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    secresponse_2011jan19.htm

January 20, 2011

Mr. Rufus Decker

Accounting Branch Chief

U.S. Securities and Exchange Commission

100 F Street, N.E., Mail Stop 7010

Washington, D.C. 20549

RE:     Orion ·Marine Group, Inc.

            Form 10-K for the Year Ended December 31, 2009

            Forms 10-Q for the Periods Ended March 31, 2010, June 30, 2010 and September 30, 2010

            Definitive Proxy Statement on Schedule 14A filed on April 12, 2010

            Form 8-K filed July 1, 2010

            File No. 1-33891

Dear Mr. Decker:

Orion Marine Group, Inc., (the “Company”) hereby responds to the comments received by facsimile on December 23, 2010 from the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”).  For your convenience and as requested, the Company’s responses are prefaced by the exact text of the Staff’s corresponding comment, which in each case is set forth in bold text.

FORM l0-K FOR THE YEAR ENDED DECEMBER 31, 2009

Management's Discussion and Analysis of Financial Condition and Results of Operations

Critical Accounting Policies

Long-Lived Assets, page 29

1.

In the interest of providing readers with a better insight into management's judgments in accounting for long-lived assets, including property and equipment, please disclose the: following in your future filings:

How you group long-lived assets for impairment and your basis for that determination;

Please disclose how you determine when property, plant and equipment should be tested for impairment and how frequently you evaluate the types of events and circumstances that may indicate impairment;

Sufficient information to enable a reader to understand what method you apply in estimating the fair value of your long-lived assets; and

For any asset groups for which the carrying value was close to the fair value, please disclose the carrying value of the asset groups.

Please show us in your supplemental response what the revisions will look like.

Response:  The Company’s long-lived assets consist primarily of equipment used in its operations.  We review the carrying value of our equipment for impairment when events or changes in circumstances, such as poor utilization or physical condition of the asset indicate that the carrying value may not be recoverable.   We estimate the fair value of the equipment through known outside market transactions and our own expertise in the industry.  We assess whether future undiscounted net cash flows generated by the assets exceed the recorded carrying value to determine if impairment is indicated.

The following excerpt from our Annual Report on Form 10-K for the year ended December 31, 2009 revises our description of long-lived assets to apply the Staff’s comments to our future filings:

Our long-lived assets, which consist primarily of equipment used in our operations are grouped according to type and estimated useful life.  Fixed assets are carried at cost and are depreciated over their estimated useful lives, ranging from one to thirty years, using the straight-line method for financial reporting purposes and accelerated methods for tax reporting purposes. The carrying value of our long-lived assets is evaluated periodically based on utilization of the asset and physical condition of the asset, as well as the useful life of the asset to determine if adjustment to the depreciation period or the carrying value is warranted. If events and circumstances such as poor utilization or deteriorated physical condition indicate that the asset(s) should be reviewed for possible impairment, we use projections to assess whether future cash flows, including disposition, on a non-discounted basis related to the tested assets are likely to exceed the recorded carrying amount of those assets to determine if impairment exists.  If we identify a potential impairment, we will estimate the fair value of the asset through known market transactions of similar equipment and other valuation techniques, and could include the use of similar projections on a discounted basis. We will report a loss to the extent that the carrying value of the impaired assets exceeds their fair values. At December 31, 2009, there were no indicators of impairment for our asset groups.

Goodwill, page 29

2.

In the interest of providing readers with a better insight into management's judgments in accounting for goodwill, please revise your future filings to disclose how you determined the reporting unit(s) to which your goodwill applies. If any of your reporting units have estimated fair values that are not substantially in excess of the carrying value and to the extent that goodwill for these reporting units, in the aggregate or individually, could materially impact your operating results, please provide the following disclosures for each of these reporting units in future filings:

Identify the reporting unit:

The percentage by which fair value exceeds the carrying value as of the most-recent step-one test;

The amount of goodwill;

A description of the assumptions that drive the estimated fair value;

A discussion of the uncertainty associated with the key assumptions. For example, assuming you use a discounted cash flow model, to the extent that you have included assumptions in your discounted cash flow model that materially deviates from your historical results, please include a discussion of these assumptions; and

A discussion of any potential events and/or circumstances that could have a negative effect on the estimated fair value.

If you have determined that the estimated fair value substantially exceeds the carrying value for all of your reporting units, please disclose this determination.  Please refer to Item 303 of Regulation S-K and Sections 216 and 501.14 of the Financial Reporting Codification for guidance. Please show us in your supplemental response what the revisions to your future filings will look like.

Response:  The following excerpt from our Annual Report on Form 10-K for the year ended December 31, 2009 revises our discussion of goodwill to apply the Staff’s comments to our future filings:

Goodwill recorded on our Consolidated Balance Sheets is subject to impairment testing at least annually or more frequently if events or circumstances indicate that the asset more likely than not may be impaired.  We evaluate goodwill at the reporting unit level.  We have determined that we have two reporting units, which are based on geography, and are referred to internally as “East Coast” and “Gulf Coast”.  Each reporting unit conducts similar business as described in this Annual Report on Form 10-K, which includes marine construction specialty services.   This reporting unit grouping reflects our internal management structure, which is based on the geographic location of our primary field offices.  The operations of each reporting unit share in the benefits of goodwill created by our acquisitions.

At December 31, 2009, goodwill totaled $12.0 million, of which $2.5 million related to the Gulf Coast, and $9.6 million resulted from the acquisition of equipment on the East Coast in 2008.

We assess the fair value of our two reporting units based on a weighted average of valuations based on market multiples, discounted cash flows, and consideration of our market capitalization.  The key assumptions used in the discounted cash flow valuations are discount rates and perpetual growth rates applied to cash flow projections.  Also inherent in the discounted cash flow valuation models are past performance, projections and assumptions in current operating plans, and revenue growth rates over the next five years.  These assumptions contemplate business, market and overall economic conditions.   We also consider assumptions that market participants may use.

As required by the Company’s policy, annual impairment tests of goodwill are performed during the fourth quarter of each year or when circumstances arise that indicate a possible impairment might exist.  Based on this testing, we determined that the estimated fair value of our reporting units substantially exceeded their respective carrying values as of October 31, 2009, goodwill was not impaired, and no events have occurred since that date that would require an interim impairment test.  In the future, our estimated fair value could be negatively impacted by deteriorating economic conditions, which may reduce our revenue growth potential.

Current Year - Year Ended December 31, 2009 compared with Year Ended December 31, 2008, page 31

3.

We note that your discussion does not fully discuss the factors that led to the changes in various line items from period-to-period, and does not quantify these factors when they are provided. For example, you state that the increase in revenue in 2009 was attributable, in part, to expansion of your dredging capabilities in 2008 and to progress schedules and rates of completion of the contracts in progress in 2009, but you do not quantify any of these factors. In addition, you note that your mix of projects shifted toward the public sector.  Without further disclosure, it is unclear how the shift from the private to public sector contributed to the increase 'in revenue. Similarly, we note that it is unclear what led to the increase in your gross profit and gross margin, as you only discuss factors that negatively impacted gross margin. These are just examples. In future filings, please identify the factors leading to the changes in your line items from period-to-period, and quantify these factors where possible. Further, please discuss whether you believe these factors are the result of a trend and, if so, whether you expect it to continue and how it may impact revenues, income from continuing operations, your planned acquisitions, your available liquidity, or any other factors. See Item 303 of Regulation S-K and SEC Release No. 33-8350.

Response:  In future filings, the Company will expand its discussion of changes in various income statement line items to more clearly identify and quantify factors leading to changes in line items from period-to-period and provide more management insight into the future impact of any trends identified.

Controls and Procedures, page 37

4.

We note that your principal executive officer and principal financial officer concluded that your disclosure controls and procedures were effective as of the end of the period covered by your Form 10-K. However, you state that your "disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in [y]our reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms." In future filings, revise to clarify, if true, that your officers concluded that your disclosure controls and procedures were effective at the reasonable assurance level.

Response:  In future filings, the Company will conform its language to clearly state that its disclosure controls and procedures were effective at the reasonable assurance level, if true.

Financial Statement

8.  Property and Equipment, page F-17

5.

In future filings, please disclose the line item(s) in which you include depreciation and amortization, as well as amounts included in each line item for each period presented. If you do not allocate depreciation and amortization to cost of contract revenues, please revise your presentation on the face of your statements of income and throughout the filing to comply with SAB Topic 11:B.  Please show us in your supplemental response what the revisions will look like.

Response:  In future filings, the Company will disclose the line items in which depreciation and amortization is included, as illustrated in the excerpt from our 2009 Annual Report on Form 10-K, which has been revised to apply the Staff’s comments below:

For the years ended December 31, 2009, 2008 and 2007 depreciation expense was $15.5 million, $14.7 million, and $12.4 million, respectively, substantially all of which is included in the cost of contract revenue in the Company’s Consolidated Statements of Income with the remaining included in selling, general and administrative expenses.  The assets of the Company are pledged as collateral for the Company’s line of credit.

6.

You had construction in progress of $14.4 million as of December 31, 2009.  If accounts payable contains any additions to your property and equipment assets, please revise your future filings to disclose in a footnote the related amounts as of each balance sheet date. Please supplementally confirm you do not include these amounts in cash used by investing activities until the subsequent period in which the cash payment is made.

Response:  In future filings, the Company will disclose in a footnote any additions to property and equipment assets which may remain unpaid at the balance sheet date, if true and will ensure these amounts (if any) are not included in cash used by investing activities until the period in which payment is made.

Exhibit Index

7.

We note your disclosure that, unless otherwise noted, all exhibits are incorporated by reference to your Registration Statement on form S-1 filed on August 2007.  However, we note that you exhibit index lists various employment agreements entered into with you executive officers in December 2009. In future filings, please include a reference to the current reports on Form 8-K or other reports pursuant to which such agreements were filed as exhibits,

Response:  In future filings, the Company will include the proper references to reports in which such agreements and exhibits were filed.

Certifications

8.

We note that in paragraphs 4 and 5 you have deleted the "(s)" following "certifying officer(s)" and that you reference "153-15(f)" instead of l5d-15(f) in paragraph 4. In future filings, please file your certifications exactly as set forth in Item 601(b)(31)(i) of Regulation S-K. Please also comply with this comment in all future quarterly reports.

Response:  In all future filings, the Company will file its certifications exactly as set forth in Item 601(b)(31)(i) of Regulation S-K.

FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 2010

General

9.

Please address the comments above in your interim filings as well.

Response:  The Company will address the comments above in its future filings.

3. Acquisition of T.W. LaQuay Dredging, LLC and assets purchased by Northwest Marine Construction, page 10

10.

In future filings, please revise your business acquisition note to disclose the amount of goodwill that is expected to be deductible for tax purposes. See ASC 805-30-50-1(d).

Response:  The Company will address the comments above in its future filings.

11.

You indicate that on February 11, 2011, you purchased several heavy civil marine Construction equipment items for a purchase price of approximately $7.0 million.  You disclosed that you recorded these assets at fair value in accordance with ASC 820.  Please address the following:

Clarify if you acquired these items for cash of $7 million or if this was a non-monetary transaction.  Explain the specific aspects of the transaction which caused you to record the purchase of these assets at fair value instead of at cost;

You indicate that based on your preliminary valuation of these assets, you have recognized a gain of approximately $2.2 million. Please tell us how you determined that it was appropriate to record a gain as a result of this transaction.  Please cite the accounting literature used to support your conclusions; and

Tell us how you considered the provisions of ASC 805-50-30 in determining your accounting treatment.

Response:  The Company acquired marine construction equipment on February 11, 2010 for $7 million in cash.  The Company followed the guidance of A