Opportunities Exist to Increase Transparency and Identify Future Actions to Mitigate Medical Supply Chain Issues (GAO-21-108)
Summary
A GAO report to congressional committees, GAO-21-108, dated November 2020, on federal agencies' use of the Defense Production Act (DPA) to address medical supply shortages from COVID-19. It explains that the DPA gives agencies authority to prioritize contracts for medical supplies so those orders get preference over others, and to expand domestic production of medical supplies. GAO identified 43 contracts and agreements, initially valued at about $3.9 billion, where agencies placed priority ratings on or funded domestic production expansion. Its title states that opportunities exist to increase transparency and identify future actions to mitigate medical supply chain issues.
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United States Government Accountability Office
Report to Congressional Committees
DEFENSE
November 2020
PRODUCTION ACT
Opportunities Exist to
Increase
Transparency and
Identify Future Actions
to Mitigate Medical
Supply Chain Issues
GAO-21-108
November 2020
DEFENSE PRODUCTION ACT
Opportunities Exist to Increase Transparency and
Identify Future Actions to Mitigate Medical Supply
Highlights of GAO-21-108, a report to
Chain Issues
congressional committees
Why GAO Did This Study What GAO Found
COVID-19 has put the U.S. health care Federal agencies used the Defense Production Act (DPA) to help address
system under severe strain, including medical supply shortages from COVID-19. The DPA gives agencies the authority
affecting the federal government’s to (1) prioritize contracts for medical supplies so those orders get preference over
ability to buy and maintain critical others, and (2) expand domestic production of medical supplies. GAO identified
medical supplies to treat patients and 43 contracts and agreements—initially valued at about $3.9 billion—where
protect health care workers. agencies placed priority ratings on or funded domestic production expansion
In March 2020 agencies began using projects for COVID-19 medical supplies (see figure). Department of Health and
DPA authorities to rapidly obtain and Human Services (HHS) and Federal Emergency Management Agency (FEMA)
expand domestic production of medical officials stated that nearly all the approximately 181,000 ventilators and 166.5
supplies for COVID-19. The CARES million of the respirators they placed on priority rated contracts, respectively,
Act provided the Department of have been delivered as of September 2020.
Defense (DOD) $1 billion for DPA
purchases related to COVID-19. HHS Federal Agencies’ Use of Defense Production Act and Similar Actions for Medical, Testing,
also reported using some of the $8.4 and Vaccine Supplies, March 2020-September 2020
billion it obligated to buy supplies and
replenish the Strategic National
Stockpile to increase domestic
production of medical supplies, which
GAO refers to as similar actions.
The CARES Act includes a provision
for GAO to monitor funds provided for
the COVID-19 pandemic. This report
examines (1) federal agencies’ use of
these actions to address COVID-19,
and (2) the federal approach for using
DPA and similar actions for medical
supplies, among other issues. GAO
analyzed agency announcements,
federal procurement data, contracts,
project data, and planning documents
from March 18 through September 30,
2020, and interviewed HHS, DOD, and Note: One respirator contract included orders for powered air purifying respirator kits and goggles.
We show these as three separate actions.
FEMA officials.
What GAO Recommends Federal agencies initially used a targeted DPA approach to address early
COVID-19 medical supply issues, such as for ventilators and N95 respirators. By
GAO is making two recommendations, September 2020, agencies increased use of DPA and similar actions to a total of
including that HHS identify how DPA 10 types of medical supplies, and additional DPA actions are likely for masks,
and similar actions will be used to pharmaceuticals, screening and diagnostics, and personal protective equipment.
increase domestic production of In light of COVID-19 supply issues, an August 2020 executive order also directed
essential medical supplies as part of that agencies take steps to reduce U.S. reliance on foreign manufacturers of
efforts to reduce reliance on foreign medical supplies and other items. To support this order, HHS is leading an effort
manufacturers. HHS concurred with to identify and mitigate risks for increasing domestic production of medical
the recommendation.
supplies, but the agency has not yet identified its plans. As HHS completes this
effort, an opportunity exists to identify how the DPA and similar actions may be
View GAO-21-108. For more information, needed to support the effort. Specifically, identifying further use of the DPA and
contact W. William Russell at (202) 512-4841 similar actions to increase domestic production of key medical supplies can help
or RussellW@gao.gov. alleviate national security risks from continued reliance on foreign manufacturers.
United States Government Accountability Office
Contents
Letter 1
Background 4
Agencies Have Used DPA and Similar Actions to Address COVID-
19 and Increase Production of Medical Supplies, but Full Use of
the Authorities Is Not Centrally Reported 12
Federal Agencies’ Approach to Using DPA and Similar Actions
Have Helped Address Some Medical Supply Issues, But Future
Actions Have Not Been Identified 19
Agencies Have Begun Identifying Lessons Learned for Future
Interagency Coordination and Use of DPA and Similar Actions 26
Conclusions 28
Recommendations for Executive Action 29
Agency Comments 29
Appendix I Priority Rated Medical Contracts and Domestic Production
Expansion Projects for COVID-19 33
Appendix II GAO Contact and Staff Acknowledgements 35
Tables
Table 1: Executive Orders Related to Defense Production Act for
Medical Supplies, March 2020-August 2020 7
Table 2: Defense Production Act Title I Priority Rated Contracts
for Medical Supplies, March 2020-September 2020 13
Table 3: DOD and HHS Use of Defense Production Act Title III
and Other Contracts and Agreements for Increased
Domestic Production of Medical Resources as of
September 30, 2020 16
Table 4: Priority Rated Medical Contracts for COVID-19, Defense
Production Act Title I 33
Table 5: The Departments of Defense and Health and Human
Services Domestic Production Expansion Projects,
Defense Production Act Title III and Similar Actions 34
Page i GAO-21-108 Defense Production Act
Figures
Figure 1: Process for Reviewing and Approving Federal Agencies’
Use of Defense Production Act (DPA) Authorities to
Address COVID-19 Medical Supply Chain Issues 9
Figure 2: Use of Defense Production Act (DPA) or Similar Actions
to Address Critical Medical Item Shortages, March 2020-
September 2020 21
Figure 3: Excerpts from the Department of Health and Human
Services Assistant Secretary for Preparedness and
Response’s Strategic Plan for 2020-2023 24
Abbreviations
COVID-19 Coronavirus Disease 2019
DOD Department of Defense
DPA Defense Production Act
FEMA Federal Emergency Management Agency
FPDS-NG Federal Procurement Data System-Next Generation
HHS Department of Health and Human Services
OMB Office of Management and Budget
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Page ii GAO-21-108 Defense Production Act
Letter
441 G St. N.W.
Washington, DC 20548
November 19, 2020
Congressional Committees
The emergence of the Coronavirus Disease 2019 (COVID-19) pandemic
has put the U.S. health care system under severe strain, including
affecting the federal government’s ability to purchase and maintain
inventories of critical medical supplies. The supplies are needed to test
and treat patients, protect health care workers, and ensure that vials and
syringes are available once one or multiple vaccines are approved. In
March 2020, within 1 month of the start of the pandemic, the Department
of Health and Human Services (HHS) had distributed most of the
personal protective equipment supplies in the Strategic National Stockpile
to states and other entities. Moreover, the Federal Emergency
Management Agency (FEMA) received requests for millions of N95
respirators and gloves—from states, local, tribal, and territorial
governments—that far exceeded domestic supply. According to a FEMA
official, there was also concern that the inventory of ventilators would be
exhausted. The federal government struggled to meet medical supply
needs because the U.S. is dependent on foreign sources for many
personal protective equipment supplies such as gowns and gloves, and is
competing against countries all over the world for the same supplies
during this pandemic.
As early as March 2020, federal agencies began using authority
delegated under the Defense Production Act (DPA) to address medical
supply chain needs. Based on this delegation, federal agencies have the
authority to, among other things, place priority ratings on medical supply
contracts so that agencies’ orders would get preference over others, as
well as provide incentives to expand domestic production of medical
supplies so that the U.S. will be less dependent on foreign sources of
supply. 1 The CARES Act provided the Department of Defense (DOD) $1
billion specifically for DPA purchases to prevent, prepare for, and respond
to COVID-19, domestically or internationally. 2 DOD plans to use
approximately $213 million of this funding for medical supplies and $687
million to offset the financial distress in the defense industrial base
caused by COVID-19. DOD also plans to use $100 million to support DPA
loans, in collaboration with the U.S. International Development Finance
1Pub. L. No. 81-774 (1950), codified at 50 U.S.C. App. §§ 4501 et seq., as amended.
2Pub. L. No. 116-136, (2020).
Page 1 GAO-21-108 Defense Production Act
Corporation under Executive Order 13922. HHS reported that it obligated
about $8.4 billion to buy supplies and replenish the Strategic National
Stockpile. HHS is obligating some of these funds to expand domestic
production of medical supplies. 3 Throughout the report, we refer to
actions for placing priority ratings on contracts and awarding contracts or
agreements for domestic production expansion projects (whether the
actions were taken with funds specifically designated for DPA purchases
or provided to HHS) as DPA and similar actions.
The CARES Act includes a provision for GAO to conduct monitoring and
oversight of the use of funds made available to prepare for, respond to,
and recover from the COVID-19 pandemic. 4 This report examines the
federal government’s use of DPA and similar actions to address COVID-
19 medical supply chain issues, including (1) the extent that federal
agencies have used DPA and similar actions; (2) the federal approach for
using DPA and similar actions for medical supplies; and (3) federal
agencies’ efforts to identify lessons learned on the use of the actions.
This is the first in a series of reports we plan to issue on the use of DPA
and similar actions for COVID-19.
To determine the extent that federal agencies have used DPA and similar
actions to address COVID-19 medical supply chain needs, we initially
relied on HHS, FEMA, and DOD agency announcements stating the use
of these authorities between March 18, 2020, and September 30, 2020.
We corroborated this information with contract and other data provided to
us by these agencies. We also verified whether the contracts and other
procurement actions were included in the federal government’s
procurement database, known as the Federal Procurement Data System-
Next Generation (FPDS-NG) and determined whether they were identified
as DPA actions in the database. HHS, FEMA, and DOD officials were
able to provide contracts or other information for 43 DPA or similar
actions that were mentioned in agency announcements. There were four
additional DPA or similar actions that were mentioned in agency
announcements or identified by HHS related to assays, diagnostic
systems, and ventilators. 5 HHS has not yet provided contract or other
3HHS officials identified the Public Health and Social Services Emergency Fund as an
example of appropriations available to expand domestic production of medical supplies.
Pub. L. No 116-136, Division B, Title VIII.
4Pub. L. No. 116-136, § 19010.
5An assay provides a sensitive, nucleic-acid-based diagnostic tool for evaluating
specimens from patients in the acute phase of an infection.
Page 2 GAO-21-108 Defense Production Act
information to corroborate these. Therefore, we excluded these four
actions from our analysis. We plan to continue to seek this information
from the agency.
We used the contract and other documents to determine the type, dollar
value, and production timeframes of medical supplies where a priority
rating was placed on the contract, as well as the equipment being
purchased for domestic production expansion projects and the increased
production capacity expected. We also reviewed relevant standards for
internal control in the federal government, including those for information
and communication management. HHS also has other contracts to
procure medical supplies, which we did not include in this review because
they did not include a priority rating or were not for domestic production
expansion purposes. Lastly, our review focused on medical supplies and
did not include priority ratings or production expansion efforts for
pharmaceuticals, therapeutics, or vaccine research.
To determine the federal approach for using DPA and similar actions for
medical supplies, we analyzed information and interviewed officials from
HHS, FEMA, and DOD that serve on various task forces or are in
organizations that support the review, approval, and execution of DPA
authorities. This included officials from the Supply Chain Advisory Group,
Joint DPA Office, DOD’s Joint Acquisition Task Force, and DOD’s DPA
offices, which help award domestic expansion projects. We examined
pertinent documents, such as Executive Orders, HHS strategic planning
documents, and a leadership briefing to gain insight on how DPA
authorities have been and are intended to be used to address critical
supply needs. We also reviewed standards for internal control in the
federal government for managing change in order to identify opportunities
federal agencies may have as they respond to executive direction to
reduce foreign dependence for medical supplies.
To determine federal agency efforts to identify lessons learned on the use
of these actions, we analyzed available documentation from DOD, FEMA,
and HHS aimed at capturing lessons learned and interviewed agency
officials about ongoing efforts.
We conducted this performance audit from May 2020 to November 2020
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
Page 3 GAO-21-108 Defense Production Act
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
During the Korean War, Congress enacted the Defense Production Act of
Background 1950 to ensure the availability of industrial resources to meet DOD’s
needs. 6 The DPA facilitates the supply and timely delivery of products,
materials, and services to military and civilian agencies in times of peace
as well as in times of war. Since it was enacted in 1950, Congress
amended the DPA to broaden its definition beyond military application
and expanded coverage to include crises resulting from natural disasters
or “man-caused events” not amounting to an armed attack on the U.S.
The definition of “national defense” in the Act has been amended to
include emergency preparedness activities conducted pursuant to Title VI
of the Robert T. Stafford Disaster Relief and Emergency Assistance Act
(Stafford Act) and critical infrastructure protection and restoration. 7 In
2018, Congress reauthorized the DPA through September 30, 2025. 8
Defense Production Act There are three major authorities of the DPA that are currently in effect,
Provisions DPA Titles I, III, and VII.
• Title I: Priorities and Allocation Authority: authorizes the President
to require priority performance on contracts or orders and allocate
materials, services, and facilities as necessary or appropriate to
promote the national defense. 9 The President can delegate Title I
authority to various agencies, including the Departments of Homeland
6Pub. L. No. 81-774 (1950), codified at 50 U.S.C. App. §§ 4501 et seq., as amended.
7A declaration under the National Emergencies Act authorizes the President to activate
existing emergency authorities in other statutes, and the President must cite the
authorities being exercised. 50 U.S.C. § 1621. A governor may request an emergency
declaration under the Stafford Act if the situation is of such severity and magnitude that
effective response is beyond the capabilities of the state and the affected local
governments, and federal assistance is necessary. 42 U.S.C. § 5191. According to the
Federal Emergency Management Agency, the President declared a nationwide
emergency pursuant to 42 U.S.C. § 5191(b) to avoid governors needing to request
individual emergency declarations. The Robert T. Stafford Disaster Relief and Emergency
Assistance Act, as amended, permits the President to declare a major disaster after a
state’s governor or chief executive of an affected Indian tribal government—a governing
body of an Indian or Alaska Native tribe, band, nation, pueblo, village, or community that is
federally recognized—finds that the emergency or major disaster is of such a severity and
magnitude beyond the State, Indian tribal government, and local government’s
capabilities. 42 U.S.C. § 5170. Governor means the chief executive of any state, which
includes, among others, Puerto Rico and the U.S. Virgin Islands. 42 U.S.C. § 5122 (4)(5).
8Pub. L. No. 115-232, §1791 (2018).
9Throughout the report we use the term contracts to refer to both contracts and orders.
Page 4 GAO-21-108 Defense Production Act
Security, Commerce, Defense, and HHS, among others. The authority
each department holds is based upon its area of expertise in different
sectors such as industrial resources, water, or health resources.
Title I authority allows priority-rated contracts or orders to take
preference over any other unrated contracts or orders if a contractor
cannot meet all required delivery dates. It also enables agencies to
issue three types of allocation orders that require a person or
corporation to (1) reserve resource capacity in anticipation of a rated
order; (2) take or refrain from taking certain actions or divert use of
materials, services, or facilities from one purpose to another; or (3)
limit the amount of a resource to be used for a specific purpose.
In 2008, we found that some agencies did not have a system or
regulations in place for the priorities and allocations authority. 10 We
recommended that several civilian agencies develop and implement a
system for using the priorities and allocations authority for each
agency’s respective resources. Since then, each agency that is
designated as a resource department developed its own priorities and
allocations systems. We also recommended that, to maximize
effective use of the priorities and allocations authority, the Secretaries
at the Departments of Agriculture, Energy, HHS, Homeland Security,
and Transportation consider, in advance of an emergency, approving
programs and placing priority ratings on contracts for items that are
likely to be needed in an emergency. Agencies later informed GAO
that processes and procedures for placing priority ratings on contracts
prior to an emergency were either in place or being assessed.
• Title III: Expansion of Productive Capacity and Supply: authorizes
the President to provide a variety of financial incentives—loans, loan
guarantees, direct purchases, and purchase commitments—to firms
to meet a variety of national defense goals, including maintaining,
restoring, and expanding the domestic industrial base. The financial
incentives may be used only when certain conditions are met. For
example, purchase commitments may generally be made when,
among other conditions, the President finds that the U.S. industry
cannot reasonably be expected to provide the capability for the
needed industrial resources, material, or critical technology in a timely
manner. Title III financial incentives can help reduce the risks for
10GAO, Defense Production Act: Agencies Lack Policies and Guidance for Use of Key
Authorities, GAO-08-854 (Washington, D.C.: June 26, 2008).
Page 5 GAO-21-108 Defense Production Act
domestic suppliers associated with the capitalization and investments
required to establish, expand, or preserve production capabilities.
Executive Order 13603, signed in 2012, designated the authority to
implement Title III actions to the Secretary of Defense and the heads
of other federal agencies and designated the Secretary of Defense as
the DPA Fund Manager. 11 According to DOD officials, the Deputy
Assistant Secretary of Defense for Industrial Policy provides
management, direction, and oversight of the DPA Title III program, on
behalf of the Under Secretary of Defense for Acquisition and
Sustainment. The Air Force serves as the Executive Agent for DOD’s
Title III program and maintains a program office to execute the
authority under the guidance of the Office of the Secretary of Defense.
According to DOD Title III officials, DOD typically awards technology
investment agreements for these projects. 12
• Title VII: General Provisions: provides for a range of authorities,
which include giving private firms that participate in voluntary
agreements for preparedness programs limited protection from
aspects of the antitrust laws and protecting contractors who honor
priority-rated contracts from lawsuits brought by other customers. Title
VII allows for establishing an executive reserve for employment in
executive positions in the government during periods of national
defense emergency. Title VII also provides for investigative authority
to collect information on the U.S. industrial base. For example, the
Department of Commerce completed assessments of the U.S. rocket
propulsion industrial base and the U.S integrated circuit design and
manufacturing industry in 2018 and 2019, respectively. It also
completed an assessment of the impact of foreign sourcing on the
health-related infrastructure in 2011, which Department of Commerce
officials stated was its only assessment of health and medical
resources as of June 2020.
11Exec. Order No. 13603, 77 Fed. Reg. 16651 (March 22, 2012).
12A technology investment agreement is an assistance instrument used to stimulate or
support research. It may be either a kind of cooperative agreement or a type of assistance
transaction other than a grant or cooperative agreement. The ultimate goal for using a
technology investment agreement is to foster the best technologies for future defense
needs. Technology investment agreements differ from and complement other assistance
instruments in that they address the goal by fostering civil-military integration. 32 C.F.R.
§§ 37.110 and 37.115.
Page 6 GAO-21-108 Defense Production Act
Executive Orders Allowing On March 13, 2020, the President declared COVID-19 a national
Use of DPA Authorities for emergency under the National Emergencies Act and a nationwide
emergency under the Robert T. Stafford Disaster Relief and Emergency
COVID-19
Assistance Act. The President also approved major disaster declarations
under the Stafford Act for all 50 states, the District of Columbia, and five
territories. The President then issued several executive orders from
March 2020 through August 2020 allowing agencies to use DPA
authorities to mitigate COVID-19 supply chain issues. Table 1 provides a
description of the executive orders related to medical supplies.
Table 1: Executive Orders Related to Defense Production Act for Medical Supplies, March 2020-August 2020
Executive Order
Number Datea Description
13909 March 2020 Provides authority to the Secretary of Health and Human Services to determine, in
consultation with the Secretary of Commerce and the heads of other executive
departments and agencies, proper nationwide priorities and allocations of all health and
medical resources needed to respond to COVID-19 within the United States.
13910 March 2020 Addresses prevention of hoarding and price gouging of resources such as personal
protective equipment and disinfecting and sanitizing products.
13911 March 2020 Provides the Secretary of Health and Human Services and the Secretary of Homeland
Security the authority to expand production capacity of resources such as personal
protective equipment and ventilators. Delegation of Defense Production Act Title VII
authorities are also provided.
13922 May 2020 Provides the Chief Executive Officer of the United States International Development
Finance Corporation the authority to, among other things, make loans to create,
maintain, protect, expand, and restore the domestic industrial base capabilities,
including supply chains within the United States and its territories.
13944 August 2020 Provides authority to the Secretary of Health and Human Services to determine priorities
and allocations of essential medicines, medical countermeasures, and critical inputs,
including active pharmaceutical ingredients.
Source: GAO analysis of Presidential Executive Orders. | GAO-21-108
a
Exec. Order No. 13909, 85 Fed. Reg.16227 (Mar. 23, 2020); Exec. Order No. 13910, 85 Fed. Reg.
17001 (Mar. 26, 2020); Exec. Order No. 13911, 85 Fed. Reg. 18403 (Apr. 1, 2020); Exec. Order
No.13922, 85 Fed. Reg. 30583 (May 19, 2020); and Exec. Order No. 13944, 85 Fed. Reg. 49929
(Aug. 14, 2020).
Organizations That According to FEMA and DOD officials, a process has been put in place
Approve and Assist with for three organizations to review and approve agency requests to use
Execution of DPA
Authorities for COVID-19
Medical Supplies
Page 7 GAO-21-108 Defense Production Act
DPA authorities in response to COVID-19. 13 These organizations include
the Joint DPA Office, the Unified Coordination Group, and the White
House Coronavirus Task Force. 14 Officials stated that the Joint DPA
Office and the Unified Coordination Group are jointly led by FEMA and
HHS officials. In addition, several DOD organizations support the
execution of these authorities—the Joint Acquisition Task Force, DPA
Title III Offices, and military service contracting offices. All of these
organizations were established from January through April 2020 to help
respond to COVID-19 with the exception of the DPA Title III offices and
the military service contracting offices, which were preexisting. Figure 1
describes the DPA review and approval process.
13According to FEMA officials, not all DPA requests underwent the review process as
some items, specifically ventilators, were approved directly through Presidential
Memorandum.
14According to a FEMA official, as of June 15, 2020, FEMA’s DPA program assumed
responsibilities of the Joint DPA Office.
Page 8 GAO-21-108 Defense Production Act
Figure 1: Process for Reviewing and Approving Federal Agencies’ Use of Defense Production Act (DPA) Authorities to
Address COVID-19 Medical Supply Chain Issues
*Denotes organization created in response to COVID-19.
According to FEMA officials, the White House Coronavirus Task Force
makes the final decision on use of DPA authorities for medical supplies.
Exceptions could occur under an expedited process. In these situations,
the White House Coronavirus Task Force has 1 hour to review the
request; if no objection is identified in that time frame, approval is granted.
In determining whether to approve use of these authorities, a FEMA
official stated that the White House Coronavirus Task Force considers
existing business relationships that manufacturers have with healthcare
providers, the capacity of the manufacturer to meet all customer needs,
and the extent to which individual states are also procuring medical
resources from some of these same manufacturers to meet their own
needs.
Page 9 GAO-21-108 Defense Production Act
In addition to its role in the DPA review and approval process, the Unified
Coordination Group has responsibility for operational command,
leadership, and decision making for the COVID-19 pandemic response.
Eight operational task forces were established by the Unified
Coordination Group to provide operational guidance and secure
resources to coordinate the whole-of-government response to COVID-19,
including the Supply Chain Task Force. Initially this task force was
responsible for maximizing the nationwide availability of mission-essential
protective and lifesaving resources and equipment based on need. For
example, the task force launched Project Air Bridge on March 29, 2020,
to expedite the delivery of critical supplies from overseas manufacturers
to distribute them to areas of need in the U.S., reducing shipment time
from weeks to days, according to FEMA’s website. The task force has
since been renamed the Supply Chain Advisory Group and is responsible
for advising the procurement of medical supplies to replenish the
Strategic National Stockpile and assisting with the transition of
procurement responsibilities to other federal stakeholders.
Previous GAO Reports In June 2020, we reported that HHS was using DPA authorities to
address supply chain needs and to help replenish the Strategic National
Stockpile for some items. 15 According to the President’s budget proposal
for fiscal year 2021, the Strategic National Stockpile is the largest
federally owned repository of pharmaceuticals, critical medical supplies,
federal medical stations, and medical equipment available for rapid
delivery to support the response to a public health emergency when state
and local supplies are depleted. 16 However, according to officials from
HHS’s Office of the Assistant Secretary for Preparedness and
Response—the organization that oversees the stockpile—the Strategic
National Stockpile did not have the capacity to provide states with
supplies at the scale necessary to respond to a nationwide event such as
the COVID-19 pandemic. For example, an HHS official stated that the
stockpile did not contain the number of N95 respirators that would be
needed in a severe pandemic.
The administration announced plans to restructure the Strategic National
Stockpile on May 14, 2020, based on lessons learned from recent
pandemics, including COVID-19. The HHS Office of the Assistant
15GAO, COVID-19: Opportunities to Improve Federal Response and Recovery Efforts,
GAO-20-625 (Washington, D.C.: June 25, 2020).
16Department of Health and Human Services, Fiscal Year 2021 Public Health and Social
Services Emergency Fund: Justification of Estimates for Appropriations Committee.
Page 10 GAO-21-108 Defense Production Act
Secretary for Preparedness and Response issued a request for
information to gather input from the private sector and other organizations
on how to restructure the stockpile and improve supply availability, among
other things. We have ongoing work examining the contents and
management of the Strategic National Stockpile.
In September 2020, we reported that the federal government had taken
steps to mitigate medical supply chain shortages. 17 However, we noted
that there are ongoing constraints around certain types of personal
protective equipment and testing supplies, such as nitrile gloves, surgical
gowns, N95 respirators, swabs, reagents, tubes, pipettes, and transport
media. Additionally, we noted that up to this point in the federal response,
responsibility for stabilizing and expanding the medical supply chain relied
on the coordination of multiple federal departments and their staff, many
of whom were temporarily assigned to support COVID-19 response
efforts. As the response evolves, many of these responsibilities—
including monitoring supply availability, acquiring supplies, and building a
resilient domestic manufacturing base—are transitioning or have recently
transitioned over to HHS. For example, the Supply Chain Advisory Group
is transitioning its medical supply chain management responsibilities to
HHS. Responsibility for procuring and distributing testing supplies to
states transitioned from FEMA to HHS in July 2020, according to HHS
officials. DOD also began transitioning acquisition responsibilities back to
HHS.
We made two recommendations to help facilitate future efforts to address
COVID-19 supply chain issues.
• First, we recommended that HHS, in coordination with FEMA, should
immediately document roles and responsibilities for supply chain
management functions transitioning to HHS, including continued
support from other federal partners, to ensure sufficient resources
exist to sustain and make the necessary progress in stabilizing the
supply chain, and address emergent supply issues for the duration of
the COVID-19 pandemic.
• Second, we recommended that HHS, in coordination with FEMA,
further develop and communicate to stakeholders plans outlining
specific actions the federal government will take to help mitigate
remaining medical supply gaps necessary to respond to the
17GAO, COVID-19: Federal Efforts Could Be Strengthened by Timely and Concerted
Actions, GAO-20-701 (Washington, D.C.: Sept. 21, 2020).
Page 11 GAO-21-108 Defense Production Act
remainder of the pandemic, including through the use of Defense
Production Act authorities.
HHS and FEMA both non-concurred with the recommendations. In
general, HHS and FEMA stated that they have established adequate lines
of communication and have taken significant action to meet federal, state,
local, tribal, and territorial government medical supply requests. We
acknowledged many of these efforts in the report, but reemphasized the
need for further action.
Federal agencies used priority ratings on contracts early in the pandemic
Agencies Have Used to get needed medical supplies to healthcare providers as quickly as
DPA and Similar possible, most notably ventilators and N95 respirators. HHS and DOD
also have domestic production expansion projects underway to increase
Actions to Address production of N95 respirators and other supplies. GAO found 43 awards
COVID-19 and where DPA and similar actions were used. These awards were initially
valued at about $3.9 billion. Federal agencies do not centrally report all
Increase Production DPA Title I actions in FPDS-NG, which among other things, makes it
of Medical Supplies, difficult for federal agencies to assess the effectiveness of these
authorities in addressing medical supply chain needs. Appendix I includes
but Full Use of the a list of the priority rated contracts and domestic production expansion
Authorities Is Not projects that we identified.
Centrally Reported
HHS and FEMA Placed HHS and FEMA used DPA Title I authorities to place priority ratings on 25
Priority Ratings on Medical medical supply contracts as of September 30, 2020. The contracts were
initially valued at about $3.3 billion. HHS placed priority ratings on 19 and
Supply Contracts to
FEMA placed priority ratings on six. The majority of the contracts were
Address COVID-19 awarded from March through May 2020 and most of the ratings were
placed on contracts for ventilators and respirators. Table 2 provides
details on federal agencies’ use of DPA Title I authority to place priority
ratings on medical supply contracts.
Page 12 GAO-21-108 Defense Production Act
Table 2: Defense Production Act Title I Priority Rated Contracts for Medical Supplies, March 2020-September 2020
Total Awarded Amount
Number of
Type of Medical Resource Prioritized Contracts (dollars in millions) Number of Units
Ventilators 9 2,340.4a 180,906a
Respirators (N95, K95, KN90)b 12 623.5 888,592,540
Air purifying respirator kits 2 136.5 28,950
Goggles 1 3.4 Over 200,000
Syringes 3 154.6 Not Providedc
Totals 25d 3,258.4 N/A
Source: GAO analysis of Department of Health and Human Services (HHS) and Federal Emergency Management Agency contract offices documentation data. | GAO-21-108
a
The contract award amount includes additional medical supplies than those indicated, such as hoods
and consumables. The figure also represents the initial contract value and number of ventilators
procured. According to HHS officials, it modified two contracts to procure fewer ventilators, but did not
provide us with updated ventilator contract values and quantity data.
b
The N95, KN90, and KN95 respirators model types provide a letter to indicate a resistance to oils
and the nation in which the respirator’s standards were approved, and a number to show the degree
to which the respirator filters airborne particles.
c
HHS provided three syringe contracts but redacted information on the number of units procured.
d
One contract for N95 respirators also included orders for powered air purifying respirator kits and
goggles. We included the contract for the kits and goggles in the individual rows, but excluded them
from the total count to avoid double counting.
HHS placed priority ratings on nine contracts to initially procure over
180,000 ventilators. An HHS official stated that the agency recently
modified two of the contracts, to procure fewer ventilators due to
decreased demand. HHS, however, did not provide us with updated
information on those contract modifications. We plan to continue to seek
this information from the agency. Nearly 80,000—or about 44 percent of
the initial number of ventilators acquired through priority-rated contracts—
were to be produced through two contracts with traditional ventilator
manufacturers and automotive manufacturers that had excess capacity at
that time. Specifically, General Electric partnered with Ford Motor
Company for one contract, and Ventec Life Systems partnered with
General Motors for another contract. HHS did not provide detailed
delivery information, but an official stated that the majority of ventilators
acquired with priority rated contracts had been delivered by September
30, 2020.
HHS and FEMA placed priority ratings on 12 contracts and task orders
with five contractors to procure a total of about 889 million N95 and other
respirators. One of the HHS N95 respirator contracts also included
powered air purifying respirator kits and goggles. HHS has not yet
provided us with delivery information on the N95 respirators it ordered or
Page 13 GAO-21-108 Defense Production Act
the powered air purifying respirator kits and goggles. We plan to continue
to seek this information from the agency. An official from FEMA stated
that 166.5 million of the respirators it ordered had been delivered as of
September 10, 2020. HHS also awarded three contracts for syringes, but
has not yet been able to provide detailed information on the quantities
procured or delivered. We plan to continue to seek this information from
the agency .
FEMA issued an Allocation Order, published as a Temporary Final Rule,
to prohibit certain personal protection equipment items from being
inappropriately diverted abroad, consistent with the April 3, 2020,
Presidential Memorandum on “Allocating Certain Scarce or Threatened
Health and Medical Resources to Domestic Use”. FEMA’s initial
Temporary Final Rule was published on April 10, 2020, a Notification of
Exemptions was published on April 21, 2020, and an updated Temporary
Final Rule was published on August 10, 2020, effective through
December 31, 2020. 18 According to FEMA, as of September 4, 2020:
• N95 respirators for medical use are still subject to high demand within
the U.S., and supply is not expected to catch up with demand until
January 2021. FEMA had open requests for over 2.7 million medical
grade N95 respirators from state, local, tribal, and territorial
jurisdictions.
• Domestic supply of surgical masks does not meet current demands.
FEMA had open requests for over 15.8 million surgical masks from
state, local, tribal, and territorial jurisdictions.
• Domestic supply for latex and vinyl examination and surgical gloves
has largely caught up with demand, but there is still a significant
shortage of nitrile gloves. 19 FEMA had open requests for over 149.3
million nitrile gloves from state, local, tribal, and territorial jurisdictions.
• FEMA had open requests for 8.8 million gowns from state, local, tribal,
and territorial jurisdictions.
1885 Fed. Reg. 48113 (Aug. 10, 2020).
19Nitrile gloves are disposable gloves made of a non-latex synthetic material used to
reduce the risk of contamination between medical examiner and a patient.
Page 14 GAO-21-108 Defense Production Act
DOD and HHS Have DOD and HHS are also using DPA Title III or similar actions to increase
Efforts Underway to domestic production of personal protective equipment, testing, and
vaccine delivery supplies. For example, while priority ratings were placed
Increase Domestic
on N95 respirator contracts, agencies are also pursuing projects to
Production of Medical increase domestic production of N95 respirators. According to HHS and
Supplies DOD, the country’s ability to produce personal protective equipment
domestically is critical not only to respond to pandemics, but also to
ensure the security of the nation.
According to HHS and DOD officials, they plan to award $1.513 billion for
domestic production expansion projects for medical supplies using
CARES Act appropriations—$1.3 billion from funds HHS designated to
buy supplies for the COVID-19 response and replenish the Strategic
National Stockpile and approximately $213 million from funds provided to
DOD that were specifically designated for DPA Title III investments. 20
According to the Under Secretary of Defense for Acquisition and
Sustainment, DOD is using an additional $687 million in DPA Title III
CARES Act funding to offset the financial distress in the defense
industrial base caused by COVID-19, primarily in the aviation, space,
shipbuilding, and microelectronics sectors. We plan to examine these
other projects as part our future defense industrial base work.
As of September 30, 2020, DOD awarded more than $637 million on 18
medical supply domestic production expansion projects—or nearly 40
percent of the planned funding. DOD awarded some of these projects on
behalf of HHS. 21 These projects help to address some of the current and
projected supply chain needs for personal protective equipment, materials
for N95 respirators and ventilators, testing materials, and vaccine delivery
supplies.
The projects are being completed by companies that are already
manufacturing these supplies in the U.S. An official from the DOD DPA
Title III office stated that companies submitted domestic production
20DOD told us they are making the DPA Title investments under the authority of 50 U.S.C.
4533. DOD also told us that it allocated $100 million in CARES Act appropriations to
support domestic loans under the authority of 50 U.S.C. 4532, in collaboration with the
United States International Development Finance Cooperation, to increase the domestic
production of N95 respirators, other personal protective equipment, pharmaceuticals,
ventilators, airway management consumables, and testing supplies.
21For example, the Economy Act authorizes agencies to obtain supplies or services from
another agency or from other major organizational units within an agency. 31 U.S.C. §
1535.
Page 15 GAO-21-108 Defense Production Act
expansion proposals that balanced the companies’ ability to meet the
country’s increased demand for certain supplies while also being able to
maintain profitability over a longer period. The companies are using the
funding to, among other things, procure additional equipment and
materials, as well as to expand or build new facilities in some cases.
Table 3 provides additional details of the domestic expansion efforts for
medical resources.
Table 3: DOD and HHS Use of Defense Production Act Title III and Other Contracts and Agreements for Increased Domestic
Production of Medical Resources as of September 30, 2020
Maximum
Contract Value Projected annual full rate
Number of (dollars in Projected production production increase
Medical Item Awards millions)a increase by January 2021 quantity
Personal Protective Equipment
N95 Respirators 5 278.7 450 million 822 million
Gloves 1 22.4 225 million 450 million
Surgical Masks 1 3.5 No production increase 100 million
expected by this time
Materials needed to produce Personal Protective Equipment
Ventilator Components 1 4.9 No production increase 7.8 million
expected by this time
Filter Media 3 18.2
N95 Respirators 637 million 1,957 million
Face Masks 2,304 million 6,648 millionb
Ventilators 330 million 330 million
Testing Materials
Swabs 3 136.7 422.4 million 952.8 million
Test Kits 3 35.1 73 million over 120 million
Vaccine Supplies
Syringes 1 138 540 million 540 million
Source: GAO analysis of Department of Defense (DOD) and Department of Health and Human Services (HHS) data. | GAO-21-108
Note: Filter media helps prevent virus particles from passing through N95 respirators, face masks,
and ventilators.
Contract values in table represent the government’s portion of total award.
a
b
According to the agreement language, the filter media will be used for either face masks or
respirators.
Our analysis of data for the 18 projects shows that six projects, including
syringes and filter media for ventilators, are scheduled to be completed by
the end of 2020. The remaining 12 are scheduled to be completed
between January 2021 and November 2021. DOD officials said that the
Page 16 GAO-21-108 Defense Production Act
agency tracks the delivery of equipment to monitor progress of domestic
production expansion projects. They also stated that DOD officials have
visited some contractor facilities to assess progress. We plan to examine
the status of these medical supply expansion efforts and the extent to
which they help meet projected demand for the items as part of our future
work assessing the use of DPA authorities in response to COVID-19.
Use of DPA Title I Authority We determined that there is no data field in FPDS-NG—the federal
is Not Fully Reported in government’s central repository for procurement actions—that identifies
when DPA rated contracts have been awarded in response to COVID-19.
the Federal Procurement
In April 2020, the Office of Management and Budget (OMB) directed
Data System federal agencies to use a special code in FPDS-NG that indicates when
procurement actions were issued in response to COVID-19. 22 This
included new contract awards for supplies and services as well as
modifications, irrespective of whether the contract being modified was
originally awarded to address COVID-19. The memorandum stated that
these actions were intended to promote full, clear, and consistent
transparency in the tracking of COVID-related procurement actions. OMB
did not provide any additional reporting guidance for tracking the use of
DPA authorities or similar actions to fund domestic production expansion
projects. For example, federal agencies were not required to include
additional information in the description of requirements data field when a
priority rating was placed on a contract.
As of September 30, 2020, we found that over 72,000 contract actions
reported in FPDS-NG were related to COVID-19, and only four of the 25
priority rated contracts actions we identified indicated in FPDS-NG that a
priority rating was placed on the contract. Specifically, the FPDS-NG
description field for four of six task orders FEMA placed on an indefinite
delivery, indefinite quantity contract for N95 respirators indicated that they
were a DPA order. 23 HHS and FEMA officials stated that they do not
require their contracting officers to identify priority ratings in the
description field for procurement actions because OMB guidance does
not specifically direct them to identify these actions. FEMA officials stated
22OMB required agencies to use National Interest Action code P20C for COVID-19 actions
in FPDS-NG.
23Indefinite delivery indefinite quantity contracts are awarded to one or more contractors
when the exact quantities and timing for products or services are not known at the time of
award.
Page 17 GAO-21-108 Defense Production Act
that contracting officers added more detailed information in the FPDS-NG
description field for the four task orders on their own volition.
By contrast, OMB provided updated guidance to federal agencies on April
17, 2020, to take additional steps to identify when agencies reimburse a
contractor for the cost of paid leave incurred during COVID-19. For
example, federal agencies are directed to enter “COVID-19 3610” at the
beginning of the FPDS-NG description in the requirements data field on
the contract action report for the modification. The guidance states that
central collection of these data will support federal-wide analysis of
contractor payments and implementation oversight, as well as help
safeguard taxpayer dollars against duplicative and wasteful spending.
In the absence of additional clarifying direction to federal agencies to
identify DPA rated contracts in FPDS-NG, OMB will miss an important
opportunity to help agencies further promote full, clear, and transparent
tracking of COVID-related actions, and federal agencies would not have
complete information to support federal-wide analysis of the effectiveness
of the DPA and similar actions to address medical supply needs.
Moreover, Congress will not be able to fully track related procurement
data and assess the overall effectiveness of these actions. Standards for
Internal Control in the Federal Government states that agencies should
obtain relevant data in a timely manner for management to make
informed decisions and evaluate the agency’s performance in achieving
key objectives and addressing risks. 24
24GAO, Standards for Internal Control in the Federal Government, GAO-14-704G
(Washington, D.C.: September 2014).
Page 18 GAO-21-108 Defense Production Act
Federal Agencies’
Approach to Using
DPA and Similar
Actions Have Helped
Address Some
Medical Supply
Issues, But Future
Actions Have Not
Been Identified
Initial Actions to Address Federal agencies used DPA and similar actions to target limited types of
COVID-19 Were Focused medical supplies—such as ventilators and N95 respirators early in the
COVID-19 response—but later took actions for other personal protective
on Ventilators and N95
equipment and testing supplies. Part of the reason is because, according
Respirators, but Have to the head of the Supply Chain Advisory Group, the pandemic caught the
Expanded to Other Types federal government off guard and the government has been playing
of Supplies catch-up ever since. In addition, HHS, FEMA, and DOD officials also
stated that since COVID-19 began, the White House Coronavirus Task
Force has advocated using a tailored approach when using the DPA to
ensure that health institutions are sufficiently equipped while also
minimizing disruptions to private industry.
Most of the DPA actions taken as of September 30, 2020, were targeted
at addressing critical medical item shortages to treat patients and protect
healthcare providers based on requests from state, local, tribal, and
territorial governments. As previously noted, these included actions to
quickly place priority ratings on contracts or to increase domestic
production of ventilators and N95 respirators, and filter media projects,
which are expected to take several months or more than a year to
complete.
Federal agencies also used DPA Title I authorities to allocate and prevent
hoarding of N95 respirators, as well as other critical medical supplies for
COVID-19. The Department of Justice established a COVID-19 Hoarding
and Price Gouging Task Force to develop effective enforcement
measures, establish best practices, and coordinate nationwide
investigations into allegations of individuals violating the allocation order.
The Department of Justice made at least two announcements where it
Page 19 GAO-21-108 Defense Production Act
charged individuals for hoarding medical supplies and devices. 25 In one
instance, it announced charges against an individual for hoarding
personal protective equipment and seized more than 100,000 facemasks,
10,000 surgical gowns, nearly 2,500 full-body isolation suits, and more
than 500,000 pairs of disposable gloves.
More recently, DPA and similar actions have been used to address
supply shortages for other personal protective equipment and testing
supplies, as well as to ensure that supplies, such as syringes, are on
hand to support the delivery of a vaccine once available. We have
ongoing work examining efforts to increase testing capacity and data
collection, as well as vaccine development and delivery efforts that will be
performed through project Operation Warp Speed. 26 Figure 2 provides an
overview of federal agencies’ actions to address a total of 10 types of
COVID-19 medical supply needs through September 30, 2020.
25HHS, in accordance with Executive Order 13910, identified medical supplies and
devices that were scarce and may not be accumulated (1) in excess of the reasonable
demands of business, personal, or home consumption, or (2) for the purpose of resale at
prices in excess of prevailing market prices. These supplies included N95 filtering
facepiece respirators, powered air purifying respirators, portable ventilators, chloroquine
phosphate or hydroxychloroquine, disinfecting devices and other sanitizing and
disinfecting products suitable for use in a clinical setting, medical gowns or apparel (e.g.,
surgical gowns or isolation gowns), and personal protective equipment such as coveralls,
face masks, surgical masks, and gloves or surgical gloves.
26On May 15, 2020, the President announced Operation Warp Speed. This is a joint HHS
and DOD effort, with coordination from other agencies, to achieve the priority goal of
accelerating development, production, and distribution of effective diagnostics,
therapeutics, and vaccines to counter COVID-19.
Page 20 GAO-21-108 Defense Production Act
Figure 2: Use of Defense Production Act (DPA) or Similar Actions to Address Critical Medical Item Shortages, March 2020-
September 2020
Note: One contract for N95 respirators also included orders for powered air purifying respirator kits
and goggles. We included the contract for the kits and goggles as separate actions.
Page 21 GAO-21-108 Defense Production Act
Additional DPA actions are likely to be taken by agencies. The Joint
Acquisition Task Force reached out to industry between July 10, 2020
and August 15, 2020, for domestic production expansion proposals for
masks, pharmaceuticals, screening and diagnostics, and personal
protective equipment. According to task force officials, as of August 28,
2020, teams of experts were reviewing and ranking the proposals.
The federal government recently announced that it will be using Title VII
authorities—voluntary agreements with private firms—to address longer
term medical supply needs. With required approval from the U.S. Attorney
General, on August 17, 2020, FEMA established a voluntary agreement
for enhanced coordination and cooperation with private sector
manufacturers, distributors, and industry representatives to provide
critical healthcare resources to respond to a pandemic, including
expediting the distribution of needed medical supplies throughout the U.S.
This voluntary agreement establishes the Committee for the Distribution
of Healthcare Resources Necessary to Respond to a Pandemic, which
consists of a chairperson, representatives from FEMA, HHS, Department
of Justice, and other federal agencies with equities in the agreement, and
participants who have substantive capabilities to carry out the purpose of
the agreement.
The FEMA Administrator appoints the chairperson from FEMA senior
executives. Among other things, and as directed by the chairperson, the
committee members will collectively identify and resolve the allocation of
scarce resources amongst all necessary public and private sector
domestic needs. The chairperson makes decisions and may create and
execute specific plans of action. Participants to the agreement receive
limited protection from antitrust liability for specific actions taken under the
agreement.
Opportunities Exist for An HHS strategic plan and a recently issued Executive Order identified
HHS to Identify How DPA reliance on foreign manufacturers as a risk to the U.S. healthcare supply
chain and stated that steps should be taken to increase domestic
and Similar Actions Could
production of medical supplies. HHS has not yet identified how DPA and
Further Reduce the Risk similar actions could be used to address this risk.
of U.S. Reliance on
Foreign Manufacturers of HHS’s Office of the Assistant Secretary for Preparedness and Response
Medical Supplies is the principal advisor to the Secretary of HHS on matters related to
federal public health and medical preparedness and response for public
health emergencies. In April 2020, the office issued its Strategic Plan for
2020-2023. The plan states that in an increasingly complex and
dangerous world, being ready and able to protect the health of all
Page 22 GAO-21-108 Defense Production Act
Americans is paramount to U.S. national security. The plan described the
risk environment for the medical supply chain as follows:
Supply Chain Disruption and Corruption: Highly efficient supply chains have resulted in
a “just-in-time” approach regarding day-to-day healthcare capabilities throughout the
U.S. and globally, as well as surge medical capacities in an emergency. This situation
may leave health-related facilities and systems with limited inventories and the rapid
onset of cascading impacts in the event of a supply chain disruption or corruption.
Strategically, the biggest risk to healthcare sector supply chains is the U.S.
dependency on foreign sources of pharmaceuticals, precursor ingredients or materials,
and finished medical products or devices. When such commodities — including
ordinary items such as protective masks and surgical gloves — are unavailable, or if
reach-back support is significantly affected, patients will be directly impacted by
accompanying disruptions and delays in the provision of key medical services.
Interruption of foreign supply chains as a result of significant natural disasters, regional
military or political conflicts, or trade disputes compounds the risk of disruptions that
can directly impact healthcare provision in the U.S.
As shown in figure 3, the strategic plan lays out four priority goals. Priority
Goal 3 provides a general approach for addressing the potential for
supply chain disruptions, including the risks of foreign ownership of
medical countermeasures, such as personal protective equipment.
Page 23 GAO-21-108 Defense Production Act
Figure 3: Excerpts from the Department of Health and Human Services Assistant Secretary for Preparedness and Response’s
Strategic Plan for 2020-2023
Note: According to the Centers for Disease Control and Prevention, medical countermeasures are
life-saving medicines and medical supplies regulated by the U.S. Food and Drug Administration that
can be used to diagnose, prevent, protect from, or treat conditions associated with chemical,
biological, radiological, or nuclear threats, emerging infectious diseases, or a natural disaster.
Efforts to increase domestic production of critical medical supplies are
included in the Office of the Assistant Secretary for Preparedness and
Response’s planned restructuring of the Strategic National Stockpile. As
stated earlier, the office issued a request for information in May 2020 to
gather input from the private sector and other organizations on how to
restructure the stockpile and improve supply availability. Among other
things, manufacturers that responded to the request for information were
asked to answer questions about strategies their company could employ
to increase domestic production capability. For example, this included
questions about how many shifts they could add, how long it would take
to add a new production line, and if there were steps the government
could take to encourage the company to transition activities domestically.
Responses were due by May 29, 2020. Officials from the Office of the
Page 24 GAO-21-108 Defense Production Act
Assistant Secretary for Preparedness and Response stated that they are
currently evaluating the responses.
Executive Order 13944, which was issued on August 6, 2020, further
emphasized the need to reduce U.S. dependence on foreign
manufacturers of medical supplies, particularly with the development of
needed medicines and medical countermeasures. For example, the
Executive Order states, among other things, that it is the policy of the
U.S. to
• accelerate the development of cost-effective and efficient domestic
production of essential medicines and medical countermeasures and
have adequate redundancy built into the domestic supply chain for
essential medicines, medical countermeasures, and critical inputs;
and
• create, maintain, and maximize domestic production capabilities for
critical inputs, finished drug products, and finished devices that are
essential to protect public safety and human health and to provide for
the national defense.
The Executive Order requires federal agencies to take swift action in
some cases to implement the policy. For example, federal agencies are
required within 90 days of the date of the order to develop and implement
procurement strategies to strengthen and mobilize the domestic industrial
base for essential medicines, medical countermeasures, and critical
inputs. In addition, the Secretary of HHS, in coordination with the Food
and Drug Administration and in consultation with the Director of OMB, is
required within 180 days of the date of the order to take all necessary and
appropriate action to identify supply chain vulnerabilities for these items
and to mitigate those vulnerabilities. The Executive Order states that this
could include proposing regulations on the collection of information from
manufacturers on the sources of finished products and devices and the
use of any scarce inputs, as well as determining whether any Food and
Drug Administration regulations may be a barrier to domestic production,
among other things.
The DPA and similar actions are powerful tools that can help HHS meet
the strategic plan goal of reducing reliance on foreign manufacturers and
the related Executive Order policy of increasing domestic production of
essential medical items. As discussed earlier in this report, HHS has been
using these tools to address COVID-19 by increasing domestic
production of medical supplies, such as N95 respirators, ventilator
components, and the filter media needed for use in these items. While it
Page 25 GAO-21-108 Defense Production Act
is likely that HHS would use them to meet the strategic plan goal and
Executive Order policy, HHS has not yet specifically identified how DPA
or similar actions would be used.
As the HHS Office of the Assistant Secretary for Preparedness and
Response completes its 180-day effort to identify and mitigate supply
chain vulnerabilities for essential medical items, an opportunity exists for
the HHS to identify how DPA and similar actions may be needed to
support the effort. Standards for Internal Control in the Federal
Government states that when an agency is affected by changes in
external conditions, such as the recognition that the U.S. is over reliant on
foreign sources, it should identify, analyze, and respond to the changes
on a timely basis, which includes identifying the necessary actions to
address the changing conditions. 27 Identifying further use of the DPA and
similar actions can help inform efforts to reduce reliance on foreign
manufacturers and increase domestic production of essential medical
items to address this national security concern.
DOD, HHS, and FEMA officials stated that they are beginning to collect
Agencies Have lessons learned about actions needed to improve future COVID-19
Begun Identifying response efforts and national emergencies, including use of DPA. For
example, while DOD officials stated the agency has not developed a
Lessons Learned for complete list, on June 10, 2020, the Under Secretary of Defense for
Future Interagency Acquisition and Sustainment testified that individual agencies are working
to memorialize lessons learned over the course of the COVID-19
Coordination and Use pandemic response to enable swift interagency action and alignment in
of DPA and Similar future national emergencies. 28 The Under Secretary mentioned difficulties
in facilitating the timely execution and interagency transfer of funding from
Actions HHS to DOD, which generally must be made for an order under the
Economy Act.
The Under Secretary stated that DOD and HHS have since come to
understand the interworking of DPA authorities and how to legally assist
each other in acquisition and distribution, and ensure proper
documentation is in place so coordination efforts can be activated quickly.
HHS and DOD signed a memorandum of understanding on April 23,
2020, documenting the procedures that would be used to transfer funds
from HHS to DOD and how DOD would assist HHS in the acquisition of
27GAO-14-704G.
28House Committee on Armed Services. “Department of Defense COVID-19 Response to
Industrial Base Challenges.” Wednesday, June 10, 2020.
Page 26 GAO-21-108 Defense Production Act
supplies and services in response to COVID-19. In addition, as of August
2020, DOD officials stated they were in the process of creating a new
policy office that will provide policy guidance and oversight of future DOD
support to interagency partners. According to DOD officials, lessons
learned will also be codified into the existing Joint Rapid Acquisition
Office interagency support processes as it takes over the Joint Acquisition
Task Force’s current role and responsibilities to establish a more
permanent interagency focal point.
In addition, the HHS Office of the Assistant Secretary for Preparedness
and Response indicated that it has also identified lessons learned and is
considering:
• Adding a clause to contracts that indicates a priority rating is possible,
which would make it more efficient to place a priority rating on a
contract in the future. This is in line with a recommendation we made
in a 2008 report on the use of DPA authorities. 29 HHS stated in a
written response to our inquiry that it had not previously placed priority
ratings on contracts in advance of an emergency because there were
no limitations to accessing needed supplies in the commercial market.
• Providing both regular and just in time training on DPA Title I
authority, which includes written guidance, to its contracting officers.
In a written response, HHS officials noted that three of 20 contracting
officers had experience using DPA Title I authorities and that there
was no formal training in using this authority prior to the COVID-19
pandemic.
It should also be noted that prior to COVID-19, HHS conducted
emergency exercises throughout 2019. In August 2019, these exercises
culminated in what is known as the Crimson Contagion Functional
Exercise, which among other things, identified lessons learned in using
DPA authorities. These exercises reviewed the nation’s ability to respond
to a large-scale outbreak of a novel virus that quickly spreads around the
world and included representatives from multiple federal agencies
including HHS, FEMA, DOD, and the White House. In the exercises’
after-action report, HHS indicated that participants were not clear on the
applicability or use of DPA authorities to mitigate medical supply
shortages. In response, HHS recommended that agencies should clarify
the possible uses of the DPA by (1) examining the applicability of Title III
and Title VII authorities to address supply chain and material shortages
29GAO-08-854.
Page 27 GAO-21-108 Defense Production Act
during a pandemic response, and (2) providing an educational briefing on
DPA authorities and its possible uses in different kinds of incidents. In
June 2020, HHS officials told us that they had not implemented actions to
address the recommendations from the Crimson Contagion exercise prior
to the pandemic response.
According to FEMA officials, the agency is also developing initial
observations about COVID-19 response efforts and national
emergencies—to include the use of DPA—and is working with its
program offices to collect additional information, augment analysis, and
revise observations. They stated that the final lessons learned will be
included in the after-action report, which will be published in 2021.
According to officials, given the size, scale, and ongoing nature of the
response, as well as the necessity of distributing accurate information,
FEMA intends to share these findings once they have been fully
validated.
The DPA can be a powerful tool for federal agencies to mitigate medical
Conclusions supply chain issues and protect our national security during the time of an
emergency. In the case of COVID-19, agencies have efforts underway to
expedite deliveries and expand medical supply production from the U.S.
industrial base through DPA and similar actions.
Much is unknown about how effective the use of DPA and similar actions
will be in meeting projected COVID-19 needs because complete
information on use of the authorities is not centrally reported in FPDS-NG.
OMB directed federal agencies to identify COVID-related procurement
actions in FPDS-NG, but did not direct agencies to further identify their
use of DPA Title I in FPDS-NG. The lack of clarity could be rectified by
having contracting officials more clearly identify their use of DPA Title I in
FPDS-NG. This would promote full, clear, and consistent transparency in
the tracking of COVID-related actions, and federal agencies would have
complete information to support federal-wide analysis of the effectiveness
of the DPA and similar actions.
It is also unclear how DPA and similar actions will be used to more
broadly reduce the risk of U.S. dependence on foreign manufacturers of
medical supplies, which the administration has determined to be a
national security threat. This is because HHS has not yet identified how
DPA and similar actions could be used to address this risk and meet the
U.S. policy of increasing domestic production of essential medical items.
This could also be rectified as HHS leads a 180-day effort to identify and
Page 28 GAO-21-108 Defense Production Act
mitigate supply chain vulnerabilities for essential medical items in
response to an Executive Order.
We are making the following two recommendations to OMB and the
Recommendations for HHS’s Assistant Secretary for Preparedness Response, respectively:
Executive Action
OMB should direct the Office of Federal Procurement Policy to develop
appropriate agency reporting guidance to provide greater transparency on
the use of DPA Title I authorities for COVID purposes. The reporting
guidance should enable taxpayers and other interested stakeholders to
see where a priority rating was placed on the contract or contract
modification for COVID-19 purposes. (Recommendation 1)
The HHS Assistant Secretary for Preparedness and Response should
identify how DPA and similar actions will be used to increase domestic
production of medical supplies going forward. This could be included in
HHS’s 180-day effort to identify and mitigate vulnerabilities for essential
medicines, medical countermeasures, and critical inputs that is required
to support Executive Order 13944, which is aimed at reducing reliance on
foreign manufacturers of medical supplies. (Recommendation 2)
We requested comments on a draft of this product from the Office of
Agency Comments Federal Procurement Policy within the Office of Management and Budget,
HHS, FEMA, and DOD. The Office of Federal Procurement Policy and
HHS provided email comments that are summarized below. FEMA and
DOD provided technical comments that we incorporated in the report, as
appropriate.
The Office of Federal Procurement Policy concurred with our
recommendation to develop appropriate agency reporting guidance to
provide greater transparency on the use of DPA Title I authorities for
COVID purposes. In its response, staff from the Office of Federal
Procurement Policy noted that the ability to identify contracts or actions
using the DPA is a shared objective and that the office welcomes the
opportunity to consider how to track such actions.
HHS concurred with our recommendation to identify how DPA and similar
actions will be used to increase domestic production going forward. An
official from the Assistant Secretary for Preparedness and Response
office that has responsibility for the DPA stated that HHS has established
a Supply Chain and Industrial Base Assurance Steering Committee to
assure a viable and resilient medical countermeasure supply chain and
industrial base. The official also stated that in an assessment of lessons
Page 29 GAO-21-108 Defense Production Act
learned, HHS identified a need to establish a DPA program office, similar
to those in DOD, the National Aeronautics and Space Administration and
the Departments of Homeland Security, Commerce, and Transportation.
Further, the official stated that the Office of the Assistant Secretary for
Preparedness and Response has created a new branch to lead and
coordinate use of DPA authorities for HHS, which will include finalizing
the Health Resources Priorities and Allocations System and establishing
a program office that will develop guidance and templates for use, training
for contracting officers and program managers, all on a new HHS
webpage.
We are sending copies of this report to the appropriate congressional
committees, the Secretary of Health and Human Services; the Secretary
of Homeland Security; the Secretary of Defense; and the Director of the
Office of Management and Budget. In addition, the report is available at
no charge on the GAO website at http://www.gao.gov.
If you or your staff have any questions about this report, please contact
me at (202) 512-4841 or russellw@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made key contributions to this
report are listed in appendix II.
W. William Russell
Director, Contracting and National Security Acquisitions
Page 30 GAO-21-108 Defense Production Act
List of Committees
The Honorable Richard C. Shelby
Chairman
The Honorable Patrick J. Leahy
Vice Chairman
Committee on Appropriations
United States Senate
The Honorable Lamar Alexander
Chairman
The Honorable Patty Murray
Ranking Member
Committee on Health, Education, Labor, and Pensions
United States Senate
The Honorable Ron Johnson
Chairman
The Honorable Gary C. Peters
Ranking Member
Committee on Homeland Security and Governmental Affairs
United States Senate
The Honorable James Lankford
Chairman
The Honorable Kyrsten Sinema
Ranking Member
Subcommittee on Regulatory Affairs and Federal Management
Committee on Homeland Security and Governmental Affairs
United States Senate
The Honorable Nita M. Lowey
Chairwoman
The Honorable Kay Granger
Ranking Member
Committee on Appropriations
House of Representatives
Page 31 GAO-21-108 Defense Production Act
The Honorable Frank Pallone, Jr.
Chairman
The Honorable Greg Walden
Republican Leader
Committee on Energy and Commerce
House of Representatives
The Honorable Bennie Thompson
Chairman
The Honorable Mike D. Rogers
Ranking Member
Committee on Homeland Security
House of Representatives
The Honorable Carolyn B. Maloney
Chairwoman
The Honorable James R. Comer
Ranking Member
Committee on Oversight and Reform
House of Representatives
Page 32 GAO-21-108 Defense Production Act
Appendix I: Priority Rated Medical Contracts Appendix I: Priority Rated Medical Contracts
and Domestic Production Expansion Projects
and Domestic Production Expansion
for COVID-19
Projects for COVID-19
Table 4: Priority Rated Medical Contracts for COVID-19, Defense Production Act Title I
Contract Award Amountb
Medical Supply Contractor Award Datea (dollars in millions)
Department of Health and Human Services
Ventilators Philips North America LLC. 4/7/2020 646.7
ResMed Corp. 4/8/2020 32.0
Hill-Rom Company Inc. 4/8/2020 20.1
Medtronic Public Limited Company 4/10/2020 9.1
Vyaire Medical, Inc. 4/10/2020 408.0
General Electric-Datex-Ohmeda 4/14/2020 336.0
Zoll Medical Corp. 4/9/2020 350.0
General Motors Company 5/4/2020 476.1
Combat Medical Systems 7/10/2020 62.5
N95 Respirators Honeywell Safety Products USA Inc. 3/28/2020 168.5
Honeywell Safety Products USA Inc. 4/20/2020 4.4
3M Company 3/26/2020 172.9
O&M Halyard, Inc. 3/30/2020 62.3
Draeger, Inc. 4/7/2020 31.2
Moldex-Metric, Inc. 4/6/2020 49.9
Air Purifying Respirator Honeywell Safety Products USA Inc. 4/20/2020 26.5
Kits Bio-Medical Devices International 8/20/2020 110.0
Goggles Honeywell Safety Products USA Inc. 4/20/2020 3.4
Vaccine Supplies Becton, Dickinson and Company 5/27/2020 11.7
Marathon Medical Corp. 5/1/2020 27.4
Retractable Technologies Inc. 5/1/2020 83.8
Department of Homeland Security, Federal Emergency Management Agency
N95 Respirators 3M Company 4/15/2020 4.0
3M Company 4/21/2020 18.8
3M Company 4/28/2020 49.5
3M Company 7/7/2020 6.1
3M Company 7/24/2020 22.4
3M Company 8/29/2020 3.5
Source: Based on GAO analysis of agency data. | GAO-21-108
Due to incomplete information, we were unable to verify all award dates.
a
b
The contract award amount covers medical supplies and associated components or consumables
that facilitate operation. The figure also represents the initial contract value. According to HHS
officials, it modified two contracts to procure fewer ventilators, but did not provide us with updated
ventilator contract value and quantity data.
Page 33 GAO-21-108 Defense Production Act
Appendix I: Priority Rated Medical Contracts
and Domestic Production Expansion Projects
for COVID-19
Table 5: The Departments of Defense and Health and Human Services Domestic Production Expansion Projects, Defense
Production Act Title III and Similar Actions
Maximum
Medical Contract Valueb Annual Capacity
Supply Contractor Award Datea (dollars in millions) Increase After Completion
N95 Respirators
Moldex-Metric, Inc. 5/8/2020 20.1 60,000,000
3M Company 5/1/2020 126.0 312,000,000
3M Company 4/17/2020 76.0 156,000,000
Honeywell Safety Products USA 4/15/2020 27.3 144,000,000
Inc.
O&M Halyard, Inc. 4/15/2020 29.3 150,000,000
Surgical Masks
Crosstex International, Inc. 7/17/2020 3.5 100,000,000
Filter Media for N95 Respirators and Ventilators
Lydall Performance Materials, Inc. 6/19/2020 13.5 4,608,000,000 (Masks) or
1,200,000,000 (N95)
National Packaging Services 7/24/2020 2.8 2,040,000,000 (Masks) or
(NPS) Corp. 720,000,000 (N95)
Hollingsworth & Vose Company 5/19/2020 1.9 330,000,000 (Ventilators)
38,000,000 (N95 Face Masks)
Ventilator Components
Pall Biomedical Inc. 7/21/2020 4.9 7,800,000
Gloves
Renco Corp. 7/14/2020 22.4 500,000,000
Syringes
ApiJect Systems America, Inc. 5/8/2020 138.0 540,000,000
Swabs
Hardwood Products Company LP 7/29/2020 51.2 540,000,000
and Puritan Medical Products
Hardwood Products Company LP 4/28/2020 75.5 240,000,000
and Puritan Medical Products
Copan Industries, Inc. 8/31/2020 10.0 172,800,000
Test Kits
Hologic Inc. 7/25/2020 7.6 24,000,000
Becton, Dickinson and Company 7/30/2020 24.4 156,000,000
BioFire Defense, LLC. 8/7/2020 3.1 Information is not for public release
Source: Based on GAO analysis of agency data. | GAO-21-108
Due to incomplete information, we were unable to verify all award dates.
a
Contract values in table represent the government’s portion of total award.
b
Page 34 GAO-21-108 Defense Production Act
Appendix II: GAO Contact and Staff
Appendix II: GAO Contact and Staff
Acknowledgements
Acknowledgements
W. William Russell, (202) 512-4841 or russellw@gao.gov
GAO Contact
In addition to the contact named above, Cheryl Andrew, Assistant
Staff Director; Sameena Ismailjee, Analyst-in-Charge; Christopher Allison;
Acknowledgements Philip Farah; Lori Fields; Kurt Gurka; Stephanie Gustafson; Julia Kennon;
Tim Moss; and Megan Setser made key contributions to this report.
(104315)
Page 35 GAO-21-108 Defense Production Act
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