The U.S. Department of Defense announced new contract awards totaling nearly $2 billion in total value on Monday -- and a modification of an existing contract worth $6.9 billion all on its own. Yet one of the most interesting contracts announced on the day was a smallish $54 million award won by Raytheon (NYSE:RTN).
Raytheon's award, which exercises an option to make follow-on purchases from a firm-fixed price, option eligible, non-multiyear contract, will have Raytheon supply the U.S. Army with 765 Excalibur 155 mm artillery rounds. What's interesting about this is that, although the Army has been buying Excalibur rounds since at least 2008, to date only about 600 rounds of the ammunition have been fired in anger. That number now looks likely to rise, as the Army makes plans to buy more Excalibur rounds in one single transaction than it's used in combat over the past five years.
According to Raytheon, the Excalibur is a "revolutionary precision projectile" developed for use by the U.S. Army and Marine Corps. "Using GPS precision guidance technology," says the company, "Excalibur provides accurate, first round, fire-for-effect capability in an urban setting. Excalibur is considered a true precision weapon, impacting at a radial miss distance of six meters from the target."
Although each Excalibur round costs more than $70,000, Raytheon notes that "analyses have shown that on average it takes at least 10 conventional munitions to accomplish what one Excalibur can."
Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of Raytheon. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.