Defense Production Act

Congress enacted the Defense Production Act of 1950 (DPA) to ensure the availability of industrial resources to meet defense needs. Amendments to the Act allow its use for energy supply, emergency preparedness, and critical infrastructure protection and require agencies to report on foreign offsets, which are incentives to foreign governments to purchase U.S. goods and services. Only Titles I, III, and VII remain in effect. In the National Defense Authorization Act for Fiscal Year 2008, Congress directed GAO to review recent agency efforts to implement the DPA. This report (1) examines the extent to which agencies use DPA authorities and (2) assesses agencies' response to reporting requirements on the economic impact of foreign offsets. GAO's work is based on a review of policies and guidance for the use of DPA authorities, instances in which agencies have exercised the authorities, and the analysis used in required reports on foreign offsets.

The Department of Defense (DOD) routinely exercises the DPA Title I priorities and allocations authority, which allows rated contracts and orders to be delivered before others, to ensure the availability of defense resources. However, civilian agencies have generally not used the Title I authority and most differ from DOD in deciding when to apply it. For example, DOD places ratings on most of its contracts before critical defense items are needed. In contrast, agencies such as the Department of Homeland Security (DHS) generally request ratings after delivery needs are identified, potentially delaying critical items during emergencies. Also, agencies responsible for responding to domestic emergencies and procuring resources in the areas of food and agriculture, health resources, and civil transportation, lack policies and guidance that could facilitate execution of the Title I authority and delivery of items needed in an emergency. While the Departments of Agriculture (USDA) and Health and Human Services are developing regulations to establish a framework for considering priority ratings, the Department of Transportation (DOT) has not yet begun to do so. Other DPA authorities have been used exclusively by DOD or have not been triggered by recent events. For example, DOD has generally been the sole user of the Title III authority for expansion of production capabilities, while events that would activate some Title VII authorities--such as the National Defense Executive Reserve and voluntary agreements--have not occurred. Agencies have taken steps towards fulfilling their offset reporting requirements to Congress, but data collected by the Department of Commerce limits the analysis of the economic effect of offsets. Commerce officials noted that a more detailed analysis could be provided if they requested more specific product data from prime contractors. Also, a DOD-chaired interagency team--required to report on its consultations with foreign nations on limiting the adverse effects of offsets--has reached consensus with other nations that adverse effects exist, but not yet on best practices to address them. Actions by the National Commission on Offsets have similarly been limited in the assessment of economic effects.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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