We Need $10B to Pay Contractors’ Coronavirus Expenses, Pentagon Tells Congress

The Pentagon needs Congress to approve “around $10 billion” to cover defense contractors’ coronavirus-related expenses, a top defense official said Monday.

Alan Shaffer, deputy defense undersecretary for acquisition and sustainment, became the first Defense Department official to put a price tag on the relief effort.

“If there is another supplemental or stimulus package for realistic economic adjustment, we could be looking at somewhere around $10 billion in additional program costs,” Shaffer said during a taped appearance on the Government Matters television show that aired Monday afternoon.

Also on Monday, White House economic advisor Larry Kudlow told Fox Business that the Trump administration is putting together a fourth coronavirus stimulus package. 

The CARES Act allows defense companies to recoup money they used to keep employees working amid the pandemic. While Congress authorized these reimbursements, they did not appropriate the funding.

Until now, Pentagon officials have been vague in saying how much money was needed to cover the costs. During a June 11 House Armed Services Committee hearing, Ellen Lord, the defense undersecretary for acquisition and sustainment, said the Defense Department would request in the “lower end” of “tens of billions of dollars.”

Last week, defense analyst Jim McAleese estimated that  between $12 billion and $15 billion would be needed to cover companies’ coronavirus expenses. If Congress does not appropriate the funds, the Pentagon would likely cut weapons buying and research funding to cover the costs, the CEOs of most major U.S. defense firms wrote in a July 7 letter to White House Office of Management and Budget Director Russell Vought.

Factory shutdowns and trouble receiving parts from suppliers in the U.S. and globally have caused manufacturing disruptions across weapons programs. The current spike in COVID-19 cases in the southern United States in Florida, Texas, and Arizona, states with large defense manufacturing hubs, further disruptions to weapons projects are possible.

“We’re going to be at this for a while,” Schaffer said. “The exact number of months — your crystal ball is as good as mine.”

Pentagon officials have been closely monitoring the aviation sector, where a substantial drop in commercial airline passenger travel has prompted airlines to ground planes and cancel new aircraft orders. In recent weeks, the Pentagon has awarded more than $400 million in bailouts to aviation, shipbuilding, space and even textile companies that manufacture military uniforms. Shaffer in the interview that aired Monday said more bailouts through so-called Defense Production Act Title 3 might be necessary.

“I think we’re going to have to look at what we can do through Defense Production Act title 3 [and] through other mechanisms to make sure that we remain viable in the aircraft [industry],” he said. “We’ve seen some projections from the industry that suggest the aircraft industry will take two to three years to rebound.”

While Shaffer said “shipbuilding should be OK,” he said, “we’re watching the space industrial sector very closely because we’ve seen a contraction in the commercial side for space launch.”

Major U.S. defense firms are scheduled to report second-quarter earnings before the end of the month.