KBR Wins Air Force Contract

Zacks

KBR Inc. (KBR) recently announced that its joint venture with CH2M Hill was awarded a contract worth $17.9 million under the Air Force Contract Augmentation Program (:AFCAP). As per the terms of the agreement, the joint venture will be responsible for operating and maintaining power plants at Al Udeid Air Base, Qatar for the U.S. Air Force.

In Nov 2005, the team of CH2M Hill and KBR was awarded a 10-year Indefinite Delivery Indefinite Quantity (:IDIQ) contract, through a competitive bidding process for a worldwide contingency support. Tasks under the AFCAP included engineering and construction of temporary facilities, procurement, logistics, and a full range of operations and maintenance services. Under AFCAP, the CH2M Hill-KBR partnership and the five other contractors were to compete for task orders on an individual basis for a total contract value of $10 billion over 10 years. The current contract is the 40th task order which KBR has won and signifies Air Force's reliability on the team’s ability to meet its requirements.

The estimated period of performance for the contract is a base year plus two option years. During this period, KBR will provide all transportation, management, labor and selected necessary equipment to provide electrical power production and distribution to various base facilities on Al Udeid Air Base. Apart from these, KBR will also contribute to the airfield lighting system and training of airforce personnel on the installed aircraft arresting system.

During the last few quarters, a number of new contracts and orders have been showering upon KBR. The most recent one is from the Dos Republicas Coal Partnership to provide detailed engineering and technical assistance services for the Eagle Pass Mine near Eagle Pass, Texas. There was also a front-end engineering and design (FEED) contract from Pacific NorthWest LNG Ltd, a subsidiary of PETRONAS. Although KBR currently has a Zacks Rank #3 (Hold), given the favorable scenario, we expect the the stock to experience a revision and show a rising trend in the coming quarters

Other stocks from the same sector that look promising include Michael Baker Corporation (BKR) with a Zacks Rank #1 (Strong Buy), while  Quanta Services, Inc. (PWR) andHarris & Harris Group, Inc. (TINY) both have a Zacks Rank #2 (Buy).

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