Defense News Roundup: Pentagon Maxes Out the Credit Card This Week


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 -- but that's in an ordinary week, and last week was anything but ordinary. With the Pentagon's fiscal year drawing rapidly to a close (on Monday, in fact), the generals rushed to beat the deadline to max out their budgets before the new year begins.

Result: In five short days, they rang up a cash register receipt $26.73 billion long -- spending as much in a week as they'd ordinarily spend in a month. And what did they spend it on? The vast number of contracts awarded over the past few days makes it impossible to be comprehensive, but here are a few of the highlights:

Green energy ...
The Pentagon's project to support "green energy" industries through a massive $7 billion, source-agnostic "Power Purchase Agreement" continued apace last week, with the addition of a fourth category of alt-energy to its shopping list -- biomass. Multiple large companies won the right to bid to sell the Pentagon energy derived from biomass, such as ethanol or methane gas. All of them must compete with three dozen-odd other companies, however, variously hawking green energy derived from solar, wind, and geothermal sources.

An ethanol plant in South Bend, Ind. -- literally "green" energy. Source: Wikimedia Commons.

For the first time, a Berkshire Hathaway subsidiary made an appearance in the Pentagon's list of winners, when a MidAmerican won a place at the table. Meanwhile, Germany's Siemens notched its third win in this series of contract announcements -- making it the company singularly most likely to win at least some of the $7 billion in funds on offer.

... and Red Cross
Multiple companies -- from giants like Johnson & Johnson on down -- won hundreds of millions of dollars in contracts to supply the Pentagon with "various medical and surgical products," as the Pentagon stocked up on everything from Band-Aids to X-ray machines to orthopedic devices before the fiscal year runs out.

Nukes ...
This being the Pentagon we're talking about, of course, most of the contracts awarded last week dealt more guns & ammo. To service the military's big guns, for example, Northrop Grumman won upwards of $120 million to do maintenance work on intercontinental ballistic missiles based a Hill Air Force Base in Utah, and to assist with works to ensure the arsenal's safety.

A Minuteman III missile getting its oil changed and tires rotated. Source: Wikimedia Commons.

... and conventional weapons
Meanwhile, the very largest single contract awarded for the week -- that didn't deal with alternative energy supplies, at least -- went to Lockheed Martin , maker of the F-35 stealth fighter jet. On Friday, Lockheed won a massive $4.15 billion contracts funding the purchase of 40 new F-35 Lightning II fighters -- not only for the U.S. Air Force, Navy, and Marines, but also for the militaries of Australia, Italy, Norway, and the United Kingdom as well.

Opportunities on the horizon
So much for the contracts that everyone knows about. Now, let's move on to one contract that may not yet be incorporated into defense contractors' stock prices.

On Friday, we learned that the U.S. Defense Security Cooperation Agency has notified Congress of plans to upgrade Japan's fleet of four E-767 Airborne Warning and Control System (AWACS) aircraft. Assuming Congress approves the sale, all four planes in the Japan Air Self-Defense Force will receive new equipment to improve their ability to intercept and analyze enemy electronic communications, new cryptographic computes, and improved equipment for discriminating "friendly" aircraft from "foes."

The contract -- which has not yet been signed or even announced officially -- will be given to Boeing to fulfill if it is approved, and will be worth $950 million. Most investors aren't factoring this extra revenue into their valuations for Boeing stock, because no one knows about the contract yet -- except that now, you do.

You don't always have to look far to find good investments. Sometimes, profiting from our increasingly global economy can be as easy as investing in your own backyard. And the Pentagon's helpful habit of publishing all its contracts daily as they're awarded certainly makes that easier for defense investors. Want to find more "easy to understand" investments? The Motley Fool's free report "3 American Companies Set to Dominate the World" shows you how. Click here to get your free copy before it's gone.

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