The Navy’s top acquisition official said the Navy recently infused about $600 million into the shipbuilding industrial base by reducing withholds and retainers to help it deal with COVID-19 pandemic issues.
“Just in the NAVSEA programs we were immediately able to infuse about $600 million of funds that we had in withholds or retainers or whatnot. And able to do that without increasing any risk to the system,” Assistant Secretary of the Navy for Research, Development and Acquisition James Geurts told reporters during a phone roundtable on April 28.
He said Naval Sea Systems Command (NAVSEA) was able to do that without increasing risk to the system.
“So not only has that allowed us to put some cash into the system that can go all the way through the supply chain, it also points to some areas where we’re reforming the way we’re going forward on programs,” Geurts added.
He said the NAVSEA funds includes ship repair and new ship construction work and went through examples of how it has smoothed out retention and repair funding.
“Like on repairs, we generally have in the past had a 10 percent retention on any repair. We were already moving toward reducing that because we found it not to be a terribly effective tool in the long run, using other tools to ensure with the work was complete and we had warrantees on the work. And so we had already been kind of moving down that path experimentally and we thought it was in everybody’s best interests to move to that quickly.”
Geurts noted a lot of the retention had “an overly large impact on mid and small subcontractors…we’re only as strong as our industrial base and so as we attack this problem that was something that I felt was an appropriate means to ensure that they understood how important they were to the Department of the Navy.”
He said this kind of change aims to help keep the industrial base strong and ready for the Navy and industry to come out of the pandemic.
The release of these funds is part of the Navy’s focus on the ensuring the economic wellness of the defense industrial base during the pandemic.
Geurts highlighted he continues to be “extremely impressed by their ability to manage through this disruption and continue to operate.”
Separately, Geurts provided an update on contract award disbursements remaining faster than planned to help industry.
“Our contract awards continue to stay well paced above our previous standards…we remain about 29.7 percent ahead of the amount we put on contract from this time last year. So that’s compared to end of month April so I would expect that to remain probably 30 to 32 to 33 percent by the time we get to the end of the month.”
Earlier this month, Geurts told reporters as of April 10 the Navy had put $88.52 billion on contract for FY 2020, a 32 percent acceleration over the $66.2 billion put on contract by this time in 2019 (Defense Daily, April 16).
This week he said that faster disbursement is happening while the Navy is tracking 18 percent fewer contract actions this year compared to last year.
“So both the government and industry teams are leveraging new ways to operate to get efficiency as well as get things on contract.”
Geurts reiterated his method is to ensure the work is lined up so as the workforce comes back to full strength across different industries and facilities and new efficiencies are added, “we can continue to accelerate and not only recover but recover in a way that we’ve got more resilience and more capacity.”