Amending Title III of the Defense Production Act

Gao ID: 121083 April 13, 1983

GAO discussed extending titles I and III of the Defense Production Act (DPA) beyond their current expiration date. Title III authorities can be used to provide financial and other assistance to private industry. Title III, with title I priorities and allocations, facilitates the production of goods and services necessary for national defense. GAO also discussed its views on a Federal Emergency Management Agency (FEMA) proposal for using title III to meet the national defense stockpile goal for cobalt and the relationship between this proposal and the administration's fiscal year 1984 title III budget request. While GAO agrees with extending both title I and title III, it believes that Congress should consider amending title III to ensure that the economic and national security benefits and costs of each title III proposal are properly addressed. Since the results of any such analysis are only as valid as the data, assumptions, and methodology use, GAO believes that Congress should consider amending the act to provide itself with ample opportunity to review each title III proposal. The 5-year extension proposed in H.R. 2057 appears reasonable to GAO. A proper analysis of the economic and national security benefits and cost would show that for some strategic and critical minerals, title III authorities may not be the most effective alternative for promoting long-term national defense. In the President's April 5, 1982, program plan and report to Congress, he stated that an analysis was ongoing to determine whether circumstances exist under which the use of DPA incentives would be more cost effective than stockpile purchase. An analysis was performed by FEMA to identify the most economical investment alternative for providing a level of cobalt availability equivalent to a strategic stockpile of 85.4 million pounds. That recommendation was based on a cost comparison which concluded that cumulative Federal expenditures would be substantially less under its proposed option. However, GAO questions the results of the FEMA analysis and resulting recommendation based on deficiencies in the data, assumptions, and methodology used.

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