Supersedes:           12/31/02

                  2.       Involuntary Separation

                           Severance pay will be based on current base salary
                           and total completed years of accumulated service as
                           follows:

                           a.       Officers

                                    1.       Two weeks' severance pay for each
                                             completed year of accumulated
                                             service up to 52 weeks.

                                    2.       Minimum eight weeks' severance.

                           b.       Non-Officer Executives

                                    1.       Two weeks' severance pay for each
                                             completed year of accumulated
                                             service up to 26 weeks.

                                    2.       Minimum four weeks' severance.

                  3.       Involuntary Discharge

                           a.       The company will not provide severance pay
                                    nor consider proration of Incentive
                                    Compensation (Paragraph C, Definitions).

                  4.       Limitations

                           a.       Maximum severance pay will be 52 weeks for
                                    officers, 26 weeks for non-officer
                                    executives.

                           b.       Minimum severance pay will be eight weeks
                                    for officers, four weeks for non-officer
                                    executives.

                           c.       The total completed years of accumulated
                                    service calculated for a severance payment
                                    may only be used one time in severance
                                    calculations.

                           d.       For executives involuntarily separated and
                                    placed on Leave of Absence in Lieu of
                                    Layoff, severance pay will be based on
                                    completed years of accumulated service up to
                                    the effective date of the Leave of Absence.

                           e.       Officers in policy making positions who meet
                                    retirement criteria will receive severance
                                    pay as follows:

-------------------
This Fluor Corporation policy is subject to modification or revision in part or
in its entirety to reflect changes in conditions subsequent to the effective
date of this policy.

<PAGE>

                                                                   Exhibit 10.12

                       FLUOR CORPORATION AND SUBSIDIARIES
                                MANAGEMENT MANUAL

Section:          Human Resources             Directive:            460
                                                                    Page 4 of 8
Subject:          EXECUTIVE SEVERANCE PLAN    Effective:            10/27/03

Applies To:       Fluor Corporation           Supersedes:           12/31/02

                                    1.       Officers who meet the minimum
                                             retirement income requirement set
                                             forth by federal law, excluding any
                                             amount payable under this Plan,
                                             will receive severance pay for only
                                             the period from the date of
                                             termination until January 2
                                             following the officer's 65th
                                             birthday subject to the limitation
                                             set forth under Procedure, A.2.a.

                                    2.       Officers who do not meet the
                                             minimum retirement income
                                             requirement set forth by federal
                                             law, computed excluding any amount
                                             payable under this Plan, will
                                             receive severance pay as determined
                                             under Procedure, A.2.a.

                           f.       In the case of involuntary separation due to
                                    an executive's inability to perform his/her
                                    essential job functions with reasonable
                                    accommodation, the executive's severance pay
                                    amount will be reduced by the expected
                                    entitlements under Fluor's short-term and
                                    long-term disability for the number of weeks
                                    determined under Procedure A.2.a and b. If
                                    the actual entitlements received by the
                                    employee are less than that deducted from
                                    severance pay, the employee will be paid the
                                    difference for the period of weeks for which
                                    the employee received severance. This
                                    provision is not intended to affect any
                                    state or federal benefits to which the
                                    executive may be entitled.

                           g.       In cases where the executive is entitled to
                                    legislated severance pay in non-U.S.
                                    countries, executive's severance pay amount
                                    will be reduced by any legislated severance
                                    payments required of the company that are
                                    calculated with reference to the number of
                                    weeks determined under Procedure A.2.a and
                                    b.

                  5.       Severance pay will be paid in a lump sum, or at the
                           discretion of the company, annual installments over a
                           period not to exceed the total number of weeks
                           determined under Paragraph A.2.a. and b. above.

                  6.       In event of an executive's death prior to payment of
                           the entire entitlement, payment may be made to the
                           designated beneficiary in one lump sum or by
                           continuation of installments at the discretion of the
                           executive's corporate employer.

-------------------
This Fluor Corporation policy is subject to modification or revision in part or
in its entirety to reflect changes in conditions subsequent to the effective
date of this policy.

<PAGE>
                                                                   Exhibit 10.12


                       FLUOR CORPORATION AND SUBSIDIARIES
                               MANAGEMENT MANUAL

Section:          Human Resources             Directive:            460
                                                                    Page 5 of 8
Subject:          EXECUTIVE SEVERANCE PLAN    Effective:            10/27/03

Applies To:       Fluor Corporation           Supersedes:           12/31/02

         B.       INCENTIVE COMPENSATION

                  (As defined in the Executive Incentive Compensation Plan,
                  Fluor Corporation and Subsidiaries Management Manual)

                  1.       Voluntary Separation

                           The company will not provide a prorated incentive
                           award.

                  2.       Involuntary Separation

                           Incentive Compensation may be considered based on the
                           number of completed months of service during the
                           current fiscal year prior to termination and
                           consistent with the administration of the Plan during
                           the year of termination.

                3.    Involuntary Discharge

                      The company will not provide a prorated incentive award.

         C.       COMPANY AUTOMOBILES

                      In company locations where officers/directors may be
                      assigned company-owned automobiles, the following will
                      apply:

                  a.       Voluntary Separation

                           Officers/directors who voluntarily retire will be
                           presented with the automobile that is currently
                           assigned as a gift.

                  b.       Involuntary Separation

                           Officers/directors who are requested to take early
                           retirement will be presented with the automobile
                           which is currently assigned as a gift.

-------------------
This Fluor Corporation policy is subject to modification or revision in part or
in its entirety to reflect changes in conditions subsequent to the effective
date of this policy.

<PAGE>

                                                                   Exhibit 10.12

                       FLUOR CORPORATION AND SUBSIDIARIES
                                MANAGEMENT MANUAL

Section:          Human Resources             Directive:            460
                                                                    Page 6 of 8
Subject:          EXECUTIVE SEVERANCE PLAN    Effective:            10/27/03

Applies To:       Fluor Corporation           Supersedes:           12/31/02

                  c.       Involuntary Discharge

                           Officers/directors will not be given an automobile,
                           and it will not be available for purchase.

         D.       CLUB MEMBERSHIP

                  Company memberships will not be awarded to an executive
                  regardless of reason for termination.

         E.       AUTOMOBILE ALLOWANCE

                  1.       In locations where executives receive a car
                           allowance/insurance, the following will apply:

                           a.       Voluntary Separation

                                    The company will not provide a car
                                    allowance/insurance.

                           b.       Involuntary Separation

                                    The company will not provide a car
                                    allowance/insurance.

                           c.       Involuntary Discharge

                                    The company will not provide a car
                                    allowance/insurance.

         F.       INSURANCE COVERAGE

                  Applicable insurance coverage, i.e., group health, long-term
                  disability, executive health, etc., will cease on date of
                  termination. Where applicable, departing executive may elect
                  continued coverage through the Consolidated Omnibus Budget
                  Reconciliation Act (COBRA).

-------------------
This Fluor Corporation policy is subject to modification or revision in part or
in its entirety to reflect changes in conditions subsequent to the effective
date of this policy.

<PAGE>

                                                                   Exhibit 10.12

                       FLUOR CORPORATION AND SUBSIDIARIES
                                MANAGEMENT MANUAL

Section:          Human Resources             Directive:            460
                                                                    Page 7 of 8
Subject:          EXECUTIVE SEVERANCE PLAN    Effective:            10/27/03

Applies To:       Fluor Corporation           Supersedes:           12/31/02

         G.       TIME OFF WITH PAY (TOWP) PROGRAM

                  Balance will be paid at time of termination.

         H.       STOCK BASED AWARDS

                  1.       Voluntary Separation

                           Upon qualified retirement, awards may become 100
                           percent vested.

                  2.       Involuntary Separation

                           Upon qualified retirement, awards may become 100
                           percent vested.

                  3.       Involuntary Discharge

                           Vested portion may be exercised.

         I.       LONG TERM INCENTIVE (LTI) PROGRAM

                  Applicable cash awards under the long-term incentive program
                  will not be prorated for any reason, except death or total and
                  permanent disability.

         J.       WAIVERS

                  A settlement agreement and release form must be obtained from
                  employees in exchange for severance benefits. No severance
                  benefit will be due employees unless a settlement and release
                  agreement provided by the company has been properly and timely
                  executed.

         K.       OUTPLACEMENT

                  In-house outplacement services are available.

-------------------
This Fluor Corporation policy is subject to modification or revision in part or
in its entirety to reflect changes in conditions subsequent to the effective
date of this policy.

<PAGE>

                                                                   Exhibit 10.12

                       FLUOR CORPORATION AND SUBSIDIARIES
                                MANAGEMENT MANUAL

Section:          Human Resources             Directive:            460
                                                                    Page 8 of 8
Subject:          EXECUTIVE SEVERANCE PLAN    Effective:            10/27/03

Applies To:       Fluor Corporation           Supersedes:           12/31/02

         L.       PLAN TERMINATION

                  This Plan will expire December 31, 2006. Any executive whose
                  employment terminates after the Plan expires, will not be
                  eligible for participation in the Plan. Further, no benefits
                  will accrue or be payable under the Plan after Plan
                  Termination.

         M.       EXCEPTION

                  Approved by the Chief Executive Officer of Fluor Corporation.

-------------------
This Fluor Corporation policy is subject to modification or revision in part or
in its entirety to reflect changes in conditions subsequent to the effective
date of this policy.