5 Things Your Taxes Bought for the Pentagon in June
The United States Department of Defense is one of the biggest departments in the U.S. government. Fortunately, it's also one of the most transparent of government agencies, posting every contract it awards (aside from the penny-ante stuff -- there's a $6.5 million threshold for reporting) for public review on its website, and within mere hours of its being awarded.
Given the effort the Pentagon goes to in order to keep us informed of its spending, it would almost seem impolite not to take a look. And so that's what we just did over the holiday weekend. We tallied up all Pentagon contracts awarded in the month of June. And what did we find?
Aside from expenditures on servicemembers' salaries, health care and similar recurring "overhead," the Pentagon awarded $31.3 billion worth of contracts to defense contractors in the month of June.
Here are a few of the things they got for their (read: your) money...
20th-Century Technology
June was a month dominated by big-budget mega-contract awards. One of the biggest went to Boeing (BA), not coincidentally America's largest defense contractor by market cap. For $466.5 million, Boeing has been hired to repair guidance systems on U.S. Air Force Minuteman III intercontinental ballistic missiles. This contract will run through June 2, 2021.
22nd-Century Technology, Too
Smaller in size by far, but with potentially greater potential in years to come, were a quartet of contracts awarded early in the month to defense contractors Leidos Holdings (LDOS) and Ball Corp. (BLL). Leidos will receive $15 million on two contracts to conduct "laser interaction testing" and "target vulnerability assessments and data analysis" for the U.S. Air Force. Ball Corp will do similar but more extensive work, receiving a total of $32 million. Both companies will be researching the effects of high-power "continuous-wave (up to MW Class) and high energy pulsed (kJ) lasers interacting with individual materials, multi-material subsystems, and/or fully functional targets."
If successful, this work could accelerate the development of a whole new class of weapons for the U.S. military, potentially rendering the rest of the world's arsenal of explosives-based weapons obsolete.
Meanwhile, Back in the 21st Century ...
Somewhere between the realms of Cold War nukes and Buck Rogers laser weapons lie the more mundane parts of the Pentagon arsenal -- and these got plenty of funding as well. The U.S. military is preparing a wholesale makeover of its Air Force, replacing most of its planes with a new type of stealth fighter jet, the F-35 Lightning II. And in preparation for this, Lockheed Martin (LMT) was awarded $920 million last month to fund the purchase of "long lead time" parts needed to build 94 F-35 Lightning II stealth fighter jets for U.S. and foreign buyers. These will include:
• 44 "standard" configuration F-35A fighters for the U.S. Air Force
• 8 more for the Royal Australian Air Force
• 6 for the Royal Norwegian Air Force
• 2 each for the air forces of Italy and Turkey
• and 16 more for unidentified "various foreign military sales customers"
• 9 short take-off/vertical landing F-35B fighters for the U.S. Marine Corps
• 3 F-35Bs for Britain
• and 2 for Italy
• and finally, 2 carrier-variant F-35Cs for the United States Navy.
And an Aircraft Carrier to Carry Them
Speaking of those carrier variants, they're going to need ships to fly from -- and Huntington Ingalls (HII) has that covered. On June 5, the Pentagon awarded the company two separate contracts, worth a total of $4.3 billion combined, to complete design and construction work on the new nuclear aircraft carrier USS John F. Kennedy by June 2022. Once entered into service, the Kennedy will be the second of the new Gerald R. Ford-class supercarriers, of which four are expected to be built.
$4.3 Billion?! I Need an Aspirin...
If the volumes of dollars being thrown around at the Pentagon are giving you a headache, McKesson (MCK) has got you covered -- with an even bigger contract. In fact, weighing in at $6.1 billion, this company's 30-month award to supply "replenishment pharmaceuticals to furnish the Tricare pharmacy supporting 9.5 million active-duty service members, retirees and their dependents" was the single largest contract awarded by the Pentagon in the month of June.
A renewal of a smaller, $2.6 billion award granted to McKesson back in December 2012, this contract may be renewed as many as two more times over the coming seven and a half years. Ultimately, it could last as long as a decade, and be worth as much as $12.3 billion to McKesson.These contracts represent only a small sampling of the hundreds of awards your tax dollars funded last month. To see the rest, check out the U.S. Department of Defense contracts website here.
Think $4.3 billion is a lot to spend on an aircraft carrier? Motley Fool contributor Rich Smith recently read that Americans spend about $1 billion a year on fireworks for July Fourth, New Year's, and other holidays. And those don't even blow stuff up. (At least, not intentionally.) Follow him on Facebook for more defense news.
Rich owns none of the stocks mentioned above, but The Motley Fool recommends McKesson. Try any of our Foolish newsletter services free for 30 days and check out our free report on one great stock to buy for 2015 and beyond.
