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 2013. (A further $5.6 billion a week goes to pay the salaries and benefits of U.S. servicemen and servicewomen). Now, perhaps having been spooked by sequestration, the generals have been spending a lot less than that these past few months. But last week, they really opened up their pocketbooks.
In five short days, the Pentagon blew right through its weekly budget, awarding nearly $10.53 billion in contracts. Here are a few of the big line-items.
Roughly two-thirds of the money the Pentagon shelled out last week went to “green energy.” On Monday, the Pentagon announced a Power Purchase Agreement that earmarked $7 billion to buy wind energy from an array of 17 individual companies. Big utility concerns participating in the contract, including Duke Energy Corp (NYSE:DUK) and Dominion Resources, Inc. (NYSE:D), are likely to reap the bulk of the “task orders” handed out under this contract, but smaller players such as Everpower Wind Holdings, First Wind, and Turn Key Power will have a chance to bid on slices of the pie as well.
This contract mirrored a similar $7 billion award for solar power purchases announced last month.
Phalanx gun upgrades
Smaller in scale than the wind power contract, but sizable in its own right, is the $136 million contract that Raytheon Company (NYSE:RTN) won last week. Over the next four years, Raytheon Company (NYSE:RTN) will be overhauling and upgrading MK15 Phalanx Close-in Weapon Systems for the U.S. Navy, and for allies Japan and Pakistan. Potentially, this contract could grow to more than $230 million in size, as “options” are exercised to order extra work.
Phalanx is a rapid-firing machine-gun-type weapon used to destroy airborne threats. In use by 25 navies around the globe, Raytheon Company (NYSE:RTN)’s Phalanx is described as a naval vessel’s last line of defense against hostile air attacks, which have penetrated all outer defenses.
Fake bad guys
Meanwhile, on the other side of the coin, the Pentagon awarded funds to protect its own airplanes from anti-aircraft weapons like the Phalanx. Specifically, the Air Force awarded Northrop Grumman Corporation (NYSE:NOC) $219 million for the production of Joint Threat Emitters, or JTEs, for its own use in training operations, and also for use by the Royal Saudi Air Force.
A piece of equipment designed to mimic the performance of hostile anti-aircraft and surface-to-air missile batteries, JTE is used to give Air Force pilots “true warfighter training.” The device “lights up” aircraft just as if they were getting illuminated by a hostile anti-aircraft radar, giving pilots the opportunity to practice evasive maneuvers and electronic jamming defenses … without the risk of getting blown up if they fail.
Opportunities on the horizon
So much for the contracts that everyone knows about. Now, let’s move on to contracts that may not yet be incorporated into defense contractors’ stock prices.