Pentagon acquisition chief Ellen Lord said today that for the first time since the outbreak of COVID-19, more defense companies are re-opening than closing.
Lord said some of the re-openings appear to be happening in regions where coronavirus cases have peaked.
"I think a lot of this is actually looking at locations of companies," she said. "As a geographic region gets healthier so does the industrial base. . . . We also, I think, see companies knowing where to go for support in order to work their way through the system."
Lord said out of the 10,509 companies tracked by the Defense Contract Management Agency 93 are closed, down 13 from last week, with 141 companies having closed and reopened, up 73 from last week's number of 68.
Out of 11,413 companies tracked by the Defense Logistics Agency, 437 are closed with 237 having closed and reopened, up almost 100 companies from last week.
"This is the first time we have seen reopening numbers larger than the number of closures," she said.
Lord said DOD still expects a three-month "slowdown" across its major acquisition programs, but stressed it has not yet risen to the level of a "delay," which she said has a "different connotation."
"We see efficiency issues," she said. "So, we have somewhat of a slowdown in our ability to accomplish tasks. We are finding workarounds for that, versus just saying we are delaying doing something. We are looking at working through the issues which sometimes cannot be executed with the same efficiency we previously had."
Lord said DOD will continue to monitor the situation for delays.
"This is obviously a dynamic situation, and the overall impacts are being assessed on an ongoing basis," she said.
Lord said DOD is working now to understand the COVID-related inefficiencies different contractors are experiencing to determine how much companies will need to be reimbursed in accordance with Congress' most recent stimulus package. The department, she said, will be asking Congress for funding to do that as well as for other forms of COVID-19 response.
"We are still in the methodology of how to do that," she said. "We've done some calculations of a worst-case. What we are doing now is talking with [the White House Office of Management and Budget] and getting ready to talk to Congress about that."
House Armed Services Committee Chairman Adam Smith (D-WA) told reporters yesterday he does not think DOD should get new funds for the defense industrial base in an upcoming stimulus package, arguing the department already has funding it can redirect to that area. Lord said today DOD would need to be granted reprogramming flexibility by Congress to do so.
Meanwhile, Lord said $1.2 billion of cash flow due to increased progress payment rates was processed this week out of the total $3 billion DOD has pledged to push down to small defense contractors and suppliers.
She commended Lockheed Martin for committing to accelerate $450 million in payments to its supply chain and "distressed and small businesses who need it most."
Lord also noted the Pentagon has signed a new interagency agreement with the Health and Human Services Department that established a framework by which DOD will provide acquisition assistance in terms of ramping up production of medical supplies and distributing them.
"I'm excited to say we are already working on our first project together, and I look forward to expanding our partnership to deliver medical resources in support of our national mission," she said.
DOD recently announced a $75.5 million Defense Production Act Title III contract with Puritan Medical Products to double the company's output of medical swabs for virus testing.
Lord also said she and other DOD officials would be meeting with the Treasury Department tomorrow to discuss oversight of the $17 billion federal loan program intended to assist businesses deemed vital to national security. Applications for the loans are due to the Treasury Department tomorrow.
"We're going to go back to Treasury with a list of recommendations," she said. "I'm hoping that early next week . . . we can come back with a little bit more fidelity to the defense industrial base to better identify who might most benefit from this particular money."
Lord said fewer than 20 companies interested in the loans have reached out to the Treasury Department to date.
"The challenge is that this $17 billion worth of loans comes with some fairly invasive, kind of, riders on it," she said.
For instance, the Treasury Department will seek an equity stake in publicly traded companies who benefit from the program.
"For public companies it may not be as interesting as for private companies, so that's one of the differentiators I'm seeing," she said.