Pentagon taps $688 million in coronavirus aid for defense industry

By: Joe Gould

WASHINGTON ― The Pentagon plans to spend hundreds of millions of dollars in coronavirus relief funding to support vulnerable manufacturers of submarine torpedo tubes, aircraft engine parts and hardened microelectronics that were hit by closures or other effects of the COVID-19 pandemic.

The $688 million defense-industrial base fund is just one category within the $10.5 billion the Department of Defense received from Congress' $2.1 trillion CARES Act package. The department submitted its 54-page spending plan to Congress on Friday amid pressure from lawmakers after DoD had spent only 23 percent of that money weeks after it was signed into law in late March.

The Pentagon has thus far obligated $167 million of the $1 billion Congress granted under the Defense Production Act, a Korean War-era law that the president recently invoked, to have industry produce key items such as N95 respirator masks and swabs needed for coronavirus testing, ventilators and other items.

Under the same law, the Pentagon's spending plan says it would use $688 million to address impacts to the defense-industrial base caused by COVID-19, "by directly offsetting financial distress in the DIB and providing investments to regions most severely impacted to sustain essential domestic industrial base capabilities and spur local job creation.”

The plan calls for $171 million for the aircraft propulsion industrial base; $150 million for shipbuilding and submarine launch tubes; $150 million for the space launch industrial base; $80 million for the microelectronics base; $62 million for body armor suppliers; and $40 million for high-temperature materials used in hypersonic weapons.

The priorities likely overlap with vulnerable industrial base areas previously identified by the Pentagon's assessment last year, said Wesley Hallman, the National Defense Industrial Association's senior vice president of strategy and policy .

“It makes sense given what's going on now economically to ― under the [coronavirus aid] legislation ― reinforce some of the critical vulnerabilities that were identified in that report,” Hallman said.

The Pentagon plans $171 million to sustain and preserve the aircraft propulsion industrial base, as many military aviation suppliers have been hard hit from the commercial side by coronavirus travel restrictions. Some would preserve an "essential workforce through support to sustained operations at key repair facility and stabilizing sub-vendors essential to a healthy propulsion industrial base,” according to the department.

What that means is the DoD may have to absorb some of suppliers' overhead costs to keep vital suppliers in business, said Teal Group aviation analyst Richard Aboulafia. “Commercial aviation is in the worst crisis it's ever faced, and aviation propulsion aftermarket is the single part of the industry most hit by COVID-19,” Aboulafia said. “It could be [that] if there's a part like a combustor, DoD could be saying: ‘What do you need by way of guaranteed orders to keep that line open?' ”

The department, which relies on a vulnerable network of suppliers for parts for the venerable TF33 engine, hopes to “support initiatives to certify and approve new parts sources for” the engine and “catalyze the sub-tier vendor base and mitigate risk of sub-tier vendors exiting the propulsion business.” Pratt & Whitney hasn't made the TF33 in more than 40 years, but it's still used by the B-52 bomber, and no replacement is due for years.

The DoD also planned $150 million for the shipbuilding industrial base in areas such as castings, forgings and submarine launch equipment, as well as to support continuous production of essential components such as missile tubes. (Shipbuilding overall has contracted over the last decade, and there were only four suppliers with the capability to manufacture large, complex, single-pour aluminum and magnesium sand castings, according to the DoD's 2019 industrial capabilities report to Congress.)

The CEO of Virginia-based military contractor BWXT, Rex Geveden, said on an earnings call last year that the company ― which makes missile tubes for the Columbia-class submarine ― was mulling an exit from the missile tube business. The Navy and its Naval Sea Systems Command, he said, were seeking more than one supplier, adding: “We're not interested in the future orders unless we do have a way to make money on these orders.”

The DoD planned another $150 million to maintain a competitive space launch industrial base. DoD relies on a small pool of companies to launch satellites into orbit, but there are numerous companies of all sizes that support those launches, and the DoD has sought to reintroduce more competition over the enterprise in recent years.

The department would also spend $80 million to support several critical suppliers of radiation-hardened microelectronics ― products vital to DoD but with limited commercial applications. The funding would “protect the domestic capacity to ensure radiation hardened microelectronics testing capability, and key subcompacts such as substrates and wafer, are available for DoD weapon systems," according to the spending plan.

The $40 million would protect suppliers of high-temperature materials used in potentially game-changing hypersonic weapons. “An expanded, sustainable domestic production capability for hypersonic systems is essential to the Department achieving its modernization priorities,” the plan states.

https://www.defensenews.com/congress/2020/06/02/688m-in-covid-aid-helping-defense-firms-per-dod-plan/