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?
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). So far this year, the Pentagon has awarded contracts worth approximately $34.14 billion -- of which nearly one-third, $11.7 billion worth, came in the form of contracts awarded this past week alone.
And what did the generals get for their (read "our") money?
Swarms of F-35 fighter jets
Last week, we mentioned how U.S. defense contractor Lockheed Martin (NYSE:LMT) was laying the groundwork for a grand worldwide rollout of its vaunted F-35 stealth fighter jet -- still currently in the "Low-Rate Initial Production" phase of its deployment -- as it won multiple contracts to supply supply spare parts, training devices, and design tweaks for America's military allies hoping to buy the plane. This week, it's actual plane sales -- or preparations therefor -- that are the news.
On Tuesday, Lockheed won $698 million worth of funding to begin amassing parts and preparing to build 57 F-35A, -B, -and -C variants of the plane for the U.S. Air Force, Marine Corps, and Navy -- and for the militaries of Israel, Italy, Japan, Norway, and the United Kingdom as well. These funds should carry Lockheed's manufacturing prep-efforts through May 2015.
Stealth fighter jets aren't the only thing up in the air, though. The same day that Lockheed booked its big contract win, smaller defense contracting rival Raytheon (NYSE:RTN) won $18 million in funding for its new Airborne Mine Neutralization System. Deployed from a shipborne Sikorsky Seahawk helicopter, the AMNS fires "neutralizers" into the water which seek out underwater mines using sonar, underwater lights, and remote control (or fully independent action) capability. Once found, the neutralizer ... neutralizes the target -- by blowing the mine, and itself, up.
Doctor, doctor, give me some news
Meanwhile, in military med-tech news, a pair of medical subsidiaries of two foreign industrial behemoths -- Germany's Siemens (NASDAQOTH:SIEGY) and Japan's Hitachi (NASDAQOTH:HTHIY) booked a combined $1.88 billion in contracts to supply the U.S. military with radiology systems, plus associated equipment and services.
That $1.88 billion sounds like a lot of money, but the biggest news here for investors is that the $1.88 billion in combined contracts here (most of which goes to Siemens, by the way) funds only a single "option" year of these companies' contracts with the Pentagon. Two additional year-long options remain to be exercised, holding the potential for even more billions of Pentagon dollars to flow these companies' way.
Opportunities on the horizon
Perhaps the most interesting bit of defense contracting news we saw this past week, though, was Raytheon's announcement on Wednesday that its new MK-60 Patrol Coastal Griffin Missile System has moved one step closer to deployment.
The missile, a variant of Raytheon's popular air-to-surface AGM-176 Griffin model, is designed to be fired ship-to-ship as a means of defending small warships from even smaller fast-attack boats. Initial plans call for the MK-60 version of the Griffin to be installed aboard U.S. Navy Cyclone-class Coastal Patrol boats deployed to the Persian Gulf, and to America's growing fleet of Littoral Combat Ships as well.
Thereafter, though, the missile's small size (about half the size of a Hellfire) and improved range (compared to traditional shipboard chain-guns) could make it ideal for arming the small international navies of U.S. allies -- many of which boast "flagships" not much larger than America's smallish LCS vessels. Don't look now, but Raytheon may have just created a new export market for itself.