DoD issues guidance on partnering with the defense industrial base to fight COVID-19

On April 3, the U.S. Department of Defense issued a statement attributed to Lt. Col. Mike Andrews, Department of Defense spokesman:

“The Department continues to aggressively partner with the defense industry to mitigate impacts from the COVID-19 national emergency.

To date the Department, through its departmental agencies and the military services, has obligated over $265 million in actions issued in response to COVID-19 with National Interest Action value ‘P20C’ in the Federal Procurement Data System. Of note, over $165 million out of the $265 million has been obligated for Medical Construction, mainly mobile hospitals, that will help allow civilian hospitals to free up additional space for the rising number of patients suffering from coronavirus. In addition, the remaining $100 million includes efforts to provide medical resources including masks, respirators, ventilators, gloves, gowns, fuel, food and other means of support.

The Joint Acquisition Task Force (JATF), led by Principal Deputy Assistant Secretary of Defense for Acquisition Ms. Stacy Cummings, continues to align with the broader DoD COVID-19 task force. JATF serves as the single-entry point to the DoD acquisition enterprise to address the interagency’s requests for acquisition assistance, and has members embedded at the National Response Coordination Center (NRCC). The JATF leverages DoD authorities, tools, and skillsets to assist in meeting the Nation’s demand signal as defined by DoD, HHS and FEMA.

The JATF just launched the following portal, which will provide updates for industry as we get new information The website provides governance and guidance, key product lines, and welcomes resources and solutions from industry, academia, Department of Defense personnel, venture capital firms, and individual contributors. It also groups submissions from several categories (combating the spread, welfare of citizens, readiness, logistics, industrial base impacts, medical and other) so we can quickly match solutions with needs. A designated JATF team reviews inputs daily and priorities for action.

Deputy Assistant Secretary of Defense (DASD) for Industrial Policy Jennifer Santos has led 10 defense trade association calls to receive detailed insight into ongoing COVID-19 impacts to the defense industry. These calls provide the department an opportunity to communicate with over 3 million companies who are members of these associations. In addition, there have been two calls focused on supporting small businesses in the defense industry, including one with Small Business Administration leadership that discussed available loans provided through the CARES Act. Providing relief for COVID-19 impacts and increasing cash flow to industry, including changing the progress payment rates were the top issues identified by industry.

A direct result of the engagement between industry and department senior leaders is the development and issuance of 15 memos and formal guidance addressing these issues.  New memos and guidance are provided to the defense industry associations, the Hill, and are posted to the Defense Pricing and Contracting and Defense Acquisition University websites which all contracting officers and the general public have access to, ensuring all parties have updated and standardized guidance.

Understanding that the effects of COVID-19 will affect the cost, schedule, and performance of many DoD contracts, and that they are beyond the control of the contractor, this week Mr. Kim Herrington, Director of Defense Pricing and Contracting, issued several memos including Progress Payment Implementation and Equitable Adjustment. The Progress Payment Implementation states that the first post-modification progress payment request will result in the application of the higher progress payment rate against all qualified costs, including costs that have been incurred prior to the issuance of the Deviation. We estimate this will result in over $3B in cash being flowed into industry. The department has high expectations that that prime companies are ensuring cash flow is moving to small businesses in their respective supply chains who need it most.

The Equitable Adjustment memo states that Department contracts contain clauses that excuse performance delays, when the failure is beyond the control and without the fault or negligence of the contractor. This memo states that in the event of such a delay, the contractor is entitled to an equitable adjustment of the contract schedule and cost (when those costs are sufficiently supported), which means the contractor will not be in default because of an event like COVID-19. Contracting officers have the standardized guidance and are working with defense contractors.

Vice Admiral David Lewis, Defense Contracting Management Agency Director, continues to work closely with the contracting workforce and the Defense Finance and Accounting Services (DFAS) to ensure that invoices are being paid in a timely manner, and that DFAS has been paying at the higher progress payment rate. To date, there have been no reported delays on contractor submitted invoices.

To support the increased progress payment rate from 80% of cost to 90% for large businesses and from 90% to 95% for small businesses, DCMA has modified approximately 1400 contracts that were already receiving progress payments to show the increased rates. It has also authorized the use of progress payments for additional vendors if they choose.”

Source: U.S. Department of Defense

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