• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to secondary sidebar

Alston & Bird Government Contracts Blog

  • Home
  • Services
  • Meet Our Team

President Invokes Wartime Production Law to Require Commercial Businesses to Prioritize Manufacturing & Delivery of Goods to Combat Coronavirus Pandemic

March 18, 2020 By Andrew Howard

At a news conference this morning, March 18, 2020, President Trump announced he was invoking the Defense Production Act of 1950 (“DPA”) to thwart the Coronavirus pandemic. Among numerous broad powers, this 1950 law authorizes the President to force commercial entities to prioritize and accept contracts for materials and services deemed necessary to promote the national defense. While initially passed to ensure the nation’s wartime readiness following the Korean War, Congress has greatly expanded the scope of the law to include – within the meaning of “national defense” – emergency declarations under the Stafford Act. (The President declared the Coronavirus pandemic a national emergency under the Stafford Act on March 13, 2020.)

Earlier, Congressional leaders called on the President to invoke the DPA to prioritize the manufacture of ventilators, personal protective equipment and other necessary medical supplies that are in short supply. This authority stems from the “priority” and “allocation” authority vested in the President in Title I, Section 101(a) of the DPA, which provides:

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 contract 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.  

By Executive Order, the President has delegated some of this authority to agency secretaries.  See Executive Order No. 13603.

The “priority” performance authority requires “persons” (which includes commercial businesses) to both accept prioritized orders (called “rated orders” under the DPA) and give such rated orders priority over any competing orders.  There are limited instances where a commercial company can reject a prioritized order. For example, Department of Health and Human Services (“HHS”) regulations require a recipient of a rated order to reject it where the recipient cannot fill the order by the required date (though the recipient must inform HHS of the earliest date the order can be filled).  See 45 C.F.R. § 101.33(b)(1). A rated order also must be rejected where delivery by the required date will conflict with or prevent delivery of other rated orders.  Id., § 101.33(b)(2), (3), (4). A recipient may reject a rated order where the item no longer is supplied by the recipient or if the ordering agency cannot or is unable to meet the recipient’s regular terms of sale. Id., § 101.33(c).

Relatedly, the “allocation” authority vested by the DPA allows the President (or his designees) to control the distribution of materials, services and facilities to maximize the production of goods needed for the national defense.

While the authority to place rated orders rests with the President and certain agency heads, e.g. HHS, Energy, DHS, Agriculture, etc., direct recipients of rated orders may issue rated subcontracts and supply contracts to fulfill a rated government order. The priority rating must be included on each successive order placed to obtain items or services to fulfill a rate order throughout the entire procurement chain. As such, companies engaged in the manufacture and distribution of medical supplies, food, construction services and supplies and any other industry reasonably able or likely to provide goods and services capable of stemming the Coronavirus pandemic should be on the lookout for rated orders from government agencies and upstream commercial customers. Rated orders generally are designated as such and are given a “DO” or “DX” rating or otherwise reference “DPAS”.  For additional information or help with responding to a rated order, please contact any member of the Alston & Bird Government Contracts Group.

For additional information and guidance related to the Coronavirus pandemic, please visit Alston & Bird’s Coronavirus (COVID-19) Task Force page, which contains several advisories, including those related to cybersecurity,  force majeure clauses, FDA compliance and enforcement issues, among others.

Filed Under: Defense Tagged With: Defense Production Act of 1950

About Andrew Howard

Andy Howard is a partner in the firm’s Construction & Government Contracts Group who represents clients across a wide range of industries, including construction, health care, aerospace, energy and technology. Andy’s practice involves representing construction industry professionals and federal, state and local government contractors.

[Read Bio]

Primary Sidebar

This blog is a service of Alston & Bird’s Government Contracts team and provides insights on cases, rules, trends, and latest developments in local, state, and federal government contracting. Our attorney observations include analysis of investigations, litigation, protests and issues affecting present or prospective prime contractors, subcontractors, and grant recipients across various industries.

Archives

RECEIVE EMAIL NOTIFICATIONS WHEN NEW POSTS ARE ADDED.

A confirmation email has been sent to the email address provided.

Categories

Secondary Sidebar

Recent Posts

  • Biden Administration Seeking Big Changes to “Made in America” Requirements
  • The Moving America Forward Act: If Passed, Will Result in Increased Opportunities for Infrastructure Work and Contracting With the Federal Government
  • Additional GSA Webinar Guidance for Section 889 Part B Implementation Delayed to September 10, 2020
  • GSA Provides Additional Guidance on Section 889 Part B Implementation and “Waivers”
  • DoD Weighs In As Federal Contractors Search for Guidance on Implementation of Section 889 Part B
Copyright © 2021 · Alston & Bird · All Rights Reserved. Privacy.