Defense production act speeds up wartime purchases.

• Author: Nibley, Stuart B.
• Position: GOVERNMENT POLICY NOTES

One procurement tool that the government is using vigorously to accelerate its response to recent terrorist threats has been available since 1950--the little-known Defense Production Act.

This law, known as DPA for short, and the regulations that implement it, the Defense Priorities and Allocation System, or DPAS, authorize the president to:

* Require performance under government-placed contracts or orders deemed necessary or appropriate to promote the national defense.

* Allocate materials, services and facilities as necessary.

* Control the distribution of scarce and critical materials.

The DPA's fundamental purpose is to allow the federal government to jump to the front of a contractor's production line or service orders during emergencies.

It is the mandatory nature of the DPA that gives the act its teeth. Although the program is administered by the Commerce Department's Office of Strategic Industries and Economic Security, it is used most frequently by the Defense Department.

Under the DPA, a federal agency unilaterally can place a contract with a particular contractor or direct a change to an existing federal contract. Such contractual actions are known as "rated orders."

The Pentagon can place rated orders with any domestic individual, corporation, partnership, association or other organized group of persons, as well as state and local governments and agencies. A recipient must give a rated order preferential treatment over any other business.

Similarly, a prime contractor is required to use rated orders with its suppliers in order to fill a rated order it has received from the government. Therefore, even companies and suppliers that have never performed government contracts previously and may have no desire to do so must accept rated orders. Failure to comply can result in civil and criminal sanctions.

It takes little imagination to understand how the DPA system can cause problems for companies that have never contracted with the federal government. Many businesses steer clear of the government in order to avoid the web of compliance-related issues that attends the execution of all but the smallest contracts.

Any company can be compelled to perform a rated order (provided the product or service sought by the order is not wholly foreign to the firm's product line). With such performance comes a host of tedious obligations that some companies seek to avoid.

For example, the DPA imposes relatively burdensome record-keeping...