The Defense Production Act (DPA) of 1950 (P.L. 81-774, 50 U.S.C. §§4501 et seq.), as amended, confers upon the President a broad set of authorities to influence domestic industry in the interest of national defense. The authorities can be used across the federal government to shape the domestic industrial base so that, when called upon, it is capable of providing essential materials and goods needed for the national defense.
Though initially passed in response to the Korean War, the DPA is historically based on the War Powers Acts of World War II. Gradually, Congress has expanded the term national defense, as defined in the DPA. Based on this definition, the scope of DPA authorities now extends beyond shaping U.S. military preparedness and capabilities, as the authorities may also be used to enhance and support domestic preparedness, response, and recovery from natural hazards, terrorist attacks, and other national emergencies.
Some current DPA authorities include, but are not limited to
These are not the exclusive authorities of the DPA, but rather some of the most pertinent because of their historical or current use.
The authorities of the DPA are generally afforded to the President in the statute. The President, in turn, has delegated these authorities to department and agency heads in Executive Order 13603, National Defense Resource Preparedness, issued in 2012. While the authorities are most frequently used by, and commonly associated with, the Department of Defense (DOD), they can be and have been used by numerous other executive departments and agencies.
Since 1950, the DPA has been reauthorized over 50 times, though significant authorities were terminated from the original law in 1953. Congress last reauthorized the DPA in Section 1791 of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 ( P.L. 115-232 ). This extended the termination of the act by six years, from September 30, 2019, to September 30, 2025, when nearly all DPA authorities will terminate. A few authorities of the DPA, such as the Exon-Florio Amendment (which established government review of the acquisition of U.S. companies by foreigners) and anti-trust protections for certain voluntary industry agreements, have been made permanent by Congress. The DPA lies within the legislative jurisdiction of the House Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs.
Congress may consider enhancing its oversight of executive branch activities related to the DPA in a number of ways. To enhance oversight, Congress could expand executive branch reporting requirements, track and enforce rulemaking requirements, review the activities of the Defense Production Act Committee, and broaden the committee oversight jurisdiction of the DPA in Congress. Congress may also consider amending the DPA, either by creating new authorities or repealing existing ones. In addition, Congress may consider amending the definitions of the DPA to expand or restrict the DPA's scope, amending the statute to supersede the President's delegation of DPA authorities made in E.O. 13603, or consider adjusting future appropriations to the DPA Fund in order to manage the scope of Title III projects initiated by the President.
The Defense Production Act of 1950, as amended (DPA), 1 provides the President a broad set of authorities to ensure that domestic industry can meet national defense requirements. In the DPA, Congress has found that "the security of the United States is dependent on the ability of the domestic industrial base to supply materials and services for the national defense and to prepare for and respond to military conflicts, natural or man-caused disasters, or acts of terrorism within the United States." 2 Through the DPA, the President can, among other activities, prioritize government contracts for goods and services over competing customers, and offer incentives within the domestic market to enhance the production and supply of critical materials and technologies when necessary for national defense. Since 1950, the DPA has been reauthorized over 50 times by Congress, most recently in 2018 (Sec. 791 of P.L. 115-232 ). The majority of DPA authorities will expire on September 30, 2025, unless reauthorized.
This report examines some of the extensive history of the DPA, focusing primarily on its creation and most recent legislative reauthorization. This report also discusses the foremost active authorities of the DPA. Nevertheless, this report is not intended to evaluate all authorities of the DPA comprehensively. For example, though significant authorities for the Committee on Foreign Investment in the United States (CFIUS) are included in the DPA, CFIUS is generally considered separate and distinct from the DPA and this report defers to other CRS reports for in-depth discussion on that issue. This report also identifies relevant delegations of the President's DPA authorities made in Executive Order (E.O.) 13603, National Defense Resources Preparedness. 3 Finally, this report provides a brief overview of issues Congress may consider in its oversight of executive branch use of DPA authorities, as well as the implementation of changes made in the most recent reauthorization. The report also discusses congressional considerations for expanding, restricting, or otherwise modifying the authorities provided by the DPA through new legislation.
As appendices to this report, several supplementary tables provide: additional resources related to various DPA subjects; a tabled analysis of key provisions of the DPA and related portions of E.O. 13603 and in regulations; the delegation of Title I priorities and allocations authority to Cabinet Secretaries in E.O. 13603; and a chronology of laws reauthorizing DPA authorities since first enactment. There is also an appendix discussing how DPA authorities changed as a result of the last major reauthorization of the law that included reforms (P.L. 113-172, To reauthorize the Defense Production Act, to improve the Defense Production Act Committee, and for other purposes). 4
The DPA was inspired by the First and Second War Powers Acts of 1941 and 1942, which gave the executive branch broad authority to regulate industry during World War II. 5 Much of this authority lapsed at the end of that war, but the beginning of the Cold War with the Soviet Union in the late 1940s and the North Korean invasion of South Korea in June of 1950 caused the Truman Administration to reconsider the need for stronger executive authority in the interest of national defense. 6
The original DPA, enacted on September 8, 1950, granted broad authority to the President to control national economic policy. 7 Containing seven separate titles, the DPA allowed the President, among other powers, to demand that manufacturers give priority to defense production, to requisition materials and property, to expand government and private defense production capacity, ration consumer goods, fix wage and price ceilings, force settlement of some labor disputes, control consumer credit and regulate real estate construction credit and loans, provide certain antitrust protections to industry, and establish a voluntary reserve of private sector executives who would be available for emergency federal employment.
Four of the seven titles (Titles II, IV, V, and VI), those which related to requisitioning, rationing, wage and price fixing, labor disputes, and credit controls and regulation, terminated in 1953 when Congress allowed them to lapse. 8
Though commonly associated with industrial production for the DOD, the DPA currently lies within the jurisdiction of the House Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs. Prior to 1975, House rules did not permit simultaneous referral of bills to two or more committees. Precedents in both chambers did not allow divided or joint referrals, regardless of bill content. Instead, bills were assigned to committees based on the preponderance of their subject matter. Because much of the President's proposal dealt with economic policy, what became the Defense Production Act was assigned in 1950 to the House and Senate Committees on Banking and Currency (their successors are the House Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs). Although the parts of the act dealing with the requisitioning of materials, wages and prices, labor, and credit are no longer in force, these committees have retained jurisdiction.
In addition to the standing committees of jurisdiction, the original statute created a Joint Committee on Defense Production. This committee was composed of selected members from the standing Committees on Banking and Currency of the Senate and House. This committee was intended to review the programs established by the DPA and advise the standing committees whenever they drafted legislation on the subject. Although the provision in the DPA establishing the Joint Committee on Defense Production was officially repealed in 1992, 9 in effect, the Joint Committee has not existed since 1977, when salaries and expenses for the committee were last funded. 10
The DPA has been amended and reauthorized numerous times since its original enactment. Most notably, with the passage and enactment of P.L. 85-95, Congress reauthorized Titles I, III, and VII while allowing Titles II, IV, V, and VI of the DPA to expire in 1953. 11 The Defense Production Act, like the War Power Acts that preceded it, included a sunset provision that has required periodic reauthorization and offered the opportunity for amendment. Congress passed the DPA in 1950 and has thus far reauthorized it 53 times, including many short-term "stop-gap" extensions. From time to time, the DPA has expired without Congress passing a law reauthorizing and extending its termination date. In such circumstances, Congress has often ultimately passed a law retroactively setting the effective date for the law to the previous expiration date. Most notably, for example, the DPA expired on October 20, 1990, and was not reauthorized until August 17, 1991. However, upon passage of P.L. 102-99, the effective date of the law was set to October 20, 1990. The DPA was most recently reauthorized by the 115 th Congress, in Section 1791 of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 ( P.L. 115-232 ). This extended the termination of the act by six years, from September 30, 2019, to September 30, 2025, when nearly all DPA authorities will terminate. See Table A-4 in the Appendix for a full chronology of reauthorizations.
This section provides summaries of the major authorities granted to the President in the three remaining active titles of the DPA. 12 Each summary describes how the DPA authorities are delegated to Cabinet officials or other offices of the U.S. government in the issued Executive Order (E.O.) 13603, National Defense Resource Preparedness. 13 It is not intended to comprehensively evaluate all authorities in the DPA. The information provided below is reviewed in Table A-2 for select provisions of the DPA. Table A-1 also provides a list of additional materials, information, and resources on various topics of the DPA that may be of use to Congress.
The DPA provides the President an "array of authorities to shape national defense preparedness programs and to take appropriate steps to maintain and enhance the domestic industrial base." 14 [Italics added.] DPA authorities are tied to the definition of national defense, as the use of any major DPA authority must be interpreted to promote, support, or otherwise be deemed needed or essential for the national defense. 15 National defense is currently defined in the statute as
programs for military and energy production or construction, military or critical infrastructure assistance to any foreign nation, homeland security, stockpiling, space, and any directly related activity. Such term includes emergency preparedness activities conducted pursuant to title VI of The Robert T. Stafford Disaster Relief and Emergency Assistance Act [42 U.S.C. §§5195 et seq.] and critical infrastructure protection and restoration. 16
Further reference can be made to Title VI of the Stafford Act for a definition of "emergency preparedness" activities. It states that emergency preparedness:
means all those activities and measures designed or undertaken to prepare for or minimize the effects of a hazard upon the civilian population, to deal with the immediate emergency conditions which would be created by the hazard, and to effectuate emergency repairs to, or the emergency restoration of, vital utilities and facilities destroyed or damaged by the hazard. 17
Therefore, the use of DPA authorities extends beyond shaping U.S. military preparedness and capabilities, as the authorities may also be used to enhance and support domestic preparedness, response, and recovery from hazards, terrorist attacks, and other national emergencies, among other purposes.
In its original 1950 form, the DPA defined national defense as "the operations and activities of the armed forces, the Atomic Energy Commission, or any other department or agency directly or indirectly and substantially concerned with the national defense. " 18 Over the many reauthorizations and amendments to the DPA, Congress has gradually expanded the scope of the definition of national defense, as recently as 2009. 19 At that time, Congress included critical infrastructure assistance to any foreign nation and added homeland security to the definition. 20
The DPA statute also includes both a full Congressional "Findings" and "Statement of Policy," as set forth in the "Declaration of Policy" section of the DPA. 21 This section of the law gives additional guidance—though not explicit legal requirements—to the executive branch on why and how the DPA authorities should be used in order to provide for the national security. For example, in the "Findings" section, with regards to national defense and energy security, Congress stated that
to further assure the adequate maintenance of the domestic industrial base, to the maximum extent possible, domestic energy supplies should be augmented through reliance on renewable energy sources (including solar, geothermal, wind, and biomass sources), more efficient energy storage and distribution technologies, and energy conservation measures. 22
As another example, as guidance to the executive branch on how the defense industrial base should be encouraged to develop, in the "Statement of Policy," Congress stated that
it is the policy of the United States that. in order to ensure productive capacity in the event of an attack on the United States, the United States Government should encourage the geographic dispersal of industrial facilities in the United States to discourage the concentration of such productive facilities within limited geographic areas that are vulnerable to attack by an enemy of the United States. 23
Section 101(a) of Title I of the DPA states
The President is authorized (1) to require that performance under contracts or orders (other than contracts of employment) which he deems necessary or appropriate to promote the national defense shall take priority over performance under any other contract or order, and, for the purpose of assuring such priority, to require acceptance and performance of such contracts or orders in preference to other contracts or orders by any person he finds to be capable of their performance, and (2) to allocate materials, services, and facilities in such manner, upon such conditions, and to such extent as he shall deem necessary or appropriate to promote the national defense. 24
The priority performance authority allows the federal government to ensure the timely availability of critical materials, equipment, and services produced in the private market in the interest of national defense, and to receive those materials, equipment, and services through contracts before any other competing interest. 25 Under the language of the DPA, a person (including corporations, as defined in statute) 26 is required to accept prioritized contracts/orders, 27 though regulations implementing Title I authorities provide practical exemptions to this mandate. The limited allowances for when a person is required to or may optionally reject a prioritized order can be superseded by the direction of the implementing federal department. 28 In executing a contract under the DPA, a contractor is not liable for actions taken to comply with governing rules, regulations, and orders (e.g., prioritization requirements), including any rules, regulations, or orders later declared legally invalid. 29 The government can also prioritize the performance of contracts between two private parties, such as a contract between a prime contractor and a subcontractor, if needed to fulfill a priority contract and promote the national defense. 30
Title I also allows the President to allocate or control the general distribution of materials, services, and facilities. Allocation authority relates historically to the controlled materials programs of World War II, when the distribution of critical materials and resources had to be managed to maximize the production of goods needed in the war effort. 31 No allocation action has been taken by the President since the end of the Cold War. 32
There are several notable restrictions to the priorities and allocation authority. For example, it cannot be used for contracts of employment. 33 Additionally, unless authorized by a joint resolution of Congress, the authority cannot be used for wage or price controls. Private persons are also not required to assist in the production or development of chemical or biological weapons unless directly authorized by the President or a Cabinet secretary. 34
Title I also contains several provisions related to domestic energy. Section 101(c) specifically authorizes the President to allocate and prioritize contracts relating to materials, equipment, and services to maximize domestic energy supplies in certain circumstances. 35 However, Section 101(c) also restricts this use unless the President makes certain findings. 36 Further, Section 105 of the DPA restricts the authorities from being used to ration the end-use of gasoline without the approval of Congress. 37 Section 106 of Title I, as amended, also designates energy as a strategic and critical material. 38 This designation enables other authorities in the DPA, especially Title III authorities discussed below, to be used for policy purposes related to energy.
In statute, Title I priorities and allocation authority can only be used to "promote national defense." In E.O. 13603, the President further constrains that authority so that it "may be used only to support programs that have been determined in writing as necessary or appropriate to promote the national defense" by either the Secretary of Defense, the Secretary of Homeland Security, or the Secretary of Energy, depending on the issue involved. The Secretary of Defense makes determinations related to military production and construction, military assistance to foreign nations, military use of civil transportation, stockpiles managed by DOD, space, and directly related activities; the Secretary of Energy makes determinations related to energy production and construction, distribution and use, and directly related activities; and the Secretary of Homeland Security makes determinations related to all other national defense programs, including civil defense and continuity of government. 39
Once a program is determined to promote the national defense, other Secretaries who have been delegated the priorities and allocation authority can use their authority for those pre-designated program purposes. E.O. 13603 provides for the delegation of the President's priorities and allocation authority to six different Cabinet Secretaries based upon their areas of expertise in different resource and material sectors. These resource areas are further defined in Section 801 of E.O. 13603. In practice, the priorities authority held by one Cabinet Secretary is frequently allowed to be used by other federal agencies, thereby allowing one agency to use another agency's authorities (e.g., DHS was allowed to use the Department of Agriculture's priorities authority related to food resources). 40 Table A-3 in the Appendix summarizes this delegation of priorities and allocation authority.
Each of the six federal agencies to which the President delegated priorities and allocations authority are required by law to issue and annually review regulations that "establish standards and procedures by which the priorities and allocations authority under this section is used to promote the national defense, under both emergency and nonemergency conditions." 41 Five of the six delegated the authority—the Departments of Agriculture, Commerce, Energy, Health and Human Services, and Transportation—have issued those regulations. DOD has not issued its regulation as it relates to using the priorities and allocation authority for water resources, as of November 20, 2018. However, DOD has indicated that its regulation is in preliminary draft. 42 Historically, the Department of Commerce's rule establishing the Defense Priorities and Allocations System (DPAS) has been the most frequently used by the executive branch. As encouraged by statute, the DPAS regulation was used as a model to create a "consistent and unified Federal priorities and allocations system." 43 This system is referred to as the "Federal Priorities and Allocations System" (FPAS). 44 Each of the regulations that make up the FPAS establish two levels of priority for issued orders notated as "DO" and "DX." In the DPAS regulations, a "DO" rating is lower than a "DX" rating. A "DO" rating order for a product means that it must be prioritized over all other nonrated orders. However, if a product that has a "DO" rated order is needed for a different "DX" rated order, the "DX" rated order takes precedence. As a matter of practice, few select programs may receive a "DX" rating. 45
The authority to prioritize contracts is routinely employed by DOD. These prioritized contracts are typically issued under the Department of Commerce's (DOC's) delegated authority with respect to materials, services, and facilities, including construction materials, and under its Defense Priorities and Allocations System (DPAS) regulations guiding the use of this authority. 46 DOD has reported that it "includes a priority rating as a standard clause in virtually all eligible contracts and orders for items under DOC's resource jurisdiction. 47 Some past examples of DOD's use of Title I priorities authority include supporting the Integrated Ballistic Missile Defense System, the B-2 Bomber, the VC-25A Presidential Aircraft (i.e., Air Force One), and Mine Resistant Ambush Protected (MRAP) Vehicles. 48 While the priorities authority is used far less frequently by other departments and agencies, it has been used for both the prevention of terrorism and natural disaster preparedness. For example, the Federal Bureau of Investigation has prioritized contracts in support of the Terrorist Screening Center program and the U.S. Army Corps of Engineers prioritized contracts in support of the Greater New Orleans Hurricane and Storm Damage Risk Reduction System program. 49 The Federal Emergency Management Agency used the authority extensively during the 2017 disaster season, including prioritizing contracts for manufactured housing units, food and bottled water, and the restoration of electrical transmission and distribution systems in Puerto Rico. 50 Further, U.S. allies have used the authority to assist with defense-related procurement issues. 51 The specific Title I prioritization and allocation authorities related to domestic energy (Section 101(c) of the DPA) was used by the Department of Energy to ensure that emergency supplies of natural gas continued to flow to California utilities, helping to avoid threatened electrical blackouts in early 2001. 52
Unlike the prioritization authority, the allocation authority has not been used since the Cold War. The authority does support the Civil Reserve Air Fleet (CRAF) program, which was created initially in 1951, and is now managed by the U.S. Department of Transportation. Under the CRAF program, civilian aircraft are "allocated" for the potential use, if required, by the DOD so that it may augment its airlift capability with civilian aircraft during a national defense related crisis. In return for their participation in the CRAF program, civilian carriers are given preference in carrying commercial peacetime cargo and passenger traffic for the DOD. 53
Title III authorities are intended to help ensure that the nation has an adequate supply of, or the ability to produce, essential materials and goods necessary for the national defense. Using Title III authorities, the President may provide appropriate financial incentives to develop, maintain, modernize, restore, and expand the production capacity of domestic sources for critical components, critical technology items, materials, and industrial resources essential for the execution of the national security strategy of the United States. 54 The President is also directed to use Title III authorities to ensure that critical components, critical technology items, essential materials, and industrial resources are available from reliable sources when needed to meet defense requirements during peacetime, graduated mobilization, and national emergency. 55
Sections 301 and 302 of Title III of the DPA authorize the President to issue loan guarantees and direct loans to reduce current or projected shortfalls of industrial resources, critical technology items, or essential materials needed for national defense purposes. 56 Loan guarantees and direct loans can be issued to private businesses to help them create, maintain, expedite, expand, protect, or restore production and deliveries or services essential to the national defense. 57 A direct loan is a loan from the federal government to another government or private sector borrower that requires repayment, with or without interest. A loan guarantee allows the federal government to guarantee a loan made by a nonfederal lender to a nonfederal borrower, either by pledging to pay back all or part of the loan in cases when the borrower is unable to do so. These authorities, for instance, could be used to provide a loan, or to guarantee a loan, to a defense contractor that is responsible for the provision of critical services essential to the national defense when credit is otherwise unavailable in the private market.
There are a number of restrictions placed on the executive branch before these loan authorities may be used in the interest of national defense. First, the budget authority for guarantees and direct loans must be specifically included in appropriations passed by Congress and enacted by the President before such loan mechanisms can be issued. 58 Except during periods of national emergency declared by Congress or the President, 59 the DPA statute also requires the President to determine that loan guarantees or direct loans meet a number of conditions before issuance. One of the conditions in using the loan authority is that the loan or loan guarantee is the most cost-effective, expedient, and practical alternative method for meeting the need. 60 There are also a number of determination requirements for loan guarantees and direct loans that may help ensure that the loan is repaid by the recipient. 61 For example, the President is required to determine that there is "reasonable assurance" that a recipient of a loan or loan guarantee will be able to repay the loan. 62
Section 303 of Title III grants the President an array of authorities to create, maintain, protect, expand, or restore domestic industrial base capabilities essential to the national defense. 63 These authorities include, but are not limited to
In general, Section 303 authorities can be used by the President to provide incentives for domestic private industry to produce and supply critical goods that are necessary for the national defense. The scope of Section 303 authorities allows for these incentives to be structured in a number of ways, including direct purchases or subsidies of such goods. Therefore, whereas Title I authorities help ensure that the government has priority access to goods that are already being produced by domestic industries, Section 303 authorities help create a sufficient supply of these essential goods in the interest of national defense.
Prior to using Section 303 authorities, the law requires the President, on a nondelegable basis, to determine that there is a "domestic industrial base shortfall" for a particular industrial resource, material, or critical technology item that threatens the national defense. 67 This determination includes finding that the industry of the United States cannot reasonably be expected to provide the capability for the good in a timely manner, and that purchases, purchase commitments, or other actions are the most cost effective, expedient, and practical alternative method for meeting the need. 68 For projects that cumulatively cost more than $50 million to address an industrial base shortfall, the projects must first be authorized by an act of Congress. Additionally, the President is required to notify the committees of jurisdiction, and give the committees 30 days to comment, when the actions to remedy the shortfall are expected to exceed $50 million. 69 Generally, very few Title III projects exceed the $50 million threshold. The President is authorized to waive the determination and notification provisions in periods of national emergency or in situations that the President, on a nondelegable basis, determines the industrial base shortfall would severely impair national defense. 70
DOD's Broad Agency Announcement Under the DPA
In February 2018, DOD's DPA Title III office (located in the office of the Manufacturing and Industrial Base Policy) issued a Broad Agency Announcement requesting interested parties to submit white papers or proposals for "projects that create, maintain, protect, expand, or restore domestic industrial base capabilities essential for the national defense." The announcement identified three broad focus areas for potential projects:
A Broad Agency Announcement is a method by which an agency solicits interest in solving a development problem. No budget is allocated and no particular procurement approach is determined in advance. Such announcements, however, often lead to a contract, grant, or some other financial agreement. (For more information on this particular BPA, see https://www.businessdefense.gov/ DPA-Title-III/ Opportunities/ .)
In E.O. 13603, the "head of each agency engaged in procurement for national defense" is delegated the majority of the authorities of Sections 301, 302, and 303 of Title III of the DPA. 71 These agencies are specifically identified in E.O. 13603. 72 This delegation includes the ability to make all determinations not explicitly cited in the statute as being nondelegable. 73 However, this delegation does not include the authority to encourage the exploration, development, and mining of strategic and critical materials and other materials. This authority is provided to the President in the statute, and is delegated only to the Secretaries of Defense and the Interior. 74
Title III of the DPA establishes a Treasury account, the Defense Production Act Fund, which is available to carry out all of the provisions and purposes of Title III. The DPA Fund is also used to collect all proceeds from DPA activities under Title III, such as the resale of DPA-procured commodities or products. 75 The monies in the DPA Fund are available until expended. However, the unobligated balance in the DPA Fund at the end of any fiscal year cannot exceed $750 million, excluding monies appropriated for that fiscal year. 76
Table 1 provides the appropriations to the DPA Fund between FY2010 and FY2019. It is possible for appropriations to the DPA Fund to be made in any of the bills providing funding to the numerous agencies delegated Title III authorities. 77 All recent discretionary appropriations directly to the DPA Fund have come from DOD appropriations acts. As noted in Table 1, however, in FY2014-2016, the Department of Energy was authorized, and subsequently made, transfers of $45 million to the DPA Fund each year from another appropriation. 78 In addition, Title III projects that are paid for through the DPA Fund have been funded through transfers of budget authority from DOD and other federal agencies. 79 Since 2000, the average total project size for Title III projects has been $25.13 million. Of that total, an average of $14.02 million was provided by the DPA Fund, while an average of $0.95 million came from other government funding, and an average of $10.21 million was provided by private sector partners as a cost-share. 80
Table 1. Appropriations to the DPA Fund Since FY2010, in Millions