With 77% of CARES Act funds remaining, DoD well positioned to support defence industry

There is ongoing uncertainty regarding the eventual duration of the Covid-19 pandemic, with a leaked Department of Defense memo on 19 May indicating that the crisis was anticipated to persist until at least Summer 2021. Harry Boneham, Associate Analyst at GlobalData, comments, ‘despite this ambiguous, potentially lengthy timeframe, it would appear that the Department of Defense (DoD) possesses the financial means to continue to support the US defence industry through an enduring crisis. With approximately 77% of the funds allocated within the Coronavirus Aid, Relief and Security (CARES) Act outstanding, according to Democratic Senators, the DoD remains well positioned to protect the defence industrial base from the economic impact of the Covid-19 pandemic’.

The Department of Defense was allocated $10.6bn in March 2020, distributed amongst a number of specific procurements. For example, $3.4bn has been allocated for the procurement of medical equipment and facilities for the treatment of DoD personnel. Thus far it could be argued that CARES act funding has been effective in supporting the defence industry within the US. For example, the DoD’s CARES Act allocation sets aside $1.45bn specifically for the protection of supply chains. This funding has been effectual, with Ellen Lord, Under Secretary of Defense for Acquisition and Sustainment, indicating on 20 April that the majority of suppliers had remained open despite the Covid-19 pandemic. From a total of 11,413 vendor based companies, 94.79% had continued working, with a further 1.29% having closed and reopened. In addition, 83.3% of the Department of Defense’s $1bn Defence Production Act remains unobligated. This budget is earmarked for the procurement of to increase access to materials necessary for national security and pandemic recovery, and could serve as an opportunity to defence contractors.

Furthermore, a second economic relief bill is currently waiting to be taken up by the US Senate, having already been passed by the House of Representatives. The $3tn Health and Economic Recovery Omnibus Emergency Solutions, or HEROES, Act reportedly contains further support measures for defence contractors, allowing the DoD to compensate firms for the financial impact incurred of keeping workers employed during the Covid-19 crisis, including fees, and general and administrative expenses.