March 26, 2020

Coronavirus Response and Defense Production Act


KEY TAKEAWAYS

  • On March 18, President Trump declared he is activating his authority under the Defense Production Act to address the coronavirus emergency.
  • FEMA is using the Defense Production Act’s allocation authority to acquire 60,000 coronavirus test kits and order 500 million face masks for health care workers.
  • These test kits and face masks will be delivered to hospitals and clinics with the most dire shortages in order to help fight the spread of the coronavirus.

On March 18, President Trump invoked the Defense Production Act to address the coronavirus emergency. The DPA allows the president to require businesses and corporations to fulfill federal contracts for materials and services ahead of contracts for non-federal entities. On March 24, the director of the Federal Emergency Management Agency said his agency is using the act’s allocation authority to obtain 60,000 test kits and 500 million face masks. These emergency preparedness uses of the DPA are authorized under the Stafford Act.

The Defense Production Act Lets Federal Government

COVID-19 DPA

The DPA became law during the Korean War and has been renewed and amended periodically since then. Congress most recently reauthorized it in the National Defense Authorization Act for Fiscal Year 2019. The federal government used similar war powers authorities to manage the economy in conflicts prior to the Korean War.

While the law is traditionally associated with the Department of Defense, the president can use the act’s authorities to address emergency needs of other federal agencies. In the Senate, the DPA falls under the jurisdiction of the Senate Committee on Banking, Housing, and Urban Affairs.

In 2012, President Obama issued Executive Order 13603 regarding National Defense Resources Preparedness. This executive order sets the policies, implementation, and delegations of authority under the DPA; it delegates to agency heads the decision to use authorities under Title I and Title III of the law. In the case of the coronavirus emergency, the heads of the Department of Health and Human Services, FEMA, and DOD have powers under the law.

defense production act – authorities and uses

Title I Defense Production Act Authorities

Title I of the DPA provides two authorities:

1. Prioritization of federal contracts necessary to promote national defense

The most common use of DPA Title I, the prioritization of contracts, allows the federal government to tell contractors that the government’s orders for equipment must be fulfilled before any other purchaser of the equipment receives its equipment. This allows the federal government to quickly receive equipment or products from the private sector to help promote national defense. DOD is the main agency that uses this authority.

2. Allocation of materials, services, and facilities

Allocation authority allows the federal government to control the distribution of certain products, and FEMA is using the authority to allocate delivery of face masks and 60,000 COVID-19 test kits. FEMA also will add DPA allocation requirements to an order for 500 million face masks. The equipment will be delivered to hospitals, clinics, and health care workers that currently face shortages of the supplies. Prior to this emergency, DPA allocation authority had not been used in more than 30 years.

Title III Defense Production Act Authorities

Unlike Title I authority, Title III expands manufacturing capacity for needed items. So far, the Trump administration has not invoked any Title III authorities related to the coronavirus national emergency.

Title III of the DPA provides three authorities:

1. Loan guarantees and direct loans  

With direct loans or loan guarantees from the federal government, key firms in the supply chain for critical materials could expand production; speed delivery of products; and obtain key raw and intermediate materials for production. This authority is to be used if firms cannot obtain financing.

2. Purchases and purchase commitments

The president can also directly purchase or commit to purchase supplies and products from manufacturers.

3. Installation of equipment

Under the authority to install equipment, the federal government is authorized to buy and install machine tools and other equipment to expand firms’ manufacturing capacity of necessary items.  

The DPA created a fund at the Treasury Department to carry out the president’s authorities. Title III authorities are limited to funding available in the DPA fund.

The Coronavirus Aid, Relief, and Economic Security Act, which the Senate passed on March 25, provides $1 billion for the fund. It allows the federal government to use the fund for loan guarantees, to purchase critical supplies, and to install equipment for key firms if the president invokes any of the Title III authorities. The DPA Fund also received $64 million in appropriated funding for fiscal year 2020 and has approximately $200 million in unobligated funds. 

Title VII Defense Production Act Authorities

Title VII of the DPA authorizes the president to consult with business, labor, and other representatives to coordinate and to enter into voluntary agreements on issues such as production and distribution of crucial supplies and services that would otherwise be subject to antitrust laws. This authority may only be used if the president determines there is a threat to the nation’s preparedness programs. While the Trump administration has not used any of the authorities provided under Title VII, it has worked with private industry to help make necessary medical supplies more available. President Trump has encouraged Ford Motor Company and others to start making needed medical supplies. Ford is working with 3M, GE, and other companies to manufacture needed respirators, ventilators, and face shields for hospitals and medical workers.

Vice President Pence also has worked directly with manufacturers of medical personal protective equipment to ensure they expand production and speed delivery to hospitals and health care workers. The vice president has asked private construction companies to donate face masks to hospitals.