Defense Production Act
Understanding Biden’s Invocation of the Defense Production Act
On Feb. 5, the Biden administration announced plans to leverage the Defense Production Act (DPA) to bolster vaccine production, boost the availability of at-home and point-of-care virus tests, and increase the supply of critical shortages in personnel protective equipment such as masks, shields and gloves. Alongside the use of the DPA, the Pentagon announced plans to deploy at least 1,000 active-duty military personnel throughout the country to support mass vaccination efforts.
A little less than a month later, the President vowed on March 3 to make enough vaccine doses available to vaccinate every U.S. adult by the end of May. This expedited vaccination timeline was attributed to an agreement, brokered by the White House, between Johnson & Johnson and Merck to expand Johnson & Johnson’s existing vaccine production capabilities. White House Chief of Staff Ronald Klain suggested that this new vaccine production timeline was at least in part made possible by the DPA.
These announcements were made possible by two executive orders (13987 and 14001) issued during President Biden’s first week in office. The orders were designed to systematize the federal government’s management and coordination of the coronavirus pandemic recovery efforts—to include reevaluating existing supply levels in the Strategic National Stockpile—and to establish the organizing framework under which the DPA would be used. These steps are in line with Biden’s campaign promise to leverage the authorities under the DPA to support a goal of administering 100 million coronavirus vaccines within the first 100 days of his presidency.
For their part, both Pfizer and Moderna stated on Feb. 23 that they expected to increase vaccine production by the spring. Pfizer Chief Executive Officer Albert Bourla noted that the DPA has “significantly aided” his company’s efforts to secure raw materials and equipment necessary to expand production of the vaccine.
While these initial invocations of the DPA are likely to be only the first among many, the orders provide some insight into how the administration plans to utilize existing authorities to counter the pandemic in the near term. They also signal the White House’s hope to build a longer term capability to handle future health challenges that may emerge.
Before unpacking Biden’s directives, it may be useful to first review the DPA itself and the Trump administration’s invocation of its statutory authorities during the first 11 months of the pandemic.
Background on the Defense Production Act
The DPA was originally enacted in 1950 during the Korean War. It was inspired by two World War II-era laws (the First War Powers Act of 1941 and Second War Powers Act of 1942) that granted the president emergency powers to, among other things, enter into contracts and to require the prioritized fulfillment of those contracts over all others. The laws also included the power to allocate materials and facilities for their fulfillment. While these original authorities lapsed at the end of World War II, the beginning of the Cold War and the outbreak of the Korean War prompted President Truman to appeal to Congress to reinvigorate executive authorities to protect the country’s national security.
The original DPA included seven titles, four of which expired at the end of the Korean War in 1953, as detailed by the Congressional Research Service. Three of those titles have been reauthorized more than 50 times since then (most recently in the John S. McCain National Defense Authorization Act of 2019, which authorizes the act until 2025). The authorities that were allowed to lapse related to labor disputes, requisitioning, rationing, wage and price fixing, and credit controls.
Today, the act confers on the president a broad set of powers to mobilize the resources and production of domestic private companies to meet key national security and defense needs. Specifically, it allows the president to reorient the nation’s domestic manufacturing and production capabilities and to require companies to prioritize and fulfill contracts that address those national needs. (Lawfare previously explored these DPA authorities in March 2020, after President Trump’s initial invocation of the act. This article summarizes those authorities below.)
Title I of the DPA (“Priorities and Allocations”) allows the president to require persons and businesses to prioritize and accept government contracts for materials and services and to allocate the general distribution of materials, services and facilities to promote the national defense. Before doing so, the president has to determine that the materials in question are scarce and essential to the national defense. The White House also has to determine that the national security needs cannot be met in a less intrusive manner.
Title III of the DPA (“Expansion of Productive Capacity and Supply”) allows the executive to provide financial incentives—such as loans, loan guarantees, direct purchases and purchase commitments—to incentivize domestic manufacturers and to ensure that the federal government has the capacity to produce critical items. The authorities include the ability not only to provide economic incentives but also to procure and install equipment in private industrial facilities to achieve the necessary production goals. This particular authority is part of the regular functioning of the executive branch and its various departments and agencies. For instance, the Department of Defense regularly uses the authority to manufacture defense technologies.
Finally, Title VII of the DPA (“General Provisions”) establishes key definitions, covers rule-making under the act and sets out the sunset provisions. Title VII also provides a broader set of authorities for the executive to approve voluntary agreements among market competitors that may otherwise risk antitrust and contract liabilities. These actions are subject to monitoring by the Federal Trade Commission and the Department of Justice to ensure that parties are following the terms and purposes of the agreement. In 1988, Congress passed the “Exon-Florio” amendment to the DPA, which created the Committee on Foreign Investment in the United States (CFIUS) and granted the president the power to review certain corporate mergers, acquisitions and takeovers to evaluate whether they adversely impacted national security interests. While CFIUS has since developed its own, separate statutory footing, it was originally created under the DPA.
Trump’s Use of Defense Production Act
President Trump first invoked the DPA in late March 2020 in response to the coronavirus pandemic and subsequently expanded his use of the act in follow-on executive orders and directives. These follow-on measures were focused on cracking down on hoarding of medical supplies, limiting the export of medical goods, increasing domestic production of masks and ventilators, providing financial support and loans necessary for purchases, and securing the nation’s food supply by declaring meat plants as critical infrastructure. As part of these efforts, the Trump administration engaged with General Motors to produce ventilators and with 3M to produce N95 respirator masks. Throughout the spring, summer and fall, the Department of Defense continued to invoke the act to bolster domestic production of critical supplies in the Defense Industrial Base (DIB) to support vital national security industries impacted by the pandemic. The DIB is an industrial complex designed to support research, development, and maintenance of military weapons systems and parts across nine areas including aircraft and shipbuilding, electronics, munitions and space systems.
In August, the Trump administration also invoked the DPA to expand coronavirus testing capacity. In total the administration invoked the authorities of the act 18 times to counter the pandemic.
Still, many experts criticized the Trump administration for not quickly invoking the act and for allegedly not using it enough to increase production. The nonpartisan Congressional Research Service noted in late July 2020 that it was unclear which executive agency was charged with the task of leading the administration’s use of the DPA and claimed that the administration’s use of the act was “sporadic and relatively narrow.” In addition, many groups criticized the Trump administration for not targeting the act’s authorities toward addressing pending shortfalls in supplies and equipment necessary for vaccine production.
During the initial outbreak, Trump’s invocations of the DPA attempted to address shortfalls in personal protective equipment, producing much needed ventilators to treat patients and expanding testing capacity. The Biden administration’s approach is informed by the next phase of the pandemic—the need to quickly develop a mass vaccination capability across the country.
Biden’s Executive Orders
During his first week in office, President Biden signed two executive orders designed to organize the administration’s whole-of-government approach to the coronavirus pandemic and to leverage the DPA to address critical national needs. The orders established the position of COVID-19 response coordinator, held by Jeff Zients, who is empowered to serve as the conduit for the administration’s coronavirus policies and, specifically, its utilizations of the DPA.
Biden’s initial framework order, which outlines the president’s approach to the DPA, highlights four priorities: an immediate inventory of supplies, an evaluation of the viability of using federal pricing schedules to assist state and local governments’ acquisition of needed supplies, the development of a long-term strategy and capability to respond to future pandemics, and tribal access to the Strategic National Stockpile.
Most immediately, the Biden administration directed an inventory review of critical materials; treatments; and supplies, personal protective equipment and resources necessary to effectively produce and distribute tests and vaccines at scale. This part of the order also directed an evaluation of whether private industry could reasonably be expected to provide such supplies in a timely manner. The goal of this provision is to quickly identify and rectify any shortfalls or gaps in supplies. The administration also asked that agency heads evaluate whether current liability risks, regulatory requirements, or other factors impede the development and production of needed supplies, and, if so, whether any actions can be taken to remove those impediments.
The second part of Biden’s order requests a determination of whether the use of reasonable pricing clauses in federal contracts can facilitate better purchase rates for state, local, tribal and territorial government buyers of the needed supplies. In the late 1980s and early 1990s, the National Institutes of Health (NIH) used pricing clauses to enable public access to intellectual property developed through public and private partnership in the health care space. Although the NIH abandoned the measures in 1995, the current debate around reasonable pricing clauses centers on the Bayh-Dole Act, which includes a price-setting mechanism for the federal government. Specifically, the provision (known as “march-in rights”) allows the government to require any contractor that develops a patent through federal funding to grant a license to applicants or, in the event that the contractor refuses, the government can grant the license itself. While no administration has invoked this provision, several Democratic presidential candidates proposed it as a means of lowering drug prices without congressional action. In the current instance of combating the coronavirus, the federal government can use the pricing clauses as leverage to ensure favorable pricing for testing and vaccination technologies that private companies have developed with the support of federal funding. Additionally, it can invoke its march-in rights to grant licenses to third parties to produce the same products and, in turn, lower market prices for the goods. At present, while there has been no indication that the administration has made a determination on this front, its funding to Johnson & Johnson is an example of the type of leverage that it may have used in negotiations with the company and Merck to expand vaccine production.
Third, Biden’s order directs executive departments and agencies to provide a strategy to design, build and sustain a long-term capability to manufacture supplies for future pandemics and biological threats within 180 days of the order. Finally, the executive order directs the secretary of health and human services to facilitate access to the Strategic National Stockpile for federally recognized tribal governments and health care providers.
Using this framework, the administration announced on Feb. 5 that it would leverage the DPA to boost supplies for manufacturing Pfizer’s coronavirus vaccine, ramp up availability of at-home or point-of-care virus tests, and produce more personal protective equipment—namely masks, shields and nitrile gloves.
With regard to boosting Pfizer’s vaccine production capabilities, the administration plans to give Pfizer priority access to raw materials as well as key equipment—filling pumps and tangential flow filtration skid unit components—to allow the company to overcome bottlenecks to increase manufacturing and meet its delivery targets. Biden’s team also plans to sign contracts with six diagnostic companies to boost the availability of at-home tests.
These initial actions are likely to be the first of many additional steps that the administration will take to address the evolving needs of the ongoing national health crisis. But at this stage, they demonstrate that the Biden administration plans to take a more hands-on approach and to directly engage with vaccine manufacturers to determine where bottlenecks exist and to leverage the DPA to help ease supply and production constraints.