Ellen M. Lord, undersecretary of defense for acquisition and sustainment, updates the news media on the Defense Department’s COVID-19 acquisition policy at the Pentagon, June 22, 2020.
Transcript
Inter. Okay, so good morning, ladies and gentlemen. Those in person as well as those on the phone and virtually watching us on defense dot gov Thanks for joining us here today and a belated Happy Father’s Day to everyone. Especially my father, Air Force Retired Master Sergeant Ken Andrews. Eso family plug apologized this morning. Undersecretary of Defense for Acquisition and Sustainment Ellen Lord will provide a department update on acquisition efforts to combat Cove it 19. And then both she and US International Development Finance Corporation Chief executive Officer Adam Bowler will discuss their signing of a joint memorandum of agreement which formalizes the relationship between our two organizations to utilize $100 million of the department’s Cares Act. Spend plan to provide a subsidy for multiple federal loans to create, maintain, protect, expand or restore domestic industrial base capabilities to support National COVID-19 Response. Both leaders will have an opening statement and then we’ll take your questions. We do have a hard stop at 11:30. So please be respectful so we can get in as many as we can, ma’am, Over to you. Thank you, Mike. A good morning, ladies and gentlemen. Thank you for joining us today in a special thank you to Adam Bowler from the Development Finance Corporation, or DFC, for making the trip to the Pentagon here in person. Before we make our joint announcement, I want to give you an update on the department’s continued efforts to mitigate impacts from COVID-19. Since January, the department’s top priorities have remained, protecting our three million service members, their families and all of our civilian and defense contract personnel. While continuing our national security missions and helping the American people confront this crisis, we continue toe on Earth the continued sacrifice and selfless service of our service members deployed around the country who are still supporting and protecting the American people. The department has placed over $3 billion in contract obligations spanning over 18,000 actions to Combat COVID. It impacts the Defense Logistics Agency, or D L. A. Especially is continuing to closely coordinate with the military services toe understand requirements and priorities. To protect the force specifically, to protect the force, de L. A has procured over 5.9 million and 95 respirator masts, 14.2 million non medical and surgical masks, 118 million exam gloves, 2.7 million isolation and surgical gowns and 8000 ventilators. Delivery of 13 million nonmedical cloth face coverings to our military services combatant commands, U S Coast Guard and several federal agencies is ongoing. Last week, D. O. D completed our 14th Aeromedical evacuation mission, safely transporting the 78th COVID-positive patient from forward deployed locations toe a higher level of care in Europe and the United States. These missions have moved service members D o D. Contractors, civilians and two dependent Children were fully committed to the safety of our air crew, medical support staff and patients during these missions. My thanks to the Defense Threat Reduction Agency or Detroit and the Joint Rapid Acquisition Cell, or J Iraq, who continue to partner with the Joint Staff, Transcom and the Air Force to make these missions possible, D. O. D. Remains closely partnered with FEMA and HHS, providing almost $800 million in life saving supplies and equipment to service members and federal agencies in the nation’s whole of government approach to the Corona virus pandemic. Moving on to the Defense industrial base, or dib, we continue to carefully and methodically track the state of the dib through Defense Contracting Management Agency DCM A and D L. A. Who both produced daily reports documenting operational status. Out of the 10,509 companies DCM A tracks, we’re down to two closed and 267 companies having closed and reopened. Out of the 11,413 companies delay tracks, 31 are closed with 661 having closed and reopened domestically. We have seen some minor improvements. We continue to see the greatest impacts, both domestically and internationally in the aviation and shipbuilding supply chains. Our acquisition and sub statement team remains focused on partnering with industry to maintain readiness and Dr Modernization, Scott Bomb and our Industrial Policy team continue to lead multiple industry calls every week. I am proud of the department’s responsiveness in addressing defense industry concerns outlined during these calls. Mr. Kim Harrington, director of defense pricing and contracting, has issued 35 defense pricing and contracting memos aggressively responding to industry needs and impacts. Those memos include guidance allowing companies to continue to work, providing liquidity to the industrial base, implementing legislation benefiting industry, improving the speed of contracting activity and providing spending transparency. An update on the $3 billion of increased cash flow due to increase progress payment rates. As of this week, we have processed over $2 billion in invoices at the higher progress payment rate. We have spoken with each of our major prime companies, and they have confirmed their detailed plans to work with their supply chains, toe accelerate payments, toe, identify distressed companies and small businesses. The department’s Office of Small Business Programs continues to aggressively partner and engage. Amy Murray’s team has hosted multiple small business Webinars and remains a one stop shop for small businesses in need. On June 15th De L. A launched the Fed mall small business corridor for small business contractors to purchase personal protective equipment for their personnel to safely perform contracts for the government. Currently, there are four suppliers offering approximately 88 PPE items. Lastly, on the dib, we continue to assess a three month slowdown toe all programs due to COVID-19. I continue to use the word slow down and impact and did not say the word delay, which carries a very different connotation I won’t discuss any program specifically, but we have seen inefficiencies across most programs. Cove in 19 is shutting down defense manufacturing facilities and production lines, disrupting supply chains and distressing the financial stability off the company’s D.O.D. Relies on to protect the nation. D. O. D continues to partner with our industry partners to do everything possible to keep programs on schedule and to minimize the cost and schedule impacts. This is obviously a dynamic situation, and the overall impacts will not be completely known for a while. As we work through how we operate over the next few months, I stress that we expect our defense industrial base toe follow CDC guidelines. I remain very proud of DeLay, DCM A and the Defense Threat Reduction Agency, Dutra, The Defense Acquisition, University de AU and the Joint Acquisition Task. Fourth, Jeff and the entire department’s efforts to supply the whole of government an interagency battle against COVID-19 while H. A Dress and FEMA have both the field infrastructure and the medical knowledge toe lead, Our nation’s efforts, D. O. D. Brings the breadth and depth of acquisition expertise toe underpin the interagency in contracting program management and industrial expansion for health and medical resource is the Pentagon’s chemical and biological defense program. See BDP continues to play a key role in executing the D. O D. Strategy for countering weapons of mass destruction. Continues to support Army labs, Defense Health Agency, D. H. A. HHS and FEMA. COVID-19 countermeasures like testing vaccines, masks, a mask, filters and screening machines. This includes over $150 million of CBD P investments in diagnostics, vaccines, therapeutics and modeling capabilities. The department’s DP A Title three investment in response to COVID-19 remains on increasing manufacturing capacity and throughput. D. O. D continues to use DP A title three for Dib Resiliency and Security, Medical and Health Care. Resource is with HHS and FEMA Coordination. D. O. D has obligated approximately $472 million in DP, a title three funds for both Medical Resource Is and the Dib. In June, we have announced 10 actions totally over $320 million to help sustain and strengthen essential domestic industrial based capabilities and defense critical workforce in shipbuilding, aircraft manufacturing and clothing and textiles. And we expect more actions will be announced over the next few weeks. This investment is critical in allowing Americans to be tested and help reopen the economy. The increased production will ensure the U. S government gets dedicated long term industrial capacity to help meet the needs of the nation. The department remains keenly focused on the threat of adversarial capital, especially at a time when the current COVID crisis is being exploited by our adversaries. We remain part of a whole of nation approach that values an open investment environment while recognizing the need to protect it. We work closely with military services and inter agency partners, including the Development Finance Corporation and Department of Energy, to take additional measures to protect and promote critical assets. This approach includes consistent messaging to public, private and academic sectors about the methods of our adversaries, the methods they use to access technological know how economic security can be undermined by acquisitions of companies in the defense and dual use sectors by companies that claim to be US based but are actually owned or controlled by adversarial foreign entities. The blurring of the line between commercial do use applications and defense applications further helps those adversaries that focus their policies around using burgeoning commercial technologies to strengthen their military capabilities. Specifically, the department is committed to countering Chinese aggression. On this front, my team is working to efficiently implement Section 889 part B of the F Y 19 nd A, which aims to prohibit certain Chinese companies from our supply chain were also close to publishing are proposed CMM See policy which will improve our dip. Cyber hygiene practices. These and other legislative initiatives will help us defend against Chinese practices, while we also aggressively pursue offensive actions toe sort, their theft of intellectual property and their predatory M and A activity. The department has three main tools to combat this area of national security. Concern are Mergers and Acquisitions Team, which works closely with the Department of Justice and the Federal Trade Commission counterpart. The Interagency Committee on Foreign Investment in the United States, or Citius and D. O D’s trusted capital Programme established in late 2019 to strengthen manufacturing in the defense industrial base, including by providing opportunities for trusted financial institutions and qualifying companies to explore mutually beneficial partnerships in support of national security goals now toe Why Adam is here with me today On May 14 2020 the president signed Executive order 13 9 to 2. Delegating authority to DFC toe Execute loans using defense production Acti p A. Title three. Authorities in support Off the COVID-19 Response up to $100 million will be expended to secure multiple loans in line with high national security. Economic security impact. This authority was delegated to do DFC for two years in conjunction with DP, A loan related waivers provided by Congress in The Cares Act as detailed in Our Cares Act Spend Plan. We will utilize the $100 million to provide a subsidy from multiple federal loans to create, maintain, protect, expand or restore domestic industrial based capabilities to support National COVID-19 Response. These funds are being utilized to provide subsidy for federal loans to create, maintain, expand or store domestic industrial base capabilities. To support National COVID-19 response, I will say a second time. Adam and I have just signed a memorandum of agreement that formalizes the relationship between D, o. D and D F. C, enabling us to move forward in executing against this new authority. Formerly known as the Overseas Private Investment Corporation. DFC brings decades of federal credit experienced they’re advancing key national objectives and addressing domestic challenges in response to the current outbreak. DFC also has the unique ability to address this crisis with a global perspective, coordinating their international efforts with this new domestic time limited authority. DFC has been in sync with D. O. D. Among other federal agencies throughout the covert crisis and will continue to partner closely to ensure our approach and response to COVID-19 is completely coordinated. In closing, the department continues to do everything we can to support our military members, their families, defense contractors and our fellow citizens. I want to personally thank both Congress and the defense industry associations, both who have been invaluable in helping us protect and advocate for the dib. I remain extremely proud of the selfless efforts of Department of Defense personnel who continue to do everything they can to help provide medical masks, test kits, medicine and meals to support America’s military, medical, emergency services and law enforcement professionals who are on the front lines and need the most. Now Adam will make a statement that will be happy to answer your questions. Thank you. Thank you. I appreciate it as the CEO Development Finance Corporation, which is America’s Development Bank. I’m honored to join Under Secretary Lord here today. Mark Mark the start of our partnership with the Department of Defense. Our two agencies will leverage our unique strengths and expertise to carry out the mandate of the Defense Production Act and strengthen America’s self self reliance and resilience across critical supply chains. To understand the significance of this partnership, we should reflect on the origins of the Defense Production Act almost 70 years ago today, after fighting two world wars, both of which required unprecedented economic mobilisation, the country recognized that America’s strength against any any enemy is derived from our people, a workforce that belt the greatest economy in the world. They understand that our country’s freedom cannot be separated from the strength of our economy. With this in mind, Congress passed the Defense Production Act to provide our country with the requisite tools to harness the power of our economy In times of national crisis Today we were battling a new enemy. We watches the COVID-19 virus has spread around the world that at home. This administration is mounting an extraordinary response, and it’s one that I’m proud to support. The president’s executive order last month authorizes the DFC to use tools under the Defense Production Act to strengthen America’s domestic industrial base and it sure resilience in critical supply chains. As we respond and recover from this health crisis. DFC is well suited for this mission. Given our investment experience, our global focus and our track record of working very closely with the private sector and partnership with the Department of Defense, I’m confident that we can help secure a stronger, safer America while at the same time not only continuing but expanding DFCS development mandate around the world. Thank you. Okay. Thank you, sir. We’re going to go to the phone. Tony. Capacity. Oh, are you up? Yes, I am. Can you hear me, Mike? Yep. Go for Miss Lord and my Michael. Thank you for your all your excellent service over the last couple years. It’s a very difficult beat, Miss Lord. Quick question for you. On June 10th you told the House Armed Services Committee that the Pentagon faces potential for billions and covert related penalty payments. Can you brought bound that 12 days later, Roughly how much you’re talking. And when we leave here, you rom be Stand up the request to the appropriations committees. D o d. Has submitted our request to O m b o M B now has it, and we continue to work carefully through with D C M A D c a How we will calculate those. Can you give a sense of, uh, you said lower lower digit billions a couple weeks ago. Can you bound it is like 15 billion or 16 I would say a lower double digit billions. All right, I want quickly, then oversight so that taxpayers aren’t screwed on this one. What’s the mechanism being set up? I think you know, I’m Tony, that we do things in a very deliberate way in d o d. So we’re working through defense pricing and contracting along with D c M A D c. A. The comptroller to make sure we have clear mechanisms to identify the data that substantiates those 36 10 claims. So we will have a very substantive data set by which we will make recommendations. Okay. We’re gonna go back here in the room with McClatchy Operation Works. Warp Speed has a stated goal of delivering 300 million vaccines by January. What’s D pays role in getting those delivery mechanisms? Whether it’s going to be a strange or whatever type of delivery tool and what room for error? Is there really a This point? We work closely d o d HHS whole of government on Operation Warp speed. And we’re looking at what there is in terms of the whole supply chain from developing a vaccine toe, actually delivering those vaccines. So we continue to increase the capacity and throughput off the whole supply chain and will continue to monitor where we are on that. So it’s close coordination. And just as a follow up, can you give an example of increasing throughput, like what? Specifically cos you’re looking for as far as being able to get that vaccine into people’s hands quickly? Well, what it’s done is there’s a whole task force working on this, so they’re working on everything from developing vaccine and therapeutics to the delivery system. So we look at capacity and throughput and make sure that we’re going to have enough to deliver up to the 700 million doses that are thought to be required. And one quick last. One of the criticisms that the DP eight use has come unders that is very difficult to get a transparent look at what price is being paid per unit. What elements are in place to provide more transparency to the public American public on how this tool is being used to help them? I think we have a long data trail to say exactly what we’re doing with those dp $8. Again, we’re not buying individual units with those Most of the time we are investing in tooling equipment, buildings, infrastructure and perhaps some training things like that. So we have a lot of transparency. We have published the individual or the companies that have received the funding as well as theater mount. We’re going to go to the phone. Erin Meta. Yeah, thanks for doing this. My thanks for everything over the years, um, quickly wanted. Asked on the three month slowdown that you’ve mentioned a couple of times regarding major defense products, you said the same thing three months back in April. Now, obviously, towards the end of June, I understand we’re talking about three months. Kind of on a rolling basis that you’re seeing slowdowns here or its three months compared to where it was supposed to be, April. And just looking forward, do you think that slowdown is gonna continue in some capacity until there is a back seat place? So Good morning, Aaron. What we were focused on are the three months where we thought the impact was the most significant to the workforce in the dib. So it was that April May June timeframe we see on enormous amount of recovery in the defense industrial base. It depends on location and what type of work is being performed, But there is enormous progress coming back. Ah, lot of work is being done as tele work, although obviously for manufacturing, we need people on the line. So we’re doing things differently in terms of following CDC guidelines and so forth. So we’re getting back up to speed. We don’t know what that new normal will be on speed, but we see an enormous amount of recovery, and we think there’s roughly a three month impact, but we will continue to monitor. Okay, we’re gonna come back in the room. Sandra. Sandra, are one space news. Thank you. Secretary Lord talked about the 320 million for defence production after title three for the industrial base. Some of some actions were announced somewhere would be announced for launch A small launch. Can you give us a sense of how these companies are selected to receive contracts? What is the criteria for selecting Is do they have to be financially distressed or other other chapters? We have a team OSD in conjunction with the services that meets on a weekly basis. We look at the data we have from D C M A and D L. A. And we look at the impact to our readiness and modernization. So it really comes down to having the forces ready and the team looks at it and comes to a consensus and makes decisions on the way with the launch contracts. You have to get back to him that I’m not up to speed, but we’re going to go to the line. Tony Burton, aka are you there? Yes, I’m here. Thank you. Thanks, Mike. Thanks, ma’am. My question goes again to the funding. Is is there a timeline that you need to have that money by. Is it urgent to get it? Or can it wait until January February? And Tony, which funding are you talking about? The supplemental funding that you talk to the ask about the need to reimburse contractors for 36 10 and then other non 36 10 claims they’re likely to make? Well, liquidity is important. That’s why we put out over 30 memos to simplify and speed up contracting and increase the percentage in progress payments and so forth. So sooner is better, I think is the best way to put it. We have not yet received any claims because I believe the defense industrial base is waiting to more clearly understand what the processes. And we’re working with them on the criteria. And then quickly Is there a chance that D o d will take some of this auto hide and pay for it? Or is it got to be supplemental funds? We are analyzing things on a day by day basis, so I really am not get a conjecture. We’re going to do one last question. Nick, are you up? Hey, there. Thank you, Mike. And thank you guys for doing this under Secretary Lord, I want zoom in a little bit and talk about the role of Mexico in the procurement effort of the last few months. A few months ago, you wrote to them urging them to reopen factories. Have they been responsive to some of your pushing? And can you respond to some of the people I’ve talked to in Mexico who fear that some of those factories that do supply us with necessary parts have reopened too quickly or haven’t taken, um, Kobe? 19 precautions? Seriously enough. Thanks. I wrote letters and actually talk to our State Department colleagues in Mexico about reopening, talking about the criticality of the defense industrial base. They were very, very cooperative and obviously want their facilities up and running in a safe manner. So that’s been a very good process, very, very receptive. And to the people along the border, especially, who have worried that the pressure that they’ve felt from the United States to reopen have left some workers vulnerable to COVID-19 again, we advocate for using safe practises. Okay, so what we’re gonna do now is ah, quick closing remarks. Mamadou, have any closing remarks? I just want to say that I really value the partnership with Adam Bowler and DFC. I think we’re doing a good job of being creative, looking at all the different ways. Weaken support the industrial base. How we can become more secure and resilient. Both on the medical resource is side as well as the defense industrial base. So thank you, Adam, for your partnership, sir. Any closing remarks? Thanks, Undersecretary. I was involved closely in our administration’s efforts and sourcing ventilators on gun of the lessons learned. I think the thus far there is resource 150,000 within a short period of time. And that’s because of the strength of America’s domestic manufacturing base on DSO. One of our lessons learned to date is that’s critical on will be critical going forward. So I think this is a great example of an inter agency collaboration where we’re both leveraging our strengths and partnerships. I’m very excited about it. So thanks all for being here and thank you, man, for being an advocate, um, in a consistent leader in communicating and taking the time to do this. I think we’ve done 20 to 25 of these. It’s been my honor to serve with you. Spend my honor to serve with many of the reporters that air here. And thank you all for your cooperation over the last two years. Thank you very much. Have a great day. Thank you.