House Committee on Financial Services: Mission Critical: Restoring National Security as the Focus of Defense Production Act Reauthorization, Part II
House Committee on Financial Services
Subcommittee on National Security, Illicit Finance, and International Financial Institutions
Mission Critical: Restoring National Security as the Focus of Defense Production Act Reauthorization, Part II
Topline
- Republicans asked about using the DPA to strengthen our competitive posture with China.
- Members from both parties asked about using the DPA to enhance the defense industrial base.
Witnesses
- Dr. Laura Taylor-Kale, Assistant Secretary of Defense for Industrial Base Policy, U.S. Department of Defense (DOD)
- Ms. Thea Rozman Kendler, Assistant Secretary for Export Administration, Bureau of Industry and Security (BIS), U.S. Department of Commerce
- Ms. Cynthia Spishak, Associate Administrator, Federal Emergency Management Agency (FEMA)
Opening Statements
Subcommittee Chair Blaine Luetkemeyer (R-Mo.)
In his opening statement, Luetkemeyer warned that the Defense Production Act (DPA) is set to expire in 2025. He noted that since DPA was reauthorized in 2018, the federal government has used it at a pace far exceeding previous years and in more creative ways. Luetkemeyer said he was encouraged that the Department of Defense issued its first-ever National Defense Industrial Strategy in 2023. He explained that many of the expanded authorities the DPA is being used for have very little to do with the original purpose of the legislation, which Luetkemeyer cited as an area of concern. He concluded that the DPA is an essential mechanism that deserves reauthorization for the next fiscal year but emphasized that it requires review to ensure that it is not just rubber-stamped by Congress.
Subcommittee Ranking Member Joyce Beatty (D-Ohio)
In her opening statement, Beatty explained that Congress has amended the definition of national defense to include emergency preparedness, critical infrastructure protection, homeland security, and more. She clarified that the DPA does not give the president a blank check to spend money, while the authority must be renewed periodically. Beatty emphasized the need to assess national defense and leverage tools like the DPA wisely to bolster domestic supply chains, support our allies, and ensure our energy independence. She concluded that the Executive Branch has used the DPA appropriately to accelerate the manufacturing of clean energy technologies, noting the Department of Defense’s statement that climate change must be considered as a part of our national security strategy.
Full Committee Ranking Member Maxine Waters (D-Calif.)
In her opening statement, Waters described the DPA as an important tool that ensures the country can respond to any security threats that may arise. She warned about the security threats coming from the former President of the United States, citing Trump’s comments about bloodshed if he loses the election. Waters warned this presents a major threat.
Testimony
Dr. Laura Taylor-Kale, Assistant Secretary of Defense for Industrial Base Policy, U.S. Department of Defense (DOD)
In her testimony, Dr. Taylor-Kale described reauthorizing the Defense Production Act as one of the most important actions that Congress can take to ensure that the defense industrial base is prepared. She discussed how the Executive Branch has historically used DPA authorities to manage defense production capacities and strengthen our defense industrial base during times of war, peace, and emergencies. Taylor-Kale reiterated that the DPA will remain an essential national defense tool for protecting our supply chains, particularly for critical weapons systems, in the future.
Taylor-Kale discussed how adversarial capital investments in the US industrial base further intend to weaken the US by robbing American industry of technological innovation. She cited the DOD’s first-ever National Defense Industrial Strategy and highlighted the report’s four priorities: resilient supply chains, workforce readiness, flexible acquisition strategies, and economic deterrence. Taylor-Kale concluded that since the last DPA reauthorization in 2018, appropriations have increased dramatically for Title III, from an average of $70 million per year to $1 billion.
Thea Rozman Kendler, Assistant Secretary for Export Administration, Bureau of Industry and Security (BIS), U.S. Department of Commerce
In her testimony, Kendler explained that DPA Title I authorities authorize the president to require acceptance and priority of contracts and orders to promote the national defense. She warned that
if the DPA’s Title I authority were to lapse, the Department of Commerce would lose its statutory authority to support procurement on behalf of any entity other than the US Armed Services. Kendler discussed the Commerce Department’s work to conduct a wide range of surveys on the US industrial base in areas critical to national security. She explained that information from those surveys will help Commerce to understand the health and viability of these sectors. Kendler concluded by discussing the Department’s January-issued survey, which aims to understand how developers are developing frontier AI models and what they are doing to keep those models safe and secure.
Ms. Cynthia Spishak, Associate Administrator, Federal Emergency Management Agency (FEMA)
In her testimony, Spishak explained that the DPA was intended to ensure that the federal government could efficiently channel industrial resources during times of crisis. She noted that in addition to supporting DOD programs, the DPA affords critical authorities to FEMA and its interagency partners for carrying out civil defense efforts that underpin disaster preparedness. Spishak said that FEMA’s continued stewardship of the DPA underscores the necessity of maintaining a central coordinating body that is adept at navigating the complexity of crises. She discussed how reauthorizing the expiring provisions of the DPA will enable FEMA, the Department of Homeland Security, and other federal agencies to continue efforts vital to emergency preparedness, including reauthorizing contracts related to emergency preparedness and critical infrastructure protection. Spishak concluded that Congress must ensure the maximum flexibility in the DPA Authorities to ensure that the United States can mobilize and respond to a multitude of threats with efficiency and precision within the necessary controls.
Question & Answer
China
Luetkemeyer asked whether the US is prepared to meet and defeat the global threats to the United States, citing the war in Ukraine and a potential conflict in China. Taylor-Kale said the DOD learned a lot after COVID and Ukraine about what is needed to mobilize the industrial base, citing the importance of having surge capacity. She noted the PRC remains the US’ pacing threat and described Taiwan as the pacing scenario and emphasized the need for the authorities in the DPA for the acquisition of critical technology.
Rep. Andy Barr (R-Ky.) asked about how the DOD is using the DPA and the United States’ rich domestic resources to ensure that we can compete with China. Taylor-Kale noted that critical minerals and strategic materials are a key component for many of our weapons systems, including many of the ones used in Ukraine. She said the DOD invested over $1 billion in critical minerals and strategic materials through the DPA since 2020.
Rep. Dan Meuser (R-Pa.) asked whether heat pumps worth $250 million and $250 million of critical materials from China were purchased under the DPA last year. Taylor-Kale said the question should be deferred to the Department of Energy.
Rep. Zach Nunn (R-Iowa) asked what more can be done with our Five Eyes partners, minus New Zealand, to contain our adversaries in the South China Sea. Taylor-Kale said there are discussions with the UK, Canada, and Australia to address how we can use mutual benefits to address defense critical supply chains in each nation.
Rep. Monica De La Cruz (R-Texas) asked whether China would lower prices to drive US critical mineral companies out of business if DPA provisions like price floors were not in place. Taylor-Kale emphasized concerns about the PRC’s interventions in the critical mineral space, and noted it is something that the DOD is focusing on using Title III investment.
De La Cruz asked whether China could drop prices to drive the US out of business. Taylor-Kale said increasing domestic production is a deterrent and reiterated that making investments in critical aspects of defense supply chains will serve as a deterrent for our adversaries. Kendler said BIS is deeply concerned about the ability of China to use critical resources in a way that is contrary to US national security, citing China’s controls on gallium and germanium as an example. She explained that Commerce has used their DPA authority under Title VII to look into iron boron permanent magnets and vanadium.
Rep. Young Kim (R-Calif.) asked Taylor-Kale about bridging the gap in shipbuilding between the CCP and US. Taylor-Kale noted the Defense Production Act is one of multiple tools the US has to strengthen the shipbuilding industry.
Funding for Foreign Entities
Nunn asked whether the DOD would support Title III awards being made available for foreign companies, even if they spend the funds abroad. Taylor-Kale said the DOD applauds Congress for redefining domestic sources to include Australia and the UK. She explained they give awards to companies that are planning to do projects in the US and Canada with a priority on domestic sourcing and domestic production.
Nunn asked whether the DOD could award DPA Title III awards to a foreign entity to build in a foreign country. Taylor-Kale said they have the ability to provide awards to companies that are based in the US, UK, Canada, and Australia.
Defense Industrial Base
Beatty asked whether the DPA fits in with other tools that the Executive Branch has to shape the industrial base. Spishak said yes, noting that it plays a critical role and can be used in situations other than an emergency.
Rep. Roger Williams (R-Texas) asked whether our defense industrial base is sufficiently equipped, and how it can be enhanced to optimize our national security capacity. Taylor-Kale said the DOD uses the DPA every day to prioritize and build more capabilities across the industrial base. She noted the National Defense Industrial Strategy highlights the importance of stockpiling and creating more resilient supply chains.
Williams asked Taylor-Kale to elaborate on the relationship between small businesses and the industrial base. Taylor-Kale noted that 40% of DPA Title III awards go to small businesses. She explained how this creates more competition and alleviates pressure points in the supply chain by eliminating single sources of technology and materials. Williams asked Taylor-Kale to elaborate on how increasing competition could drive prices down. She reiterated that addressing single sourcing builds more competition in the industrial base.
Rep. Barry Loudermilk (R-Ga.) asked what Congress should keep in mind as they move towards reauthorizing the DPA, particularly with respect to cybersecurity. Taylor-Kale said the DOD has a defense industrial base cybersecurity strategy, which she described as a key area for small businesses and manufacturing. Spishak said the updated definition of the DPA covers the protection and restoration of critical infrastructure systems.
Kim asked about an industrial base assessment and how it relates to Title VII. Kendler explained the Title VII Assessment is very important to protecting our national security. She explained how BIS works to survey the industry in various areas that are important to our national defense and finds information that is only available through our surveys.
Kim asked Spishak to discuss the impact of the Defense Production Act Committee on the industrial base. Spishak explained the Committee is intended to have strategic policy conversations regarding the Defense Production Act at the Secretary or Administrator level. She noted the Committee created a network allowing agencies to be well coordinated.
Green Technology & Critical Minerals
Beatty asked how the DPA uses green technology to address national defense. Taylor-Kale noted that these uses have increased over the past several years. She said it is key to ensure our supply chains have the critical components and minerals they need and to make sure that we can get the manufacturing of components onshore.
Barr asked Taylor-Kale to discuss the role our permitting process plays in our inability to mine the minerals needed for our national defense. Taylor-Kale cited domestic production and increased capacity as priorities for the DOD. She noted the DOD uses the DPA Title III authorities to work with key allies like Canada and Australia to ensure the supply of minerals for our weapons systems.
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