Defense CEOs ask White House, Pentagon to push for aid in next stimulus bill

Chief executives of eight major defense companies have asked the White House and Pentagon to push for additional stimulus funds as the Senate prepares to debate another round of coronavirus economic relief legislation.

Under one section of the first CARES Act stimulus law signed in late March, government contractors can get reimbursement from the Defense Department of the estimated costs to keep paying employees who could not get to their designated work sites because of the COVID-19 pandemic.

In both letters sent Tuesday and obtained by WT, the CEOs said those costs to keep the workforce in a ready state are only one category of money the sector needs in order to prevent job losses and preserve capital for investments in new technologies.

Other categories of costs they cited include those resulting from travel restrictions, facility closures, social distancing within facilities, buying personal protective equipment, cleaning procedures and financial impacts associated with disruptions to manufacturing and supply chain.

DOD does not have the funds to cover the costs of those items and requests for equitable adjustment in the event of disruptions to work that is on contract, the letters said.

CEOs who signed the letters were those for Boeing’s defense segment, General Dynamics, Lockheed Martin, Raytheon Technologies, L3Harris Technologies, Huntington Ingalls Industries, BAE Systems’ U.S. subsidiary and Textron.

Bloomberg first reported the story Wednesday.

Without the additional funds, the CEOs said DOD’s planned topline budget for this current fiscal year and the next two after that will be drawn from to cover the costs of maintaining a ready-state workforce and keeping the supply chain intact.

In the letter to acting Office of Management and Budget Director Russell Vought, the CEOs urged him to support an emergency supplemental request for additional funds in time for the Senate to consider the next COVID-19 response bill slated to see debate over it start in the coming weeks.

“While the DOD may be able to use other appropriated funds to reimburse contractors, the cost for (CARES Act) expenses is well beyond its ability to fund without significantly jeopardizing ongoing modernization efforts required to fully implement the National Defense Strategy,” said the letter to Vought.

The letter sent to DOD acquisition chief Ellen Lord said companies anticipate they will have their estimated costs related to COVID-19 impacts in by the end of this week. In June, Lord told the House Armed Services Committee that DOD could need to cover up to $10 billion in COVID-19 claims from companies and said in a separate Pentagon media briefing that many large programs will likely see a three-month slowdown.

On Wednesday during an event hosted by the Brookings Institute, Lord said one item the pandemic has brought greater awareness to is DOD’s “supply chain being offshore with potentially adversarial countries” and especially regarding microelectronics. Because of that, she said DOD wants to bolster domestic manufacturing.