Boeing Wins $2.1 Billion P-8A Poseidon Defense Contract

Will supply U.S. Navy with 16 of its new anti-submarine warfare aircraft.

Feb 25, 2014 at 10:47PM

The Department of Defense awarded 11 separate defense contracts Tuesday, worth a total of $2.375 billion. One single contract, however, consumed 87% of the funds on offer -- and Boeing (NYSE:BA) won it.

Boeing's award, a contract modification worth $2.07 billion, exercises an option on an underlying contract, and instructs Boeing to supply the U.S. Navy with 16 P-8A Poseidon Multi-mission Maritime Aircraft from Full-Rate Production Lot I of the aircraft. Additionally, Boeing will supply 16 Ancillary Mission Equipment kits for the aircraft. Delivery of the aircraft is due April 2017.

Boeing's contract win with the Navy follows an announcement by the Prime Minister of Australia last week, confirming that the Australian Defence Force will purchase just half as many Poseidons from Boeing for a price nearly twice as large -- $3.6 billion. Australia's purchase price, however, presumably includes the cost of maintaining and servicing the aircraft over some term of years.

Boeing's Poseidon has been the subject of some controversy here in the U.S. in recent weeks. Last month, a report by the Pentagon's director of operational testing and evaluation suggested that the Poseidon was failing to live up to its promises, and exhibited "major deficiencies" in its ability to perform reconnaissance and anti-submarine warfare missions while on deployment to Japan last year. The plane's defenders quickly leapt to its defense, however, with Undersecretary of Defense for acquisition, technology, and logistics Frank Kendall, for example, insisting that for all its flaws, the plane is still a "good product."

Boeing's P-8A Poseidon. Source: U.S. Navy.

Rich Smith and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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