DOD Explains How Contractors Will Get Reimbursed for COVID Expenses—If Congress Cuts a Check

Under Secretary of Defense for Acquisition and Sustainment Ellen Lord at a press briefing August 20.

Under Secretary of Defense for Acquisition and Sustainment Ellen Lord at a press briefing August 20. Marvin Lynchard/Defense Department

Ellen Lord says the bill would come to $10 billion to $20 billion.

With lawmakers and the White House unable to come to an agreement on a new coronavirus stimulus package, it’s unlikely that money requested to reimburse defense contractors for pandemic-related expenses will reach these companies until at least the second quarter of 2021, according to the Pentagon’s top weapons buyer.

Ellen Lord, defense undersecretary for acquisition and sustainment, laid out the reimbursement process for the first time Wednesday. She said it would take the Pentagon five to six months to distribute those funds after they are approved by Congress.

“Then we want to look at all of the proposals at once,” Lord said Wednesday at the Defense News Conference. “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.”

Lord estimated that the tab for defense contractors’ pandemic expenses from March 15 to Sept. 15 would come to “between $10 and $20 billion.”

In July, Senate Republicans floated legislation that included $11 billion to cover these companies’ coronavirus-related expenses. The CARES Act — which Congress passed in March — allows companies to recoup money used to keep employees working amid the pandemic. Since then, progressive Democrats have mounted an assault on defense spending, calling for Pentagon dollars to be shifted to domestic programs.

“We believe we need that appropriation to maintain readiness,” Lord said. “If we do not get that, what we are going to find is we are not going to get the number of units delivered, we are not going to maintain warfighter readiness [and] we’re not going to move forward in modernization.”

The pandemic has affected defense companies differently depending on their locations and the size of their commercial aerospace portfolio. As airlines cancel orders for new planes amid a sharp decline in travel, companies with large defense businesses, such as Lockheed Martin and Northrop Grumman — have been able to withstand the pandemic better than Boeing or Raytheon Technologies, which have large commercial businesses.

“I would contend that most of the effects of COVID haven’t yet been seen,” Lord said.