Client Spotlight

SMI Client New Balance Retools to Produce PPE

by: Richa Patel

Shortly after closing its factories and stores due to COVID-19, New Balance retooled and reopened factories in the U.S. to begin producing general-use face masks. Their goal is to manufacture up to 100,000 masks per week at break-even pricing or as donations. The current mask is made from five-ply laminated fabric and uses elastic shoelaces as adjustable straps. New Balance is advancing its design to ideally meet FDA requirements and create a product that can be used by frontline medical staff.

New Balance is also responding to calls for PPE including gowns and foot coverings. R&D teams for the company are working towards prototypes and exploring collaborative opportunities to address PPE shortages.

Updates from DC

DOD Releases Memo Detailing Support to the Defense Industrial Base (DIB)

by: Aarzu Maknojia

The Defense Department is working with industry to make sure that critical materials can still be produced for use by the government. One tool the department is using to ensure the companies remain viable is a memo that defines the DIB as critical infrastructure allowing it to stay open even when other businesses have been directed to close.

Additionally, the department is working to increase the “progress payment” rate on some defense contracts in order to improve cash flow for industry involved in the ongoing production of large defense items. They are looking to increase this rate from 80% to 90% for large businesses and from 85% to 95% for small businesses. This is expected to push an additional $3.3 billion into the DIB.

They are also working to improve cash flow by allowing partial payments for businesses that are unable to keep up with the originally agreed upon schedule for delivery.

Moreover, the government is hearing requests from companies that may need “equitable adjustment.” This allows small businesses to recoup unforeseen costs associated with working during COVID-19.

Senate Aims for Early June for NDAA Markup

by: Richa Patel

The Senate Armed Services Committee (SASC) will attempt to consider its version of the National Defense Authorization Act (NDAA) during the week of June 8th.

The markup was initially planned for the week of May 18th although it was never formally announced but the pandemic has kept Congress out of session and delayed many bills with an attempt to prioritize emergency legislation.

The full committee markup would begin June 10th and is usually conducted in a single week.

The House Armed Services Committee (HASC) postponed their markup scheduled for April 30 and has not yet announced a new date.

House Democrats Unveil $3 Trillion Relief Bill

by: Richa Patel

House Democrats released a huge coronavirus response plan, dubbed the ” HEROES Act ,” on May 12th.

Included in the package would be nearly $1 trillion for state and local governments to replace revenue shortfalls, including $540 billion for states, territories and tribes and $375 billion for cities, counties and local governments. The package also includes:

-$200 billion for a Heroes’ Fund for essential workers to receive hazard pay;
-$75 billion for testing, contact tracing, and isolation measures;
-Another round of direct $1200 payments;
-Enhancing new employee retention tax credit to encourage keeping employees on payroll;
-Requiring OSHA to issue standard requiring workplaces to develop infection control plans;
-$10 billion for Covid-19 emergency grants through the Economic Injury Disaster Loans program;
-Extension of unemployment benefits, ensuring weekly $600 unemployment payments through January;
-$175 billion for housing assistance;
-$15% increase to SNAP benefit and more funding for nutrition programs; and
-$25 billion for Postal Service and $400 million for Census Bureau.

Senate Republicans immediately dismissed the bill, and it is unlikely that Congress will pass another relief bill until June due to bipartisan resistance.

No DoD Funding in the House Democrat Relief Bill

by: Richa Patel

In the CARES Act, the Defense Department received $10.5 billion in March to aid its coronavirus response efforts. Leaders now say they need more money as weapons programs slow and costs increase.

However, they won’t see that funding increase in the House Democrats’ relief package. Extra cash may still come following Senate negotiations or in future coronavirus response legislation.

HASC Chairman Adam Smith said he thinks the Pentagon can reimburse contractors with existing funding. Pentagon’s top weapons buyer Ellen Lord has told reporters that the DoD is expecting a three-month delay across major weapons programs due to the crisis.

HR 266, The Paycheck Protection Program and Health Care Enhancement Act, or ‘CARES 3.5,’ Passes in April

by: Richa Patel

HR 266 is a $483.4 billion compromise legislation that shored up the Paycheck Protection Program (PPP) and provided additional support for critical health care needs. The bill was signed into law April 24, 2020.

The legislation provided:

-$320 billion for the PPP, including $60 billion for community banks, small lenders, federal credit unions, and those institutions serving underserved segments;
-$60 billion in loans and grants for the Economic Injury Disaster Loan Program;
-$2.1 billion to administer Small Business Administration (SBA) programs;
-$75 billion to reimburse health care providers for health care related expenses and lost revenue attributed to the coronavirus; and
-$25 billion for increased testing.

New House Bill Aims to Improve the PPP

by: Aarzu Maknojia

As part of the CARES Act passed on March 27th, Congress established the PPP to be implemented by the Small Business Administration (SBA) with support from the Department of the Treasury. This program was supposed to help provide small businesses with funds to pay up to 8 weeks of payroll costs including benefits as well as helping to pay interest on mortgages, rent and utilities. It authorized up to $349 billion towards job retention and certain other expenses.

While many small businesses benefited from these PPP loans, others expressed frustration.

The first round of funding ran out in a couple of weeks. As part of its latest relief package passed on April 16th, Congress authorized an additional $310 billion and as of May 6 th , more than 2.4 million loans worth more than $183 billion have been approved as part of the second round of PPP funding.

Part of the problem with the design was that the SBA is already a small agency with a reputation for inefficiency. On one informational call it hosted, it recommended that companies that hadn’t heard back should reapply because the applications may have gotten lost. This was in addition to there not enough available funds for everyone seeking funds.

While the SBA will still be the executor, the House bill proposes a number of modifications including allowing all nonprofits to apply, amending the loan forgiveness rules, and more.

This bill was passed without Republican support and it is unlikely to pass the Senate.

Congress Adjusts to the COVID-19 Era

by: Aarzu Maknojia

When it first started becoming apparent in mid-March that it was going to be necessary for people to self-isolate in their homes, Congress became concerned with what procedure it would follow in order to conduct regular order – voting, speeches, committee hearings, and more.

As a first step, Congressional offices closed or limited the number of people that could be in at a given time – asking staff members for member and professional staff members for committees to start working from home.

In the run-up to the vote for the CARES Act, House Speaker Nancy Pelosi formally rejected voting by proxy voting or any kind of electronic voting. This legislation was passed by “unanimous consent” or a “voice vote.” There is also no record of how each lawmaker voted. This also means that any lawmaker could have held up the passing of the bill and it became crucial for Congress to find a solution when one House representative threatened to do just that.

The House has been voting in small groups, making sure Members are keeping their distance. However, with the average age of House members being 58 years and of Senate members being 62 members, it is critical that Congress is cautious.

Committee hearings and markups pose a different challenge. As a general rule, committee are open to the public and can only be limited in certain situations. While some committees have been allowing reporters in to film their sessions, this is still risky because committee members are appearing in person. Additionally, markups especially as they relate to the authorization and appropriations process, often include a number of discussions and side conversations which are not quite possible over video conferencing.

Just last Friday, the House adopted historic rules changes to allow lawmakers to cast votes and conduct committee meetings remotely during the pandemic. One of these changes allows proxy voting which allows absent lawmakers to authorize colleagues to cast votes on their behalf. This will likely entail an adjustment period but should speed up the process for taking care of business.