Although the Defense Production Act was enacted to support defense readiness during the Korean War era, the federal government has expanded its use to address nonmilitary national priorities as well. DPA contracts take priority over commercial ones, so it is imperative for contractors to be prepared so they can comply in the event they are required to fulfill government orders. Careful and strategic planning will help contractors not only address this potential compliance challenge but also leverage it as a business opportunity, writes Tenley Carp of Arnall Golden Gregory.
In an era marked by geopolitical turbulence, emerging technologies and increasingly fragile global supply chains, American businesses can no longer afford to assume the status quo will persist. The possibility of the US being drawn into a global military conflict — once perhaps a remote one — has become a credible concern among policymakers and national security analysts. While many companies continue to operate as if peace is a given, the US government is quietly preparing for scenarios that could require a large-scale mobilization of industrial capacity, driven by the statutory authorities of the Defense Production Act.
For companies in key sectors — including manufacturing, energy, healthcare, transportation, telecommunications, semiconductors, cybersecurity and logistics — the DPA is a powerful, active law that could impact operations, contractual obligations, supply chains and the very structure of enterprise risk planning.
Requiring reauthorization by the end of September, now is the time for private companies to get ahead of the curve and prepare for compliance with the DPA — before it is invoked in response to the next major crisis.
What is the Defense Production Act?
Enacted in 1950 during the Korean War, the DPA gives the president sweeping authority to ensure the timely availability of essential domestic industrial resources to support national defense and emergency preparedness. Over the years, it has been reauthorized and amended to reflect evolving national priorities and remains one of the central statutory tools available to the executive branch in times of crisis.
Key authorities under the DPA include:
- Title I, prioritization and allocation: This provision allows the government to require businesses to prioritize contracts and fulfill government orders ahead of all others — regardless of existing commercial commitments. It also authorizes allocation of materials, services and facilities deemed critical to national defense.
- Title III, expansion of productive capacity and supply: The government may provide financial incentives — such as loans, loan guarantees, purchases and installation of equipment — to increase private-sector production of critical materials and goods.
- Title VII, general provisions: This title includes measures like voluntary agreements and advisory committees to foster cooperation across private industries.
The definition of “national defense” under the DPA is broad. It includes not just military needs but also critical infrastructure protection, emergency preparedness, cybersecurity and response to natural or manmade disasters.
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Read moreDetailsWhen has the DPA been used?
The DPA has a long history of use — not just during war but also in peacetime emergencies under both Republican and Democratic presidents:
- Covid-19 pandemic: The Trump and Biden administrations invoked the DPA to compel companies like General Motors to produce 30,000 ventilators and 3M to produce respirators, N95 masks and other medical supplies.
- Energy shortages and infrastructure: The DPA has supported the domestic production of lithium-ion batteries, critical minerals, transformers and other components for the electrical grid (examples include agreements to expand lithium mining in North Carolina and accelerate cobalt sulfate production in Canada).
- Semiconductor and supply chain security: In recent years, the federal government has increased DPA engagement in the semiconductor sector (the fundamental building blocks of most modern electronics) to support domestic fabrication capacity and reduce dependence on foreign suppliers.
- Defense and military equipment: Throughout its history, the DPA has underpinned defense contracting by ensuring materials and components are available for everything from fighter jets to radar systems.
With global tensions escalating and military posturing increasing in the Indo-Pacific, Eastern Europe and the Middle East, there is a growing likelihood that the DPA will be used more aggressively — and with far broader reach — than at any time since World War II.
Why private companies must take this seriously now
A common misconception is that the DPA applies only to traditional defense contractors or companies that have existing federal contracts. That is false. Any business that touches a critical supply chain — even tangentially — could become subject to DPA authorities in the event of a national emergency.
Consider the following examples:
- A logistics company may be required to prioritize military shipments over commercial deliveries.
- A software company providing AI-enabled cybersecurity tools could be ordered to redirect services to protect critical infrastructure.
- A pharmaceutical manufacturer might be compelled to produce specific medications or vaccine components.
- A data center operator may be instructed to allocate bandwidth or storage capacity for emergency operations.
- A semiconductor supplier could be ordered to halt exports to fulfill a domestic defense order.
Without preparation, companies may face sudden operational disruption, breach-of-contract risks and compliance failures — alongside reputational and financial fallout. In contrast, companies that understand the DPA and embed compliance into their enterprise risk and continuity planning can adapt quickly and even capitalize on government incentives and contract opportunities.
Legal risks and compliance consequences
Failure to comply with a lawful DPA order can result in serious legal consequences, including:
- Civil and/or criminal penalties under 50 U.S.C. § 4513: Fines may be assessed for failure to perform under priority-rated contracts or for misallocation of resources, and jail time is possible.
- Contractual liability: Companies that cannot fulfill existing private-sector contracts due to prioritization orders may face breach-of-contract claims unless appropriate legal protections are in place.
- Loss of government business: Refusing to cooperate with DPA orders can result in suspension, debarment or exclusion from future government opportunities.
Strategic actions companies should take now
To minimize exposure and ensure readiness, private-sector companies should take proactive steps.
1. Assess DPA applicability to your business
Start by identifying whether your products, services or materials fall within sectors that have historically been covered by the DPA or are likely to be relevant in a future mobilization. These include (but are not limited to):
- Energy and power generation
- Advanced manufacturing
- Healthcare and pharmaceuticals
- Communications and IT
- Food and agriculture
- Critical minerals and metals
- Logistics and transportation
- Financial and cybersecurity services
Even if you are not a prime contractor, your position in the supply chain (as a first-tier subcontractor or even as a lower-tier subcontractor) may place you within reach of DPA obligations.
2. Review contractual protections
Ensure that your contracts — both upstream and downstream — contain clauses addressing force majeure, government orders and emergency reallocation of capacity. Address questions such as:
- Do we have indemnity if we must divert a product to fulfill a federal priority order?
- Can we suspend performance with nongovernment customers in a DPA-triggered scenario?
- Are our subcontractors prepared to comply with redirected allocations?
These questions should be part of both new contract negotiations and periodic reviews of key agreements.
3. Develop a DPA compliance framework
Similar to the way companies approach export controls or data privacy laws, a structured approach to DPA readiness is essential. Consider:
- Assigning responsibility to a compliance lead or government contracts attorney.
- Developing internal protocols for responding to rated orders.
- Training relevant departments — legal, sales, operations, logistics — on DPA procedures.
- Maintaining up-to-date contact with appropriate government contracting officers or program managers.
4. Build flexibility into production and logistics
Companies that can rapidly shift production lines, modify output or reallocate resources are best positioned to comply with — and potentially benefit from — DPA priorities. Investment in modular production, dual-use capabilities and scalable logistics can yield a competitive advantage in national emergencies.
5. Engage with federal agencies before a crisis
The DPA is not just about mandates — it also includes opportunities. Agencies like the departments of defense/war, energy, and health and human services routinely issue DPA-related solicitations and funding opportunities to expand domestic capacity.
Early engagement through industry days, cooperative research and development agreements or public-private partnerships can position companies as trusted partners — not just reluctant draftees — in the national defense effort.
The global risk environment: A catalyst for readiness
Recent developments have made DPA readiness more urgent:
- China–Taiwan tensions have increased the risk of conflict that could disrupt semiconductor supply chains and spark US military involvement.
- Russia’s ongoing war in Ukraine has led to global shortages in metals, energy and munitions — and the US has already used DPA authorities to increase domestic arms production.
- Cybersecurity threats from state-sponsored actors targeting energy grids, financial systems and infrastructure pose “nonkinetic” risks that may prompt DPA-style mobilization.
- Supply chain fragility, exposed by the Covid-19 pandemic, continues to affect pharmaceuticals, food, electronics and medical devices.
In short, while the DPA may have once seemed limited to wartime scenarios, its use in modern crises — both military and nonmilitary — is increasingly likely.
Don’t wait for the knock at the door. The Defense Production Act is a powerful tool designed for moments when time is short and stakes are high. In such moments, the federal government won’t wait for companies to “get up to speed.” It will issue orders, make allocations and expect performance.
For companies caught off-guard, the consequences can be severe. But for companies that prepare today — by understanding their exposure, updating contracts, training personnel and building operational flexibility — the DPA can represent not just a compliance challenge but a strategic opportunity.
As the global risk environment continues to evolve, the question is not whether the DPA will be used again — it’s when. And when that time comes, will your company be ready?
Tenley Carp is a partner at law firm Arnall Golden Gregory and leader of the firm’s government contracts practice. She negotiates government contracts, counsels clients, oversees audits and investigations and handles bid protest litigation and claims. 
