Authored by Alexander Canizares

Defense contracting is among the areas addressed in the 883-page Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (H.R. 748), which was passed by the Senate on March 25, 2020.

The $2 trillion bill provides spending in a wide range of areas intended to help businesses and people affected by the coronavirus (COVID-19) crisis. The bill now moves to the House for consideration.

Of interest to defense contractors, the Senate bill includes $1.45 billion in Defense Working Capital Funds to combat COVID-19. The bill also removes a $1 billion cap on advance billings for Defense Working Capital Funds (Sec. 13003) to “improve DoD flexibility in responding to COVID-19 effects and ensure supply chain stability,” according to a Senate Appropriations Committee summary of the bill. Defense Working Capital Funds are revolving funds that DoD uses to finance operations. The bill also provides an additional $1 billion for Defense Production Act purchases (which could be used to produce personal protective equipment and medical equipment) and $3.8 billion for a Defense Health Program that includes funding for research and development as well as testing and evaluation in response to COVID-19.

The Senate bill also does the following:

  • Allows DoD to waive certain restrictions on its use of “other transaction” (OT) authority in response to COVID-19 (Sec. 13006). According to the Senate Appropriations Committee summary, this provision is intended to “improve defense industrial base liquidity, particularly among small businesses, in its response to COVID-19.” For example, for prototype or follow-on production transactions related to COVID-19 of more than $500 million, the bill would waive a statutory requirement that DoD notify Congress before making the award.
  • Removes incurred cost limits on progress payments under undefinitized contract actions (Sec. 13004).
  • Removes limitations on DoD’s usage of undefinitized contract actions for COVID-19 response (Sec. 13005).