    [House Hearing, 119 Congress]
    [From the U.S. Government Publishing Office]

                     EVALUATING THE DEFENSE PRODUCTION ACT
    =======================================================================

                                    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 NINETEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JUNE 12, 2025

                                   __________

                               Serial No. 119-27

           Printed for the use of the Committee on Financial Services

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                www.govinfo.gov

                                     __________

                       U.S. GOVERNMENT PUBLISHING OFFICE
    60-988 PDF                  WASHINGTON : 2025

    -----------------------------------------------------------------------------------

                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                        FRENCH HILL, Arkansas, Chairman

    BILL HUIZENGA, Michigan, Vice        MAXINE WATERS, California, Ranking
        Chairman                             Member
    FRANK D. LUCAS, Oklahoma             SYLVIA R. GARCIA, Texas, Vice
    PETE SESSIONS, Texas                     Ranking Member
    ANN WAGNER, Missouri                 NYDIA M. VELAZQUEZ, New York
    ANDY BARR, Kentucky                  BRAD SHERMAN, California
    ROGER WILLIAMS, Texas                GREGORY W. MEEKS, New York
    TOM EMMER, Minnesota                 DAVID SCOTT, Georgia
    BARRY LOUDERMILK, Georgia            STEPHEN F. LYNCH, Massachusetts
    WARREN DAVIDSON, Ohio                AL GREEN, Texas
    JOHN W. ROSE, Tennessee              EMANUEL CLEAVER, Missouri
    BRYAN STEIL, Wisconsin               JAMES A. HIMES, Connecticut
    WILLIAM R. TIMMONS, IV, South        BILL FOSTER, Illinois
        Carolina                         JOYCE BEATTY, Ohio
    MARLIN STUTZMAN, Indiana             JUAN VARGAS, California
    RALPH NORMAN, South Carolina         JOSH GOTTHEIMER, New Jersey
    DANIEL MEUSER, Pennsylvania          VICENTE GONZALEZ, Texas
    YOUNG KIM, California                SEAN CASTEN, Illinois
    BYRON DONALDS, Florida               AYANNA PRESSLEY, Massachusetts
    ANDREW R. GARBARINO, New York        RASHIDA TLAIB, Michigan
    SCOTT FITZGERALD, Wisconsin          RITCHIE TORRES, New York
    MIKE FLOOD, Nebraska                 NIKEMA WILLIAMS, Georgia
    MICHAEL LAWLER, New York             BRITTANY PETTERSEN, Colorado
    MONICA DE LA CRUZ, Texas             CLEO FIELDS, Louisiana
    ANDREW OGLES, Tennessee              JANELLE BYNUM, Oregon
    ZACHARY NUNN, Iowa                   SAM LICCARDO, California
    LISA McCLAIN, Michigan
    MARIA SALAZAR, Florida
    TROY DOWNING, Montana
    MIKE HARIDOPOLOS, Florida
    TIM MOORE, North Carolina

                          Ben Johnson, Staff Director

                                     ------

     SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT FINANCE, AND INTERNATIONAL
                             FINANCIAL INSTITUTIONS

                        WARREN DAVIDSON, Ohio, Chairman

    ZACHARY NUNN, Iowa, Vice Chairman    JOYCE BEATTY, Ohio, Ranking Member
    FRANK D. LUCAS, Oklahoma             JOSH GOTTHEIMER, New Jersey
    PETE SESSIONS, Texas                 JUAN VARGAS, California
    ANDY BARR, Kentucky                  BILL FOSTER, Illinois
    ROGER WILLIAMS, Texas                VICENTE GONZALEZ, Texas
    YOUNG KIM, California                RITCHIE TORRES, New York
    ANDREW OGLES, Tennessee              SEAN CASTEN, Illinois
    LISA MCCLAIN, Michigan               SAM LICCARDO, California
    MARIA SALAZAR, Florida
                             C  O  N  T  E  N  T  S

                                  ----------

                            Thursday, June 12, 2025
                               OPENING STATEMENTS

                                                                       Page
    Hon. Warren Davidson, Chairman of the Subcommittee on National
      Security, Illicit Finance and International Financial
      Institutions, a U.S. Representative from Ohio..................     1
    Hon. Sean Casten, Member of the Subcommittee on National
      Security, Illicit Finance and International Financial
      Institutions, a U.S. Representative from Illinois..............     2

                                   STATEMENTS

    Hon. French Hill, Chairman of the Committee on Financial
      Services, a U.S. Representative from Arkansas..................     4
    Hon. Maxine Waters, Ranking Member of the Committee on Financial
      Services, a U.S. Representative from California................    37

                                   WITNESSES

    Mr. William Russell, Director, Contracting and National Security
      Acquisitions, Government Accountability Office.................     4
        Prepared statement...........................................     7
    Mr. Adam G. Levin, Analyst in Economic Development Policy,
      Congressional Research Service.................................    22
        Prepared statement...........................................    24

                                    APPENDIX

                     RESPONSES TO QUESTIONS FOR THE RECORD

    Written responses to questions for the record from Mr. William
      Russell
        Representative Young Kim.....................................    56
        Representative Zachary Nunn..................................    57
        Representative Maxine Waters.................................    58
    Written responses Written responses to questions for the record
      from Mr. Adam G. Levin.........................................
        Representative Young Kim.....................................    63
        Representative Zachary Nunn..................................    65
        Representative Maxine Waters.................................    67

                                  LEGISLATION

    H.R. ----, the Syria Sanctions Accountability Act................    74
    H.R. 3074, the Common Cents Act..................................    78
    H.R. ----, a bill to modernize and reauthorize the Defense
      Production Act of 1950, and for other purposes.................    82
    H.R. ----, a bill to amend the Defense Production Act of 1950 to
      require the President to declare a national emergency before
      using certain authorities under title I of that Act, and for
      other purposes.................................................   107
    H.R. ----, a bill to amend the Defense Production Act of 1950 to
      prohibit discrimination based on energy source in the use of
      certain authorities under title I and title III of such Act,
      and for other purposes.........................................   109
    H.R. ----, a bill to amend the Defense Production Act of 1950 to
      expand the duties of the Fund manager of the Defense Production
      Act Fund, and for other purposes...............................   111
    H.R. ----, a bill to amend the Defense Production Act of 1950 to
      require certain agencies to prepare an industrial base strategy
      report, and for other purposes.................................   113
    H.R. ----, a bill to amend the Defense Production Act of 1950 to
      require the Chairperson of the Defense Production Act Committee
      to maintain a database for use by the members of the Defense
      Production Act Committee, and for other purposes...............   117

                     EVALUATING THE DEFENSE PRODUCTION ACT

                                  ----------

                            Thursday, June 12, 2025

                 U.S. House of Representatives,
    Subcommittee on National Security, Illicit Finance,
              and International Financial Institutions,
                               Committee on Financial Services,
                                                        Washington, DC.

        The subcommittee met, pursuant to notice, at 10:01 a.m.,
    2128 Rayburn House Office Building, Hon. Warren Davidson
    [chairman of the subcommittee] presiding.
        Present: Representatives Davidson, Nunn, Hill, Barr,
    Williams of Texas, Kim, McClain, Waters, Vargas, Casten,
    Foster, Casten, and Liccardo.
        Chairman Davidson. The Subcommittee on National Security,
    Illicit Finance, and International Institutions will come to
    order. Without objection, the chairman is authorized to declare
    recess of the committee at any time.
        This hearing is titled ``Evaluating the Defense Production
    Act.''
        Without objection, all members will have 5 legislative days
    within which to submit extraneous materials to the chairman for
    inclusion in the record.
        I now recognize myself for 4 minutes for an opening
    statement.

      OPENING STATEMENT OF HON. WARREN DAVIDSON, CHAIRMAN OF THE
        SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT FINANCE AND
      INTERNATIONAL FINANCIAL INSTITUTIONS, A U.S. REPRESENTATIVE
                               FROM OHIO

        I want to welcome our witnesses to today's national
    security hearing, which is devoted to evaluating the Defense
    Production Act (DPA) ahead of its expiration on September 30,
    2025. As Congress prepares to reauthorize the Defense
    Production Act, today's panel of witnesses will provide a
    fundamental overview of DPA, examining its authorities and uses
    to increase this committee's understanding for effective
    updates and improvements. This panel's testimony will inform
    our consideration of how Congress can reform and more
    effectively deploy the Defense Production Act.
        The DPA was initially enacted in 1950 in response to the
    outbreak of the Korean War, as President Harry Truman aimed to
    secure domestic industrial resources to meet the Nation's
    national security needs during that war and future national
    emergencies. It was created with good intentions to bolster the
    resilience of the United States' industrial base in times of
    crisis by promoting domestic production rather than a reliance
    on foreign sources.
        Today, this is more critical than ever, as the United
    States has become dependent upon foreign production of critical
    materials, goods, and services across many sectors. Moreover,
    in recent years, the DPA has not been used as effectively as it
    could, and arguably, it has been misused. It is time for
    Congress not just to reauthorize but to reset and realign DPA's
    authorities.
        For example, the previous administration invoked Defense
    Production Act to require suppliers to provide key inputs to
    infant formula manufacturers before other customers. Is this a
    proper use of DPA? A month later, President Biden leaned on DPA
    to boost the production of residential heat pumps. While the
    goal might have been laudable, is this really a correct use of
    DPA? I look forward to examining all sorts of things with this
    review.
        Under both Biden and the first Trump Administrations, many
    of the DPA's authorities risk irrelevance. From 2018 to 2024,
    for example, there was only one direct loan and zero loan
    guarantees, not because there is no need, but because DPA
    processes are arguably too cumbersome. If so, they need reform.
    Meanwhile, our supply chains remain vulnerable, and our defense
    stockpiles are dangerously depleted and deeply entrenched with
    bureaucratic processes. The DPA was most notably used during
    the coronavirus disease (COVID) pandemic, and this is the first
    reauthorization since then.
        This period highlighted deep vulnerabilities. If we can
    count on the DPA to be reactive once an emergency arrives, our
    response may come too late. Modernizing DPA means discovering
    what a more proactive posture would look like. We have the
    opportunity to prepare rather than just react.
        Our adversaries are advancing in critical sectors from
    semiconductors to tooling, rare earth mineral processing to
    pharmaceuticals, and we need stronger domestic capabilities
    that cannot be done currently. The need for a powerful DPA and
    robust defense industrial base here in the United States
    intensifies as threats we face continuously augmented, and
    relationships become strained in various ways.
        The DPA is a critical component of the United States'
    national security toolkit that warrants reauthorization. Yet
    this should come only after a thorough review, reassessment,
    and taking every opportunity to improve on it. I urge my
    colleagues to focus on reauthorizing the DPA with purpose and
    commitment to national security and a robust, resilient future
    for our United States. Anything less could put our Nation's
    future at risk.
        With that, I yield the balance of my time.
        Chairman Davidson. I now recognize the gentleman from
    Illinois, Mr. Casten, for 4 minutes for an opening statement.

       HON. SEAN CASTEN, MEMBER OF THE SUBCOMMITTEE ON NATIONAL
         SECURITY, ILLICIT FINANCE AND INTERNATIONAL FINANCIAL
           INSTITUTIONS, A U.S. REPRESENTATIVE FROM ILLINOIS

        Mr. Casten. Thank you, Mr. Chairman, for holding this
    hearing. Thank you to our witnesses for appearing today. I am
    not the ranking member of this committee. I will make no claims
    to be able to fill Mrs. Beatty's shoes. I will brag only that I
    have a better hip because she is out getting surgery today to
    have that hip repaired, so she will be back at full strength
    shortly.
        The DPA gives the President authority to take various
    actions to ensure that the supply of materials and services are
    necessary for our national defense, gives the President the
    authority to prioritize government contracts, waive
    international trade agreements, offer incentives within the
    domestic market to enhance production of critical materials and
    technologies if deemed necessary for the national defense.
        We have seen many benefits in Illinois. We recently saw DPA
    invoked to help resources in shipbuilding, not because Illinois
    is on a port, but because Illinois has a lot of steel
    manufacturing that was important to that need, and that is an
    important issue.
        Over the years, Congress has amended the definition of
    national defense to include emergency preparedness, energy
    production activities, critical infrastructure, protection
    restoration, and homeland security. We, of course, saw
    applications when we were facing novel challenges, national
    security from the COVID-19 pandemic to the increasingly
    devastating effects of climate change. To tackle those issues,
    the executive branch has appropriately used the DPA to produce
    ventilators, vaccines, as well as to accelerate domestic
    manufacturing of clean energy technologies.
        In 2022, the Biden Administration invoked the DPA to
    develop and reshape supply chains for transformers and other
    grid components, solar panels, heat pumps, and hydrogen fuel
    cells. That is relevant because the Department of Defense, on a
    bipartisan basis going back for decades, has listed climate
    change as a threat to national security all the way back to
    2008, saying that it must be a part of every strategic decision
    the Department makes.
        I wish my Republican colleagues did not criticize the use
    of the DPA to support cleaner and cheaper energy sources,
    because it is important. We want electric grid resiliency, but
    we politicize this. We accuse President Biden of accusing the
    DPA to advance his agenda. I would argue that the DPA is an
    important tool to mobilize the U.S. industrial base to meet the
    demands of national defense, including energy security and
    independence.
        I would note that President Trump recently invoked the DPA
    to promote the development of nuclear energy, which the
    President argues is necessary to achieve energy independence,
    also a cleaner source, maybe not a cheaper source, but let us
    not pick winners, but let us make sure that we do acknowledge
    that energy security is important.
        I do want to acknowledge that I think my Republican
    colleagues raise a good point. Congress has a long history of
    solving problems by asking the executive branch to solve them.
    Then we have a long history of complaining that the executive
    branch abuses the power that we gave them. We can choose where
    that sits, but that is an ongoing issue. I think a lot of us on
    the Democratic side have concerns about how the current
    occupant of the White House is also abusing some of these
    powers. We have seen this not in the DPA, but in the
    International Emergency Economic Powers Act (IEEPA), where the
    President has declared that there is an emergency that requires
    the imposition of tariffs. IEEPA is not a tariff statute, but
    it is being used that way. We have seen more recently in the
    Twitter feud between the President and Elon Musk, Steve Bannon
    saying that the President should use the DPA to seize SpaceX in
    retaliation. That is not how the DPA works.
        So in this context, I think it is appropriate at this
    moment that we are discussing how Congress intended the DPA to
    function and how, if at all, we should tweak the DPA to make
    sure that Congress continues to fulfill its responsibilities as
    the Article I branch, and I would submit to you the best branch
    among the three in Congress.
        I look forward to the discussion, and I yield back.
        Chairman Davidson. Thanks, Mr. Casten.
        I now recognize the chairman of the full committee, Mr.
    Hill, for 1 minute.

       HON. FRENCH HILL, CHAIRMAN OF THE COMMITTEE ON FINANCIAL
             SERVICES, A U.S. REPRESENTATIVE FROM ARKANSAS

        Chairman Hill. I thank you, Chairman Davidson.
        America is navigating one of the most dangerous and complex
    global threat environments in recent history. Our adversaries
    are accelerating innovation, scaling production, and heavily
    investing in their own national defense capabilities. It is
    critical that the United States keeps pace and expands our
    dominance as the leader across the free world. That requires
    not just military might, but economic resilience, financial
    agility, and industrial strength.
        Today, this subcommittee will review the Defense Production
    Act ahead of its reauthorization. We will explore ways to use
    the Defense Production Act to secure supply chains and
    strengthen our domestic industrial base, while ensuring that
    our agencies have the tools they need to meet these 21st
    century threats.
        I thank Chairman Davidson for his leadership. I look
    forward to our panel, and I thank members on both sides of the
    aisle for engaging on this important issue.
        I yield back.
        Chairman Davidson. Thank you, Chairman.
        Today, we welcome the testimony of Mr. William Russell, a
    Director in Contracting and National Security Acquisitions at
    the Government Accountability Office, and Mr. Adam Levin, an
    Analyst in Economic Development Policy at the Congressional
    Research Service. We thank you both for taking time to be here
    today and for the preparation you have done in advance.
        You will each be recognized for 5 minutes to give an oral
    presentation of your testimony. Without objection, your written
    statements will be made part of the record.
        Mr. Russell, you are now recognized for 5 minutes for your
    oral statement.

        STATEMENT OF WILLIAM RUSSELL, DIRECTOR, CONTRACTING AND
       NATIONAL SECURITY ACQUISITIONS, GOVERNMENT ACCOUNTABILITY
                                 OFFICE

        Mr. Russell. Thank you, Chairman Davidson, Chairman Hill,
    Vice Chair Nunn, and Congressman Casten, members of the
    subcommittee. Thank you for the opportunity to discuss Federal
    agency use of the Defense Production Act. While the DPA was
    first enacted nearly 75 years ago, its authorities continue to
    be relied upon to bolster the industrial base today.
        Since its last reauthorization in Fiscal Year 2018,
    Congress has appropriated at least $3.2 billion for DPA-related
    activities, and agencies have used the DPA in a range of
    circumstances to address national emergencies such as the
    COVID-19 pandemic to ongoing efforts to make our supply chains
    more resilient. In 2025 alone, agencies are using the DPA to
    help reconstitute the naval industrial base and to assist with
    expanded production of critical minerals. Unless reauthorized,
    the DPA authorities will expire in September 2025.
        Overall, the DPA has been a durable and important tool to
    address emergencies and enable domestic industrial base to
    maintain or increase production of needed defense resources. I
    would like to highlight today how agencies have used the DPA
    since it was last reauthorized, as well as several challenges
    they faced in doing so. This is based on our prior work looking
    at the DPA, as well as our new report that was issued today.
        From fiscal years 2018 to 2024, agencies such as the
    Department of Defense (DOD), Department of Energy, Health and
    Human Services, and others have placed over 2.5 million Title I
    priority ratings on contracts or orders. Priority ratings
    require companies to preference the delivery of goods and
    services needed to the national defense over other customers.
    For example, DOD uses these ratings for the production of
    military aircraft and ships, among other things.
        These agencies also made 222 Title III investments, valued
    at approximately $3.2 billion, to bolster the domestic
    industrial base through expansion of manufacturing capacity of
    existing suppliers, sustaining some of those suppliers, and
    bringing in new suppliers. For example, DOD completed
    investments that were used to respond to COVID-19 by expanding
    production of N95 masks and respirators and has ongoing
    investments intended to expand the domestic capacity in areas
    such as critical materials used in weapon systems, areas like
    electronics, missiles, munitions, and more.
        Use of Title VII authorities included industrial-based
    assessments and one voluntary agreement with industry over that
    period. For example, DOD, Health and Human Services (HHS),
    Department of Homeland Security (DHS), and others requested or
    completed 17 industrial-based assessments to better understand
    critical supply chains such as microelectronics.
        Agencies have experienced a number of challenges when using
    the DPA, specifically difficulties tracking the rated orders
    through the COVID-19 response. Our latest report found
    additional challenges. For example, DOD noted that industry
    partners did not always understand how to apply the priority
    ratings throughout the supply chain, and DOD is currently
    conducting outreach to ensure a better understanding of these
    responsibilities.
        In terms of Title III, a key authority for loans was only
    used once since 2018. We found that DOD does not currently have
    the expertise within its Defense Production Act Purchases
    Office to fully leverage loan authorities. Additionally, the
    DPA-wide coordinator, currently Federal Emergency Management
    Agency (FEMA), has not collected and shared lessons learned,
    leveraging DOD's extensive experience with Title III
    commitments over the years, but doing so could benefit other
    agencies like HHS. We had a recommendation to FEMA to address
    this issue, and they concurred with it and are planning to take
    actions on that front.
        In terms of Title VII, we found that there were challenges
    using voluntary agreements. For example, FEMA faced challenges
    establishing an agreement in time to have meaningful impact
    during COVID-19 related to the distribution of personal
    protective equipment (PPE). Government Accountability Office
    (GAO) has made a number of recommendations in our prior
    reports, and the agencies have generally taken actions to
    address them, barring one, which is the U.S. International
    Defense Finance Corporation. We asked them to evaluate their
    effectiveness in applying the Title III loan program to assist
    DOD. That one is still open.
        In conclusion, the DPA has helped agencies prepare for and
    respond to threats in national defense, respond to emergencies,
    and increase the resilience of vital supply chains.
    Implementation of the authorities can be further improved to
    make the DPA more effective and efficient moving forward.
        Mr. Chairman, this concludes my prepared remarks.

        [The prepared statement of Mr. Russell follows:]
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Davidson. Thank you.
        Mr. Levin, you are now recognized for 5 minutes for your
    oral statement.

      STATEMENT OF ADAM G. LEVIN, ANALYST IN ECONOMIC DEVELOPMENT
                 POLICY, CONGRESSIONAL RESEARCH SERVICE

        Mr. Levin. Thank you, Chairman Davidson, Committee Chairman
    Hill, Vice Chairman Nunn, Congressman Casten, and members of
    the subcommittee for inviting the Congressional Research
    Service to testify today. My name is Adam Levin, and I am an
    Analyst in Economic Development Policy. This morning, I will
    summarize my written statement on the Defense Production Act of
    1950, or DPA, including a brief summary of the law's
    authorities and a few issues for Congress to consider.
        The DPA provides the President with an array of authorities
    to ``shape national defense preparedness programs and to take
    appropriate steps to maintain and enhance the domestic
    industrial base.'' Since enactment, Presidents have used the
    DPA to manage the Nation's defense and non-defense-related
    productive capacity.
        The DPA contains three active titles, Title I, Title III,
    and Title VII. Title I allows the President to require private
    businesses to preferentially accept certain contracts and
    orders, as well as to allocate materials, services, and
    facilities.
        Title III allows the President to provide loans, loan
    guarantees, purchases and purchase commitments, subsidies, and
    other financial assistance directly to private businesses.
        Title VII provides the President with a variety of
    authorities, including the power to establish voluntary
    agreements with industry and obtain information on the
    industrial base. Title VII also defines key terms, including
    national defense, and provides for the termination of most DPA
    provisions. Due to this termination provision, the DPA's
    expiring provisions are currently set to terminate on September
    30, 2025. Congress has reauthorized the DPA dozens of times,
    most recently in 2018.
        In addition to extending the law's termination provision,
    some reauthorizations have amended various other aspects of the
    DPA, for example, by expanding eligibility for Title III
    assistance to certain businesses in the United Kingdom and
    Australia.
        Use of DPA authorities by executive branch agencies has
    ebbed and flowed over time. The executive branch frequently
    invoked the DPA in the first few years after enactment. In the
    following years, the DPA, particularly Title III, was invoked
    less often, at least through the early 1980s. In recent years,
    DPA usage has increased. For example, both the Trump and Biden
    Administrations invoked the law to respond to the COVID-19
    pandemic.
        The Biden Administration also used Title III authorities to
    respond to the 2022 Russian-Ukrainian War and to address
    national defense concerns through clean energy technology
    investments. In March 2025, President Trump issued an executive
    order intended to bolster national security by increasing
    domestic mineral production that, among other actions, invoked
    Title III authorities.
        I will now highlight a few issues Congress may consider. As
    mentioned, most DPA provisions will expire on September 30,
    2025, unless reauthorized. Since 1950, Congress has
    reauthorized expiring DPA provisions on at least 53 separate
    occasions. Within the past 40 years, there has been at least
    one lapse in authorization, although Congress later
    retroactively enacted a reauthorization to encompass this
    period. With the upcoming expiration date in mind, Congress may
    consider whether to reauthorize the DPA, what to include in any
    potential reauthorization, and how long a potential
    reauthorization may last.
        Congress may also consider its oversight of the DPA. For
    example, Congress could assess whether it feels the DPA has
    been used too often, too infrequently, or on an appropriate
    basis, as well as whether the President has the right amount of
    latitude to implement the DPA's authorities. Should Congress
    determine that its oversight role needs adjustment, Congress
    could seek to further clarify how the DPA may or may not be
    used. One option for doing so may be to amend the law's
    definition of national defense.
        Congress provides appropriations for DPA activities. Since
    Fiscal Year 2020, Congress has appropriated at least $4.4
    billion to the DPA fund, which pays for Title III activities,
    as well as at least another $10 billion to pay for DPA
    responses to the COVID-19 pandemic. Congress may consider
    whether to continue these levels of appropriations, which are
    relatively high by historical comparison.
        This concludes my remarks. Thank you for the opportunity to
    testify. I look forward to your questions.

        [The prepared statement of Mr. Levin follows:]
       [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Davidson. Thanks, Mr. Levin.
        I now recognize the ranking member of the full Committee,
    Ms. Waters, for 1 minute.

        HON. MAXINE WATERS, RANKING MEMBER OF THE COMMITTEE ON
       FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM CALIFORNIA

        Ms. Waters. Thank you very much.
        The Defense Protection Act is America's way that mobilizes
    our Nation's resources, helping to meet challenges like war,
    pandemics, or natural disasters. It gives the President
    extraordinary authority to prioritize, allocate, and boost
    production of critical materials, services, and facilities and
    in the hands of someone willing to bend, break, or disregard
    the law, is concerning.
        Donald Trump has abused the International Economic
    Emergency Powers Act to launch his trade war. He has abused the
    Alien Enemies Act to declare war against migrants. He is
    abusing Title X and sending troops into L.A. streets. Someone
    with such disregard for the law might use the DPA to hurt civil
    protesters or reward his crypto investors. Given these novel
    abuses, we must consider novel ways to protect DPA's important
    activities and enhance our oversight.
        Thank you, and I yield back.
        Chairman Davidson. I thank the ranking member.
        I will now turn to member questions and recognize myself
    for 5 minutes to begin questions.
        Title I of the Defense Production Act deals with priority-
    rated contracts and orders which take preference over other
    contracts in the event that a contractor cannot meet all
    required delivery dates. That works fine in the United States
    for industries that already exist. We saw in COVID where you
    had contractors trying to find ultimately the same handful of
    suppliers, mostly in China, and just bid up the price. So we
    have challenges even mapping what some of the supply chains
    look like to be ready in advance, so we found reacting is not
    always adequate.
        Existing priorities and allocations in DPA span from
    agriculture, defense, energy, commerce, homeland security,
    transportation, and health resources. I am aware that recently
    from 2018 to 2044, nearly all priority ratings were placed for
    military goods. This makes sense to me given the original
    intent of President Truman's 1950 legislation, but the world
    continues to develop and change.
        However, as I said, the industrial supply of
    semiconductors, prescription drugs, steel, tooling, rare earth
    minerals, microelectronics, to name a few, are extremely
    important for the United States to produce domestically and are
    key inputs in all aspects of our supply chains.
        A reliable and resilient industrial base consisting of
    these inputs in addition to conventional military armaments is
    vital for national security. For instance, the COVID pandemic
    exposed an enormous existence reliance on China for health
    supplies. Specifically, India and China are increasingly the
    leading U.S. sources for generic pharmaceuticals, which account
    for 91 percent of all prescriptions in the United States. You
    cannot just turn on those kinds of supply chains overnight, so
    it is time to implement proactive solutions now.
        Mr. Russell, while DPA originally and currently promulgates
    military equipment, do you believe it is aligned with the
    legislation's objectives to consider other sectors like
    pharmaceuticals in national supply chain readiness?
        Mr. Russell. Absolutely, Mr. Chairman. I think we have seen
    in the last several years since the DPA has been reauthorized
    that the DPA authorities have been applied across a number of
    areas. Certainly, a lot of those do have to do with DOD and
    military equipment, but there are investments in
    pharmaceuticals. HHS has been using it to help resupply the
    strategic national stockpile that was so critical during the
    COVID-19 pandemic. So there are a range of uses for Title I and
    Title III beyond just the military applications.
        Chairman Davidson. Mr. Levin, what do you think? We have
    mentioned everything from energy security, pharmaceuticals, and
    health supplies. What do you think about being more proactive
    with the DPA authorities?
        Mr. Levin. Thank you, Mr. Chairman. I echo my colleagues'
    comments that most DPA uses, excuse me, are for defense
    applications by DOD. DOD is the heaviest user of DPA but what I
    can also say is that the DPA is generally understood to give
    the President fairly wide latitude in using it as long as it is
    used for the purposes of national defense and if the President
    does declare that it is being used in cases of national
    defense. I think that is what we have seen in the past few
    years with some of the non-defense applications of the law.
        Chairman Davidson. Yes, so you definitely lean on the
    presidential discretion. It is kind of wide open. Congress
    tried to be proactive with the Creating Helpful Incentives to
    Produce Semiconductors for America (CHIPS) Act. President Trump
    has been critical of that approach. I did not think it was the
    best approach, but at least we are recognizing critical
    shortage. I agree with Mr. Casten, we should be a little more
    proactive. I think this gives us a great opportunity.
        You know, Mr. Russell, on the defense side, Russia
    currently produces more artillery, shells, tanks, drones,
    munitions of all sorts in greater capacity than really North
    Atlantic Treaty Organization (NATO) combined. We have seen kind
    of an alarming surge from Russia's capabilities in Ukraine in
    particular. How can authorities under DPA be used effectively
    to not just use the arsenal approach but domestic supply chains
    to bolster the rest of the defense industrial base?
        Mr. Russell. Yes, thank you for the question, Mr. Chairman.
    I think what we saw with DOD trying to recapitalize and re-
    equip for items sent to Ukraine was a great example. DPA
    authorities are used exclusively in terms of Title III, Title I
    to buildup supplies of ammunition, tactical vehicles, missiles,
    all kinds of munitions, and so Title III has been an
    instrumental tool to help companies quickly scale up
    production, add a shift. You can use those funds to buy
    important manufacturing equipment, to facilitate, and create
    new facilities. That has been a key aspect that we have seen
    just recently.
        Chairman Davidson. Yes, thank you, and I look forward to
    continuing the dialog.
        My time has expired, and I now recognize the gentleman from
    Illinois, Mr. Casten, for 5 minutes.
        Mr. Casten. Thank you. I want to start with an observation
    I made at the start, that Congress, the bias whenever we see a
    problem is to direct the executive branch to solve it. It is
    much easier to write legislation that way. We could do a better
    job.
        I want to start with you, Mr. Levin, and can you just talk
    about within the existing DPA, can you help us understand what
    congressional oversight has built into that constrains the
    executive branch?
        Mr. Levin. Yes, thank you for the question, Representative.
    There are a few oversight mechanisms. For example, with funding
    of the DPA, Congress has set a cap on the DPA fund, which pays
    for Title III actions. The unobligated balance at the end of
    every Fiscal Year cannot exceed $750 million. That is one
    example.
        Another one is for Title III activities as certain
    activities over $50 million require congressional approval
    before the President can take those activities. Those are a few
    examples of some of the oversight that Congress has written
    into the law.
        Mr. Casten. Okay. Mr. Russell, are you familiar with the
    ways that the DPA has been used in the past to help address
    U.S. energy supply?
        Mr. Russell. Certainly, the Department of Energy has a
    number of rated orders under Title I.
        Mr. Casten. Mr. Levin, are there any specific examples you
    are aware of?
        Mr. Levin. Yes, The DPA in Title I specifically does
    identify energy as a critical and strategic material,
    therefore, making it eligible to be covered by the DPA, for
    example.
        Mr. Casten. Okay. I was thinking of specific ones. I will
    just throw out that President Ford used the DPA to build the
    Trans-Alaska oil pipeline. The Clinton Administration used it
    for oil production. The Bush Administration used it to provide
    natural gas to California during the 2000 electricity crisis.
    We have used this a lot to recognize the supply. I am a bit of
    a nerd on this because I was in the energy industry for 20
    years before I came to Congress, and there is an old saying in
    the power industry that everybody wants to be the third owner
    of a power plant.
        I think it is also true for refineries. I think it is also
    true for transmission lines. You have no control over your
    commodity costs. You have no control over what you are
    producing, but you have a ton of capital that is sitting on
    thin margins. I think the challenge has often been where the
    DPA has been handy is how do you build stuff in that
    environment without government oversight? We have done it with
    regulated monopolies, et cetera, et cetera.
        There is a concern--there is political pushback when Biden
    was using this to say, well, let us build stuff that is
    cheaper, like wind, like solar, like efficiency. I think the
    challenge has been that the industry has always been deathly
    afraid of cheap energy because if you build cheap energy, it
    lowers your margin, and you have a bunch of capital that has
    not been recovered yet.
        There is this pushback from Trump who is saying, well, I
    want to use the DPA to build nuclear, which is really capital
    intensive, has a low marginal cost, but takes 15 years to
    build. We have had, like the NextEra CEO, John Ketchum, warned
    that what the White House is doing right now could lead to
    significant energy shortages and reliability challenges because
    you still have this challenge of how the private sector is
    going to build and what are they going to allow to build.
        I guess what I am wondering for either of you who want to
    answer is, if you have this tension between building cheap
    energy that will benefit consumers or building expensive energy
    that will benefit producers, does the DPA in any way constrain,
    whether in Title I or Title III, how the executive branch
    should balance the interests of energy consumers, AKA 330
    million Americans, versus energy producers, AKA a handful of
    Americans. Does the DPA constrain that tradeoff?
        Mr. Russell. I will try to address that, Congressman. I
    think the way we have seen it is the DPA is just the--so those
    are the larger policy questions, and then the DPA is the tool
    to execute decisions on that policy. So certainly the Title III
    investments, whether it is loans or expansion of manufacturing,
    can help push a particular supply chain to get bigger, but in
    terms of the larger framework----
        Mr. Casten. Yes, so the DPA does not direct the political
    equities.
        Mr. Russell. Yes, it is agnostic in that----
        Mr. Casten. This gets to my larger point of we in Congress
    should be grappling with those political equities, and I would
    love to see us have a DPA that says if we are going to give
    that power to the White House, I would like to see us put
    consumers first, and I would welcome any thoughts--and I
    realize we are out of time--about how we might structure the
    DPA to ensure that we are always using that very powerful tool
    to put the interests of Americans first, not just put the
    interests of American energy producers first.
        Thank you, and I yield back.
        Chairman Davidson. Thank you, Mr. Casten.
        The gentleman from Kentucky, Mr. Barr, who is also the
    Chairman of the Subcommittee on Financial Institutions, is now
    recognized for 5 minutes.
        Mr. Barr. Thank you. If it was not for regulations, cheap,
    affordable energy it would be fossil energy. Regulations are
    what is driving up the cost of conventional energy.
        Mr. Levin, permitting and regulatory barriers imposed by
    the Biden Administration have significantly obstructed grid
    development at a time when our energy demand is rapidly
    accelerating, driven in large part by the rapid growth of
    artificial intelligence and data centers needed to power the
    technology. How can the Trump Administration, we know the Trump
    Administration has issued some executive orders on coal and
    other fossil energy--how can the Trump Administration use DPA
    authorities to either build new or reopen shuttered power
    plants, whether they are coal-fired plants or gas-fired plants,
    and strengthen domestic energy reliability?
        Mr. Levin. Thank you for the question, Representative. The
    DPA does give the President broad latitude to invoke the law if
    it is deemed to be a national defense concern. You are correct
    that President Trump did recently issue a termination and
    executive order that named coal as essential to national
    defense and eligible for Title III assistance.
        One thing I would say is that the DPA, given its levels of
    appropriations and the funding cap, sometimes it can be
    difficult to, for example, create a new industry or restart an
    industry as opposed to using the DPA as more of a catalytic
    investment to get something started. I think that might be a
    consideration in this case.
        Mr. Barr. So, under existing Title I and Title III
    authorities, can the executive branch invoke those authorities
    to bypass permitting requirements?
        Mr. Levin. The DPA does not specifically address permitting
    requirements. That could be something that Congress will
    consider. So it would be like----
        Mr. Barr. So, in reauthorization, we could add that to the
    toolbox, so to speak, of giving the executive branch under the
    DPA the ability to expedite permitting?
        Mr. Levin. I am not an expert in permitting, and I believe
    there are other laws that govern that but consideration of that
    could be something Congress could look at, at least.
        Mr. Barr. What other barriers are there that the DPA could
    potentially eliminate to reopening or building new coal-fired
    power plants to address the massive need for power for
    artificial intelligence and data centers?
        Mr. Levin. Again, the DPA, the President can invoke it to
    provide awards, for example, under Title III to companies, to
    coal companies, for example, or other energy companies that the
    President has determined to be essential to national defense,
    and so that is one option. Another----
        Mr. Barr. Are there other laws that are in place that would
    frustrate the President's invocation of the DPA to permit new
    coal-fired power?
        Mr. Levin. That would be outside the scope of my expertise.
        Mr. Barr. I think here is the point. It is too hard to
    build new coal-fired power plants in this country. It is too
    hard to build new gas plants in this country that we need for
    national security, that we need for artificial intelligence
    (AI). There are subsidies that have been a policy to build
    renewables, but it is too hard today to open new fossil energy
    power generation. The DPA is needed to cut through all that red
    tape. It is a national security imperative that we need base
    load power in this country.
        My question is--is the DPA a sufficient tool to cut through
    all of that red tape? What do we need to do in reauthorization
    of DPA to make sure that these other barriers, these regulatory
    barriers to reliable, affordable energy are removed?
        Mr. Levin. Congressman, I think that the DPA is one tool
    that is available to the President and to the government, so I
    think it is best considered as part of any suite of options
    that might be considered. Again, I would go back to some
    potential funding constraints, the $750 million cap on
    obligated funding. I think given that it is potentially
    worthwhile to think of the DPA, how it could operate in
    conjunction with other tools that are available.
        Mr. Barr. Thank you. My time has expired.
        Chairman Davidson. I thank the gentleman from Kentucky.
        The gentleman from California, Ms. Waters, who is also the
    ranking member of the full committee, is now recognized for 5
    minutes.
        Ms. Waters. Mr. Russell, President Trump and Elon Musk were
    recently engaged in a Twitter spat. While this was amusing in
    some ways and some would say really unsurprising, it also
    raised questions about the Defense Production Act. This was
    because, as these two corrupt oligarchs fought, Steve Bannon,
    an advisor to the President, declared that Trump should use his
    DPA authority as President to ``seize SpaceX,'' Musk's company.
        Mr. Levin, could the President use the DPA to seize Elon
    Musk's companies or any of his company's assets? Why or why
    not?
        Mr. Levin. Thank you for the question, Ranking Member. As
    the DPA is currently constructed, it does not allow for the
    requisitioning of companies. There was a title that lapsed in
    1953 that did provide for a requisitioning of private
    businesses under some circumstances, but that is no longer an
    active title.
        Ms. Waters. Thank you. Can the DPA be used to refuse
    contracts or force undesirable contracts on firms for
    inappropriate reasons, like if a company's CEO spoke ill of the
    President's trade policy or did not make a big enough
    investment in his private cryptocurrency company? Can they be
    used to refuse contracts?
        Mr. Levin. Title I do needs require companies to accept
    priority-rated contracts. Regulations that are in place do
    allow for certain exemptions to those requirements. However,
    those regulations, the exemptions are generally based on things
    like a company not being able to fulfill the order or having
    other rated orders ahead of that order in the queue.
        Ms. Waters. Finally, I know that Members of Congress might
    have disagreements on the scope of what should constitute
    national defense under the DPA. Generally, though, we agree on
    its purpose. Is it conceivable, though, that instead of
    preparation or support for possible emergencies, the DPA funds
    could be diverted to pay for a deportation camp in Libya or
    refurbishing the prison in Alcatraz and so on? What are the
    limitations of the act and what are the oversight options for
    Members of Congress who have concerns about how the law is
    being interpreted and executed by the President? I am sticking
    with you, Mr. Levin.
        Mr. Levin. Thank you. I cannot speculate on potential uses
    of the DPA. What I can say is that the DPA is generally
    understood to give the President broad authorities to invoke it
    for national defense as national defense is defined in the law.
    I think a potential oversight mechanism for Congress could be
    to address the definition of national defense. It has done so
    numerous times over the years. For example, homeland security
    was added to the definition, I believe, in 2009, so that would
    be a potential oversight mechanism for Congress.
        Ms. Waters. Further, and I know this may go a little beyond
    your expertise, but do you see that the President, having
    created all of these crypto companies, Stablecoin, that any way
    they can be enhanced that would cross with the DPA?
        Mr. Levin. Again, it is hard to speculate on potential
    cases. That does seem to be outside of the DPA's scope.
        Ms. Waters. As I understand it, he wanted to set up a DPA
    Bitcoin reserve. Did you hear about that?
        Mr. Levin. I did not.
        Ms. Waters. Did anybody hear about that?
        Mr. Russell. I have not heard of that.
        Ms. Waters. Okay, because you are such an expert in DPA,
    let me just ask if perhaps in your continued work and research,
    et cetera, that if you learn about cryptocurrency being
    advanced to the President's ownership in any way, I would hope
    that you would include that in the knowledge that you could
    share with the Congress of the United States.
        Thank you very much, and I yield back.
        Chairman Davidson. Thank you, Ms. Waters.
        The gentleman from Texas, Mr. Williams, who is the Chairman
    of the Small Business Committee, is now recognized for 5
    minutes.
        Mr. Williams of Texas. Thank you, Mr. Chairman, and thank
    you all for being here today.
        When the Defense Production Act is activated in an
    emergency, the Federal Government turns to large contractors to
    fulfill urgent needs, but these larger corporations do not
    operate in a vacuum. They rely heavily on small businesses for
    parts, components, and especially services. What often happens
    is that large primes pass DPA driven, expecting small
    businesses to absorb costs, ramp up production, or shift their
    operation at a moment's notice. These small businesses are
    willing to do their part, but they often lack the resources or
    flexibility to make those changes quickly without taking a hit.
        Mr. Russell, how can we ensure that small businesses are
    protected when DPA authorities are deployed in an emergency and
    what can be done to prevent unintended negative impacts on
    small suppliers and contractors further down the chain?
        Mr. Russell. Thank you for the question, Congressman. A
    couple of thoughts there. One, in Title VII, there is a
    specific preference for small business utilization and to try
    to give awards and think of small businesses as part of using
    the DPA, so that is a plus. That is something the committee
    could potentially look at to build on in other sections.
        In terms of Title I, the rated orders we did see during
    COVID-19 an instance with a particular fabric for N95 masks
    that lots of rated orders, and then some of the sub-tier
    suppliers that provided those materials got bombarded with
    competing rated orders. So, the key there, one of the
    expectations in Title I is for those companies and for the
    government to have a way to reconcile when those bottlenecks in
    the supply chain emerge. So on the supplier standpoint, raise
    your hand, let the government customer know that you have these
    competing priorities.
        Then there has to be a coordination group. Right now, FEMA
    is the lead of agency-wide coordination, but that group has to
    be active to quickly reconcile and get some relief from those
    sub-tier suppliers.
        It is an important issue to look at. It is one that DOD,
    when we were doing the recent work, also noted that they are
    trying to educate some of the sub-tier suppliers on the
    responsibilities for Title I when they have a rated order.
        The only other thing I would add is that within the Title I
    authorities, there are two types of rated orders, DO/DX, so
    there is an ability to further prioritize across rated orders.
        Mr. Williams of Texas. Thank you. One of the biggest
    complaints I hear from small business owners, especially
    manufacturers, is that when a national emergency hits, the
    Federal process slows them down. Whether it is an unclear
    guidance, burdensome paperwork, or long waiting times for
    approvals and reimbursements. Many of these firms simply cannot
    navigate the red tape fast enough to make a difference and when
    you are talking about national security disaster response,
    timing is everything. These small businesses have the talent
    and equipment but lack a robust compliance department.
        Again, Mr. Russell, what reforms to the DPA could better
    support small business in scaling production quickly during
    emergencies without getting buried in Federal red tape?
        Mr. Russell. Yes, I would go back again to look at Title
    VII and some of the preferences that are already there for
    small businesses, and maybe that is an area that can be
    expanded as you think about reauthorization. I think DOD is
    doing the lion's share of the use of some of the titles, Title
    I and III in particular, so there could be an opportunity to
    help educate small businesses.
        They have tried to streamline the process with white papers
    and applying to the needs that emerge, but there is always more
    improvement to expedite the amount of time that it takes to
    look at the proposals that the small businesses or other
    companies propose and then come to a contracting or other
    decision.
        Mr. Williams of Texas. In closing, we are in a different
    security environment today than when the DPA was first written,
    and our adversaries are not just building up their militaries,
    they are using economic leverage, trade choke points, and cyber
    attacks to weaken us before a shot is even fired. So what we
    have seen through hacking, hostile trade policies, targeted
    shortages, and critical inputs, these are real threats to our
    national defense readiness, and the DPA needs to keep up the
    pace with them.
        Briefly, while we have time left, Mr. Russell, as our
    adversaries become more sophisticated in targeting supply
    chains through cyber attacks or trade manipulation, how can DPA
    authorities be modernized to help neutralize these threats?
        Mr. Russell. A couple of thoughts there. One, there is the
    Defense Production Act Committee (DPAC). That has been largely
    dormant. That could be a forum to potentially go across
    agencies that use the DPA and come up with a larger strategy to
    get at some of these national issues, cybersecurity. It could
    also be used to potentially----
        Chairman Davidson. The gentleman's time has expired. I
    encourage a follow up afterwards. The gentleman's time has
    expired.
        The gentleman from California, Mr. Vargas, is now
    recognized for 5 minutes.
        Mr. Vargas. Thank you very much, Mr. Chair, and again, I
    thank the witnesses for being here.
        The Defense Production Act of 1950 has been a vital tool
    for our country in times of crisis. Whether it is a war or
    global pandemic, we have to make sure that we have the ability
    to respond swiftly to national security threats, and again,
    that is why I think this hearing is so important. Again, I want
    to thank the chairman and the ranking member for bringing it
    forward.
        During COVID, I had a provision included in the American
    Rescue Plan to support the President's use of DPA authorities
    with an additional $10 billion in appropriations to fund
    testing, personal protective equipment, vaccine production, and
    other critical medical supplies. The scope of how far the
    President should be able to go with DPA is an important
    discussion for us to have today, and I am glad we are having
    it.
        In San Diego, we are proud to have a strong shipbuilding
    presence and a number of shipyards, but China's growing
    dominance in shipbuilding may threaten our national security.
    Mr. Russell, in fact, you even mentioned the naval industrial
    base. According to a recent report, China's largest state-owned
    shipbuilder built more commercial vessels by tonnage in 2024
    than the entire U.S. shipbuilding industry has built since the
    end of World War II. Now, if that statistic is correct, that is
    incredible. So how can the DPA be used strategically as a tool
    to support this domestic shipbuilding that I think is so vital?
        Mr. Russell. Yes, absolutely. There was a recent executive
    order to tackle the naval industrial base, so that gives us
    authority to use Title III, which can definitely help. We will
    see it play out over time. In terms of funding to expand the
    capacity of our shipbuilders to hire more staff to get the
    critical equipment they need, castings and foragings are
    another area where DPA investments are used to help facilitate
    shipbuilding.
        The other aspect would be maybe some industrial-based
    assessments. There is that authority under Title VII that can
    help to further illuminate where there are some shortfalls in
    the supply chain and help agencies come up with a strategy to
    address them.
        Mr. Vargas. A couple of these large companies are in my
    district, and it is normally not the case that they are trying
    to find things because usually they do not have a contract for
    a ship. That is the thing. So, they build up their resources in
    the sense of staffing, they get all these great welders, and
    then all of a sudden, they do not have a contract to build a
    ship or to fix a ship and all of a sudden, they have to lay off
    all these people. It is very, very hard for them once again to
    get people to be able to do this. There has to be some way
    where we can work with the government to make sure that this
    does not happen again. I do think that this is a real problem.
    I think you do too, and I think others do too. How do we have
    more shipbuilding in the United States? I think we are getting
    our clock cleaned on this.
        Mr. Russell. Yes, the one thing I would add, and we have
    done a body of work looking at some of the struggles in
    shipbuilding, and the DPA is one aspect that could help,
    certainly with the Title III investments and potential use of
    loans, but there is work for the Department of the Navy to do
    as well in DOD in terms of production smoothing, ensuring that
    they are sufficiently utilizing the shipyards and maintaining
    the workforce when the companies do ramp up.
        Mr. Vargas. Okay. Again, I hope we can do more in that
    because that really is a big concern of mine. Again, that is
    why I thank the chairman for bringing this forward.
        Last, one of the things that was interesting when you were
    talking about small business, one of the things you did not
    mention was the Fifth Amendment of taking private property for
    public purpose without just compensation. How does that
    interplay with the DPA, because obviously, that is a
    fundamental right under the Constitution?
        Mr. Russell. Congressman, are you referring to the
    industrial base assessments?
        Mr. Vargas. Sure, but I guess also the context that you
    have a small business here that puts out a whole lot of money
    or is an opportunity that is lost to it. It is sort of a
    taking. How do you compensate? There is a basic, right, a
    fundamental right under the Fifth Amendment that the government
    cannot take anything for public purpose without just
    compensation. How does that interplay with the DPA?
        Mr. Russell. Yes, that is not something that we have seen
    since it was reauthorized in 2018. Generally speaking, once the
    contractor or order has the priority rating, it is just a
    matter of executing the government's need above other
    customers. For the most part, what we have seen at DOD that
    uses a lion's share of those is that the company is able to
    meet all their orders, so they do not have to prioritize.
        Mr. Vargas. Okay. My time is up. Thank you, Mr. Chairman.
        Chairman Davidson. Thank you, Mr. Vargas.
        I would now like to recognize the gentlewoman from
    California, Ms. Kim, for 5 minutes.
        Ms. Kim. Thank you, Chairman Davidson and Ranking Member,
    for hosting this hearing. Thank you to our witnesses for
    joining us today.
        In 2021, those of us in Orange County saw the benefits of
    the Defense Production Act, or DPA, firsthand when it was
    invoked to increase fire hose production. As fires blazed
    through California, it was thanks to DPA that fire crews had
    the tools they needed to save lives and protect our homes.
        As we consider the reauthorization of DPA, I believe it is
    critical that we make reforms that will protect our national
    security and enable efficient domestic supply chains and
    strengthen emergency preparedness. One method of achieving that
    goal is reforming the DPAC, the Defense Production Act
    Committee. The goal of DPAC was to result in real coordination
    at the Cabinet level and ensure that the President had
    effective advice on how to utilize the DPA appropriately.
    Unfortunately, it does not seem like DPAC is fulfilling that
    role.
        Mr. Levin, what reforms should we consider to ensure that
    DPAC fulfills that mandate?
        Mr. Levin. Thank you, Congresswoman. I think there are a
    few things Congress could consider. When the DPAC was
    established, it had purview for reporting on all of the DPA,
    Title I, Title III, and Title VII. It was also, in statute,
    required to have an executive director. An executive director
    does not appear to have ever been appointed. In the later
    reauthorization, I think it was 2014, the DPAC's remit was
    reduced to just Title I from all the authorities.
        I think Congress could consider whether it wants to go back
    to the DPAC's original mandate and what tools might be able to
    strengthen it in doing so. So, that could be increased
    reporting requirements. That could potentially be something
    like mandating the level of official from the agencies that sit
    on the DPAC specifically requiring that.
        Another thing that I will mention is that, by executive
    order, FEMA has been delegated to be the Chair of DPAC. At one
    point, that was a rotating position, at least between FEMA and
    DOD and DHS--FEMA through DHS, I should say. It could be a
    rotating position again.
        The last thing I will say is, Congress could consider
    potentially providing appropriations directly for the DPAC.
        Ms. Kim. Okay. I do want to see DPAC as engaged and active
    within the Federal Government, and one idea to achieve that
    would be an increase in assessments and simultaneous
    coordinations within the DPAC. Do you think that kind of a
    proposal will be beneficial in creating a more effective DPAC?
        Mr. Levin. I think that could be something that could be
    beneficial, and I think observers have noted that the DPAC was
    originally charged with interagency coordination, things like
    that, and has, over the years, appeared to not totally fulfill
    that role.
        Ms. Kim. Yes. Overall, it seems like we need to thoroughly
    analyze DPAC and ensure that it functions the way that it was
    originally intended, and it is a tool during a crisis rather
    than a liability.
        Another aspect of the DPA that I am concerned about is
    Section 705. Section 705 authorizes the President to obtain
    necessary information to conduct the industry studies, and that
    includes inspection of business records and property.
        Mr. Levin, does anything in the law prevent an
    administration from using this authority to obtain Americans'
    personally identifiable information that may be possessed by a
    business?
        Mr. Levin. Nothing in the law specifically prevents that.
    However, the law does provide that the President or the
    business from which the information is being gleaned upon a
    request can keep it.
        Ms. Kim. Thank you. I want to get to--you did answer that
    quickly.
        I am going to shift gears and close by touching on China
    and our overreliance on them for imported goods. So, if we end
    up in global conflict with China and other countries, our
    current Federal permitting timeline will not allow us to
    produce the necessary goods to protect Americans.
        Mr. Russell, can you talk about how we can reform the DPA
    to streamline the permitting and enable private companies to
    deliver the goods that we need on time?
        Mr. Russell. Absolutely. Thanks for the question. I think
    in short, there was a recent executive order that does just
    that, tries to target critical materials, critical minerals. As
    you noted, China does produce the lion's share or at least
    mines the lion's share of rare earths and other things that are
    important, and we have seen some instability in that supply
    over the last few months.
        Chairman Davidson. The gentlewoman's time has expired.
        Ms. Kim. I yield back.
        Chairman Davidson. The gentleman from Illinois, who is also
    the Ranking Member of the Financial Institutions Subcommittee,
    Mr. Foster, is now recognized for 5 minutes.
        Mr. Foster. Thank you, Mr. Chair, and to our witnesses.
        Mr. Russell, I would like to start out with a shout out to
    GAO for all the tremendous work that you did on oversight of
    Operation Warp Speed and including the DPA during the COVID
    crisis. Early on, I think in about April 2020, I led a letter
    from Congress basically encouraging the administration to do
    Operation Warp Speed. We did not call it Warp Speed then, but
    it said, do not worry, just stand up these factories to build
    vaccines that have not been proven to work. Congress, we
    promised, would not yell at you if you built a factory that
    ended up useless, which is actually what happened. Two of the
    three vaccines that we put a lot of money into worked and one
    did not, and that is okay. That was the thinking behind it.
        It was shared by Dr. Peter Marks, who actually, I think,
    coined the term Operation Warp Speed and he was one of the
    heroes who stood up for the operation in the first place. It is
    one of the tragedies of recent history that he recently quit in
    disgust over all of the activities of Robert F. Kennedy, Jr.
    (RFK) and the budget cuts in agencies he is overseeing. There
    was really spectacular work that was done, a lot of it with the
    DPA at the time.
        As part of the COVID Select Committee that I was on, I
    partnered with my Republican partner Representative Dr. Mark
    Green on requesting and then help guiding GAO oversight of
    Operation Warp Speed. One of the great things that came out of
    that is that we have now a bunch of lessons learned. So, if we
    are in a comparable situation, there is actually a very good
    set of documents that can be read about what is going to work,
    what is going to be easy, what is going to be hard, when to use
    DPA and military assistance versus just going to the public.
        The GAO was sitting in on a lot of the planning of
    Operation Warp Speed, and it was great to see that partnership,
    that those who were executing Operation Warp Speed on the
    government level understood that GAO sitting in on their
    meetings and understanding what they were doing was a positive
    thing. I heard later that they appreciated the advice and the
    periodic documents you did. So, that is an example of
    government really working well, and when that happens, you
    deserve public acknowledgment.
        The thing that we have struggled with for a long time is
    that there are lots of critical industries that we should, as a
    matter of national security, maintain in the United States, or
    at least in the countries we trust in the free world for which
    the United States is not the low-cost supplier, okay? One
    example of this that is in the news right now is the critical
    minerals for permanent magnets.
        The other Ph.D. physicist in Congress, Representative Rush
    Holt, worked for probably more than a decade on that with
    almost no success. What he got were reports. What he got
    Congress to agree to were reports on what a huge vulnerability
    this is and no action because the only things you can do--the
    only tools government has are either taxing and spending,
    taxing in the forms of tariffs, protective tariffs, or perhaps
    set-asides, which are sort of equivalent, or spending,
    subsidies.
        The problem that Rush Holt ran into in trying to get some
    action ahead of time on critical minerals is that he was faced
    with Republicans who would not tax and would not spend, even to
    protect what has turned out to be a really, really critical
    part of our supply chain.
        My question, I guess, if you look at the two tools, the two
    basic approaches, tariffing or set-asides, which are sort of
    equivalent they have the feature that, yes, you can protect the
    U.S. industry, but it makes that industry less competitive. You
    can see that in military set-asides where the military stuff is
    just way overpriced compared to commercial markets. Or you can
    subsidize, which is sort of what we did during trying to get
    the CHIPS in Science, chip production. So do you have any
    observations on how effective those two tools are, which, if we
    have to create some amount of taxpayer debt, how do you do the
    balance on that?
        Mr. Russell. I can speak to the other side of the ledger,
    certainly the subsidizing using the DPA. We have seen that
    through purchase commitments and other arrangements, a lot of
    support across some vital supply chains that DOD and others
    have identified whether that is hypersonics, emerging things
    like biomanufacturing.
        Mr. Foster. If you can respond for the record with anything
    that is written to sort of, give us guidance on when the
    subsidies are the best approach and when the taxes and tariffs
    are the best approach, that would--because that is what I have
    been struggling with for my time in Congress.
        Mr. Russell. Absolutely. I can take that back----
        Mr. Foster. Yes, thank you.
        Mr. Russell [continuing]. because I did not have----
        Mr. Foster. I appreciate it.
        Mr. Russell [continuing]. the expertise in those areas.
        Mr. Foster. Again, you guys did great work, and please pass
    that on.
        Chairman Davidson. Thank you, Mr. Foster.
        Mr. Russell. I will, certainly.
        Chairman Davidson. The gentleman's time has expired.
        The gentleman from Iowa, Mr. Nunn, who is also the Vice
    Chairman of the Subcommittee on National Security, is now
    recognized for 5 minutes.
        Mr. Nunn. Thank you very much, Mr. Chairman, and thank you
    both for being here today.
        I think we all recognize the Defense Production Act is one
    of the most valuable tools in the arsenal for the United States
    to be able to protect itself. I just want to say, first and
    foremost, I believe strongly in a free market. I think we all
    agree that private property rights matter, but I also recognize
    that there are things that are so important to this Nation's
    security that we must have a whole, not a government approach
    alone, but a whole-of-nation approach to being able to tackle
    these challenges and provide the security for every American.
        As geopolitical tensions rise across the world, we must
    ensure that this 1950s version of a DPA continues to evolve
    with it. This Congress, I believe, needs to be able to provide
    President Trump and all future Presidents with a fully armed
    and updated DPA that allows the executive branch to
    strategically address our national security threats. I speak
    from a position here where I would like to highlight two bills
    that we are working on, first, the Federal Overhaul of Reserve
    Command Executive Modernization (FORCE) Act, as well as the
    Committee Leadership and Enhanced Accountability for Resilience
    (CLEAR) Act, two updates to the DPA, working with friends on
    the other side of the aisle here, Representative Jim Himes, to
    be able to move forward.
        Now, let us look back where this came from. Look, at the
    advent of World War II and onwards, General Motors changed cars
    into tanks. Boeing took commercial aircraft and turned them
    into a fleet of Boeing 17 Stratofortresses, which we would have
    never had before. Kaiser alone produced 3,000 ships in over 2
    years and he did not do it alone. He brought in the best
    leaders from government and industry working together.
        Mr. Russell, you are the Director of Contracting at the
    National Security Acquisitions and Government Accountability
    Office. During a national security emergency where a President
    would enact the DPA, do you believe it would be beneficial for
    the executive branch, Cabinet, and Members of Congress to have
    guidance and feedback from members in the private sector?
        Mr. Russell. Yes, and that is a little used part of the
    DPA, which is the executive reserve. As we looked back over the
    last several years, since the last reauthorization, no
    executive reserves were set up across the agency. So, that is
    an area where, certainly with COVID, that was the stress test
    of the DPA in a number of ways. There needed to be coordination
    with companies as decisions were being made. So the executive
    reserve is one tool----
        Mr. Nunn. I would agree with you here. Look, this is why
    not only the reserve, but what we are working on together as a
    FORCE Act would bring the best leaders in industry back to the
    table and have these conversations. A perfect example right
    now, look, one shipyard in China has built more ships in 2024
    alone than the entire United States has produced since World
    War II. If we think the Department of the Navy is up to the
    chops of being able to catch up, I think we would all be wrong.
    I will speak as an Air Force guy. If we cannot even get a new
    plane for the President done on time, we are going to have a
    real hard time trying to do this internally. We must be seeking
    out, through this DPA, the opportunity to bring in expertise
    from the field.
        I would also highlight here that President Trump has
    secured a massive critical mineral deal to combat China's
    dominance in the sector. Would you agree with me that the
    United States could leverage the DPA to help bring on and
    prioritize critical minerals for things that are needed for
    national security?
        Mr. Russell. Absolutely, I think those efforts are already
    underway.
        Mr. Nunn. I think that this DPA has an opportunity to help
    lead in that charge.
        I would also look at private capital procurement. Financial
    services companies in my district in Iowa are looking at how
    they can contribute to providing capital for the national
    security sector. Right now, taxpayers alone should not be on
    the hook for covering all of our national defense. This has to
    be a whole-of-country approach.
        Would you also agree that private capital has a role in
    helping to alleviate some of the inventory financing
    constraints that currently plague our Department of Defense?
        Mr. Russell. Absolutely. Private capital is an important
    part of investments in new and innovative technology that the
    government would want to use. One of the things that we have
    seen is a lack of use of the loan authorities under Title III.
    If nothing else, some of those signals, the use of those loans,
    can provide a demand signal to industry and also help cultivate
    then, private capital----
        Mr. Nunn. I would agree.
        Mr. Russell [continuing]. potentially to come in the mix.
        Mr. Nunn. This is something that also we should be looking
    at in the DPA.
        Finally, very briefly, Mr. Levin, look, we have reports
    that China is building over 50 mega data centers every single
    year. The United States has a hard time even keeping pace but
    before we can build a data center, we need a workforce. We do
    not have enough electricians and linemen in the country right
    now to build the data centers we need to even keep pace with
    this. Can the DPA also be used to look at things like building
    the workforce necessary to help protect our country?
        Mr. Levin. I think, yes. I think that is an area also where
    there may be more opportunity for Congress to build that into
    the DPA.
        Mr. Nunn. Excellent. Thank you very much.
        Thank you, Mr. Chair. I yield my time.
        Chairman Davidson. Thank you, Mr. Nunn.
        The gentleman from California, Mr. Liccardo, is now
    recognized for 5 minutes.
        Mr. Liccardo. Thank you, Mr. Chair, and thank you both for
    your testimony.
        We have certainly learned a lot of lessons from the war we
    are seeing in Ukraine and elsewhere around the globe around the
    limitations of traditional defense procurement as we watch
    $1,000 drones be deployed in great numbers, and we are spending
    $1 million or $2 million per rocket to try to shoot them down.
        What I hear routinely in Silicon Valley is a frustration of
    an awful lot of tech leaders, of innovators, entrepreneurs,
    venture capitals (VCs), and others around trying to deal with
    defense procurement. I know this is not a new challenge. I know
    a lot has been written about the challenges of procuring tech,
    but clearly, the DPA does provide under Section 4533(a) for the
    procurement of critical technology items, and we have seen that
    certainly in 2023 and other times. I believe at that time it
    was around microelectronics. I suspect this is going to be
    increasingly a focus for us as we think about critical supply
    chain as technology.
        I am thinking a lot about how the DPA might be used as a
    method to nudge the Defense Department and other departments
    toward more nimble ways of procuring technology than the
    traditional approaches of procuring ships and tanks. I think
    you have all heard the criticisms that the sclerotic approach
    of 9-year procurement cycles, of long lists of specifications,
    does not work in a world where technology development is much
    more dependent on iterative and nimble approaches, whether it
    is microelectronics or biotech.
        I guess my question is, how do you see that we could use
    this reauthorization as an opportunity to expand, for example,
    bipartisan efforts in support of the Defense Innovation Unit,
    which, over the last decade has demonstrated one alternative
    approach, or as we saw with Operation Warp Speed, a better
    approach to procuring technology through the DPA?
        Mr. Levin. Thank you, Congressman. I can address that
    first, at least. I think one thing we have not mentioned here
    today, which could potentially be relevant to your question, is
    mobilization planning. I think that is not something that is
    directly addressed in the DPA but could be potentially in any
    reauthorization. Having DOD or other agencies do mobilization
    planning and connect that to any DPA planning efforts could be
    something to potentially address that.
        Mr. Liccardo. Thank you, Mr. Levin.
        Mr. Russell.
        Mr. Russell. Yes, I would just add that I am glad you
    mentioned the Defense Innovation Unit. That is a key effort the
    Defense Department has to try to bring in those innovative
    companies and scale fast. So, to the extent that Title III
    authorities, whether it is loans as we talked about earlier,
    try to attract private capital in conjunction with loan
    guarantees and other things that the government can do to help
    spur and foster that innovation could be a good thing.
        Mr. Liccardo. Thank you. I understand under Title III, we
    are entitled to impose conditions on how DPA appropriations are
    used, consistent with congressional intent. I understand we are
    not the committee that is going to reform defense procurement,
    and I understand that is not exactly what the DPA is about.
    Have there been other attempts to essentially nudge procurement
    toward a more nimble future through the DPA? Have we seen that
    before? Are there examples we could look at as guidance?
        Mr. Russell. Outside the DPA, there are certainly other
    efforts to reform defense procurement. It is an area that has
    been on GAO's high-risk list, I think----
        Mr. Liccardo. Yes.
        Mr. Russell [continuing]. since the 1990s. So, just
    effort--usually, the Defense Authorization Act would have the
    shaping legislation for the procurement reforms, but there is
    certainly more to be done. I would speak to work that we have
    done looking at leading commercial practices, how companies do
    the speed of innovation, coming up with minimal viable
    products, the digital twins. All of those tools are important
    and can help streamline the requirements in the procurement
    side at DOD.
        Mr. Liccardo. Thank you. I appreciate it and look forward
    to having conversations offline, particularly on mobilization,
    about how we might be able to do that in this legislation.
    Thank you, gentlemen.
        I yield.
        Chairman Davidson. Thank you, Mr. Liccardo.
        The gentlewoman from Michigan, Mrs. McClain, who is also
    the Conference Chair for the Republican Party, is now
    recognized for 5 minutes.
        Mrs. McClain. Thank you, Mr. Chairman, and thank you for
    holding this hearing. Thank you both for being here, appreciate
    it.
        Mr. Levin, I want to start with you. I like the public-
    private partnership idea arena. Can you discuss a little bit
    more and give me some examples of the successful voluntary
    partnerships between the government and industry that actually
    bolster our country's national defense because I do think we
    are on to something with this?
        Mr. Levin. Thank you, Congresswoman. The voluntary
    agreements provision of the DPA has not been used heavily over
    the last few years. I believe since Fiscal Year 2018, there has
    only been one new one, and that was initiated by FEMA to
    address the COVID pandemic. The Department of Transportation, I
    believe, has one or two other active ones. So, it is an area
    that the DPA provides for but has not been used very much in
    recent years.
        Mrs. McClain. Do you have some examples of how it has been
    working successfully, those partnerships?
        Mr. Levin. Again, with the limited usage in recent years,
    it is hard to say, but the DPA was used during COVID, for
    example, Title I to procure ventilators, masks, things like
    that.
        Mrs. McClain. Was it successful?
        Mr. Levin. It was able to purchase those things. There were
    also some criticisms from some places that FEMA, for example,
    did not have the necessary expertise to fully implement its DPA
    authorities.
        Mrs. McClain. Okay. Mr. Russell, how should this committee
    consider reforms to ensure that the United States does not have
    deficiencies in areas of critical defense and what sectors--I
    am thinking specifically maybe critical minerals--should we
    focus on?
        Mr. Russell. Thank you for the question, Congresswoman.
        I think DOD and their Industrial Base Policy Office, other
    aspects of the agencies that use the DPA typically can outline
    what some of the key supply chain areas are that either are
    emergent or at risk. Critical materials, rare earths are one in
    the news recently. To the extent that some of the authorities
    under Title VII with the industrial base assessments----
        Mrs. McClain. Yes.
        Mr. Russell [continuing]. can be harnessed to coincide with
    areas where either we want to expand as a country or shore up
    some risks. That could be a positive thing. You just need to
    have that coordination, so the left hand knows what the right
    hand is doing in terms of each of the agencies that have the
    DPA authorities.
        Mrs. McClain. In coordination. I think you touched on
    something which is extremely important, I think, coordination.
    How do we do a better job of that, in your opinion? Give us
    some examples----
        Mr. Russell. Sure. Right now, FEMA is the governmentwide
    coordinator of the DPA. There is a lot of activity around Title
    I authority, the priority ratings. There could be more on Title
    III. We had a recommendation in our report that came out today
    that recommended that FEMA try to leverage some of the lessons
    learned and experiences of DOD in applying the Title III
    purchase----
        Mrs. McClain. Yes.
        Mr. Russell [continuing]. commitments and other things so
    that could be shared with other agencies like HHS that are
    trying to stand up that capability. So, there are lots of
    synergies like that, that could potentially be bolstered with--
    --
        Mrs. McClain. Those recommendations, I think, would be
    helpful, so thank you for that.
        Since you talked about priorities, let us move into that.
    The DOD issued 300,000--roughly, give or take--300,000 priority
    ratings each year, seems like a lot. My concern, if everything
    is a priority, then nothing is a priority. Three hundred
    thousand priorities seem pretty large to me. What I am
    wondering is how can we reform the performance rating system so
    that we are actually using the DPA in a thoughtful, targeted
    manner, right? I am not saying--but 300,000 seems to be a lot.
    How do we narrow that down and really funnel our criteria for
    making those decisions a priority?
        Mr. Russell. I would say the lion's share of those
    priorities do relate to the Department of Defense, and they
    pretty much put priority ratings on all procurement contracts
    related to the major defense weapon systems, other activities.
        What we have heard from industry associations and in
    talking to the DOD folks that administer those programs is that
    it is sort of baked in. The contractors understand their
    responsibilities for the priority ratings. The key is where
    there are bottlenecks or challenges that occur at the sub-tier,
    that those get elevated and then resolved quickly.
        Mrs. McClain. Okay. My time has expired. Thank you.
        Chairman Davidson. Thanks, Mrs. McClain.
        I would like to thank our witnesses for their testimony
    today. Without objection, all members will have 5 legislative
    days to submit additional written questions for witnesses to
    the chairman. Questions will be forwarded to the witnesses for
    their response. Witnesses, please respond no later than July
    17th.

        [The information referred to can be found in the appendix:]

        This hearing stands adjourned.

        [Whereupon, at 11:20 a.m., the subcommittee was adjourned.]

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