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Defense Production Act Authority and the Coronavirus Outbreak 

by Edward Lebow, Michael Scanlon

Published: March, 2020

Submission: March, 2020

 



With the coronavirus outbreak, attention has been focused on the Defense Production Act of 1950 (“DPA”)[1], a statute dating back to the time of the Korean War, which authorizes the President in times of national emergency to:


  • Make direct purchases and purchase commitments of critical supplies and services;
  • Interrupt the normal flow of goods, even when under contract, by requiring U.S. businesses to prioritize government contracts over all other orders;
  • Install equipment in private industrial facilities to secure production of critical supplies to meet national defense and homeland security needs;
  • Allocate or control the general distribution of material, services and facilities to promote the national defense;
  • Provide incentives to contractors such as loans and loan guarantees;
  • Establish voluntary agreements with private industry;
  • Investigate and prosecute hoarding; and
  • Employ persons “of outstanding experience and ability.”


The President delegated his DPA authority to department and agency heads in a 2012 executive order.[2]“While the authorities are most frequently used by, and commonly associated with, the Department of Defense (DOD), they can be and have been used by numerous other executive departments and agencies.”[3]


The purchase and allocation of critical supplies under the DPA is delegated to the Department of Commerce, which can order suppliers to prioritize production and delivery.Other pending commercial contracts are in effect put on hold pending satisfaction of government needs. Contractors must offer similar prices, terms and conditions as for non-DPA orders.Contractors are also required to pass these priorities down to their respective suppliers and subcontractors.


Although the Trump administration issued an executive order on March 18 invoking the DPA,[4]it did not find it necessary to take action under the law until March 23, when President Trump did take an initial step under the DPA by issuing an Executive Order authorizing the Attorney General to investigate and prosecute hoarding of personal protection equipment and related price gouging.[5]On March 24, the administration went quite a bit further, with FEMA administrator Peter Gaynor announcing that the agency would start using its DPA powers to procure about 60,000 test kits and began inserting DPA-specific language into its contracts for 500 million masks.[6]New York Governor Andrew Cuomo and others have been urging President Trump to invoke the DPA even more broadly and “order factories to manufacture masks, gowns, ventilators.The essential medical equipment that’s going to make a difference between life and death.”[7]


 


Footnotes:

[1] 50 U.S.C. § 4501 et seq.



[2] See Executive Order 13,603 (March 16, 2012)



[3] Congressional Research Service, The Defense Production Act of 1950: History, Authorities, and Considerations for Congress, R43767 (updated mar. 2, 2020).



[4] Executive Order on Prioritizing and Allocating Health and Medical Resources to Respond to the Spread of Covid-19, Mar. 18, 2020, https://www.whitehouse.gov/presidential-actions/executive-order-prioritizing-allocating-health-medical-resources-respond-spread-covid-19/.



[5] See 50 U.S.C. § 4512; see also Executive Order on Preventing Hoarding of Health and Medical Resources to Respond to the Spread of COVID-19, Mar. 23, 2020, https://www.whitehouse.gov/presidential-actions/executive-order-preventing-hoarding-health-medical-resources-respond-spread-covid-19/



[6] Rebecca Ballhaus & Andrew Restuccia, Administration to Use Defense Production Act for First Time in Coronavirus Pandemic, Wall St. J., Mar. 24, 2020, https://www.wsj.com/articles/administration-to-use-defense-production-act-for-first-time-in-coronavirus-pandemic-11585058618?mod=djemalertNEWS



[7] Karen DeWitt, Cuomo asks for Federal Defense Production Act, says April 28 primary might be mail-in only, WBFO NPR.com, Mar. 23, 2020, https://news.wbfo.org/post/cuomo-asks-federal-defense-production-act-says-april-28-primary-might-be-mail-only; see also Daniel H. Horn, Opinion:  How America Can Avoid Italy’s Ventilator Crisis, N.Y. Times, Mar. 22, 2020, https://www.nytimes.com/2020/03/22/opinion/health/ventilator-shortage-coronavirus-solution.html. 


 










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