The U.S. Department of Defense announced no fewer than 35 separate contract awards, worth a combined $1.78 billion Friday. A very significant portion of these funds, however, about 32%, was not spent on military hardware at all -- but on shipping costs.
Specifically, the U.S. Transportation Command awarded three contracts Friday, worth $171 million each, to hire FedEx (NYSE:FDX), UPS (NYSE:UPS), and Atlas Air Worldwide's (NASDAQ:AAWW) Polar Air Cargo subsidiary to perform a second option year (out of four possible) on their respective indefinite delivery/indefinite quantity fixed-price contracts to perform Worldwide Express 5 (WWX-5) small package delivery services for the military. All three of these contracts will now run through Sept. 30, 2014.
Incidentally, FedEx won a second defense contract for itself Friday, this being a $49.8 million option-year exercise hiring FedEx to perform "overpacking" and transportation of perishable substances for the Defense Commissary Agency and Defense Logistics Agency. This contract, which specifically concerns the delivery of "primarily fresh fruits and vegetables," continues FedEx's contract to deliver such produce from the U.S. West Coast to Defense Department locations in Japan, Korea, Guam, and Alaska. Unless extended further, it will run from Oct. 1, 2013 through Sept. 30, 2014.