The Pentagon is telling Congress it needs $11 billion in emergency supplemental funding to mitigate the impact of the COVID-19 pandemic across its acquisition portfolio and the U.S. defense industrial base, according to a new document obtained by Inside Defense outlining expected delays to specific programs.
The Pentagon estimates its programs between March 15 and June 15 experienced $11 billion in cost increases "realized because of inefficiencies caused by COVID-19," the document states.
The money sought would be used to support approximately 106,000 jobs, according to DOD.
The Pentagon breaks down the impact by service: $4.7 billion and 43,214 jobs for the Navy; $4.3 billion and 27,768 jobs for the Air Force; $1.1 billion and 29,252 jobs for the Army; $594 million and 3,956 jobs for the Missile Defense Agency; and $190 million and 1,859 jobs for U.S. Special Operations Command.
"This estimate is calculated by considering the projected spend over this period for the portfolio, assessment of the percentage of that spend attributed to direct labor, and application of reported inefficiencies in that sector," the document states.
The Pentagon says industry is demonstrating approximately 30% to 40% inefficiency across the defense industrial base, though in "certain sectors like shipbuilding," DOD is seeing 50% to 60% inefficiency.
The DOD request, however, has not been welcomed by congressional Democrats.
House Armed Services Committee Chairman Adam Smith (D-WA) and Sen. Dick Durbin (D-IL), the top Democrat on the Senate Appropriations defense subcommittee, wrote in a Defense News op-ed today that they are concerned by the "lack of detail" in DOD's request.
"We cannot panic and hand out blank checks to defense contractors," they wrote. "To do so would set an irresponsible precedent for years to come."
Meanwhile, the Pentagon notes its current estimate does not cover "potential overhead rate increases due to layoffs, especially if the contractor performs both government and commercial work."
Additionally, the department notes it is "concerned with a potential loss of critical labor skills (e.g. welders) and continues to work these issues by contract and location as we analyze the impact across the Defense Industrial Base."
The Pentagon cited several reasons for inefficiencies, including confirmed cases of COVID-19 or quarantines, facility closures, teleworking, travel restrictions, inavailability of parts or supplies, high absentee rates, local and state lockdowns, foreign government lockdowns, added costs for personal protection equipment, added costs of cleaning and social distancing and financial distress.
The Pentagon also notes it must foot the bill for Section 3610 of the Coronavirus Aid, Relief, and Economic Security Act, which allows contractors to claim reimbursement for the costs of remaining in a "ready state."
"The biggest sectors affected have been Aviation, Space, Combat Vehicles, Clothing and Textiles and Missiles," according to the DOD document. "Some sectors like Aviation also have significant impacts related to commercial aviation challenges."
Shipbuilding concerns
In the document, DOD notes that it is concerned about key parts of the defense industrial base. For the Navy, the Pentagon is most concerned about shipbuilding, which involves "significant touch labor; greater facility impact from social distancing; and strong union representation at some yards pushing for paid leave with facility shutdown," the document states.
DOD is worried that "at least one of the big seven shipyards may shut down" in the near future.
"Worker attendance rates range from 50% to 70% for blue collar workforce, and much of the white-collar workforce is teleworking," according to DOD. "Recovery from a full shutdown would extend inefficiencies well into next year after restart."
Aircraft procurement is less of a concern as it entails "moderate touch labor but tends to enable better distancing," according to the document.
Though DOD has yet to see prime contractor production impacts in aircraft procurement, the department says it has observed "sub-tier component impacts" and "short-term plant shutdowns."
'Major' Air Force delays
The Air Force, however, is experiencing "major program delays," according to the Defense Department. The top contractors impacted are Boeing, GE and General Dynamics.
The Ground Based Strategic Deterrent, Long Range Standoff Weapon, F-35 Joint Strike Fighter and KC-46 tanker are slated for "delays to program milestones and weapon system fielding."
Production of the Joint Air-to-Surface Standoff Missile and Advanced Medium-Range Air-to-Air Missile is being slowed by reduced workforce and facility inavailability.
The Small Diameter Bomb program is being impacted by reduced workforce availability, "while the motor supplier, MBDA Inc., is being pulled to support [the] Federal Emergency Management Agency with motors for hospital beds."
Furthermore, DOD states the Kaman Corp., which provides fuzing components to AMRAAM & JASSM, is experiencing a "significant drop in commercial demand" that has led to the company "reporting problems."
There are also expected problems in space procurement. For example, the National Security Space Launch program is expecting delays because of SpaceX's workforce being quarantined, according to DOD.
"The industrial base is also seeing impacts as OneWeb, a low earth orbit communication provider, is considering bankruptcy due to the current situation," the Pentagon report states.
The Minuteman III and nuclear communication programs are also experiencing delays due to facility shutdowns.
The Pentagon also worries that small businesses critical to defense infrastructure do not realize their work is "exempt from most local shelter-in-place orders."
MDA contract delays expected
The Defense Department also notes the Missile Defense Agency will have "contract award delays," citing the Next Generation Interceptor request for proposal release, the Regional Glide Phase Weapon System and the Hypersonic and Ballistic Tracking Space Sensor.
Other delays will impact SM-3 Block IIA missile production, Aegis Ashore Poland construction, Aegis "testing delays for Flight Test Missile (FTM)-44 (Aegis), FTM-31, and FTM-33," the Sea-based X-band radar software upgrade, missile launch sites at Ft. Greeley, AK, and the Long-Range Discrimination Radar.
The Army felt the impact of COVID-19 with a BAE Systems facility in York, PA, which closed for two days and returned with 50% of its workforce. Also, General Dynamics Land Systems halted some production work on Army vehicles in Lima, OH, for two weeks due to COVID-infected employees, according to the document.
The Hellfire missile and Joint Air-to-Ground Missile programs are experiencing slowed deliveries due to supply chain interruptions, the document states.