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Full Impact of COVID-19 on Industrial Base Not Yet Known

By C. Todd Lopez

WASHINGTON (Sept. 09, 2020) -- While it appears the defense industrial base has fared well through the COVID-19 crisis, the full impact has yet to be seen, the undersecretary of defense for acquisition and sustainment said.

"We use the Defense Contract Management Agency and the Defense Logistics Agency to track about 22,000 key companies that the department works with," Ellen M. Lord said today in an online discussion during the 2020 Defense News Conference. "Going back over the last six months, we did have hundreds of companies shut down, but now we're down to only about 30. So, that's very, very good news."

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The department monitors the health of the defense industrial base, or DIB on a daily basis, Lord said.

"We look at on-time-deliveries, deliveries missed, and, most importantly, we listen to what the issues are, really leveraging the industry associations, to do a lot of listening," she said. "What we are looking for is whether or not we're maintaining warfighter readiness for our production programs. And then relative to modernization, whether we are hitting key milestones relative to development programs."

While the Defense Department has done a lot to help ensure the stability of the DIB during the COVID-19 crisis, Lord said it'll be a while before the DOD knows for sure just exactly how healthy the industrial base is following COVID-19. Right now, she said, it's too early to tell how well companies have fared during the crisis.

"All the reports that have come out in large part don't reflect the hits that were taken by business," she said. "There have been mixed reports in terms of revenue and profitability. I would contend that most of the effects of COVID haven't yet been seen, because most companies gave their employees time off -- they stretched out production, paid a lot of people for working 100% when, perhaps, they were only getting 50% of the hours in, and so forth."

Lord said the department would like to get a solid accounting of the effects of COVID-19 on the DIB for a defined period of March 15 through September 15 in order to make the best determination on how else the department can help. One part of that will be businesses within the DIB writing up how they were affected by the pandemic and submitting those to DOD where they would be assessed.

"We think it would take five to six months, because once we got an appropriation, we would go out for a request for proposal," she said. "The larger companies are going to have to flow down those RFPs through their supply chain to gather the data. This has to be a very data-driven drill. So we would get all of that back, we think that would take two to three months, then we want to look at all of the proposals at once. It isn't going to be a first in first out. And we have to rationalize using the rules we've put in place, what would be reimbursable and what's not. So overall, we think five to six months in terms of a process."

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