Transcript

Department of Defense Acquisition and Sustainment Leaders Hold a Press Briefing on the Defense Department's COVID-19 Acquisition Efforts

March 25, 2020
Ellen M. Lord, Undersecretary of Defense for Acquisition and Sustainment; Jennifer Santos, Deputy Assistant Secretary of Defense for Industrial Policy; Kim Herrington, Director of Pricing and Contracting

STAFF: Good morning, ladies and gentlemen, both those joining us here in the Pentagon and most of you, joining us virtually and on the phone.

This morning, Undersecretary of Defense Ellen Lord, Deputy Assistant Secretary of Defense for Industrial Policy Ms. Jennifer Santos, and Director of Defense Pricing and Contracting Mr. Kim Herrington are here to provide an update on how the department is supporting the interagency effort to partner with the defense industry to mitigate impacts from COVID-19.

They will each provide an opening statement, and then we will go into Q&A using the list of reporters that have dialed in and those in the room.

Ma'am, over to you.

UNDERSECRETARY OF DEFENSE ELLEN M. LORD: Thank you, Mike.

And good morning, ladies and gentlemen. We really appreciate you being here today.

I'm going to provide an update on the department's continued efforts to aggressively partner with the defense industrial base to mitigate impacts from COVID-19.

As Mike said, I'm joined today by my DASD for Industrial Policy Jen Santos, and the director for defense pricing and contracting, Kim Herrington. They have both played key roles in really productive daily engagements with industry.

I want to start by offering my condolences to the family of the Crystal City-based Defense Security Cooperation Agency contractor who passed away on March 21st. This is an example of why Secretary Esper has stated that the department continues to focus on our three priorities: one, protecting our service members, their families and our civilian coworkers, to include DOD contractors; two, safeguarding our national security missions; and three, supporting the administration's whole-of-government approach in addressing this national health emergency.

There are three key takeaways I want to leave everyone here with today. First, I want to reassure the American people that the United States military remains steady, remains ready and capable of meeting all of our national security requirements.

Second, although our acquisition and sustainment leaders in industrial policy, defense pricing and contracting, the Defense Logistics Agency, DLA, and the Defense Contracting Management Agency, DCMA, has made significant progress this week in addressing specific concerns outlined by defense industry leaders, there is more to do, and we will not stop until the job is done. If you are open in industry, we are open.

Third, I cannot express how thankful I am for the incredibly selfless effort of department leaders and contracting officers across the nation. They're helping to ensure a secure, reliable and resilient defense industrial base.

Before Jen and Kim provide their opening statements I want to say that I remain committed to daily communication and collaboration with the defense industry, state governors and the Hill. I first emphasize that we continue to work through the department's COVID-19 Task Force and the interagency on everything we do.

So some insight into our daily rhythm: At 7:45 A.M. I have a call with key OSD acquisition and sustainment, service representatives and commanders, directors and stakeholders from DLA, DCMA, and the Defense Threat Reduction Agency, DTRA, as well as the Office of Economic Adjustment, as well as others. We go over active tasks, new requirements and new data received over the last 24 hours. Almost as important, this daily call ensures that everyone knows who has the lead for different activities, and who is on the call. We maintain strict discipline in order to ensure updates are provided and received on key tasks. 

My deputy, Al Shaffer, then takes that information to the COVID DOD Task Force meetings so that we can keep everyone in the department and interagency informed. Likewise, General Steve Whitney, who is performing the duties of deputy assistant secretary for sustainment, represents A&S at the Joint Staff COVID-19 working group.

At the same time, industrial policy hosts what began as a daily synch call with numerous defense trade associations, and has evolved into an every-other-day call. This is to communicate what we're doing to hear, to listen to what the defense industrial base issues are and to exchange data.

The department is receiving demand signals from the Federal Emergency Management Agency, FEMA, Health and Human Services, HHS, Department of Homeland Security, DHS, and other federal agencies for medical resources. When I say "medical resources," this is our lexicon for both medical equipment as well as personal protective equipment.

In response, I have established a Joint Acquisition Task Force. We call it the JATF, another DOD acronym. It is led by Ms. Stacy Cummings, who is our principal deputy assistant secretary of defense acquisition enablers. The task force will synchronize the DOD acquisition response to this crisis, working closely with all the services and defense agencies. The task force will leverage DOD authorities for maximum acquisition flexibility -- I emphasize "flexibility" -- to provide resilient capability in the current health crisis. Ms. Cummings, as the JATF lead, has the authority to leverage the services' and agencies' acquisition resources to support the acquisition execution of our DOD COVID response. The Defense Production Act authorities and funding in response to this immediate crisis shall be prioritized and directed by the JATF.

The JATF scope includes building capacity in identified areas of fragility in the defense industrial base, both the industrial capability and workforce, with a focus on reducing reliance on foreign supply sources. We have embedded people at the National Response Coordination Center, or NRCC, working with Admiral Polowczyk especially advising FEMA and HHS on the Defense Production Act, Title I and Title III.

I can't stress enough the importance of the data repositories and portals we have in DCMA, industrial policy, as well as those that we are establishing under the JATF. These repositories allow us to bring in critical feedback from the contracting officer level all the way up to the Pentagon. We additionally are providing portals for good ideas from industry so that there is one repository where we can go and see what is being offered in terms of technical assistance and manufacturing capabilities.

One example of a data product that we are generating is what we call a heat map. We show the number of CDC corona -- coronavirus positive tests, as well as state and local shelter-in-place rules and guidelines. All of this information can help us with predictive solutions and planning when overlaid with the location of our industry partners.

This battle rhythm and cadence of meetings every day helps ensure we're focused on the problems at hand, and that we utilize data and analytics to chart the most effective and efficient path forward. Last week we had four productive daily synch calls with the Defense Industry Association leaders and other key trade associations, who provided important feedback that allowed our leaders to make significant progress on matters such as the critical defense contractor workforce's ability to continue working, ensuring cash flow to the defense industrial base, and getting standardized guidance out to industry.

After meeting with Senator Inhofe Friday morning and working closely with the Department of Homeland Security, I issued a memo that defined essentiality in the defense industrial base workforce, ensuring the DIB's critical employees can continue working. This was very important, because industrial leaders told us that state and local governments had different shelter-in-place rules and guidelines, with some even issuing misdemeanor citations to workers trying to get to work.

This memo will help ensure continuity of mission with our full commitment to the safety of the workforce and states and local government.

Last Friday, Mr. Kim Herrington, director of defense pricing and contracting, issued a deviation on progress payments memo. Kim will go into more detail, but I'm proud of our efforts to address and standardize a key industry concern. I am firmly committed to ensuring that this is done in a fully transparent and accountable manner.

Vice Admiral David Lewis, DCMA director, has worked closely with the contracting workforce and the Defense Finance and Accounting Services, or DFAS, to ensure that invoices are continuing to be paid in a timely manner.

Our Office of Small Business Programs within Industrial Policy reached out to defense industry small businesses and is working with the Small Business Administration and their Small Business Emergency Loan Program to help protect these companies. We know innovation comes in large part from small businesses and we remain committed to supporting these small businesses.

Moving forward, the department remains fully engaged with the interagency to leverage the Defense Production Act to help reinforce critical elements of the DIB. Jen will provide more details on the DCA task force that Scott Baum will be leading for DOD to help prioritize requirements and funding through the interagency process.

As we discussed with the Joint Acquisition Task Force, it's important that everything we do has joint representation, a joint mindset, and the joint warfighter in mind. It's critically important that we understand that during this crisis the DIB is vulnerable to adversarial capital, so we need to ensure companies can stay in business without losing their technology.

In closing, I recognize that what we're doing is imperfect. But we are working as smartly and quickly as we can, in close coordination with the Hill, state governors and the defense industrial base, to do everything we can to support our military members, their families, defense contractors and our fellow citizens. We recognize how serious this pandemic and national emergency is, and we will continue to remain fully transparent and provide oversight and accountability in all we do.

I want to personally thank the Industry Association leaders, National Government -- Governors Association, and our colleagues on the Hill. Each one has played a vital role in helping to ensure our force and contractors have what they need to continue mission-critical tasks and programs. We will continue to partner with you moving forward.

Now Jen will offer her remarks followed by Kim, and then we'll be very happy to answer your questions. Thank you.

Jen?

DEPUTY ASSISTANT SECRETARY OF DEFENSE JENNIFER SANTOS: Thank you for that introduction, Undersecretary Lord.

I would also like to extend my sympathies to the family and friends of our colleague in DSCA who passed away this weekend. My team in the Office of Industrial Policy is working tirelessly to support the priorities of Secretary Esper as laid out by Undersecretary Lord.

Within the past week, we have recalibrated aspects of our mission to identify ways to partner with industry as we jointly navigate the challenges brought by the COVID virus. Our three lines of efforts are in place: assess, protect, and promote.

We are assessing the impacts of COVID-19 on companies in the defense space; we are exercising hypervigilance to protect in a time of economic uncertainty; and promoting the defense industrial base capabilities to aid in a government-wide response to the virus.

First, I want to start with what we are doing in industrial policy to assess the situation. We are listening to our industry partners and taking action. We (Industrial Policy) are the help desk to industry, and directing industry to the right DOD organization.

Teamed with Defense Contract Management Agency, we have established a portal for all defense industrial base companies to provide information on their operating status. We will provide that portal information.

We are also updating our industrial policy website with common frequently asked questions, and created an industrial policy common mailbox that feeds into the DOD organizations. This mailbox is for other COVID-19-related inquiries, as they are outside of the realm of the operating status the Defense Contract Management Agency will receive. We are very dynamic in also adding a portal that the [inaudible] website will feed into.

Last week, we started daily calls with our industrial association partners, reaching over 3 million companies. The industry associations consolidate the industry concerns and bring them to our attention. We have key personnel across the department to directly answer their questions online. Kim, my colleague, will discuss DOD contracting actions we completed.

This dialogue provides an important view into the impacts that COVID-19 is having, whether those are consequences for our workforce including contractor supply chains, manufacturing capabilities or critical infrastructure. This conversation has helped shape solutions such as having a memo issued by Under Secretary Lord to define essentiality in the defense industrial workforce, enabling critical defense industrial base employees' continuing to work.

We are understanding the supply chain vulnerabilities associated with the virus. We created, as Secretary Lord announced, the heat map -- we're referring to it as the supply chain heat map -- for our leadership to understand the impacts of the supply chain overlaid with the CDC data.

As a part of the "promote" of our mission, we have authorities that we can -- that we can leverage to help our supply chain. Last week, the president invoked aspects of the Defense Production Act, or the DPA. Two of those titles are within the purview of my office and come into play here, and can be used to promote the strength of the defense industrial base.

One, DPA Title I, which provides the authority to priority-rate defense contracts and to allocate materials in a way that best meets the warfighter needs. Two, DPA Title III, which provides the DOD a means to partner with industry to strengthen commercial industrial base capabilities essential to national defense.

Under these authorities, the DOD may provide economic incentives to industry partners to aid in a timely delivery of essential domestic resources. In concert, as of Sunday, I had my deputy, Mr. Scott Baum, leading the Defense Production Act Task Force over at FEMA.

His work there will actively work with industry and our government partners to ensure Title I and Title III are utilized where needed in concert with the whole-of-government approach to combat coronavirus.

To protect our industrial base, we have tools to combat adversarial capital like strengthening and expanding national security investment reviews under the Committee on Foreign Investment in the United States -- referred to as CFIUS -- are more important than ever. We simply cannot afford to let this period of uncertainty eat [inaudible} that foreign investment is shifting into hypervigilance.

Further, over the past few weeks, we have been hosting Trusted Capital events. This program has continued to host these events virtually. This program has been launched to get to the left of CFIUS by ensuring that critical companies are able to access clean capital that assists their commercialization.

In conclusion, our assess, protect, and promote lines of effort remain more vigilant as ever as we work to address the impacts of the coronavirus pandemic. I would like to echo the words of Under Secretary Lord and offer my sincere thank you to our industry stakeholders who have helped make these efforts possible, and to my dedicated industrial policy team for their boundless energy.

I will now turn over the floor to my friend and colleague Kim Herrington, director of Defense Pricing and Contracting.

DIRECTOR OF PRICING AND CONTRACTING KIM HERRINGTON: Thank you, Jen.

And good morning. Defense Pricing and Contracting has issued a number of policy memos directed to the contracting workforce to quickly address issues and concerns related to the defense industrial base.

Based on the DHS direction identifying the defense industrial base as critical infrastructure, and in conjunction with Ms. Lord's memo to industry, DPC issued a policy memo to their contracting workforce, instructing them to advise their contractors who qualify as critical infrastructure to continue to work and use the DHS and DOD documentation as the basis to do so.

We also allowed the heads of contracting activities and program executive officers flexibility to identify specific companies and contracts that are deemed to be critical.

As has been mentioned, we also issued a deviation to our contracting regulations that raises the progress payment rates for large businesses from 80 percent to 90 percent, and for small businesses from 90 percent to 95 percent. This will provide additional and immediate cash flow to industry once incorporated into the contract.

We have coordinated with the comptroller's office to ensure the Defense Finance and Accounting Service is continuing to pay in a timely manner, and with the services and the Defense Contract Management Agency to ensure contracting officers and representatives will be available to receive and accept products, approve invoices and also to work toward accelerating payments.

We also issued direction to the contracting workforce to be as flexible as possible to allow contractors to also telework when it does not impact the mission. This will allow those companies to continue to work and get paid.

Lastly, we are pushing through relevant regulation and deregulation in the FAR and DFARS that can assist industries' liquidity and efficiency. Thank you.

STAFF: Okay, we're going to start in the room. We're going to start with Tom.

Q: Ms. Lord, if you could answer this question. I mean, as we all know, the governors, the mayors desperately need the PPE, the masks, the gloves, the ventilators, the test kits. Ford and GE apparently said that they can get ventilators up and running by June.

If you could talk about some of these products that are needed, and can you move faster than June? Governor Cuomo says that, "We need this stuff now."

MS. LORD: So what we are doing is using this Joint Acquisition Task Force to be the group that takes in all the demand signals from HHS and FEMA and then goes and looks at the resources that we have to begin to manufacture.

So, as you said, we have some JVs (Joint Ventures) that have been formed, we have some other business relationships that are being formed. We are working with those groups to see how quickly they can stand up. And as soon as we have good data we will get that through Mike back to you.

Our objective is to move forward as quickly and responsibly as possible. We think setting up the organization embedded within FEMA and HHS will enhance communications. Also having a single point feeding into the rest of DOD acquisition will also be helpful.

So we will strive to do everything we can before June, but I have no data to address that now. But we will get back.

Q: Are you confident from talking to industry groups that you can move faster?

MS. LORD: Yes.

Q: (inaudible) of these products that are --

MS. LORD: Yes, there are many products that we can move very quickly on.

There are great ideas coming out, from 3D printing to other things. I'm looking at alternative materials for N95 masks versus what has been traditionally been used.

There are many, many good ideas. Our job is to look at those that are most actionable that will give us the highest volume and work through those.

Q: And lastly on the test kits, because those are desperately needed to get the universe of how many people are infected, any sense from the industry how quickly they can move on the test kits?

MS. LORD: We have one of those that is worked up through the White House using DPA from Secretary Azar. We'll get back to you on the timing on that. But we are moving very quickly on that; a lot of science being applied.

STAFF: Okay, we're going to go to the phones. Mike Stone, are you there?

Q: Yes, right here. Thank you. Appreciate it.

You just mentioned DPA, Secretary Lord, so is DPA actively being used to prioritize anything at the moment?

MS. LORD: So, DPA is being used, both Title 1 and 3, within the Department of Defense. I think as you know, it gives us the ability to provide loans, grants, provide long-lead funding.

We are doing that for critical fragility, as we call it, within the defense industrial base.

Health and Human Services has Title 1 and, I think, soon to be Title 3 -- although that has not yet been codified -- authority for medical resources. So we have our people onsite with HHS and FEMA advising them how to use those authorities. We anticipate seeing more of those implemented very shortly once Health and Human Services and FEMA does that, they will give our acquisition task force the demand signal, and we will go out and help them place those orders.

STAFF: Mike, did you get that?

Q: Yes, I sure did.

Confused -- sorry. I'm confused. The president said that he hasn't used DPA and you guys are, so can you just square that for me on -- on where you guys are able to use it but the president says that it hasn't been used?

MS. LORD: Well, DPA is a broad authority and DOD has had DPA authority for the defense lines of effort, if you will.

What he -- I don't want to speak for the president, but I think he is talking about broadly using DPA to, in fact, take over private industry. That's what he has clearly said he is not going to do.

The White House is very judiciously looking through what segments of DPA they will use. There are some authorities already out there. We can get back to you, Mike, with a succinct statement on that so it's very clear to you.

And we will continue to keep you apprised because I see this evolving over the week. But I think this is the difference between surgical applications versus broad-based enactment.

STAFF: We're going to go to Tony Capaccio. Tony, are you on the line?

Q: I am, sir. Thanks for the opportunity.

Ms. Lord, two quick questions.

Can you address some of the criticism of the increase of -- from 80 percent to 90 percent of large prime progress payments? What is the money going to be used for? What do you want the money to be used for? And what mechanisms are in place to prevent abuse of those payments?

And secondly, on the F-35 --

MS. LORD: Tony, hold on. Tony, Tony, wait a second. Let's take one at a time here.

Initially I said that we are committed to keeping our defense industrial base in place to support the warfighter. I'm going to ask Kim Herrington to give you a few more specifics on what we actually did in terms of moving the progress payment amounts.

Q: Thank you.

MR. HERRINGTON: Hi, Tony.

So, progress payments are paid on contract for work that's already been performed. So those costs have already been incurred and what we are doing is just increasing the cash back to the companies by raising the rate. So, it's not for anything new, it's for work that they're already performing on the contract. They've incurred those costs previously.

For large businesses we are reimbursing at a rate 80 percent; now we're reimbursing at a rate of 90 percent prior to delivery.

So, so there's nothing new in the sense of different applications of the funds; it's to reimburse the contractors for the work that they've already done.

As far as monitoring, the same processes that are already in place to verify and validate the invoices are continuing to be done.

Q: Okay, fair enough.

And on F-35, the JPO this morning said that Edwards has suspended flight operations and test operations in general.

Ms. Lord, can you give a little bit of clarity on that? And what impact might that have on the full-rate production decision that you've established as March 21 as a threshold date?

MS. LORD: So, Tony, as you know, the F-35 is a large program that is spread many places around the globe.

I will say that today F-35 Joint Strike Fighter is performing very, very well operationally. Marine Corps, Navy, Air Force are using the aircraft to great effect, along with our partners and FMS customers.

We have a number of areas where we have to pause across the department in terms of what we're doing either in research and development or in testing or operations.

What I - I am in daily contact with General Fick at least once a day. The JPO is managing this well. What I would like to do is ask Mike to coordinate with P.A. at the Joint Program Office and we will get back to you later today with areas where we are pausing.

Right now, I can't comment on the full-rate production decision. What I will tell you is we are moving forward while we work on COVID-19. We still have normal operations going, executing on our programs.

Because, just like your question about progress payments, I want to emphasize that we are looking at the totality of what we do with the acquisition workforce -- supporting the warfighter, making sure that both readiness and modernization are underway, all the way back to making sure that we have a secure, safe, and resilient defense industrial base -- so, close communication, keeping cash flowing, keeping operations going with minor pauses in a variety of places.

Q: Okay, thank you and stay safe -- wash your hands, stay safe.

STAFF: Thanks, Tony, you too.

We're going to go back into the room. Barbara Starr?

Q: Ms. Lord, I'm really looking for some specifics here, if you can. What is your -- the Department's estimate right now about how many workers in your defense industrial base and defense companies in this country are currently not working because of this, who are out of work?

I guess I don't understand how -- I need to understand better how this is directly affecting the defense industrial base. So how many are out of work?

What is your concern in any programs that will be affected in terms of not being able to deliver spare parts on time, to keep operations going, where you see the biggest jeopardy to acquisition in ongoing programs?

And you mentioned that you had some concern that the defense industrial base not be vulnerable to adversarial capital. Do you have concerns that as these companies have these layoffs and their perceived value drops, their stock prices drop this could open the door to foreign investors trying to take them over? What are you doing to stop that?

But most importantly, how many defense workers are out of -- out of work in this country?

MS. LORD: I do not have an actual number for you here today. I can go back and work with DCMA and get you the best estimate in the next couple of hours that we have. I will say that the concern --

Q: Could you -- thank you, I would greatly appreciate that. Do --

(CROSSTALK)

MS. LORD: I'd say the bulk -- I will say that the bulk of defense industry is working today. We've had a few specific issues, such as Boeing, where they had to shut down an operation. We have a few military operations that you had cited where we're having to pause.

But I will tell you, the vast majority are working. They do want to work. CEOs are reaching out to us to ensure that they can continue operations. That's why I put out my memos, so that we didn't have local law enforcement stopping people on the way to work.

We have had incredible collaboration from governors. I spoke with Governor Tom Wolf from Pennsylvania last Friday to ensure that some Boeing and BAE facilities could keep up and running in the state of Pennsylvania.

We were having particular concerns in the state of California. Last Friday, I talked to the chief of staff of the governor of California. Last Friday --

Q: Where in California, did you have concerns?

MS. LORD: Sunnyvale, Carlsbad, those areas. So we continue to work there, where there is sometimes a lack of clarity reading governor’s orders and what is essential, what is not, what support there is. So we are using our Office of Economic Adjustment who has a very strong communication path with the Governors Association to make sure they understand where we are.

So the vast majority is working. We want industry to know that our demand signal is still there. We want them to adhere to all the CDC guidelines. We are not asking anyone to do anything differently than all of us are doing with social distancing, quarantining, and so forth.

Q: Two very quick follow-ups. The foreign investment question, and are you convinced that it's safe for all these people to go to work?

MS. LORD: The foreign investment issue is something that I have been tracking for the last couple years. There is no question that we have adversarial capital coming into our markets for nefarious means. So what we are doing is on the defense side looking at CFIUS, on the offensive side we're using our trusted capital mechanisms.

What I can say in terms of safety in the workplace is that we are working very, very closely with our industry partners to make sure they have all the information available that the government is pushing out as to what safe operations are.

Q: Coronavirus -- I'll be very quick. My question actually is, in the coronavirus situation, are there specific concerns that you see foreign capital making a move?

MS. LORD: Well, I think it presents a greater attack surface, if you will, as there is uncertainty especially with small businesses as to whether their contracts will continue. So we want to basically mitigate that uncertainty. That's why we are being forward leaning and over-communicating, probably, to say we are open, we want them to be open.

We want the defense industrial base to be safe, but we want them to know that we are open and we're hoping they are making every effort to be open as well.

STAFF: Okay. Doug Cameron, are you on the line?

Q: I am. Let me get myself off speaker and everything. Can you hear me okay?

MS. LORD: Yes. Doug, you might want to speak up just a little bit more.

Q: Okay, (inaudible) the room.

Secretary Lord, we're kind of, you know, 45 minutes into this call and we haven't heard a direct example of something that the defense manufacturing base, with its continued funding and the heat maps and the task forces, is actually able to do -- or is doing, rather, in terms of working towards or even producing essential supplies. You talked before about joint ventures. Maybe you could -- you could expand a little bit with some concrete examples of what all these task forces have actually produced.

MS. LORD: Okay, so just a point of clarification, Doug, we obviously have our own strategic reserves. And after we at DOD make sure we have taken care of our service members, we have begun to ship N95 masks, for instance, out to support the rest of the interagency and we will backfill with those.

We are also making sure that ventilators -- for instance, a member of our staff actually got together with on one of the automotive companies and one of the ventilator manufacturers and helped them craft a business arrangement, and basically facilitated the exchange of technical information to help them get up and going, thereby providing a template.

I will tell you that this is all very, very real time. We wanted to come and give you information about what our daily cadence is and what we're doing.

In the next two or three days we will be able to give you examples, but I will tell you that I am fielding calls from CEOs, from other individuals. We -- our first action was to make sure that we have a system in place. If we do not have a system with clear roles and responsibilities, how information flows, how money flows, how we are going to really leverage our adapted acquisition framework, we will descend into a very uncoordinated state. So my first effort is to set up the structure and governance to make sure OSD, the agencies, and the services are aligned, then the deal flow can begin. There's an enormous amount of activity.

I will commit, within 48 hours Mike Andrews will get back with specific examples, but I do not want to give out misinformation, and I want to make sure we're totally coordinated in what we're doing.

Q. Okay, but with all respect, I mean, you mentioned an automaker, but -- and -- and you helped facilitate the process and -- there. But again, you have this huge defense industrial base, and frankly, our readers will wonder, why can you mention an automaker and not a single member of the defense industrial base? (inaudible) --

MS. LORD: We have two different things going on. We have our defense industrial base, who we are working through with DPA Title 3 and Jen can give us a couple examples on things we're doing with fragility. Then separate and distinct is our support to HHS and FEMA on COVID-19. That's where we're just getting these deals put together and advising.

So there are two separate but well-coordinated activities leveraging the capacity and the capability of DOD. One is what I will call our standard work, where we continue to work with the industrial base to allow them to move forward crisply, that’s what the cash flow comments are about, but there is some DPA Title 3 activity that Jen can address. Separate and distinct, yet in coordination is the work we are doing to leverage what we have for acquisition capability to Health and Human Services and FEMA. They have to give us the demand signal. Once we get clarity on the demand signal we will execute.

If you recall, FEMA just got the lead role on Friday. This weekend Admiral Polowczyk from Joint Staff was detailed over to be part of them over the weekend. We stood up a team. So this is all very new. I know COVID has been here for several weeks, but this coordination at this level of detail just started on Friday.

So Jen, do you want to talk about the defense industrial base, our presidential determinations, and how we're putting DPA Title 3 money to work within the defense industrial base for our defense needs?

MS. SANTOS: Yes, ma'am. So yes, so thank you.

So the defense industrial base leverages DPA Title 3. DPA Title 3, Defense Production Act, allows for infusion of funding into companies to make sure they can meet the demand signal. In the N95 mask example, HHS issued a contract over the weekend to five companies. Those five companies now are working with us to ensure we can help them meet their demand signal.

Specific examples over the past calendar year -- so the president signed out 14 presidential determinations over 2019. One of them I'll give you a specific example on is the small UAS. So in June of last year, small UAS identified a defense industrial base, and so we've used that authority to create a United States industrial base command -- demand signal to build up manufacturing in the United States. So that -- that is how Defense Production Act Title 3 has been leveraged.

In coordination with HHS, we have been working very closely with them. My deputy, Scott Baum, went over there on Sunday and started educating HHS on how to use the Defense Prioritization and Allocation system, which was the first executive order the president signed out, and then also how to leverage the Defense Production Act Title 3 authorities to expand the industrial base to meet the demand signal the nation requires right now.

STAFF: Okay, Doug. We're going to move on here. We're going back into the room. Jennifer with Fox.

Q: Ms. Lord, you're in charge of acquisition and procurement. There was an execute order issued by the Joint Chiefs on February 1st, suggesting that a pandemic is coming. What did you do to begin stockpiling masks, protective equipment, PPE and ventilators at that time? Can you take us back to when you started, and why there isn't a greater stockpile in the U.S. military right now?

MS. LORD: There is actually a very significant stockpile in the U.S. military, which we can get back to you with. What we did was first assess the stockpile, and then what we have done is distributed some of those for DOD use. We have also made both masks and ventilators available outside of DOD. There are, I believe, 200 ventilators. We can check on that. They're slightly different than the ventilators used in a typical civilian hospital, but with direction they can be used, so DHA has worked on that.

DLA has been in coordination with the interagency on what our stockpiles are, and we have moved some of our materials, and then we are backfilling them. So we can get back to you with the exact numbers and examples, but things are moving forward.

Q: So I believe it was 2,000 ventilators that you had. And did you start buying more ventilators. Two thousand is not going to solve the current crisis.

MS. LORD: Correct, I understand. We are working on procuring more ventilators right now, and I think one of the things we might have talked about a little bit earlier is the fact we have multiple companies that are standing up capability to do that right now. And in fact, we can get back with who those are. I don't particularly want to throw out a lot of company names when we have not told them that we are going to release them to the general public. We are still working through business arrangement. Everyone's very, very committed.

So I would characterize this as all in. There's an enormous amount of work going on. We need to quantify that and get back to you with that.

Q: Its six weeks later. February 1st was when the exord went out. It's hard to understand why this is just beginning right now.

MS. LORD: I think what you are seeing is its just beginning in an aggregated form. There were a lot of different efforts going on throughout the services, throughout the agencies, within DOD and the other agencies. What you are just hearing now is that it is an all-of-government effort being coordinated in one place.

The reason we're doing that is to be able to give you the data, to be able to give you the specifics, which have been difficult to give you up to this point in time.

We just started standing up capability on Friday. We, real-time, are having meetings constantly. So I will commit to you within the next 48 hours, we will get back with details on that.

STAFF: Okay, we're going to go to Katrina?

Q: Yes, thanks so much.

Just to specify, can you let us know if you've signed no deals yet in response to the coronavirus pandemic since Friday -- or if you have got any deals, could you give us a number? And could you give us the value of economic incentives that you are hoping to deploy under Title 3?

And I've got a follow-up.

MS. LORD: So I can't give you a specific number of deals, but I will tell you there have been deals done. So we will take that and get back to you with specifics. Again, I want to be respectful of the companies that we are doing those with, and make sure that everyone is ready for us to go public with that for a number of reasons.

And the second part of your question was that you already said -- I can't recall.

Q: Economic incentives.

MS. LORD: Oh, economic incentives. I will tell you that I was on the phone -- I was on the Hill on Friday morning and on the phone all weekend, yesterday with both members as well as staffers, as was the comptroller here, the Secretary of Defense, the deputy secretary of defense, working through the White House and OMB, working on exactly what those economic incentives are.

There are a lot of moving parts. There's this very large bill that's about to be voted on, then there will be a follow-on appropriation. We are not sure exactly what the numbers are that are going to go into the final bill, but they will be significant.

Q: Thank you. And my follow-up is, would you in any way consider using the Defense Production Act to start building medicine, manufacturing plants for the long term, to wean the U.S. off Chinese supplies?

MS. LORD: Absolutely. Everything is on the table. We are looking at short-term, using immediate capacity and capability that exists and then augmenting manufacturing sites, research sites that exist right now.

But this is giving us the opportunity to really focus strategically on this critical segment. So yes, we are working short-term and we are working long-term. And that's in conjunction with the services. Especially the Army has enormous capability relative to medical research.

STAFF: Okay, we're going to have to close out. I'm going to give Tom one last question.

Q: A couple of quick ones. You said you want to reduce reliance on foreign sources. I mean, in the short term, wouldn't you want to be desperately reaching out to any source you can for PPE, number one? And also --

MS. LORD: Let me -- I would like to answer that. Absolutely, we are looking everywhere. However, we know that there's more fragility associated with foreign resources. So when we find ourselves dependent on a foreign resource that we cannot reach for a specific amount of time, we want to have the resiliency to be able to deal with that here domestically.

Q: Also I think this is what Jen said, that HHS and FEMA have to give you folks demand signals, exactly what they need. I mean, don't we know that already or is that still uncertain?

MS. LORD: They have an enormous number of demand signals. What they have to do is prioritize and then allocate and distribute.

Q: Do we have any sense of their priority now?

MS. LORD: Right now, we have been primarily focused on ventilators and respirators, but there's also test kits that have been looked at, swabs and other things. So I want to be careful, that I'm not on the ground there and this is changing hour by hour. We have that information, I just don't have it right here.

Q: Could I just ask a clarification of Jennifer’s question really quick? Since all of this began, with the planning order and all of that, has the Department of Defense put out a single contract for additional ventilators?

MS. LORD: I will check. I believe we have. I will have to check on that, we have a lot of --

MR. HERRINGTON: I'll take that.

MS. LORD: -- contracts going out, I know for masks. We have worked on a variety of different ventilators. We actually have contracts in place, it's a question of whether or not the supplier can deliver against them.

So I want to be careful here. We have a lot of long-term contracts --

Q: You have standing contracts for ventilators?

MS. LORD: We have standing contracts for most of our equipment that we release against. So it's a question of what the ability is to fill those contracts. I just want to be careful and precise when I ask -- when I answer your questions. We have many long-term contracts that we release task orders or new quantities.

Q: If you would take the question, have you put out any contracts or are you about to, or standing contracts -- take it every which way -- for ventilators?

MS. LORD: DHA is working on that. I don't have the data here, but I can get back to you today on that. Absolutely.

STAFF: I'm sorry, I'm sorry --

(CROSSTALK)

STAFF: No, ma'am, I'm sorry, I've got to get her to a 10 o'clock. I am very sorry.

Do you have any closing remarks, ma'am?

MS. LORD: I just want to say that we are working very hard to make sure that we have a system to process all of this. I understand the concern with not having many numbers here. We didn't come this morning planning on giving numbers.

I commit to you, we will follow up on that because we have an enormous amount of disaggregated activity, great activity, going on. We now have the need because this is growing so exponentially, to make sure we have a system for aggregating that. And when we give you a number, it is a good number and we have all the data behind it for what will be the logical follow-on questions.

Thank you.

STAFF: Thank you.