With the recent use of provisions of the Defense Production Act to keep open meat packing plants, we are reminded that this piece of legislation can be used for more than typical defense expenditures like weapons systems and other military expenditures. DPA has in fact been used during past crises like hurricanes and floods.
A prioritized order is different from most other orders from the Pentagon in that if a company manufactures that item, they are required to accept the order and turn the order within a specific timeframe. Failure to perform has implications for their ability to pursue defense-related work in the future. This creates real opportunities for companies with the streamlined systems and processes to confidently deliver in this setting when their competitors perhaps cannot.
To be clear, use of the DPA and prioritized orders under the Defense Priorities and Allocations System (DPAS) have been minimal during the pandemic. And even a Memorandum of Understanding Regarding the Potential Use of the Defense Production Act with Regard to FDA-Regulated Food During the COVID-19 Pandemic simply says DPA authorities could be used—not that they will be.
Prioritized orders for defense materiel
While we are seeing little in the way of prioritized orders for COVID-19-related materials like testing kits and personal protective equipment (PPE), we are seeing a flurry of orders for defense-related material designed to ensure a steady flow of materiel despite production interruptions of the COVID-19 pandemic. According to Meritalk, these prioritized orders include:
- A $15 million agreement with Bethel Industries, Inc.
- A $20 million agreement with GE Aviation
- An $80 million project with Spirit AeroSystems
- A $19.5 million agreement with Steel America
- A $500,000 agreement with Allied Systems
What these orders mean
In our new whitepaper on DPA, we explore what these orders mean for defense manufacturers, and how their systems must be up to the task of documenting compliance with the government’s terms. These terms and provisions include:
- Mandatory Acceptance, which means a contractor, subcontractor or supplier shall accept a rated order when they make the item, normal terms of sale apply and they can meet the delivery dates.
- Mandatory Extension, which means a manufacturer or contractor must communicate the DPAS rating to their suppliers.
- Priority Scheduling, so activities including the acquisition of all needed production items can satisfy the delivery requirements of each rated order.
- Customer Notification, which requires a rated order be accepted or rejected, in writing, within 15 working days for DO-rated orders and 10 days for DX-rated orders.
Software for aerospace and defense manufacturers should provide simple and consistent ways to comply. Is your enterprise resource planning (ERP) software up to the task?
To find out more about why defense manufacturers are seeing more prioritized orders under the Defense Production Act, download the IFS whitepaper today.
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