Defense Industry’s Covid Closings Decline, Pentagon Agency Says

(Bloomberg) -- The defense industry has made major strides reducing the impact of Covid-19 on operations, decreasing total closings of facilities to six on Monday from a high of 148 in mid-April, according to the Pentagon agency that oversees contracts.

“We’re seeing a significantly smaller fraction of the industrial base impacted on a daily basis” as contractors have become “better at restoring operational capability after potential exposures” to the coronavirus, Army Lieutenant General David Bassett, director of the Defense Contract Management Agency, said in an interview. “We’ve gone from having a substantial fraction of the industrial base impacted to today,” where it’s “just a handful.”

In total, 279 defense contracting locations were forced to shut down an average of 20 days since April because of the pandemic.

In addition, 149 locations currently have reduced operations because of the virus, according to the agency, which tracks 10,509 locations of major defense contractors and their subcontractors.

“These closures have generally been short-term in order to clean facilities” or to “reduce the potential exposure of employees,” according to agency spokesman Matthew Montgomery.

Ellen Lord, the Defense Department’s acquisitions chief, has warned that pandemic disruptions are expected to result in defense industry claims for reimbursement of more than $10 billion under the Cares Act, which provides economic aid including reimbursing contractors for payments to employees affected by disruptions such as plant closings. She has said a single contractor, which she didn’t name, is estimated to have at least $1.5 billion in potential claims.

Bassett said the decline in plant closings reflects that companies “have really got a plan in place so that they know what they have to do when they find people who have been exposed, how they have to handle the plant and then what they can do to get back up quickly and safely.”

Bassett assumed command of the contract agency on June 3 after a career that included positions as the Army’s top program manager for command-and-control networks and for ground-combat vehicles.

“As we watch right now and cases are beginning to rise in certain areas of the country, I’ve asked all of our teams to really think about what we can do right now to make sure if we do end up in a shutdown we can avoid impacts to the industrial base and our deliveries,” he said.

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