DPA Rated Contracts Have Some Caveats.

Author:Levy, Fred
 
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The Defense Production Act allows the executive branch to apply a priority rating to its contracts, which would require them to be prioritized over any competing obligations, including prior commercial commitments. Contractors should be aware of how the legislation may apply to them.

The Defense Production Act, also known as the DPA, is a Korean War-era statute that provides the president with various authorities to regulate U.S. industry for the purpose of "shap[ing] national defense preparedness programs and tak[ing] appropriate steps to maintain and enhance the domestic industrial base." National defense is defined quite broadly. In addition to encompassing military-, energy- and national security-related activities, it also includes emergency preparedness activities under the Stafford Act. Although the law has not broadly been invoked in response to a public health emergency to date, it may be deployed in response to the COVID-19 epidemic.

The authority of the executive branch to apply a priority rating to its contracts is commonly used through the Defense Priorities and Allocations System.

The executive branch may allocate or control materials, services and facilities in any manner deemed necessary or appropriate to promote the national defense. This authority is quite broad and even covers technical data that may be necessary for technology transfer. However, the allocations authority may only be used for wage or price controls if accompanied by a joint resolution of Congress.

The DPA also provides several additional authorities which can provide encouragement and funding to develop and promote critical national infrastructure. These include: purchasing or making purchase commitments of industrial resources or critical technology items; making subsidy payments for domestically produced materials; purchasing and installing equipment for government and privately owned industrial facilities to expand their productive capacity; and issuing loan guarantees and direct loans.

The Defense Production Act requires that to use prioritization or allocations authority in the civilian marketplace, the president must make findings as to the scarcity of material and the need to invoke the prioritization or allocations authority. A President Obama-era executive order and existing regulations required the department invoking DPA authority to make the required findings and submit them to the president for approval before exercising the authority.

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