Tick-tock, tick-tock, tick-tock ...
The clock's ticking down to the final minutes on the Pentagon's multibillion-dollar purchase of an estimated 5,200 all-terrain armored vehicles for the war in Afghanistan. And with as much as $12 billion on the line, investors are humming the old Carly Simon tune (as popularized by the Heinz ketchup commercials): "Anticipation, anticipation ... why's the Pentagon making me wait?!"
Once again, the contestants are:
(NASDAQ:FRPT)-- a small-cap defense contractor that was once recommended by the Fool's own Motley Fool Rule Breakers team.
(NYSE:GD)-- Defense contracting heavyweight, and one half of the team that is "Force Dynamics."
(NYSE:NAV)-- you loved the trucks, now try the armored vehicles.
(NYSE:OSK)-- fresh off its accounting disaster of '08, and looking to rebound.
- And last but the opposite of least, Britain's BAE Systems, which managed the neat trick of getting two bids submitted to the MRAP-Lite competition.
Who will win?
No one knows. Collins Stewart, a longtime follower of the industry, believes Force Protection and BAE are the odds-on favorites. But the truth is that we're not entirely sure when this contract will even be awarded. Maybe as early as tomorrow ... and maybe not.
The bigger question, though, is whether anyone will win at all. We all remember the legal wrangling that derailed efforts to award an Air Force Tanker contract to first Boeing
First thing we do, let's ... appease all the lawyers
Although it's fumbled the ball many times before, market pundits wonder whether the Pentagon might have finally wised up. Rumors are already circulating that while the Pentagon still intends to choose a single M-ATV design, it will order the winning bidder to subcontract part of the work out to one or more of the losers.
Thus, the Pentagon would reap the efficiencies of producing just one type of armored car -- interchangeable parts regardless of who builds it, ease of training the mechanics, and so on -- while at the same time minimizing litigation risk. As a fringe benefit, increasing the number of people building the M-ATV would accelerate delivery of the vehicles to the front.
Does that mean lower potential profits for "the winner's" shareholders? Maybe. But like the man said: "A bird in the hand is worth two arguing it out in court."
Do you like to invest, but love to invest in stuff that makes other stuff go "boom"? Then you'll enjoy reading:
Fool contributor Rich Smith owns shares of Force Protection and Boeing. General Dynamics is a Motley Fool Inside Value recommendation. Why do we tell you this? Because The Motley Fool is positively militant about disclosure, that's why.