Senators warm to idea of more pandemic funds, flexibility for DOD

The Defense Department is having some money -- and image -- problems as it contends with media reports of misusing $1 billion of pandemic-related funds, while asking Congress to appropriate more relief for contractors.

At an Oct. 1 Senate Armed Services subcommittee hearing, senators didn't waste time asking DOD's chief buyer, Ellen Lord, about a Washington Post report intimating the Defense Department had misused $1 billion in pandemic funds allocated for medical supplies to pay defense contractors.

Sen. Tim Kaine (D-Va.), the Subcommittee on Readiness and Management Support's ranking member, raised the question in his opening remarks and during the first round of questioning, asking Lord to explain if DOD has been transparent about CARES Act spending.

Lord said the organization had complied with the legislative requirements and submitted a timeline of Defense Production Act spending, calls, briefings and hearings.

And rather than pushback, Kaine and other senators seemed to offer support.

"To summarize quickly your testimony," Kaine said, "the idea is these CARES Act dollars have been used to deal, both within the DOD and within our supply chain, with the health effects of coronavirus so that we can continue to do the work that is needed but also to shore up economic damage that is being visited upon some of the key actors in the supply chain so that we won't see an erosion of the supply chain that would hurt our national defense."

"We really owe it to the American public to use the dollars correctly and to be transparent about how they're being used and I'm glad you were able to address this this morning," he added

Kaine later said he wanted Congress to consider being more flexible with spending timelines pertaining to CARES Act funding across government.

"There's all sorts of funding," he said, "where the money was supposed to be spent by a certain time," with regard to Section 3610 contracts.

"COVID has dramatically changed the timing, the ability of folks to act in a timely fashion," he said. "It's my hope that Congress will recognize that and continue to allow flexibility and use of funds even past the time that may have been the allotted time" pre-COVID.

The added scrutiny comes as the U.S. government begins operating under a continuing resolution that runs until Dec. 11, and Congress wrestles with both a second coronavirus stimulus package and fiscal year 2021 appropriations. Defense policy and spending bills are also likely to stalled until after the November presidential election.

Defense companies have advocated for and are awaiting relief from what Lord has previously called the estimated $10 billion "COVID penalty" on existing contracts, a request that some legislators have bristled at given DOD's $733 billion budget for 2020.

DOD increased progress payments, with about $2.6 billion already paid to defense companies, and pre-awarded some contracts to increase cash flow, but needs additional appropriations from Congress, Lord argued.

"What we need is an extension of section 3610 of the CARES Act in order to give us the authorization to be able to take care of one-time costs," she said. "But just as importantly, we need the appropriation to have the money to do that."

"Unless we get an appropriation what is going to happen is that will come out of program funding that will impact not only readiness but modernization," she added.

Lord's request seemed to get support from Sen. Joni Ernst (R-Iowa), who asked about the defense industrial base's ability to maintain functions through the pandemic.

"There are specific items and pieces of legislation that we need to continue from the CARES Act moving forward," Ernst said, "it's still not business as usual."