Why Businesses Must Stop Dithering and Learn to Love the Defense Production Act

The year was 2017. The global financial crisis of 2008 was a distant memory. The economy was booming, there was no national emergency, no lethal pandemic and no urgent shortage of medical supplies. In fact, there were no urgent shortages of any overarching kind, whether medicine, food, or fuel. And yet, in 2017 President Trump invoked the Defense Production Act.

His explanation for doing so underscores why health care advocates, businesses and other U.S. citizens have been imploring the president to exercise his authority under that same piece of legislation to address the COVID-19 crisis — which actually is a full-blown, urgent, life-threatening emergency.

What is the Defense Production Act?

The Defense Production Act (DPA) was enacted in September 1950, shortly after the U.S. officially entered the Korean War. Its primary aim was to mobilize key domestic industries for war — steelmaking, for example — while guarding against price gouging, labor exploitation and other market abuses.

It is important to note, though, that DPA is not limited to wartime use. It has been updated, reauthorized and invoked many times since 1950.

The full title of DPA leaves plenty of wiggle room for non-war uses. It is, as the full title explains, “an Act to establish a system of priorities and allocations for materials and facilities, authorize the requisitioning thereof, provide financial assistance for expansion of productive capacity and supply, provide for price and wage stabilization, provide for the settlement of labor disputes, strengthen controls over credit, and by these measures facilitate the production of goods and services necessary for the national security, and for other purposes.”

In fact, President Trump first invoked DPA within months of taking office. As recorded in the Federal Register on June 15, 2017, the president determined that certain technology related to the aerospace industry would not be available in a “timely manner” without presidential action under DPA.

As explained in the Federal Register, the president determined that “purchases, purchase commitments, or other action pursuant to section 4533 of the Act are the most cost effective, expedient, and practical alternative method for meeting the needs for those critical technology items” (emphasis added).

That rationale fits the current COVID-19 crisis to a T. Nevertheless, as of this writing the president has only signed an executive order invoking DPA, without taking the concrete actions necessary to actually implement its provisions.

Wait, so DPA could have been officially activated weeks ago?

Yes, DPA could have been officially activated weeks ago. Or months and years ago, for that matter.

Another recent example occurred in 2012, when President Obama formally invoked DPA on behalf of the U.S. Navy. After the Republican-controlled Congress blocked the Navy from purchasing biofuel on the open market, Obama’s DPA authority provided seed money for the construction of four biofuel plants, earmarked for the Navy.

The U.S. was far from a fuel crisis in 2012, and yet DPA kicked in.

As for the current crisis, the president’s own Federal Emergency Management Agency (FEMA) updated its COVID-19 position on March 20, 2020, confirming its readiness to implement presidential authority pursuant to both the DPA and Title VI of The Robert T. Stafford Disaster Relief and Emergency Assistance Act.

“The Act requires companies to prioritize government orders and contracts that are necessary to meet the response efforts associated with the coronavirus COVID-19 pandemic,” FEMA explains. “Authorities can also be used to provide financial incentives and assistance to private industry to expand production and capacity for necessary supplies and resources."

Why is the president hesitating?

Why, indeed. Despite urgent and repeated pleas for a coordinated, expedited federal response to the COVID-19 crisis, the president continues to lean on individual governors to resolve their own state’s problems.

That clearly presents a problem in terms of the national welfare. Instead of collaborating on priorities, states that have mobilized resources on COVID-19 are forced to compete with each other, and with the federal government, for supplies.

The insistence on state-level leadership is also more than a little ironic, considering that presidential authority under DPA was recently renewed in 2018, just one year after Trump took office.

The renewal affirmed Title III of DPA, which “provides the president broad authority to ensure the timely availability of essential domestic industrial resources to support national defense and homeland security requirements through the use of highly tailored economic incentives,” as explained by the DPA Title III Office, which is part of the U.S. Department of Defense.

“Specifically, the program is designed to create, maintain, protect, expand, or restore domestic industrial base capabilities,” adds the Office.

Business leaders step in where the president fears to tread

In other words, the president has had the tools, the authority, and the precedent, to act well in advance of the catastrophe and coordinate a nationwide effort to ramp up production of vital supplies before waves of sick people began crowding into hospitals.

The job of picking up the pieces is now left to U.S. business leaders.

Some of them appear to bear at least some of the blame for the mess; reportedly, the U.S. Chamber of Commerce has been among those lobbying the president to rely on voluntary private sector efforts instead of implementing DPA.

That’s something to keep in mind as 3M, Facebook, Tesla and other leading companies suddenly come through with their own plans for increasing production or turning over their own stockpiles of face masks and other critical supplies.

In the meantime, the president’s responsibility seems to consist only of applauding from the grandstand while businesses scramble over each other for a share of a new, lucrative market.

On Sunday, for example, The Hill cited a tweet from the president that said “the auto companies will be permitted to “make ventilators and other metal products, FAST! ‘Go for it auto execs, let’s see how good you are?’”

Easier said than done. As pointed out by NBC News among many other news outlets, ventilators are complicated, expensive pieces of equipment. Converting an auto factory to make ventilators will be an equally complicated and expensive endeavor that could take weeks or months, even as the window of time squeezes shut.

Then there’s the whole matter of the specialized supply chain for medical ventilators, of which metal is only one part.

As auto makers and other companies ramp up ventilator production, they will be competing for parts and raw materials, putting even more upward pressure on prices.

Some companies appear to have taken these issues into close consideration, with General Motors being one example.

At the other end of the scale, the lack of presidential leadership leaves the field open for a worst-case scenario in which scores of U.S. manufacturers at all levels of readiness, quality and expertise rush pell-mell to secure their supplies, giving rise to needless inefficiencies and delays.

Apparently, that is the best that the American people can expect given the lack of leadership from the White House.

As for the ability of U.S. business leaders to fill the void — in protecting workers as well as producing medical equipment — frankly, so far the record has been mixed.

Image credit: Natanael Melchor/Unsplash