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The ability to take immediate action to respond to a national emergency is vital, and the United States government continues to seek ways to utilize all authorities available to it in order to fight the spread of COVID-19. This article discusses the impact of the DPA on contractors and other businesses providing critical supplies.

Authors: Holly A. Roth Lawrence P. Block Liza V. Craig Noah T. Jaffe William T. Kirkwood

On March 18, 2020, President Trump issued an Executive Order on Prioritizing and Allocating Health and Medical Resources, which triggered the Defense Production Act (DPA) of 1950, P.L. 81-774, 50 U.S.C. §§ 4501 et seq. Today, March 24th, the Federal Emergency Management Agency (FEMA) Administrator announced that the government will be using the DPA today for the first time to counter COVID-19.

The DPA confers upon the President vast authorities to impose some control over private-sector industry to ensure the production of material that is deemed necessary for national defense. These authorities can be used across the federal government to ensure that the domestic industrial base is capable of providing materials and goods required. The authority to prioritize certain government contracts in order to ensure the timely availability of such goods and services is contained in Title I of the DPA. Title 1 of the DPA is administered by the Department of Commerce (DOC) and implemented by regulations called the Defense Priorities and Allocation System (DPAS).1

In this article we describe aspects of the DPAS that businesses should know about in order to successfully perform any rated orders that may be issued to them as a result of the President invoking the DPA. The range of contracted work affected is wider than one might expect. The DPA provides delegated agency authority to require changes to existing unrated federal contracts to make them rated under DPAS, as well as issue new contracts to government contractors, in the traditional sense, and to businesses that may not consider themselves “government contractors.” Currently, the agencies that have been delegated use of this authority are the Department of Defense (DOD), the Department of Homeland Security (DHS), the Department of Transportation (DOT), the Department of Agriculture (USDA), the Department of Energy (DOE), and the Department of Health and Human Services (HHS).2 Businesses performing work pursuant to DPAS rated contracts for these agencies should familiarize themselves with the DPAS to understand what such businesses are obligated to do.

Rated orders

The central feature of the DPAS is the use of a rated order, which can be a prime contract, a subcontract or a purchase order (hereinafter referred to as an "order" or "orders") in support of an approved program issued in accordance with the provisions of 15 C.F.R. Part 700.3 The DOC has delegated authority to the DOD to place rated orders on its contracts.

A rated order indicates that such order has been prioritized pursuant to the DPA. There are two levels of priority ratings: DX, which indicates the highest national defense urgency, and DO, which indicates that the order is critical to the national defense. All DX-rated orders have equal priority to one another and take preference over DO-rated orders. All DO-rated orders have equal priority to one another and take preference over unrated or commercial orders. A priority rating will have two components: the rating level and the symbol of the approved program.4 For example, DOC1 would indicate the critical need rating for food resources. DOC1 would have equal priority to DOA5 (critical need for weapons) but would be of lesser priority than DXC1 (highest urgency for food resources).

A rated order must contain four elements: (1) the aforementioned priority rating, (2) the required delivery date or dates (imprecise dates such as "immediately" or "as soon as possible" are not compliant), (3) an authorized written or digital signature certifying that the rated order is authorized by the DPAS and that the DPAS is being followed and (4) a certification statement such as "This is a rated order certified for national defense use, and you are required to follow all the provisions of the Defense Priorities and Allocations System regulation (15 C.F.R Part 700)."5 If these four elements are not present on an order intended to be a rated order, then the business in receipt of the order should request from the contracting officer or higher-tier government contractor a completed rated order.