On March 18, 2020, President Trump invoked the Defense Production Act of 1950 (“DPA”) in an effort to mobilize U.S. domestic production of medical and other supplies as the U.S. begins to move against COVID-19.
Traditionally, a “war time” measure, the DPA gives a president broad authority to influence and direct private entities to produce strategic goods or muster strategic materials. These goods and materials, known as “essential” in the DPA, are those identified by the president as needed for military preparedness, and also to enhance or support domestic preparedness, response, and recovery from national emergencies, including natural disasters.
To ensure “essential” goods and materials are available in such an effort, the DPA gives the president broad authority to require individuals and entities to take on and prioritize contracts for related materials and services. This does not mean a designated entity can no longer produce other goods or materials – it simply means that DPA-enabled contracts must be prioritized and completed first. For example: a company that produces ventilators may continue to produce other medical equipment – but government-mandated ventilator orders pursuant to the DPA must be completed before other work may continue. Relatedly, a separate producer of a ventilator component may also be forced to take a government contract for that component part before it can continue with other production.
The DPA also grants the authority to provide loans and other incentives to increase production of needed goods and materials, as well as the authority to broadly govern private industries – including the creation of agreements, prevention of certain mergers or similar transactions that threaten national security, and employment of certain individuals vital to national defense.
As you can see, this gives the federal government enormous power to influence production of vital goods, materials, and supplies. In social terms, the invocation of the DPA is a positive step – a sign of a “whole of government” approach in the fight against COVID-19. However, businesses that produce (or potentially produce) goods, materials, or services that may be needed to combat COVID-19 should begin to prepare for the receipt of government contracts – and how such contracts may impact other obligations.
The BridgehouseLaw Team is here for you to assist and advise.