The DPA is intended to facilitate 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, DPA has been amended to broaden its definition beyond military application. Congress has expanded DPA’s coverage to include crises resulting from natural disasters or “man-caused events” not amounting to an armed attack on the United States. 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. In 2003, the DPA was reauthorized through September 30, 2008. Currently, only Titles I, III, and VII are in effect: Title I 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 or to maximize domestic energy supplies for national defense needs. The authority allows priority-rated contracts or orders to take preference over any other unrated contract or order if a contractor cannot meet all required delivery dates. The authority is delegated among various agencies, including DOD, USDA, and Commerce, with respect to different types of resources such as water, food and agriculture, and industrial resources. Currently, Commerce administers the only priorities and allocations system that is actively used—the Defense Priorities and Allocations System (DPAS)—which is used for industrial resources. Commerce has delegated its authority to use priority ratings for industrial resources to DOD, DOE, and DHS in support of approved national defense, energy, and homeland security programs. Title III allows agencies to provide a variety of financial incentives to domestic firms to invest in production capabilities to ensure that the domestic industrial and technological base is capable of meeting the critical national security needs of the United States. It may be used when domestic sources are required and firms cannot, or will not, act on their own to meet a national defense production need. Title III financial incentives are designed to reduce the risks for domestic suppliers associated with the capitalization and investments required to establish, expand, or preserve production capabilities. Executive Order 12,919 authorized the authority to implement Title III actions to the Secretary of Defense and the heads of other federal agencies and designates the Secretary of Defense as the DPA Fund Manager. DOD’s Office of Technology Transition provides top-level management, direction, and oversight of the DPA Title III program. 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. Title VII provides for a range of authorities, which include giving private firms that participate in voluntary agreements for preparedness programs, defenses 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 a National Defense Executive Reserve (NDER) composed of recognized experts from the private sector and government, which could be activated in the event of an emergency. Title VII also provides for investigative authority to collect information on the U.S. industrial base, which has been used by Commerce to conduct surveys and prepare reports at the request of the armed services, Congress, and industry. DPA also requires the President to report annually to Congress on the effect of offsets—a range of incentives or conditions provided to foreign governments to purchase U.S. military goods and services—on U.S. defense preparedness, industrial competitiveness, employment, and trade. Additionally, DPA requires Commerce to prepare a report to the Congress on the cumulative effects of offsets on defense trade, with a focus on the U.S. defense subcontractor base. Defense offsets include coproduction arrangements and subcontracting, technology transfers, in-country procurements, marketing and financial assistance, and joint ventures. Foreign governments use offsets to reduce the financial effect of their defense purchases, obtain valuable technology and manufacturing know-how, support domestic employment, create or expand their defense industries, and make the use of their national funds for foreign purchases more politically palatable. Views on defense offsets range from beliefs that they are both positive and an unavoidable part of doing business overseas to beliefs that they negatively affect the U.S. industrial base. U.S. prime contractors have indicated that if they did not offer offsets, export sales would be reduced and the positive effects of those exports on the U.S. economy and defense industrial base would be lost. Critics charge that negative aspects of offset transactions limit or negate the economic and industrial benefits claimed to be associated with defense export sales. The effect of offsets on the U.S. economy has been a concern for many years, and Congress has on numerous occasions required some federal agencies to take steps to define and address offset issues. DPA, as amended, provided for an interagency team to consult with foreign nations on limiting the adverse effects of offsets in defense procurement—without damaging the U.S. economy or defense preparedness—and provide an annual report on their consultations and meetings. Other steps have been taken to address offsets outside of the DPA, including establishing a national commission to report on the extent and nature of offsets. DOD is the primary user of the DPA, but other agencies can use Title I priorities and allocations authority for emergency support functions. Agencies other than DOD generally do not apply the authority and would do so after an issue affecting delivery needs had been identified, which could add delays to the delivery of critical products during emergencies. We found a lack of developed policies or guidance also may limit agencies’ ability to use the authority in emergencies. Other authorities in the DPA have had limited use. Specifically, Title III authority to expand production capabilities for industrial resources or critical technology essential to the national defense has been used almost exclusively for defense needs, and circumstances have not required use of some Title VII authorities, such as the National Defense Executive Reserve or voluntary agreements. While other agencies have used or have considered using Title I’s priorities and allocations authority, DOD has been the primary user. DOD places priority ratings as a proactive measure on almost all of its contracts for industrial resources, which number approximately 300,000 annually, to facilitate timely execution of the authority. The Title I authority allows rated contracts or orders to take preference over any other unrated contract or order if a contractor cannot meet all required delivery dates. DOD has used the authority in recent years to prioritize the delivery of material for body armor for the Army and Marine Corps and to ensure that the military’s Counter-Improvised Explosive Device systems and the Mine Resistant Ambush Protected Vehicle program receive high industrial priority. DOD employs this approach to ensure that its use of the priorities and allocations authority is self-executing, which it reports should mitigate the risk of not having critical items to meet defense requirements. The U.S. Army Corps of Engineers (USACE), which executes the authority for water resources, also uses this approach to procure water through advance contracts for emergency response purposes, according to a USACE official. In contrast, officials from other agencies indicated that they would decide to place priority ratings on contracts or modifications on a case-by-case basis after a triggering event had identified an issue affecting delivery. DHS reported that it has authorized or endorsed to the Department of Commerce the use of priority ratings 15 times since 2003, which includes endorsing other federal agencies’ use of priority ratings in support of homeland security programs. DHS makes endorsements with respect to programs, not specific contracts. Over half of these have been in support of critical infrastructure protection and restoration requirements. For example, a railroad company used a priority-rated contract to procure switch equipment and generators to help restore rail service in the Gulf Coast region following Hurricane Katrina. DHS also endorsed the use of a priority rating for a Department of State continuity of operations facility for which Commerce authorized a priority rating for a contract to procure a generator to provide emergency power. However, DHS officials told us that, unlike DOD, its contracts, including those placed for emergency preparedness purposes, do not automatically receive priority ratings. DOE, HHS, USDA, and DOT have had little or no experience using Title I priorities and allocations authority. The National Nuclear Security Administration, a separately organized agency within DOE, has applied priority ratings to contracts primarily in support of defense and atomic energy programs. Aside from these purposes, DOE has not encountered a need requiring the use of its priority and allocations authority for energy resources in the past several years. However, DOE also reported that it has considered using the authority in response to a number of emergency preparedness and disaster response cases, such as the restoration of refinery services affected by fire and flooding in 2007. Upon consideration, DOE determined that use of the authority was not necessary. DOT has not used the Title I authority since the DPA was reauthorized in 2003, but has used it in the past for airport security and in support of DOD during the Gulf War. Appendix II describes DOT’s current and past use. While HHS and USDA officials said that they have not encountered circumstances to date that would require the use of priority rated orders, HHS officials anticipated that they could use the authority to place priority ratings on contracts prior to an emergency for a selected number of health resources needed in an emergency, such as masks, respirators, and antibiotics. In contrast, USDA and DOT officials indicated that they would place a rating on a contract once it was determined that the private sector could not otherwise respond to a need. Most of the agencies we reviewed play a key role in an emergency—under the National Response Framework—to execute contracts to procure needed goods and services in areas such as transportation, human services, and energy.