01 May 2020
Posted in Aerospace, Defense & Security
Pentagon supports its supply chain as federal help set to reduce
Following the press conference of Undersecretary of Defense for Acquisition and Sustainment Ellen Lord updating on ongoing COVID-19 measures;
Nicolas Jouan, Aerospace and Defense Analyst at GlobalData, a leading data and analytics company, offers his view on the situation;
“With a US$738bn budget allocated to national defense in 2020, the Pentagon is sometimes considered as an unfair beneficiary of federal aids to fight the COVID-19 crisis. Smith is speaking for many when he considers that stimulus packages should now be directed to more exposed parts of the economy.
“The DoD is, therefore, acting on its own with increased progress payment rates and loans to small businesses. Lord explained during the press conference that her administration already had processed US$1.2bn on the US$3bn of promised accelerated invoices. Another US$350m loan has been granted to small businesses to face the crisis. These measures are important to keep the maximum of small and medium enterprises in business with the Pentagon in order to preserve know-how and competition on the longer term.
“Doing business with the government is hard for new vendors, whose survivability rate after ten years was estimated at a dismal 20% by a CSIS study even before the crisis. COVID-19 is hurting disproportionately these small and medium companies who are exposed to sudden complete interruption of activities if their production line stops or if their usual contractors up in the supply chain interrupt payment. Even a relatively big company such as Spirit Aerosystems has to lay off staff in front of the struggles of its most important client: Boeing. In this context, it would not be surprising to see a further increase of financial help coming from the Pentagon.”