What Manufacturers Need To Know About The Defense Production Act

Shalane Layugan January 21, 2021

On January 21, 2021, President Biden signed a series of executive orders including invoking the Defense Production Act to combat the COVID-19 pandemic. The order directs federal agencies to make use of the act to increase production of materials needed for vaccines, masks, and testing kits.

Many manufacturers and engineers have volunteered to address the shortage of supplies to combat the coronavirus pandemic throughout last year but some supplies are taking a long time to produce. Invoking the Defense Product Act (DPA) allows the federal government to direct U.S. manufacturers to ramp up production of emergency medical supplies immediately.

Last year, FEMA confirmed using the DPA for the first time during the coronavirus pandemic to order about 60,000 test kits and 500 million personal protective masks. However, FEMA then announced later that same day, “At the last minute, we were able to procure the test kits from the private market without evoking the DPA.”

The uncertainties of today's crisis coupled with manufacturers' exempt status from state-wide closures signal that the industry should remain prepared for the enactment of the DPA. Here’s what it means for U.S. manufacturers and how they can prepare. United States flag on aircraft

The History Of The Defense Production Act

Congress passed the Defense Product Act in 1950 during the Cold War-era in response to President Truman’s concerns that the war in Korea would cause supply shortages and there would be a need to expedite production for the military defense.

Although originally known as a wartime authority, the law’s definition of “national defense” to shape U.S. military preparedness and capabilities has broadened throughout the years. The DPA now has provisions that include homeland security, recovery from natural disasters, and other emergencies.

The DPA has been invoked many times, but recently on smaller scales. For example, the U.S. government issued the DPA in 2019 to direct the Defense Department to develop rare-earth magnets used in electronics “essential to the national defense” amid concerns of China export restrictions of the materials.

What Manufacturers Could Expect From Enactment Of The DPA

If the U.S. government contacts a private manufacturer to place an order to produce medical supplies, the DPA does not provide more capacity or materials (which may already be in short supply) to produce what is being contracted. The DPA simply reprioritizes the supply chain. Essentially, the government’s orders would come first for manufacturers to supply over other orders. For example, if a textile company makes materials for PPE and other paper consumer products, agencies can use the order of the Defense Production Act to have that company put all other production on hold to make PPE material first.

Although the U.S. federal government has the authority to order the industry in times of need, it has been a long time since the DPA has been used for public health purposes. According to a former Pentagon official and National Security Council staffer from previous administrations, there are steps that may take place before contract orders are sent to manufacturers:

The federal government assesses each of the 50 states to determine the locations that need supplies
The type of supplies needed (ventilators, masks, gloves, etc,) and the exact number of supplies is determined as hospitals assess how many days of personal protective equipment they have and what are their biggest gaps of supply
The president delegates requests to federal agencies (the vast majority by the Defense Department) who would identify the domestic manufacturers who are capable of producing those items

The DPA has provisions or parts of the law that can just be invoked, like an “allocation” provision for companies to be “on notice” to fulfill an upcoming order. Manufacturers should be on alert and consider stocking supplies on alert to set aside supplies that may be needed to fulfill an upcoming order from the federal government.

Supply chain disruptions are still likely so it’s important manufacturers should continue to keep communications with customers clear about operations. Communicate especially often with suppliers in order to be aware of any potential shortages. Let them know if the coronavirus outbreak has altered operations, production has shifted focus, and if regular customer service remains unchanged.

Open lines of communication with your customers and your internal teams are some effective ways to overcome supply chain disruption. Ensure your tools and technology are running smoothly should you need to shift your production. In addition, have a thorough and complete understanding of every element in your supply chain and your contingency plans — and make sure your relevant teams are familiar with the plans too.

Resources For Manufacturers To Prepare

Manufacturers should familiarize themselves with how the Department of Defense (DoD) conducts business. Common concerns of the DoD include counterfeit parts, anonymity, incomplete quotes, and inaccurate data. Ensure your data sheets are accurate and are published with the latest revision date. The data you present on your website should also be consistent.

Market your products and services well using your unique sell proposition to establish trust in the industry. Corrugated Metals is a roll forming manufacturer that was contacted by the U.S. Air Force in the early 2000s to create a new product for them. The RFQ came from Corrugated Metals’ company profile listing on the Thomas Network and spurred a new way for Corrugated Metals to do business with the DoD. More than a million buyers source products and services on the Thomas Network — including those in the defense industry.