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President Trump Invokes the Defense Production Act

March 20, 2020

On March 18, 2020, the President issued an Executive Order invoking the Defense Production Act of 1950 (50 U.S.C. §§ 4501 et seq.). The Defense Production Act empowers the federal government to:

  1. Direct that the performance of certain contracts and orders is prioritized over others; 
  2. Require entities to accept and perform certain contracts; and  
  3. Allocate materials, services, and facilities in such manner, upon such conditions, and to such extent as deemed necessary or appropriate to promote the national defense.

The President delegated these authorities to the Secretary of Health and Human Services (HHS) and directed the Secretary to “issue such orders and adopt and revise appropriate rules and regulations as may be necessary to implement [the] order.” The authority is scoped to “health and medical resources needed to respond to the spread of COVID-19, including personal protective equipment and ventilators.” The Secretary of HHS may identify additional specific health and medical resources that are scarce and critical to the national defense.

Enacted during the Korean War, the Defense Production Act has been invoked in recent years to address narrow requirements of the Department of Defense. The Government’s authority under the Act is quite broad and includes the ability to require the priority performance of contracts to which the Government is not party. The Act, however, does not permit the Government to set wage or price controls absent a joint resolution of Congress.

Entities subject to Defense Production Act orders enjoy limited liability protection in the performance of those orders. These liability protections, however, are unlikely to extend to general tort claims, and the Act is not a basis to seek indemnification from the Government in the performance of an order.

Companies that manufacture health and medical resources, even those that do not typically contract with the Government, should pay close attention to any statements or orders from HHS. A statement from the Secretary indicated that HHS is “coordinating closely with private suppliers, healthcare purchasers, and our federal partners like the Commerce Department to ensure that resources are going where they’re needed.”    

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Steve Bunnell, an O’Melveny partner licensed to practice law in the District of Columbia, Lisa Monaco, an O’Melveny partner licensed to practice law in the District of Columbia and New York, and John Dermody, an O’Melveny counsel licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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