$2 trillion rescue bill gives defense contractors limited relief

Defense contractors would get some relief for personnel costs under the Senate-passed $2 trillion coronavirus stimulus and relief bill but worries over increased production costs remain.

The federal government would be able to reimburse contractors with paid or sick leave if they are unable to reach their job site or telework due to the coronavirus outbreak, according to a section of the Senate's $2 trillion coronavirus relief package. But that relief, while welcome, doesn't solve many defense contractors' main concern: escalating costs or expanded duties.

Industry reactions were mixed but seem to agree the Senate's package missed key items that would give companies that work with the government protections they believe are needed to keep working in the midst of the global crisis.

The Aerospace Industries Association praised the bill's passage as "encouraging"; however, the National Defense Industry Association called the bill "a positive step" but noted "limitations" in giving companies, and their employees, assurance that any added costs to their current contracts would be covered.

Retired Gen. Herbert Carlisle, NDIA's president and CEO, told FCW the organization was advocating for legislative language that would include equitable adjustments for defense contractors, which would give them extra time to perform contracted tasks and additional monies if changes were made due to the pandemic, such as increased production or workforce needs -- anything that affects ability to perform.

"The skilled labor force is fragile," Carlisle said. "We need that workforce to be protected at this time."

Carlisle, the former commander of Air Combat Command, said contracts, particularly for small businesses and those up for renewal in the next 90 days, were vulnerable without those guarantees.

"The personnel piece of this is a big deal," he said. "We really, really need equitable adjustments from DOD ... to make [companies and employees] whole."

But there's still another option without that language, which is unlikely to be added and passed in a final bill: effective use of the Defense Protection Act (DPA), Susan Cassidy, a partner at Covington and Burling who specializes in government contracting and procurement, told FCW.

Cassidy said equitable adjustments aren't necessarily a guarantee and require a mutual agreement between the contractor and government as well as quantifiable proof the costs have increased due to the changing environment and need to be covered.

"If [DOD] can bring the DPA in and start using that more effectively," Cassidy said, "there's a lot they can do to help companies. It's really a tool that the government hasn't implemented yet, and I'm not entirely sure why."

But there could be some relief under DPA, she said, because the government is able to assert itself as a top buyer from commercial companies, and it's easier to buy using that legal authority than it is for the Stafford Act, which gives grants to state governments and not-for-profit organizations, which can then contract out for goods and services, Cassidy said.

The White House issued an executive order to activate DPA but has said it hasn't yet made an order because companies are scaling up production voluntarily.

The Defense Department has indicated it will explore using DPA, namely the ability to prioritize its contracts and orders over commercial needs, ensuring their availability for national security. DOD's head of acquisition, Ellen Lord, announced during a March 25 media briefing that a new Joint Acquisition Task Force would evaluate and coordinate DPA use.

Lt. Col. Mike Andrews, Defense Department spokesman, said DOD is working with the defense industry to understand how DPA funds can help meet large-scale demands in response to the global COVID-19 crisis. Andrews clarified that under the executive order, the Department of Health and Human Services, not DOD, has the authority to prioritize health resources, and the organizations are working together with the Federal Emergency Management Agency to coordinate a response.

"DOD is actively seeking economic stimulus injection opportunities from the defense industry for future Title 3 actions, and continues to identify ready projects that can be immediately used if DOD is funded in the stimulus bill," Andrews said via email. "We will bolster U.S. suppliers who may have had commercial content which has not vanished (commercial shipbuilding, aviation, and IT)."

This also includes increasing current production, defense contractors who can convert to producing medical equipment and supplies, such as masks and gloves, and companies that can provide existing commercial products that where manufacturing stopped "due to COVID-19 protocols by a state or local authority and now DOD can 'fill' the line with military production," Andrews said.

This article first appeared on FCW, a partner site to Defense Systems. 

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