By Vanessa Grossl, CSG Policy Analyst
President Donald Trump has invoked the Defense Production Act, a law from 1950 to help fill gaps in needed supplies, such as additional N95 face masks, and to clear up supply-chain issues encountered in the manufacturing of ventilators. This order came in the form of a presidential memorandum, will help fight the COVID-19 outbreak in the states and gives the federal government more control during emergencies to direct industrial production.
State Medical Supply Shortages
Top health care officials have said that there is not enough stockpiled medical equipment such as masks, gowns and gloves in the Strategic National Stockpile to fulfill gaps in state and local supplies as the health care systems deal with the coronavirus. The role of the national stockpile is to fill the gap temporarily until states and localities working with the private sector can respond to the state and local needs. President Trump has made it clear he believes teaming up with private companies is the best way to combat coronavirus on multiple levels. According to CNN, in a call with U.S. governors in March, the President advised state leaders to develop ties with private-sector vendors, who can often move faster with less restrictions than the federal government.
“Look at the bizarre situation we wind up in: Every state does its own purchasing,” said New York Gov. Andrew Cuomo on March 31, describing the process states are undergoing to acquire supplies. “It’s like being on eBay, with 50 other states bidding on a ventilator.”
On April 2, Cuomo said New York only had six days of ventilators left in its stockpile. “Our attitude here is we’re on our own,” he said, because, “I don’t think the federal government is in a position to provide ventilators to the extent that the nation may need them.”
Impacts Within States
House Republicans have created an America Works Together online resource searchable by state that details how businesses of all sizes as well as individuals in each state have stepped up to help produce needed supplies and equipment, often in innovative ways. Even before the Defense Production Act was invoked, extraordinary examples of patriotism were on display as businesses in the states work to do their part. It remains unclear what workforce safety measures will be implemented in the states where factories exist who were ordered to help with producing essential medical supplies.
Additionally, a number of states have sent aid to other states struggling the most with supply shortages.
Action by the Federal Government
The Federal Emergency Management Agency (FEMA) has described the Defense Production Act as “the primary source of presidential authorities to expedite and expand the supply of resources from the U.S. industrial base to support military, energy, space and homeland security programs.”
The Act is divided into three main sections:
- Priorities and Allocations – Allows the president to require corporations to accept and prioritize contracts for services and materials deemed necessary to aid U.S. national defense.
- Expansion of Productive Capacity and Supply – Gives the president the authority to create incentives for industry to produce critical materials.
- General Provisions – Broadlyestablishes government authority to strike agreements with private industry, to halt foreign corporate mergers that threaten national security and to create a volunteer bloc of industry executives who could be called to government service.
The first order directed the supply of materials to make ventilatorsto six companies: General Electric Co., Hill-Rom Holdings Inc., Medtronic Public Limited Co., ResMed Inc., Royal Philips N.V. and Vyaire Medical Inc. The second order directed FEMA, to “use any and all authority available under the Act to acquire” N95 respirators from 3M.
Private Sector Response
Minnesota manufacturing giant 3M has warned that the federal administration’s request for the company to stop exporting N95 masks to other countries in order to fulfill the gap in supplies at home could actually make the protective gear less available in the U.S. Ceasing all export of respirators produced in the U.S. could cause other countries to retaliate and do the same. 3M has plans to export N95 masks to the U.S. from its facilities in countries including Singapore and China.
More than a week prior to the Defense Production Act announcement, GM established a partnership that would allow one of its facilities in Indiana to produce 10,000 ventilators per month. GM is now tasked with producing 6,132 ventilators by June 1 and 30,000 ventilators by the end of August 2020. On April 8, the U.S. Department of Health and Human Services also announced that Royal Philips is set to produce 2,500 ventilators by the end of May and a total of 43,000 by year’s end.
Some argue that instead of deciding which companies or factories should take on this production and at what capacities, the federal government should provide market incentives that allow companies to step up to the challenge, which could perhaps be faster than the alternative. They argue that the decision to retool production facilities requires large costs for the manufacture and that more certainty around purchase commitments would ease concerns about investment in from the private sector. Some companies are hesitant because they remember others who responded to past outbreak concerns by doubling their staffs and investing millions in new factory equipment, only to come close to bankruptcy when crises were averted quickly and no one was left to purchase their supplies. Additionally, liability protections and targeted deregulation would also build confidence businesses need to spur rapid scale production processes.