DOD oversight report tracks pandemic spending

A recent watchdog report provides a glimpse into how the Defense Department spent emergency pandemic funds.

In the much-redacted report, the DOD's Office of Inspector General reviewed six key awards totaling $207 million in contracts and found that officials complied with federal acquisition regulations and other authorities when funding existing contracts and new technology investment agreements with $1 billion allocated in the CARES Act for purchases and contractor payments under the Defense Production Act.

The Pentagon assigned $213 million of this for medical supplies and $687 million to offset financial setbacks experienced by defense industrial base contractors as a result of the COVID-19 pandemic.

Boeing and ArcelorMittal received the most. The aircraft giant got $63 million to help sustain the domestic supply chain for the C-17's spare engine parts and ArcelorMittal $56 million for "domestic manufacturing of Navy-grade alloy steel plates used in the production of surface ships, aircraft carriers, and submarines" respectively.

LeoLabs Incorporated and Oceus Networks received the least with the former getting $15 million to support "the only supplier of critical space data services" to monitor and mitigate space threats. Details on Oceus Networks' $10 million contract activity were heavily redacted, only noting that awards were related to a mobile cellular network.

A $33.6 million award to eMagin Corporation sustained production of "organic light emitting diode microdisplays," such as those used in helmet mounted displays used in aircraft during night operations, while the Urban Mining Company got nearly $29 million to sustain and expand operations of "the only domestic manufacturer of Neodymium Iron Boron rare earth magnets" needed for aircraft, submarine and missile components.

Key redactions also obscured the number and dollar figures of contracts awarded for aircraft, electronics, materials and hypersonics, shipbuilding, space operations, and soldier and ground systems. However, in written testimony submitted for an Oct. 1, 2020 hearing of the Senate Armed Services Committee, then DOD acquisition chief Ellen Lord said that the department had awarded $663.4 million of the $687 million had been doled out to contractors, with the largest chunks going to shipbuilding and aircraft manufacture.

Defense contractors and lawmakers have long raised concerns over increased production costs due to the pandemic, calling for coverage of workplace expenses related to the pandemic, from travel restrictions to social distancing in facilities, purchasing personal protective equipment, and supply chain disruptions.

The Department of Defense has additional authority under Section 3610 of the CARES Act to cover those costs, estimated by at around $10 billion by officials. According to a previous DOD OIG report from December use of the 3610 authority has been sparing. OIG auditors determined last year that contractors largely sought other forms of COVID-19 financial support.

DOD's acting acquisition chief Stacy Cummings told the Senate Armed Services Committee in February that additional appropriations would be needed to offset those costs.

"While the Department may be able to use other appropriated funds to reimburse contractors, the cost for 3610 is beyond the Department's resourced ability to do so without jeopardizing modernization or readiness."