Vaccine mandate already causing problems for defense contractors — they will get worse

The federal COVID-19 vaccine mandate is already causing disruptions for defense contractors — and the problems are likely to get worse.

Employees are staging protests and walkouts in response to the federal mandate, which requires all government contractors to be fully vaccinated against COVID-19 by Jan. 4.   Unlike private employers covered by the Biden mandate, federal contractors haven’t been given the option to test workers weekly for COVID-19, and the recent OSHA enforcement suspension does not apply to them.

As the deadline approaches, major defense companies expect to see employees quit rather than be vaccinated. Losing this human capital will, in turn, cause delays in time-sensitive defense programs at a time when the country can least afford them. On-time delivery of items such as F-35 fighter jets and the Columbia-class submarine is crucial in the U.S.’s competition with China.

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The subject was popular in companies’ recent quarterly earnings calls. Raytheon CEO Greg Hayes said the company is “expecting some level of disruption, some level of challenge in the supply chain.” He told CNBC that the company expects to lose “several thousand” of its 125,000 employees.

The vaccine mandate “has not been well received by a pretty sizable portion of our employees,” Textron CEO Scott Donnelly reported. “There’s no question that we’re going to lose some employees because of this,” he added. 

Losing a sizable chunk of the workforce would disrupt any industry, but defense manufacturing is particularly vulnerable. The labor market for the highly skilled – and highly specialized – manufacturing done in our nation’s shipyards, munitions plants and the rest of the industrial base is a very tight and often fragile market.

Imagine, for example, the impact when a welder for submarines leaves the job. Submarine construction requires very specific welding techniques with unique equipment and military-grade materials. Mastering these techniques takes years of training under an experienced mentor, especially since a mistake could lead to the sinking of a multibillion-dollar vessel and the loss of its crew. If a senior welder quits or is fired over the vaccine mandate, the company loses both his rare skill and his mentorship. 

Labor is very much the capacity-constraining factor in the U.S. defense industrial base today. Many experienced employees are reaching retirement age, while the next generation is increasingly opting for so-called “knowledge based” careers rather than manufacturing careers. When defense program funding is unpredictable – especially for programs with long lead times, such as shipbuilding – highly skilled employees are laid off, find new work in the private sector and are unavailable when Washington, D.C., wakes up and reinstates funding. Many roles require security clearances, which can take years to get and can cost companies thousands of dollars per person. 

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Taking these trends into account, a recent Defense Department report found that gaps in U.S.-based human capital are a major risk factor for several defense industry sectors: ground systems, machine tools, missiles and munitions, shipbuilding, software engineering, space and the organic (or government-owned) industrial base.

When highly skilled employees in these sectors quit over the vaccine mandate, it will be very difficult, if not impossible, to replace them. This will be a problem for the largest prime contractors but will be especially difficult for smaller subcontractors, since small and mid-sized companies do not have the hiring resources, training programs and other tools that the largest companies use to attract new hires.

And delays in lower tiers of the supply chain can create a ripple effect for entire programs.

Delays also raise the cost of work. In some situations, defense contractors may be able to bill the costs of complying with the vaccine mandate back to the Defense Department. Even contractors operating under fixed-price contracts may have grounds for adjustments of those contracts.

Any additional costs will weigh on an already insufficient defense budget. The Biden administration’s proposed 2022 defense budget was 0.6 percent lower than the 2021 budget when considering inflation. The administration already plans to spend defense dollars on climate change-related projects; the vaccine mandate will create yet another unaccounted-for tax on the defense budget. 

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It doesn’t have to be this way. Defense firms have been open for business throughout the pandemic, even during state and local shutdowns, because they were considered part of U.S. “critical infrastructure.” All that time, they have followed safety protocols, requiring that employees wear masks and maintain social distancing in the workplace.

As a result, defense production has kept going through all these challenges, even before there was a vaccine. Weekly testing requirements could provide a further safeguard against COVID-19 transmission.

The Biden administration must decide whether the federal vaccine mandate is the best course of action for personal safety and national security — and take responsibility for the results. 

Maiya Clark is a researcher at the Heritage Foundation’s Center for National Defense. Her research focuses on the defense industrial base.