Pay & Benefits

Pentagon makes the most use of emergency contractor paid leave

Federal agencies were given authority under section 3610 of the Coronavirus Aid, Relief, and Economic Security Act to reimburse their contractors for paid time off for those employees that were unable to perform work due to office closures and other COVID-19 response activities.

Of such contractors, those working for the Department of Defense received more reimbursement funds by far than any other agency, according to a Government Accountability Office report released Sept. 3.

The DoD has obligated $18.3 million so far for such reimbursements — though agencies are authorized to grant them for missed work through Sept. 30 — with NASA providing the next highest amount at $3.6 million.

The reimbursements are designed to make sure that agencies do not lose the people able to perform necessary work due to unemployment and the need to search for a new job.

“For example, the guidance explains that it may be beneficial to reimburse contractors for paid leave to keep personnel in a ready state for activities so the contractor can resume supporting the agency’s mission as soon as possible when circumstances permit,” the report said.

But not all agencies have used the Section 3610 authority, opting to instead look for reimbursement funds or solutions elsewhere.

The CARES Act did not appropriate funding for such reimbursements, and agencies have instead been instructed to use already-appropriated dollars to offer the cash needed to pay for employee leave.

“Officials from some agencies noted reluctance to use funding from other priorities — such as DOD’s modernization and readiness efforts — for section 3610 reimbursements. Representatives from industry associations also expressed concerns about availability of funding and the possibility of denied reimbursement requests due to a lack of funding, even if contractors meet all other eligibility conditions,” the report said.

Instead, agencies have turned to accelerated payments to small businesses, favorable tax changes and use of loans under the Paycheck Protection Program to pay employees unable to work. The Department of Energy, for example, reimbursed contractors for around $550 million using other authorities, far more than the half million the agency reported under CARES Act authority.

The process of obtaining reimbursement through the CARES Act authority may also deter some contractors from even starting the request.

“Representatives from industry associations noted that DOD’s procedures for requesting section 3610 reimbursements could deter requests due to the scope and scale of required information,” the report said.

Despite these challenges, certain agencies expect the ultimate price tag for CARES Act reimbursements to reach into the billions of dollars.

“In a June 2020 testimony before the House Armed Services Committee, the under secretary of defense for acquisition and sustainment quoted a large prime contractor as stating that the impact of section 3610 could be up to $1.5 billion for that company and its associated suppliers. The same contractor also noted estimates in excess of $1 billion for COVID-19 costs not related to section 3610,” the report said.

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