What Is the Defense Production Act (DPA)?

The Defense Production Act (DPA) is a law that gives the U.S. president the power to order companies to produce goods and supply services to support national defense. Originally passed in 1950, the law was first used during the Korean War. It's been adapted over the decades to respond to challenges beyond war preparations. It was enlisted to help the country recover from natural disasters, energy security, public health, and to protect against terrorism.

History of the Defense Production Act (DPA) 

The Defense Production Act (DPA) was enacted in 1050 to bolster U.S. initiatives in the Korean War. The legislation drew inspiration from the War Powers Act which had previously facilitated econo꧒mic mobilization during World War II.

The core powers of the DPA allow the president and certain cabinet members to require companies to prioritize activities and accept contracts that are deemed necessary to support national defense. The legislation also allows the president to use loans and other financial incentives to boost production capacity and allocate goods, services, and facilities as needed.

The DPA has been reauthorized by Congress more than 50 times, most recently in 2018, and is scheduled to expire in September 2025.

The biggest change in the law over the years has been an expansion in the definition of “national defense” to encompass energy production, critical infrastructure development, emergency preparedness and recovery, counterterrorism activities, and public health actions, as well as measures to ensure the continuity of government. 

The Department of Defense is the most active user of priority orders under the act, placing some 300,000 contracts each year. The Department of Homeland Security secured fewer than 150 orders in 2020, the last year the data was made available, with 47% of those supporting preparedness for hurricanes and other disasters.

The allocation power provided by the law hadn't been exercised since the end of the Cold War until the COVID-19 pandemic led to an executive order by President Donald Trump on March 23, 2020 to prevent price gouging and hoarding of medical supplies.

How the DPA Works

The key power of requiring companies to prioritize contracts along with the seldom-used ability to allocate resources was initially granted to the president but Congress has since delegated those authorities to six cabinet officials. The other department heads in addition to the Secretary of Defense with prioritization authority involving their relevant portfolios include the Secretaries of Agriculture, Energy, Health and Human Services, Transportation, and Commerce.

As part of the Department of Commerce, the 澳洲幸运5官方开奖结果体彩网:U.S. Census Bureau placed seven priority contracts worth $14 million in fiscal year 2019 for network servers and other equipment to support the collection of the 2020 national census. Priority orders can also be placed on behalf of foreign governments if they’re considered critical to national defense. The Defense Department helped expedite the refurbishment of atmospheric controls for a naval vessel for a U.S. ally in 2012.  

The DPA also allows the government to provide incentives to the 澳洲幸运5官方开奖结果体彩网:private sector to expand production capacity in the name of national defense. It can use tools ranging from loans, loan guarantees, and subsidies to the outright purchasing and installing of production equipment in factories.

The government hadn't engaged in any lending under the act in more than three decades but the International Development Finance Corporation issued a $140 million loan to National Resilience Inc. The loan was announced in March 2023.

The Defense Department has been the most active in using these provisions but the Energy Department provided $135 million in incentives between fiscal years 2014 and 2016 to promote the development of hydrocarbon biofuels. The funding for incentives comes from the DPA Fund which is 澳洲幸运5官方开奖结果体彩网:appropriated $250 million each year. The projects tend to be relatively modest, getting about $25 million in funding on average.

Expansion Due to National Security Concerns

One major expansion of the DPA was the establishment of the Committee on Foreign Investment in the United States (CFIUS) in 1975. It gives the president the authority to put the merger or acquisition of a U.S. company▨ by a foreign company under review due to national security concerns.

An amendment to the DPA in 1988 codified the review process and gave the committee significant authority to analyze potential mergers and recommend whether the president should block them. A revision in 2018 further widened the scope of transactions that could fall under national security review including those involving a foreigner taking a noncontrolling stake in a U.S. company. 

In fiscal year 2022, 286 potential transactions came under national security review with about half of them prompting a CFIUS investigation. No presidential decisions were issued.

How the DPA Helped Combat COVID-19 

The DPA played a role in the U.S. government’s response to COVID-19 from early on in the pandemic. President Trump declared a national emergency in March 2020, making the pandemic eligible for government action under DPA.

Trump used the DPA sparingly, however, issuing six executive orders and four memoranda that resulted in the prioritization of orders for personal protective equipment, financial incentives to increase the domestic production of medical equipment, and anti-gouging measures.

White House trade advisor Peter Navarro iꦰnsisted to the press that the threat of the DPA could be used to incite voluntary action without actually having to implement it.

The Departments of Homeland Security and Defense had announced plans to put about $1.5 billion in CARES Act funding toward boosting the production of medical supplies. The agencies had provided nearly $640 million for 18 projects by September 2020 for ventilators, respirators, and materials for COVID-19 tests and vaccine delivery.

The government also placed 43 priority orders valued at nearly $4 billion for medical supplies, including 181,000 ventilators and 166.5 million respirators.

President Biden continued to leverage the powers of DPA to address the pandemic, shifting in part to focus on distributing the vaccine. The president issued a series of executive orders regarding COVID-19 in January 2021, including one that established a COVID-19 coordinator in the White House to manage agency-wide response and delegate authority to relevant cabinet members to use DPA as needed.

Resulting actions under the law included prioritizing orders oꩵf the Pfizer vaccine, increasing production of more than 60 million COVID-19 tests by various suppliers, and creating domestic capacity to produce p꧟ersonal protective equipment.

The Bottom Line

The DPA has been used by presidents for decades to enlist the private sector to support national defense. The law has evolved to help meet the challenge as the country faces new threats whether from foreign nations 🧸or natural emergencies.