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 (OCO), the DoD is budgeted to spend about $11 billion a week in fiscal 2015. Ordinarily, $5.8 billion of that would go 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 the first full week of fiscal 2015 was no exception, with total defense contract awards amounting to just $750 million.
And what did the generals get for their (read "our") money?
In a week of sparse contract awards, the biggest defense contract announced went to food service provider U.S. Foods. Yes, once again, Sysco's (NYSE:SYY) pending purchase of USF is likely to pay dividends to its shareholders, as U.S. Foods landed a sizable contract to provide "subsistence support" to U.S. Navy bases in Florida through October 2016.
"Subsistence" level foodservice may not sound very filling. But with this contract bringing $312.6 million award in new revenues to the defense contractor, Sysco shareholders should be very pleased indeed.
Flight Simulator: F-35
After the USF award, contract sizes drop dramatically. Lockheed Martin (NYSE:LMT), however, was able to "make it up on volume" (somewhat), winning a pair of contracts Thursday to supply "full mission simulators" for use in training pilots to fly the F-35 joint strike fighter. Delivery of two simulators to the Japan Self-Defense Forces will bring Lockheed Martin $37.1 million in revenues, and delivery of two more simulators to Israel will bring in a further $30.9 million -- so $68 million in total.
Target practice for Japan
Orbital Sciences (NYSE:OA) won another of the few sizable awards -- $27.7 million to supply seven GQM-163A Coyote Supersonic Sea Skimming Targets to the U.S. Navy and the Japanese Maritime Self-Defense Force for use in target practice.
And Black Hawks for the Feds
Finally, United Technologies (NYSE:UTX) won a $21.8 million award to supply a pair of Sikorsky UH-60M Black Hawk helicopters to the Federal Bureau of Investigation. Why the FBI is running its equipment purchases through the DoD these days is hard to say -- but that's where the contract popped up this week, in the form of an "option exercise" attached to an underlying 2012 contract to supply the U.S. Army, Navy, and foreign powers with up to 916 Black Hawks.
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.
You caught the news last week about Latvia's plan to purchase 123 surplus British armored vehicles for its army, right? Some commenters, hearing about this, suggested that if the Baltics are really worried about a Russian invasion, though, they might be better off purchasing anti-tank missiles for their infantry than stocking up on antique British Army rejects -- and maybe someone in Tallinn was reading those comments. Because according to the U.S. Defense Security Cooperation Agency (DSCA), Estonia has done just that: Put in a request to purchase 350 Javelin anti-tank missiles for its army.
DSCA notified Congress of the purchase request on Tuesday, noting that Congressional approval of the sale "will contribute to the foreign policy and national security of the United States by helping to improve the security of a NATO ally." (It stands to reason that further sales to Estonia and Estonia's neighbors would increase such security even further). As for this particular arms deal, assuming it goes through, it should be worth $55 million to the Lockheed Martin / Raytheon (NYSE:RTN) joint venture which manufactures the Javelins, and which has been 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.