[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
MISSION CRITICAL: RESTORING
NATIONAL SECURITY AS THE FOCUS
OF DEFENSE PRODUCTION ACT
REAUTHORIZATION, PART II
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON NATIONAL SECURITY,
ILLICIT FINANCE, AND
INTERNATIONAL FINANCIAL INSTITUTIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
__________
MAY 8, 2024
__________
Printed for the use of the Committee on Financial Services
Serial No. 118-91
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
__________
U.S. GOVERNMENT PUBLISHING OFFICE
56-463 PDF WASHINGTON : 2024
-----------------------------------------------------------------------------------
HOUSE COMMITTEE ON FINANCIAL SERVICES
PATRICK McHENRY, North Carolina, Chairman
FRANK D. LUCAS, Oklahoma MAXINE WATERS, California, Ranking
PETE SESSIONS, Texas Member
BILL POSEY, Florida NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri BRAD SHERMAN, California
BILL HUIZENGA, Michigan GREGORY W. MEEKS, New York
ANN WAGNER, Missouri DAVID SCOTT, Georgia
ANDY BARR, Kentucky STEPHEN F. LYNCH, Massachusetts
ROGER WILLIAMS, Texas AL GREEN, Texas
FRENCH HILL, Arkansas, Vice EMANUEL CLEAVER, Missouri
Chairman JIM A. HIMES, Connecticut
TOM EMMER, Minnesota BILL FOSTER, Illinois
BARRY LOUDERMILK, Georgia JOYCE BEATTY, Ohio
ALEXANDER X. MOONEY, West Virginia JUAN VARGAS, California
WARREN DAVIDSON, Ohio JOSH GOTTHEIMER, New Jersey
JOHN ROSE, Tennessee VICENTE GONZALEZ, Texas
BRYAN STEIL, Wisconsin SEAN CASTEN, Illinois
WILLIAM TIMMONS, South Carolina AYANNA PRESSLEY, Massachusetts
RALPH NORMAN, South Carolina STEVEN HORSFORD, Nevada
DAN MEUSER, Pennsylvania RASHIDA TLAIB, Michigan
SCOTT FITZGERALD, Wisconsin RITCHIE TORRES, New York
ANDREW GARBARINO, New York SYLVIA GARCIA, Texas
YOUNG KIM, California NIKEMA WILLIAMS, Georgia
BYRON DONALDS, Florida WILEY NICKEL, North Carolina
MIKE FLOOD, Nebraska BRITTANY PETTERSEN, Colorado
MIKE LAWLER, New York
ZACH NUNN, Iowa
MONICA DE LA CRUZ, Texas
ERIN HOUCHIN, Indiana
ANDY OGLES, Tennessee
Matt Hoffmann, Staff Director
Subcommittee on National Security, Illicit Finance,
and International Financial Institutions
BLAINE LUETKEMEYER, Missouri, Chairman
ANDY BARR, Kentucky JOYCE BEATTY, Ohio, Ranking Member
ROGER WILLIAMS, Texas VICENTE GONZALEZ, Texas
BARRY LOUDERMILK, Georgia WILEY NICKEL, North Carolina
DAN MEUSER, Pennsylvania BRITTANY PETTERSEN, Colorado
YOUNG KIM, California, Vice BILL FOSTER, Illinois
Chairwoman JUAN VARGAS, California
ZACH NUNN, Iowa JOSH GOTTHEIMER, New Jersey
MONICA DE LA CRUZ, Texas
ANDY OGLES, Tennessee
C O N T E N T S
----------
Page
Hearing held on:
May 8, 2024.................................................. 1
Appendix:
May 8, 2024.................................................. 29
WITNESSES
Wednesday, May 8, 2024
Rozman-Kendler, Thea D., Assistant Secretary of Export
Administration, Bureau of Industry and Security (BIS), U.S.
Department of Commerce......................................... 6
Spishak, Cynthia, Associate Administrator, Federal Emergency
Management Agency (FEMA), U.S. Department of Homeland Security. 7
Taylor-Kale, Laura, Assistant Secretary for Industrial Base
Policy, U.S. Department of Defense (DOD)....................... 4
APPENDIX
Prepared statements:
Rozman-Kendler, Thea D....................................... 30
Spishak, Cynthia............................................. 43
Taylor-Kale, Laura........................................... 49
Additional Material Submitted for the Record
Luetkemeyer, Hon. Blaine:
Written statement of Dr. Jeffrey ``Jeb'' Nadaner, Senior Vice
President, Govini, and former Deputy Assistant Secretary of
Defense for Industrial Policy.............................. 55
Rozman-Kendler, Thea D.:
Written responses to questions for the record from
Representative Barr........................................ 59
Written responses to questions for the record from
Representative Ogles....................................... 60
Written responses to questions for the record from
Representative Waters...................................... 61
Spishak, Cynthia:
Written responses to questions for the record from
Representative Nunn........................................ 62
Written responses to questions for the record from
Representative Waters...................................... 65
Taylor-Kale, Laura:
Written responses to questions for the record from
Representative Nunn........................................ 72
Written responses to questions for the record from
Representative Ogles....................................... 74
Written responses to questions for the record from
Representative Waters...................................... 77
MISSION CRITICAL: RESTORING
NATIONAL SECURITY AS THE FOCUS
OF DEFENSE PRODUCTION ACT
REAUTHORIZATION, PART II
----------
Wednesday, May 8, 2024
U.S. House of Representatives,
Subcommittee on National Security,
Illicit Finance, and
International Financial Institutions,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:03 p.m., in
room 2128, Rayburn House Office Building, Hon. Blaine
Luetkemeyer [chairman of the subcommittee] presiding.
Members present: Representatives Luetkemeyer, Barr,
Williams of Texas, Loudermilk, Meuser, Kim, Nunn, De La Cruz;
Beatty, Gonzalez, Pettersen, and Foster.
Ex officio present: Representative Waters.
Chairman Luetkemeyer. The Subcommittee on National
Security, Illicit Finance, and International Financial
Institutions will come to order.
Without objection, the Chair is authorized to declare a
recess of the subcommittee at any time.
Today's hearing is entitled, ``Mission Critical: Restoring
National Security as the Focus of Defense Production Act
Reauthorization, Part II.''
And I think it is important to note that this is an area
that this subcommittee doesn't normally get into, but I think
it is very important because it is within our purview, and
because we get into it a lot, we need to have a lot of, I
think, hearings on it to be able to understand the issue, to be
able to get all the information that we can to make a good
judgment and understand what we need to do, what we are doing
right, what we are doing wrong, and what needs to be taken care
of. So, we appreciate the witnesses being here today and being
able to do that.
With that, I recognize myself for 5 minutes to give an
opening statement. On March 12th of this year, this
subcommittee held the first part of this hearing to learn more
about the history, the current landscape, and what the future
might hold for the Defense Production Act of 1950, or the DPA.
During that hearing, we heard testimony from the Congressional
Research Service (CRS) and other expert witnesses about the
important role the DPA plays in maintaining our national
defense posture as the envy of the world, as well as the
dangerous state of our current defense industrial base. Today,
we will continue that conversation as we welcome witnesses who
represent the key agencies which execute the DPA: the Commerce
Department, the Department of Homeland Security, and the
Department of Defense. We don't often see these agencies here
at the Committee on Financial Services, but we hold the great
responsibility of having the sole jurisdiction over the DPA.
DPA is set to expire in September 2025. In light of the
increased use of DPA by both the current and previous
Administrations, and the need to restore our defense industry
for our great power competition with China, we have started to
examine and consider this legislation in its entirety. DPA,
which Congress passed in response to the Korean War, affords
the President a broad set of authorities to ensure that
American industry has the capability and the capacity to meet
our nation's national security needs.
Our hearing in March highlighted some key areas where
Congress may wish to consider improvements to meet the current
moment. Since the DPA was reauthorized in 2018, the Federal
Government has utilized the financial tools of the DPA at a
pace far exceeding previous years and in more creative ways. In
March, we heard the Director of the Ronald Reagan Institute,
Dr. Roger Zakheim, discuss some of the urgent needs to address
military shortfalls in ammunitions and weapons, naval
shipbuilding and maintenance, and supply chain and strategic
materials shortfalls.
In the meantime, Congress acted to address the ongoing
conflicts in Ukraine and Israel, which further exercise and
stretch our defense production industries, and all the while,
the People's Republic of China's (PRC's) military continues to
build up its capabilities to threaten its neighbors and
challenge our own military. These are all stark reminders of
how critical a strong national industrial base is to the
national security of the United States.
I was encouraged to see in December of 2023, the Department
of Defense, through the leadership of our witness today,
Assistant Secretary Taylor-Kale, introduce the first-ever
National Defense Industrial Strategy. This strategy does a
great job of outlining the priority areas that are critical to
a modern defense-focused industrial ecosystem. Today, I hope
Dr. Taylor-Kale will tell us more about the report and how
Congress can act moving forward. It will also benefit our
members to hear how the DPA has been helpful in its past and
current implementations as well as the areas where the DPA
might be underutilized.
One other area of concern that I share with Dr. Zakheim and
another witness, former Deputy Assistant Secretary of Defense,
Dr. Jeb Nadaner, is that many of these expanded authorities for
which the DPA is being used seem to have little to do with what
the legislation was originally intended to accomplish.
In one of his earliest Executive Orders, President Biden
invoked DPA authorities to strengthen U.S. supply chain
resilience. He followed it up by using DPA Title I authorities
to require suppliers to provide key inputs to infant formula
manufacturers ahead of other customers.
In June of 2022, the President began using DPA to
accelerate domestic production of energy technologies like
solar panels, insulation, heat pumps, biofuels, and power grid
infrastructure. The heat pump case remains particularly
controversial, not least because the dependence is primarily on
allied manufacturers and seems to have little do with national
security.
Some of these actions, unfortunately, have reinforced the
narrative that Presidents could exercise powerful DPA
authorities for reasons unrelated to national security. This
undermines the support for a critical tool, that, when used
properly, is essential to building and maintaining our nation's
ability to defend itself and our allies.
To be clear, I don't want to throw the baby out with the
bathwater. The DPA is an essential mechanism that deserves
reauthorization before the end of the next fiscal year, but it
also needs a thorough review and a careful adjustment, not just
a rubber-stamp approval from Congress. Today's hearing should
give us critical insight into the factual applications of the
DPA. I think it is critical that our members be informed and
up-to-speed on all of the applications of the DPA.
I want to thank our witnesses today for being here and for
their ongoing engagement with the members and staff. I look
forward to their testimony.
With that, I recognize the ranking member of the
subcommittee, Mrs. Beatty from Ohio, for 5 minutes.
Mrs. Beatty. Good afternoon, and thank you, Mr. Chairman,
for holding this hearing. And thank you to our witnesses for
appearing here today for part two of our discussion on the
Defense Production Act (DPA), which is set, as you have heard,
to expire in September of next year.
The DPA gives the President the authority to take various
actions to ensure the supply of materials and services
necessary for national defense. For example, the President has
the power to prioritize government contracts, waive
international trade requirements, and offer incentives within
the domestic market to enhance the production of critical
materials and technologies if deemed necessary for national
defense. As was discussed at our previous hearing on this
topic, Congress has amended the definition of, ``national
defense,'' over the years to include emergency preparedness,
critical infrastructure protection and restoration, homeland
security, and more.
Let's be clear. The DPA does not give the President a blank
check to spend taxpayers' money. It is subject to the annual
appropriations process, with limits on how many funds can be
rolled over to future years. In addition, the authority must be
renewed periodically, and we are here today to continue our
discussion on reauthorization. There is no doubt that the DPA
grants broad powers that must be applied in a careful and
prudent manner. Nevertheless, it is imperative that we assess
national defense through a wider lens, and leverage tools like
the DPA wisely to bolster domestic supply chains, support our
allies, enhance U.S. competition, and preserve the United
States' energy independence.
In recent years, we have faced novel challenges that have
threatened our national security in some shape or form, from
the COVID-19 pandemic to the increasingly-disastrous effects of
climate change. To tackle these issues, the Executive Branch
has appropriately invoked the DPA to produce ventilators and
vaccinations as well as to accelerate domestic manufacturing of
clean energy technologies. While some of my colleagues may
claim that these threats are beyond the scope of the DPA, I
would argue that preparation, prevention, and deterrence are
key components of national defense. In fact, the Department of
Defense itself has listed some climate change threats to
national security since 2008, stating that it must be a part of
every strategic decision the Department makes.
The DPA is a critical tool to ensure that we are prepared
for anything, and it is imperative that we continue to use it
in an intelligent way to bolster the United States' strength
and stability. I look forward to working with my Republican
colleagues in a bipartisan manner to reauthorize this essential
legislation in the coming year because I believe hearing from
our witnesses today, and if we work together on the same page
for the same goal, we will get there. Thank you once again to
our witnesses. And I yield back.
Chairman Luetkemeyer. The gentlelady yields back.
We now welcome the testimony of our witnesses today: Dr.
Laura Taylor-Kale, Assistant Secretary for Industrial Base
Policy at the U.S. Department of Defense; Ms. Thea Rozman-
Kendler, Assistant Secretary of Export Administration at the
Bureau of Industry and Security at the U.S. Department of
Commerce; and Ms. Cynthia Spishak, Associate Administrator of
the Federal Emergency Management Agency. We thank each of you
for taking the time to be with us here today.
Each of you will be recognized for 5 minutes to give an
oral presentation of your testimony. And without objection,
each of your written statements will be made a part of the
record. I have the gavel, so be concise, and we look forward to
your remarks.
With that, Dr. Taylor-Kale, you are recognized for 5
minutes for your oral testimony.
STATEMENT OF LAURA TAYLOR-KALE, ASSISTANT SECRETARY FOR
INDUSTRIAL BASE POLICY, U.S. DEPARTMENT OF DEFENSE (DOD)
Ms. Taylor-Kale. Thank you. Good afternoon, Chairman
Luetkemeyer, Ranking Member Beatty, and distinguished members
of the subcommittee. I am absolutely delighted to have this
opportunity to testify before you today alongside my colleagues
from FEMA and Commerce.
In addition to timely, consistent appropriations and
multiyear procurement, reauthorizing the Defense Production Act
may be one of the most important actions that the Congress can
do to ensure that the U.S. industrial base is ready to support
defense needs and the war fighter. DOD's primary aim in the use
of the Defense Production Act is to increase the readiness and
resilience of the defense industrial base in support of defense
critical needs and the war fighter. As such, the DPA is an
essential tool for national defense, and the successful
implementation of the National Security Strategy, the National
Defense Strategy, and the recently-released National Defense
Industrial Strategy.
Since Congress enacted the DPA in 1950, the Executive
Branch has invoked DPA authorities to manage the nation's
defense-related production capacity, defense critical supply
chains, and to protect and strengthen the U.S. industrial base
in war, peace, and during national emergencies.
At this time, I would like to thank Congress for adding the
United Kingdom and Australia to the definition of, ``domestic
sources,'' in the Fiscal Year 2024 National Defense
Authorization Act. Allowing DOD to enter agreements with
companies from the U.S., Canada, the U.K., and Australia
reinforces important alliances like AUKUS and supports the
short- and long-term development of secure defense critical
supply chains. Going forward, the DPA will remain an essential
national defense tool for mitigating supply chain
vulnerabilities in our key weapons and defense systems.
Defense production is a deterrent, especially when
undergirded by a strong and innovative industrial ecosystem.
Fully executing DPA authorities in support of domestic
industrial production remains a priority for this
Administration's defense industrial policy. Our adversaries
attempt to use supply chain vulnerabilities to weaken the U.S.
military and economy. Through our role on the Committee on
Foreign Investment in the United States (CFIUS), we see how
adversarial capital investments in the U.S. industrial base
further attempt to weaken the United States by robbing our
industrial base of technological innovation, and the DOD
remains vigilant against adversaries using adversarial capital
to weaken the U.S. defense industrial base.
As you noted, Mr. Chairman, in January of this year the
Department published the first-ever National Defense Industrial
Strategy, where we highlight four key strategic priorities for
building a modernized, resilient industrial ecosystem:
resilient supply chains; workforce readiness; flexible
acquisition strategies; and economic deterrence. As such, the
reauthorization of the DPA and the full use of the authorities
are absolutely essential for implementation.
We use the Defense Production Act to, of course, prioritize
defense needs within industrial supply chains, along with the
Department of Commerce, and to allocate scarce components. We
also use it to alleviate pain points in supply chains and
expand domestic manufacturing of critical technologies and
processing and production of critical minerals and strategic
materials that are vital for our defense capabilities and for
the war fighter.
So, what has DOD achieved in the numbers? Since the last
DPA reauthorization in 2018, appropriations have increased
dramatically for Title III from an average of about $70 million
a year to about a billion dollars. As the first Senate-
confirmed Assistant Secretary for Industrial Base Policy, my
top priority is overseeing the effective management and
execution of DPA authorities and appropriations in support of
our military and the war fighter.
In Fiscal Year 2023, we executed a total of $733 million in
DPA Title III awards. This helped strengthen defense critical
supply chains in microelectronics, strategic materials, and
kinetic capabilities in energy storage and batteries. Demand
for DPA assistance is at an all-time high, and I predict that
it will remain so going forward as we continue to work on
alleviating these pain points in the supply chain.
In my written testimony, I noted a couple of key areas
where Congress can consider adjustments to the DPA. I look
forward to continuing to work with this Congress in a
bipartisan manner and I am honored to represent the Department
of Defense today. Thank you, and I look forward to your
questions.
[The prepared statement of Assistant Secretary Taylor-Kale
can be found on page 49 of the appendix.]
Chairman Luetkemeyer. Thank you. Ms. Rozman-Kendler, you
are recognized for 5 minutes.
STATEMENT OF THEA D. ROZMAN-KENDLER, ASSISTANT SECRETARY OF
EXPORT ADMINISTRATION, BUREAU OF INDUSTRY AND SECURITY (BIS),
U.S. DEPARTMENT OF COMMERCE
Ms. Rozman-Kendler. Chairman Luetkemeyer, Ranking Member
Beatty, and members of the subcommittee, I appreciate the
opportunity to testify alongside my colleagues before the
subcommittee on the critical role the Defense Production Act
(DPA) plays in supporting our national defense. The Department
of Commerce's Bureau of Industry and Security (BIS) has several
responsibilities in implementing DPA authorities under our
national security mission, and I will use this opportunity to
highlight two of them. The rest is reflected in my written
statement for the record.
First, DPA Title I authorities authorize the President to
require acceptance and priority performance of contracts and
orders to promote the national defense. The Commerce Department
has held this authority under Title I since 1950 when the DPA
was first enacted. Today, we implement these authorities
through the Defense Priorities and Allocations System
regulation (DPAS), which is used regularly to support the
purchase of industrial resources needed for U.S. national
defense requirements. We work closely with interagency partners
to ensure the timely delivery of industrial resources needed to
ensure our national security goals.
The Defense Department is the largest user of the DPAS.
Under a delegation from Commerce, DOD places an estimated
300,000 DPAS priority-rated contracts and orders each year. The
DPAS is a vital part of the Defense Department's procurement
system, and we, at Commerce, are proud of the role we play in
supporting our servicemembers.
Commerce also may authorize priority ratings on a case-by-
case basis. For example, in coordination with our colleagues at
the Federal Emergency Management Agency (FEMA), we granted the
General Services Administration and the Architect of the
Capitol DPAS priority rating authority for items needed to
support the safety of U.S. Government buildings, including
congressional facilities. Commerce has also provided DPAS
rating authority in support of the Wildland Fire Protection
Program, National Airspace Operations, and land port of entry
construction. These activities demonstrate the role of the DPAS
as a force multiplier for our national defense.
In recent years, we have witnessed unprecedented supply
chain challenges for the U.S. industrial base. Commerce, in
coordination with interagency partners, has responded to a
significant increase in DPAS requests for assistance. Last
calendar year, we took 59 actions, the highest by the
Department in the last 34 years. If the DPA's Title I authority
were to lapse, Commerce would no longer have statutory
authority to support procurement on behalf of any entity other
than the U.S. Armed Forces. Without Title I, we would have
available only the limited authority provided by the Selective
Service Act. This occurred during Operation Desert Storm. We
would not be able to place ratings for wildland fire equipment,
aviation network equipment, or weather satellites, all of which
we have undertaken with our interagency partners in the last 12
months.
Shifting gears, Commerce also acts under Title VII of the
DPA. Title VII authorizes the President to obtain information
to assess the capabilities of the U.S. industrial base to
support the national defense. Under this authority, for
national security purposes, we use industry-specific surveys to
obtain essential information from U.S. industry. This is
information unavailable from any other source, for example,
production, research and development, export control, and
employment. Commerce develops custom surveys that focus on that
key information, and our assessments provide findings and
recommendations for government policymakers and industry
leaders to ensure our national defense.
Over the last 38 years, the Commerce Department has
conducted industrial base assessments and surveys on a wide
range of topics from healthcare products to rocket propulsion.
Survey information that we collect supports data-driven
policies and actions in areas critical to our long-term
economic and national security.
We are currently in the middle of six surveys and
assessments related to various longstanding and emerging
industries. When completed, information from these surveys and
assessments will provide the U.S. Government with insights
needed to understand the health and viability of the assessed
industry sectors. In particular, in January of this year, we
issued a survey to determine how U.S. artificial intelligence
(AI) developers are developing frontier AI models and what they
are doing to keep those models safe and secure. Data collected
from this survey will inform the development of safety and
security standards for frontier AI models and help spur AI
innovation.
If our DPA Title VII authority expires, we will lose a
critical tool that helps to ensure our national defense. We
will be unable to collect the unique data that enables
assessment of the health of our industrial base, depriving
policymakers of important data to support decisions. The
Department of Commerce is eager to work with Congress to
reauthorize the non-permanent provisions of the DPA. Thank you
for the opportunity to testify today. I look forward to your
questions.
[The prepared statement of Assistant Secretary Rozman-
Kendler can be found on page 30 of the appendix.]
Chairman Luetkemeyer. Thank you. Ms. Spishak, you are
recognized for 5 minutes.
STATEMENT OF CYNTHIA SPISHAK, ASSOCIATE ADMINISTRATOR, FEDERAL
EMERGENCY MANAGEMENT AGENCY (FEMA), U.S. DEPARTMENT OF HOMELAND
SECURITY
Ms. Spishak. Chairman Luetkemeyer, Ranking Member Beatty,
and members of the subcommittee, thank you for this opportunity
to discuss reauthorization of the non-permanent provisions of
the Defense Production Act and the importance of
reauthorization to the promotion of the nation's homeland
security and emergency preparedness needs.
The Defense Production Act is the primary source of
presidential authorities to expedite and expand the supply of
materials and services needed to accomplish national defense
priorities, including certain civil emergency preparedness and
response authorities. As was said, enacted back in 1950, the
DPA was Congress' response to the production shortages the
nation faced during the Korean War. Specifically, the DPA was
intended to ensure that the Federal Government could
efficiently channel industrial resources during times of
crisis. Since its enactment, Congress has consistently
acknowledged the evolving importance of the DPA by
reauthorizing it over 50 times.
Today, in addition to supporting the Department of Defense
programs, the DPA also affords critical authorities that FEMA,
the Department of Homeland Security, and our Federal
interagency partners leverage in executing the civil defense
efforts that underpin disaster preparedness response, critical
infrastructure protection and restoration, and counterterrorism
enterprises.
Since its establishment in 1979, FEMA has been at the
forefront of administering the DPA by ensuring that the Act's
broad and evolving mandates are effectively managed, from
military preparedness to comprehensive civil emergency
response. This responsibility was envisioned by Congress in
1950 and has been reaffirmed through successive Executive
Orders and legislative amendments that have expanded the scope
of national defense beyond strictly military activities.
FEMA's continued stewardship of the DPA underscores the
necessity of maintaining a central coordinating body that is
adept at navigating the complexities of national crises and
mobilizing the nation's industrial base. As threats to national
security become increasingly diverse and complex, FEMA's role
is more vital than ever, ensuring that the DPA's capabilities
are aligned with contemporary security needs and that the Act
remains a cornerstone of national resilience and preparedness.
In addition to our work in administering the DPA, FEMA
leverages DPA authorities in executing its responsibility for
coordinating the implementation of policies and programs that
ensure efficiency and the national mobilization of resources in
response to national security emergencies. The authorities
provided in the DPA are critical to FEMA's ability to execute
this important responsibility.
Reauthorizing the expiring provisions of the DPA will
enable FEMA, the Department of Homeland Security, and other
Federal agencies to continue efforts vital to the nation's
homeland security and emergency preparedness. This includes
prioritizing contracts that provide necessary resources to
enhance national resilience, emergency preparedness, critical
infrastructure and protection, and efforts that reduce the
risks associated with acts of terrorism. Reauthorization is
also vital to maintaining key abilities to invest in expanding
the productive capacity of the domestic industrial base to
ensure national defense needs are met.
As Congress considers the strategic direction for the
reauthorization of the DPA, it is crucial that its authorities
address the evolving landscape of national threats that
transcend traditional military functions. Congress must ensure
the maximum flexibility in the DPA authorities to ensure the
United States can swiftly mobilize and respond to a diverse
array of threats with efficiency and precision within the
necessary controls of program administration. FEMA stands ready
to work with the committee and our interagency partners to
ensure that the reauthorization of the DPA can meet this
changing risk environment and advance the nation's homeland
security.
Thank you for this opportunity to appear before you today,
and I look forward to your questions.
[The prepared statement of Associate Administrator Spishak
can be found on page 43 of the appendix.]
Chairman Luetkemeyer. Thank you.
Before I get started with my questions, I just have a quick
comment here for Ms. Rozman-Kendler. We are disappointed in
your agency, Ms. Rozman-Kendler. We tried to get ahold of you
through your staff many times, but they wouldn't answer phone
calls and wouldn't answer emails. You did not want to appear
today, and that cannot be tolerated. Our committee has
jurisdiction over the DPA, and your agency handles the
execution of it, so we have to work together. For your people
to drag their feet and not respond to our committee folks is
unacceptable, and it will not be tolerated again.
With that, the questioning begins, and I recognize myself
for 5 minutes.
Oh, the ranking member of the full Financial Services
Committee, the gentlelady from California, Ms. Waters, is here,
and we will recognize Ms. Waters for one minute for an opening
statement
Ms. Waters. Thank you very much, Mr. Chairman. I have a
prepared 1-minute statement, but I am really bothered by some
other problems that I see growing in this country, and as I
understand it, the Defense Production Act, or DPA, is an
important tool that ensures our country is prepared for and can
respond to any security threat that may arise.
Mr. Chairman and members, there are security threats coming
from the former President of the United States almost every
day. He talks about violence if he is not elected. He talks
about a civil war. He talks about, basically, if he is not
elected, there will be bloodshed, so I consider that this is a
serious domestic threat coming from the former President. Is
that included in the Defense Production Act? It is not fair,
absolutely, to bring the question up today, but I would like to
put it on everybody's mind. I yield back.
Chairman Luetkemeyer. The gentlelady's time has expired.
I now recognize myself for 5 minutes for questions.
My first question is for Dr. Taylor-Kale. I sit on the
China Select Committee, and we have heard testimony from our
generals and have done tabletop exercises to demonstrate that
United States lacks the stockpiles of critical munitions for a
military engagement with the PRC over Taiwan. Looking at the
current defense stockpiles and considering the capacity and
production rates of our defense industrial base, from your
perspective, do you believe we are adequately positioned to
meet and defeat the global threats facing the United States and
our allies, including the current wars in the Middle East and
Ukraine as well as the potential conflict involving China?
Ms. Taylor-Kale. Mr. Chairman, thank you for the question,
but first, I want to say off the bat again that the Department
of Defense uses the DPA to increase the readiness and
resilience of our industrial base, specifically to address the
threats that you mentioned in support of national defense. I
think it is important to note that we learned a lot over the
last few years after COVID and Ukraine and what we have had to
do to mobilize the industrial base, but our industrial base has
managed to keep us safe and provided war fighters with the
tools and capabilities to fight our adversaries in times of
need. I think that we view the importance of having surge
capacity and more resilience in the industrial base as very
important, and we intend to continue to use the Defense
Production Act for that purpose.
Chairman Luetkemeyer. Do you think we are ready? That is
the question, and here is a good example. Yesterday, one of the
national papers had a headline, ``China's Satellite Fleet Poses
Threats to U.S. Troops in Potential Pacific Conflict,'' and
this comes from the Space Force Intelligence Chief. They have
200 more satellites in space today than they did just a few
years ago, and their capacity has increased 550 percent. That
is a real threat. Are we ready to address that? That is the
question.
Ms. Taylor-Kale. Sir, the PRC remains our pacing threat,
and certainly, Taiwan being the pacing scenario. The way that
we use the Defense Production Act is really to address a lot of
the pain points in the supply chain for critical technologies
and capabilities that we need in order to meet the threat.
Chairman Luetkemeyer. Okay. A follow-up question then.
Because we sometimes misuse the DPA, does that pose a danger
for these industries, these different companies whenever they
have to then turn their company around and actually respond to
a national security threat? Do you understand my question?
Ms. Taylor-Kale. Absolutely, sir.
Chairman Luetkemeyer. Do they have the capacity to do two
things at one time? I guess that is the question. And do they
have the ability to prioritize away from the one that is not
necessarily a national security issue to the one where our
lives are hanging in the balance?
Ms. Taylor-Kale. And sir, I would offer that part of the
way that we use the Title I authorities is to exactly address
this issue. The prioritization of defense critical needs is one
that we work within the Department, and with the Department of
Commerce to do so, so that the industrial resources that we
need, the critical components that we need for our key systems,
for our weapons are available at the time that we need them.
Chairman Luetkemeyer. Okay. Ms. Spishak, you talked a while
ago about different ways that you interact with all of these
different agencies to deliver services. From that standpoint,
can you help me see how we can be more targeted with the DPA to
make sure we do it the right way, that we don't have extraneous
things that we are doing with it that aren't necessarily
national security-oriented, but we can target where we need to
go? Is there a way to do that?
Ms. Spishak. Mr. Chairman, thank you for your question. I
think the most important thing to keep in mind, and several of
us have alluded to the evolving threat landscape, is trying to
balance the authorities within the Defense Production Act with
the checks and balances associated with the program
administration. So, by continuing to offer that flexibility
upfront, it allows us to meet those growing needs, but also
make sure that we are paying attention to those checks and
balances and evaluating the work.
Chairman Luetkemeyer. Dr. Taylor-Kale, I guess you kind of
have to go back to help me understand the process here of how
an industry or an individual company can access the system,
because apparently what goes on is you will send out a request
for a proposal, and they will send you their information, but
they never hear from you again. The Defense Department doesn't
respond in a timely fashion and say, hey, we didn't actually
want something for this particular piece of military equipment
or hardware. We were looking for something else. Instead, they
get something back saying, well, there are no funds available,
or they don't answer at all. Can you talk about that issue?
Ms. Taylor-Kale. Absolutely, sir. First and foremost, there
are a couple of different ways to submit White Papers into the
Department of Defense. We have the newly-stood-up Defense
Industrial Base Consortium. But I will note that it has been my
priority as Assistant Secretary to speed up our execution
times, including our response to industry.
Chairman Luetkemeyer. Okay. I will send you a question and
ask for a written response on that because we have some
specific examples of people who are not being responded to.
Thank you very much, and I yield back.
I now recognize the ranking member of the subcommittee, the
gentlelady from Ohio, Mrs. Beatty, for 5 minutes.
Mrs. Beatty. Thank you, Mr. Chairman. Let me continue with
you, Madam Assistant Secretary. The diversity and the value of
the DPA Title III projects administered by the Department of
Defense have expanded in response to the emergencies that our
nation and the world have faced over, let's say, the past 4
years. For example, the Biden Administration chose
appropriately to employ Title III authorities to assist
munitions and critical minerals producers in response to the
Russian invasion of Ukraine, and the Biden Administration has
also invested in clean energy.
So my question is, in what ways do these DPA uses address
national defense and improve national security, followed up by,
what is the Department doing to ensure adequate oversight of
this DPA-related work?
Ms. Taylor-Kale. Thank you, Madam Ranking Member. I will
note that using the Defense Production--I think you are
referring a lot to the Title III projects that we manage--
indeed has increased pretty substantially over the last several
years. Five years ago, we had $70 million and a handful of
projects, and now, we have a much more robust portfolio.
In prioritizing how we use Title III funds, the Department
of Defense, and my office really works very closely with our
military services to understand their needs and pairing that
with the industry proposals and White Papers that we receive
and also ones that we solicit as well, getting at and making
sure that defense supply chains have the critical components,
have the critical minerals. As you mentioned, Russia holds a
lot of those, as well as the PRC. Making sure that we can bring
some of that processing onshore and have them available at will
for our defense supply chains has been absolutely critical and
important for the Department and, frankly, a really key use of
the DPA for national defense.
As far as oversight, my office oversees particularly the
Title III awards. As I mentioned earlier, part of my work here
has been to really expand and make sure that we are moving and
executing in a timely fashion. We have increased the capacity
to be able to execute awards over the past year and less than
that even. We have reduced the amount of time that it takes for
industry to get a response for our proposals. All of this is
really in service of making sure that our military services and
the war fighters have what they need at the time that they need
them and that there are no delays in our weapon systems as a
result. Thank you.
Mrs. Beatty. Thank you for that. I am going to address this
to all of the witnesses, but we will start with you, Ms.
Rozman-Kendler. The President can author a presidential
determination for Title III projects without congressional
notification, with potentially significant implications for
national security, supply chains, and the U.S. economy.
Understanding that this would differ by specifics, what might
be the positive or negative effects of imposing additional
congressional notification or authorization requirements for
Title III activities?
Ms. Rozman-Kendler. Congresswoman, I appreciate the
question, and certainly also, to the chairman's point earlier,
we are eager to collaborate with Congress, of course, and
especially with this subcommittee. The Commerce Department does
not maintain authorities under Title III, so I think I need to
defer that to my colleagues. Thank you.
Mrs. Beatty. We will go next to you, Ms. Spishak.
Ms. Spishak. Thank you, Ranking Member Beatty. While DHS
does have the authorization to have a Title III program, we
currently don't have it appropriated and aren't utilizing it,
so I don't have any further comments.
Mrs. Beatty. Okay. Then, Ms. Spishak, let me ask you this.
As we have seen, especially over the past 4 years, the DPA can
shape how businesses in the United States operate and how the
economy functions. Does the DPA fit in with other tools the
Executive Branch has to shape the U.S. industrial base,
including supplies or services or labor?
Ms. Spishak. Yes, I think it plays a critical role. It is
one of many instruments, as you highlighted, and, I think one
that is important to always recognize is, ``always available.''
It is not a requirement to have something like a public health
emergency or a national emergency to be able to be utilized.
Mrs. Beatty. Okay. Unfortunately, my time has expired.
Chairman Luetkemeyer. The gentlelady's time is up. With
that, we go to the gentleman from Kentucky, Mr. Barr, who is
also the Chair of our Subcommittee on Financial Institutions,
for 5 minutes.
Mr. Barr. Thank you, Mr. Chairman. I am just kind of
curious, because I am a member of the bipartisan House Military
Depot and Industrial Facilities Caucus. I represent the Blue
Grass Army Depot in Madison County, Kentucky, and we just
completed, actually, demilitarization of the last remaining
legacy chemical weapons there as part of our chemical weapons
treaty obligations. But in terms of our arsenal depots, are we
utilizing those facilities to enhance the industrial base
sufficiently, and is there any interface between the
authorities of the DPA with those depots and arsenals to surge
our supply chain resiliency and defense industrial base?
Ms. Taylor-Kale. Thank you. It is a great question. First,
I will note that the DPA does allow us to do Title III
investments in the organic industrial base, and we continue to
look forward in working closely with the services in order to
do so. The organic industrial bases and depots are very
important components for our overall industrial ecosystem and
making sure that we have the components and capabilities that
our war fighter needs at speed and at scale. I will note that
in the Fiscal Year 2025 budget that was recently released,
modernizing the organic industrial basis is a key aspect of it.
The Army is preparing to invest over $4.5 billion over the next
15 years just in that area. I completely agree with you, sir,
and I understand the importance of them.
Mr. Barr. Yes. We have a great relationship with the Army
Materiel Command, and I just think that some of these depots,
the one I represent included, are underutilized and can really
be an asset in this mission.
Dr. Taylor-Kale, another question for you. The U.S.
currently has 250 billion tons of coal, coal waste, and coal
ash in reserve which are rich in rare earth elements and other
critical minerals. How is DOD utilizing the DPA and the United
States' rich domestic resources to ensure our critical minerals
and rare earth stockpile can compete with foreign adversaries
such as China?
Ms. Taylor-Kale. Sir, the critical minerals and strategic
materials are an absolute key component to many of our weapon
systems, including ones that we have used for support for
Ukraine. And certainly, we have used the Defense Production Act
to really get at some of the pain points and alleviate those
pain points in the supply chain. For instance, since 2020, the
Department of Defense, through DPA, has invested over a billion
dollars in critical minerals and strategic materials using
actually DPA as well as the industrial base fund. We continue
to prioritize the use of DPA for critical minerals and
strategic materials, as well as processing, as well as in
production as well. So, I completely agree with you on the
importance of it and certainly the importance for our key
weapons systems.
Mr. Barr. Let me follow up also, because the Biden
Administration's environmental laws have made U.S. mining one
of the most comprehensively regulated industries in the world,
leading to a permitting process that can take years or even
decades for each project, and the Administration's posture on
mining, I think will only lead to more roadblocks. So, despite
America being blessed with some of the largest mineral reserves
in the world, instead of producing for ourselves, we depend on
other countries, often adversaries like China and Russia, for
all or most supplies of many of these critical minerals. Could
you discuss the role our long and arduous domestic permitting
process plays in our inability to mine the minerals that we
need for our defense and energy requirements? This could be a
win-win-win. Coal is not being combusted as much anymore
because of environmental laws, but there are a lot of
unreclaimed coal mines in this country. There is a lot of coal
refuse out there. There are hazardous sites. We could harvest
critical minerals, not for combustion out of coal, but critical
minerals, and remediate a lot of environmental problems in our
country all at the same time, a win-win-win, but we need
permitting and we don't need roadblocks. So, can you speak to
that?
Ms. Taylor-Kale. Sure. I know we are running out of time,
but I want to underline that domestic production and increasing
capacity is an absolute priority for the Department of Defense.
A key objective of the Administration has been to make sure
that we can meet current and future demand. We use the Defense
Production Act Title III authorities to work on the domestic
aspect of processing, but we're also working with key partners
and allies like the U.K., Australia, and Canada. And I think
that we can continue to discuss how we can better make sure
that the Department of Defense has the supply of critical
minerals that it needs for its weapon systems, and I am happy
to follow up further with you.
Chairman Luetkemeyer. The gentleman's time has expired.
Mr. Barr. Thank you.
Chairman Luetkemeyer. The ranking member of the Full
Committee, the gentlelady from California, Ms. Waters, is now
recognized for 5 minutes.
Ms. Waters. Thank you very much, Mr. Chairman. While I
understand thoroughly what DPA means and what it can do for us
in many ways to, basically protect, to deal with the supply
chain, on and on and on, and I understand what we were able to
do during COVID, I am not focused on that today. But I
appreciate our witnesses who are here today to talk about
climate change and other things that certainly need to be
addressed as we look at DPA. So with that, I yield back the
balance of my time. I am focused on other domestic terrorism.
Chairman Luetkemeyer. I appreciate the comments from the
ranking member, and she yields back her time. With that, we
will go to the gentleman from Texas, Mr. Williams, who is also
the Chair of the House Small Business Committee.
Mr. Williams of Texas. Thank you, Mr. Chairman, and thank
you, witnesses, for being here today. Current conflicts in the
Middle East and Ukraine have decreased our domestic defense
industrial stockpiles, and with the strongest military in the
world, it is imperative that we prioritize rebuilding our
defense industry and stockpiles to ensure our readiness in the
face of any emerging threats. We cannot afford to let our guard
down, especially as adversaries like China seek to expand their
influence and undermine global stability. It is essential for
our national security that we maintain a robust defense
capability to safeguard our interests and deter any potential
threats to our sovereignty.
So, Dr. Taylor-Kale, with the number of conflicts happening
around the world and the ever-growing threat of the Chinese
Communist Party, do you believe that our defense industrial
base is sufficiently equipped? And additionally, how can we
enhance our base and production to optimize our national
security capacity?
Ms. Taylor-Kale. Thank you, sir. Thank you for the
question. I want to reiterate that as much as we have had to
rely on the defense industrial base, particularly over the last
5 years, to bring the capabilities that our war fighters need
and that our allies and partners need and, frankly, the
American people during COVID, it has really stepped up and it
continues to do so. We use the Defense Production Act every day
to help prioritize and build more capabilities in our
industrial base.
I also want to highlight the point that you make about
stockpiling and very much the importance of it. In the National
Defense Industrial Strategy, we highlight the importance of
stockpiling and using it to create more-resilient supply chains
and ensure that we have defense critical components at the time
that we need them. My office, my team, we work very closely
with the National Defense Stockpile manager to ensure that in
implementing and executing the Defense Production Act, we are
working closely with stockpile needs. So again, I completely
agree with you on the importance of the stockpile for our own
overarching posture and for our own security and using the
Defense Production Act.
Mr. Williams of Texas. Okay. Main Street has stepped up to
help defend our country since World War II, and continues to
provide for our national defense today. As of 2021, nearly
60,000 companies and over 1.1 million employees have
contributed to the U.S. defense industry. These contractors
range from the smallest businesses to large corporations who
help to meet supply chain needs and work to develop the latest
innovative systems and capabilities.
It is crucial that we ensure that there are opportunities
for small businesses. I chair the House Small Business
Committee, and most businesses are small, so it is imperative
that we make sure they have opportunities to enter this space
and give them a chance to compete. So again, could you
elaborate on the key relationships small businesses have with
the defense industrial base and the necessity to increase the
opportunities for small businesses in the space and create more
competition?
Ms. Taylor-Kale. Sir, I completely agree with you that
small businesses are an important part of our defense
industrial base. I will also note that in terms of DPA Title
III awards that the Department issues, about 40 percent of
those awards tend to be to small businesses. We use the Title
III awards, again, for the needs and the services and also to
alleviate pressure points in the supply chain, but we are also
using them oftentimes to create more competition and make sure
that we eliminate sole sources of supplies of key material.
Small businesses are a very important aspect of this. So, we
will continue to support small businesses through our Office of
Small Business Programs and our various programs for small
businesses as well as through the Defense Production Act.
Mr. Williams of Texas. Since the 1990s, the defense
industry has seen a 90-percent decrease in the prime
contracting space, from 51 contractors to 5 contractors. It is
important to recognize the increase in the number of
contractors leads to more reliable supply chains, scaled
efficiency, less backlogs, and this increases competition.
Again, the key word, ``competition,'' helps to ensure that our
national defense is ready and strong. So, we continue to allow
the free market to work to keep our nation secure. In the small
amount of time I have left, could you elaborate on how
increasing competition in the defense industry could lead to
greater innovation and cost-effectiveness for the development
and acquisition of military equipment technology, increasing
our bases' capabilities? Could competition drive prices down?
Ms. Taylor-Kale. Sir, I completely agree with you. We,
again, think of the work that we do through our programs in
small business as well as through Defense Production Act Title
III as part and parcel to helping to create more resilience in
the defense industrial base, and create more competition in the
system. Again, oftentimes what we are trying to do is address
critical supplies and material where there is sole sourcing.
And again, using the authorities that we have through DPA and
the others that Congress has given us is really part of how we
are trying to build more competition in the industrial base so
that we have more cost-efficiency and are able to provide more
capabilities to the war fighter.
Mr. Williams of Texas. And my time is up. I yield back.
Chairman Luetkemeyer. The gentleman yields back. With that,
we will go to the gentleman from Texas, Mr. Gonzalez, for 5
minutes.
Mr. Gonzalez. Thank you. Thank you, Mr. Chairman, and
Ranking Member Beatty, and I would like to thank all of the
panelists for showing up here today to talk to us.
I would like to begin by discussing voluntary agreements
under the DPA, and this will be to the panel, whomever wants to
chime in on this. I believe that there is only one currently in
effect tied to public-private collaboration at the height of
the pandemic, which is still very near and dear to all of us.
This collaboration brought together the best minds on a
volunteer basis to collaborate and coordinate what was needed
to get the United States and our people and our economy through
COVID-19. The group wraps up its work next summer.
When the 5-year period of this agreement expires, are there
ways to leverage these voluntary agreements to plan ahead for
future pandemics or other crisis, to build and stand by an
industrial capacity for a period for a potential surge of use
during a conflict? It has been suggested that these voluntary
agreements under DPA could be the ideal way to prepare for
these kinds of contingencies. I would like to hear your
thoughts.
Ms. Spishak. Thank you for your question. I am happy to
start. Well, you started with the pandemic, the voluntary
agreement that was established, and you are correct, it was
established for 5 years. So, it will come to a close towards
the end of next year, provided we don't see any changes in the
current conditions. Under this voluntary agreement, we did
learn a lot, and I think a couple of those things we learned
will be really helpful for future voluntary agreements.
To your point, I think it is a great opportunity for us to
figure out better ways to integrate the civilian, military, and
the private sector in terms of collaborating in a space that
will not violate any antitrust laws. In particular, it took
longer than we would have anticipated to get the voluntary
agreement stood up for a variety of reasons, including that
this is really the first one that has gone through
implementation to that level. And I think that now that we know
what those mechanisms are, we are looking at ways that we can
think about that in the future so they are in place in advance
of something that we would want to be ready for that engagement
around.
Mr. Gonzalez. Thank you. Any recommendations you would make
to the committee today as we look forward?
Ms. Spishak. I am happy to take that back for the record
and reflect on some of the things we learned through COVID as
we bring this current voluntary agreement to a close.
Mr. Gonzalez. Very well. Thank you.
Also, as we have seen, especially over the past 4 years,
the DPA can show how business in the United States operates and
how the economy functions. How does DPA fit in with other tools
the Executive Branch has to shape the U.S. industrial base,
including supplies and services and labor, and do you see any
gaps in coverage that should be a concern to folks in Congress?
Ms. Taylor-Kale. I will start off there. Again, for the
Department of Defense, our main goal is to use the Defense
Production Act, all the titles, to build resiliency in the
industrial base for defense critical needs, so I will defer to
other agencies on the broader economic concerns. Sometimes, we
use Title I, Title III, and the information that we get out of
Title VII in order to create a more robust response in certain
critical sectors of need, and I am happy to get back to you
with more information for the record as well.
Mr. Gonzalez. I would appreciate that. Thank you. And I
yield back.
Chairman Luetkemeyer. The gentleman yields back. With that,
we will go to the gentleman from Georgia, Mr. Loudermilk, for 5
minutes.
Mr. Loudermilk. Thank you, Mr. Chairman. And thank you to
all of our panelists here today. This is a very interesting
subject, since I come from about a 30-year career in the IT
sector, and cybersecurity has always been and will always be a
great concern of mine.
Ms. Rozman-Kendler, one of the United States' greatest
defense assets is its cybersecurity workforce. Even though the
demand for cybersecurity-related talent has far outstripped
supply, the U.S. still boasts one of the largest pools of
cybersecurity talent in the world. Unlike our adversaries, most
of these talented professionals work for private firms outside
the State, Defense, and Intelligence apparatus.
In their sobering 2020 report, the Cyberspace Solarium
Commission highlighted the need to designate responsibilities
for cybersecurity services under the Defense Production Act.
More recently, the Director of the Cybersecurity and
Infrastructure Security Agency (CISA), Jen Easterly, suggested
that the agency is exploring ways that private incident
response firms could be, ``compelled,'' to assist the U.S.
Government in response to a large-scale drastic cyberattack
against the United States. So with all that, the question would
be, could you briefly explain the benefits of using the Defense
Production Act to respond to a cyber-related national
emergency?
Ms. Rozman-Kendler. Excuse me. I certainly share your
concern about protecting our cybersecurity workforce and
ensuring that they have a significant role in our national
defense. The definition of, ``national defense,'' under the DPA
is not something that the Commerce Department administers.
Mr. Loudermilk. Okay.
Ms. Rozman-Kendler. We work with the Department of Homeland
Security (DHS) particularly in the cyber context. Under our
delegation, if they were to place a rating order here based on
their definition of, ``national defense,'' that is what would
enable that to move forward.
Mr. Loudermilk. Okay. Would anyone else like to tackle the
question, the benefits of using DPA in a cyber-related national
emergency? Dr. Taylor-Kale?
Ms. Taylor-Kale. Sure. Sir, I will make a quick note on
this. I think, again, the benefit of the Defense Production
Act, in general, is that it allows the President the authority
to recognize when there is a national emergency and then apply
the tools of prioritization allocation as well as direct grants
or purchase commitments to sort of tackle the problem, and then
with Title VII, being able to gather information from industry,
as Commerce does. When you put it all together, it really
allows for the ability to tackle a problem from many different
angles. DOD hasn't used the authorities for cyber-related
issues, but, again, if the President determined that we needed
to, or if there was such an emergency in place, we would look
to potentially use the Defense Production Act.
Mr. Loudermilk. Is there anything that we should keep in
mind as we move to reinforce or reauthorize DPA next year,
especially when it comes to cybersecurity? Anyone? Yes?
Ms. Taylor-Kale. I will note that, again, in my oversight
over defense industrial policy and, again, small business, we
have a Defense Industrial Base cybersecurity strategy that was
also released this year, just a couple of months ago.
Cybersecurity is one of the key issues for manufacturing in
small businesses. We worry about the ways in which small
businesses will be able to address some of the cybersecurity
needs that the Defense Department has. I don't believe that
this would necessarily fall under the purview of the Defense
Production Act, but it is certainly something the Department is
addressing and using other authorities, and any other tools.
Mr. Loudermilk. Ms. Spishak?
Ms. Spishak. Thank you. I just wanted to reiterate that
based on the definition that Congress updated in 2003 of,
``national defense,'' as my colleague was alluding to, it does
cover the protection and restoration of critical infrastructure
systems. And I could imagine, several scenarios where the
preparedness or the response to a cyber incident for critical
infrastructure would be something that could be covered by the
Defense Production Act.
Mr. Loudermilk. Okay. Thank you very much. Dr. Taylor-Kale,
I just have a few seconds left, but could you briefly explain
standby procurement contracts under Title III of the DPA?
Ms. Taylor-Kale. Sir, I believe you are talking about
purchase commitments, and these are a critical tool. We have
not used them yet. We have use cases that we believe we will be
able to use in this coming year, but it allows us to be able to
essentially buy material or guarantee to buy material in
advance. It is particularly helpful for strategic materials,
critical minerals, where we need some sort of an offtake and a
way for the Defense Logistics Agency, the National Defense
Stockpile, to be able to use it.
Mr. Loudermilk. Okay. Thank you, Mr. Chairman. I yield
back.
Chairman Luetkemeyer. The gentleman yields back. We will
now go to the gentleman from Illinois, Mr. Foster, for 5
minutes.
Mr. Foster. Thank you, Mr. Chairman, and witnesses. I think
the two most significant recent uses of this are the COVID
epidemic, and also, the recent AI Executive Order, and the
COVID thing, I think we built into the CARES Act mandatory GAO
reporting on what went on because you are in this interesting
box. By definition, it is an emergency, so you have to bypass a
lot of the paperwork for sending stuff out for bids and so on,
and that has a huge opportunity for potential corruption or all
sorts of bad things. And what we came to in that instance was
combining using the authorities and a very strong GAO
oversight.
And I was wondering if you have any comments on whether
that is an effective thing, just the knowledge that the GAO is
going to be looking over your work as you are doing all of
these things on a very tight time scale? Is that a model that
has worked well? Any comments you have on whether we should
continue to make that part of a large scale use of the Defense
Production Act?
Ms. Taylor-Kale. I will comment quickly, sir. First, I
think any time that you have oversight over something as
powerful as the Defense Production Act, it offers many
opportunities to learn, and certainly during COVID, we learned
a lot in the Department about execution and how to execute
quickly and efficiently as a result of what we learned in
COVID. And since then, we have taken steps within the
Department to move to work more quickly with our execution
agent.
You will see the sessions that I had for ways to improve
the DPA law will particularly help the Department of Defense,
where, right now, we have a sole and exclusive executive agent.
In times of emergency like in COVID, we really need to be able
to move much more flexibly, and, frankly, as our DPA Title III
appropriations increase, having more flexibility with our
execution offices will continue to be helpful.
Mr. Foster. Yes. As I recall, one of the main GAO
conclusions was that HHS, in particular, was not practiced in
using the Defense Production Act because they traditionally
hadn't really been an emergency response organization for
national security emergencies. And I think there is just a lot
of valuable information. I was on the COVID Select Committee in
the last session of Congress and worked with now-Chairman, Mark
Green, on GAO oversight of Operation Warp Speed, where I think
the DPA was used to very effective use.
Anyway, now to AI. Last October, President Biden invoked
the DPA in his Executive Order on AI. And using these
authorities, they called for AI developers to share safety
information, including the results of relevant red team testing
with Federal agencies. I think this is an important approach,
but I wonder what happens when these reports come back, and is
there anything you can say about--have you received any of the
red team reports back? Have you set up a team to interpret what
they mean, and what is the game plan here?
Ms. Rozman-Kendler. Thank you for the opportunity to talk
about this. We are very excited about the opportunity presented
in the DPA and the Executive Order to survey the very small
number of frontier AI model developers about exactly what you
mentioned, the safety and security as they develop frontier
models. The results of our survey are still coming back. We are
working very closely----
Mr. Foster. Have you received at least some information
back from them----
Ms. Rozman-Kendler. As a normal process here, we have back-
and-forth with the companies that receive surveys to make sure
they understand what we are looking for and to make sure that
the results we get are useful to us, so that is a normal part
of the process. We have started to receive information. That
is, of course, extremely sensitive. It is unique information--
--
Mr. Foster. So, you don't intend to make this public? If
you find something really scary in the red team results, that
will be communicated back and, hopefully, they will fix it, or
what happens next if something bad is discovered in the red
team results that the companies are not addressing?
Ms. Rozman-Kendler. Absolutely. We use the results of our
surveys to inform policy decisions. So if there is something
that we found in that data that we would need to use, or other
members of the government would need to use in some way, we can
certainly affect that.
Mr. Foster. I would be interested in your plans on sharing
them both with the public and with Congress. If you discover
something that you think we should know about, I would like to
know that there is a plan for communicating it back to us.
Ms. Rozman-Kendler. It is extremely sensitive data that is
highly protected, but we certainly want to make sure that we
can action it as appropriate.
Mr. Foster. Thank you. My time is up, and I yield back.
Chairman Luetkemeyer. The gentleman yields back, but he
makes a great point. Again, we need to be working together with
you and with us to make sure we do the right thing here and
protect our country. Thank you.
The gentleman from Pennsylvania, Mr. Meuser, is recognized
for 5 minutes.
Mr. Meuser. Thank you, Mr. Chairman. And thank you to all
of our witnesses. Clearly, we have some very severely
escalating global tensions--Israel, Ukraine, Taiwan, Iran, and
various situations in Africa.
I guess the main question, Dr. Taylor-Kale is, is our
industrial base prepared to surge should it be required? Do we
have a plan for stockpiling? Some of the production sites, are
they aware that they are production sites that we are counting
on to surge for perhaps two or three significant conflicts? Are
they aware that they may be tapped? I will start with those
questions.
Ms. Taylor-Kale. Absolutely. Thank you, sir. The DOD,
through the military services, through my office, and through
the Office of the Under Secretary of Defense for Acquisition &
Sustainment, has regular ongoing dialogues with industry,
specifically along the lines of key weapon systems that are
needed for surge for wherever the conflict may be, whether it
is the current conflict in Ukraine or Israel, and also to
address the pacing threat in the Indo-Pacific. I will note that
one of the key issues that we see are long lead times for the
fielding of certain systems to the war fighter. Part of how we
use the Defense Production Act, frankly, sir, is to actually
address some of these long lead times.
Mr. Meuser. The Navy has expressed some concerns about
steel production for our ships. I have concerns as well with
our natural gas. We have a prohibition now on exports. We
should be, of course, looking after the well-being of the
European Union, which could use our natural gas, particularly
if there were multiple severe conflicts throughout the world,
and I would imagine that is what the Defense Production Act is
and you folks are engaged in. Can you address the steel
production, and if you do, in fact, have natural gas concerns
not just for us domestically but for our allies?
Ms. Taylor-Kale. Sir, certainly, the need for energy is a
key one for us as well as for our allies and partners. Using
the Defense Production Act, we are not making investments that
address natural gas or steel per se, but I understand
completely your concern and how this will affect our allies and
partners as we address conflicts around the globe.
Mr. Meuser. Ms. Rozman-Kendler, that might be within your
role. Do you have concerns about that?
Ms. Rozman-Kendler. Congressman, if there were an area here
that we could explore with a survey, we have done that before
under Title VII of the DPA. To gather information on the
industrial base, we could certainly engage with----
Mr. Meuser. Okay. A survey? Come on. If they need natural
gas, they are going to get it from somewhere, and they are
getting it from Russia and other places. And that might not be
a very friendly business partner in the near future.
Let me ask you about the Strategic Petroleum Reserve (SBR)
situation, where we are about 30 percent, at best, of capacity.
Is that an example of our preparedness in minerals and other
items, energy, for instance, and other production capacities
that are important to our domestic security? I will ask you,
Ms. Rozman-Kendler.
Ms. Rozman-Kendler. That is not something that is within my
purview, sir, but I do----
Mr. Meuser. Ms. Taylor-Kale? It has to be within one of
your purviews.
Ms. Taylor-Kale. I'm sorry. Can I----
Mr. Meuser. The SBR being at 25 percent to 30 percent of
its capacity is not a good example of our preparedness for
defense production, and that is energy, which runs everything.
Is that an example of our capacity or is that an anomaly?
Ms. Taylor-Kale. Sir, I understand your concerns around
energy. What I will say is that the Department of Defense, and
my office, don't have oversight over the Strategic Petroleum
Reserve. So I would have to defer to, I believe, the Department
of Energy or the Department of the Interior for that.
Mr. Meuser. I think it was last year, there was $250
million spent on heat pumps out of the Defense Production Act,
and then, curiously, there was another $250 million for
critical minerals, which were purchased from overseas, in fact,
many from China. Can somebody explain that?
Ms. Taylor-Kale. You are probably referring to Title III.
The questions around heat pumps, I will have to defer to the
Department of Energy, as those were their awards. We received
$250 million from the Inflation Reduction Act for----
Mr. Meuser. That is what this money was used for, right?
Ms. Taylor-Kale. ----critical minerals, but we----
Mr. Meuser. I am out of time, Mr. Chairman. If we could
follow this up later, that would be great. Thank you.
Ms. Taylor-Kale. Sure. I am happy to do so.
Chairman Luetkemeyer. The gentleman's time has expired. We
will now go to the gentleman from Iowa, Mr. Nunn, for 5
minutes.
Mr. Nunn. Thank you, Mr. Chairman, and thank you very much
to the committee members for being here today, particularly
those speaking on the Defense Production Act.
The U.S., as we all know, is a strategic leader in the free
world, in large part due to our arsenal of democracy, and what
you are helping to provide for this is essential. And with the
hot conflicts that continue to rage in the Middle East and
around the world, continuing throughout our area, our strategic
stockpiles, as we all know, have continued to dwindle, and the
ability to not only re-support but find new ways into this
continues to be challenged. The U.S. has the most capable
innovation and manufacturing capabilities in the world, so I
think we all collectively want to find ways to do this
effectively.
With that, I would like to talk about leveraging the full
spectrum of the Defense Production Act to allow the U.S. to
fill our existing gaps in output and harness the full potential
of our partners, both within the industrial sector, the
innovative sector, as well as our foreign allies. So, let's get
started.
I would like to begin with you, Dr. Taylor-Kale. I
appreciate you being here today. As we look at what we are
doing in the Defense Production Act, particularly in Title III,
we have identified that there are more and more foreign
partners who have the potential to be with us--the United
Kingdom, Australia. Would you support DPA Title III awards
being made available for foreign companies even if they
potentially spend those funds abroad?
Ms. Taylor-Kale. Thank you for the question, and, again, I
want to underline that the Department really applauds the
Congress for redefining domestic sources to include Australia
and the U.K. As it currently stands, we give awards to
companies that are planning to do projects in the United States
or in Canada. As of yet, we haven't actually issued a DPA Title
III award for a company working in Canada, and now that we have
the new authority for the U.K. and Australia, we will be able
to do so there. But our priority is domestic sourcing and
domestic production, and generally that means companies that
are planning to do work in the U.S., and now also, Canada, the
U.K., and Australia.
Mr. Nunn. Which is great. As we expand into that, I guess I
want to know, are there certain things that would be more
effectively done with, in this case, our Five Eyes partners,
minus New Zealand, in a more efficient way, particularly when
we are talking about submarine development for containment of
potential adversaries in the South China Sea?
Ms. Taylor-Kale. The way in which we have talked about
using the Defense Production Act, particularly with these
expanded domestic partners, is really to use it for our mutual
benefit to address supply chain concerns. We have defense
critical supply chains that are a concern for us as well as for
Canada, the U.K., and Australia. So, the way that we plan to
use these awards is really to address how we can use mutual
benefit to address some defense critical supply chain.
Mr. Nunn. Thank you. Let me ask a more specific question,
then. Under DPA Title III, do you have the ability to award to
a foreign entity that would build in a foreign country? Does
that authority exist?
Ms. Taylor-Kale. My understanding of the law is that we
have the ability to award to companies that are based in the
U.S., the U.K., Australia----
Mr. Nunn. Right, like the joint strike fighters. Obviously,
we can build components in all of those areas. That would make
sense, correct? The same can be said for software----
Ms. Taylor-Kale. As long as the companies are from the
U.S., the U.K., Australia, Canada----
Mr. Nunn. I got it. Yes.
Ms. Taylor-Kale. ----and also working in those countries.
Mr. Nunn. What is the average length of time for receiving
a DPA Title III request once a final government reply has been
delivered, let's say, in the last 2 years?
Ms. Taylor-Kale. Sure. In the last 2 years, we have
improved it where now, from the time that we receive a White
Paper to when we make a determination to the company, it can be
anywhere from 3 months to more. Where the time has come into
place and where it has increased time is in the actual
obligation of the awards. Again, it has been my priority as
Assistant Secretary to decrease those times. And with the new
Defense Industrial Base Consortium, as well as working more
closely with our Air Force partners, we are going to be able to
reduce those times to 12 to 16 weeks.
Mr. Nunn. That would be amazing if that is the timeline
that you are able to do. I think we have all experienced
collectively the, ``Valley of Death,'' here, particularly for
folks who want to come into this sector. Right now, we only
really have five major defense contractors, with so much
innovation available. I would encourage us to look collectively
at how we can provide better on-ramps for these folks, and how
we can lessen that timeline, particularly with our allies, to
be able to bring on the innovation necessary at the time and
place of need.
Thank you very much, Mr. Chairman. I yield back.
Chairman Luetkemeyer. The gentleman yields back. With that,
we go to the gentlelady from Texas, Ms. De La Cruz, for 5
minutes.
Ms. De La Cruz. Thank you, Mr. Chairman, and thank you,
witnesses, for being here today.
As we look forward to reauthorizing the Defense Production
Act, we are confronting a world that is more and more in
conflict than it has been in many years, with the wars raging
in Europe, our ally Israel engaging in a war that keeps
threatening to spread, and China becoming belligerent towards
its domestic neighbors. It is critical that this committee
actually stays focused on what the uses are for the DPA, and
that the DPA is not used for political controversy or to
compete against allies and our friends.
As you know, I am from Texas, so my question has to do with
critical minerals needed for a wide range of industrial
purposes, including defense. And what I mean by that is 32 of
37 critical minerals are either concentrated in China or in
other countries with strong diplomatic or economic ties to
China, and only 5 of the 32 are concentrated in the United
States, Australia, or Canada. This, in my opinion, is a
strategic weakness, and we need to enhance our capacity to
build out supplies of these minerals.
As I mentioned, I am from Texas, and in Texas, we recognize
this, and we are happy to be on the receiving end of a number
of DPA-facilitated projects to refine rare earth minerals. The
previous Administration used its DPA purchasing authority to
put a floor on the price of rare earth elements refined in the
United States, including, again, in my home State of Texas.
Dr. Taylor-Kale, and Ms. Rozman-Kendler, do you believe
that China would just drop prices to drive U.S. critical
mineral companies out of business if DPA provisions like this
were not in place?
Ms. Taylor-Kale. Ma'am, I want to underscore the concern
that you are raising about the PRC's interventions in the
critical mineral space. This is something that the Department
has been concerned about and really focusing our DPA Title III
investments on to address the military services' needs.
I will give an example. You mentioned using the Defense
Production Act not just for defense needs. Again, we are very
concerned and focused on readiness and resilience in defense
critical supply chains, but there are ways in which our
investments can also be helpful in the commercial market. For
instance, lithium batteries is something that we use in defense
systems and it is key for us. We have made investments using
Title III there, but obviously, lithium is going to be
important for batteries that are not defense needs. So
certainly, focusing on defense critical needs is something that
can oftentimes be a win-win for even the commercial side as
well.
Ms. De La Cruz. Reclaiming my time here, do you believe
that China would drop prices to drive the United States out of
business? And that is the main concern there, is how is China
going to affect the United States if they drop prices?
Ms. Taylor-Kale. I will defer to my colleague from Commerce
on the state of play with trade with China. But I will say that
from our perspective, any way that we can increase defense
production, we see as a deterrent. And we believe by making
these investments in critical aspects of defense supply chains,
that we are actually making a deterrent mechanism for our
adversaries.
Ms. De La Cruz. Okay. Thank you.
Ms. Rozman-Kendler. Congresswoman, I share your concerns.
We are deeply concerned about the ability of China to use
critical mineral resources in a way that is contrary to U.S.
national security. Take, for example, their controls on gallium
and germanium that they have put in place in the last year,
that are of deep concern. I would also note that we have used
DPA authority under Title VII to look into neodymium iron boron
permanent magnets and also vanadium. These are two surveys that
we have conducted, and the results of those surveys are used
for policy decisions in those spheres, and I imagine that we
will continue to do that work to support our colleagues making
national security decisions.
Ms. De La Cruz. Thank you. My time is up. I yield back.
Chairman Luetkemeyer. The gentlelady's time has expired.
The gentlelady from California, Mrs. Kim, is recognized for 5
minutes.
Mrs. Kim. Thank you, Chairman Luetkemeyer, and Ranking
Member Beatty, for holding this hearing. And thank you to our
witnesses for staying this long.
I want to let you know that I am concerned that we don't
have the naval capabilities to ensure that we are successfully
deterring any conflict against the Chinese Communist Party
(CCP) in the Indo-Pacific. The Office of Naval Intelligence
recently said that the CCP's shipbuilding industry yields 232
times the shipbuilding capacity of the United States and it
represents almost 50 percent of the total global shipbuilding
supply. And we, the United States, have 7 shipyards that build
warships for the Navy, whereas the CCP operates more than 20
shipyards. This is all evidence that we are falling behind in
our strategic competition with China.
Dr. Taylor-Kale, how is your office thinking about bridging
this gap of shipbuilding capacity between the U.S. and the CCP?
Ms. Taylor-Kale. Ma'am, thank you for the question. First,
I want to say that the Defense Production Act is one of
multiple tools that the Department of Defense has to strengthen
the defense industrial base, and the shipbuilding industry in
particular.
Mrs. Kim. As Congress is looking to reauthorize the DPA, is
there anything that you would change in the current statute to
fast-track and facilitate the shipbuilding projects?
Ms. Taylor-Kale. I certainly think, ma'am, our ability to
be able to execute more quickly in order to address the real
urgency of the threat will be very important. Again, as I
noted, we use other tools within the Department, so another
industrial base fund that I have within my office, we work
closely with the Navy on shipbuilding workforce. The Navy is
also prioritizing investments and using their authorities. They
recently passed supplemental offers, over $3 billion, in
submarine industrial base investments, so we are seeing where
these investments are going into play. And again, the DPA is
one of multiple tools that we can use for that.
Mrs. Kim. Thank you. Ms. Rozman-Kendler, can you discuss
the Interagency Offset Working Group, what it does, who are the
members and how often do they meet, and what results have come
out of those meetings?
Ms. Rozman-Kendler. Thank you. We do collaborate very
closely with the Interagency, of course, across our DPA
authorities. I think I may need to get back to you on specific
details as that is not something in which I am personally
engaged. But across-the-board, especially with the State
Department when it comes to offsets, we are working to engage
with industry here in the United States and with governments
overseas. We also take very seriously our reporting requirement
with respect to offsets to make sure that we are informing
Congress of what we are observing in that field.
Mrs. Kim. Okay. We can follow up on that then.
Ms. Rozman-Kendler, you talked about Title VII, and it has
historically been used to inform what are commonly referred to
as the industrial base assessments, and the Department of
Commerce conducts those assessments. So, what is an industrial
base assessment, and what is the relevance of those assessments
in relation to Title VII?
Ms. Rozman-Kendler. Thank you, Congresswoman. The Title VII
industrial base assessment and survey authority is very
important to protecting our national security. We work to
survey industry in various areas important to our national
defense to find information that is only available through
those surveys. It is unique information. I mentioned earlier
employment data or, as we talked about in the artificial
intelligence context, safety and security information, that
those companies do not otherwise make public, and with that
information, we inform policymakers on how to move forward.
Mrs. Kim. Thank you. I want to ask Ms. Spishak, the Defense
Production Act Committee (DPAC) was created during the 2009
reauthorization. Can you discuss what, if any, impact the DPAC
has made? And it is my understanding that the FEMA
Administrator currently sits as the Chair, so can you discuss
some of the duties that they serve in that role?
Ms. Spishak. Thank you for the question. The Defense
Production Act Committee, you are correct, was established in
2009, and the FEMA Administrator serves as the Chair. It is
really a body that is intended to have strategic policy
conversations regarding the Defense Production Act at the
Secretary, Administrator, or Director level, depending on the
department or agency.
I think the most important value that it has offered us so
far is that it has been kind of the underpinning and the
organizational structure for us to develop a strong interagency
working group at the level of the directors who are engaging
across the various Defense Production Act programs, both with
the determination departments and with the resource
departments. So, it has created this network for us to be able
to be well-coordinated as one of FEMA's major roles is making
sure that there is coordination against the national
mobilization.
Mrs. Kim. Thank you very much. My time is up. I yield back.
Chairman Luetkemeyer. The gentlelady's time has expired,
and we have run out of Members to cross-examine you today, so I
want to thank you all for your participation. You did a great
job of explaining and answering our questions. If any of our
Members do have questions, they will submit them through our
office, and we will submit them to you. I think I mentioned to
you, Ms. Taylor-Kale, that I have one that I want you to finish
up answering, and I would appreciate a quick response back on
that. We do hope that you respond to that very promptly.
The Chair notes that some Members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
With that, the hearing is adjourned. Thank you very much
for your participation.
[Whereupon, at 3:29 p.m., the hearing was adjourned.]
A P P E N D I X
May 8, 2024
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
[all]