COVID-19 Response Sparks Efforts to Strengthen Supply Chain

By C. Todd Lopez

WASHINGTON (Sept. 29, 2020) -- The COVID-19 pandemic revealed the fragility of the Defense Department's supply chain. As a result, the department is taking a variety of steps to strengthen that supply chain, the undersecretary of defense for acquisition and sustainment said.

"One of our first actions was to ensure that the defense industrial base was essential and designated as critical infrastructure," Ellen M. Lord said today in an online discussion during the ComDef 2020 conference, a virtual conference providing insights and perspectives on issues facing the international defense communities. "We quickly took measures to increase communication and gain greater insight into potential delivery and production challenges."

In March, Lord stood up the Joint Acquisition Task Force, or JATF, to work with the U.S. Department of Health and Human Services and the Federal Emergency Management Agency to help those agencies get access to the department's robust acquisition capability.

"JATF's goals included bringing analytic, program management and contracting expertise from the services and DOD agencies to quickly respond to demand from FEMA and HHS," Lord said.

The department also used about $215 million of funding through the Coronavirus Aid Relief and Economic Security Act, or CARES Act, to increase capacity and throughput of the domestic healthcare supply chain, Lord said, as part of an effort to re-shore critical healthcare manufacturing capability.

Over the last six months, she said, the department has also invested about $640 million in industrial base expansion to support increased capacity for production of materials related to COVID-19 prevention, detection and treatment.

To help businesses within the defense industrial base better cope with COVID-19, the office for Defense Pricing and Contracting issued a memorandum in March that encourages telework for contractors, even if the initial contract didn't specify that as a possibility, Lord said.

To further strengthen the DIB during COVID-19, Lord said the department raised progress payments from 80% to 90% for large businesses, and from 90% to 95% for small companies.

"In August, DPC also issued a class deviation providing policy and guidance to contracting officers for reviewing and processing contractor requests for reimbursement of paid leave costs under the authority of Section 3610 of the CARES Act," she said.

The industrial policy team within A&S also began hosting daily calls with industry and industry association leaders to discuss their most pressing needs during COVID-19, and to improve their knowledge of how DOD could help.

"While the calls are no longer held as frequently, they have reached 15 industry associations, which collectively represent 3 million companies around the world," Lord said. "They are an important conduit of information, both to and from the private sector."

The COVID-19 pandemic, along with other government reports have highlighted the need to re-shore critical industries related to defense, including microelectronics, rare earth minerals and unmanned aerial systems.

In particular, Lord said, the U.S. currently manufactures just 12% of microelectronics, and just 3% of packaging and testing of those electronics happens in the U.S. At the same time, she said, more than half the intellectual property associated with microelectronics is generated inside the U.S.

Lord said that the reliance on off-shore semiconductor manufacturing, packaging and testing strains the department's ability to acquire and sustain the potent microelectronic components that are embedded in defense systems.

"Experts within A&S and throughout the DOD are working to develop a microelectronics strategy to ensure currently-fielded and future DOD systems have secure components," Lord said. "This strategy requires novel business concepts, such as public-private partnerships, allowing the DOD to leverage commercial market advancements and demand in order to reassure microelectronics production and testing."