The response to the ongoing COVID-19 pandemic has catalyzed renewed interest in the Defense Production Act.
This statute is one of the country's most powerful laws for federal intervention in national commercial activity. The act was passed in 1950 in response to the Korean War and has been reauthorized over 50 times, most recently in 2018. The DPA continues to serve a vital role empowering the president to protect the country against shortages of critical goods, services and materiel necessary for national defense or civil emergency response. The DPA creates incentives for companies to contribute to the crisis response by innovating new uses of their productive capacities and supplier networks.
To ensure the act remains a capable tool for supporting the defense industrial base, policymakers should consider reforms that would improve the law's loan-making provisions, funding stream and transparency requirements.
Today's Defense Production Act retains three broad sets of executive authorities--Titles I, III and VII--that empower the president to ensure that U.S. producers prioritize the nation's interest over commercial production during times of crisis.
Title I empowers the president to jump the government to the front of the line to receive commercial products from domestic producers. This process ends with the power to require and prioritize production of critical national defense needs from U.S. companies.
The Defense Contracting Management Agency, as part of the defense priorities and allocations system, assigns priority ratings to certain contracts and orders. Specific sections within the act go further to authorize specific government activities when the act is invoked.
Section 102 prohibits hoarding of designated materials, regardless of whether intended for business or personal use.
Section 108 directs the president to show strong preference for small business, especially in underemployed areas when using these authorities. President Donald Trump recently invoked these sections in response to the COVID-19 pandemic to require General Motors to produce ventilators and to delegate authority to the Department of Health and Human Services secretary to designate items as "scarce materials" that could not be horded.
Title III of the act supports the growth and retention of domestic productive capacity and material supplies critical to national defense. Specifically, sections 301, 302 and 303 help companies in the private sector avoid the...