Appendix A. Acronyms

APAS
ASD (HD&ASA)

ASPR
CAL
CIKR
CIPAC
CIPR

DCIP
DFOs
DHS

DHS/FEMA

DHS/IP
DIB
DOC
DOC/BIS
DOD
DOE
DOE-OE

DOT
DPA
DPAS
E.O.
ESF
FAR
FDA
FY
GAO
GCC
GSA
HSPD
HTS
ISER
ISR
MARAD
NIPP
NRF

Agriculture Priorities and Allocation System

Office of the Assistant Secretary of Defense for Homeland Defense and
Americas’ Security Affairs

Assistant Secretary for Preparedness and Response

Critical Asset List

Critical Infrastructure and Key Resources

Critical Infrastructure Partnership Advisory Council

Critical Infrastructure Protection and Resilience

Defense Critical Infrastructure Program
Defense Food Orders
Department of Homeland Security

Department of Homeland Security/Federal Emergency Management
Agency

Department of Homeland Security/Office of Infrastructure Protection
Defense Industrial Base

Department of Commerce

Department of Commerce/Bureau of Industry and Security
Department of Defense

Department of Energy

Department of Energy -Office of Electricity Delivery and Energy
Reliability

Department of Transportation

Defense Production Act of 1950

Defense Priorities and Allocations System

Executive Order

Emergency Support Function

Federal Acquisition Regulation

Food and Drug Administration

Fiscal Year

Government Accountability Office

Government Coordinating Council

General Services Administration

Homeland Security Presidential Directive

High Temperature Superconductor

Infrastructure Security and Energy Restoration Division
Intelligence, Surveillance, Reconnaissance Systems

Maritime Administration

National Infrastructure Protection Plan

National Response Framework

A



allies to provide reciprocal priority and allocation support. The supplier was informed of the
arrangement between the U.S. and its government and explained the importance of the
requirement. As a result, the supplier agreed to increase production capacity thereby
ensuring the simultaneous and on-time delivery of antenna’s for multiple ISR systems.

2.3.3. Special Priorities Assistance (SPA)

Although the DPAS is largely self-executing, the contractor or DOD may ask DOC for SPA
to resolve any problem that may occur. SPA is a process used to:

¢ Expedite delivery at any level of the supply chain to meet a specific need or to
accelerate delivery under a rated order due to a change in military urgency;

e Resolve delivery conflicts among various rated orders; and

e Authorize an industrial priority rating for foreign nation defense contracts within the
United States when such authorization would further U.S, national defense interests.

Any entity within the acquisition or production supply chain of a rated order may request
SPA. If SPA requests cannot be resolved within DOD, the Office of the Under Secretary of
Defense for Acquisition, Technology and Logistics is authorized to endorse the request for
SPA and forward it to DOC for action.

2.4. Department of Energy
2.4.1. DOE Authorities and Procedures Under DPA Subsections 101(a) and 101(c)

DOE derives its authorities and procedures with respect to DPA Subsections 101(a) and
101(c) from several sources:

¢ E.O. 12919 has several provisions regarding use of priorities and allocations authority
with respect to energy resources:

© Section 201 delegates the President’s priorities and allocations authority with
respect to “all forms of energy” to the Secretary of Energy;

o Section 202 states that DPA Section 101 authority may only be used “with
respect to energy production and construction, distribution and use, and
directly related activities” to support programs that have been determined by
the Secretary of Energy to be necessary or appropriate to promote the national
defense; and

o Section 203 of E.O. 12919 delegates the President’s authority under
Subsection 101(c), which involves maximizing domestic energy supplies, to
the Secretary of Commerce but provides that DOC re-delegates to DOE the
authority to make the findings described in subsection 101(c)(2)(A) that the

10



1. Introduction

1.1, Purpose and Scope

This report was prepared pursuant to Subsection 1002(b) of the Implementing
Recommendations of the 9/11 Commission Act of 2007 [Public Law (P.L.) 110-53].
Subsection 1002(b) directs the Secretary of Homeland Security to submit an annual report to
Congress on actions taken by the Federal Government to ensure, in accordance with
Subsections (a) and (c) of Section 101 of the Defense Production Act of 1950 (DPA) [50
U.S.C. App. 2071], the preparedness of industry to reduce interruption of critical
infrastructure! and key resource” (CIKR) operations during an act of terrorism, natural
catastrophe, or other similar national emergency.

This report was prepared by the Department of Homeland Security’s Federal Emergency
Management Agency (DHS/FEMA) in cooperation with the Departments of Agriculture
(USDA), Commerce (DOC), Defense (DOD), Energy (DOE), Health and Human Services
(HHS), and Transportation (DOT). This report is being submitted to the Senate Committees
on Banking, Housing, and Urban Affairs and Homeland Security and Governmental Affairs,
and the House Committees on Financial Services and Homeland Security.

Development of this report involved: (1) interagency meetings to provide direction and
coordination for the drafting of each department’s input; (2) preparation of report language
by personnel engaged in DPA programs and CIKR protection and restoration activities; (3)
consolidation of each department’s input into this report; and (4) review and approval of the
consolidated report by departments whose actions are described herein.

' As defined in the Defense Production Act of 1950, critical infrastructure means “any systems and assets,
whether physical or cyber-based, so vital to the United States that the degradation or destruction of such
systems and assets would have a debilitating impact on national security, including, but not limited to, national
economic security and national public health and safety.”

? As defined in the Homeland Security Act of 2002, key resources are “publicly or privately controlled
resources essential to the minimal operations of the economy and government.”

? Subsection 1002(b) reads as follows: “(b) Report on Industry Preparedness.--Not later than 6 months after the
last day of fiscal year 2007 and each subsequent fiscal year, the Secretary of Homeland Security, in cooperation
with the Secretary of Commerce, the Secretary of Transportation, the Secretary of Defense, and the Secretary of
Energy, shall submit to the Committee on Banking, Housing, and Urban Affairs and the Committee on
Homeland Security and Governmental Affairs of the Senate and the Committee on Financial Services and the
Committee on Homeland Security of the House of Representatives a report that details the actions taken by the
Federal Government to ensure, in accordance with Subsections (a) and (c) of Section 101 of the Defense
Production Act of 1950 [50 U.S.C. App. 2071], the preparedness of industry to reduce interruption of critical
infrastructure and key resource operations during an act of terrorism, natural catastrophe, or other similar
national emergency.”



NSA National Shipping Authority

PAIR Priority Allocation of Industrial Resources
P.L. Public Law

SCC Sector Coordinating Council

SoS Security of Supply

SPA Special Priorities Assistance

SSAs Sector-Specific Agencies

SSPs Sector-Specific Plans

USACE United States Army Corps of Engineers
USD (AT&L) Undersecretary of Defense for Acquisition, Technology, and Logistics
USDA United States Department of Agriculture
YBCO Yttrium Barium Copper Oxide



DOC’s Information Technology program (to ensure timely equipment upgrade);

HHS’ Health Resources Influenza Medical Countermeasures program (to procure
items for the production of 2009 H1N1 influenza vaccine);

DOE National Nuclear Security Administration’ Safeguards, Second Line of Defense
and Nuclear/Radiological Incident Response programs (to procure neutron detector
and associated equipment); and

DHS Office of the Chief Procurement Officer to procure FDA-approved Personal

Protective Equipment (to prepare for and protect against the 2009 H1N1 influenza
outbreak).

DHS Office of the Chief Procurement Officer to procure security technology (to
support the mission-related activities for border and transportation security, counter-
terrorism, and critical infrastructure protection and restoration).

14



authority primarily in support of emergency preparedness and critical infrastructure
protection and restoration activities.

Except in cases when a special agreement has been made between DOC and the department
with applicable DPA priorities and allocations authority, the DPAS cannot be used to
prioritize food, energy, health, water, and civil transportation resources. These resources are
under the jurisdictions of USDA, DOE, the Department of Health and Human Services,
DOD, and DOT, respectively, in accordance with E.O. 12919.



Table 1-1. Sector-Specific Agencies for CIKR

Department of Agriculture Agriculture and Food

Department of Health and Human Services*

Department of Defense Defense Industrial Base

Department of Energy® Energy

Department of Health and Human Services Healthcare and Public Health

Department of the Interior National Monuments and Icons

Department of the Treasury _ Banking and Finance

Environmental Protection Agency Drinking Water and Water Treatment
Systems

Department of Homeland Security
Office of Infrastructure Protection Chemical

Commercial Facilities

Critical Manufacturing

Dams

Emergency Services

Nuclear Reactors, Materials, and Waste

Communications
Office of Cyber Security and Information Technology
Telecommunications
Transportation Security Administration Postal and Shipping
Transportation Security Administration/US. Transportation Systems®
Coast Guard’
Federal Protective Service Government Facilities

* The Department of Agriculture is responsible for agriculture and food (meat, poultry, and egg products)

5 The Department of Health and Human Services is responsible for food other than meat, poultry, and egg
roducts.

Phe Energy Sector includes the production, refining, storage, and distribution of oil, gas, and electric power,

except for commercial nuclear power facilities.

7 The U.S. Coast Guard is the SSA for the maritime transportation mode.

5 As stated in HSPD-7, the Department of Transportation and the Department of Homeland Security collaborate

on all matters relating to transportation security and transportation infrastructure protection.



1.2. Background
1.2.1. Protection of Critical Infrastructure and Key Resources (CIKR)

Protection of the Nation’s critical infrastructure and key resources is one of the core missions
of the Department of Homeland Security. Through the efforts of its Office of Infrastructure
Protection (DHS/IP), DHS is in the forefront for ensuring industry preparedness to reduce
interruption of CIKR operations. DHS works with industry on a daily basis to reduce both
the likelihood and consequences of interruptions to CIKR operations due to terrorism, natural
catastrophes, or other national emergencies.

DHS is responsible for coordinating interagency CIKR protection and resilience, and
emergency preparedness planning efforts including the National Preparedness Guidelines, the
National Response Framework (NRF), and the National Infrastructure Protection Plan
(NIPP). Together these strategic planning documents provide the context for integrating
critical infrastructure protection and resilience as a key component of the Nation's unified
approach to homeland Security. They provide a concept of operations and a framework

for implementation of the DPA provisions when relevant and appropriate to address
processes for reducing interruptions of CIKR operations under terrorist threats and
emergency conditions.

Federal Government policies for CIKR protection, resilience, and restoration charge the
Secretary of Homeland Security with responsibility for coordinating the national effort to
enhance CIKR protection and resilience. Federal Government policy also designates Federal
Sector-Specific Agencies (SSAs) with responsibility for coordinating planning, preparedness,
and a protection activity within the identified CIKR sectors, and gives the Secretary the
authority to designate additional sectors. This approach provides the structure needed to
address the unique characteristics and operating models of each of the sectors.

The overarching framework for the critical infrastructure mission is outlined in the NIPP and
supporting Sector-Specific Plans (SSPs). The NIPP serves as the foundation for the
integrated risk-informed approach used by government and private sector partners to identify,
assess, and prioritize risks to CIKR and implement programs to enhance CIKR protection
and resilience. In accordance with the triennial review provisions, the NIPP, first issued in
2006, was updated and reissued in 2009.

Developed by DHS through a collaborative process with CIKR partners at all levels of
government and the private sector, the 2009 NIPP captures the evolution and maturation of
programs and processes established in 2006, The revised NIPP integrates the concepts of
resilience and protection and broadens the focus of NIPP-related programs and activities to
the all-hazards environment. Among other enhancements the 2009 NIPP includes an
expanded discussion of the Defense Production Act of 1950 and the Defense Production
Reauthorization Act of 2003. DHS and the other Sector-Specific Agencies initiated the
triennial review of the Sector Specific Plans in 2009. The updated sector plans will be
finalized and issued in 2010. The CIKR sectors and the SSAs are listed in Table 1-1.





e The Secretary of Commerce for all other materials, services, and facilities, including
construction materials.

P.L. 111-67 requires Federal departments with delegated priorities and allocations authority
to issue final rules by June 27, 2010, providing standards and procedures for use of this
authority and to consult with each other, as appropriate and to the extent practicable, to
develop a “consistent and unified Federal priorities and allocations system.” FEMA is
currently leading an Interagency Working Group (IWG) to coordinate development of
standards and procedures for the unified Federal system. Participants on the IWG include:
USDA, DOC, DOD, DOE, HHS, DOT, DHS/IP and DHS/FEMA.

Section 202 of E.0. 12919 provides that section 201(a) authority of E.O. 12919 may be used
only to support programs that have been determined in writing as necessary or appropriate to
promote the national defense by:

e DOD with respect to military production and construction, military assistance to
foreign nations, stockpiling, outer space, and directly related activities;

e DOE with respect to energy production and construction, distribution and use, and
directly related activities; and

e DHS with respect to essential civilian needs supporting national defense, including
civil defense and continuity of government and directly related activities.

In general, proposed uses of DPA Section 101 authority for protection or restoration of most
types of critical infrastructure must first be determined by DHS to be “necessary or
appropriate to promote the national defense.”

1.2.3. Defense Priorities and Allocations System (DPAS)

DPA authority to issue priority ratings to support the timely delivery of industrial resources is
implemented through the DPAS regulation [15 C.F.R. Part 700]. This regulation is
administered by DOC, in consultation with the heads of the departments and agencies
specified in Subsection 201 (a) of E.O. 12919, and is used, as authorized by DOC, by other
Federal departments and agencies and industry to support programs necessary or appropriate
to promote the national defense, including critical infrastructure protection and restoration.
The key elements of the DPAS regulation are mandatory acceptance of rated orders,
preferential scheduling of rated orders to meet delivery requirements, and extension of
priority ratings to lower level suppliers and subcontractors.

DOC has delegated certain priority rating authority with respect to industrial resources to
DOD, DOE, the General Services Administration (GSA), and DHS. DOD implements its
priority rating authority as a standard clause in most of its contracts and orders for industrial
resources. Use of the priority rating authority by the other three agencies is limited. DOE
and GSA use their authority, primarily, in support of DOD-approved programs. DHS uses its





(DOC/BIS) administers this authority through the Defense Priorities and Allocations System
(DPAS) regulation. The purpose of the DPAS is to ensure the timely availability of
industrial resources to meet current national defense and emergency preparedness program
requirements and to provide an operating system to support rapid industrial response in a
national emergency. All companies in the United States must comply with the provisions of
the DPAS regulation.

DOC/BIS has delegated authority to DOD, DOE, DHS, and the GSA, to place, in accordance
with the DPAS regulation and under the authority of the Defense Production Act and E.O.
12919, priority ratings on contracts or orders for industrial resources to support programs
determined by DOD, DOE, or DHS as “necessary or appropriate to promote the national
defense.” DOC/BIS may also authorize other government agencies, foreign governments,
owners and operators of critical infrastructure, or companies to place priority ratings on
contracts or orders for industrial resources on a case-by-case basis. Such requests must first
be determined as “necessary or appropriate to promote the national defense” by DOD, DOE,
or DHS.

DOCYBIS has also authorized other Federal agencies, on a case-by-case basis, to place
priority ratings on orders to expedite the delivery of industrial resources needed to enhance
the protection of government facilities, a critical infrastructure sector. In addition, DOC’s
DPAS delegation to DOD provides that DOD may authorize persons to place rated orders for
delivery of production or construction equipment required to support DOD-approved
programs and projects, when the equipment is necessary for the timely performance or
completion of rated contracts or orders when timely delivery of the equipment cannot be
obtained otherwise. DOD has authorized companies in the defense industrial base, a critical
infrastructure sector, to place priority ratings on orders to expedite the delivery of industrial
resources, including to support recovery from industrial accidents that have adversely
impacted production capabilities.

In 2009, DOC/BIS took action through the DPAS, in cooperation with DHS/FEMA, to
support the protection, restoration, and recovery efforts of Federal owner/operators of critical
infrastructure. These actions are listed in section 2.8 of this report.

2.3. Department of Defense

2.3.1. The Defense Priorities and Allocations System

The DPAS provides DOD with powerful authorities to help protect our nation. DOC has
delegated to DOD authority under the DPAS to:

e Apply priority ratings to contracts and orders supporting approved national defense
programs; and

commercia} fertilizer; all forms of energy; health resources; all forms of civil transportation; and water
resources),



2. Priorities and Allocations

Federal departments, both individually and collectively, have taken a number of actions to
implement DPA Section 101 authorities in support of CIKR protection and restoration in
recent years. Representatives of the Federal departments with delegated DPA authorities and
responsibilities meet periodically to review DPA delegations and guidance with regard to
CIKR protection and restoration. DPA authorities, including the priorities and allocations
authority, have been incorporated into Federal emergency preparedness plans. This chapter
describes recent and ongoing actions in all of these areas.

2.1. Department of Agriculture

The DPA, the Stafford Act, E.O. 12656 (Assignment of Emergency Preparedness
Responsibilities), and E.O, 12919 (National Defense Industrial Resources Preparedness)
authorize the Secretary of Agriculture to establish plans to provide for the continuation of
agricultural production, food processing, storage, and distribution through the wholesale
level and to place priorities on contracts for continuation of agricultural production during
times of national emergency.

To address this issue and to support national defense programs, including domestic
emergency preparedness and Critical Infrastructure and Key Resources protection and
restoration and to fulfill the requirements of E.O. 12919, USDA is in the process of
developing plans and regulations to establish and implement an Agriculture Priorities and
Allocation System (APAS) pursuant to its DPA Section 101 authority. The APAS will
support continuation of agricultural production by ensuring that agricultural producers,
processors, distributors, and wholesalers receive preferential scheduling for items and
processes necessary to maintain their agricultural operations during times of a declared
national emergency. Under APAS, USDA would issue priority orders to private sector
processors, distributors, and wholesalers as a means to redirect agricultural commodities to
areas of hardship. USDA is also participating in an interagency working group with
representatives from the six Federal Departments with delegated priorities and allocations
authority to coordinate their E.O, 12919 rulemaking for a consistent and unified Federal
priorities and allocation system.

Until APAS is implemented, USDA has a memorandum of understanding in place with DOC
that will be executed when conditions warrant delegating USDA’s priorities and allocations
authority to DOC in response to emergency conditions.

2.2. Department of Commerce

DOC is delegated authority, through E.O. 12919, to implement the DPA priorities and
allocations provisions for industrial resources.'° DOC’s Bureau of Industry and Security

'° For the purposes of DPAS, “industrial resources” includes all materials, services, and facilities, including
construction materials, the authority for which has not been delegated to other agencies under Executive Order
12919 (e.g., food resources, food resource facilities, and the domestic distribution of farm equipment and



1.2.2, Defense Production Act

The Defense Production Act provides a number of important authorities to expedite and
expand the supply of critical resources from the U.S. industrial base to support homeland
security, domestic disaster preparedness, response, and recovery, and critical infrastructure
protection and restoration, as well as military, energy, stockpiling, and space activities. In
2009, the DPA was reauthorized for five years until September 30, 2014.

The DPA Reauthorization Act of 2009 [P.L. 111-67] broadened the DPA definition of
“national defense” to include “homeland security”? and “critical infrastructure assistance to
any foreign nation.” P.L. 111-67 also amends the language in Title III, which provides
financial incentives to the private sector to expand production capacity and supply in critical
national defense sectors, including critical infrastructure protection and restoration, homeland
security and emergency preparedness activities. Specifically, Sections 301 and 302 of the
DPA enable loan guarantees and loans to be used in support of private sector critical
infrastructure protection and restoration activities. In addition, P.L. 111-67 enables President
to waive requirements that could delay the establishment of voluntary agreements, when
needed to restore critical infrastructure.

Subsection 1002(b) of the Implementing Recommendations of the 9/11 Commission Act of
2007 specifically refers to the authorities in DPA Subsections 101(a) and 101(c). These
subsections authorize the President to: (1) require acceptance and preferential performance of
contracts or orders (other than contracts of employment) that he deems necessary or
appropriate to promote the national defense or to maximize domestic energy supplies; and (2)
allocate materials, services, and facilities in such manner, upon such conditions, and to such
extent as he shall deem necessary or appropriate to promote the national defense or to
maximize domestic energy supplies.

The President’s priorities and allocations authorities under DPA subsection 101(a) are
delegated to the following department heads in subsection 201(a) of E.O. 12919 (National
Defense Industrial Resources Preparedness):

e The Secretary of Agriculture with respect to food resources, food resource facilities,
and the domestic distribution of farm equipment and commercial fertilizer;

e The Secretary of Energy with respect to all forms of energy;
e The Secretary of Health and Human Services with respect to health resources;
e The Secretary of Transportation with respect to all forms of civil transportation;

e The Secretary of Defense with respect to water resources; and

° The definition of homeland security is a new definition provided in P.L. 111-67. It includes efforts “to prevent
terrorist attacks within the United States; to reduce the vulnerability of the United States to terrorism; to
minimize damage from a terrorist attack in the United States; and to recover from a terrorist attack in the United
States.”



Table of Contents

1. Introduction

iets
123

Purpose and Scope

Background

1.2.1. Protection of Critical Infrastructure and Key
Resources (CIKR)

1.2.2, Defense Production Act

1.2.3. Defense Priorities and Allocations System

2. Priorities and Allocations

Vs
Dis
2.3.

2.4,

Oy,
2.6.
21%
2.8.

Department of Agriculture
Department of Commerce
Department of Defense
2.3.1. The Defense Priorities and Allocations System
(DPAS)
2.3.2. Priority Allocation of Industrial Resource
2.3.3. Special Priorities Assistance
Department of Energy
2.4.1. DOE Authorities and Procedures under DPA
Subsections 101(a) and 101(c)
2.4.2. Use of DPA Section 101 Authorities to Reduce
Interruption of Energy Resources
Department of Homeland Security
Department of Health and Human Services
Department of Transportation
Use of Priorities and Allocations for Protection and
Restoration of CIKR

Appendix A. Acronyms

iii



materials (including equipment), services and facilities are critical and
essential. The Secretary of Commerce makes the finding described in
101(c)(2)(A) that the materials (including equipment), services, or facilities
are scarce, and the finding described in subsection 101(c)(2)(B) that is
necessary to use the authority provided by subsection 101(c)(1).

10 C.F.R. Part 221 sets forth the procedures to be used by DOE and DOD, pursuant
to the DPA, whenever the priority supply of crude oil and petroleum products is
necessary or appropriate to meet national defense needs.

e 10C.F.R. Part 216 describes and establishes the procedures to be used by DOE to
make the findings required by DPA Section 101(c)(2)(A). This regulation was
updated in 2008.

e Both of the above regulations are subject to change given the recent passage of P.L.
111-67 and its mandate to “issue final rules...that establish standards and procedures
by which the priorities and allocations authority under this section is used to promote
the national defense.” DOE is participating with the Interagency Working Group on
reviewing these new rules, which may alter the current regulatory scheme.

e A Memorandum of Understanding between DOE and DOC spells out the respective
jurisdictions and responsibilities of these two departments for products and equipment
associated with the production of petroleum and gas.

2.4.2. Use of DPA Section 101 Authorities to Reduce Interruption of Energy Resources

It has rarely been necessary to consider use of the priority authority to address emergency
supply needs to restore electric power, because it is common industry practice for affected
utilities to “borrow” needed components from unaffected utilities, when such components are
available, Certain high impact but low frequency events, such as major earthquakes or solar
electromagnetic pulse circumstances, may require use of priority ratings to assist utilities
with restoration and recovery.

DOE includes priority ratings in its maintenance and operations contracts for national
laboratories and other facilities that support DOD nuclear programs. These contracts support
efforts to protect and restore operations at these facilities, in the event of a disruption caused
by an act of terrorism, natural catastrophe, or other similar national emergency.

2.5. Department of Homeland Security

A delegation from DOC (DPAS Delegation 4) provides DHS a procedure through DOC for
handling requests from owners and operators of critical infrastructure to place priority rated
contracts and orders for industrial resources in support of critical infrastructure protection
and restoration activities. Delegation 4 also provides procedures for use of priority ratings in

ll



and response for emergency conditions are addressed in ESF #1 (Transportation) of the NRF,
which also addresses use of DPA authorities under emergency conditions.

The U.S. Maritime Administration (MARAD) has four long-established regulations derived
from the DPA and relevant executive orders:

e 46C.F.R. Part 340—Priority Use and Allocation of Shipping Services. This
regulation is designed to ensure that DOD will have access, as necessary, to shipping
services and port facilities in crisis or war

e 46C.F.R. Part 345—Restrictions Upon the Transfer or Change in Use or in Terms
Governing Utilization of Port Facilities. This regulation requires prior approval of
the National Shipping Authority (NSA)—- MARAD’s emergency operations mode —
to transfer or change utilization of port facilities, “to meet the requirements of the
national security”

¢ 46C.F.R. Part 346—Federal Port Controllers. This regulation prescribes the standard
form of agreement between the NSA and port authorities for the appointment and
functions of Federal Port Controllers during national defense emergencies

e 46 C.F.R. Part 347—Operating Contract. This regulation prescribes the standard
form of contract to be entered into between the NSA and marine terminal operators
during civil defense emergencies or national emergencies declared by the President.

DOT is developing internal rules and is participating in the inter-agency working group
developing a consistent and unified rulemaking for the execution of Federal priorities and
allocations authorities as required under the DPA Reauthorization Act of 2009.

2.8. _ Use of Priorities and Allocations for Protection and Restoration of CIKR
Operations

DPAS Delegation 4 authorizes DHS to place priority rated contracts and orders in support of
DHS and State, local, and tribal government programs determined eligible by DHS for DPAS
support. During 2009, the DHS Chief Procurement Officer was authorized to use DPAS
priority ratings to support procurement of personal protective equipment to protect DHS
personnel against the 2009 HIN1 influenza virus and FEMA Regional and Deputy
Administrators and Federal Coordinating Officers were authorized to use DPAS rated orders
to prepare for and respond to the 2009 hurricane season.

Both FEMA and DOC are involved in DPAS actions involving use of priority ratings by
other Federal agencies or owners and operators of critical infrastructure for civilian programs
involving emergency preparedness or critical infrastructure operations. For these non-DHS
organizations, FEMA determines if a program is “necessary and appropriate to promote the
national defense” and DOC authorizes use of a DPAS priority rating to support the civilian
program, as appropriate. During 2009, FEMA made determinations that the following
programs were eligible to be supported using DPA priorities authority:

13



Executive Summary

This is the third annual report to Congress on actions taken by the Federal Government using the
priorities and allocations authority provided in Section 101 of the Defense Production Act of 1950
(DPA) to ensure the preparedness of industry to reduce interruption of critical infrastructure and key
resource (CIKR) operations under emergency conditions. This report was prepared in accordance
with Subsection 1002(b) of the Implementing Recommendations of the 9/11 Commission Act of
2007 [Public Law (P.L.) 110-53]. The Department of Homeland Security (DHS) developed this
report in cooperation with the Departments of Agriculture (USDA), Commerce (DOC), Defense
(DOD), Energy (DOE), Health and Human Services (HHS) and Transportation (DOT). The
reporting period for this report is from January 1, 2009 to December 31, 2009.

Section 101 authorizes the President to require acceptance and priority performance of contracts or
orders and to allocate materials, services, and facilities to promote the national defense or to
maximize domestic energy supplies. Executive Order (E.O.) 12919 delegates the President’s
priorities and allocations authorities to USDA, DOC, DOD, DOE, HHS, and DOT with respect to
resources within each of these departments’ jurisdictions. It provides that the priorities and
allocations authorities may only be used for programs that have been determined to be “necessary
or appropriate to promote the national defense” by DOD (for military and space programs), DOE
(for energy resources), or DHS (for essential civilian needs).

DOC administers the Defense Priorities and Allocations System (DPAS), which provides guidance
and procedures for the acceptance and preferential performance of contracts or orders for resources
within DOC’s jurisdiction, pursuant to the E.O. 12919 delegation to DOC. The DPAS is used by
other Federal departments and agencies, foreign governments, and industry, when authorized by
DOC, to ensure timely delivery of industrial resources needed to support approved programs.

During 2009, actions were taken by Federal Departments to apply the DPA priorities authority in
support of emergency preparedness, response, and recovery activities conducted pursuant to title VI
of the Stafford Act, and critical infrastructure protection and restoration. For example, use of DPAS
priority ratings was authorized to support: (1) timely equipment upgrades by DOC’s Information
Technology System Program; (2) anticipated emergency preparedness, response, and recovery
activities for the 2009 hurricane season by the Federal Emergency Management Agency’s
(FEMA’s) Federal Coordinating Officers; (3) procurement of certain types of personal protective
equipment by DHS components to prepare for the 2009 HINI influenza virus outbreak; and (4) the
International Safeguards, Second Line of Defense and Nuclear/Counterterrorism Incident Response
programs of DOE’s National Nuclear Security Administration to procure neutron detectors and
associated equipment.



Assistant Secretary for Legislative Affairs

U.S. Department of Homeland Security
Washington, DC 20528

pattie,

: Homeland

JUL - 1 2010
Security

oH Us
os

Foreword

I am pleased to present the following report, “Use of the Defense Production Act to Reduce
Interruptions in Critical Infrastructure and Key Resource Operations during Emergencies” for
Calendar Year 2009, This report is required by Subsection 1002(b) of the Implementing
Recommendations of the 9/11 Commission Act of 2007 [Public Law 110-53]. The report is an
interagency effort led by the Federal Emergency Management Agency on behalf of the Department
of Homeland Security that includes the Departments of Agriculture, Commerce, Defense, Energy,
Health and Human Services, and Transportation. Pursuant to congressional requirements, this
report is being provided to the following Members of Congress:

The Honorable Christopher J. Dodd
Chairman, Senate Banking, Housing, and Urban Affairs Committee

The Honorable Richard C. Shelby
Ranking Member, Senate Banking, Housing, and Urban Affairs Committee

The Honorable Barney Frank
Chairman, House Financial Services Committee

The Honorable Spencer Bachus
Ranking Member, House Financial Services Committee

The Honorable Joseph I. Lieberman
Chairman, Senate Homeland Security and Governmental Affairs Committee

The Honorable Susan M. Collins
Ranking Member, Senate Homeland Security and Governmental Affairs Committee

The Honorable Bennie G. Thompson
Chairman, House Homeland Security Committee

The Honorable Peter T. King
Ranking Member, House Homeland Security Committee

irect inquiries relating to this report to me at (202) 447-5890.

Assistant Secretary
Office of Legislative Affairs

www.dhs.gov



e Request that DOC provide Special Priorities Assistance (SPA) to resolve problems
involving rated contracts and orders and authorize use of priority ratings by foreign
firms.

Except for end items that are commonly available in commercial markets in sufficient supply
and for items to be used primarily for administrative purposes, all DOD contracts for
industrial resources (including construction contracts and Foreign Military Sales contracts)
are rated orders under the DPAS. DOD uses two levels of rating priority, identified by the
rating symbols "DO" or "DX." If a contractor cannot meet all required delivery dates
because of schedule conflicts, DO-rated orders automatically must be given preference over
unrated orders and DX-rated orders automatically must be given preference over DO-rated
orders and unrated orders. Such preferential treatment is necessary even if it requires the
diversion of items being processed for delivery against lower rated or unrated orders. Only
the Secretary and Deputy Secretary of Defense can authorize DOD programs to use a DX
rating.

2.3.2. Priority Allocation of Industrial Resources

On occasion, military operations may require increased or accelerated delivery of weapons,
supplies, and systems. These emergent requirements may create competing demands within
DOD for limited industrial resources. The Department’s Priority Allocation of Industrial
Resources (PAIR) Task Force is charged to ensure that industrial resources are allocated
among DOD programs in a comprehensive and integrated manner, in accordance with
operational priorities. The PAIR Task Force’s mission is to:

e Determine the industrial resources required to accomplish emergent plans;
e Identify any conflicting DOD demands on these resources; and

e Devise approaches to resolve these conflicts based on warfighting requirements
established by the Joint Chiefs of Staff.

The Task Force typically utilizes the DPAS to implement production resource allocation
(delivery) decisions as needed to resolve competing requirements among defense-related
critical infrastructure for limited resources. The Office of the Under Secretary of Defense for
Acquisition, Technology and Logistics usually issues a request for Special Priority
Assistance (see 3.3.3) to the Department of Commerce to allocate materials or expedite
deliveries of defense items, in accordance with PAIR decisions.

For example, the PAIR process was used to assist an Intelligence, Surveillance and
Reconnaissance (ISR) Task Force chartered by the Secretary of Defense with the rapid
acquisition and deployment of ISR systems. Particularly noteworthy, the PAIR resolved a
delivery constraint that left unaddressed would have significantly delayed operational
fielding. Multiple buying activities placed or were about to place competing purchase orders
for hundreds of sensor arrays from a single supplier located in a Security of Supply (SoS)
partner nation. The Department has established SoS arrangements with some of its closest



support of: (1) approved DHS programs; (2) state, local and tribal government programs that
involve disaster preparedness, mitigation, response, and recovery activities; and (3) programs
of other Federal department and agencies that involve essential civilian needs determined by

DHS to be necessary or appropriate to promote the national defense.

In 2009, DHS/FEMA has completed a number of actions involving priorities and allocations
authority:

e Published a FEMA DPAS Directive and FEMA DPAS Manual;
e Developed a FEMA DPA Program Division website; and

e Provided coordination in the development of the Administration’s legislation to
reauthorize the DPA.

2.6. Department of Health and Human Services

Section 201(a)(6) of E.O. 12919 delegates, to the Secretary of HHS, Presidential authority
under Section 101 of the DPA to utilize DPA procedures and require acceptance and priority
performance of contracts for health resources. E.O. 12129 Section 901(j) defines health
resources as “materials, facilities, health supplies and equipment (including pharmaceutical,
blood collecting, and dispensing supplies, biological, surgical textiles, and emergency
surgical instruments and supplies) required to prevent the impairment of, improve, or restore
the physical and mental conditions of the population.” In Fiscal Year (FY) 2009 HHS
utilized its delegated authority to award four rated order contracts for needle and syringe
units to support vaccination efforts against the 2009 H1N1 influenza virus.

HHS is drafting a regulation that is intended to implement DPA procedures to issue rated
order contracts for health resources (the proposed regulation). The proposed regulation will
amend the HHS Acquisition Regulation. It will set forth HHS policy on the use of the DPA
authority delegated to the Secretary of HHS and offer guidance to agency personnel on the
use of those procedures. The proposed regulation is in response to a Government
Accountability Office recommendation that HHS prepare a formal regulation implementing
DPA procedures.

2.7. Department of Transportation

DOT is delegated DPA Section 101 authority with respect to all forms of civil transportation.
Civil transportation is not covered by the DPAS, but the DPAS has been used in the past to
expedite the delivery of industrial resources for protection and restoration of transportation
facilities and services. DOT has DPA protocols for civil transportation that can be issued
quickly in times of crisis. In addition, the Department ensures that senior leadership and
necessary decision-makers are briefed on the applicability of the DPA and the DPAS. The
Federal Aviation Administration Crisis Management Handbook contains guidance regarding
DPAS requests. DOT planning and procedures to address civil transportation preparedness

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