Pentagon Faces Potential for Billions of Dollars in Covid Claims

U.S. Defense Dept acquisition chief Ellen Lord says the claims could stem from two provisions in the CARES Act.

• Section 3601 of the economic aid law allows agencies to reimburse contractors for payments tied to sustaining employees prevented from working due to Covid-19 facility closures or other restrictions, Lord tells a House Armed Services Committee hearing today, according to prepared testimony
• “Section 3610 authorized, but did not appropriate, the funds needed to make these reimbursements,” Lord says
• “Cost for 3610 is likely well beyond” the Pentagon’s current funding “without significantly jeopardizing” weapons “modernization or readiness efforts,” Lord says
• Just one major prime contractor estimates that 3610 impacts could be up to $1.5b for their company and their associated suppliers: Lord
• Separately, contractors will be able to seek Pentagon reimbursement for Covid-19 related costs associated with govt directed stop-work orders, purchase of personal protective equipment, cleaning and sterilization costs, and impacts from implementing CDC guidance, she says
• “As with section 3610, the department does not have the funding to cover these costs,” Lord says
• The same prime contractor forecasting $1.5b in potential Sec. 3610 claims estimates these additional costs “to be in excess” of $1b, Lord says