As the U.S. moves closer to the so-called "Fiscal Cliff", big ticket government spending areas like defense and entitlement programs are likely to be at the center of the debate. If the White House and Congress can't agree on a compromise, the Federal Government is threatened with automatic across-the-board cuts that will come into effect in January 2013.
According to Department of Defense documents, since 2001 contracts for services have increased 137%, compared to a 1% increase for payrolls of active duty military personnel over the same time period (in 2011 dollars), and is labeled as "increasingly unaffordable." However, among the largest government contractors are some of the largest companies in the country, some that employ more than 100,000 workers and draw a majority of their revenue from government sources.
To understand the spending involved, CNBC.com analyzed data from USASpending.gov,
which was established in 2006 by the U.S. Office of Budget Management to make federal awards publicly available. According to the site, in FY2011 there were $536.8 billion in government contracts awarded to approximately 170,000 contractors. The data presented here are based solely on U.S. government contracts and do not include assistance, insurance, grants, loans or other forms of payment.
So, who are the biggest U.S. government contractors?
1. Lockheed Martin (LMT)
Photo: Getty Images
Contracted in 2011: $39.98 billion
Total 2011 revenue: $46.30 billion
Contracted in 2012, so far: $18.97 billion
Headquartered in Bethesda, Md., Lockheed’s dependence on contracts from the U.S. government is no secret. The company researches, designs, develops and manufactures satellites, space vehicles, combat aircraft, missile defense systems, aeronautics and intelligence systems, which are essentially out of the scope of non-government consumers.
Lockheed’s biggest contract 2012 was for $3.48 billion with the Department of Defense for a fixed-wing aircraft.
In Lockheed’s 2011 annual report, the company notes that it derives 82% of sales from U.S. Government customers, including 61% from the Department of Defense and 17% of sales to foreign governments. The first entry in the report’s “Risk Factors” section states that “a decline or reprioritization of funding in the U.S. defense budget, that of other customers, or delays in the budget process could adversely affect our ability to grow or maintain our sales, earnings and cash flow.”
*Number includes contracts listed for “Lockheed Martin Corporation” and “Lockheed Martin” on USASpending.gov.
2. Boeing (BA)
Photo: Getty Images
Contracted in 2011: $21.45 billion
Total 2011 revenue: $68.73 billion
Contracted in 2012, so far: $16.03 billion
Although Boeing’s main sources of revenue are commercial airlines, the Chicago-based company’s Defense, Space & Security segment deals primarily with the U.S. government.
That segment accounts for approximately $21 billion of the company’s $68 billion in 2011 revenue.
Boeing’s largest contracts in 2011 were for fixed-wing aircraft and airframe structural components. Its top five contracts were worth over $500 million each and the highest individual contract came in at $1.5 billion. Aside from traditional aircraft, Boeing was also contracted for over $1 billion by NASA, according to USASpending.gov.
3. General Dynamics (GD)
Photo: generaldynamics.com
Contracted in 2011: $19.47 billion
Total 2011 revenue: $32.67
Contracted in 2012, so far: $8.79 billion
In 2011, General Dynamics of Fairfield, Conn., engaged in more than 18,000 contracted transactions with the U.S. government, totaling approximately $19.47 billion, with a majority of the contracts awarded by the Navy ($12.9 billion) and the Army ($4.6 billion). Many of its large contracts include the manufacturing of submarines and destroyers, with its largest contract for a submarine worth over $2 billion. General Dynamics saw an increase in government spending from $14.8 billion in 2010 to $19.47 billion in 2011.
In General Dynamics’ 2011 annual report, the company’s first three risk factors highlight dependency on the U.S. government for “a significant portion” of revenues, with more than two-thirds of the company’s sales coming from the U.S. government in each of the past three years. The company says that “A decrease in U.S. government defense spending or changes in spending allocation could result in one or more of our programs being reduced, delayed or terminated. Reductions in our existing programs could adversely affect our future revenues and earnings."
4. Raytheon (RTN)
Photo: David Monniaux
Contracted in 2011: $14.76 billion
Total 2011 revenue: $24.86 billion
Contracted in 2012, so far: $5.72 billion
Headquartered in Waltham, Mass., Raytheon’s primary businesses are defense-oriented, with major contracts including several air defense systems, marine combat systems,
missile systems and other military products, sold primarily to governments around the world. Perhaps Raytheon’s most recognizable product in the general public is its Tomahawk cruise missiles, which are supplied to the U.S. Navy.
Raytheon’s highest contracts in 2011 were for guided missiles, with two contracts for over $1 billion each. Additional contracts for guided missiles ranged between $130 million and $400 million, with other top contracts including ammunition and bombs.
5. United Technologies (UTX)
Photo: RadicalBender
Contracted in 2011: $7.90 billion
Total 2011 revenue: $58.2 billion
Contracted in 2012, so far: $2.41 billion
United Technologies, headquartered in Hartford, Conn., is a multinational conglomerate that manufactures a wide range of products, from aircraft engines and helicopters to fuel cells, elevators and building systems.
The biggest contract for United Technologies in 2011 was for $910 million to manufacture a gas turbine and jet engine aircraft. Other large projects include the maintenance and repair of gas turbines, jet engines and other aircraft, several of which cost the government between $200 million and $600 million.
All contract values were drawn from USASpending.gov during the week of June 11, 2012 and are from this source unless otherwise noted. 2011 revenues are from the individual firms’ annual reports, unless otherwise noted.
MTW- Is it not strange that they have all exceeded the contracted price, some by five times? Being a defense contractor is a license to take our money, or at least more of it than they say that they will; and the sad part for us, is that these companies are already doing just fine. Now we know why. This must be where the Social Security, Postal Service, FEMA, and all of the other broke intragovernmental agencies' money has gone to-partially. Nobama-Nobiden in 2012! GOD BLESS YOU ALL.
Posted by Michael T. Wayne- A Little Crazy
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