In response to the growing Coronavirus pandemic, President Trump announced that the federal government will invoke the Defense Production Act to obtain necessary medical equipment and supplies from private industry. In this post we address some of the most frequently-asked questions about the DPA.

What is the Defense Production Act?

Originally conceived during the Korean War, the DPA allows the President to divert goods and supplies from civilian use to promote the national defense. This authority is not limited to sourcing aircraft parts or ammunition, or to supporting active military operations. The text of the Act expressly extends to matters involving “national economic security and national public health or safety.”

The Defense Priorities and Allocations System regulations in 15 C.F.R. Part 700 implement the Defense Production Act. The DPAS regulations provide detail about how the government will issue rated orders and what contractors and commercial suppliers must do to respond.

How does the government prioritize orders for specific supplies?

The government specifies the relative priority for specific supplies by issuing a “rated order,” which may be designated “DX” or “DO.” A DX order has the highest priority. It must be fulfilled before any other DO or unrated order. A DO rated order must be fulfilled before an unrated order. A rated order must be fulfilled first, even if it means the contractor must divert items already in process or ready for delivery under another contract.
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The spread of COVID-19 (Coronavirus) remains unclear, but its impacts are already being felt. Supply chains are being disrupted and companies are implementing preventative measures to protect their employees. Many businesses have already suspended non-essential travel, encouraged remote working arrangements, and advised employees to follow the Centers for Disease Control risk-reduction strategies. Given these delays and disruptions, it’s logical to wonder:  Are delays or impacts related to the Coronavirus an excusable delay?

The answer is yes, if you can prove it. Below we outline the standard contract clauses dealing with delays from epidemics and discuss how courts have interpreted those clauses in the past when contractors claimed their delays should be excused due to an epidemic.
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