Transcript

Undersecretary Of Defense (A&S) Ellen Lord Holds a Press Briefing on COVID-19 Response Efforts

April 30, 2020
Ellen M. Lord, Undersecretary Of Defense For Acquisition And Sustainment

STAFF:  Okay.  Good morning, ladies and gentlemen.  Thanks for being here this morning, those in person and those virtually, on the phone and watching online.

This morning, Undersecretary of Defense Ellen Lord is here to provide an update on how the department is supporting the interagency effort to partner with the defense industry to mitigate COVID-19 impacts.  She'll provide an opening statement, and then we will go into Q&A, using the list of reporters that I have in the room, as well as those dialed in.

Ma'am, over to you.

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

Good morning, ladies and gentlemen.  And we really appreciate you joining us today for an update on the department's continued efforts to mitigate impacts from COVID-19.

I want to start by offering my sincere – sincerest condolences to the families of the 27 we have lost at DOD to COVID-19.

As Secretary Esper has consistently said since January, our top priorities remain protecting our 3 million service members, their families and all of our government, civilian and defense contractor personnel, while continuing our national security missions and helping the American people confront this crisis.

Today, more than 60,000 service members, including 44,000 National Guardsmen, 5,000 Reservists, and 4,000 health care professionals, representing all components are currently deployed across the United States.  We honor their continued sacrifice and selfless service to protect the American people.

The department, particularly the Defense Logistics Agency, or DLA, is continuing to closely coordinate with the military services to understand requirements and priorities to protect the force.  Specifically to protect the force, DLA has procured over 5.9 million N95 respirator masks, 14.2 million non-medical and surgical masks, 92.2 million exam gloves, 2.4 million isolation and surgical gowns, and 8,000 ventilators.

Delivery of over 5 million non-medical cloth face coverings to our military services, combatant commands, U.S. Coast Guard and several federal agencies has begun.

The Defense Threat Reduction Agency, or DTRA, and the Joint Rapid Acquisition Cell, or the JRAC, continue to partner with the Joint Staff, TRANSCOM, and the Air Force to execute a joint urgent operational need to safely transport COVID-19 patients from overseas locations to the United States.  We are fully committed to the safety of our air crew, medical support staff, and patients during these missions.

Currently, the Air Force employs the Transportation Isolation System developed by DTRA during the Ebola outbreak in 2014, which allows eight or so patients to be safely transported.  The new technology will enable air transport of significantly more patients in isolation, bringing greater responsiveness to those in need.

DoD remains closely partnered with FEMA and HHS, providing almost $800 million in life-saving supplies and equipment to service members and federal agencies in the nation's whole-of-government approach to the coronavirus pandemic.

Moving to the defense industrial base, we continue to carefully and methodically track the state of the DIB through Defense Contract Management Agency, or DCMA, and DLA, who both produce daily reports documenting operational status.

Out of the 10,509 companies DCMA tracks, 93 are closed, down 13 from last week; with 141 companies having closed and reopened, up very significantly, 73 from last week's number of 68.  This is the first time we have seen reopening numbers larger than the number of closures.

Out of the 11,413 companies DLA tracks, 437 are closed, with 237 having closed and reopened, up almost 100 companies from last week. 

Domestically, while we have seen some minor improvements, we continue to see the greatest impacts in the aviation supply chain, shipbuilding, and small space launch.

Last week, I spoke about the impacts on the industrial base by several international pockets of closure.

On Mexico, while I won't provide any numbers, we have seen positive results.  I am thankful to our U.S. ambassador in Mexico, and to the government of Mexico, who has taken great strides to evaluate firms and their contribution to U.S. National Security requirements.

I have had ongoing conversations with our U.S. ambassador to Mexico, U.S. corporate CEOs, members of the House and Senate, as well as other officials in the State Department over the past two weeks to highlight key companies constraining our domestic defense supply chain in order to catalyze re-openings in Mexico.  We appreciate Mexico's ongoing positive response.

We're also watching India very closely.  India has mandated closure of businesses, which is impacting defense sector primes.  India is a major defense partner, and we hope they can all stay safe while transitioning back to an operational status.

Our acquisition and sustainment team remains focused on partnering with industry to maintain readiness and drive modernization.

Jen Santos and our industrial policy team continue to lead multiple industry calls every week with 18 industrial associations.  I am proud of the department's responsiveness in addressing defense industry concerns that are outlined during these calls.

Mr. Kim Herrington, director of defense pricing and contracting, has issued 22 Defense pricing and cost memos, aggressively responding to industry needs and impacts.  The memos include guidance for increased telecommuting, increased progress payment rates, acquisition timeline impacts, reimbursement for those prevented from working, and more.

An update on the $3 billion of increased cash flow due to increased progress payment rates:  This week, we processed over $1.2 billion in invoices at the higher progress payment rate.  We have spoken with each of our major prime companies and they have each confirmed their detailed plans to work with their supply chains to accelerate payments and to identify distressed companies and small businesses.

I want to particularly commend Lockheed Martin, who publicly committed to accelerating $450 million to their supply chain, again, focusing on distressed and small businesses who need it most.

The Department's Office of Small Business Programs continues to aggressively partner and engage.  Amy Murray's team hosted two business webinars earlier this month that focused on available relief efforts and cyber-security.  Yesterday, she held a foreign investment webinar attended by 300 companies to help inform small businesses about adversarial foreign investment, regulations in place to counter that capital, and the tools available to industry to help protect themselves.

We see positive results of the Small Business Administration's industry relief efforts.  Over $350 billion in allocated funds have been loaned to small businesses across the country.  And while we don't have the exact breakdown of business industries, I know that a significant portion went to companies in the defense sector and that we will continue to see innovation from this critical group of businesses.

As you know, an additional $310 billion in funds were released Monday morning as part of the small business bill.  I encourage our small defense businesses to reach out and apply, if needed.  If you are a small business who needs help, please reach out to Amy and our team.  She has personally helped connect multiple companies with banks willing to provide loans.

Lastly, on the DIB, we continue to assess the impact of a potential three-month slowdown to many programs due to COVID-19.  I intentionally use the words "slowdown" and "impact" and I am not saying the word “delay”, which carries a very different connotation.

I won't discuss any program specifically, but we have seen inefficiencies across many programs.  COVID-19 is temporarily shutting down defense manufacturing facilities and production lines, disrupting supply chains, and distressing the financial stability of the companies DOD relies on to protect the nation.

DOD continues to partner with industry to do everything possible to keep programs on schedule and to minimize the cost and schedule impacts.  This is obviously a dynamic situation and the overall impacts are being assessed on an ongoing basis.  I stress that we expect our defense industrial base to follow CDC guidelines for worker safety.

I remain very proud of DLA, DCMA, the Defense Threat Reduction Agency – DTRA, the Defense Acquisition University – DAU, and the Joint Acquisition Task Force, or JATF; and the entire Department's effort to support the whole-of-government and interagency battle against COVID-19. Whether in uniform or as civilians, we are all joined in the fight against COVID-19.

The JATF serves as our overarching framework for acquisition support to the whole-of-government efforts under the National Response Coordination Center, or NRCC, up to the White House – White House Task Force, led by the Vice President.

While HHS and FEMA have both the field infrastructure and medical knowledge to lead our nation's COVID-19 efforts, DOD brings the breadth and depth of acquisition expertise to underpin the interagency to contract and provide program management and industrial expansion for health and medical resources.

I want to give you insight into how the JATF is organized and focused.  Stacy Cummings, as the JATF director, works with all the service, agency, and joint staff JATF leads, and also has both functional and product leads.  The JATF product lines are ventilators, N95 masks, screening and diagnostics, PPE, pharmaceuticals, and syringes.  And the JATF functional leads are supply chain visibility, additive manufacturing, and the Industry Portal.

The Department and HHS have signed an interagency agreement that establishes a framework by which the DOD will provide acquisition assistance on behalf of HHS and their CARES Act authorities.  I'm excited to say that we are already working on our first project together and I look forward to expanding our partnership to deliver medical resources in support of our national mission.

To date, the Department has leveraged 8,000 contracting actions in response to COVID-19, totaling over $1.7 billion, and we anticipate reaching $2 billion by the end of this week. This includes $700 million in medical construction for the mobile military medical hospitals.  Medical equipment, lab equipment, and testing remain high priorities.

DLA remains an invaluable resource to HHS, FEMA, and the nation.  Since February 1st, DLA has executed 5,026 contract actions valued at $837 million, including $688 million directly supporting FEMA and HHS requirements.

An update on the 60 Battelle Memorial Institute Critical Care Decontamination Systems which allow medical professionals to reuse masks up to 20 times, reducing the nation's need for new inventory. 

Eight units are operational in the cities of New York, Columbus, Ohio, Boston, Chicago, and Tacoma, Edison, New Jersey, and New Haven, Connecticut.  Fourteen units are setting up and should be operational soon in cities from coast to coast including Miami, Denver, and Burbank, California.  The remaining units are being prioritized for delivery.

We have provided 20 million N95 masks to HHS and FEMA and all have been delivered to the states of California, Georgia, Florida, Illinois, Maryland, New York, New Jersey, Pennsylvania, Texas, and West Virginia.

With the USNS Comfort departing New York City, the department remains fully-committed to supporting New York City.  We continue to support New York City with doctors and nurses who are embedded and supporting 11 New York City hospitals.

DTRA is providing COVID-19 modeling support to DOD, interagency, and international partners.  Their modeling is focused on the rate of increase or decrease of the spread, status around DOD installations, impact on the DIB, and a two- to three-week future projection.  They have provided this analysis to combatant commanders and U.S. government interagency partners.  They are currently modeling specific nations in Europe based on a request from NATO.

The Pentagon's Chemical and Biological Defense Program, or CBDP, continues to play a key role in executing the DOD strategy for countering weapons of mass destruction, continues to support Army labs, Defense Health Agency, HHS and FEMA COVID-19 countermeasures like testing, vaccines, masks, mask filters, and screening machines.  This includes over $150 million of CBDP investment in diagnostics, vaccines, therapeutics, and modeling capabilities.

The department's DPA Title 3 investment in response to COVID-19 remains on increasing manufacturing capacity and throughput.  DOD continues to use DPA Title 3 for DIB resiliency and security, as we always have, as well as medical and health care resources with HHS and FEMA coordination. 

Last night we announced a $75.5 million Defense Production Act Title 3 contract with Puritan Medical Products, who will be able to double its output of swabs to 40 million per month starting in May.  Puritan is securing a facility in Pittsfield, Maine, where it will create a manufacturing facility.  Puritan will add 150 people to their current 500-person workforce to staff the new factory.  Puritan has already placed orders for material, parts are being machined, and 40 new machines needed to produce the swabs on order.

This investment is critical in allowing Americans to be tested and help reopen the economy.  The increased production will ensure the U.S. government gets dedicated, long-term industrial capacity to help meet the needs of the nation.  The current DPA Title 3 medical and health resources priorities and the critical DPA Title 3 defense sectors have not changed since I briefed you last.

In closing, the department continues to do everything we can to support our military members, their families, defense contractors and our fellow citizens.  I want to say a heartfelt thank you to both OMB and the NSC.  They have been instrumental in supporting department efforts which would not have been successful without their partnership.

I remain extremely proud of the selfless effort of the Department of Defense personnel who continue to do everything they can to help provide medical masks, test kits, medicine, and meals to support Americans' military, medical, emergency services and law enforcement professionals who are on the front lines and need them most.

I'd be very happy to answer your questions.  Thank you.

STAFF:  Thank you, ma'am.  We're going to start in the room.  Ma'am, over to you.

Q:  Okay.  Tara Copp with McClatchy.

Secretary Lord, the last time you were in here you talked about the 3 N95 contracts that have been signed for $133 million.  Today, besides the DOD's press release on it, there's no documentation that I can find on what types of units were sold, what price point was allowed for the government.  And I just bring this up as an example of, how are you going to provide accountability in the larger sense with so much money being spent in such a rapid fashion to make sure that these masks are actually delivered, that the government is getting a reasonable price point, and looking out for taxpayer money?

MS. LORD:  Okay, so just to clarify a point here, HHS had put several manufacturers on contract for N95 masks.  What the JATF did in supporting HHS and FEMA was to execute DPA Title 3 contracts to increase both the capacity and the throughput of three companies who already had contracts to manufacture the N95 masks. 

So we have absolute traceability as to the actual amount those companies were put on contract for.  They were 3M, Honeywell, and O&M Halyard.  And what we did was issue contracts that hold the companies accountable to a specific increase in mask manufacturing in a given amount of time.  So we had their baseline manufacturing capacity.  We had details on what exactly all the money they received through the Title 3 action was for, and we make sure they buy that equipment, do the facility improvements, perhaps train the workforce was part of some of that, I believe, and then we monitor to make sure that they have the output required by that contract.

Q:  But 3M makes masks that range in, you know, unit price from 86 cents, or maybe 60 cents a unit to as much as $3.  I mean, how is the taxpayer supposed to know which mask they're producing, and know that those masks are actually delivered to a location that needs them?

MS. LORD:  HHS has the contract for the manufacturing and FEMA does the distribution based on priority.  So I'm sure that HHS and FEMA could provide you that detail.

Q:  The documentation on those -- okay.

STAFF:  Okay, Tony Capaccio, going to you on the phone.

Q:  Hi there, Ms. Lord.  Can you hear me?

MS. LORD:  Yes, I can, Tony.

Q:  Hey, hey, two quick questions.  Under the DPA have you designated any programs under the -- as a DX category for priority – prioritization of components and delivery?

MS. LORD:  So there are probably two pieces to that answer, Tony.

For -- as you recall, there's an executive order that was issued in March that gives HHS the ability to rate contracts with DPAS ratings under DPA Title I.  HHS has moved out and put some DO ratings on contracts.  We have a process inside of DOD to work up through our system, and then reach out to HHS if we wanted to put a DO or DX rating on any medical or health care resources.  Up to this point in time we have not done so for either DO or DX ratings.

We continually look at DX ratings for our defense industrial base that we ourselves have the ability to do.  I am not aware of any recent DX ratings in terms of accelerating something for COVID that still is in the defense industrial base.

However, I know there are a number under discussion, but I will take an action, working with Mike to go back and just make sure that I'm giving you a current, accurate, and complete answer on that one.

Q:  Okay.  Working on progress payments, do you see the $3 billion, that you've already accelerated, do you see that increasing or is that going to be the ceiling?

MS. LORD:  Right now, we project $3 billion as the ceiling because we looked at outstanding contracts, we had about 1,400 of them that would receive progress payments.  If you recall, DCMA did a block change to all of those contracts and we approximate a $3 billion impact of most companies being moved from 80 to 90 percent in terms of progress payments and then of course small business going from 90 to 95.

We have already seen -- I think I quoted about $1.2 billion of that being invoiced and we think the balance will be in the next week or two.

Q:  Thank you.

STAFF:  We're going to go back in the room to Ryan Browne, CNN.

Q:  Hello, ma'am.  Thank you for doing this.

You mentioned a three-month slowdown projection -- potential slowdown as opposed to a delay.  What is driving the three-month assessment?  Is that the current rate of the pandemic spread or is that going to be reevaluated constantly?  What is kind of your methodology behind looking at a three-month period?

MS. LORD:  It was looking at what we had in our modeling and also what we were experiencing.  Again, we work at overlaying the geographic locations of our defense industrial base with where COVID outbreaks are.  So that was our best projection about a month ago.  We will continue to assess.

We have many companies that planned well and had resiliency that are working through this with minimal impact.  Others have more significant impact.  So we continue to look at that but it really is on a case-by-case basis.

At this point, we envision it being about three months for the most significant impact.  We are working very hard.  It's the reason obviously we are engaging with industry and the interagency to do everything we can to support our defense industrial base.

We think we're learning how to work in this new environment and get back up to rate, if you will, in areas where we didn't.  But right now, that is our best estimate.  And we are working obviously to minimize impacts.

Q:  Thank you.

STAFF:  We're going to go to the line.  Aaron Mehta, are you up?

Q:  Even I can make a 10 o'clock, come on.  Ma'am, appreciate you doing this.

(Laughter.)

I wanted to hit on something you mentioned the last time and also this time, both that you appreciate Lockheed's efforts to push money down in the supply chain.  Last time, you kind of specifically said we are hoping for similar public demands on some other major primes but that has not happened as far as I've seen.

Are you concerned that some of these companies aren't making these efforts and would you expect some of these companies to begin to publicly say what's the (inaudible) -- that money and how they're supporting the plan?

MS. LORD:  I believe that the major primes are flowing down.  They've committed, but I always like to trust yet verify.  So I encourage all of those companies to be as transparent and forthcoming as they can be because we have a responsibility to the taxpayer, as well as to the mid-tiers and the small companies, to make sure actions we take at the prime level do go down all the way through the chain.

However, I need to rely on CEOs of major primes to come forth with that data.

Q:  Do you feel those companies are being transparent with you and the American public about how that money is being spent?

MS. LORD:  I believe they are.

STAFF:  All right, we're going to go back in the room to Lucas with Fox.

Q:  Secretary Lord, how much longer are you going to be cranking out the masks?

MS. LORD:  Cranking -- how much longer are we going to be cranking out the masks?  For a very long time because we have a couple of objectives here -- we have more than a couple, actually, we have multiple.

One, we need to take care of the demand we have right now.  That started with medical personnel but we need the country to get back to work and that is going to require some PPE that includes masks.  So number one, we have to bridge beyond non-medical personnel.  PPE and masks are very significant.

We then have to refill the national stockpile -- very, very important to us.

And then we need to look forward to what the data is telling us, that there may well be another significant outbreak this fall.  We want to be prepared for that.

And then finally, we need to be prepared as a nation to look at any further pandemics that might come along.  So we see this as an ongoing issue, both within the Defense Department because we need to not only support the nation with everything we're doing with HHS and FEMA but we have our primary mission here of national security and we have to be ready to go ahead and do that.

Q:  So you see the Pentagon battling COVID for the next six months or a year?

MS. LORD:  I think the nation is going to be battling COVID for six months or a year.  And I again look to DOD as the support in times of national emergency, to FEMA and HHS when it's a pandemic, and again they have the infrastructure, they have the overall mission, yet we have a capability to surge our 140,000 acquisition professionals to provide the contracting, the program management support, to really energize the medical industrial base.

And obviously we've learned that we've had fragility in it on a number of fronts.  We were overly dependent on foreign sources -- we still have the Air Bridge working to bring all kinds of medical resources back to the United States.

So we need to make sure that we have security and resiliency in our medical industrial base and we can help HHS to make sure that we have both the capacity and throughput that we need, not only now but in the future.

So the Defense Department can help with that.  We are there to support and provide our acquisition expertise but we will stand down once we do have the capacity, the capability, and the volume coming out of that industrial base for medical resources that we want to be robust and self-sustaining.

Q:  Finally, you spoke glowingly about Mexico earlier.  Would you like to see more manufacturing shift from China to Mexico?

MS. LORD:  What I would like to see is the U.S. have the capacity and through-put to take care of ourselves in times of need.  We, at this point, have some national security issues with China.  I'm not going to comment on other countries.  But I think we have found that our dependency on China is more than we need it to be.

Q:  And do the laws allow --

STAFF:  We're going to go to Courtney Kube because Lucas is going to ask eight questions.  So, Courtney, over to you.

Q:  Hey, it's Courtney Kube.

I have to apologize in advance because my kids have been screaming during this entire briefing, so if you've addressed this already, just tell me and I'll look back at the transcript.

But yesterday Adam Smith, the chairman of House Armed Services, said that he believes that DOD needs to be doing more to take money that's in the DOD budget already and provide it for making more PPE.

So what I'm curious, Secretary Lord, is there some way to do that, to take unobligated funds and use it in some way to make more PPE?  And do you think DOD -- are there areas where DOD can be doing more in producing PPE? 

Thanks.  If you've addressed, it's all right, ignore me.

MS. LORD:  So, certainly, Courtney.

Well, I think your question seems to focus particularly on PPE and the comments that Chairman Smith made yesterday about taking some of DOD's budget and perhaps redirecting it towards needs for COVID.

We do have constraints in terms of what we can do in terms of reprogramming.  Congress is fairly strict about appropriating money with specific authorizations for its use.

So, that being said, there is the potential potentially to use some of our O&M money for that.  However, we do have pretty significant needs in terms of readiness and modernization in order to perform our primary mission, which is national security.

So we will look at that, however; I am not sure that we have the fiscal flexibility to encompass all of the new demands we have and the inefficiencies that we are seeing and perhaps may see in the future.  But I respect what Chairman Smith is saying and we will obviously do our best.

However, I will say that we continue to look at gaps in funding we have for specific issues.  We continue to work with OMB on that, and we will continue to talk to Congress about what we assess as our needs to really carry out our missions.

Q:  Thank you.

STAFF:  Okay, we're going to go to Tony Bertuca.

Q:  Hello, ma'am.  Thank you for being with us.

Could you please define for us in greater detail the difference between what you view a slowdown is and what a delay is?

MS. LORD:  What's the question, Tony, the difference between a slowdown and a delay?

Q:  Yes, the difference between a slowdown and a delay.

MS. LORD:  Yes.

So, what we are seeing as a result of illness or inability to travel, we see efficiency issues.  So we are not physically able to get contractors, sometimes, overseas to conduct inspections of aircraft for instance.  So we have somewhat of a slowdown in our ability to accomplish tasks.  We are finding work-arounds for that versus just saying we're delaying doing something.

We do not look at delaying things.  We are looking at working through the issues, which sometimes cannot be executed with the same efficiency we previously had.

Q:  And when we last asked you --

(CROSSTALK)

MS. LORD:  -- hear you, if you could get close to your microphone --

Q:  Yeah, sorry about that.  When we last asked you about this, you mentioned that the department said, you know, it's going to cost you something to figure out how to mitigate the slowdowns, how to reimburse contractors in accordance with 3610.

I was wondering if you had any more detail on that, or had a sense of, you know, when you would try to understand how much the department would have to redirect to take care of that.

MS. LORD:  So we are working through the mechanics of tracing those inefficiencies with different contractors.  There is a lot of financial detail here in terms of different cost accounting systems and how labor is accounted for, whether it be direct or indirect, how overhead is spread, what is typically taken in terms of sick leave and so forth.

We are working through all of that now so that we have the transparency in terms of cost accounting, and then beginning to work on a contract by contract basis, what those COVID-related inefficiencies were.  So we are still in the methodology of how to do that.  We've done some calculations of a worst case, we talked about that last time.

So we got together here, so what we are doing now is talking with OMB and getting ready to talk to Congress about that.  But I do not have any actuals yet to share with you.

STAFF:  We're going to go to Marcus.  Marcus, are you there?

Q:  Yeah, sorry, Tony talked over me.  Thanks again for doing this.

Just in the last two weeks, there have been companies have been all reporting earnings.  You're really starting to see the impact of COVID-19 throughout them.  As you mentioned, the aerospace companies are, you know, disproportionately hit than, say, a pure defense company.

Are there any specific areas that have stood out to you and your staff in over these past two weeks that have come out in these earnings reports?  And are there any additional areas in which that has come out, that you might be taking any type of action?

MS. LORD:  So we are looking at the earnings reports, but that's a little bit looking in the rearview mirror.  What we are doing is conducting industry calls, three to five times a week.  I am talking to CEOs, I am talking to members of Congress.

We have our DCMA reps, which, frankly, is my best intelligence.  We have individually – we have individuals located both domestically and internationally who report back every day.  And every morning, I have a call with key members of my staff.  We include the services a couple times a week on that, and I literally get daily updates on what our DCMA individuals are seeing.

And typically, the most problematical areas we have now are some of the smaller manufacturers who maybe, from a dollar volume, don't do huge numbers.  But they are providing critical components across aircraft and naval sort of applications.  That's where my biggest concern is, sort of the weakest link in the system.  So that's where we're really focused on trying to bolster.

I am concerned that some of the smaller companies might end up with some significant financial fragility, so we are not only working in the interagency to identify everything that the U.S. government has in terms of resources, but we are again looking back at our trusted capital methodology and coming up with some ways that we think are pretty creative, that we might again bring capital providers together with companies who are working in the areas that are critical to the Department of Defense.

So, again, we're trying to develop these ecosystems to get those companies that have critical technology, talent, and facilities, together with those investors, whether they be venture capitalists or family foundations or whoever they might be, to bring the point of need to the point of relief, if you will, to help us through this.

Q:  Really quick follow, are you expecting any increased M&A as companies may be devalued throughout this period?

MS. LORD:  What I am concerned about is nefarious M&A practices.  We have talked a lot with other nations, particularly in Europe, and we see a lot of shell companies coming in where the beneficial owner ends up being one of our adversaries.  I'm particularly concerned about that.  We are talking to the Hill about strengthening some of our CFIUS legislation so that we have the statutory tools to intervene there.

I think we have to, regardless of the volume of M&A right now, we have to be very, very careful about the focused efforts some of our adversaries have to really undergo sort of economic warfare with us, which has been going on for some time.

STAFF:  We're going to go to Lee Hudson?

Q:  Hi, can you hear me?

MS. LORD:  Yes, Lee.  Good morning.

Q:  Oh, great, good morning.  Thanks for doing this.  Could you walk us through how the defense-industrial base companies got to the point of having more reopens than close because of COVID-19?  Is this because of state support?

MS. LORD:  I think its multiple reasons.  One is understanding what state regulations are, and then I know the Governors Association and individual governors have worked very closely with us, often through their congressional members, to understand what resources they have and what safe operations look like.

But I think a lot of this is actually looking at geographic locations of companies.  And obviously, certain parts of the country have peaked in terms of cases, and as a geographic region gets healthier, so does the industrial base.

But also, reopening isn't often as easy as just flipping the light switches on.  Often, there are inspections to be done, local and state certifications, if you will.  So it's working through some of that.

I think all the local and state governments, just as the federal government has learned, as we've gone along, and their processes become more effective and efficient.  We also, I think, see companies knowing where to go for support in order to work their way through the systems.  

So I think part of it is a learning curve, both for government and in industry.  Part of it is just geographically where cases have peaked and where they're diminishing, and I think some of it is really good proactive action to make sure that the workforce is really complying with all the CDC regulations and perhaps by following very stringent procedures there mitigating the onset of illness as well.

STAFF:  Okay, we're going to go last question to Doug Cameron.  Doug, are you there?

Q:  I am here, if you can hear me okay.

MS. LORD:  Good morning, Doug.

Q:  Splendid.  All right, Ellen, thank you again for doing this.

Two really basic ones, if we can finish off with.  My obsession with the Treasury loan program, which applications are due tomorrow, given the various options, Ellen, you know, there are federal programs -- federal support programs for best-in-(inaudible) credit, the small business program, flow down from the primes.

What is your, sort of understanding -- or how can you guide me as to what that 17 billion is actually for, given you seem working on DX-rated stuff to qualify, according to the Treasury requirements we got last week.  So who's that $17 billion for?

MS. LORD:  Well, the Treasury Department decided it should be for DX-rated companies as well as top-secret facilities.  We have talked with them several times; they have reached out to us.  I am not sure companies with DX rated contracts are perhaps the ones that have the most critical needs because of their supply chain is responding to them because of that DPAS rating.  We also typically do not reveal who top-secret facilities are, so that could be somewhat problematical.

What Treasury is very open to, is how they need to expand this.  We are in an ongoing dialogue with them; they've had a little less than 20 companies reach out to date.  We are talking to them about those companies.  They have also said that DOD could indicate companies that we think would be appropriate for that $17 billion.

So the challenge is that this $17 billion worth of loans comes with some fairly invasive kind of riders on it, and I think companies have to think very carefully about whether that makes good business sense for them.

Now, for public companies, it may not be as interesting as for private companies.  So that's one of the differentiators I see, but we are very much in a learning mode on this and Secretary Mnuchin's team has been very open to ideas and discussions.  So we actually have an industrial business council meeting tomorrow, where OSD convenes the services and the agencies, and we talk about a number of issues.  This $17 billion Treasury loan is on the agenda tomorrow to talk about.  And we are going to go back to Treasury with a list of recommendations.

So, I'm hoping that early next week, between the Treasury Department and the Department of Defense, we can come back with a little bit more fidelity to the defense industrial base to better identify who might most benefit from this particular money.

Q:  But how have we got to this stage where, you know, applications are due from 3 o’clock tomorrow, and you're going to have a meeting tomorrow about who actually should qualify for this.  And where the, not disagreement, but ongoing dialogue, as you would say, about who would qualify.

So, basically this is going to get pushed back, which would also push for saying when anyone might get the money.

MS. LORD:  Well, I'm not so sure about that.  Again, this is a Treasury Department program DOD is supporting.  We are giving advice and support to Treasury.  It is up to Treasury.  I'm telling you what they had as of yesterday.  I'm not sure what has transpired since then and I cannot speak for them.  But we want to support Treasury to make this transparent to our defense industrial base, as well as help as much as we can.

Q:  That's brilliant.  Thank you so much.

STAFF:  Okay.  So that's all the time we have.  Ma'am, any closing remarks?

MS. LORD:  I just appreciate media taking the time to listen to our message and we will continue to push out information and data as we have it.  So thank you very much, and be well.

STAFF:  Thanks for everybody for being here.  Take care.