President Trump Invokes the Defense Production Act to Aid in Efforts to Combat COVID-19
President Donald Trump announced this afternoon that he will sign an order invoking the Defense Production Act. For now, the Act will be targeted towards aiding in the production of additional masks (including N95 masks), eyewear, personal protective equipment, ventilators, and other critical equipment necessary to combat COVID-19.
Included below is a summary of the relevant provisions of the Defense Production Act:
Congress first enacted the Defense Production Act (DPA), 50 U.S.C. §§4501 et seq., during the Korean War in order to provide the President with various authorities to regulate American industry for the purpose of assisting with the national defense. The DPA, which was modeled after similar World War II-era predecessor statutes, confers various authority on the executive branch to “shape national defense preparedness programs and take appropriate steps to maintain and enhance the domestic industrial base.”
The DPA defines “national defense” quite broadly. The DPA grants the President several authorities, including the ability to control domestic resources and production capabilities. The DPA also allows the President certain development authorities to facilitate development and improvement of critical national infrastructure, including programs for energy production or construction, which may even be used to stimulate domestic energy production for commercial uses.
Authorities to control production
The DPA allows the Administration to priority rank contracts to require manufacturers to prioritize those deemed most important by the government over any competing obligations, including prior commitments to commercial partners. Simply put, the person or corporation tasked with a prioritized contract or order under the DPA is required to accept and fulfill the contract or order by the date specified by the government.
The DPA also empowers the President to allocate and control materials needed for production, as well as services, and use of facilities in any manner deemed necessary or appropriate to promote the national defense. This authority even extends to giving the Administration authority to control technical data that may be necessary for technology transfer.
The DPA also allows the institution of wage or price controls, but only if approved by a joint resolution of Congress.
Other Authorities in the DPA
The DPA empowers the Administration to create, maintain, protect, expand, or restore domestic industrial base capabilities essential to the national defense through a variety of mechanisms, including: (1) purchasing or making purchase commitments of industrial resources or critical technology items; (2) making subsidy payments for domestically-produced materials; and (3) purchasing and installing equipment for government and privately owned industrial facilities to expand their productive capacity.
The DPA also authorizes the President to issue loan guarantees and direct loans to ensure availability of industrial resources, critical technology items, or essential materials needed.
Invoking the DPA also opens up the Defense Production Act Fund that can be used to carry out authorities under the DPA, including loans. The Defense Production Act Fund is currently capped at $750 million a year. Budget authority for direct loans and guarantees must be included in an appropriations act passed by Congress, and industrial base projects that cumulatively cost over $50 million typically must be authorized by an act of Congress.
The DPA also authorizes the President to employ experts outside of normal federal hiring and pay processes and to establish a reserve of personnel who can be called on to fill executive positions in the U.S. Government when needed.
The DPA allows the President to authorize voluntary agreements in private industry, even agreements between companies to facilitate cooperation in the manufacturing and production process that absent the invocation of the DPA would violate antitrust laws.
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