DOD rolling back emergency contracting actions related to COVID

By Tony Bertuca / April 18, 2023

The Pentagon, in accordance with President Biden's termination of the national emergency for the COVID-19 pandemic, is ending several contracting and acquisition policies aimed at mitigating damage to the U.S. defense industrial base, including payment rates for large contractors that were made more generous at the onset of the pandemic, according to a new memo.

“As this national emergency declaration has terminated, contract awards shall not use emergency acquisition flexibilities that were permitted by the national emergency declaration,” according to a new memo from Principal Director of Defense Pricing and Contracting John Tenaglia.

A key policy being rolled back relates to contract progress payments for large companies, which were set at a rate of 80% prior to the pandemic but were adjusted to 90% in April 2020 to keep production lines healthy.

Now, DOD will return progress payments for large contractors to the “customary” 80%, but pledges to do so “in a manner that minimizes disruption,” with details to be provided soon, according to the memo.

However, DOD anticipates retaining the 95% progress payment rate for small businesses that was introduced at the start of the pandemic and will likely not return to the previous rate of 90%, the memo states.

The department previewed the likely progress payment change when it released a long-awaited financing study earlier this month.

Other COVID-related guidance is also being rolled back including pandemic-specific reporting, flexibilities for electronic delivery of information, and other such “class deviations” detailed in Tenaglia’s memo.

Additionally, the memo notes that DOD class deviations related to Section 3610 of the CARES Act -- which permitted the government to reimburse contractors for keeping workers in a ready state during the pandemic -- “will be maintained in force until such time that all reimbursement actions can be determined as complete.”

Though Congress passed the 3610 provision it never appropriated additional funding for DOD to reimburse contractors.

Meanwhile, Tenaglia said DOD teams executed 67,265 contracts valued at $75 billion during the pandemic, along with 540 Other Transaction Agreements valued at over $10 billion and 3,765 financial assistance actions valued at over $3 billion.

“I commend the adaptability and professionalism demonstrated by the DOD Contracting workforce, who in consultation with government program managers and requirements owners, persevered throughout the emergency,” he wrote. “Your efforts in executing these authorities were critical in facilitating DOD’s ability to support and assist the federal response to garner every resource possible to defeat this pandemic.”