Post-World War II Statute Allows President to Compel Private Companies to Help Produce Goods Necessary for National Defense
In March 2020, the Trump Administration invoked powers under the Defense Production Act in response to the COVID-19 pandemic. What is the Defense Production Act? How often are its provisions invoked? What does it allow the government to do? And what actions are permitted under the Act?
What Is the Defense Production Act?
The Defense Production Act of 1950 (DPA) is a federal law that grants the President broad powers to employ private, domestic industrial capacity to meet national defense needs and requirements. The statute was enacted as the Korean War began to ramp up and was loosely based on the War Powers Acts, which had been put in place in 1941 and 1942 to allow President Franklin D. Roosevelt to more effectively use the domestic economy to support the war effort. The DPA does not have permanent effect but must be periodically reauthorized, which was last done in 2019. The DPA will expire in 2025 unless reauthorized again.
The Authority Granted Under the Defense Production Act
Under the DPA, the President (technically, the “executive branch”) is exclusively granted the authority to invoke the Act. As a practical matter, the authority to mandate participation in the production is delegated to department or agency directors.
The DPA grants considerable powers, including the ability, through an executive order, to mandate that private companies give priority to orders for the federal government. It further allows the president to “allocate materials, services and facilities” as necessary to promote the national defense, which can include taking specific measures to respond to, or prohibit hoarding of, critically needed materials or supplies.
The Defense Production Act also permits the President to establish financial incentives for the private domestic industrial sector to develop or produce goods needed for national defense. Those incentives may include loans or loan guarantees, purchase commitments, direct purchases, or the financing of procurement and installation of any necessary equipment in private plants or facilities. Furthermore, at the discretion of the executive branch, companies that typically would be banned from working together because of anti-trust laws may be allowed to do so.
How Often Is the Defense Production Act Used?
A number of federal agencies, including FEMA (the Federal Emergency Management Agency), the Department of Defense, and Homeland Security, use the DPA to compel private companies to produce supplies, parts, and protective equipment, most often as a response to natural disasters. Though the public perception is that the Defense Production Act is rarely used, the reality, according to the Department of Defense (DOD), is that the provisions of the statute are used on a fairly regular basis to provide priority for government contracts and government needs. The DOD uses the law some 300,000 times every year, often in response to natural disasters, such as hurricanes, blizzards, and floods.
Many uses of the DPA have little to do with unanticipated natural events, though. For example, it was employed in 2019 to secure rare earth metals required in the manufacture of lasers, armored vehicles, and jet engines. FEMA and Homeland Security reportedly used the Defense Production Act more than a thousand times in 2018 alone.
How Has the Defense Production Act Been Used to Combat COVID-19?
The President issued an Executive Order on March 18, 2020, citing the DPA as authority for delegating to the Secretary of Health and Human Services to mandate performance of contracts necessary to respond to the spread of COVID-19. The actions taken by the administration under the DPA since then fall under three specific categories:
- Measures designed to increase the available resources for treating the virus and managing its spread;
- Measures for sanctioning individuals or companies who wrongfully hoard or profit from the sale of critically needed supplies; and
- Compelling certain businesses to stay open to avoid shortages in non-medical areas.
Increasing the Available Resources
Since the March 18 Executive Order invoking the Defense Production Act, the administration has directed a number of private companies, including 3M and General Motors, to divert manufacturing capacity to production of N95 respirator masks. FEMA also has drawn on the powers granted under the DPA to direct private companies to manufacture coronavirus test kits.
The Prevention of Hoarding
The administration is aggressively investigating allegations of hoarding or price-gouging with respect to the sale of critically needed materials, such as masks, gloves, and hand sanitizer. On April 24, a man in New York was the first person arrested under the provisions of the Act, allegedly in possession of more than 100,000 masks and 500,000 gloves.
Compelling Businesses to Stay Open
On Tuesday, April 28, the President issued an executive order requiring that meat processing plants continue operations to avert the risk of food shortages. According to administration officials, meat plants are deemed an “essential” business. The federal government has promised to supply the facilities with additional masks, gloves, and other protective gear. Some meat-processing plants had closed because of concerns about rates of COVID-19 infection and deaths among workers.