The Pentagon’s top acquisition official said Tuesday it may take up to six months to reimburse the defense industrial base’s billions in COVID-related claims, if the department receives appropriated funds to cover such costs.
Ellen Lord, the under secretary of defense for acquisition and sustainment, told attendees during a virtual Defense News conference that DoD would plan on assessing all of industry’s claims at once, with an expectation it would take two to three months to collect full data on the pandemic’s impact from prime contractors and their suppliers.
“We want to make sure that we have a one-time accounting for these major COVID hits, very well-defined in terms of a period of time from March 15 to Sept. 15,” Lord said. “We can’t do that at this point in time because we have an authorization through Section 3610 [of the CARES Act], but we don’t have appropriations.”
Lord has previously called on lawmakers to appropriate funds to cover the costs authorized by Section 3610, which authorized the Pentagon to cover the defense industrial base’s efforts to keep workers employed.
While the GOP proposed a version for the next relief package this summer that would have included $11 billion for defense industry’s COVID claims, the latest bill put forth by Senate Majority Leader Mitch McConnell (R-Ky.) no longer includes funds for defense (Defense Daily, Sept. 8).
The Pentagon estimates industry’s COVID claims will now total between $10 to $20 billion, Lord said Tuesday.
Lord also said she believes there’s a “delayed response” in the pandemic’s impact on industry that was not reflected in companies’ most recent earnings reports.
“But I would contend that most of the effects of COVID haven’t been seen because most companies gave their employees time off, they stretched out production, paid a lot of people for working 100 percent, when perhaps they were only getting 50 percent of the hours in and so forth. So I think the system has absorbed it up to this point in time,” Lord said. “Now when we get to the point where we’re having payments and incentive fees and award fees earned and if we haven’t done the deliveries, that’s where you’re going to see the hit. So I believe there’s a bit of a delayed response.”