President Biden plans to use the Defense Production Act to ramp up production of personal protective equipment and the supplies needed for widespread coronavirus vaccine distribution. Eric Crusius, Partner at Holland & Knight, joined “Government Matters” to discuss what the use of the Defense Production Act means for government contractors.
“This new executive order, which President Biden just signed, will allow the different agencies to work together and figure out what supplies are needed for the vaccine because, of course, the vaccine serum itself is not the whole thing. It’s the entire supply chain that gets the vaccine from the manufacturing facility to the arm of the person receiving it,” Crusius said.
Crusius said the executive order doesn’t require the use of the Defense Production Act right now, but that the Defense Department might become involved.
“[Defense Department agencies] have to look at whether these supplies are coming in at a rapid enough pace to get that 100 million shots in the first hundred days, plus the PPE that’s necessary, and if they feel like they’re not getting there, then it looks like DoD is on the precipice of getting DPA authorization that they haven’t had yet,” he said.
If the Defense Production Act is invoked, manufacturers will need to look at their supply chain and prioritize the DPA order ahead of all other orders, including those from the government.
Crusius said the government could also commandeer a manufacturing facility to create PPE or other products instead. In this scenario, the government would need to compensate contractors, including subcontractors who don’t normally do business with the government.
“The good news for the companies is, once the government tells you to [manufacture items under the Defense Production Act], you’re getting compensated for those things you’re being told to do,” Crusius said. “On top of that… the courts will give you a right to use that DPA as an absolute defense for missing those deadlines.”