Magazine article National Defense

Defense Production Act Speeds Up Wartime Purchases

Magazine article National Defense

Defense Production Act Speeds Up Wartime Purchases

Article excerpt

One procurement tool that the government is using vigorously to accelerate its response to recent terrorist threats has been available since 1950--the little-known Defense Production Act.

This law, known as DPA for short, and the regulations that implement it, the Defense Priorities and Allocation System, or DPAS, authorize the president to:

* Require performance under government-placed contracts or orders deemed necessary or appropriate to promote the national defense.

* Allocate materials, services and facilities as necessary.

* Control the distribution of scarce and critical materials.

The DPA's fundamental purpose is to allow the federal government to jump to the front of a contractor's production line or service orders during emergencies.

It is the mandatory nature of the DPA that gives the act its teeth. Although the program is administered by the Commerce Department's Office of Strategic Industries and Economic Security, it is used most frequently by the Defense Department.

Under the DPA, a federal agency unilaterally can place a contract with a particular contractor or direct a change to an existing federal contract. Such contractual actions are known as "rated orders."

The Pentagon can place rated orders with any domestic individual, corporation, partnership, association or other organized group of persons, as well as state and local governments and agencies. A recipient must give a rated order preferential treatment over any other business.

Similarly, a prime contractor is required to use rated orders with its suppliers in order to fill a rated order it has received from the government. Therefore, even companies and suppliers that have never performed government contracts previously and may have no desire to do so must accept rated orders. Failure to comply can result in civil and criminal sanctions.

It takes little imagination to understand how the DPA system can cause problems for companies that have never contracted with the federal government. Many businesses steer clear of the government in order to avoid the web of compliance-related issues that attends the execution of all but the smallest contracts.

Any company can be compelled to perform a rated order (provided the product or service sought by the order is not wholly foreign to the firm's product line). With such performance comes a host of tedious obligations that some companies seek to avoid.

For example, the DPA imposes relatively burdensome record-keeping requirements. Contractors are required to maintain accurate and complete records of each rated order transaction.

The DPAS, for its part, authorizes the Commerce Department to conduct audits and investigations by examination of books, records, documents, other writings and information to ensure that the provisions of the DPA and related statutes have been followed.

Similarly, DPAS does not exempt non-government contractors that receive rated orders from many of the tricky statutory and regulatory requirements with which traditional government contractors routinely struggle, such as those imposed by the Truth In Negotiations Act or the Cost Accounting Standards. Each of these regulations, however, permit agency heads to waive requirements in certain instances, such as those involving national security.

In most instances, both government contractors and non-government contractors are quite pleased to receive rated orders. After all, receipt of a rated order means more guaranteed business on an accelerated basis. …

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