Defense News Roundup: U.S. Navy Tops Off the Fuel Tanks, and Allies Get (Lots of) Bombs

Here's our weekly rundown of the major stories in defense spending.

Aug 18, 2014 at 12:16PM

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.

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Source: U.S. Department of Defense Fiscal Year 2014 Budget Request (link opens a PDF).

So what has the Pentagon been up to this week?

Between "base" spending levels, and supplementary spending on overseas contingency operations, the DoD is budgeted to spend about $11.8 billion a week in fiscal 2014, of which $6.2 billion goes to military hardware, infrastructure projects, and supplies. The Pentagon ran considerably under budget last week, however, awarding contracts for no more than $5.6 billion.

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

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Mk-82 bomb final assembly. Photo: Wikimedia Commons.

Bombs. Lots of bombs.
The Pentagon placed orders on behalf of foreign military clients Canada and the United Arab Emirates to purchase upwards of 18,000 bombs from General Dynamics (NYSE:GD) this week. The bombs range in size from Mk-82 500-pound bombs to Mk-84 2,000-pound bombs. In total, the contract is worth more than $38 million.

And fuel. Lots and lots of fuel.
Pentagon acquisition specialists topped off Defense Logistics Agency fuel tanks last week, placing multiple large-dollar orders for aviation turbine fuel and naval fuel from big oil suppliers including ExxonMobil (NYSE:XOM) and Valero (NYSE:VLO). In total, 11 such contracts were awarded for a total value of $1.91 billion.

And engines to burn the fuel
Ensuring that all this fuel won't go to waste, the Navy placed orders with General Electric (NYSE:GE) to supply it with 75 F414-GE-400 engines for installation aboard F/A-18E/F fighter jets. Included in the order were 27 such engines to be supplied to the Australian military under a foreign military sales contract, plus "after burner modules, fan modules, high pressure combustor modules, combustor modules, and high and low pressure turbine modules" to be supplied to both recipients. The total value of all this equipment exceeds $311 million. Deliveries are due to be completed in September 2016.

And airplanes, too -- but not the same ones as go with the engines
And Boeing (NYSE:BA), by some measures the nation's biggest defense contractor, won another of the big awards this week. Worth $296 million, this contract will fund purchases from Boeing of long-lead parts needed to manufacture eight Lot II Full-Rate Production P-8A Poseidon maritime patrol aircraft for the U.S. Navy, and an additional four planes for the Australian military. All of these planes should be delivered by April 2018.

Opportunities on the horizon
So much for the contracts that everyone knows about. Now, let's end this week's round-up with one contract that you may not yet have heard of.

On Tuesday, the U.S. Defense Security Cooperation Agency informed Congress of a planned $225 million deal to sell to the Canadian military six AN/AAQ-24(V) Large Aircraft Infrared Countermeasuresm or LAIRCM, systems, destined for installation aboard Canada's fleet of CP-140 Aurora maritime patrol aircraft.

Designed and built by Northrop Grumman (NYSE:NOC) LAIRCM is an onboard aircraft missile defense system designed to detect incoming heat-seeking missiles, and to disable them by blasting the missiles with a directed laser beam. Canada already uses LAIRCM to defend its C-17 transport aircraft from hostile missiles. It hopes to acquire more of these systems to protect its CP-140s (variants of the Lockheed Martin P-3 Orion) as well.

DSCA did not name a principal contractor for this contract -- although this will most likely be Northrop Grumman, since it builds the LAIRCM. And since the contract has not been officially announced yet, it's unlikely that investors even know it is in the works. Except that now, you know.

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Northrop Grumman's Guardian integrated anti-missile system-in-a-pod. Photo: Northrop Grumman.

Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of Berkshire Hathaway, General Dynamics, General Electric, and Northrop Grumman and recommends Berkshire Hathaway. 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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