Pentagon to ask U.S. Congress for emergency coronavirus funds to support defense industry

by Reuters
Monday, 20 April 2020 18:30 GMT

By Mike Stone

WASHINGTON, April 20 (Reuters) - The Pentagon will request billions of dollars in the next version of the stimulus package from Congress to assist the defense industry during the economic slump caused by the coronavirus outbreak, the Pentagon's top weapons buyer said on Monday.

The pandemic is affecting defense companies in the Pentagon's aviation supply chain, as well as those in the shipbuilding industry and small space launch companies, the Pentagon official, Ellen Lord, said. She added some businesses have been forced to close and then reopen facilities to sanitate them following reports of infections.

In an effort to provide financial support to defense contractors, such as the smaller suppliers of Lockheed Martin Corp and Boeing Co, the Pentagon has taken several measures including increasing interim payments, known as progress payments, on contracts and paying labor costs when healthy workers can't get to job sites.

The Pentagon is tracking the spread of the virus throughout its vast supplier network, Lord told reporters on Monday.

Out of 10,509 Defense Department contractors, 106 are closed with 68 companies having closed and reopened, Lord said. Of 11,413 subcontractors, 427 are closed with 147 having closed and reopened, she said.

The Pentagon hopes to include billions of dollars to support its industry initiatives included in the next version of the CARES Act, Lord said without specifying the amount because the request has not been approved by the White House Office of Management and Budget.

The Pentagon also finalized contracts late last week under the defense production act for making new N-95 respirator masks - $76 million going to 3M Co, $29 million to Owens & Minor Inc and $27.4 million to Honeywell International Inc, Lord said.

The Pentagon's increased progress payments will raise the rate of funding for 1,500 contracts and help provide $3 billion in increased cashflow, Lord said. "We expect payments at the higher progress payment rate to start this week."

Despite the increase, the Pentagon anticipates its contractors will feel the impact of a three-month production slowdown, Lord said.

Additional oversight of the increased payments and funds to support labor costs has not been established, Lord said. She added that industry associations may have a role in ensuring that the payments support smaller suppliers. (Reporting by Mike Stone; Editing by Aurora Ellis and Grant McCool)

Our Standards: The Thomson Reuters Trust Principles.