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.
So what has the Pentagon been up to this week?
More than it had been up to before this week, that much is for sure. DoD is budgeted to spend about $6.2 billion a week on military hardware, infrastructure projects, and supplies in fiscal 2014. (A further $5.6 billion a week goes to pay the salaries and benefits of U.S. servicemen and servicewomen). Up until this past week, spending had been exceedingly light in 2014, with the Pentagon awarding contracts worth only about half of its budgeted funds. Over the past four days, however, the funding spigot got opened up full blast, and $15.76 billion worth of contracts flowed out.
And what did the generals get for all this money?
Something to do with "special operations" -- but it's all very hush-hush
The biggest contract awarded last week, bar none, accounted for nearly two out of every three dollars' worth of contracts awarded -- and it happened just Friday. That was when the Pentagon announced that five previously little-known private military contractors -- ADS, Federal Resources Supply, Source One Distributors, Tactical & Survival Specialties, and W.S. Darley & Co. -- will share in a $10 billion firm-fixed-price, indefinite-delivery/indefinite-quantity contract for "support of special operational equipment tailored logistics support program."
Other than the fact that the contract will run through March 6, 2016, and will benefit the U.S. "Army, Navy, Air Force, Marine Corps, and federal civilian agencies," no further details were revealed about the contract.
A new aircraft carrier for the Navy
Second place in dollar value for contracts last week was a $1.3 billion contract modification won by military shipbuilder Huntington Ingalls (NYSE:HII). Ingalls, currently busy getting the new nuclear aircraft carrier USS Gerald R. Ford (CVN-78) ship-shape and ready for service, has been instructed to begin collecting materials necessary to build the second ship in the Ford class, the USS John F. Kennedy (CVN-79). With an anticipated build-cost of $13 billion or thereabouts, this contract modification should cover about 10% of the ship's construction cost.
And helicopters -- a lot of helicopters
Third place in dollar value for contracts last week was a $1.16 billion award won by Boeing (NYSE:BA). The nation's biggest planebuilder landed a contract modification from the U.S. Army, to furnish the latter with six dozen "remanufactured" AH-64E Apache attack helicopters, and a further 10 new-builds -- so 82 helos in all. Additional equipment related to training to operate and maintaining the aircraft will be included in this contract, with delivery of all helicopters ordered by June 30, 2016.
Opportunities on the horizon
Probably the single most interesting development over the past week, though -- for defense investors, at least -- is the developing crisis in Ukraine.
Over the past week, increasing numbers of Russian troops arriving in the Ukrainian Crimea have led to worldwide denunciations of Russia's occupation. They've also spurred the North Atlantic Treaty Organization to announce, on March 6, plans to "step up its partnership cooperation through the NATO-Ukraine Commission to support democratic reforms." NATO continued: "This will include bolstering ties with Ukraine's political and military leadership, strengthening efforts to build the capacity of the Ukrainian military and more joint training and exercises. " [Emphasis added.]
To what extent this statement is "mere words," versus a promise of concrete actions, remains to be seen. But taken at face value, NATO's statement Thursday appears to suggest that Western defense contractors could soon be called upon to produce the kind of military hardware that would be necessary to "build the capacity" of the Ukrainian military to resist external threats.
Rich Smith and The Motley Fool have no position in any of the stocks mentioned. 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.