The Biden administration announced changes to the Defense Production Act Loan Program on Friday to ensure that funds can only be used for direct Covid-19 response and medical-related supply chain projects.
The move, the administration said, will streamline the use of the program that allows the federal government to compel manufacturing production for national defense, and make sure crucial funds needed to beat Covid-19 go directly toward the fight against the disease that has claimed more than 580,000 lives in the United States.
The loan program of the Defense Production Act, or DPA, was announced last May via an executive order by then-President Donald Trump, allowing companies supporting the pandemic response to apply for money through the Cold War-era law. President Joe Biden’s administration says the program has received a large amount of loan applications from companies that are not directly battling Covid-19.
Even more, hundreds of millions of dollars appropriated from the act last year for Covid-19 response did not go to manufacturing personal protective equipment (PPE) or for securing the raw materials needed to produce the vaccine, but instead went to defense projects such as ship building, aviation engineering and body armor manufacturing.
Biden has used the act almost immediately since taking office to increase PPE production and speed up vaccine manufacturing. In March, he said the U.S. was able to speed up its vaccination timeline due in part to the use of the act in securing necessary equipment and materials to accelerate production of the single dose Johnson & Johnson vaccine.
Going forward, the administration said Friday, the Defense Production Act Loan Program can only be used for direct Covid-19 response and will no longer take applications for nonmedical projects. Current applications for nonmedical projects will be sent to alternative government programs that are more appropriate, the administration said.
In May 2020, the Department of Defense allocated $688 million of the $1 billion it was given under the Coronavirus Aid, Relief and Economic Security Act to defense industrial base investment, according to a report by the Congressional Research Service.
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Some money did go to things such as pharmaceutical production, vaccine-supply chain development and the production of ventilators. But other funds went to various defense projects that at the time a Defense Department spokesperson said would help “retain critical workforce capabilities throughout the disruption caused by Covid-19 and to restore some jobs lost because of the pandemic."
The loan program's streamlining efforts announced Friday would prevent cases like that going forward. The changes will "focus on building the resiliency of domestic medical supply chains" and "ensure that companies directly involved in the pandemic response receive the support they need to continue their urgent work," a spokesperson for the federal government's Development Finance Corporation said in an email Friday.
The Trump administration’s use of the Defense Production Act has already yielded questions and investigation. An inspector general's report found no misconduct over a $765 million loan to Eastman Kodak that stalled, but Congress is still investigating the loan, according to a recent statement issued by the House Select Committee on the Coronavirus Crisis.