Defense News Roundup: U.S. Navy Buys Billions of Dollars' Worth of New Warships

The U.S. military has a reputation as a somewhat secretive organization. But in one respect at least, the Pentagon is one of the most "open" of our government agencies. Every day of the week, rain or shine, the Department of Defense tells U.S. taxpayers what contracts it's issued, to whom, and for how much -- all right out in the open on its website.

So what has the Pentagon been up to this week?

DoD is budgeted to spend about $6.2 billion a week on military hardware, infrastructure projects, and supplies in fiscal 2014. (A further $5.6 billion a week goes to pay the salaries and benefits of U.S. servicemen and servicewomen.) So far this year, the Pentagon has awarded contracts worth approximately $20.33 billion -- including $4.57 billion in contracts announced this past week. That's about two-thirds under the budgeted amount.

And what did the generals get for their (read "our") money?

Lots of warships
On Monday, the U.S. Navy awarded Lockheed Martin (NYSE: LMT  ) and Austal (NASDAQOTH: AUTLY  ) -- builders of Littoral Combat Ships, or LCSes -- a total of $1.38 billion to begin construction on a series of four new LCSes. Austal, which is building its Independence-class trimaran LCSes in cooperation with General Dynamics (NYSE: GD  ) , will be building two new Independence-class vessels. Lockheed Martin will build two more of its own monohull design Freedom-class LCSes.

These contracts cover the construction of the basic seaframes on the ships, plus the cost of buying and installing some, but not all, of the vessels' electronics and weapons systems. Additional funds will be needed to complete the warships.


USS Independence. Photo: Wikimedia Commons.

Lots and lots of warships
General Dynamics won a separate contract Monday, worth $57 million, to prepare for "post-shakedown" work necessary to fix any problems revealed with the recently delivered nuclear attack submarine USS Minnesota, which it has already built for the Navy.

Lots and lots and lots of warships
And that's not all. Before the week was out, General Dynamics booked yet another warship contract win. On Friday, the Pentagon awarded the defense contractor $643 million to begin work on building a new Arleigh Burke-class (DDG 51) guided missile destroyer for the Navy. Simultaneously, the Navy gave a $602 million contract to GD-rival Huntington Ingalls (NYSE: HII  ) to build a second DDG 51. As with the LCS, the Navy is splitting awards for the construction of destroyers roughly 50-50 between the two main defense contractors bidding on the work.

Lots and lots and lots, and ... well, you get the picture
Just in case you haven't yet gotten the impression that this was a very good week for the U.S. Navy -- and the defense contractors that sell to it -- General Dynamics won yet another contract on Wednesday that bears mentioning. For $128 million, the company will be drafting plans and doing construction work on a new "Afloat Forward Staging Base" to be dubbed the USNS Lewis B. Puller (T-MLP-3 / T-AFSB-1). When complete, the vessel will be nearly as big as a full-fledged aircraft carrier, displacing 80,000 tons and offering the ability to deploy abroad, and base at sea, everything from U.S. Marines to special operations forces to disaster-relief specialists to clean up after a hurricane. 


Artist's conception of how USNS Lewis B. Puller (T-MLP-3) will look when complete. Source: Wikimedia Commons.

Opportunities on the horizon
So much for the contracts that everyone knows about. Now, let's move on to one contract that may not yet be incorporated into defense contractors' stock prices.

On Tuesday, we learned that the U.S. Defense Security Cooperation Agency has notified Congress of plans to sell the government of Pakistan a package of upgrades for that nation's fleet of C-130 transport aircraft. Assuming the contract is allowed to go forward, six Pakistani C-130s of the -B and -E configurations will upgrades to their avionics, engine management software and mechanical parts, cargo delivery systems, and outer wing sets for a total price of $100 million.

No principal contractor has yet been named for this work, but Lockheed, as the plane's manufacturer, would be a logical choice. Additionally, in its notification to Congress, DSCA pointed out that the five C-130B and 11 C-130E aircraft in Pakistan's air force are all "facing airworthiness and obsolescence issues, and will require upgrades and repairs for continued operation and effectiveness." This raises the possibility that after these first six planes are upgraded, additional upgrade work -- and additional revenues -- will be announced in the not-too-distant future.

This contract hasn't been officially announced yet, and isn't common knowledge. Thus, few investors are factoring the potential for additional revenues into their valuations for Lockheed Martin. Very few people know about it -- except that now, you do.

Thanks for all the great stock tips, Pentagon!
You don't always have to look far to find good investments. Sometimes, profiting from our increasingly global economy can be as easy as investing in your own backyard -- and the Pentagon's helpful habit of publishing all its contracts daily as they're awarded certainly makes that easier. Want to find more "easy to understand" investments? Read The Motley Fool's brand-new special report, The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love.


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  • Report this Comment On March 16, 2014, at 10:27 AM, marine1234 wrote:

    Lol chesty puller is getting a ship named after him!? He is one of the finest fighting men to ever grace this planet. You're welcome america, and he would probably walk straight up to whoever decided to name basically a cargo hauler after him and kick him in the balls! ! Lol chesty was a killer he deserves to have a killing machine named after him lol!

  • Report this Comment On March 16, 2014, at 10:39 AM, ddh1961 wrote:

    And who's gonna crew these new ships? All 5 branches are laying off tens of thousands of soldiers, sailors, and airmen in the current downsizing effort. Oh well, screw it- we're the military. We don't have to answer for poor management decisions, we just have to meet arbitrary budget goals set by our inept Congress. We'll worry about the shortage of experienced personnel later, we just want our Officer Evaluation Reports to look good for now...

  • Report this Comment On March 16, 2014, at 10:58 AM, Jerryjj wrote:

    On Tuesday, we learned that the U.S. Defense Security Cooperation Agency has notified Congress of plans to sell the government of Pakistan a package of upgrades for that nation's

    So, now the "Defense" department is selling to Pakistan ???????? Even tho they "have harbored" Bin Laden and the Taliban ??????

    ONLY in AMERIKA FOLKS

  • Report this Comment On March 16, 2014, at 11:44 AM, firefly61 wrote:

    I really don't think you can overspend when it comes to shipbuilding but I would rather see more money spent on submarines. That's where you can inflict some terminal damage on an enemy. I like the look of the litoral combat ship but don't really see whats the big deal about it. One gun and a couple of choppers?

  • Report this Comment On March 16, 2014, at 11:59 AM, alanzee wrote:

    we are gearing up !! China is flexing her muscle in ASIA Pacific...............

  • Report this Comment On March 16, 2014, at 12:02 PM, peterwolf wrote:

    "The Pentagon is one of the most "open" of our government agencies. Every day of the week, rain or shine, the Department of Defense tells U.S. taxpayers what contracts it's issued, to whom, and for how much -- all right out in the open.'

    Yup, it's a far cry from the black hole that is the welfare and 'education' budgets in this country. Those are just sink holes that have yielded nothing but government dependency for multiple generations of 'minorities' and have provided tens of thousands of useless government 'jobs' to oversee them. The result of all this?? Zero.

  • Report this Comment On March 16, 2014, at 12:04 PM, Paladin127 wrote:

    @Jerryjj - We actually sell weapons- hardware and software- to many countries the average American would view as being "the enemy". Egypt, Syria, Saudi Arabia, Yemen, China, Pakistan, Afghanistan, Iraq (except from 1991-2003), Lebanon, Turkey, et. al.

    We use these programs as incentives for them to remain somewhat docile. In places like Pakistan and Turkey, the governments are very pro-USA because of these assistance programs, even if most of the population thinks we're the Great Satan. We leverage that aide when we want their government to jump through hoops.

    As for Osama, keep in mind that the USA with it's VAST intelligence network took over 10 years to find him. Asking the Pakistanis to find him with a fraction of our technology and funding isn't realistic- especially if it's true there were sympathetic members of the ISI and Army who knew where he was and would tip him off if the Pakistani government was getting close.

    But please, don't let the reality of modern day politics affect your black-and-white analysis of the situation.

  • Report this Comment On March 16, 2014, at 12:07 PM, Waldo wrote:

    If you're going to waste money, what better way than to just throw into the open ocean. Some Admirals are wetting their pants right now.

  • Report this Comment On March 16, 2014, at 12:13 PM, Paladin127 wrote:

    @DDH1961 - Crews for the vessels will likely come from the surplus in manpower when the USN's cruiser's and Frigates get decommissioned over the coming decade. Today's Arleigh Burke class destroyers (especially the up-coming Flight III ships) can do pretty much everything a Ticonderoga class cruiser can so those designs are going the way of the battleship. Same with the few remaining Perry-class frigates. Their duties will be split between the new LCS ships and the new coast guard cutters.

    @Firefly61 - The LCS ship is meant to replace the aging Perry-class frigates in service. They will provide things like coastal defense and interdiction, search and rescue, anti-piracy / smuggling operations and special operations missions. For those types of missions, being small and fast is preferable to being big and having lots of weapons- especially the Special Operations side. Park a Nimitz class or an LHA off the coast of a country- someone is going to notice that. But a small, stealthy ship not much bigger than most Yachts? That has a much better chance of sneaking up close to a shoreline.

  • Report this Comment On March 16, 2014, at 12:39 PM, dogjudge wrote:

    This country has spent more money on defense than any other country in the world for over the last 40 years. No other country comes close.

    We have built more planes that didn't fly and planes that don't have a mission than any other country. We've had US Congressman fight to keep planes being built that couldn't fly and that the Department of Defense didn't want, but were built because the plant was in a Congressman's district.

    In WW II. The allies used to build dummy planes, etc. and have them sit on runways so that the nazis would think that we had more planes than we actually had. Right now, the US DOD would be building planes to fight those dummy planes if they were around.

    Want to talk about submarines?

    We are spending ourselves broke. How many ex-Congressmen, ex-admirals, and ex-generals are lobbyists for the defense industry?

    Some time watch when there's a discussion about eliminating bases in this country and watch politicians from both sides fighting for bases in their districts.

    Eisenhower was right and this country still doesn't get it.

    And before anyone goes there, USAF '67 to '71.

  • Report this Comment On March 16, 2014, at 1:05 PM, clloyd53 wrote:

    20.3 billion in contracts awarded equals about a trillion dollars by time the contracts are delivered. This is taxpayer money that the Obama administration is spending on union contractors. Just another way to enrich the wealthy even further. By driving the country deeper into debt. One day there will be a massive correction to our debt. But who cares. Those driving the debt now. Will be retired and gone by time the correction crashes the economy.

  • Report this Comment On March 16, 2014, at 1:13 PM, clernfimmel wrote:

    Thanks for the piece. In it's pursuit of the interests of the world's 1%, the US government has doubled it's military spending to since the bloodless coup in 2000. I'm guessing this doesn't include spending on the international surveillance state, which is secret.

    It's their empire, the 1% should pay for it. The American people don't seem to have a clue.

  • Report this Comment On March 16, 2014, at 1:42 PM, smilingdon wrote:

    "$6.2 billion a week on military hardware, infrastructure projects, and supplies in fiscal 2014"!

    We must be printing phony money 24/7! We absolutely cannot afford or support this!

    Someday this is all going to collapse on top of our heads,

  • Report this Comment On March 16, 2014, at 1:48 PM, Fight4Justice wrote:

    I am completely disgusted with the reckless waste of the US Government and the world wide Conglomerate elites who bought them. It is clear that with $17 trillion in debt and climbing that we will NEVER be capable of paying it back for which We the People own the majority of that debt. That said, it appears that the criminals who now own the US Government have decided to spend as much as possible while they still can and let the American people suffer the inevitable collapse of the dollar, the economy and even the basic needs infrastructure. There is really no way out, our destiny was sealed decades ago.

  • Report this Comment On March 16, 2014, at 1:50 PM, Fight4Justice wrote:

    It would seem that Obama has created his own branch of the military, Homeland Security. I fear the worst from this development.

  • Report this Comment On March 16, 2014, at 1:59 PM, Bolitoc wrote:

    Don't forget that USA's enemies has lots and lots and lots and lots of warships.

  • Report this Comment On March 16, 2014, at 2:10 PM, Cokamo wrote:

    With the missile technology available, sitting duck ships will become a thing of the past very shorty. What a waste of hard earned taxpayer money that could actually be used for something useful. .

  • Report this Comment On March 16, 2014, at 4:06 PM, Walterbag wrote:

    Why is the entire infrastructure CRUMBLING BENEATH OUR FEET?

    "Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. This is not a way of life at all in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron." -- Dwight D. Eisenhower

    before the existence of private central banking, there was no such thing as a world war.

    -----------------------------------

    We must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists, and will persist. We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals so that security and liberty may prosper together.

    – Dwight D. Eisenhower’s farewell address to the nation, 1961

  • Report this Comment On March 16, 2014, at 4:07 PM, Walterbag wrote:

    HANG the WAR PROFITEERS ..... there is plenty of precedence.

  • Report this Comment On March 16, 2014, at 4:15 PM, tclause wrote:

    good, peace through superior firepower

  • Report this Comment On March 16, 2014, at 4:42 PM, CPO02048 wrote:

    "On Friday, the Pentagon awarded the defense contractor $643 million to begin work on building a new Arleigh Burke-class (DDG 51) guided missile destroyer for the Navy."

    Not sure how accurate this article is seeing as 62 of the 75 planned Burke Class of DDGs have alreadsy been built and in service before Fri.

  • Report this Comment On March 16, 2014, at 4:59 PM, Pede39 wrote:

    FYI the Chinese launched a brand spanking new world class aircraft carrier late last year. They are planning on launching 6 more thru 2014, and yet more in 2015.

    If any country on this planet has the manpower and technology to spit them out that quickly, it's China.

    And THEIR people don't pizz and moan about every penny their government spends!

  • Report this Comment On March 16, 2014, at 5:30 PM, rdmcdonald48 wrote:

    We hear the DOD gets equipment that they do not want. In these times of economic hardship on the US taxpayer; why do they insist upon spending borrowed money to build hardware, while cutting manpower.

    In spite of their belief; computerized defense and attack systems are subject to unpredictable failure and cyber attacks. The human being is not.

  • Report this Comment On March 16, 2014, at 6:13 PM, Hammerhead wrote:

    More nails in the US coffin.

  • Report this Comment On March 16, 2014, at 7:56 PM, dangibson wrote:

    Congressman to his assistant -- ''did that contractor put the money in the offshore account yet?'' -- good -- now go ahead and make the announcement!!

  • Report this Comment On March 16, 2014, at 8:34 PM, ilsm50 wrote:

    When you add it all up the US spends about $1000B a year on wars, shiney toys and preparing for the last war. That includes $151B for the VA.

    Littoral Combat Ship is a cross between a minesweeper and a PT boat, it can do three different jobs but only one at once. To change missions requires extenive refit. Most use is patrolling Malaysia, or Vietnam.

    Arleigh Burke flight III 9500 ton destroyers are bring built because the Zumwalt class failed after 3 ships of welfare for the shipyards, and flight III will have no better than the outdated radar on the old frigates.

    USS Ford carrier has not settled on an outdated radar and its catapult is not ready for prime time. If it were not welfare for shipyards the ship would be scrapped.

    That is just navy waste Air Force is worse and Army almost as bad.

    The pentagon is so fouled up it cannot pass a financial audit so we think DoD has a third of the assets of the US government but no one can say how to "value" all the do overs and missed performance the pentagon buys with trillions of your money.

    Everyone is making money selling to eachother around the pentagon.

  • Report this Comment On March 16, 2014, at 9:44 PM, SailorE7 wrote:

    To Answer marine1234: "Chesty" Puller did have a fighting ship named in his honor. It was the USS Lewis B. Puller (FFG-23). It was the 15th ship in the Oliver Hazard Perry class frigate. I can understand why you didn't know, having been a marine you didn't have that information. I was a sailor for 23 yrs and served on USS Duncan (FFG 10), a sister ship to the Puller. Fair winds and following seas my marine friend.

  • Report this Comment On March 17, 2014, at 2:14 AM, Fyresquid wrote:

    The Puller is already under construction

  • Report this Comment On March 17, 2014, at 6:46 AM, marine1234 wrote:

    @Sailor ahh ok well thats better! Thank you for your service!

    And GOODNIGHT CHESTY where ever you are!

  • Report this Comment On March 17, 2014, at 9:21 AM, Grandpastu wrote:

    Why are we buying more ships? Have all the old ones sunk or is this just another scheme to fatten the wallets of the big military contractors? We don't need any ships or armies. We only need a few more good SEAL teams. It seems that they are the only ones who can get the jobs done!

  • Report this Comment On March 17, 2014, at 11:03 AM, boggyg wrote:

    the job shippers and the military industrial complex are a slimmy bunch,and really don,t care about the usa -blood money

  • Report this Comment On March 17, 2014, at 12:43 PM, ugo wrote:

    Sarah Palin said at CPAC the way to beat Russia is to crank up nuke weapons production. Reagan may have been able to outspend Russia into bankruptcy, but I doubt we could now. They have not wasted their resources in Iraq and Afghanistan in the last decade.

  • Report this Comment On March 17, 2014, at 2:16 PM, jfelano wrote:

    LCS is a collosal waste of money.

  • Report this Comment On March 17, 2014, at 5:22 PM, SLTom992 wrote:

    "Billions of dollars" could be nothing more than one nuclear submarine.

  • Report this Comment On March 17, 2014, at 6:46 PM, rrats0966 wrote:

    Why bother awarding contracts. They never come in on budget and there are ALWAYS cost over-runs. The penalty for all of that? Well they get fined 10 MIllion on a 3 Billion dollar contract Factor it in, It's a cost of doing business.

    This is such fantasy, why are we spending more than the next 15 countries combined on Defense. This can't continue. The house of cards is going to fall sooner rather than later..

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