[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
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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
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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:]
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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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