DoD Warns Contractors to be Wary of Adversarial Investments during Pandemic

DoD’s Acquisition and Sustainment Leaders recently updated the public on DoD’s COVID-19 acquisition policy at the Pentagon and announced a joint task force to handle the influx in medical and personal protective equipment needs. One of DoD’s primary points of focus during this conference was a warning to contractors about adversarial capital during this crisis.

DoD announced three lines of effort in place to combat the current COVID-19 crisis: assess, protect, and promote. It will assess the pandemic’s impact on companies in the defense work-space. It will exercise “hypervigilance to protect in a time of economic uncertainty[.]” And it will promote “the defense industrial base capabilities to aid in a government-wide response to the virus.”

To support these efforts, DoD is employing a variety of tools, including its authority under the recently invoked Defense Production Act (DPA) (which we previously blogged about here), which DoD will leverage to help its supply chain and “promote the strength of the defense industrial base.”

DoD has also established a joint task force to deal with the nation’s medical and personal protective equipment needs and to prioritize and direct the DPA’s authorities and funding. “The task force will synchronize the DOD acquisition response to this crisis, working closely with all the services and defense agencies” and “will leverage DOD authorities for maximum acquisition flexibility. . . to provide resilient capability in the current health crisis,” said the undersecretary of defense for acquisition and sustainment, Ellen Lord.

During the conference, it also became clear that one of DoD’s top priorities is the safeguarding of our national security missions. DoD warned companies to be aware of and avoid “adversarial capital” during this time, which generally takes the form of foreign investors that are “adversarial” to our national security.

According to Ms. Lord, “[t]here is no question that we have adversarial capital coming into our markets for nefarious means.” She said:

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 [defense industrial base] is vulnerable to adversarial capital, so we need to ensure companies can stay in business without losing their technology.

The deputy assistant secretary of defense for industrial policy, Jennifer Santos, also discussed the looming threat of adversarial capital during “this period of uncertainty.” Ms. Santos said, “[t]o 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[,]” or CFIUS.

DoD announced “what we are doing is on the defense side looking at CFIUS, on the offensive side we’re using our trusted capital mechanisms.” As such, DoD will be hosting Trusted Capital events virtually through its Trusted Capital Marketplace to ensure “that critical companies are able to access clean capital that assists their commercialization.”

According to DoD, this coronavirus situation

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. . . 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.

As a small business operating in the defense workplace, this means it is more important than ever to be cautious and diligent in your business ventures. There are many opportunities for such companies to help our nation’s efforts during this crisis—you just have to know where to look for them. But more importantly, companies need to ensure that their efforts to stay afloat during these times will not harm them—or our nation’s security—down the line. If you need assistance in navigating the federal marketplace during the COVID-19 pandemic, please email us or give us a call at 785-200-8919.