During the week of May 11, the Administration took several important actions reflecting its intent to make greater use of the Defense Production Act (DPA) to address product shortages and supply chain problems affecting the availability of health and medical resources needed to address the COVID-19 pandemic:
- the President issued an Executive Order delegating lending and contracting authority under Title III of the DPA to the CEO of the International Development Finance Corporation to boost “domestic production of strategic resources needed to respond to the COVID-19 outbreak, or to strengthen any relevant domestic supply chains”;
- in response to an earlier Executive Order, the Federal Emergency Management Agency (FEMA) issued regulations governing its exercise of compulsory powers under Title I of the DPA;
- the Departments of Health and Human Services (HHS) and Defense (DoD) jointly exercised their authority under Title III of the DPA to issue a contract worth $138 million to develop an “accelerated build-out of domestic surge capacity for a high-speed, population-scale emergency drug injection solution”; and
- the Pentagon announced that the official responsible for DPA efforts at DoD was being removed.
Executive Order to Boost Domestic Supplies of Health and Medical ResourcesOn May 14, President Trump issued an Executive Order delegating his authorities to extend loans and enter into contracts under Title III of the DPA to the CEO of the International Development Finance Corporation (DFC). The Order’s stated purpose is to “expand domestic production of strategic resources needed to respond to the COVID-19 outbreak, including strengthening relevant supply chains within the United States and its territories.” In order “to create, maintain, protect, expand, and restore the domestic industrial base capabilities, including supply chains within the United States and its territories (“domestic supply chains”), needed to respond to the COVID-19 outbreak,” the Order authorizes the DFC’s CEO, in consultation with the Secretaries of Defense, Health and Human Services, and Homeland Security to make loans and enter into contracts for up to two years. Any loans “extended using the authority delegated by” the Order must be “be made in accordance with the principles and guidelines outlined in OMB Circular A-11, OMB Circular A-129, and the Federal Credit Reform Act of 1990, as amended (2 U.S.C. 661 et seq.).”
This new delegation of DPA authorities is made “in addition” to prior delegations and so leaves in place other agencies’ potentially overlapping DPA authorities. Those are described in a prior alert.
FEMA DPA Title I RegulationsOn May 13, the Federal Emergency Management Agency (FEMA) issued regulations governing its issuance of orders under Title I of the Defense Production Act (DPA). The regulations—a response to an April 1 Executive Order delegating Title I authority with respect to health resources need to respond to the COVID-19 pandemic to the Secretary of Homeland Security, who in turn delegated the authority to the FEMA Director—set out the conditions governing FEMA’s issuance of prioritization and allocation orders. Prioritization orders enable the government to compel companies to give priority to certain contracts or orders over others. Allocation orders enable the government to direct both producing and receiving companies to shift products to recipients the government determines to be of highest priority.
The FEMA regulations draw on the existing DPA regulations established by DoD and HHS, but add a number of additional documentation requirements that recipients of orders should be aware of.
Joint HHS-DoD Title III ContractOn May 12, the government announced that DoD and HHS had jointly awarded a Title III contract to Connecticut-based ApiJect Systems America for “Project Jumpstart” and “RAPID USA,” which together are designed to “dramatically expand U.S. production capability for domestically manufactured, medical-grade injection devices starting by October 2020.” Project Jumpstart’s goal is to “enable the manufacture of more than 100 million prefilled syringes for distribution across the United States by year-end 2020.” RAPID USA’s aim is to boost “new and permanent U.S.-based” blow-fill-seal aseptic plastics manufacturing “facilities with the ultimate production goal of over 500 million prefilled syringes (doses) in 2021.”
Firing of DoD DPA HeadAccording to press reports, on May 14, Jennifer Santos, the Deputy Assistant Secretary of Defense for Industrial Policy since June 2019, told her staff she had been removed from her post. Neither DoD or the White House has announced a replacement.
WilmerHale’s Coronavirus Task Force, headed by former Deputy Secretary of Homeland Security Alejandro Mayorkas, will continue to follow DPA and supply developments.