The Pentagon will spend hundreds of millions of dollars in COVD-19 relief funding to support defense contractors in the CARES Act. The $688 million dollar fund is meant to support the companies that manufacture such items as submarine torpedo tubes and aircraft engine parts but also microelectronics and other key components.

The defense-industrial base fund is just one category within the $10.5 billion that the Department of Defense (DoD) received from the $2.1 trillion CARES Act package that was passed in late March. This week, amid pressure from lawmakers, the DoD submitted a 54-page spending report to Congress, which showed that only some 23% of the money had been spent.

The DoD has said it would use the money to address areas of the defense industrial base impacted by the novel coronavirus pandemic, “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.”

Money To Fight COVID-19

According to the Department of Defense Spend Plan For Funding Received in the Coronavirus Aid, Relief, and Economic Security “CARES” Act, the following plans were submitted to the Pandemic Response Accountability Committee last month:

  • $7.559 billion “to prevent, prepare for, and respond to coronavirus, domestically or internationally;”
  • $1.450 billion for the Defense Working Capital Fund “to prevent, position, prepare for, and respond to coronavirus, domestically and internally”; and
  • $1.095 billion “for Defense Health Program to fund existing shortfalls in the TRICARE managed care support contracts.”

The Pentagon has also said that it will boost existing programs with the money Congress provided via the CARES Act to help fight the COVID-19 pandemic. A portion of the money would go towards the development of artificial intelligence-based models that could rapidly screen, prioritize, and test therapeutics provided by the Food and Drug Administration  for the coronavirus candidates. 

The AI funds would also be tapped for human test trials for vaccines and antibody-based treatments. The Pentagon plans to shift $3.8 billion in funds for the Defense Health Program to its research and development accounts to support the AI initiative.

Money in the HEROES ACT

Despite the efforts that DoD is making to both fight the pandemic and keep the contractors in business, some lawmakers have expressed concern that more money – or at least too much money – is being funneled to defense contractors in the second relief bill.

Last month, the House of Representatives passed the nearly 2,000-page Health and Economic Recovery Omnibus Emergency Solutions, or HEROES Act. According to a report from ProPublica, some Democrats in the House were upset that defense and intelligence companies – and their top executives – were even included.

The $3 trillion bill was to benefit working people, renters, first responders, and others who are continuing to struggle just to get by as a result of stay-at-home orders and the shuttering of businesses. What is at issue is apparently a section of the bill that seeks to “clarify” a provision of the $2 trillion CARES act that would reimburse firms for the wages and benefits of contract employees who were kept in a “ready state, including to protect the life and safety of Government and contractor personnel” but who couldn’t actually work because the federal offices were closed.

Opposition Raised

Opponents of the bill claim that it includes fees for such things such as “general and administrative expenses,” which they see as paying executives, running the corporate office or even just marketing and sales. Those opponents say the legislation was effectively a “stealthy way to bail out” the defense and intelligence government contracting industry at taxpayer expense.

The issue appears to be that those who drafted the bill feel that it should address the small contractors but apparently take issue with the fact that it would also help major multinational firms such as Raytheon Technologies or even Amazon Web Services – companies that those opponents feel aren’t in need of a bailout.

This could still change before the bill becomes law. While it has passed the House, it still has to clear the Senate before landing on the President’s desk. 

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Peter Suciu is a freelance writer who covers business technology and cyber security. He currently lives in Michigan and can be reached at petersuciu@gmail.com.