Defense industrial base awaits vaccine mandate guidance that could determine layoffs, contract extensions

WASHINGTON — Though a federal mandate now requires contractors to be fully vaccinated against COVID-19 by early December, the defense industrial base has been left wondering what this means for its workers who refuse to get vaccinated: will there be mass firings at the end of the year, or is there a way to retain those skilled workers and leverage them in some other capacity?

The Biden administration announced Sept. 9 both federal employees and government contractors would have to be vaccinated by the end of the year: Nov. 22 for employees, Dec. 8 for contractors.

Wes Hallman, senior vice president of strategy and policy at the National Defense Industrial Association, told Defense News this week NDIA and other industry associations have been aggregating questions and concerns from their members and sharing them with Pentagon and White House leadership, ahead of implementation guidance expected later this month.

The White House has not released many answers yet, he said, and those they have provided are focused on the “overarching goals.”

“When we were talking about, ‘Hey, the presidential order carves out these things. What about those things? How is it going to be done?’ And then they would come back: the goal is to get as many people vaccinated as possible. Guidance will reflect that,” he said. “So it is 100 percent about getting the maximum number of folks vaccinated, and they are using what tools they have to make that happen.”

One of the biggest concerns relayed to NDIA is the impact on small businesses and whether they might receive any exemptions.

“The smaller the company is, the more impactful losing an employee will be,” Hallman said. “And so we kind of made that point where, for some companies, losing five or six folks is a statistic because they have thousands of employees.”

“Losing even one employee at a small business, especially where they’re deemed as a key personnel on whatever contract they’re on, means that they’re going to have a real challenge delivering on that contract, performing on that contract,” he said.

NDIA said it has relayed that to the White House and requested that, “especially in those cases, but also in large primes, depending on how many people they lose and where they lose them, et cetera — that there be equitable adjustments given on these contracts for time and cost because this is at no fault of the company that this [vaccination requirement] is being put into these contracts.

“This is the government’s choice to do it, so there needs to be an equitable adjustment when it affects the company’s ability to perform on contract, whether that be on time or cost,” Hallman added.

Asked whether the Pentagon and White House seem to be looking for ways to avoid mass resignations or firings this winter, or simply looking at how to mitigate the impact, Hallman said it’s the latter.

“It’s going to have real impact if we lose people because, unlike some other industries, these are highly skilled jobs and many of them hold security clearances, and those two things combined where you already have a labor shortage that’s been noted in all kinds of press, that’s going to be hard to replace,” he said.

Hallman said NDIA member companies have begun to think about loopholes to avoid firing unvaccinated employees. If the Defense Department mandates all employees on a particular contract be vaccinated, perhaps unvaccinated workers could be moved to another program or to a position that indirectly supports defense projects.

Hallman said the White House is working just as hard to close these loopholes.

“The goal of this is to get the maximum number of people vaccinated. So where people are speculating about loopholes, I will say there are people that are making these policies [who are working] on how to close those,” he said. “That includes, if you’re working on project X instead of Y, but you’re still working in the same location as a person working on project Y, then because everybody in project Y has to be vaccinated, so do you.”

“The whole point of this is that this is where the White House sees that it has some levers it can pull,” he added.

Putting the mandate to the test

Hallman noted vaccine mandates in other industries have gone well: when United Airlines told its 67,000 U.S.-based employees to get vaccinated by Sept. 27 or quit, more than 99 percent complied, some small number were granted waivers, and ultimately only 593 refused to comply with the policy and faced separation, according to media reports.

Still, many of the biggest shipbuilders in the U.S. are hovering around the 50-percent mark.

Huntington Ingalls Industries, which owns Ingalls Shipbuilding in Mississippi and Newport News Shipbuilding in Virginia, has put out a series of memos explaining the situation to the workforce.

“While Huntington Ingalls Industries is a publicly traded company, we are a federal contractor because we provide services to our military and government customers through federal contracts. For that reason, we are bound by any regulations, policies and contractual provisions that apply to all federal contractors,” reads a Sept. 24 memo from HII President Mike Petters.

A subsequent Sept. 29 memo from HII Chief Operating Officer Chris Kastner noted that, to meet the Dec. 8 requirement, employees need to get their first shots by Oct. 27 if they go receive the Moderna vaccine — since the shot requires four weeks between doses. A person is not considered fully vaccinated until two weeks after the second shot.

Getting the Pfizer vaccine would only buy the employee one additional week of time to make a decision since Pfizer requires three weeks between shots. If an employee opts for the one-dose Johnson & Johnson shot, they have until about Thanksgiving to decide to get the shot and still be in compliance with the White House order. HII is urging them not to wait.

“We must get started right away to ensure we are compliant by December 8, 2021 in requiring vaccination of all HII employees and contractors,” Kastner said. “While we are discussing the effects of this mandate with our union partners, it will be a condition of continued employment for our workforce to be fully vaccinated by the above date.”

The memos stop short of threatening to fire any employees on Dec. 8.

According to a Newport News Shipbuilding website, as of Oct. 7, 59 percent of employees are fully vaccinated.

Ingalls Shipbuilding would not release a specific number, but HII spokeswoman Beci Brenton told Defense News that, “at Ingalls, we estimate that our vaccinated population rate is higher than state average, and recent trends have our vaccination rate steadily improving.”

Mississippi state health information indicates that, as of Oct. 6, 45 percent of the total state population and 53 percent of adults in the state are fully vaccinated, giving the state one of the lowest rates in the country.

General Dynamics, which owns Electric Boat in Connecticut, Bath Iron Works in Maine and NASSCO in California, would not comment on its vaccination rates. Despite being in one of the most-vaccinated states — about 69 percent of Connecticut residents are fully vaccinated — Electric Boat President Kevin Graney said at a Sept. 23 event hosted by Defense One that only about half the workforce is vaccinated.

Hallman acknowledged a lot of “noise” from defense industrial base employees, some of whom are threatening to quit rather than accept the vaccine. He noted that that was the case, too, with United Airlines and other companies, but the workers ultimately chose to keep their jobs.

Still, he said it’s impossible to know how that will play out with shipbuilders, airplane manufacturers, weapons-makers and more.

A shipbuilding industry source, who was not authorized to talk to Defense News on the record, said the yards are in the incentives phase right now: offering paid time off, including Christmas Eve, to workers who can prove they are fully vaccinated; holding raffles; bringing the vaccines to the workers via popup clinics and on-campus medical facilities. While the yards hope these carrots work, the sticks may come once the administration’s guidance is released.

Of particular concern is how the retirement-eligible population will respond to the vaccine mandate.

Hallman said there’s a large wave of skilled workers nearing retirement and not nearly enough younger workers trained and ready to take their place, particularly in jobs that require an apprenticeship or trade school education.

“This remains a concern that we just have not made the human capital investments so we do have that wave of workers to replace those who are ready to retire, and we need to make some serious investments — and again, this is pre-COVID,” he said. “I think COVID is just yet one more complicating factor on that, and maybe in some cases will be the last little factor that tells worker X it’s time to retire because they can.”

Aerospace Industries Association President and CEO Eric Fanning told Defense News in a statement that, “throughout the pandemic, AIA members have expanded benefits and implemented extensive measures designed to prevent the spread of COVID-19 as our essential work continued.”

AIA is also involved in these industry talks with the administration, serving as a liaison between its members and the White House and Pentagon.

The shipbuilding source said companies are asking whether prime contractors would be responsible for verifying the vaccination status of subcontractors or if the government would do that, and how a defense company can make a vaccination requirement a condition of employment without violating labor union agreements.

While much remains unclear about how the mandate will play out, Hallman said companies should start preparing to have conversations with their government contracting officers about how workforce losses will affect future performance.

“Each company is going to have to go to its contracting officer and say, this is what happened when the mandate came in, and this is how it’s affecting my ability to perform on this contract; I’m seeking an equitable adjustment of X,” he said.

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