New HHS buying authorities among options available under Defense Production Act

Some options under the DPA are already employed on a semi-routine basis by the Defense Department and other agencies but could play a bigger role against the co...

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President Donald Trump’s executive order this week invoking the Defense Production Act gave the Department of Health and Human Services legal authorities it normally does not have to reorient domestic supply chains toward critical public health needs.

But the DPA itself contains a wide range of authorities, some of which agencies could use prior to the order, and that could come into play during the COVID-19 pandemic. Some are already employed on a semi-routine basis by the Defense Department and other agencies.

This week’s order specifically involves Title I of the DPA, which lets the government reprioritize its own contracts with suppliers, and, to the extent those procurements involve competing demands from the private sector, and move itself to the front of the line, said Jerry McGinn, the executive director of the Center for Government Contracting at George Mason University.

“That’s done through the Defense Prioritization and Allocation System, which is run by the Department of Commerce. And several agencies — the Defense Department, Homeland Security and others — already had that authority directly delegated to them, so they can essentially do that contract rating themselves,” said McGinn, who formerly managed DoD’s use of the DPA as a senior official in the Office of Manufacturing and Industrial Base Policy.

“HHS did not have that prior to the President’s executive order. So essentially, what the executive order did was give HHS that authority so they can prioritize contracts in this really crazy time that we’re in, instead of having sort of a middleman with the Department of Commerce,” he said.

DoD used the same title of the act when it saw an urgent need to field Mine-Resistant, Ambush-Protected vehicles to Afghanistan. But other agencies have used it too in recent years.

According to the Congressional Research Service, FEMA invoked Title I of the DPA “extensively” during the 2017 hurricane season to prioritize the delivery of critical supplies to Puerto Rico. And the Energy Department used it to order continued flows of natural gas to California during that state’s energy crisis in 2001.

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The same title includes an authority that would let DoD involuntarily “allocate” commercial airlines’ aircraft to supplement its own airlift capabilities. But that provision hasn’t been invoked since the end of the Cold War.

And it contains what McGinn called a “nuclear option” that would give the government the authority to take control of certain industries and their supply chains. President Harry Truman famously tried to use it to nationalize American steel production during a 1952 labor action, but the Supreme Court ruled that was unconstitutional.

“It’s very rarely used, and I don’t see ever see a situation where that would come into play here,  because government and industry is working so closely together on the common challenge before us,” he said.

But another much more commonly-used portion of the DPA — Title III — very well may play a role in the current crisis. That portion of the law is focused primarily on government intervention in the supply chain to make sure critical items can be produced domestically.

The Defense Department has made use of Title III in several ways in recent years, including to jumpstart a domestic industry for drop-in biofuels, and to resurrect parts of its supply chain that had moved offshore — leaving DoD dependent, in some cases, on one overseas supplier for items such as rare earth minerals.

“For this situation, it would be things like creating incentives to modify existing plants to increase production capabilities,” McGinn said. “That’s where a Title III grant or a loan or purchase commitment could come in. The challenge is those have traditionally taken months to develop, so it’s not an immediate fix, but it allows you to build more capacity. Some of the pharmaceutical industry’s supply chain is now sole-sourced in China. So you can use the Defense Production Act to help rebuild those industrial capacities in the U.S.”

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