Defense Contractors Need 'Double-Digit Billions' in COVID-19 Relief, Official Says

The Pentagon's top weapons buyer presented Congress with a difficult choice Wednesday: Come up with "double-digit billions of dollars" to reimburse defense contractors for their costs related to COVID-19 or risk a degradation of military readiness.

Ellen Lord, the Defense Department's undersecretary for acquisition and sustainment, told the House Armed Services Committee that the $688 million to aid contractors and subcontractors in the recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act was nowhere near enough.

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She said one unnamed prime contractor alone estimated its coronavirus-related costs at more than $1 billion and urged Congress to consider passing a supplemental bill to provide funding for assistance to the Defense Industrial Base.

A section of the CARES Act "authorized" Congress to fund offsets to the so-called "COVID penalty" for defense contractors, but did not "appropriate" the money, Lord said. She added that the DoD itself "does not have the funding to cover these costs."

In his questioning of Lord, Rep. Mac Thornberry, R-Texas, the ranking committee member, sought to unscramble what is at stake.

He noted the expenses defense contractors have accrued for layoffs, paid leave, sick leave, work stoppages and the associated costs of work slowdowns, cleaning workspaces and rearranging job sites to allow for social distancing.

"You're telling us today there's not the money to do that" and there will "have to be some sort of supplemental funding," Thornberry said.

Lord responded, "Correct."

"Otherwise, these contractors are going to have to eat several billions of dollars, which could well come at their employees' expense, which is what [the CARES Act] was supposed to help to begin with," Thornberry said.

"There's a choice there," Lord said, "whether we want to eat into readiness and modernization" that would come as a result of a slowdown in contract deliveries "or whether we want to remedy the situation in the next six months or so" with increased funding.

Nearly two hours later in the hearing, Lord finally was asked for an estimate on how much money is needed to make up for the COVID-19 penalty.

"Double-digit billions of dollars," she said.

-- Richard Sisk can be reached at Richard.Sisk@Military.com.

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