DEFENSE PRODUCTION ACT AMENDMENTS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86B00338R000300430012-1
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 18
• Document Creation Date: December 21, 2016
• Document Release Date: October 21, 2008
• Sequence Number: 12
• Publication Date: May 5, 1983
• Content Type: MEMO

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STAT
Chief, Logistics and Procurement Law
Division
STAT FROM:
STAT
Chief, Legislation Division
SUBJECT: Defense Production Act Amendments
John:
5 MAY 1983
1. Having secured a six-month extension of the Defense
Production Act, the Administration has returned to the task of
revising the Act.
2. We have reviewed the attached draft legislation and
find nothing objectionable. I would appreciate it if you would
also take a look at it, particularly the cost accounting
standards provision.
3. Please let me have your comments by 11 May, so I can
let 0MB know our views.
File: Technology Transfer/Defense Industrial Base
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Federal Emergency Management Agency
Washington, D.C. 20472
R At T
Ronorable Thomas P. O'Neill, Jr.
Speaker of the Rouse of Representatives
Washington, DC 20515
Dear Mr. Speaker:
Enclosed is draft legislation "To amend the Defense Production
Act of 1950 to support the mobilization of the defense in-
dustrial base of the United States" and "Supporting Rationale."
It is requested that this legislation be introduced and referred
to an appropriate committee.
The Office of Management and Budget advises that there is no
objection from the standpoint of.the Administration's program to
the submission of this legislative proposal for the consideration
of the Congress.
Sincerely,
George Jett
General Counsel-
enclosures
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A SILL
To amend the Defense Production Act of 1950 to support the mobilization of
the defense industrial base of the United States.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SHORT TITLE
SECTION 1. This Act may be cited as the "Defense Production Act
Amendments of 1983".
DECLARATION OF POLICY
SECTION 2. Section 2 of the Defense Production Act of 1950 (50 U.S.C.
App. 2062) is amended to read as follows:
"SEC. 2.(a)(1) In view of the present international situation, the
Nation's growing reliance on imports of materials and components, and the
need for measures to reduce defense production lead times and bottlenecks,
and in order to provide for the national defense and national security,
our defense mobilization preparedness effort requires the development of
preparedness programs, defense industrial base improvement measures, and
the expansion of domestic productive capacity and supply beyond the levels
needed to meet the civilian demand. Also required is some diversion of
certain materials and facilities from civilian use to military and related
purposes.
"(2) These activities are needed in order to improve: defense industrial
base efficiency and responsiveness, to reduce the time required for
industrial mobilization in the event of an attack on the United States or
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to respond to actions occurring outside the United States which could
result in the termination or reduction of the availability of strategic
and critical materials, including energy,=and which could adversely affect
the national defense preparedness of the United States. In order to insure
the national defense preparedness which is essential to national security,
it is also necessary and appropriate to, assure the availability of domestic
energy supplies for national defense needs.
"(b)(1) In order to insure productive capacity in the event of an attack
on the United States, it is the policy of the Congress to encourage the
geographical dispersal of the industrial facilities of the United States
in the interest of the national defense, and to discourage the concentration
of such productive facilities within limited geographical areas which are
vulnerable to attack by an enemy of the United States.
"(2) In the construction of any Government-owned industrial facility,
in the rendition of any Government financial assistance for the construction,
expansion, or improvement of any industrial facility, and in the production
of goods and services, under this or any--'ttter Act, each department and
agency of the executive branch shall apply, under the coordination of the
Federal Emergency Management Agency, when practicable and consistent with
existing law and the desirability for maintaining a sound economy, the.
principle of the geographical dispersal of such facilities in the interest
of national defense. However, nothing in this paragraph shall preclude
the use of existing industrial facilities.
"(3) To.'ensure the adequacy of productive capacity and supply, executive
agencies and departments responsible for defense acquisition shall continuously
assess the capability of the defense industrial base to satisfy near-term
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requirements as well as.increased mobilization production requirements.
Such assessments shall specifically evaluate the availability of adequate
production sources, including subcontractors and suppliers, materials, and
skilled labor, and professional and technical personnel.
"(4) It is the policy of the Congress that plans and programs to carry
out this declaration of policy shall be undertaken with due consideration
for promoting efficiency and competition."
EXPANSION OF PRODUCTIVE CAPACITY AND SUPPLY
SECTION 3. Section 301 of the Defense Production Act of 1950 (50 U.S.C.
App. 2091) is amended--
(a) in subsection (e)(1)(A), by striking
in lieu thereof "50,000,000";
(b) in subsection (e)(1)(B)--
out "38,000,000" and inserting
by striking out "60-days" and inserting in lieu thereof "20 days"
by striking out "60-day peo i-oil" each place it appears therein and
inserting in lieu thereof "20-day period";
by inserting "(i)" after "such proposed obligation and"; and
by striking out the period at the end of the first sentence
thereof and inserting in lieu thereof the following: "or
(ii) both Houses of Congress adopt a concurrent resolution
approving such obligation. If the Congress adopts such a
concurrent resolution, the guarantee involved-may be made at
any time after the date on which such concurrent resolution
is adopted."
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SECTION 4. Section 302 of the Defense Production Act of 1950 (50 U.S.C.
App. 2092) is amended--
(a) by striking out "60 days" and inserting in lieu thereof "20 days";
(b) by striking out "60-day period" each place it appears therein and
inserting in lieu thereof "20-day period"; and
(c)' in the second sentence thereof;-
by inserting "either (A)" after "such proposed loan and"; and
by striking out the period at the end thereof and inserting
in lieu thereof the following:
"or (B) both Houses of.Congress adopt a concurrent resolution
approving such loan. If the Congress adopts such a concurrent
resolution, the loan involved may he made at any time after the
date on which such concurrent resolution is adopted."
SECTION 5. Section 708A of the Defense Production Act of 1950 (50 U.S.C.
App. ?2158A) is hereby repealed.
GENERAL PROV `STDNS
SECTION 6. Section 101(a) of the Defense Production Act of 1950
(50 U.S.C? App. 2071) is amended by inserting ",services" after "(2)
to allocate materials".
SECTION 7. Section 101(c) of the Defense Production Act (50 U.S.C.
App. 2071) is amended by inserting "services," after "relating to,".
SECTION 8. Section 702(b) of the Defense Production Act_ of 1950
[50 U.S.C. App. 2152 (b)] is amended to read as follows: "(b) The word materials
shall include raw materials, articles, commodities, components, equipment,
munitions, processes, products, supplies, systems, and technical information."
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'
SECTION 9. Section 703(b) of the Defense Production Act of 1950
(50 U.S.C. App. ?2153) is hereby repealed.
SECTION 10. Section 705(e) of the Act he amended by inserting after
the words "...person furnishing such information shall..." the following:
"be exempt from public disclosure under 5 U.S.C. 522(b)(3)(B) and
shall..."
SECTION 11. The second paragraph of Section 705(e) of the Defense
Production Act of 1950 (50 U.S.C. App. ?2155) is hereby repealed.
SECTION 12. Section 711(a)(1) of the Defense Production Act of 1950
(50 U.S.C. App. ?2161) -is amended by striking out "Bureau of the Budget'
and inserting "Office of Management and Budget", in lieu thereof.
SECTION 13. Section 716 of the Defense Production Act of 1950
(50 U.S.C. App. 2165) is amended by striking out "$1,000" and inserting
"$10,000" in lieu thereof.
SECTION 14. The first sentence of section 717(a) of the Defense Production
Act of 1950 (50 U.S.C. App. 2166(a)) is amended by striking out "September 30,
1983" an& inserting in lieu thereof "September 30, 1988".
SECTION 15. Section 719 of the Defense Production Act of 1950 (50 U.S.C.
App. 2168) is amended to read as follows:
"COST ACCOUNTING STANDARDS
"SEC. 7.19. (a) Cost accounting standards shall be used by all relevant
Federal agencies and by defense contractors and their subcontractors
in estimating, accumulating, and reporting costs-in connection
with the pricing, administration, and settlement of all negotiated
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prime contract. and first-tier subcontract national defense contracts
with the United States in excess of $500,000, other than contracts
or subcontracts where the award is based on --
"(1) established catalog or market prices of commercial products;
"(2) prices set by law or regulation; or
"(3) adequate price competition.
"(b) All standards, rules, and regulations issued by the Cost Accounting
Standards Board, and in effect on the day prior to the effective
date of the defense Production Act Amendments of 1983, shall remain
in effect and be subject to the provisions.of this section. These
standards, rules, and regulations shall have the force and effect
of duly promulgated regulations.
"(c) All exemptions, waivers, and other actions by the Cost Accounting
Standards Board in connection with any function transferred by this
section, and in effect at the time of the transfer, shall remain in
effect to the same extent as if such transfer had not occurred, until
amended or rescinded by the Director of the Office of Management and
Budget.
"(d )~? The Director of the Office of Management and Budget (hereinafter re-
ferred to as the 'Director') shall have the authority to take such
action as the Director determines necessary to ensure --
"(1) that the standards, rules, regulations, and interpretations
issued by the Cost Accounting Standards Roard-are consistent
with sound accounting principles and provide for accurate, fair,
and equitable cost determinations;.and
"(2) that such standards, rules, regulations, and interpretations
conform to procurement policies, regulations, proced.ures, or
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forms promulgated pursuant to the office of Federal Procure-
ment Policy Act and other Government procurement authorities.
In performing such function, the Director is authorized to
amend or rescind the standards, rules, regulations, or inter-
pretatioins issued by the Cost Accounting Standards Board.
"(e) (1) Prior to the amendment or rescission of any standard, rule, or
regulation under this section, the Director shall publish in
the Federal Register notice*of the action proposed to be taken,
together with a report concerning such proposal. All parties
affected thereby shall be afforded a period of not less than
ninety days after such publication in which to submit their
views and comments with respect to the proposed action.
"(2) The Director shall give full consideration to the views and
comments submitted before making any final amendment or re-
scission. A final amendment or rescission may not become ef-
fective prior to the expiration of ninety days after final pub-
lication in the Federal Register.
"(f) The publication required by subsection (e)(1) shall contain, with
respect to the proposal --
a full description of such proposal;
"(2) a summary of the reasons for such proposal; and
"(3) an assessment of the probable costs of implementation relative
to the probable benefits of 'such proposal, including an analysis
of --
"(A) the effects of such proposal on inflation;
"(R) the advantages and improvements in the pricing,'administra-
tion, and settlement of contracts which will result from
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such proposal; and
"(C) the effect of such proposal on contract prices.
"(g) The Director is authorized to exempt from the requirements of
this section such classes or categories of defense contractors
or subcontractors under contracts negotiated in connection with
national defense procurements as the Director determines, on the
basis.of the size of the contracts involved, nature of the con-
tractor's business, or otherwise, are appropriate, consistent
with the purposes sought to be achieved by this section.
"(h) The Director is authorized to waive the requirements of this section.
"(i) For the purpose of determining whether a defense contractor or sub-
contractor has complied with duly promulgated costs accounting stan-
dards and has followed consistently his disclosed cost accounting
practices, any authorized' representative of the head of the agency
concerned or of the Comptroller General of the United States shall
have the right to examine and make copies of any documents, papers,
or records of such contractor or subcontractor relating to compliance.
with such cost accounting standards and principles.
"(j)am With respect to any function that may be transferred by this section
and exercised after the effective date of this section, reference
to any other Federal law or regulation to the Cost Accounting Standards
Board shall be deemed to mean the Director.
"(k) The assets, liabilities, contracts, property, and records of the Cost
Ac-counting Standards Board are hereby transferred to the Director.
"(1) The standards,. rules, and regulations made effective under this sec-
tion shall be incorporated into a single, Government-wide procurement
regulation not later than September 30, 1984. When such regulation
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becomes effective,, the provisions of this section shall terminate.
SECTION 16. Section 720 of the Defense Production Act of 1950 (50 U.S.C.
App. 2169) is hereby repealed.
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Defense Production Act
Amendments of 1983
Supporting Rationale
April 1983
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SECTION 1. Name of Act.
Rationale. These are the mobilization amendments of 1983.
SECTION 2. Update of Declaration of Policy.
Rationale. The Declaration of Policy was a call to action in the Korean
War period ?Io meet the needs of the present international situation and to
present a stronger basis for industrial mobilization preparedness, a more
clear, concise and workable declaration of policy is necessary.
SECTION 3. Raising Threshold for Individual Loans and Reducing Congressional
Review Period.
Rationale. Raising the threshold level for individual loans from S38
million tab million for Congressional review, lessens the trend toward
micro management of programs by the legislative branch of Government and re-
stores a degree of Executive discretion in the administration of defense
production programs.
Cutting the Congressional review period from 60 days to 20 days will expedite
the Congressional review of proposed projects and programs, and facilitate
the early initiation of large critical projects and programs to expand
defense production and resource supply.
SECTION 4. Reducing Congressional Review Period.
Cutting the Congressional review period from 60 days to 20 days will expedite
the Congressional review of proposed projects and programs, and facilitate
the early initiation of large critical projects and programs to expand
defense production and resource supply.
SECTION S. Repeal of Terminated International Energy Voluntary Agreement
Authorities.
Rationale. The Energy Policy and Conservation Act of December 22, 1975,
Section 25277h, provided:
"Upon the expiration of the 90-day period which begins on the
date of enactment of this Act, the provisions of Sections 708 and
708A (other than 708A(o)) of the Defense Production Act of 1950 shall
not apply to any agreement or action undertaken for the purpose of
developing or carrying out ('1) the international energy program, or
(2) any allocation, price control, or similar program with respect
to petroleum products under this Act or under the Emergency Petroleum
Allocation Act of 1973. For purposes of Section 708A(o) of the
Defense Production Act of 1950, the effective date of the provisions
of this Act which relate to international voluntary agreements to
carry out the International Energy Program shall be deemed to be
90-days after the date of enactment of this Act."
This amendment deletes from the OPA section 708A, which was superseded
by section 252 of the F.PCA as authority for the "Voluntary Agreement and
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Plan of Action to Implement the International Energy Program." As sub-
section (a) of EPCA section 252 makes that section the sole authority
for antitrust protection in connection with the International Energy
Program (IEP), the similar provision in DPA section 708A(o) is superfluous
for this purpose. Therefore, Section 708A is deleted in its entirety.
SECTION 6. Allocation of Services.
Rationale. Services are a?primary attribute of the Nation's way of
life, increasing many-fold in'importance since 1950 at the time of passage
of the DP Act. The need for, and availability of, all types and kinds of
services is an essential facet of our national defense preparedness status.
For example, the need for transportation, communications and health services
are all vital elements in national defense.
SECTION 7. Service Contracting.
Rationale. Without this amendment, there may be no DPA authority for
Strategic Petroleum Reserve (SPR) service contracting, as use of section
101(a) authority could subject all SPR contractors to defense-related Cost
Accounting Standards.
SECTION 8. Amend Definition of Raw Materials.
Rationale. Accommodate Section 201 which specifies munitions component
parts, s u pip ies and equipment in addition to "materials." The appropriate.
method is to amend the definition of materials to include munitions since
the other items are already covered in the definition. Systems have been
added to the definition of materials to better include transportation and
other service systems since the present definition includes processes but
not systems.
SECTION 9. Repeals Terminated Title IV 'Authority.
Rationale. Title IV of the-Act on Price and Wage Stabilization was
terminated on April 30, 1953. Repeal of Section 703(b) on the heads and
assistant heads of any independent agency to administer the authority
conferred'by Title IV of the Act is needed because the section is obsolete.
SECTION 10. Confidentiality of Information.
For over 25 years, under section 705(e) of the Act, the industrial commun-
ity has had specific statutory assurance that information obtained under
the Defense Production Act of 1950, as amended, (the Act) would be held on
a confidential basis unless the President or his delegate determine that
to withhold such information would be contrary to the interest of the na-
tional defense. The Freedom of Information Act of 1967 did not affect this
statutory assurance of confidentiality since it provided protection for ma-
terial specifically exempt from disclosure by statute.
However, section 5(b) of the Government in the Sunshine Act, amended the
Freedom of Information Act, effective March 12, 1977, to allow the with-
holding of material specifically exempt from disclosure by statute.only
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where such statute: (1) requires that the matters be withheld from the pub-
lic in such a manner as-to leave no discretion on the issues or (2) estab-
lishes particular criteria for withholding or refers to particular types of
The amendment to the Freedom of Information Act (subsection 552(b)(3)) con-
tained in the Government in the Sunshine Act raises serious questions concern-
ing existing statutes as authority for protecting information. Providing a
broad exemption from public disclosure of all information obtained under author.
ity of the Act will eliminate the possibility of failing to identify, in a
specific listing of information categories, types of information which should
be protected from public disclosure.
The proposed amendment to section 705(e) of the Defense Production Act of 1950,
as amended, is required in order to continue to assure the industrial community
that identity of their markets, customers, suppliers, production utilization
and capacity, share of markets, and the details of business transactions will
continue to be held by-the Government in confidence.
While it is true that certain exemptions to the Freedom of Information Act
other than exemption three might be applicable to some information obtained
under the Act, they may not protect all the sensitive information received by
the Government in administering the Act. Release of trade and commercial in.
'formation could reveal sensitive business information causing substantial dam-
age to involved firms. This problem is aggrevated by the fact that the sensi-
tive company information is required to be submitted by law and penalties are
provided for not submitting required information. Thus, it is only fair to. the
reporting entity that the Government provide adequate statutory assurances of
confidentiality concerning the disclosure*of information required to be pro-
vided under the Act.
SECTION 11. Repeals Terminated Title IV Authority.
Rationale. The Office of Price Stabilization no longer exists and
Title IV Price and Wage Stabilization authorities expired on. April 30, 1053.
Repeal of the second paragraph of Section 705(e) on confidentiality of
Office of Price Stabilization information is necessary because the section
is obsolete.
SECTION 12. Update Agency Name.
Rationale. In section 711(a)(1) the Office of Management and Budget
replaces Bureau of the Budget.
SECTION 13. Increase Penalties.
Rationale. Fines should reflect current financial realities and be
sufficiently large to provide deterrence.
SECTION 14. Five-Year Extension of the Act.
Rationale. A 5-year extension of the Act is necessary to ensure
Continuity in these vital defense mobilization preparedness programs.
An interruption of these authorities during this mobilization period will
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have a disastrous impact on defense production and the cooperation of
industry in meeting national defense needs.
A simple 5-year extension of the Defense Production Act will clearly
demonstrate the national commitment to mobilization of the Nation's re-
sources in an emergency. In addition, a 5-year extension of the Defense
Production Act provides long-term continuity to defense preparedness
programs, strengthens long-term preparedness planning, and demonstrates
a firm national commitment to maintain the responsiveness of the defense
industrial base. -
The authorities in the Act are used on a daily basis for maintaining our
defense posture. Contractors develop production schedules based on assur-
ance of obtaining materials, components, and other necessities through
extensions of priorities on their prime defense contracts. This results
in benefit to taxpayers from the reduced costs of defense programs asso-
ciated with shortened production lead times and maintenance of production
schedules.
SECTION 15. Transfer Certain of the Authorities and Functions of the
Defunct Cost Accounting Standards Board to the Director, Office of Manage-
ment and Budget.
? These authorities and functions were set out in Section 719 of the Defense
Production Act. The Cost Accounting Standards Board fulfilled its mandate
to establish cost accounting standards for defense contractors, but there
are continuing functions required to be performed in maintaining the stan
dards, including the amendment or modification of standards, granting of waivers
for individual contracts, and establishing exemptions. These standards have.
the force and effect of law and must be followed. Thus, it is necessary to
transfer the authority to exercise these functions and the authority to main-
tain, interpret, and administer these standards. This bill would transfer
the function to the Director, Office of ?1 6agement and Budget.
As modified, section 719(a) requires that the cost accounting standards shall
be used by Federal agencies and by defense contractors and subcontractors in
estimating, accumulating, and reporting costs in connection with the pricing,
administration and settlement of all negotiated prime contract and subcontract
national defense contracts in excess of 5500,000. Where the contract.award is
based on established catalog or market prices of commercial products, prices
set by law or regulation, or adequate price competition, there is an exemption
from application of this provision.
Current law does not provid# an exception for contract -awards based on adequate
price competition. The Truth-in-Negotiations Act (Public Law 87-653) required
prime contractors and subcontractors to submit cost and pricing data to the
government in connection with the award of negotiated contracts or the pricing
of contract modifications above a certain dollar threshold. That statute per-
mits contractors and subcontractors to be exempt from this requirement where
the price negotiated is based on adequate price competition. Accordingly, this
exception would provide a uniform practice with regard to the pricing of govern-
ment contracts.
Section 719(b) provides that all standards, rules, and regulations which were
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issued by the Board and. in effect before passage of this legislation shall
remain in effect, subject to other provisions of this section. These stan-
dards, rules, and regulations shall have the force and effect of duly pro-
mulgated regulations, clarifying that the:standards are to be made part of
the appropriate government procurement regulations and are to be accorded
the same legal status as those regulations.
Section 719(c) provides that all exemptions, waivers and other actions by
the Cost Accounting Standards Board and in effect before passage of this
legislation shall remain in effect, unless amended or rescinded by the Dir-
ector of the Office of Management and Budget..
Section 719(d) authorized the Director of the Office of Management and Bud-
get to take any actions necessary to ensure that (1) CAS Board standards,
rules, regulations and interpretations are consistent with sound accounting
principles and (2) such standards, rules, regulations, and interpretations
conform to procurement, policies, regulations, procedures or forms promul-
gated pursuant to the Office of Federal Procurement Policy Act or other
government procurement authorities. The Director is also authorized in this
subsection to amend or rescind the standards, rules, regulations or interpre-
tations issued by the Cost Accounting Standards Board.
.Section 719(e) requires the Director to publish in the Federal Register notice
of a proposed amendment or rescission to any cost accounting standard, rule,
or regulation. Parties are given 90 days to comment on any such action, and
the Director must give full consideration to such views before making a final
amendment or rescission.
Section 719(f) sets forth the minimum content of each such publication.
Section 719(g) authorizes the Director to exempt classes or categories of
defense contractors or subcontractors fpo:i. he requirements of the Act, based
upon the size of the contracts invol ved,,' the nature of the contractor's busi-
ness, or on other considerations which are consistent with the purposes to be
achieved by the 'Act.
Section 7,19(h) authorized the Director to waive the requirements of the Act.
Section 719(1) provides authorization for the agency concerned, or the Comp-
troller General of the United States, to examine the records of defense con-
tractors and subcontractors to determine compliance with cost accounting
standards and principles.
Section 719(j) provides that reference to the CAS Board in any other law
shall be deemed to mean the Director of the Office of Management and Budget.
Section 719(k) transfers the assets, liabilities, contracts, property and
records of the CAS Board to the Director of the Office of Management and
Budget.
Section 719(1) states that the provisions of the Act, including any. standards,
rules, regulations made effective by the Act shall sunset on September 30, 1984,
after incorporation into a government-wide procurement regulation, to assure
that cost accounting standards are fully integrated into the existing system for
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promulgation amendment, and rescission of procurement regulations.
SECTION 16. Repeal of Terminated National Commission on Supplies and
Shortages.
Rationale. The Commission expired on March 31, 1977. Its functions
are provided by the Departments of Commerce and Interior and FEMA.
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