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 lately?
Between "base" spending levels, and supplementary spending on overseas contingency operations, or OCO, the DoD is budgeted to spend about $11.8 billion a week in fiscal 2014. Ordinarily, $6.2 billion of that figure goes to military hardware, infrastructure projects, and supplies, with the balance going to pay personnel. Spending often gets a little bit out of whack at the cusp between fiscal years, however -- and this year was no exception, with Pentagon acquisition specialists handing out awards for roughly $8.99 billion last week.
And what did the generals get for their (read "our") money?
TLC for UAVs
On Wednesday, the first day of the fiscal year 2015, Northrop Grumman (NYSE:NOC) landed a sizable contract from the U.S. Air Force, hiring the defense contractor to provide $306 million worth of "logistics support" for USAF Global Hawk spy drones. Northrop will be responsible for supplying "material and services for planning, operations, and maintenance support" for the drones through September 30, 2015 -- i.e., through the end of this current fiscal year.
Tech support for high-tech missiles
Another big winner of Air Force largesse last week was Lockheed Martin (NYSE:LMT), which won $100 million to support production of Joint Air to Surface Standoff Missiles. This five-year, sole-source contract will pay for Lockheed Martin to conduct system upgrades and integration, sustainment, management, and logistical work on the JASSM, a 2,000-pound long-range munition capable of being launched not only from B-1, B-2, and B-52 bombers, but from F-16, F-15E, and certain F/A-18 fighter jets as well.
"An army marches on its stomach," Napoleon once said. And if you happen to be a company in the business of filling military stomachs, that's a good thing. Last week, the Raleigh, N.C., division of U.S. Foods -- itself soon to become a subsidiary of food services giant Sysco (NYSE:SYY) -- won a contract to supply Army, Navy, Air Force, and Marine Corps bases in the state with food and beverage items through at least September 29, 2016. The initially two-year contract is valued at up to $325 million.
And finally ...
UAVs for allies
Not all contracts awarded last week were of the $100 million-and-up variety, however. In fact, a couple of the more interesting news items coming out of the Pentagon were of pretty small dollar value. Notably, Boeing's Insitu division won two separate orders -- worth $7 million and $11 million, respectively -- from the Czech Republic and Yemen. In each case, Boeing's Insitu subsidiary will be supplying the allied nation with one single ScanEagle "system," consisting of three ScanEagle unmanned aerial vehicles equipped with infrared electro-optical night vision equipment.
Yemen's ScanEagles will apparently be deployed for use in Yemen itself. The Czech ScanEagles appear to be destined for use in Afghanistan, where Czech special forces are serving as part of Operation Enduring Freedom.
Opportunities on the horizon
So much for the contracts that everyone knows about. Now, let's end this week's round-up with one contract that you may not yet have heard of.
On Monday, September 29, the Defense Security Cooperation Agency confirmed that it has notified Congress of a planned foreign military sale to the United Arab Emirates. Specifically, the UAE has requested that the U.S. sell it 12 High Mobility Artillery Rocket Systems Launchers, or HIMARS, along with 90 practice rocket pods, 65 M31A1 Guided Multiple Launch Rocket Unitary Pods, and 100 M57 Army Tactical Missile System T2K rockets to fire from them.
Assuming this arms deal goes through, it should be worth as much as $900 million to Lockheed Martin, which manufactures the HIMARS and is named principal contractor on the sale.
Mind you, this contract is not "official" yet, and the Pentagon hasn't yet announced its award. In all probability, most investors don't even know that it's in the works -- except that now, you do.