Defense News Roundup: Billions of Dollars for Transport; MRAPs Back in the News

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

Sep 2, 2014 at 11:08AM

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 that amount, $6.2 billion of that goes to military hardware, infrastructure projects, and supplies, with the balance going to pay personnel. Last week, though, the Pentagon busted that budget in a big way -- awarding $10.95 billion worth of contracts in five short days.

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

Fedex
Mail call! Photo: The Motley Fool.

When it absolutely, positively has to be there overnight ...
Thursday saw the awarding of about $3.4 billion worth of transportation contracts by the U.S. Transportation Command to a total of 14 separate companies. The contracts covered a variety of transport services, from "international ocean and intermodal distribution services" to "international commercial express package service" to transportation of "fresh fruits and vegetables ... to the Pacific region."

FedEx (NYSE:FDX) made out best from these awards, winning a potential $668.5 million worth of awards across the latter two contracts. UPS (NYSE:UPS) won up to $617.3 million worth of work from the package delivery contract, while Maersk Line could reap nearly $525 million from the ocean and intermodal deal.

Putting out fires
The biggest single award announced last week, though, in absolute dollar terms, was a $2.5 billion contract to be split among three firms -- privately held Evergreen Fire Alarms, Federal Inc., and also Johnson Controls (NYSE:JCI). Over the course of five years, these companies will divvy up work installing "utility monitoring and control and similar systems" for the U.S. Army Corps of Engineers.

"Winter is coming"
Our final notable winner in the big-dollar value category: American Apparel (NYSEMKT:APP). According to data from S&P Capital IQ, this clothing manufacturer hasn't managed to earn a profit in nearly five years -- but the Pentagon is doing its best to help out with that. On Thursday, the U.S. Army placed an order for $99 million worth of "all-weather coats" from American Apparel.

Bigger may be better, but it's not always as interesting
So much for the big contracts. Now let's turn to a few of the smaller, more interesting awards that slipped out last week -- and there were several of them. For example:

Canadian-owned CAE USA received $10 million in funding to continue work on MQ-1/9 Contract Aircrew Training and Courseware Development at Creech Air Force Base (a.k.a. "Drone Central").

Textron (NYSE:TXT) was awarded $22 million to build a next-generation hovercraft, designated Landing Craft, Air Cushion 101, for the Navy's ship-to-shore amphibious transport fleet.

And finally, as the war in Afghanistan winds down, the U.S. Army and Marine Corps are trying to rationalize their inventories of MRAPs -- mine resistant, ambush protected armored trucks. As you've probably heard by now, some of these are being shipped to local U.S. police departments for use in riot control (sometimes with unfortunate results). As for the rest, well, the Pentagon awarded two separate contracts last week -- with both going to MRAP maker Navistar. (NYSE:NAV).

One, worth $10 million, will pay the company to put 487 Maxx Pro Dash MRAPs into "production configuration 21." A second contract, worth $38 million, will take several MaxxPro Dash variants and reconfigure them all into a configuration designated "M1235A4." (The Pentagon provided no details on what either "configuration 21" and "M1235A4" will entail, however).

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Navistar's MaxxPro Dashes are due for "reconfiguration" -- and hopefully, a wash and wax as well. Photo: Navistar.

Rich Smith has no position in any stocks mentioned. The Motley Fool recommends FedEx and UPS and owns shares of Textron. 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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