National Security Acquisitions and Foreign Trade Support in the $2 Trillion COVID-19 Stimulus Package

By Brett W. Johnson and Derek Flint

On March 27, 2020, President Trump signed into law the largest spending bill in U.S. history in an effort to combat the COVID-19 pandemic. One focus of the bill is on ensuring that sufficient amounts of critical materials are available domestically to address public health crises. Another focus is on providing aid to small businesses that have been adversely affected by COVID-19 in their foreign or domestic activities. Provisions of the bill that promote the acquisition of critical materials or support the foreign activities of small businesses are a priority that many companies with global supply chains should consider utilizing to support business operations during the crisis.

Adding Certain Medical Supplies to the “Strategic National Stockpile.” The bill requires the Department of Health and Human Services to permanently add certain medical supplies to “strategic national stockpile,” including personal protective equipment and “ancillary medical supplies.” Supplies in the strategic national stockpile are used to address public health emergencies, among other crises. The Secretary of Health and Human Services is directed to determine the amount of each supply that the agency must maintain. This is a significant opportunity for suppliers to fill the vacuum of missing medical supplies for the U.S. government.

Temporary Removal of Financial Limits on Actions to Support the Domestic Industrial Base. The bill removes the aggregate financial limit on actions to correct shortfalls in the “domestic industrial base” for one to two years. The domestic industrial base means industries that provide materials to meet national defense requirements. This provision is designed to increase access to materials necessary for national security and pandemic recovery. Of note, this may have a direct link to the Defense Production Act and the Defense Priorities Allocation System (DPAS). To the extent that a DPAS rating is applicable to a contract, companies should consider whether there is proper flow-down to meet the government’s needs.

Support for the State Trade Expansion Program. The bill provides for reimbursement of financial losses relating to a State Trade Expansion Program foreign trade mission or trade show exhibition that was cancelled due to COVID-19. The State Trade Expansion Program supports the overseas growth of American small businesses through grants and other assistance programs. The bill also extends the period of certain State Trade Expansion Program grants.

Taken together, these and other provisions give the government agencies broad discretion to purchase supplies and mitigate businesses’ losses related to the pandemic. Companies that sell goods related to national defense—particularly medical supplies—can expect to see increased demand and spending capacity from the federal government. In addition, small businesses that had to cancel foreign trade missions or trade exhibitions due to the COVID-19 pandemic may be entitled to federal reimbursement for their losses. Other provisions in the stimulus package provide similar relief to companies that have been harmed by the pandemic in other ways.

It appears that this may the first of several stimulus packages related to the crisis. Companies may want to consider evaluating business operations and determining if they qualify for assistance for the several government programs associated with the stimulus package, and working with government agencies to maximize potential benefits.