Pentagon Pumps $3B Into Industry As COVID-19 Delays Loom

PENTAGON: The Pentagon’s acquisition chief today said she expects major defense programs to be delayed by around three months due to COVID-19 closures and disruptions, while DoD rushes to pump $3 billion into the defense industry to bolster programs at greatest risk.

Speaking to reporters here this morning, Lord said she expects to have to ask the White House and Congress for “billions” more to reimburse contractors affected by work delays and broken supply chains. “We believe it will cost us something,” she said, declining to get any more specific than “billions” of dollars.

The months-long delays to programs will likely be spread throughout the defense industry as small parts suppliers shut down operations for days or weeks at a time. “We’re looking at schedule delays and inefficiencies and so forth: this isn’t about a particular program.” Lord singled out “a slowdown in the shipyards, to an extent. Aviation is actually the most highly impacted sector we have right now.”

It’s unclear what programs are at highest risk, but the Navy has been bullish on speeding up its new frigate program to award contracts some time this summer. If work slowdowns continue, that could be pushed further down the road. The Army and Navy have also been moving ahead on their nascent hypersonic weapons program, with a series of critical tests planned this year. 

Lord pointedly suggested that large defense companies need to start pushing more money into their supplier base to ensure small parts suppliers don’t go out of business, further impacting new programs and ongoing maintenance efforts. She did praise Lockheed and Boeing for increasing cash flow to lower-tier suppliers, then not-so-subtly says, she is “hoping for similar public announcements from other major primes.”

Last month, Lockheed said it would advance more than $100 million to suppliers hurt by the slowdown, and this week Boeing said it was reopening the Philadelphia-area facility where it makes the Chinook, the V-22 Osprey and other helicopters.

The Pentagon is starting to award higher progress payment rates this week, pumping $3 billion dollars in increased cash flow to industry. “We try to anticipate the problems and work with the companies to keep going to the greatest degree possible,” Lord said.

As part of that effort, DoD’s first priority is the modernization process of the nuclear triad, she said: “we look at the Missile Defense Agency, we look at the critical capabilities. We’re looking where the greatest pain points are.”

While she singled out Lockheed and Boeing, shipbuilder Huntington Ingalls is making a push to speed up contracts and get money into the hands of sub-tier suppliers early, in order to ensure companies way down the supply base food chain can continue chugging along. 

In a recent interview, company representatives told me they’ve reached out to over 2,000 suppliers in 48 of the 50 US states. “We need their products today, but we also need them in 90 days, so we want to help them brave the storm,” said Lucas Hicks, vice president of new construction aircraft carrier programs. “We’ve actually changed some payment terms on some of our supplier contracts to try to make sure that we can front them what they need to stay afloat. We’re doing some creative stuff to try and help them be able to weather the storm.”

The Department’s efforts to backstop the defense industrial base while taking steps to protect its workforce and purchase critical protective clothing like facemasks is still in its relative stages, despite the COVID-19 pandemic having been with us for months.

“We are just really beginning to pick up momentum,” Lord said.