The Defense Production Act (DPA) and COVID-19: Key Authorities and Policy Considerations

Summary

As the coronavirus (COVID-19) outbreak develops, the United States faces drug and medical supply scarcities due to disrupted supply chains and increased demand. In response, the President may exercise emergency authorities under the Defense Production Act of 1950 (DPA; 50 U.S.C. §§4501 et seq.) to address supply shortages and economic development impacts, and may have begun the process of doing so. This Insight considers DPA authorities that may be used to address domestic essential goods and materials shortages caused by the outbreak, and explores potential policy considerations for Congress. For more information on the health and epidemiological aspects of COVID-19, see CRS products R46219 and IF11421.

DPA Provisions and Recent Use

The DPA confers broad presidential authorities to mobilize domestic industry in service of the national defense, defined in statute as various military activities and “homeland security, stockpiling, space, and any directly related activity” (50 U.S.C. §4552.) including emergency preparedness activities under the Stafford Act, which has been used for public health emergencies. Many of these authorities are delegated to executive agencies under Executive Order 13603.

Current DPA authorities include, but are not limited to:

Title I: Priorities and Allocations, which allows the President to require persons (including businesses and corporations) to (1) prioritize and accept government contracts for materials and services, and (2) allocate or control the general distribution of materials, services, and facilities as necessary to promote the national defense. Title I prioritization authorities are regularly utilized by the Department of Defense (DOD) to acquire critical military capabilities and less frequently by the Department of Homeland Security (DHS) for disaster response and preparedness needs. The allocations authority has not been invoked since the Cold War, such as to promote energy development in 1974.

Title III: Expansion of Productive Capacity and Supply, which allows the President to provide economic incentives to secure domestic industrial capabilities essential to meet national defense and homeland security requirements. DPA Title III is specifically intended to “create, maintain, protect, expand, or restore domestic industrial base capabilities” (50 U.S.C. §4533). Authorized incentives include loans, loan guarantees, direct purchases and purchase commitments, and the authority to procure and install equipment in private industrial facilities. DOD regularly utilizes Title III authorities and operates a standing DPA Title III program funded by annual congressional appropriations.

Title VII: General Provisions, which includes key definitions and other distinct authorities. These provisions grant the President the authority to establish voluntary agreements with private industry; the authority to block proposed or pending foreign corporate mergers, acquisitions, or takeovers that threaten national security; and the authority to employ persons of outstanding experience and ability and to establish a volunteer pool of industry executives who could be called to government service in the interest of the national defense.

For a more in-depth discussion of DPA authorities, see CRS Report R43767.

DPA Authorities and COVID-19

As the DPA’s definition of national defense encompasses homeland security issues, the DPA could potentially be used to respond to public health emergencies, though this has not occurred before. At the President’s discretion, DPA authorities could be employed to address concerns over medical supplies shortages due to the COVID-19 outbreak.

Case Study: Using DPA to Expand Medical Protective Gear Production

As an example of how DPA authorities could be exercised, consider the availability of personal protective equipment (PPE), such as respirator masks, amid the outbreak. Reported PPE shortages may be due to significantly increased consumer demand related to the outbreak itself, and supply chain disruptions resulting from containment measures in China and elsewhere.

Under Title I, the President could prioritize domestic production of PPE to ensure sufficient national stockpiles, and allocate them according to the needs of the emergency. Under Title III, the federal government could use authorized incentives to expand domestic capacity for PPE manufacturing to meet the needs of the emergency. Under Title VII, the President could establish voluntary agreements with private industry—which might normally be subject to anti-trust statutes—to coordinate industry PPE production.

Policy Implications for Congress

The decision whether to employ DPA authorities generally lies with the President. However, in addition to Congress’s inherent oversight authority, the DPA statute outlines several specific congressional equities:

Title I authorities can only be used for wage and price controls if accompanied by a joint resolution of Congress (50 U.S.C. §4514). This could be applicable in this case in the production and sale of PPE, drug treatments or vaccines, or other necessary goods, and would require coordination between the Administration and Congress.

Budget authority for Title III direct loans and guarantees must be specifically included in an appropriations act passed by Congress (50 U.S.C. §4531).

Title III projects that cumulatively cost more than $50 million must be authorized by an act of Congress, and the President is required to notify the committees of jurisdiction (the House Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs), and provide 30 days for comment (50 U.S.C. §4533). A large-scale effort to expand outbreak-related production capacity may require sums far greater than $50 million.

However, the DPA confers broad waivers to its Title III requirements:

During a period of national emergency declared by Congress or the President; or upon determination by the President, on a nondelegable basis, that action is necessary to avert an industrial resource or critical technology item shortfall that would severely impair national defense capability. (50 U.S.C. §4531(d)(1)(B))

Another area of possible congressional interest is DPA funding, which is appropriated annually. The FY2020 appropriation to the DPA fund was $64.4 million; the President’s FY2021 budget requested $182 million for the DPA fund (p. 276). DPA appropriations could also be made as part of a supplemental appropriations package if the DPA fund is exhausted and/or to provide resources for other DPA authorities.