Analysts expect the US$2 trillion COVID-19 stimulus package currently being hashed out in Washington to provide significant support to the country’s defence industry. Speaking at the Pentagon, DoD chief acquisition official Ellen Lord said the sector could expect financial relief to flow to prime contractors and SMEs, as well as smaller supply chain players.
After spending much of the week in negotiations with US lawmakers and White House officials, Lord said that "we are not sure exactly what the numbers are that are going to go into the final bill. But they will be significant”.
US outlets are reporting that the Senate appropriations committee is considering allocating US$1.5 billion for the Defence Working Capital Fund. Allegedly, this would include up to $475 million each for the Air Force and Navy, and $500 million towards a general Pentagon fund.
Andrew Hunter, director of the Defense-Industrial Initiatives Group at the Center for Strategic and International Studies, said that the service branches would have the flexibility to allocate these funds to contractors as they see fit.
“You can use the fund for a variety of purposes,” he said. “The primary effort has been to operate business functions like depots and some Navy shipyards ... it’s very flexible so you could do procurement activity, O&M activity, and in theory you can do R&D activity, it’s easy to move money into the fund.”
While Hunter pointed out that these funds can be allocated rapidly, the speed involved will likely raise concerns over "how and where it is spent". To that end, lawmakers are expected to allocate significant funding to industry oversight bodies such as the Pentagon's Inspector General, which is expected to receive up to US$20 million.
Similarly to Australia's DACC arrangement with Med-Con, the outbreak of COVID-19 has blurred the lines between defence and defence industry contractors in some instances. The Pentagon has invoked the Defense Production Act to co-ordinate production of critical medical equipment such as ventilators, respirators and protective masks.
Wes Hallman, a senior vice president at the National Defense Industrial Association, stated in the days prior to Lord's announcement that he was particularly worried about the ability of small defence businesses to weather the outbreak; particularly those that produce unique products.
“I’m not worried about our big companies,” he said. “But on the supply chain, that drills all the way down to mom-and-pops, where there are one or two suppliers of capabilities. Should they go away, they’re unlikely to come back."
However, Lord's announcement made it clear that the Pentagon was pushing to support these supply chain critical contractors, and that the US government was working to ensure that small businesses do not have to rely on foreign sources of funding during this time.
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For further information regarding the Australian government's response to the ongoing COVID-19 outbreak, refer to the Australian Department of Health page here.