On May 18, 2022, President Biden invoked the Defense Production Act of 1950 (the DPA) to alleviate the baby formula shortage.
Biden’s Memorandum, addressed to the Secretary of Health and Human Services (HHS), stated that the “disruption threatens the continued functioning of the national infant formula supply chain, undermining critical infrastructure that is essential to the national defense, including to national public health or safety.” Thus, to ensure a continued supply of formula, the HHS Secretary, in consultation with other cabinet and agency heads, may prioritize and allocate “all ingredients necessary to manufacture infant formula, including controlling the distribution of such materials . . . in the civilian market[.]”
The DPA, as amended, gives the President broad authority to influence domestic industries in the interest of national security. Importantly, the President can mandate that persons and corporations (1) accept prioritized contracts; and (2) follow the President’s allocation of materials, services, and facilities. 50 U.S.C. § 4511(a); Defense Production Act of 1950, Section 101(a) (emphasis added). Stated differently, the President can invoke the DPA to “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.”[i]
Most recently, the President invoked the DPA to address medical supply chain issues related to COVID-19. Agencies used DPA authorities to 1) prioritize contracts for critical materials, such as COVID-19 vaccines, 2) fund projects for the expansion of domestic supply production, and 3) promote public-private partnerships.[ii] In response, private companies found DPA awards provided “timely access to raw materials and supplies and helped them expand production faster than they could have on their own.”
With the DPA being utilized for more than the traditional defense context, government contractors should become familiar with this law as its use expands to different industries. When working with federal agency partners, contractors should understand policies and procedures related to the DPA. Additionally, contractors should consider how they can compete for DPA awards as these contracts offer not only monetary allocations, but also business development and growth opportunities.
If you have any questions or need any additional information, please do not hesitate to contact the authors.
[i] Heidi M. Peters & Michael H. Cecire, Cong. Research Serv., R43767, The Defense Production Act of 1950: History, Authorities, and Considerations for Congress 1 (2022), https://sgp.fas.org/crs/natsec/R43767.pdf.
[ii] U.S. Gov’t Accountability Off., GAO-22-105380, COVID-19: Agencies Are Taking Steps to Improve Future Use of Defense Production Act Authorities (2021), https://www.gao.gov/assets/gao-22-105380.pdf.