DPA also requires the President to report annually to Congress on the  effect of offsets—a range of incentives or conditions provided to foreign  governments to purchase U.S. military goods and services—on U.S.  defense preparedness, industrial competitiveness, employment, and trade. Agencies other than DOD generally do not apply the authority and would  do so after an issue affecting delivery needs had been identified, which  could add delays to the delivery of critical products during emergencies. Specifically, Title III authority to expand production  capabilities for industrial resources or critical technology essential to the  national defense has been used almost exclusively for defense needs, and  circumstances have not required use of some Title VII authorities, such as  the National Defense Executive Reserve or voluntary agreements. Agencies’ Timely Use of Title I Authorities Could Be Limited in Emergencies

While other agencies have used or have considered using Title I’s priorities  and allocations authority, DOD has been the primary user. Agency officials acknowledged that there is a need to have policies and  guidance in order to implement the Title I priorities and allocations  authority, but the degree to which agencies have accomplished this varies. Efforts from an interagency team  chaired by DOD to consult with other countries on limiting harmful effects  of offsets have resulted in a consensus with other nations that negative  effects exist, but not yet on best practices to address them. Other related  efforts to report on offsets have yet to be completed and are limited in  their assessments of economic effects. Other Efforts to Report on Offsets Have Been Limited

In the 2003 DPA reauthorization, Congress created an interagency team to  consult with foreign nations on limiting the adverse effects of offsets in  defense procurement—without damaging the U.S. economy, defense  industrial base, defense production, or defense preparedness—and  prepare an annual report detailing the results of their foreign  consultations. Agencies’ efforts could be strengthened by placing priority ratings on  contracts for critical emergency response items before an event occurs. Recommendations for Executive Action

To ensure that the full range of Defense Production Act authorities can be  used in an effective and timely manner, we recommend the Secretaries of  Agriculture, Health and Human Services, and Transportation, in  consultation with the Department of Commerce, develop and implement a  system for using the priorities and allocations authority for food and  agriculture resources, health resources, and civil transportation  respectively. To position the Department of Commerce to respond to offset reporting  requirements, we recommend the Secretary of Commerce update  regulations to, for example, request more specific industry information  from prime contractors that would improve the assessment of the  economic effects of offsets. In its technical comments HHS noted that it is beginning to develop a  regulation to establish a framework for considering requests for priority  ratings. Appendix I: Scope and Methodology

To determine the extent to which agencies use the authorities in the  Defense Production Act of 1950 (DPA), we reviewed the current  legislation and recent amendments. Where available, we collected  and reviewed documentation on circumstances in which agencies have  used the DPA. Department of Homeland Security

Since 2003, DHS reported that it has authorized or endorsed to the  Department of Commerce the use of priority ratings for 15 programs,  which includes approval of other federal agencies’ use of priority ratings:  restoration of rail service in the Gulf Coast region after Hurricane  Katrina;    construction of an FBI facility in Northern Virginia;    construction of the Department of Justice’s Terrorist Screening Center;    procurement of perimeter security equipment for a major airport and    upgrades to cargo seaport security;    procurement of encrypted radio equipment for use in U.S. Park Police    acquisition of generator transfer switches and transformers for state    upgrade of State Department domestic facility security;    procurement of a generator for the State Department’s Continuity of  Operations facility;    construction of an emergency Federal Support Center;    procurement of equipment for a FEMA emergency facility;    DHS procurement of encrypted emergency communications equipment    procurement of FBI night vision equipment;    FEMA’s Communications Support Infrastructure Program; and    The Geostationary Operational Environmental Satellite, R-Series  Program of the National Oceanic and Atmospheric Administration.
Why GAO Did This Study

Congress enacted the Defense Production Act of 1950 (DPA) to ensure the availability of industrial resources to meet defense needs. Amendments to the Act allow its use for energy supply, emergency preparedness, and critical infrastructure protection and require agencies to report on foreign offsets, which are incentives to foreign governments to purchase U.S. goods and services. Only Titles I, III, and VII remain in effect. In the National Defense Authorization Act for Fiscal Year 2008, Congress directed GAO to review recent agency efforts to implement the DPA. This report (1) examines the extent to which agencies use DPA authorities and (2) assesses agencies' response to reporting requirements on the economic impact of foreign offsets. GAO's work is based on a review of policies and guidance for the use of DPA authorities, instances in which agencies have exercised the authorities, and the analysis used in required reports on foreign offsets.

What GAO Found

The Department of Defense (DOD) routinely exercises the DPA Title I priorities and allocations authority, which allows rated contracts and orders to be delivered before others, to ensure the availability of defense resources. However, civilian agencies have generally not used the Title I authority and most differ from DOD in deciding when to apply it. For example, DOD places ratings on most of its contracts before critical defense items are needed. In contrast, agencies such as the Department of Homeland Security (DHS) generally request ratings after delivery needs are identified, potentially delaying critical items during emergencies. Also, agencies responsible for responding to domestic emergencies and procuring resources in the areas of food and agriculture, health resources, and civil transportation, lack policies and guidance that could facilitate execution of the Title I authority and delivery of items needed in an emergency. While the Departments of Agriculture (USDA) and Health and Human Services are developing regulations to establish a framework for considering priority ratings, the Department of Transportation (DOT) has not yet begun to do so. Other DPA authorities have been used exclusively by DOD or have not been triggered by recent events. For example, DOD has generally been the sole user of the Title III authority for expansion of production capabilities, while events that would activate some Title VII authorities--such as the National Defense Executive Reserve and voluntary agreements--have not occurred. Agencies have taken steps towards fulfilling their offset reporting requirements to Congress, but data collected by the Department of Commerce limits the analysis of the economic effect of offsets. Commerce officials noted that a more detailed analysis could be provided if they requested more specific product data from prime contractors. Also, a DOD-chaired interagency team--required to report on its consultations with foreign nations on limiting the adverse effects of offsets--has reached consensus with other nations that adverse effects exist, but not yet on best practices to address them. Actions by the National Commission on Offsets have similarly been limited in the assessment of economic effects.