Where Does the Defense Production Act Go from Here?
Key aspects need strengthening.
The Defense Production Act, though regularly used before the pandemic, has been invoked more broadly and urgently since March. The Trump administration put the 70-year-old law to work in various ways: prioritizing U.S. government orders for N95 masks, directing companies to produce ventilators, and most recently, aiming to rebuild industrial capacity related to public health. The Biden administration should build on these efforts — and work to strengthen sections of the DPA that hinder its broader use.
At the direction of the Acting Homeland Security Secretary, we recently participated in a review of the department’s economic security role, including a look at the DPA. The law is composed of several sections (“Titles”), each providing the president various authorities. Over time, the president has delegated the execution of these authorities to relevant federal agencies, primarily the Departments of Defense, Homeland Security, and, since the onset of COVID-19, Health and Human Services.
Title I of the DPA gives the president the authority to allocate and distribute goods and services to meet government needs. President Trump invoked the distribution authority in mid-March to enable HHS to prioritize contracts for health and medical resources such as personal protective equipment, or PPE. Since then, at least $3.15 billion of COVID-19 contracts have been issued this way. The president was more reluctant to use the allocation authority of Title I, but did direct specific companies to produce equipment such as ventilators. These efforts have had a clear impact. Despite the pressure that the recent surge in COVID-19 cases has put on supply chains, there have been no significant national shortages of PPE or other equipment since the early spring.
To address the substantial longer-term supply chain challenges exposed by the pandemic, a number of DPA Title III projects have been awarded since May focused on public health and defense industrial capacity. Congress appropriated $1 billion under the CARES Act to the DPA Fund and DoD, because Title III projects have historically focused on defense industrial base needs, has worked in close coordination with HHS to obligate these and other funds. In addition, the long-dormant Title III loan authority, launched in May under the direction of the U.S. International Development Finance Corporation, recently announced its first award, a $590 million loan to expand infrastructure and deliver critical COVID-19 vaccines.
DPA Title VII gives the president the authority to make voluntary agreements between the government and the private sector, but only one voluntary agreement existed before COVID-19. In August, the Federal Emergency Management Agency (FEMA) issued a new voluntary agreement with private industry to respond to pandemics by increasing “information sharing and coordination…to maximize the effectiveness of the pandemic response…”
During the campaign, the Biden team emphasized that it would use the DPA to its fullest extent to combat the coronavirus. Here are two suggestions toward that end. First, build on existing DPA efforts. Title I helped deliver PPE and public health equipment where it was needed most, so only tweaking is necessary there. The significant increase in Title III projects, the creation of the loan program, and the new Title VII voluntary agreement are all promising developments, but each will need strong leadership to ensure their success to help nurture the expansion of U.S.-based production of PPE, pharmaceutical, and defense capabilities.
Second, strengthen the DPA for the future. The Homeland Security Advisory Council Economic Security Subcommittee report noted two areas where additional action would be particularly beneficial. At a national level, the DPA is governed by a mishmash of old and overlapping executive orders spanning numerous administrations that need to be refreshed and simplified. The President has delegated the authority to execute these orders to DHS —and more specifically the Federal Emergency Management Authority — but the FEMA programs supporting the DPA and related authorities have atrophied since the end of the Cold War. While detailed plans and standing organizations are not solutions by themselves, a new executive order clearly outlining and aligning the DPA and other authorities, policies, and responsibilities would better position the government to address future national emergencies.
Another area is the expansion of Title III to areas beyond defense and public health industrial capacity. DHS currently has one active Title III project underway, but it should strengthen this connection and its use of Title III by working with DoD to build an institutional capacity to identify homeland industrial base weaknesses and develop Title III projects to mitigate these areas. Other agencies should consider this approach as well.
Jerry McGinn is the Executive Director of the Center for Government Contracting in George Mason University’s School of Business and previously oversaw Defense Production Act activities at the U.S. Department of Defense. Daniel Kaniewski is a managing director at Marsh and McLennan Companies and a former deputy administrator of the Federal Emergency Management Agency. They are writing in their personal capacities.