Government Contracting, Coronavirus, and the Defense Production Act

Posted By smay || 17-Apr-2020

Government Contracting, Coronavirus, and the Defense Production Act

Many government contractors are aware of the Defense Production Act (DPA), but in the coronavirus era it is a good time to familiarize yourself with some of the smaller details and figure out if your company has an opportunity to capitalize on it.

The DPA was enacted in 1950 because of the Korean War, and initially was primarily used for national defense efforts. However, since then, the DPA has been expanded and is now a staple in the United States’ ability to respond to terrorist attacks and natural disasters.

The coronavirus pandemic is considered a natural disaster, and the strain it has put on the health care industry has been unprecedented. The sudden need for surgical masks, gloves, respirators, ventilators and other medical supplies has exploded, and the federal government has invoked the DPA to help meet this demand. Recently, the Department of Health and Human Services gave General Motors a $500 million DPA contract to provide ventilators, and others are sure to be following soon given the demand.

If you are approached by either the federal government or a private company to provide goods or services for a DPA-related order, you are required to accept the order. You may negotiate terms, but ultimately, if you refuse, your company could face civil or criminal penalties. One term to negotiate is a loan guarantee, particularly if it will help facilitate the contract. The federal government can provide capital either for goods or employees to make sure any contract deadline is met. So, if you are a smaller firm, do not be dissuaded from reaching out to larger firms getting DPA orders. If you can help fulfill the contract, the government will provide economic help for you to do so.

Also, if you do receive a DPA order, the federal government can reprioritize your existing contracts to ensure the order is met. For example, if the government needs ventilators in 30 days and you have other ongoing contracts that may interfere with the DPA order being timely performed, the government has full authority to intervene to delay your fulfilling other contracts. Therefore, communicating with your clients is imperative if you find yourself in this situation.  

Another benefit to the DPA is that it facilitates making agreements between companies by loosening the usual requirements. If you receive a DPA order and need a second company to help fulfill the order, you can work with pretty much anyone you want with a reduced amount of mandatory paperwork. The DPA allows for voluntary agreements between private companies, and this helps speed the process of delivering goods and services.

If you have not gotten a DPA order, but want to get involved as a government contracting firm, you can certainly volunteer to assist the federal government in the effort like Apple, Ford and TESLA have. Having an official DPA order does help get supplies faster, but if companies can use their own resources or network to access supplies, it will benefit them to get into the market.

We are in unchartered waters with COVID-19, but if you think your government contracting company can help fill a void do not hesitate to reach out and the first step is registering with SAM. You would be helping our nation get through a bad time, and you just may find new revenue streams.

 

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