[Senate Report 104-134]
[From the U.S. Government Publishing Office]



   104th Congress 1st            SENATE                 Report
         Session
                                                       104-134
_______________________________________________________________________




                                                       Calendar No. 178

 
                EXTENSION OF THE DEFENSE PRODUCTION ACT

                               __________

                              R E P O R T

                                 OF THE

                     COMMITTEE ON BANKING, HOUSING,
                           AND URBAN AFFAIRS
                          UNITED STATES SENATE

                              to accompany

                                S. 1147




   August 10 (legislative day, July 10), 1995.--Ordered to be printed

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

  ALFONSE M. D'AMATO, New York, 
             Chairman
PAUL S. SARBANES, Maryland           PHIL GRAMM, Texas
CHRISTOPHER J. DODD, Connecticut     RICHARD C. SHELBY, Alabama
JOHN F. KERRY, Massachusetts         CHRISTOPHER S. BOND, Missouri
RICHARD H. BRYAN, Nevada             CONNIE MACK, Florida
BARBARA BOXER, California            LAUCH FAIRCLOTH, North Carolina
CAROL MOSELEY-BRAUN, Illinois        ROBERT F. BENNETT, Utah
PATTY MURRAY, Washington             ROD GRAMS, Minnesota
                                     BILL FRIST, Tennessee
 Howard A. Menell, Staff Director
  Robert J. Giuffra, Jr., Chief 
              Counsel
 Philip E. Bechtel, Deputy Staff 
             Director
Steven B. Harris, Democratic Staff 
    Director and Chief Counsel
Brent S. Franzel, Staff Director, 
  Subcommittee on International 
              Finance
 Jonathan M. Harris, Professional 
               Staff
 Bruce E. Kutz, Professional Staff
  Patrick A. Mulloy, Democratic 
    Chief International Counsel



                            C O N T E N T S

                              ----------                              
                                                                   Page
Introduction.....................................................     1
Background.......................................................     1
History of the legislation.......................................     2
Committee action.................................................     2
Section-by-section analysis......................................     3
Regulatory impact statement......................................     3
Cost of legislation..............................................     3
Changes in existing law..........................................     5
                                                       Calendar No. 178
104th Congress                                                   Report
                                 SENATE

 1st Session                                                    104-134
_______________________________________________________________________



                 EXTENSION OF THE DEFENSE PRODUCTION ACT

                                _______


   August 10 (legislative day, July 10), 1995.--Ordered to be printed

_______________________________________________________________________


Mr. D'Amato, from the Committee on Banking, Housing, and Urban Affairs, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 1147]

                              introduction

    On June 28, 1995, the Senate Banking Committee marked up 
and ordered to be reported a bill to extend the expiration date 
of the Defense Production Act (DPA) from September 30, 1995, to 
September 30, 1998 and to authorize to be appropriated such 
sums as may be necessary to carry out existing DPA programs for 
fiscal years 1996, 1997, and 1998. The vote was 15 yeas and 1 
nay.

                               background

    The Defense Production Act, 50 U.S.C. App. 2061 et seq., 
was first enacted in 1950 to mobilize the Nation's productive 
capacity after the outbreak of the Korean War. The Act has been 
reauthorized and amended a number of times, most recently in 
1992. The original 1950 Act contained seven titles, four of 
which were permitted to expire in 1953. Currently, three titles 
of the DPA are in effect, and they are due to expire on 
September 30, 1995, unless renewed.
    Title I grants to the President the power to prioritize 
performance of specific contracts to meet urgent defense 
requirements, and to allocate resources to industries to 
optimize the production of defense materials.
    Title III authorizes the President to use loans, loan 
guarantees, purchase commitments, and grants to encourage 
contractors to establish or expand activities to provide 
increased industrial capacity for defense needs. Title III 
programs are currently managed by the Department of Defense.
    Title VII authorizes the President to provide antitrust 
defenses to private entities conducting joint activities under 
voluntary agreements aimed at solving production and 
distribution problems impairing national defense preparedness. 
The creation of such voluntary agreements must be initiated by 
the President, and must be approved by the Attorney General and 
the Chairman of the Federal Trade Commission before any 
antitrust protections are accorded to the participants. Section 
721 of Title VII, a provision popularly known as the Exon-
Florio provision, authorizes the President to suspend or 
prohibit the acquisition, merger, or takeover of a domestic 
firm by a foreign firm if such action would threaten to impair 
national security. This provision was added to the DPA by the 
Omnibus Trade and Competitiveness Act of 1988.

                       history of the legislation

    In October 1990, the Defense Production Act expired during 
the House-Senate conference on a reauthorization and amendments 
bill. At the time, Operation Desert Shield was under way, and 
the Defense Department was using DPA authorities to ensure that 
orders for military items were filled in advance of commercial 
orders. On at least two occasions, top Defense Department 
officials wrote to Congress asking for an extension of DPA 
authorities, which they viewed as important in the conduct of 
Operation Desert Shield and, subsequently, Desert Storm.
    During 1991, Congress passed two short-term extensions of 
the DPA, while it considered multiyear reauthorization bills. A 
bill to expand and extend DPA authorities through September 30, 
1995 was passed by Congress and signed into law in 1992 (S. 
347, P.L. 102-558).
    The Federal Emergency Management Agency, as the lead agency 
on DPA matters and on behalf of the Administration, wrote to 
the Committee requesting an extension of DPA authorities 
because these authorities are essential to U.S. industrial 
readiness to support the national defense (copy included). 
Responding to this request, the Committee met on June 28, 1995, 
and marked up and ordered reported a bill to extend the 
expiration date of the DPA to September 30, 1998.

                            committee action

    Paragraph 7(b) of Rule XXVI of the Standing Rules of the 
Senate requires the committee report accompanying a measure 
reported from the committee to include the results of each roll 
call vote taken on the measure and any amendments thereto. In 
addition, paragraph 7(c) requires the report to include a 
tabulation of the vote cast by each member of the committee on 
the question of reporting the measure.
    In accordance with the Standing Rules of the Senate, the 
following is the tabulation of the vote on the question of 
reporting the measure, a bill to extend and reauthorize the 
Defense Production Act of 1950, held on Wednesday, June 28, 
1995.
    Measure adopted by: Yeas 15 Nays 1.
        YEAS                          NAYS
D'Amato                             Gramm
Shelby
Bond
Mack
Faircloth
Bennett \1\
Grams
Frist \1\
Sarbanes
Dodd
Kerry \1\
Bryan \1\
Boxer
Moseley-Braun
Murray
    ----------
    \1\ Indicates vote by proxy.

                      SECTION-BY-SECTION ANALYSIS

    Section 1 cites the Act as the ``Defense Production Act 
Amendments of 1995.''
    Section 2 provides for an extension of the Defense 
Production Act for a period of three years from September 30, 
1995 to September 30, 1998. Sections 714 and 719, included in 
the previous authorization, are not permanently reauthorized in 
this bill. Public Law 89-554 repealed section 714 in 1966, and 
Public Law 100-679 repealed section 719 in 1988.
    Section 3 authorizes to be appropriated such sums as may be 
necessary to carry out existing DPA programs for fiscal years 
1996, 1997, and 1998.

                      REGULATORY IMPACT STATEMENT

    Pursuant to rule XXVI, paragraph 11(b), of the Standing 
Rules of the Senate, the Committee has evaluated the regulatory 
impact of the bill and concludes it would result in no net 
increase in the regulatory burden imposed by the Government.

                          cost of legislation

    The cost estimate of the Congressional Budget Office 
appears below:
                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, August 2, 1995.
Hon. Alfonse M. D'Amato,
Chairman, Committee on Banking, Housing, and Urban Affairs, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office (CBO) 
has reviewed the Defense Production Act Amendments of 1995, as 
ordered reported by the Senate Committee on Banking, Housing, 
and Urban Affairs on June 28, 1995. We estimate that the bill 
would result in additional outlays of $80 million to $85 
million over the 1996-2000 period, but all costs would be 
subject to discretionary appropriations. Because it would not 
affect direct spending or receipts, the bill would not be 
subject to pay-as-you-go procedures. Also, enactment of the 
bill would not affect the budgets of State and local 
governments.
    The Defense Production Act of 1950 (DPA) authorizes a 
system for placing priorities on defense contracts (Title I), 
increasing domestic capabilities to produce goods necessary to 
the national defense (Title III), mobilizing a reserve of 
production managers during wartime (Title VII), and maintaining 
information on the defense industrial base (Title VII). These 
authorities are set to expire on September 30, 1995; this bill 
would extend them to September 30, 1998.
    The bill would have a budgetary impact for two reasons. 
First, the bill would authorize the appropriation of such sums 
as may be necessary for direct loans, loan guarantees, or 
purchase guarantees under Title III to correct for shortfalls 
in domestic industrial capacity. In recent years, the 
Department of Defense (DoD) has used the authority for purchase 
guarantees--that is, the authority to commit to buying a 
specific quantity of a defense good if a manufacturer cannot 
sell it elsewhere. Appropriations for purchase guarantees have 
averaged about $30 million a year over the 1986-1995 period, 
ranging from $29 million in 1986 to $100 million in 1994. No 
money was appropriated in 1992, 1993, or 1995, and the 
Administration did not seek any funds in its budget request for 
1996. Because of these sharp variations in annual funding 
levels, specific yearly amounts for the open-ended 
authorization are difficult to project. Based on the historical 
average over the past decade, we estimate that the increase in 
authorizations would total about $90 million for the three-year 
period covered by the bill. Also based on historical spending 
patterns, we estimate that outlays would rise by less than $80 
million over the 1996-2000 period.
    Other costs of the bill would stem from the salaries and 
expenses devoted to maintaining the priority, executive 
reserve, and information systems. These expenses--about $2 
million a year--would be covered by annual appropriations for 
various agencies, including the Federal Emergency Management 
Agency, DoD, and the Department of Commerce.
    If you would like further details on this estimate, we will 
be pleased to provide them. The CBO staff contact is Amy Plapp 
who can be reached at (202) 226-2840.
            Sincerely,
                                         June E. O'Neill, Director.
Hon. Alfonse M. D'Amato,
Chairman, Committee on Banking, Housing, and Urban Affairs, U.S. 
        Senate, Washington, DC.
    Dear Senator D'Amato: The nonpermanent provisions of the 
Defense Production Act of 1950, as amended (DPA), will expire 
on September 30, 1995. The DPA is the key legislation that 
provides the President with authorities to obtain, in a timely 
manner, the products, materials, and services needed by our 
Armed Forces to meet national security requirements. Failure to 
reauthorize the DPA could jeopardize our ability to prepare for 
and respond to a national security emergency or a truly 
catastrophic disaster.
    Title I of the DPA authorizes the President to require 
priority performance on contracts and orders, as necessary, to 
meet approved national defense and emergency preparedness 
program requirements and to allocate materials, services, and 
facilities, as necessary, to promote these programs. This 
authority, as implemented, assures domestic sources of supply 
and timely delivery at minimal cost and with minimal 
interference to normal commercial activities. This authority 
has proven extremely valuable over the last 45 years and has 
been used by the military departments during every conflict, 
including Desert Storm. Title I authorities are also now 
available for the effective management and focusing of the 
Nation's resources in response to a catastrophic domestic 
natural, accidental, or man-caused disaster.
    Title III of the Act provides the President the authority 
to establish, expand, or maintain industrial capacity essential 
for national defense. This authority facilitates the transition 
of manufacturing technology from the laboratory to production. 
Items produced and manufacturing processes under DPA Title III 
authorities enhance the industrial capacity and operational 
capabilities of defense systems such as the Army's Apache 
helicopter and the Air Force's F-22 and Navy's F-18 fighter 
aircraft.
    In addition to providing administrative and implementation 
provisions, the DPA's Title VII authorizes a National Defense 
Executive Reserve (NDER) program which is comprised of civilian 
executives which are used by Federal civil departments and 
agencies during national defense emergencies.
    Continuation of these DPA authorities is essential to our 
domestic industrial readiness to support our national defense. 
Historically, Congress has recognized the important role these 
authorities play in our overall preparedness posture. We urge 
Congress to continue its support and consider acting favorably 
on the legislative recommendations of the Administration. We 
hope that you will provide your support to this proposed 
reauthorization of the DPA.
    The Office of Management and Budget advises, that from the 
standpoint of the Administration's program, there is no 
objection to the submission of this letter.
            Sincerely,
                                          James Lee Witt, Director.

                         CHANGES IN EXISTING LAW

    The Committee has determined that it is necessary, in order 
to expedite the business of the Senate, to dispense with the 
requirements of rule XXVI, paragraph 12, of the Standing Rules 
of the Senate, with respect to this legislation.

                                
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