Defense News Roundup: Raytheon Ships Torpedoes As the U.S. Navy Raises CANES

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.

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. But once again, the Pentagon ran under budget last week, awarding contracts for only slightly more than in the previous week -- $5.63 billion.

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

The Mk54 anti-submarine torpedo can engage targets is shallow water or deep. Illustration: Raytheon.

Torpedoes from Raytheon
The U.S. Navy exercised an option under a pre-existing contract Wednesday, instructing defense contractor Raytheon (NYSE: RTN  ) to supply it with an unspecified number of MK54 Mod 0 Lightweight Torpedo Kits, and to provide related engineering and repair services needed to upgrade these torpedoes. The Mk 54 "MAKO" torpedo is primarily an anti-submarine weapon, and it's a "hybrid" torpedo, combining the homing and warhead portions of the Mk 50 with the Mk 46 torpedo's propulsion unit. Designed primarily for use in shallow waters, the Mk 54 is said to be superior to the original MK46 when used in deep water. These torpedo kits will be supplied for use both by the U.S. Navy, and by the allied militaries of Australia, India, and Turkey.

Raytheon will receive $59 million for the contract.

From Harris Corp., crisis management services
Wednesday was a big day for Pentagon contracts, with an even bigger award going to Harris Corp. (NYSE: HRS  ) . Harris was awarded an indefinite delivery, indefinite quantity contract, or IDIQ, worth up to $450 million to perform engineering, maintenance, and program management work on the Defense Information Systems Agency's Crisis Management System, or CSM. The contract, originally awarded for just one year, may be extended as far out as one full decade if all options are exercised.

In fact, Harris is just coming off a 10-year contract (originally awarded in 2004) for its work on CSM, which provides the U.S. president with a secure, top-secret communications system for use during national emergencies, keeping the Commander-in-Chief in contact with the Joint Chiefs of Staff, members of his Cabinet, and other executives -- including from aboard Air Force One and Marine One.

Sysco gets KP duty
Another of the week's more lucrative contracts -- if not as sexy as the ones for high explosives and high-tech -- went to food services company Sysco (NYSE: SYY  ) . On Tuesday, Sysco was awarded a contract worth up to $281 million to serve as "prime vendor food and beverage" for Army, Navy, Air Force, and Marine Corps locations in North Carolina through July 16, 2016.

Then, three days later, a second contract likely to benefit Sysco was awarded, when US Foods, a company Sysco is set to acquire, was awarded a $17 million contract to serve as "prime vendor full line food distribution" for U.S. Air Force locations in North Dakota.

Together, the two contracts add up to nearly $300 million in incremental revenue for Sysco -- which sounds like a lot, but which is actually barely 0.6% of the revenues the company takes in in a year.

Saving the best for last
And finally, the truly huge news of the week arrived -- when else? -- on Wednesday. That was when the Pentagon named five firms, including General Dynamics (NYSE: GD  ) , Northrop Grumman (NYSE: NOC  ) , privately held Global Technical Systems, and two British firms -- BAE Systems and Serco Group -- to split an IDIQ contract estimated in excess of $2.5 billion in value.

Dubbed "CANES," for "Consolidated Afloat Networks and Enterprise Services," this mammoth project aims to modernize communications networks across the U.S. Navy by August 2022. At least two years in the making already, CANES has already been installed aboard nine U.S. destroyers. Ultimately, the plan is to roll it out across 180 separate "platforms," including shore installations, submarines, and surface vessels. When complete, CANES will consolidate legacy and stand-alone Navy cybersecurity, command and control, communications, and intelligence networks into one unitary system.

Which of the five companies will perform which parts of the project -- and how the $2.5 billion will be divvied up -- remain to be seen. But it's clear that CANES is a big deal for the Navy, and for the defense contractors that will now begin work to implement it as well.

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Guided missile destroyer USS McCampbell (DDG 85), the first U.S. warship to be equipped with CANES.. Photo: U.S. Navy.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 26, 2014, at 9:02 AM, danbhart wrote:

    The way you continue to suppress major war is to keep ahead of those other nations who would challenge you if they could. If you stay far ahead, they will not. It is better to spend money on staying ahead than in repairing the cities, burying the dead and decontaminating radioactive lands. That is, of course, if you survive to be able to DO any of that. While money must not be wasted, the necessity of continuing progress demands we remain relentless in improving our military, even if that means some folk will have to go find a job at Walmart rather than live off welfare.

  • Report this Comment On August 26, 2014, at 9:02 AM, danbhart wrote:

    At least they will be ALIVE!

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Rich Smith

As a defense writer for The Motley Fool, I focus on defense and aerospace stocks. My job? Every day of the week, I'm monitoring the news, figuring out the winners and losers, and tracking down the promising companies for you to invest in. Follow me on Twitter or Facebook for the most important developments in defense & aerospace, and other great stories.

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