On March 18, 2020, President Donald Trump announced that he will invoke The Defense Production Act of 1950 (the “Act”) to overcome medical supply shortages resulting from the coronavirus pandemic.
The Act provides the President of the United States with the authority to require any capable person or company to accept government issued product orders in preference to other product orders as necessary to promote national defense and to allocate materials, services, and facilities as he deems necessary. President Trump’s executive order designated medical resources as scarce and critical, which means that the Act grants him the authority to control the general distribution of these medical materials in the civilian market. He delegated this authority to Secretary of Health and Human Services Alex Azar. Addressing these shortages is an important action being taken to ensure that medical resources, such as personal protective gear and ventilators, are available to the healthcare system.
As Secretary Azar addresses these critical shortages, the manufacturers and suppliers approached by the government should be aware of their obligations under the Act and make plans to preserve the long term economic viability of their respective businesses. What are the consequences of prioritizing new orders over pre-existing orders? Who will be responsible for the resulting breaches, delays, and frustration of contracts? Will the manufacturer be held responsible for product liability issues borne out of less than ideal manufacturing circumstances? Is the government contractor defense available in these circumstances? You may face these questions and other legal issues if your company is approached by the government in this time of crisis. It is important for every business to prepare for the challenges that lie ahead. Metz Lewis attorneys are mobilized to advise businesses and individuals regarding coronavirus-related issues. We are monitoring developments so that we may continue to offer you proven guidance during this pandemic.
This was written by Timothy Berkebile