WASHINGTON — More than 60 percent of small companies in the defense supply chain are seeing disrupted cash flow, according to a new survey put forth from the National Defense Industrial Association.
“This survey shows how the defense lifeline runs through small business,” Hawk Carlisle, NDIA’s president and CEO, said in a statement. “These companies must survive if the defense industrial base is to remain the best in the world on other side of COVID-19.”
COVID-19 is a newly discovered coronavirus — a family of viruses, some of which cause disease in people and animals, named for crownlike spikes on their surfaces.
As of Friday, 458 small businesses had responded to the survey, which will remain open through April 10. Fifty-five percent of respondents have less than $5 million in annual revenue, and 70 percent have less than 50 employees.
Sixty-two percent of the respondents have seen disrupted cash flow as a result of the economic downturn. Primarily, those have come as cuts to billable hours or delayed payments from prime contractors because of shutdowns or telework. A lack of telework options is also an issue for contractors.
Notably, 54 percent of respondents say they cannot work on a contract because they are currently under a shelter-in-place order.
And optimistically, 69 percent do not expect cost overruns on fixed-price contracts as a result of the coronavirus-related disruptions. Those that do expect such overruns predict them to be in the 10-20 percent range.
The results of the survey were delivered Friday to Ellen Lord, the undersecretary of defense for acquisition and sustainment. Speaking to reporters on Wednesday, Lord said she is closely watching the lower tier of the supply chain for weak spots that may appear.
Last week, the Defense Department announced new measures to increase progress payments out to both small and large companies to ensure they are able to keep work moving on schedule.
Aaron Mehta was deputy editor and senior Pentagon correspondent for Defense News, covering policy, strategy and acquisition at the highest levels of the Defense Department and its international partners.