Ellen M. Lord, Top Pentagon Official, Testifies on COVID-19 Policy

Ellen M. Lord, undersecretary of defense for acquisition and sustainment, testifies before the House Armed Services Committee, June 10, 2020. She is briefing lawmakers on the Defense Department’s COVID-19 response to industrial base challenges, contributions to interagency efforts, and use of existing acquisition authorities — including the Defense Production Act — to respond to the challenges of the pandemic and maintain readiness.

Subscribe to Dr. Justin Imel, Sr. by Email


And I want to welcome our witness even though it my advanced age. I’m not. As Rick was saying earlier. We think you’re their way. Can almost see you in the distance, appreciate you wearing the bright color. T help us with that. So this is our first hybrid hearing. Quite confident this will work out just fine. I appreciate the members who are here. We have members who are participating remotely as well. I have a statement of front that will explain the process on. Then we’ll proceed with normal hearing. So I’d like to walk members who are joining today’s proceeding remotely. Those members are reminded that they must be visible on screen within the software platform for the purposes of identity verification. When joining the proceeding, establishing and maintaining a quorum participating in proceeding and if necessary, voting will not be necessary. Today, members who participated remotely are reminded to keep the software platforms video function on for the entire two entirety of time. They attend the proceeding. These members may leave and rejoin the proceeding. If members depart for a short period for reasons other than joining a different proceeding, they should leave the video function on members will be absent for a significant period or depart to join a different proceeding. They should exit the software platform entirely and then rejoin it if they return. If a member who is participating remotely experiences technical difficulties, please contact committee staff for assistance, and they will help you get reconnected. When recognized video of remotely attending members participation will be broadcast in the room and via the television slash Internet feeds. Members participating remotely are asked to meet their microphone when they’re not speaking. Doing so will help to ensure that remote technology works properly. Members participating remotely will be recognized normally for asking questions, but they want to speak at another time. They must seek recognition verbally. In all cases, members are reminded toe on mute their microphone. Prior to speaking, members should be aware that there is a slight lag of a few seconds between the time you start speaking in the camera shot, switching to you to account for this. Please do a brief preamble in your remarks before you, or you could just pause and wait for his I, um you don’t have to actually prepare a preamble. I don’t believe members are also advised that I have designated committee staff member to, if necessary, mute unrecognized members microphones to cancel any inadvertent background noise that may disrupt the proceedings. Members may use the software platforms chat feature to communicate with staff regarding technical or logistical support issues. Only finally, remotely participating members should see a five minute countdown clock on the software platforms display. But if necessary, I will gently remind members when their time is up, Thank you very much. Um, I appreciate As I said, folks being here certainly appreciate under Secretary Lord appearing as all of us have tried to figure out across the country, What can we do? What can’t we do? What can we do safely? How do we do it in a way that respects the very real public high health crisis that we’re facing still enables us to do our job on And I will said Department of Defense has been very cooperative that we’ve done a number of remote informal committee events during the course of this pandemic. Undersecretary Lloyd has participated and I think at least one of those not Mawr, and that has been very helpful and it is it is good to have witnesses here in person, and the subject of today’s hearing is to discuss the department’s response to the pandemic and specifically the efforts. And as the undersecretary for acquisition, you are in the middle of this. The efforts to ramp up production necessary to meet that aspect of the public health challenge and very early on it was obvious that we were going to have such a massive increase in public health demands surrounding Cove in 19 1 of the things that was going to be required was to mass produce far greater quantities of certain key public health needs than we would normally have. We have a global supply chain that presented enormous challenges there many examples of that. But you know, for instance, for the testing capacity, swabs are enormously important. Ah, good chunk of those happen to be made in northern Italy, which created a significant challenge. So we had to adjust, and I will say it’s awkward because we have a witness here who I know has worked very hard on this issue. I have been in communication with her going back months now, and she understood this right up front. The importance of it. I do think overall the administration in D. O. D. Was slow to respond and there are still challenges going forward. We needed to figure out how to produce things more quickly and from the very start in the undersecretary and I spoke about this. Nobody understands how to do that better than the Department of Defense in the United States of America. Certainly in the public sector defense in the United States of America, certainly in the public sector, nobody procures Mawr equipment of a very kind and has a deeper industrial base than the Department of Defense. And I felt very strongly that early on they should get involved. I realized that as a public health crisis, the lead agencies were HHS in FEMA, but they clearly did not have the capacity the D o. D did. D o. D has gotten involved to the Defense Protection Act in other ways, and and that’s a positive, I hope in the future we will understand that that needs to happen as soon as possible, and we saw this coming in the January February time frame. Now, with that said, we’ve learned a lot as we’ve gone forward. Me early on, there was a huge focus on producing more bed capacity. We set up a number of field hospitals in a number of places in a lot of cases that it didn’t turn out, that a lot of those were needed. So we learned as we went. But the two big areas that have been a challenge or one testing in that area belatedly, we have started to have some successes. I think believe the president was just up in Maine visiting a production facility there, which, if I have my numbers correct, is cranking out 40 million swabs a month. And that is a remarkable increase in absolutely necessary to the challenge in front of us. The one big area where we still have a significant gap, believe it or not, is in personal protective equipment. And the response to that has been very frustrating when you have now sort of created this sort of global competition, where states and localities and everybody is competing to track down P p e. On in the global marketplace, 50 states competing against each other, the federal government in competing with them all manner of different nations and other folks competing against each other, and that’s made it difficult. And I know in my own states example, we very early on recognized this, and we have managed to frankly leverage some relationships with companies in the area. Microsoft Amazon have been helpful to reach out to partners around the world to get some of that product, but it still does not appear to very coordinated. In fact, I received a letter just this week from our governor about ah lot of the equipment that has come in from different places. Our sorry lot of PPE that has come in has not been has doesn’t work. It has not panned out the way we expected it to, and I am still concerned. We do not have the domestic production capacity necessary to meet the need. As we saw with the example of the swabs, we can crank up production, and that was the conversation that I was having in early March. A while, you know, Look, we don’t do that. We only produce this many, and that’s true, all right. But we’re pretty big, pretty powerful, have a lot of money. We can change. OK, you can say, Well, gosh, it’s impossible There’s no way we can produce 100 million masks a month. Well, what if we did this? Okay, what? The full force of the federal government came in and said, This is what you’re gonna build. If we need this machine, we need this material, will find it and will make it happen. That that took too long, in my view. And I still unworried on the PPE side that we’re not producing sufficient number of masks to meet the needs and demands we needed is a basic point. What we’re struggling within our state is nursing homes, is every place is just to get there and make sure that they have a dependable source of masks. And I I’m not sure of the statistic, but I believe at one point it was between third and 40% of the people who have died in this country from Covert 19 were in nursing homes. It is clearly the vulnerability. Now you know exactly what type of mask we need for depending on the setting, we can have that debate. But what I want to see is this ramp up our production capacity. Last thing quickly. Apologies haven’t done this in a while, so we got a lot to say. Um, is you know, as we are trying to figure out how these contracts went out, there have been a number of disturbing stories about business people coming along and say I can get you 30 million masks so they get a contract and produce nothing that that money seemed to go out very confusing way. And even within the there’s $1 billion that was specifically given to D. O. D. To manage Defense Protection Act steps. I’m curious how that money is being spent. One thing that really stood out for me, um, was apparently $100 million has gone to the foreign direct investment, Um, government, which something I’ve worked on with Congressman Yoho. We just expanded their ability to take equity stakes, but it’s for it’s for international development. They provide loans to developing countries. What are they doing with $100 million a DPC money to send out loans? The domestic companies and it didn’t really make any sense. So I am still worried about whether or not we are using the full force and power of the federal government to meet this crisis, particularly when it comes to producing PP to make sure that we bring the competence to the problem. That is necessary. No doubt this is a huge, complicated, difficult problem that would have been really hard to anticipate in all of its varied forms. The idea that we could have a pandemic certainly was out there. The specifics of it, that’s difficult, but we are supposed to be the best was supposed to be able to do difficult things on bits. Still very important. The disease has not gone away, and there’s a lot more work to be done with that I will yield to Mr Thornton ranking member Thornberry for his opening statement. Thank you, Mr Chairman, and I join in welcoming Undersecretary Lord on thanking her for participating in today’s hearing. Not only is the substance of what we have before us today important, this is an important trial run because this is the same room we would you we will use to have our full committee markup in just a few weeks time. So I appreciate her being here, and I would have to say from my perception, well, two things one is under Secretary Lord has had a lot on her plate. Uh, chairman just described ah whole range of things related to medical equipment and so forth. The Defense Production Act, the ODIs role in that, as well as the supply chain for everything that d o d has to have to support our men and women of the military at a time when a pandemic has basically shut down, must most all of the economy. And at a time when we are much more sensitive to foreign sources that make be a part of our supply chain. And I would say, for my standpoint, looking at it, I think certainly under Secretary Lord and much of the department has done a pretty good job, uh, dealing with unprecedented circumstances with technology that makes lots of noises, just like, you know, we’ve we’ve just been hearing. I think there’s no question we still have challenges toe work our way through. We’ll talk about some of those today, but I really appreciate the effort and and the success in dealing with all of those issues the medical stuff, the Defense production act, the the whole supply chain for everything. That d o d. Actually, it men and women who serve require, I hope, on the other side of this, What we can also do is step back and look at changes that we can make or that the department can make to procure things faster. There are there are some lessons not just in with pandemics and medical related things, but but the world is changing quickly. Technology changes quickly. We have to be faster. And I think some of the challenges related to Cove it should help inform us as far as acquisition, sustainment and things moving forward. Uh, and it may be challenges of a completely different kind, but we need to learn those lessons and institute. So again, appreciate you being here and look forward to your testimony and the questions beyond Thank you Under Secretary Lord Chairman Smith, ranking member Thornberry and distinguished members of the committee. Thank you for the opportunity to testify today on matters related to the department’s response to the Cove. It 19 pandemic. While Cove in 19 has had an unprecedented impact on the nation under Secretary s Spurs leadership, the Department of Defense has contributed immensely to the administration’s whole of government response. Today I will describe key elements of how the acquisition enterprise has supported other federal agencies and the Defense Industrial Base, or dib. The Cove in 19 Pandemic highlighted critical shortfalls in the medical supplies and personal protective equipment supply chain. On March 18 President Trump invoked the Defense Production Act. In doing so, he delegated authority to the secretary of health and human Services to determine nationwide priorities. And allocation of health and medical resource is for responding to the spread of Cove in 19. Accordingly, the D. O. D has been supporting HHS to execute DP a authorities. On March 27 the president signed The Cares Act. It includes language and resource is to mitigate critical shortfalls and to create an expanded metal domestic industrial base capabilities. The D. O. D, in support of HHS and FEMA, initiated several projects to support approximately $210 million worth of medical equipment investment. The Cares Act also provides authorities, and resource is to HHS to invest in industrial expansion. D. O. D. Has been providing acquisition assistance to HHS to acquire medical resource is and expand industrial capacity and manufacturing throughput. Our collaboration also supports the HHS strategy to replenish and modernize the strategic national stockpile to ensure the department was postured toe leverage. All of its resource is I created the Cove in 19 Joint Acquisition Task Force, or Jad. If the jet, if team has created processes toe enable HHS and FEMA to quickly and effectively access the D. O D acquisition workforce, its expertise and authorities, the jet ifs worked with HHS has evolved to its current support. HHS in expanding and replenishing the stockpile, as well as expanding the domestic manufacturing base for some of those items in order to decrease our dependence on foreign suppliers for medical resource is D. O. D. Has focused on increasing domestic industrial capacity and capabilities. To that end, we executed some $284 million in industrial expansion effort during the 1st 2 weeks of May 2020. The JAT, if is in close coordination with HHS regarding replenishment of the stockpile. Reconstituting domestic production or creating new production that shifted offshore years ago often requires capital expenditure, capital equipment, expenditures, retooling and retraining of the workforce. While the Jazz has focused on sharing the D. O D’s acquisition expertise with HHS and FEMA the Defense Logistics Agency has supplied badly needed medical supplies. DeLay has obligated over $752 million through the end of May to provide life saving medical supplies. I would like to highlight that this support includes an ongoing effort to supply nearly 15,000 nursing homes with the two week supply of P p e. I’d now like to turn the issues surrounding the dip, including actions we have and are taking to ensure dib viability. We’re using $688 million of Cares Act funding toe address impacts to the dib By directly offsetting financial distress and providing investments to regions most severely impacted. These investments will sustain essential domestic industrial base capabilities and spur local job creation. The Industrial based Council has prioritized risks to address the use of this funding. Newly identified issues are continually coming in, and the IBC will continue to prioritize effort for execution. Another area where we will be supporting the dib is by making Defense Production Act loans through the US International Development Finance Corporation, or DFC. Mr. Chairman, I just have a few more minutes. I know some five minutes might take two or three more minutes, Thank you. Funds will support HHS strategic national stockpile priority areas specifically and 95 respirators, other personal protective equipment, pharmaceuticals, ventilators, airway management consumables and testing supplies. We’ve also taken more immediate and direct action to support the dib by implementing congressional direction, empowering the contracting workforce and ensuring a healthy dib. Through continued guidance and direction, we have taken steps to ensure the widest dissemination of guidance to the contracting community. These policy documents focus on allowing companies to continue to work while maintaining workforce safety, providing liquidity, implementing legislation beneficial to industry, improving speed of contracting and providing spending transparency. In the early stages of the pandemic, the department increased the progress payment rate from 80 to 90% for large businesses and from 90 to 95% for small businesses. This change will infuse an estimated $3 billion in cash toe all levels of the dip. Further, the department has partnered with the major primes to ensure this increase in cash makes its way throughout the supply chain. As you know, Section 36 10 of the Cares Act allows agencies to reimburse contractors for payment, associate it with the preservation of workforce is prevented from working due to cove in 19 facility closures or other restrictions. Our implementation guidance provides a framework for contracting officers. Toe assess any claimed allowable paid leave, including sick leave that a contractor or their subcontractors provide to keep their employees in a ready state. It is important to note that Section 36 10 authorized but did not appropriate the funds needed to make these reimbursements. While the department may be able to use other appropriated funds to reimburse contractors, the cost for 36 10 is likely well beyond the department’s resource stability. To do so without significantly jeopardizing modernization or readiness. For example, just one of our major primes estimates that 36 10 impacts could be upto $1.5 billion for their company and their associated suppliers. Section 36 10 leave Costs are just one category of cove in 19 related costs being experienced by the dib. Others include those associated with contracting officer direction, such as a stock work, the purchasing of PPE cleaning and sterilisation costs, impacts related to implementing centers for disease control, guidance, such a spacing out factory floor activity and the costs associated with schedule delays emanating from the supply chain. As with Section 36 10 the department does not have the funding to cover these costs. The same prime contractor noted earlier estimates the these non 36 10 Cove in 19 related costs to be in excess of $1.5 billion correction to be in excess of $1 billion. The department’s response to Cove in 19 addresses a full spectrum of needs. I am incredibly proud of the department’s response to this national emergency and to our dedicated individuals who have worked so diligently on behalf of the American people. With that, I look forward to answering your questions and many Mr Chairman that you mentioned in your opening. I’m very interested in discussing Thank you certainly, thank you very much. Yes, it is a starting point on the on the swabs. One of the very reassuring things is to hear that they’re producing 40 month. We have a quantifiable figure on that’s not far off from what we need. There’s Mawr. Obviously, I don’t have a similar number. And in 95 masks I’ve asked this question before and don’t have an answer How many in 95 masks are we now producing A week? A month? However, you want to categorize it in this this country, Where did we come from and where do we want to get to? And I get to sort of the international peace in a second but domestic U. S. Production. So one of our challenges has been aggregating the demand signal first for the medical community and then forgetting back toe work, then looking at reconstituting our strategic national stockpile and then looking for ongoing activities. So we have had the supply chain task force under our under admiral plump checks guidance at the NRCC, looking at aggregating back demand signal. While that is going on and we’re taking part of that. What we have done is taken dp a title three money and then we in order to do even mawr industrial expansion, we worked with lawyers to be able to use the economy act to move money from HHS for industrial expansion to be executed. I’m sorry. That’s not actually what I what I asked What is the form? So I understand how maney That’s a separate question. But how many are we? And if you don’t know, that’s fine. I was about to say, I do not have that. I can take that for the record, But I might call on our Jad if director Miss Stacey Cummings to begin to address that. But But as you’re in as you’re looking at the demand signal, I hear that a czar When I told our governor that a couple months ago he about pulled his hair out, I’ll give you a demand signal. Um, it’s very large. And so what have we learned at this point? I’ll ask the question in different way. What is the demand signal for in 95 masks based on our projections prior to the cove, it, uh, Covad Response. We were nationally using about 50 million, um, and 95 respirators in a year. I will tell you that that demand went up to about 140 million over the 90 days of peak demand. And so what we’re looking at from a demand signal is significant. A significant increase in the use of n 95 masks. Which is why we made the significant investment that Miss Lord mentioned earlier. I can tell you that based on the investments that we’ve made by the end, by October of 2020 we will be seeing an increase of 450 million masks a year. And by January of 2021 an increase in total, including that for 50 up to over 800 million. Master, that’s domestic production. That’s domestic production car. And I’m sorry. So you’re producing 450 year in your estimate. Is this point what is our need? The demand signal, if you will. So, based on the, um, based on having 90 days of stock, we’re looking at that number being about 300 million to be used in 90 days of peak use. So 300 million, like 100 month about 100 month during peak use is on the high end of demand that we want to be able to have access to again during that. Now we’re getting somewhere. So ah, 100 month and we’re set to produce by the end of October. 450 year. 450 additional 1,000,000 a year by January. Our annual production additional toe. What additional to our base. Okay. In our baseball, I can’t tell you the proprietary information of the base that was being produced. But what I on individual companies? Sorry, but what I can tell you is that starting in 2021 we anticipate our total domestic production to be in excess of a 1,000,000,000 per year. So we’re getting very close to being able to meet that demand domestically. But we’re not quite there yet. Okay? And I do understand I don’t have any problem with supplementing and internationally, but we want to try to get that number. Oppa’s highest possible. Thank you. Upside wanna, um, yield at this point, Teoh. Mr Thornberry, for any questions he has. Thank you, Mr Chairman. And under Secretary Lord, I just wanted to clarify part of what you talked about in your testimony. Section 36 10 of the Cares Act says that contractors can be reimbursed for sick leave, paid leave other things they’ve done to try to keep their folks, uh, employed. But you’re telling us today that there’s not the money to do that. So if that’s gonna happen and it would run into the billions, eso if that’s gonna happen that would have to be some sort of supplemental funding. Correct. And otherwise, these contractors are gonna have to eat several billions of dollars, Um, which could welcome at their employees expense, which is what this wasn’t supposed to help to begin with. Well, there’s a choice there whether or not we want to eat into readiness and modernization or whether or not and slow down, um, readiness and modernization on an ongoing basis, or whether we want to remedies this situation in the next six months or so and then be able to continue on to make sure that we have the ready forces that we need to have for national security. Okay, um, I want to ask a broader question about the defense industrial base and that is, do you feel like you have good visibility in what the defense industrial base is? And as just as one example of that. So if we wanted a list of parts where we were down to a single supplier, can you do that? Give us some sense for how much you know about this very complex, um, community, I guess that supplies our men and women in uniform. We have been gaining on our knowledge, which I would say is still insufficient. But it started out with the report we did as a result of the executive order 13 806 report we put out about two years ago week segmented the defense industrial base. We all began to have a common lexicon and we identified fragilities in that base, whether it be sole source suppliers or whether it be the dependence on overseas sources of supplies that highlighted work. We started doing using the Defense Production Act and other mechanisms to begin to bolster our capability. Fast forward to Cove it Cove. It exacerbated that fragility that we had identified through the report, and we found that we could not onshore the materials that were produced offshore and that we might not be able to for quite some time. So what this required us to do was really accelerate our illumination of our supply base. And we’ve had a number of our individuals out of our acquisition group. Are Industrial policy group work with specific tools to illuminate the supply chain not only to understand who was in there and then identify what the weaknesses were, but where we had actually what I will call adversaries as one of our key suppliers. So part of our effort here is not Onley toe Identify where where we are sole sourced but where we actually need to re sure a lot of that capability. And in fact, we mentioned the $100 million of DP A Title three being used with the Development Finance Corporation. The idea is that we’re taking an existing infrastructure in the government working closely with D o d. To use all the knowledge that we have gained in turns off medical resource fragility as well as defense industrial base fragility. And we’re going to use a modest amount of our DP A title three money as collateral to go and do treasury loans to re sure businesses so that we have the domestic capability. Okay. And so I just briefly, I take by your answer, we’re working on that single source foreign sourced, etcetera. But we we’re not We don’t quite know the full extent of it yet. We know a large amount of it. We do not know the full extent, and that is a key focus of ours, and we need to continue. It’s important on a number of members are interested in that as well. So we look forward to working with you. Thank you, Chairman. You back? Thank you. And now we reach the exciting moment of the hearing when we call our first witness who was participating remotely. Um, and that would be Susan Davis, who is recognized for five minutes. It will probably take a second. Thank you, Mr Chairman. And, um, it to have this experiment at this time. I want to thank you. Um, Madam Undersecretary Lord, very much because I know that you’ve been working 24 7 at this, and we all greatly appreciate that, You know, there was an article in the Atlantic recently how to actually use the Defense Production Act. And, you know, in the suffering is the mentions using the staffs who does not mean giving up on American continuity in an emergency, but competently maximizing it and recognizing that the energy must come from the top. Would you say that that’s generally or position? I believe that’s directionally correct. What we are trying to do is send a strong demand signal that we want domestic production. So what? We’re doing is saying we will take papers on what level of investment could generate, what increased capacity and throughput over what specific period of time and rack and stack those applications against our requirements that are prioritised and then begin to address them. And would you say that those working with you are all pretty much on the same page on that? Yes, I believe so. Okay. I wonder if you could talk then, about how the department is planning to use the G p a for vaccine production distribution. Um, are you making those plans now? And what are the known shortcomings in vaccine distribution that the G p. A would prove most useful to address? Yes. So, about three weeks ago or so we buy for Kate id our supply chain. Task force efforts into project warp speed and then the strategic National Stockpile Operation Warp Speed has two leaders, Doctor Slow away and General Purna, who report directly to secretaries Esper and a Czar. They are working first on vaccines than on therapeutics and then on diagnostics. So they picked up a lot of the work obviously be being done by HHS and D H a right Now, what they are doing is prioritizing who they are funding for vaccines and then how they will be distributed. We stand ready to support them, but right now they are finalizing all of their investment plans, and they’re reporting out directly on that trope from lessons learned that we’ve gone through now. So what do you What is gonna be a hard A stumbling block is a competition, Um, for the vaccine. What? What is it that you think is gonna be getting away? I think first of all, we have to make data driven decisions. There are a lot of anecdotes. I think we all have to have the same facts set and then prioritize and move forward. Additionally, our adversaries are watching what we’re doing very closely. So the security around all of these efforts is paramount. We have to also come up with a scheme to your earlier point as to how we prioritise distribution. We also have to deal with the risk scenario of how do you quickly get FDA approval for a vaccine in a smart way, where you are balancing risk and reward so and what now? You You have but but a great deal of energy and thought into this. But I’m wondering, are there some areas that you have not been able to bring about some of the changes that you’d like to see, Perhaps with the interagency? What? What are you not doing that you’re hoping down the line? I think initially it was a bit frustrating to go throughs the legal issues around moving money between agencies. We have kind of cracked the code on the economy act and how to have the correct documentation move quickly. That’s what I would term a non recurring engineering event that I hope we do not have to go through again. And we need to memorialize that to make sure we can activate it quickly. I think at this point we are pretty well aligned with communications up through all of the different organizations. But I think we have to remain very disciplined about communications so that we are all putting our efforts towards he objectives and not getting distracted by things that look interested. We have to be very, very disciplined. I asking Did you have any involvement with Project Air Bridge? I’m sorry that general ladies time work thing is awkward part here, but five minutes or upside, you wanna move on to other members and we have Mr Turner up next to his recognized for five minutes. Thank Miss Chairman. I want to thank you for your executing this very unique structure for us to surprise. You can’t give anyone mawr capable, Secretary Lord, hopefully, hopefully your meat in order to try this. Um, Mr McCoy, you spoke of the how busy Secretary Lord was with the Defense Production Act and imports on the defense Industrial base issues sexual like, I’d like to ask you for a moment if you could give us some additional fidelity on the your work on the defense industrial base. I was very impressed. Now, on the phone conference that we had with you and in the written communications that you have given us in responding to the needs of the defensive deprivation, you mentioned some of those issues in your testimony. You talked about increased costs associated with working leave, um, sanitizing workspaces. Um, and of course, work disruption. We also know that some of our defense adjusted basis lost some of their liquidity due to commercial interruptions on some of their supply chain interruptions. So you did this very, very quickly. So if you could give us some additional Fidelity’s how did you do about with this bushel basket of things that you needed to do knowing that we had defense contractors, dissents work for suppliers, contractors. But then the next step that I’m really incident is, once you go through this, what you provided this additional assistance, this additional help to try to get the defense industrial base over this period. What type of assessment information back are you going to be receiving as to how has this left? Of what condition are they in? How has what has been more effective or less effective? And what new things should we be? Different? And that’s my only question. So after your answer, Mr Chairman, over your back. Very good. So I had started when I first took this position meeting with industry on a quarterly basis, along with 15 or so of my colleagues with Department of Defense. I leveraged three industry associations that I thought really caught everything from small business toe large crimes so that we got a good cross section. We use those quarterly meetings with CEOs to both push information that we thought that was useful but probably more importantly, toe listen to industry about what their concerns and issues were when the pandemic hit and we saw how catastrophic it could be to our defense industrial base. What we did was just really amped up those engagement. So starting on March 17th we had our first Taliqan with industry and we broadened beyond just the three industry associations that we worked with to really start including non traditional is and others. And for multiple weeks we had calls three times a week. One of those calls per week was focused on small business, and we listened to what the problems were and as a result of that, the team sitting behind me, a lot of the leadership of a N s listen to what the issues were, and we tried to start taking the first small steps. We realized liquidity was really the most key issue. So what we did is we started trying to simplify how to do business. We raised micro threshold levels. We changed progress payments. In fact, there’s a whole binder I have right here that has over 30 different memos from defense, pricing and contracting Teoh ease how to do business. What we did is we got real time feedback three times a week on what the biggest pain points were so that we could prioritise all of those memos to provide some relief on the other side. What we did is we started more regular convening of what we call our industrial base council. I look at OSD is kind of the corporate function with my customers being the operating units, which are the services we had, the service acquisition executives, logisticians, others together. And we have worked every week for the last two months to rack and stack. What s a ese were seeing for critical issues so that we could focus our Defense Production Act, title three investments as well as start putting programs on contracts faster. Each of the services has dozens MAWR contracts that have been awarded this time of the year than they did last year. So it again it was listening to industry constantly getting back. Thank you back Sunday after we’re going to the next questioner. And that is Mr Landerman, who was recognized for five minutes. Very good. Thank you. Mr Chairman. and Secretary Kerry Lord, I want to thank you for attending today’s hearing and for accommodating to the new form. Out of these hearings have been a couple of Kobe related questions, but before I get to that, I just wanted to call your attention to Section 16 48 last year’s Nd A, which called for the for a comprehensive framework to strengthen, decided security off the defense industrial base. And we made an important for a step with top security Maturity model certification program. But I have to tell you, what we received from the department was really wholly unacceptable. The first update that the department provided to Congress appeared to show that the department is not re made a good faith effort to deconflict, synchronize and harmonize the various programs that we depend on to keep the industrial base safe. So what I wanted to ask you, I hope that you will commit to providing that the committee, with all the specific factors described in the legislation Absolutely. In fact, we’ve taken one of our key leaders, Katie Harrington. She is very, very focused on this area. We work closely with N S A. As well as the services because we understand the vulnerabilities, and we need to commit the funds to make sure that we have a secure and resilient set of war fighting tools. Okay, Thank you. It’s something my subcommittee is going to be following closely before to work with you. Appreciate the work that American is is doing and look forward to getting a more comprehensive update for department in the very near future. In that case, um, let me turn to a covert related question. Last week we heard from, uh, the Defense Logistics Agency that they’re working to give defense companies on the defense industrial base potentially testing equipment to allow them to do testing of themselves. Electric boat, just by way of example, in my district has been called for a technical report. Some time they’ve taken some steps on their on their own. But you given, uh, there, there, medical facilities that they have unset. It makes it possible to do that. But can you please update us on what the d o. D is doing to determine, uh, disseminate about 70 testing equipment to, uh, defense critical infrastructure? What we are doing is reaching out beyond just our government contracting, contracting employees and we are now reaching out to small businesses and making are fed mall available. So what this is is going online searching just like you would at home for a variety of things, so that you can go and compare and contrast different PPE and other materials were trying to make that much more accessible to small businesses, and we’re working to see how that can be legally access by states as well. So so using the purchasing power on the logistic capability of the d. O. D. To help both acquire and then also disseminate the equipment that I understand that correctly. And so the one of the challenges, which was highlighted in an earlier question, is aggregating a demand signal. If we can have a more focused location to aggregate that demand signal that gives us better leverage, better price capability and so forth and frankly, eases the ability to come in and get PPE on, we plan to grow that capability into other things as well. Um, so I know that, uh, you wave one of the corona virus, uh, appears to be receiving, but this is a medical health officials and what’s happening in the country you re signed and filed. It really sounded the alarm of future waves. You touched on some of this already. But it was Lord, what groundwork You laying to ensure now that the GOP could quickly amassed and distribute Resource is just in case. I know the wave does occur in the vault. What are your? What we’re doing is not Onley modernizing the strategic nuclear stockpile for the nation, meaning that we will have i t systems that will easily let us know what we have and where it is. But we’re doing the same thing with our d o d stockpile. That means looking at what is what is in it, what the levels should be and making sure we reconstitute it very quickly so that we not only have the capability to deliver a day by day, but that we have already reserved. Thank you very much. Thank you. Thanks, Germans. Time is expired. Mister Rogers is recognized for five minutes. Thank you, Mr Chairman and Miss Lord, thank you for being with us today. And thank you for your service to our country. Uh, early in this pandemic, we were having some troubles are contractors of defense. Contractors were happens in troubles obtaining parts from Mexico because of the different way that they were handling the pandemic from us. And I understand you were working on that. Can you tell us the status of that situation now? Absolutely. My latest DCM reports say that everything is open in Mexico. What we did to support that effort was what we did with governors here. Domestically, when local and state regulations are put out, sometimes there is a disparity in terms of how they are interpreted. So what I did in terms of Mexico was to call our embassy talkto all of the U. S. Officials there give them a prioritized list of companies that were critical links in our supply chain and called back every day giving data until they were able to open them up. So the Mexican government was very, very responsive once they had the facts and figures. So the second area we’ve had issues, there is India, which were working through most of those and then a variety of other small int. Great. Thank you. I want to follow up on the line of questioning from Mr Thornberry where you talked to you about the job, the consequences of the Kobe impact on your budget and then the impact that that’s had on our defense contractors and their employees. Oh, this is a genuine consent consensus that there’s gonna be 1/4 interest. Cares act sometime in July. Anticipate the offering cover. So the administration of funding that you need to back feel to replace the look you used to deal with Kobe. You broke up a little bit there. But I think the question waas what would we would do? We have a number to make up for what? I’ll call the cove. It penalty to contractors on their existing contracts and so forth. Correct? Yes. We have rough numbers on that. We have submitted them. They aren’t o N B right now. Great. Thank you, ma’am. I go back. All right. Um, term? Sure. Smith eyes how orbit. And so I will take over the chair. As it happens, I’m also next in line. So first off, I will recognize yourself for five minutes and, um asking names consent to include in the record in a letter from Governor Jay Insley to Vice President Mike Pence which chair Smith mentioned earlier regarding Washington has experience with PPE and the need for D. P. A. Um implementation end a second. I want to follow up on what Mr Rogers was discussing as well. You mentioned that there is a number that you estimate, I guess. Can you share that estimate with the committee today? About what? Those I guess the Kobe penalty costs are it would be in the double digit of billions of dollars. So somewhere between 10 billion and $99 billion on the lower end of that. All right, thanks. Second, do you have other than that, though? Do you have guidance for allowable cost specific guidance for allowable costs under section 36 10? My recollection from your testimony is that well, it will arrive shortly. We have put out, um, enormous amount of guidance on this. It’s a dialogue with industry again to make sure we understand what the needs are. We are committing to within 30 days. I think, less than that put out final guidance. But just for your reference, we’re working through, you know, looking at confirmed cases or quarantines, government facility closures or stand downs. Test lays thistle is a really a key item. If you couldn’t get out, toe arrange and so forth because of research and development center inefficiencies, Tele work closures due to travel restrictions, logistic implications caused by travel restrictions occur, requiring commercial flight availability of parts and supplies, high absentee rates, local and state lockdowns, foreign government lockdowns company and thank you. So So I understand it’s fairly broad and fairly specific. And you mentioned 30 days. Is that 30 days from today or 30 days from a day before? Before this, 30 days from today, we will have it done. Okay. Thanks. Um let’s, uh, question I have for you still on the supply chain, but I think I mentioned this. We had the the briefing call a few months back whenever that was a few weeks back, um, and that to do with the use of the DP A beyond Cove in 19 and the flexibility of the department has there was a particular instance with aluminum and use and defense manufacturing has an impact in Washington state. There’s a aluminum plant there that is curtailed 100% for other reasons, but, uh, still, the need for aluminum can you speak at all to how you are thinking about using the di p A for either commodity purchase or purchases Otherwise, and are you thinking contemplating that we are contemplating anything that is a constraint? At this point, The way we’ve broken down looking at the dip has typically been aircraft shipbuilding, space soldier systems. At this point, I am unaware of a cross cutting commodity, but I think I’m gonna ask Kevin Fahey to come up and address this. Kevin, as you know, is SD for acquisition, and he’s the one that’s closest to the actual programs and goes to all of the industrial base meetings. I wouldn’t know. I would note, there’s I have a one minute, 15 seconds just rode Quirk. So what we do is we All the program officers bring in their issues where they see the supply chain. We also have industry that comes in and talk to us. That specific issue has not been brought to us from the aluminum Washington came in. We prioritize it. Basically, the first priority is things that was specifically impacted by Cove. It and most of that, as you can imagine, is driven by the financial situation. Yeah, OK, there is the opportunity. If there is a need, we want to hear that. So I would say that Kevin is the person to reach out to for those who have issues. So I’ll just conclude by saying what I heard. What I heard you say is one. You have the flexibility to address that. Second, you have financial authority to address that. Correct. Thank you. Are you back? Thank you. Um, just one quick note on the remotely participating members. If you if you are in fact, sitting there, it’s good. Toto, leave the video on now. Just like in a regular hearing. Members come and go. And if you happen to be eating lunch or something, we don’t have to view that so you can turn it off. But if you are sitting there like you would normally be there it is good to live video on. I’m just so we can know who’s there. But you gotta move around. Move around is fine. Uh, next up. Is Mr Conaway recognized for five minutes? Well, they were sharing their story. Thank you for being here. What I heard in the conversation about PPE, particularly was that you’re trying something. They were, uh, Pandemic Peak supply. Uh uh, capacity from domestic production, which would be great if the peak lasts a long time. Most of us think it’ll it’ll ab at some point in time. But you look like you put in place a significant amount of capacity that might might not be needed when the pandemic ends. Can you talk a bit about what’s in the contracts that will allow companies to unwind that capacity? Or is it in the contract that they have to maintain it while these other things? And what’s the cost to the taxpayer to maintain that, what, at some point, time will be excess capacity for PPG Way will be know what those costs are on a running race. So two separate issues in my mind, the DP A Title three provides funds through contracts to companies for facilities, equipment, tooling, training, flowing down funds through the work through the supply chain. The idea is either to preserve capacity or to increase it separate and distinct issue off letting contracts for a certain number of items over a certain amount of time. What we’re doing is carefully looking at what we think demand signals are And there is again a diversity of thought about that. And we will not over invest in an area where we do not need mawr capacity or believe we will have excess capacity. So those are the trades. They’re being done because obviously we don’t have an infinite amount of money. We have to prioritize what we’re doing. Well, this used your n 95 mask is an example. You said by January we will have the capacity to do 80 month. Peak demand was what I heard was 100 month. Um, were not at peak demand now, but so is that 80 month pay for or is that capacity? That would be, uh you don’t need to keep making these masters stacking them up in a warehouse anywhere beyond a certain point. But what will happen to those with an 80 month under this scenario? So again, the capacity is there. We let contracts that are separate and distinct. The capacity has it cost. Will you maintain the capacity? And how much would that maintaining a festive causes? Really? Did you? Yeah, correct. In terms of maintaining capacity that would typically be captured in overhead rates and so forth. And if we get to the point where we built up the strategic national stockpile and the monthly utilization no longer requires the entire capacity that we have in the nation, that typically what businesses would do would be to repurpose or idle certain lines. So they’re not paying to keep something operational if there’s not a demand signal. But again, we’re trying to be smart about that so that we are not going to find ourselves in a huge overcapacity situation. Okay, I understand how private company would react on its own nickel. I just want to make sure that you’ve got the authorities toe react in that exact same manner when it’s clear that compassion is not longer and the taxpayers have to pay folks for idle capacities that say that absolutely correct. And again when we write contracts, if they’re long term contracts, they typically have a base and then option years that could be executed. So we typically are incredibly reticent about committing to a long term contracts where the demand signal is unclear. Okay, well, I think that’s been a concern and appreciate your testimony today with every chairman. I’ll yell back. Thank you. Mr. Courtney is recognized for five minutes. Great. Thank you, Adam. And thank you, Secretary Lord, for being here. I also want to thank you for the quick follow up after the April 16 teleconference call regarding Cures Act, Section 36 10 again you again followed up in terms of some of your comments about the sort of scope of the paid leave in terms of the department’s interpretation of the Cares Act. Ondas, you point out the sort of Q and A F A Q sort of guidance that the department’s been putting out has also been helpful in terms of putting some precision around the scope of the reimbursable paid leave. But as you point out, an unfunded authorization kind of leaves us, you know, frustrated in terms of being able to convert that into a reality. For a lot of these workers who, some of whom have contracted Corona virus and obviously the intent of Congress, needs to be filed up on with an appropriation. But you indicated to Mr Larsen that the department, I guess, is putting its arms around a figure are you doing that? Based on claims that are being submitted by contractors, You know, regarding specific workers who have been out for two weeks. Three weeks, four weeks, hospital. What s So is there something that we’re going to really see? That’s very clear part so that we can help with the appropriators. If again, there is gonna be another Kobe bill at the end of July. The figure that we arrived, that is data driven. We have not yet had any contractors actually submit claims because they’re aware that there is not an appropriation yet. And I believe that they’re concerned they might get a one time shot and want toe. Make sure what the entire situation is. That being said, our DPC group as well as acquisition have spent an enormous amount of time talking with contractors and understanding the range of challenges that they see. Our Defense Contract Management Agency has individuals embedded in all of the major primes and visiting the smaller ones. So we have eyes on every day, and in fact, I get data every morning that we share it are start up in terms of the 20,000 roughly companies that we track the number of closures, the days average that they’re closed, the number of openings, what level of workforce they have. So we can do some rough calculations ourselves. But our boots on the ground, so to speak, are collecting their own information and talking with management teams. So we believe that we understand the lower end of the number. I believe there will be some delayed issues because again, our primes air trying to look down through their supply chains. But as you get lower in the supply chain, typically some of the tear twos or threes are not sharing with the tear ones all of their issues, because they don’t want to reveal a lot of the what they think is proprietary data and so forth. So I think it will be a while toe unravel. We just actually had another, um, teleconference, actually a video teleconference that we set up this morning for Secretary Esper with a lot of the large primes where we talked about this very issue. So again, the fact that Congress already took at least half a step with an authorisation shows that I think there’s support for, you know, making sure that we finish the job. And really, um, you know, compensate people for their, particularly for their sick leave s o the extent that you can incorporate us in terms of, you know, that data driven analysis and that we can help. I want to encourage the department to do that. Thank you. Once a the figures are released, I will commit to coming back and doing that because that’s in our mutual best interest. Because again, I’m very concerned. The defense industrial base, I believe, is the nexus of economic security and national security, and it’s vitally important to make sure they remain as healthy as possible. Great. Thank you. You’re back out. Ah, thanks, Joe. Up next. Is Mr Whitman recognized for five minutes? Well, thank you, Mr Chairman. Secretary Lord, Thanks for joining us. I want to talk about the ship repair, maintenance and overhaul industry. Aziz, you know, there been some challenges there. Prior to Kobe 19 the requirement up to Kobe 19 on payments to the industry was 90% retailer. 90% payment or 10% retain ege, where they call progress payments up to 90% and then 95% for small businesses. Uh, and as we have seen, those yards now have to accommodate more shifts. So more maintenance availabilities longer duration. There’s Maura, Maura, those dollars that are being held up. In fact, it’s right now over $100 million is in retain Ege for those yards those dollars air needed for those yards to reinvest to get the capacity necessary to keep the throughput going to repair. The ship’s not only that are there now, but the ships that are to come to those yards. And we all know the longer the ships in the yard, the less available it is. And availability has become a big issue these days, As we make sure that we’re meeting readiness needs to give Assistant Secretary of the Navy Gertz credit, he said, OK, we’re gonna change that because of Kobe 19. We’re gonna drop that down to 1% retaining so they get 99% of those dollars, which has been a tremendous help. The question is, is that’s a temporary measure. Would the Pentagon consider making that a permanent measure to help the cash flow for our ship maintenance, repair and overhaul industry? I know that Secretary Gertz is spending an enormous amount of time on this and talking with CEOs and a number of individuals on a weekly basis. I think at this point we are letting the data drive us and we’re not drawing any hard lines. We want to be flexible. I think there are a lot of things that we have learned during this pandemic that we don’t want to unlearn. But we have to look at the value equation, obviously for the taxpayer and what we’re getting for deliveries as well. But again, we will remain open and flexible to what makes the best sense for all those. So that the data indicates things were going well. The contractors were performing with this 1% retaining. Going forward with the Pentagon, make it permanent. I don’t want to speak for the Navy right now, but I will tell you I think it would get serious consideration. Okay, Very good. Let me ask you to. Our committee is very focused, obviously, on resource is as you talked about earlier, maintaining readiness is incredibly important. We know the challenges that we face now with Kobe 19 related costs. We want to make sure we’re getting money to restoring readiness to modernization. But last week, a major industry partner that is Ken posting reading from a Lockheed Who’s the CFO raised the idea of the benefit of a global sentiment settlement that is a macro adjustment on equitable adjustment on costs related to Kobe 19. So instead of going contract by contract to look at it and say, How do we come up with a way to make sure that everybody is justly compensated for the costs associated Kobe 19 would make it much faster, making much less complicated and make it much less likely that they’re going to be protest to say, Well, you did this for this contractor, but you didn’t do it for this contractor. What processes or mechanisms are you considering to efficiently manage the coming wave or what we know we’re gonna be Kobe 19 adjustments to make sure that they’re fair and equitable on to make sure there’s a non opportunity to make things right. And is there an opportunity for a global settlement of some kind? I’m gonna ask Mr Kim Harrington, who runs defense pricing in contracting, to address that because he’s spending an enormous amount of his time on 36 10 and equitable adjustment. Yes, sir. Eso when Miss Lord Reference that final guidance would be coming out within a months time period. That is, in fact, what we’re working on right now. And as she noted about our industry engagement discussions, that has been one of the primary topics. We gave industry an opportunity to provide input to us. We got about 100 pages of input on. So that is, in fact, what we’re working on right now is to, uh is to come up with the most efficient way Teoh. Resolve those reimbursements. And you’re right that Global Settlements would make a lot of sense in many cases. Not all but many very good. Thank Mr Chairman, I you back. Thank you, Mr. Nor Cross. Thank you. Appreciate it. Can you hear me? We got you. It’s all working. Great. Well, actually, Miss Lords, great to see you again before, too. When we can get to gather a number of issues, jump up to us right away. But I want to stay on the Ori. Is the request reputable adjustments? Is that the only method that’s available to contractors to look to the government will absorb their coverage. Cost? No, I think 36 10 is separate and distinct from equitable adjustments. And again, I’ll ask him Harrington to differentiate between the two and perhaps comment on anything else. Yes. So, uh, what I would say, sir, is there’s There’s sort of three buckets that we think about in terms of these costs where these would fall. The request for equitable adjustment is codified and regulation around specific actions that the government takes to drive. So in cases where maybe we issued a stop work or maybe where a facility was closed, a government facility was closed. You know, that would be a case for a traditional ari A. As Miss Lord noted, 36 10 was authorized by Congress. And so that’s sort of a separate bucket. And then you’ve got everything else from PP cost to facility rearrangement to social distance and things of that. I understand that. That’s the point. We’re trying to make him pressed for time. Right is that there are more than one area theory is something that has been set up and they can do it. We spoke with Dr Jedi during a briefing yesterday, and he indicated few, if any arias have come through. So there is more than one bite at the apple and we want to make sure because there not all companies are created equal in terms of how this affected them. But the number we were told were 4 to $6 billion. So hearing a double digit digit figure, Mrs Ward is something that is a bit of a surprise sauce. Let me ask you, looking at the budget and what has been spent this year, are we spending everything that has been given to us or there’s some savings across the entire D o D that we might tap into before we start looking for us to give additional money? Well, I think you’re aware that the CMO, at the request of Secretary Esper, has been working on defense wide reviews. And we have swept up, if you will, ah, lot of funds that were refocusing on modernization. So it is all a matter of priorities right now. We don’t see the flexibility other except out of programmes themselves. If again, we wanted to affect what could be delivered out of programs to address this cost we saw in the past where re program has taken place to fund the wall cell. We didn’t like it then, so I don’t think we like it anywhere now. I just want to follow up on a quote that you made earlier. We want it domestic production and certainly we do to. During yesterday’s briefing, we got a list of the nations that were working with. Would you be supportive of bringing up domestic content to close to 100%? And if you wouldn’t, why wouldn’t you? And this is outside of that 35 program I understand both. For Medical Resource is as well as the defense industrial base, we would like to have as much defend our domestic production as possible. Obviously, competition is always our friends, so we like to have two sources of supply wherever. But we are actively looking at reassuring a number of critical items. For all of the reasons that we’ve cited during this hearing and all of the challenges we have faced getting critical equipment to the assembly lines. So obviously people are now understand the different level wide being made in America is important, but again, would you be supportive of bringing that rate up closer toe high percent incrementally. We can’t do this overnight. But what we hear time after time is we want predictability. You can’t change it. One year. Would you be in favor of predictable ways bringing up that percentage? Absolutely. Thank you. Like you’re back. Thank you. I have Mr DesJarlais next organized for five minutes. Is he still with us? Does not sound like it’s so necessary. Probably have Is Mr Kelly. Thank you, Mr Chairman. And thank you, Secretary Lord, for being here. It’s very important, I think one of the things that I want to concentrate on it kind of goes to what Chairman are Mr Conaway from Texas Said is initially number one. We had some stockpiles, and then we started production, but within just a production, then you also have the distribution and whose prioritizing where those distribution goes. And that priority is both by location and by need. I d nurses native. The grocery store donated this New York City needed It is Mississippi native who is responsible for coordinating on number one, the production, which is you. But then the distribution and the prioritization of where that distribution goes for PP for example, whether it’s mask or hand sanitizer of those things that has come out of the supply chain Task force working at the NRCC between FEMA and HHS with strong support from D o. D with Admiral Plus check leading that and then reporting up through the ucg up to the White House task force. And I’m a little different than everyone else. We kind of got got called unexpectedly with all these things that we didn’t know that we would need. But I thought we did a phenomenal job deal day specifically in helping with that distribution, I can tell you in my home state of Mississippi, we had on our Mima r Mississippi emergency management, which didn’t have the number of personnel nor the logistics experience, which the Mississippi National Guard just sent a few planners over there, which helped them with distribution and supply points. And also in those priorities. What are we doing, Secretary lowered to make sure that we capture our lesson, learned who’s conducting an interagency and the Inter department A R and lessons learned so that when we face the next pandemic or the next big event in the United States that we capture these lessons, Lord, and take him forward, the individual agencies are, and I know the White House task Force is looking at that. I will tell you, in terms of distribution of PPE and medical resource is one of the highest priority items right now is to have a modern I T system that we would typically have in some other industries so that the government contract where all of this is and also ensure that they only use carriers that they contract so they know where everything is all of the time. It was a huge lesson learned early on in the pandemic, as was the entire opposition process, because we were asking a group at HHS that typically only does about $5 billion of acquisitions a year. Look at this huge tidal wave, and that’s why D O. D. Has come in to really set up processes and help out in an emergency situation. But we want to make sure we get irreversible mo mentum so that we leave behind a sustainable acquisition and distribution system that could be utilized in the future. And then the final thing that I think we need to capture out of this. But initially, hand sanitizer was a big deal. I had, um, eatery that turned into immediately processing hand sanitizer, which now it’s no longer probably no longer needed. So you know, they’ve got a look at getting back are the same thing with, like, stockpiles of in 95 mask or ventilators or all these other things. Some of those things go out with days, so you have a strategic stuff pile, but it has to be rotated. And so, But at some point, the rotational value of maintaining that stockpile will be less than the production required to keep that stockpile rotated. Who is responsible for managing that going forward in the future? Is that Is that the defense production actors that you, Secretary Lord, who is that well for this strategic national stockpile? HHS has responsibility for that. I will tell you a d o. D. We have our war stopper stockpiled, and we do that. I think, in a relatively innovative way where we are paying manufacturers. Teoh keep stock in hand, but it’s rotated, so it’s not aging. We always have to have a certain amount available, but I think it’s kind of a win win situation. We’re trying to share all of those techniques with HHS to again just not only reconstitute the strategic national stockpile, but to modernize it. Very good. Not knew that was the answer. And thank you all for what you’ve done in assisting either organization with that Mr Chairman on your back. Thank you, Mr Diego. Thank you, Mr Chairman. This is, uh, they give us chairman. Are you in my time to reserve slopping? To whom? Okay. This locker. A generous offer by Mr Gaia. Um, Mrs Lock in. Are you, uh, available? I think you may have to amuse yourself. We cannot hear you at the moment. Yeah. I don’t know. We can’t We can’t hear you. Um I don’t know why we can’t hear you. I see you’re talking. I see your hands moving. But if you can hear me hadn’t happened at some point. Um, way. Do not. Yeah, we do not have a Slotkin. So for now, Mr Mr Diego, if you won’t use used Mr Chairman, who’s who’s next on then underwater? That, um this training hand is the next Democrat. Sorry, Mr. Bring D c Mr. From D. C. Is next after after you. But I used my time to that person. Okay, that doesn’t work. Great, cause he’s gonna have his own time here in just a couple of minutes. Um, why don’t we try to figure out the technical problems, Slotkin? I will reserve Mr Diego’s five minutes. And once we figure out detectable problem with Miss Slotkin, I will go back to Mr Diego, then give this time to miss Lock in and we’ll call her up. But for now, we’ll give Mr Bring D. C A shot. Mr. D. C. Are you on the line? You know what’s funny about this? When I said things were going so well, Rick Larson looked at me and said, You know, you just screwed the whole thing up. And he was He was right. Okay, So we don’t have Mr Brindisi. Um, and Miss Slotkin is still for some reason, not able to communicate. All right, just wait a second. Hair voice. No, Um all right, I’ll give Miss Trey Hannigan. Thank you, Mr Chairman. And your eyes for five minutes. Um, Secretary Lord, thank you so much for coming before the committee. I think the entire committee is grateful that DeLay stepped in and played such a major logistical role at a time when there was no blueprint. And I’m sure, a fair amount of silo busting that you had to make happen. You know, as I walked through the time line between National Emergency being declared on March 13th and in the White House, issuing an executive order to compel GM to accept, perform and prioritize, uh, federal contracts for ventilators. I’m just kind of diagnosed. The primary source of you know DeLay or friction was it was that lack of authorities was an interagency. Logistics was at the realization that arrest, if I chain was largely overseas. They’re wondering if you could just speak to that. Are you asking, in general or specifically, about GM? No, just in general, I think. I think again, um, that this was a gargantuan task that first had to be analyzed. What were the issues? What was needed? And we had individuals at FEMA who are very good at reacting to specific events like a hurricane or a forest fire. We had people at HHS who were brilliant medical individuals and research individuals and so forth. But there wasn’t the combination off expertise in terms of operational and programmatic knowledge to go and procure complex systems that perhaps had, um, different training needs had different parts that had to be purchased. Consumables keep them going. There was not the experience with complex distribution systems with evolving demand signals that had to be re prioritized. So I think it was an issue of both scale and scope very quickly. And I believe that the Department of Defense, by the nature of what we do, is better equipped to deal with those very abrupt, very large, very complex dilemmas. And, um, it took a bit to really sort through the authorities and how to make sure we were legally helping out on both the acquisition and distribution side. So there was a bit of learning, non recurring engineering. I would say that had to happen, that we have captured that now. And I believe we have the mechanisms. So we’ve learned from that and we should not see that in the future. And we plan on leaving a very sustainable system that can be handled so that we don’t see this again. I appreciate all of that, and in a perfect world if we were going to build a system. Teoh respond with agility and speed to, you know, a pandemic, one that might, you know, be right around the corner. Should this continue to be an inter agency response. I mean, organizationally, we don’t exactly get the economies of scale through a shared services model. And you have a pretty demanding day job. Should that rest with, you know, HHS that they have a medical industrial base. I’ve heard you say bringing that supply chain home is an important priority. There’s no question there’s a huge man, that and that those manufacturing jobs home. But would it would it take some of the friction out of the system if that rested with HHS and they had its own, You know, M l A. And you know, uh, authorities that, you know, they sort of, um uh had just singularly, I think that remains to be seen. We’re just now getting to somewhat of a steady state with these systems. There’s a lot of support planned through September for HHS. FEMA’s stepping back a little bit now that we’re getting into a hurricane and forest fire season and we have a team that will remain with HHS through September. We will see at that point whether or not that sustainable. And I think that we at D o d can always provide a surge capacity on assistance. Um, system capacity. I don’t believe that. Generally, it’s a good idea to duplicate capabilities at scale around the government. I’m sorry, Joan. Ladies, time has expired. If you have a closing thought there, did you want to wrap up just right? Yes. I was just gonna say, I don’t think they need something right now. Hopefully, we can leave them with the system, and we can augment as needed. Thank you very much. So just an update here. So next up, we’re gonna go Miss Hartzler, followed by Brindisi and Bacon. We’re still trying to resolve theme the issue with Miss Lock in to try to make sure we can get her like toe work. Um, and when we do, we’ll come back to Mr Diego for the yielding of that time. But now Miss Hartzler is recognized for five minutes. Thank you, Mr Chairman and the Secretary Lord, from the great job that you’ve done in a very difficult time in our nation to stand up and keep our industrial base strong. And to make sure Americans have the supplies that they need have a few different questions. The 1st 1 is about section 889 The 19 National Defense Authorization Act with prohibits federal agencies the company that used any equipment, a system or service from certain Chinese telecommunication companies like CTO, eat away and a off for this provision and offer prudent amendment to expand Ferguson to Chinese video surveillance equipment. From my vision here, a doctor and I don’t believe that these video surveillance equipment should be are critical federal properties. But I understand that the contractors who are supposed to remove these equipments having some difficulty due to cope it. And the administration has not released the rules yet for what they need, likely, and the deadline is August 13. So do you feel like the deadline needs to be extended? Look for them to be able to comply, Or do you have an update for us on what was really to be released at Cast that this equipment will be reviewed? Absolutely. Section 889 I believe, is of critical importance, as you know, Section A has been released and complied with part B of that, we are 100% behind the intent of that. We D o d are a bit concerned about the two year deadline. Um, not for our own facilities quite as much as that of the industrial base. While what we find is, if you look all the way down the supply chain, it is a heavy lift to find all of this equipment everywhere and the thought that somebody in six or seven levels down the supply chain could have one camera in a parking lot, and that would invalidate one of our major primes. Being able to do business with us gives us a bit of pause, so we are very supportive of it. But I believe we need to extend it in terms off the time for compliance so that we don’t have unintended consequences. Okay. Thank you. DoubIe of working with you guys on that to see what we can do. Appreciate that your support of it we wanted to be workable about certainly appreciate your support in getting that implemented switch. Skimmers, as you got has been law discussion about our dependence on China who are critical pharmaceutical, pharmaceutical medicines for our military. And as we discussed in people come first hearing. You know my colleague John Garamendi. Dishonor, piss up coal as well as myself. Introduced a bill a Pharmaceutical Independents Long Term Readiness Reform Act, which seems to take the first step in tackling this issue by ensuring Mata America produces theme medicines, the vaccines and vitamins on the antibiotics for military can. You sure this what the department defense is doing currently with 1/5 production act to help stand the pharmaceuticals? Are you already taking steps to go down this road and help? Or what else do we need t to get that back here on our shores? We very much are focused on that. I’m going to ask Stacey Cummings to come up on and speak to some of the specifics. One point is early on we worked with lawyers so that we could tap into the $17 billion of care Zach that went to HHS for some of this industry expansion. So AP eyes advanced. Pharmaceutical ingredients are an area that we’re spending a lot of time on now reassuring, using the industry expansion dollars through the cares act. And Stacy has some of those specifics. Thank you. Yes. So what we did when we stood up the JAT If is we set up some product leads across different functional areas in pharmaceuticals and AP eyes with one of those areas that we saw as it as a direction that we needed to look into. So when we look at the strategic National Stockpile, our first focus has been partnering with HHS on PP. Our next area of focus is critical care, medications, pharmaceuticals. And we have, through our industry portal, been capturing proposals and ideas from industry as well as from government on where we can make that next investment dollar to look at the most those most critical pharmaceuticals and AP eyes and those most valuable next investments to be ableto onshore and create domestic production. Thank you. And I’m sorry. The gentleman’s time has expired. So we’re gonna give Mr Diego another shot here. I believe we have the Slotkin cute up, Mr. Diego. Of course, I said would be hysterical at this point. Who declined to yield? It is your time, Mr Diego. You organize for five minutes. Thank you, Chairman. Uh, you and she represents walking. All right. Thank you. Representative Diego. Sorry about that. Apologies for the pick up. Um, and thank you, Under Secretary Lord for being here and your whole approach to the committee during Cove. It has been really commendable. And I really appreciate the communication. I feel like I’ve rarely seen an issue. Are so many people agree Where that we just after the experience of Kobe, learned in real time that certain supplies, certain issues or medical supplies and pharmaceuticals, at least one of them should be produced should be able to surge Your And I guess my first question is, we talked a lot of what you’ve done with the Defense Production Act, which is great. But if you’re looking at the future, what are the two or three things this committee can do to help enshrine in law some things that incentivize even more production onshore? What are the two or three things you recommend? Well, obviously, money solves some problems, but it usually has to be accompanied by policy. S o. I think if there was a preference for onshore supplies, that would be useful. But we have to think about the cost of doing business with this, so providing the money to re sure set up factories and so forth is one step. But I believe we need to recognize that a lot of business went offshore because of a lot of bureaucratic hurdles and cost one of those or tax incentives. So this committee might think, Think about what tax incentives could be provided in order to make it more attractive to produce here domestically. And those taxes could take a lot of different forms in different portions, whether it be real estate or workforce or training or whatever. It might be different relief. Uh, thank you for that. I think we have, ah, lot of folks who feel very strongly about this issue, so we’d love to work with you, even if they’re small issues that we could do through the nd a. The other question I have is looking forward, way learned through this process. There’s a lot of things we don’t have on the shelves that we need it, and my question is going forward, how you manage requirements. Who’s gonna keep vault of stuff we want to have in supply? Who’s gonna refresh that list? What is your requirements. Let’s look like And who owns that list from a d o. D perspective. We’re saying yes. So what? We realize Waas There were critical items that we never thought about before. Most of this PP, for instance. So, um, acquisition and sustainment has partnered very, very closely with the joint staff. The joint staff typically develops requirements, and then we work on the acquisition and distribution portion of this. There’s been quite a robust discussion within D. O d About this, we have a Deal de task force that is chaired by the deputy secretary of defense, Norquist, as well as the vice chairman, Joint Chiefs of Staff. I’m general heightened, and we many of us meet with them three times a week or so. And these are the very items that were grappling with. We have been working on a demand signal for P p e. All kinds of medical resource is on an ongoing basis, first looking at medical facility requirements, which was the first demand signal, and then for the nation to get back toe work, then for a strategic stockpile. And then you know what is the ongoing need, especially if we have another spike here sometime this fall. So that’s a work in progress. But I will tell you enormous progress has been made. Um, the joint staff is the group within Department of Defense who owns requirements. We’re looking at some possible nd a language that we’d love to work with you on just to maintain after this cove, it experiences over first wave and second wave. I’m just making sure we have a regular process to update those requirements and refresh those requirements. I don’t want to go over time, since I’ve already borrowed time. But thanks so much for being here. Erin. Thanks to representative Lady Yields back, Chairman had a step. The chairman had to step out. So representative bacon is yielded, is recognized for five minutes. You can thank you very much as a little girl. I appreciate you being here today that you do a great job here, just as you do. Um, all the time. Your comments. I really appreciate you. I want to talk to you. About what? We didn’t find 1998 concerning the supply chain with any involvement which I search Chinese companies like c t and wanting. We, uh This requires restrictions in there and administration. Supposed committed to is a report. Are you concerned about the department’s ability to implement subsection 89 on the current timeline, especially the public crisis and what he recommended? Reason? I ask that with Wasn’t two months to implement. The administration is not yet released additional guidance, so I’m just curious not were around with that. Are we able to comply with the supply train restrictions regards to while away and c t thank you so very, very supportive of Section 89 Obviously, we’ve implemented part a Part B. I am 100% behind the intent. I am very concerned about being able to implement it in August as well as totally comply within two years. I think the majority of it can be done, but we have very complex supply chains and we’re just now getting better at illuminating the 3rd 4th 5th 6th levels. And I am concerned that we might have some unintended consequences with shutting down major portions of our defense industrial base because of one infraction of a hick vision camera in a parking lot somewhere at a Level four supplier. So we again are very, very supportive of the intent. I am concerned about unintended consequences. I believe we need more time. I can appreciate that. I think that’s Ah, I’ll standing answer. And that’s my question. I yield back. But I appreciate your insight. Thank you. Thank you, Mr Cisneros. Thank you, Mr Chairman and Secretary. Lord, thank you for being here. You and your staff. Um, I lived on a bipartisan letter along with my colleague, Congressman Bacon on this committee addressing dressed to Secretary Esper and Secretary Cesar about support for small businesses that have a stepped up to manufacture critical supplies. In this time of need, we have small business owners in our district that are concerned about the future viability of producing such critical supplies without certainty. I appreciate what the department is doing to support the defense industrial base where large. But what is the department doing including and support to HSS to support small businesses. Now, we have small businesses that have switched their production to start making PPE, and they’re kind of worried about the uncertainty. They don’t know how much material that they need to buy because they’re not sure how long this is going to continue So how do we give him that certainty? Understood. In fact, we have had many, many PTC’s with small business. And last week we had Secretary Esper do a VTC with many small business associations. What we’re doing just now is getting ready to have a Siris of industry days in the next 30 days outlining many of our requirements for the strategic national stockpile. We will drawing those industry days being laying. We will lay out what the demand signal looks like. That should provide certainty. We did not have this coalesced in orderto have, ah, large demand signal all at once previously. But I think that is one of the keys. Secondly, we have portals where they can go. They can always call our industrial policy team at a N s. We have gone to great lengths and well, why’d your office with this? To provide what we call a placemat with all kinds of links into the department. Small business is where most of our innovation in this country comes from. Obviously, liquidity is critical to them at this point in time and we want to be there to support them. We would like to have as much small business involvement as possible. So I think in these industry days, on and again we can provide your office with information. They will get a lot more detail about opportunities coming up in the very near term. That will be very significant in terms of volume and duration. All right, well, thank you for that. So as we move forward and we look at lessons learned, I’m what other items are we looking at? The D o d procures that primarily depend on overseas procurement. Are we creating a list on, like, you know, Hey, you know, we depend a lot on overseas procurement for this. Maybe we need to kind of start thinking about manufacturing. Some of these items in comas are taking a look at that. Absolutely. We started with the 13 806 defense Industrial base report that again highlighted fragility, and we are working down that list. I will tell you two things that I am particularly concerned about. One is processing of rare earth minerals that affects us in so many different ways. We need to have a domestic capability for that. That’s on one end. The other area that I am extremely concerned about that. We are working to come up with a variety of I think innovative solutions Is the whole micro a lot electron ICS supply base. Uh, this is an area where we have a lot of foreign dependency. And I think we have the entire supply chain thinking differently over the last year and especially over the last three months. And I think they’re willing to be far more creative in terms of looking at public private partnerships in a number of other things. So many items that we have prioritised. We can share the list with you. But I will say top of mind right now are rare Earth mineral processing and the entire micro electronics supply chain, including foundries. And as we move to the removed Teoh some in Conus production, whether it be for swabs, PPE, facemask based covers. Uh, as we started to do that, how do we ensure this industrial base doesn’t go away? I mean, there is gonna be times where it’s gonna be like, just like it’s happened before. It’s cheaper to make it overseas. Why don’t we just buy it from there? But how are we gonna ensure that production continues. So in this time of need, we can make sure that we have the capability toe ramp up and make those productions in Conus when we need them. First of all, I think we have to have a business environment that encourages business domestically. I mentioned taxes a while ago. I also talked about when we were addressing vaccines, what we have for FDA procedures and so forth. We need to be safe. We need to manage risk. But we need to be efficient and effective. And I think, frankly, we have lost a lot of business because we have become to bear bureaucratic, too expensive to do business here. We also getting back to the point of how do we not let these lines go dry? We are being very careful to make sure that we’re spreading our industry expansion dollars many places so that we are not over building capacity in one particular area. Thinking at this point, I don’t think we’re close to that. Anything I have misch e Next, I know she was here in person or she’s now remote or she’s not here. Okay, um then Mr Gallagher is the next Republican on the list. Mr. Gallagher, you still with us, Mr Phonic? That’s last Republican member that I had on the list. So I’ll go to Mr Crow if there are Republican members. If you could let staff know that you re added to the list. Mr. Crow is recognized for five minutes. Thank you, Mr Chairman. Thank you, Secretary Lord, for coming in and for the hard work that you and your team have put in under very significantly challenging circumstances, I wanted to just pull on the threat a little bit mawr of this issue of our ability or the challenges and aggregating demand signals. Eso start that. Can you just describe for me how do you define a demand signal? Is that just how much pp that we need any given week? Correct. And so you need to segment who is generating the demand. So obviously, at the beginning of the pandemic, the focus was on healthcare facilities. On Ben, we shifted to nursing homes and so forth. So there’s all of the medical care critical care. Long term care is one segment of the demand signal. Then obviously, we have our forces from a d. O d perspective that we look at. But then we look at the rest of the nation, and if we are going to comply with CDC guidelines and get the nation back toe work, that is going to require a certain amount of PPE. So if I can affect just interject for a moment here, would that include? Those signals come from states, municipalities, private industry, other government agencies? Is that all of the kind of places where those cigarette from and in fact HHS and FEMA have retained some outside organizations as well? Subject matter expert. And again, there’s a diversity of thought on this, so one has to rationalize it. So if they’re coming from all these different locations, something that you said earlier kind of stuck out to me that you said that we’re having a really hard time still aggregating that demand signal and that you saw a present need to create a centralized location, Teoh assess all of those signals and to figure out what the need is, which was, he begs the question for me. If we don’t have that centralized location and ability to sort through all of that, how do we even sitting here today have our arms around or know what it is we need. Um, What I was trying to convey is that is happening now with HHS and FEMA with the supply chain task force. So that is one of the critical tasks, if you will, That Admiral love check is undertaking and reporting back to the White House task force. So this this task force, in your estimation, is it successfully aggregating those demands signals? To the extent that you see in here right now, U S government knows what’s needed and where it’s needed. I believe they dio and that has been a process, not an event. It has resulted. The information has come from many places. There’s been a large level of interaction with a lot of state governments. There also has been a lot of work with distributors of medical equipment. For instance, understand what their total demand signal was prior to the pandemic. And it is come from teams, independent teams looking at it and in your estimation, is HHS FEMA supply chain task forces that the appropriate place, given your a very important role in D. O. D. Is really important role in managing the defense supply chain. Is it appropriately located within HHS and FEMA? I think it is because it has been augmented with many people from D o D. And we and A N s talk very frequently. We have people embedded over at the NRCC where most of this has been happening. Um, for instance, I talked probably three times a week with Admiral Plum. Check. We have, um, Stacey Cummings. It goes to meeting several times a week. So this is sorted through so that we have what I would call a cadence of communications. Now, this was not the case on March 15th a. But since about April 15th we have started toe work into this rhythm. So it’s been a process, not an event toe aggregate this demand signal, but because we believe we understand it at this point to the degree you can. That is why we can move forward and modernized the strategic national stockpile and know what? And do you believe that you need any additional authorities? Or are you confident that you have both the authorities and inadequate kind of operational picture of the need of this point? At this point, I believe we do What we want to make sure that we continue to test is that we have the authorities toe work between agencies very quickly using the economy act to move money around so we can go and use Theo expertise where it is and bring it back to the point of need. Thank you, Secretary or Lord, I yield back. Thank you. Mr Are small working. Ask for five minutes. Thank you. There bringing. I don’t know that your microphones on their the buttons and an odd I wanted to follow up on the conversation that you were having with Congresswoman Davis about vaccine production and distribution. So I understand the vaccine development is being addressed by Operation Warp Speed. However, I have some real concerns that if we wait until the vaccine is developed, before we start thinking about the mechanisms to produce and distribute, it will lose precious time. Perfect is not the case. That’s not the case. So I’m about to ask Parallel, They wonderful. I’m so pleased to hear that you are working in parallel. I recognised your comment about the need to have a plan to increase the speed of distribution. So can you tell me what the timeline is for that plan that is being worked in Operation Warp speed right now and general partner is probably better to answer that. But I will tell you there has been an enormous amount of work done up to this time. What is being rationalized right now is where the vaccine goes first. And once the prioritized list of who receives it is determined, then that determined where it will go and then the details can be worked out. OK, so to to fully understand that so operation warp speed is not only managing the development of the plan, but the development of the vaccine, but also where it will be delivered. Who is managing the for what needs to be manufactured in an effort to distribute the vaccine as quickly as possible. So it’s a combination of general arm of Dr SLA way and general partner. They are leading it. And what is happening is a Siris of vaccine Companies are being funded to manufacture and then do the finish and fill on Ben. They’re looking at the distribution as well. So I want to make sure I fully understand that they’re working with individual companies for the manufacturing of the specific things that will be needed for the distribution. So I’m not thinking just the vaccine, but the vials and the needles and the swabs Correct. Okay. And so is D o. D. Through the Defense Production Act, already starting to identify how to make sure that there aren’t those same hiccups in the supply chain that we’ve seen in testing, for example, absolutely. However, what we have done is we have moved away from the Defense Production Act for the health resource is because we have found a way to tap into a larger pool of money that HHS has through the Cares act to do the exact same investment in industry to get that increased capacity and throughput. So, yes, that is being worked. That is primarily within warp speed right now, working with the joint p e O. Under the Army, and they leverage the Joint Acquisition Task Force as well. So yes, there’s a large d o d portion of that. Okay, and can you explain just a little bit more what the value is of going through the carries act process as opposed to the Defense Production act? Absolutely right Now we had $1 billion appropriated through DP A Title three in The Cares Act. We used about 200 million of that for HHS type things, if you will. And then we were able toe work with HHS lawyers and D O D lawyers and come up with a mechanism to use the economy Act to tap into $17 billion that HHS has. So it expands the pool and allows us to use even more money while taking the balance of the $1,000,000,000 that came through for DP A Title three and use a portion of that for the defense industrial base. I appreciate your comments there, and I’m pleased to hear that you’re that you’re working with Operation Warp Speed. Teoh. Utilize that. And can you explain a little more about your role with in Conjunction? As you mentioned, you are working with them. They look back to us for acquisition assistance as needed. But what we did was really by for Kate all of our efforts about three or four weeks ago from what we were doing in terms of just thesis, apply chain Task Force into one effort, looking at the strategic National stockpile and another effort being Operation warp speed, which is the vaccines, therapeutics and diagnostics. So some of the people that were working in Jad, if on everything went over and we’re dedicated to warp speed. That being said, General Purna and I have regular conversations. Stacey’s team in the Jad if support them. So it’s a very fluid organization in terms off. If there is a need, we will support that instantaneously. My time is expired. Thank you. Next up, we have Mr Brindisi. Thank you, Chairman. Thank you to our witnesses for being here. I appreciate the department’s assistance in helping our communities. There’s find this pandemic. However, this unprecedented Kuroda virus pandemic has made it clear that our country’s five chains for critical supplies materials have vulnerabilities that must be addressed. And we have a lot of work to do to make sure our domestic industrial base is more prepared for situations that might happen in the future. Secretary, for I want to ask you about domestic non availability waivers, Aziz, you know, under the Buy America Act and the very amendment, the law requires agencies to buy certain products domestically and when domestic items are not available at a reasonable cost or quantity. The department can waive requirements with the domestic non availability waivers undersecretary. Or could you briefly describe how frequently the Department of Defense uses the message Unavailability waivers for requirements mandated by the Buy America Act or the very amendment. I will have to take that for the record and give you full details on that. I will tell you during this pandemic one of the biggest challenges we’ve had in terms of domestic production are textiles, and we have worked out a little bit of policy that allows us if we cannot produce domestically to prioritize partial domestic, um, production of it. But we are working with several industry associations to make sure that we ramp up domestic production to the greatest degree possible. We were working early on with Puerto Rico because they had many local shutdowns, and they were critical to us for textile production, in fact, converted over some items. But this is an area of focus for us, and I will get back to you with the numbers, okay, so you can get back to us as to how many waivers are typically granted in a year. You could provide that information for maybe the last few years. Yes. Okay. All right. I want to follow up. I appreciate you talking about the concerns regarding rare materials and micro electron ICS. The cove in 19 pandemic has raised many supply chain issues and questions for the future. And I am also particularly concerned about the lack of domestic production of rare earth elements, including indium, germanium and 10. As you know, the United States was once self reliant and domestically produced rare earth elements, but over the past 20 years has become has become 100% reliant on imports primarily for China. There are important defense and non defense applications for rare earth elements, including fighter jet engines, guided missile systems, space based satellites, communication systems and touch screens. I appreciate you mentioning that this is a concern. I’m working on some length for the nd A regarding this, but can you go into any more detail? Do you have a plan to decrease Theo D’s reliance on China for things like airport elements or micro electron ICS? Absolutely. From the rare earth, the issue is not so much getting them out of the ground or where they are. It’s the processing of them. So we are looking at a variety of options to do this domestically. We are also talking with some of our close partners and allies about having backups of that as well. So this is an area that we are focused on relative to, perhaps reassuring using The Development Finance Corporation just had a meeting on that earlier this week. But we’ve been looking at this for about two years. We have a number of ideas from the microelectronics point of view. I am very concerned at the lack of domestic foundries. We Indio d only use about 1 to 2% of the entire production there. However, having trusted parts is very important to us. And I believe we have the ability to re look at how we work all the way up through the different levels of the supply chain to have mawr onshore capability that until we can meet so we can really identify the technology for zero trust in microelectronics, we need to have some trusted sources and we actually have quite a bit of activity going on right now to come up with a number of scenarios that we will be bringing forward in the next couple of months of how to do. I’ll stop there. But I’d like to follow up with the offline on the trusted foundry issue. We have some interesting things happening here in New York state and some new semiconductor facilities that are going up. And I’d love to follow up with you. More on that? Absolutely. Thank you. I have had Mr Brown. I’m not sure he’s still on the call. Mr Brown, are you there? That is no Mr Garamendi. Thank you, Mr Chairman. Secretary Lloyd. Thank you very much for your team, Stacy. Terrific job briefing a few days back and obviously going today. So compliments to you as long as to your team. Beyond that, the issue of the pharmaceuticals has been raised by several of my colleagues. We continue Teoh, pursue that along the way. Also, I want Teoh. Just ask the question. There’s some 150 $1,000,000 of the $1,000,000,000 that was allocated was originally going to be for medical issues. It’s now been stirred over to the International Development Finance Corporation to respond to the cocotte 19 outbreak. What is there family? It was established in December of 2019. They got 3/4 of a $1,000,000,000 to do something. Could you? Is that your responsibility or is that somewhere else and a couple different ways is doing? I believe I can explain this. We, through The Cares Act received a $1,000,000,000 for DP a Title three. We began executing on that for medical industry expansion. What we found was we had a number of defense industrial based critical needs a swell and worked with our legal teams to find a way to be able to have d o d execute industry expansion for Medical Resource is utilizing the HHS $17 billion appropriation from Cara’s act. So we switched over to start using the other pool of money to continue to fund industrial expansion off. Medical resource is which we continue to do today. We also then started working on Defense Industrial Base industry expansion using DP A title three. The There then was an executive order about three weeks ago that enabled the Development Finance Corporation, which typically does international investment, for the benefit of our national security, to, um broadened what they do and use their infrastructure actually do loans to re sure critical capability for the U. S. As a result of cove it. So what we’re doing is taking up to $100 million to provide collateral for the Development Finance Corporation, or DFC, to re sure either health resource types of companies are other national security critical companies. However, that is not being done in isolation. We I I meet with Adam Bowler, the CEO of DFC. Once a week, we sit down and talk about our priorities that we’ve generated along with HHS and FEMA as well as our industrial base council priorities. And we’re generating a demand signal to dfc toe allow them to use their back office, so to speak, to look at potential loans to re sure capability to the US to create jobs and a supply chain. Here, the V p. A. Title three money is collateral on Lee that is being used for that. Okay, well, thank you for that explanation, most of which is not understandable, because I don’t Perhaps none of us really understand who those organizations are. We’re talking about a vast amount of money that is flying back and forth around here all for the good purpose of re shoring. I suspect the honor to General is going to be very, very busy trying to keep track of all of this. And certainly we need to know where all this money is going and whether it is going to a successful outcome or not. Well, I don’t want you stop a champion to resort, but it’s imperative that we have documentation of where the money is going. And for what purpose And for what? Six test, if any. So a please keep that in mind. And as you develop that information, please forward it on to our committees. And with that, I you Yeah, absolutely. I commit to doing that. I’m more than happy to come with Adam Bowler and talk about DFC specifically if needed. Thank you. Thank you. I’m not sure who is still here, so I’m just going through the list. If you’re not here, you don’t have to speak up, Mr Keating. I have next. He’s not here. Mr. Villa. Miss Cheryl. Miss Loria. Hi. This is Ah, you like you recognize five minutes. Oh, thank you, Mr Chairman. Thank you, Miss Lord, For for being here again to talk to us today for your updates had an issue that was brought to my attention by several small businesses here in our community and have two roads. A lot of them support the Department of Defense. Um, and they brought to my attention that in November of last year on the d. L. A. Moved away from the practice of accelerated payments to small business suppliers, and they went from a net 15 to a net 30 at cited shortages and the working capital fund up Under the best of circumstances, the small businesses look on continuous cash flow. Having payments tied up for additional two weeks is putting a divisional strain on them, and especially during the financial burden that they’re experiencing during the cold. It crisis on this has been exacerbated even more so. My question is, you know, business. Is the department taking any steps to return to the accelerated timeline payments of Net 15 for small businesses? Yes, in fact, although we did move from net 15 to net 30 we are closer, usually to the 15 then the 30. However, when we submit our requests for the next traunch of funding, if there is Crunch four here. We have included in that funding to move back to net 15 and that is a need to have working capital fund funding. Okay, Thank you. And I was gonna be My question is what additionally did you need from Congress to move back to the to the net? 15? My second question is relative to the Cares act and specifically section 36 10 um, which provided a much needed boost for the national security contractor workforce. But it’s set to expire on 30 on. And I am skeptical that our national security facilities back to their full pre coded level by September 30th up. And I was curious to quantify how you foresee this acting readiness. Um, as a first won this round out. If we allow that to aspire, we are monitoring to see the health of the defense industrial base. In fact, I get numbers every day through D c m a N D l A. So, for instance, we followed 20,000 companies to date due Toa cove. It we’ve had 960 cumulative closures. We’ve had 859 cumulative re openings, so that leaves us with about 101 cos currently closed on day. That’s about 57 average days closed. So that would be part of what 36 10 would look at is the impact to the employees and so forth. As a result of that, we also, as you know, have issues around sickness and not being able to get into facilities, government facilities and so forth. We’re writing guidance right now. Toe have claims submitted against that. Although we do have the authorization for 36 10 we do not have an appropriation for 36 10. So one of the items that we will be submitting our traunch for our funds to help us reimburse the defense industrial base we continue to monitor on a daily basis to see about the health of the companies. We are optimistic that we see a trend improving in terms of efficiency and ability to operate. Obviously, we have to continue to use all the CDC recommended practices, and we hope we can mitigate any impact due to a second spike of covert. If we do see that in the fall. Well, thank you and thanks for quantifying based on the metrics of the number of companies impacted. There’s any specific areas weapon systems, impact operationally that come from specific key company, maybe source of suppliers of any material that’s necessary. That rise to your level. Very high concern. We two answers to the question one there three basic areas that have had the most significant impacts on one of them is aviation vertically, aviation, propulsion and that, in large part as you well know, is due to the implosion of the commercial aviation industry. Secondly, we have seen shipyard impacts for a variety of reasons, although that’s coming back pretty well right now. And thirdly, we’ve seen satellite launch impact again because of the commercial dependence there. Now, we also have seen some critical companies that really we’re not on our radar screen, so to speak. Previously that had a couple cases and in one case, particularly a fatality. And there there was a very significant impact and shutting down that I apologize was Secretary of the Gentleman’s Time has expired, people. Teoh, thank thank you very much. I know Miss Hoolahan is on the line to land You are now Thank you, Chairman. And thank you so much for coming today I want to echo my follies Appreciation for your participations. I think we lost these hearings. I think you hear me. We can. You’re breaking up here. Yeah, we got you. You’re breaking up a little bit, but I think we got you. Clear right. Go ahead. I want to thank you for speaking on rare a D a a with you all that everything in Puerto Rico, which has a heritage in history and textile manufacturing, as you mentioned, a pharmaceutical manufacturing toe. What degree can you talk about the ability that we might have to be able to incentivize bringing or re shoring manufacturing and production of PPE and pharmaceuticals after Puerto Rico? If you wouldn’t mind talking about that, we have an effort to re sure both PPE as well as pharmaceuticals. And it comes down to the capability of the company’s in Puerto Rico or anywhere else in the U. S. So if there is an interest in doing some of that, as we’ve already seen from some companies in Puerto Rico relative to making some in 95 masks, for instance, they can reach out to our portal on make sure that your office gets all of the information and we are looking at all kinds of proposals. So we are very interested in speaking with any company anywhere in the U. S. That has an interest in a capability in participating. We want to talk about to utilize those dollars. How can we maybe in the case of an island like Puerto Rico that has been under such duress for so many years at this point in time, it is such an obvious solution for re shoring needs. How can we be more aggressive in our outreach to that island? What I would suggest is number one, that the individuals the company’s on that island that want to participate reach out to industry organizations. One of the most effective ways that we deal with industry is through industry associations because it allows the member companies needs to sort of be echoed and amplified, and it is easier for us to respond to a common reach out from an industry association. So I would really encourage Puerto Rican companies to think about what they have. Four facilities, equipment, um, people in terms of skill sets and reach out to industry associations to understand everything we have available and we want to hear from them. Likewise, I’ll make sure your office has all the information on how to reach out to portals that d o d has. Thanks. And I just want to companies that a lot of big, loving people on domestic manufacturers of problems, factories on the court, And it’s not just for the remainder of the time. I want to go back to something that representative pro talk briefly about which is, you know, is there one central place where we can look around and find all of ours by? I’m sorry, I I think she was asking if there is one central, central place weaken look to find supplies. But I’m Kristie. You’re kind of You’re kind of you’re breaking up. So I sure sort of cup of this. I’m asking whether there’s an information. So what, you feel kind of the i t systems that is there to be able to monitor and track all of the supplies that we’re talking about? A modern I t systems such as Amazon would have distribution. Yeah, well, so a couple different things One, we have a modern system to sell through. D l a in terms of distribution of PPE and so forth. There is a modern system that is being put in by HHS and FEMA for distribution of same. Thank you. I look forward to learning more about that, and I yield back the balance of my time. Thank you, sir. Thank you. I believe that’s all the people that we had who had questions. My staff can let me know if that’s not, in fact, the case. I didn’t just have one fall up, So where I started, I know we talked about You’re gonna get toe being able to potentially produce ability. Almost a 1,000,000,000 masks a year by January. And I think you get the number where we at right now in terms of the number of mass that we’re producing each month. You may have answered that I may have missed it. I don’t have that specific, but Stacy may. Well, we’re gonna have to take that for the record to give you specifics. We have them, but I can’t. I can’t give him to you right now because it is. Mr. Conaway was pointing out. We don’t know if we’re going to need a 1,000,000,000 a year come January. Um, you know, I think we have our need right now. So would where that how that ramp looks would be helpful. It’s good to know that by January we’re gonna be there. Where are we gonna be in September, for instance? When? And I can absolutely provide that to you. The one thing I do want to point out is that one of Miss Lords comments about how the demand signal is complicated is that there is a medical demand signal, and then there’s a nonmedical demand signal. So I feel very confident that the investments that we’ve made across the federal government in masks is well worth it and will be used domestically. And I think it’s It’s a matter of understanding how they’re used now and in the future. And when they’re used for medical purposes and non medical purposes, that’s very good point. There’s been a lot of sort of back and forth about the utility of masks on and what what type are necessary. But in close working environments, we were not in a close working environment. Here we have distance, but if you’re, you know, been with the group of people in meatpacking plants and other places you can. You can wear one of these masks, but they’re not as useful as an in 95 mask. So even if we’ve got the health care professionals covered, if you don’t have an in 95 mask, you do the best you can. And in a meatpacking plant or in a manufacturing place, we were close to each other. But if they’re available, I think there’s there’s going to be a pretty big demand signal for those for some time to come. Um, other than to say thank you. Um, you been here for almost 2.5 hours now and I appreciate that Onda also to thank the staff. What you see here was not easily put together way show up and participate. But the technology that had to be wired in the room that had to be found, all the decisions that were made, the task staff, you set all this up on, and this is also very helpful practice for us for when we will be coming here, try to mark up our bill. So staff did incredible work on this, and I want to want to publicly thank them for that work without a yield toe. Mr. Thornberry, for any closing remarks he might have. Mr. Chairman, I just echo those comments on again. Thank Under Secretary Lord for being here. Thank you. And with that, we are adjourned.

Share with Friends:

Leave a Reply

Your email address will not be published.