The rise of DPAS rated orders and how to handle them

By Skyler Handl, Corporate Counsel, Public Sector

Your marketing strategy may focus on one thing, but the government’s increasing application of the Defense Production Act may have other plans for you. If your government business has a manufacturing component, it’s important to be able to navigate this legislation.

The COVID-19 pandemic and ensuing supply chain shortages have put a spotlight on Defense Production Act (DPA) 15 C.F.R. Part 700.  Enacted in 1950, this post World War II era legislation grants the U.S. government authority to jump to the front of the line in acquiring goods or services required to meet national defense requirements and promote “emergency preparedness.” The Department of Defense issues approximately 300,000 DPAS (Defense Priorities and Allocation Systems) rated orders annually. While traditionally used for military and national security acquisitions, the DPA recently made national news for its use by the U.S. government to acquire personal protective equipment (PPE) and baby formula. It has even been invoked as a possible way to get gas and oil prices under control.

Receiving a DPAS order

Despite its long history and extensive use, many commercial companies remain largely unfamiliar with the operation and requirements of the DPA. From semi-conductors to baby formula and building materials, familiarity with the DPA is becoming more of a necessity for commercial industry.  

The DPA requires commercial companies, both private and public owned, to accept DPAS rated orders from the U.S. government and prioritize those orders over unrated orders, even if the customers for the unrated orders have been waiting a long time. Failure to comply with the DPA can potentially result in criminal liability. Furthermore, the U.S. government can seek an injunction to compel performance of the DPAS rated order.  

How do you know if you received a DPAS rated order?

A valid DPAS rated order will contain: 1) a priority rating of either “DO” or “DX”, 2) a requested delivery date, 3) a clear statement on the face of the order stating it is a rated order and 4) an electronic or manual signature. Ratings may only be applied by the U.S. government but flow through the entire supply chain.

The DPA requires acceptance of DPAS rated orders within a specified amount of time. DX rated orders must be accepted within 10 working days, and DO rated orders must be accepted within 15 working days. DX rated orders receive the highest priority followed by DO rated orders and then everything else, including unrated orders.

Rejecting a DPAS order

Only under limited circumstances may a DPAS order be rejected. Specifically, if a contractor or subcontractor is unable to fill the order by the requested date, they must advise the customer of a date by which the order can be filled. Again, these orders must receive priority over commercial and unrated orders, so an inability to meet a requested delivery date because of previously placed commercial or unrated orders is unacceptable.

The feasibility of meeting a date must be calculated based on labor and material being fully prioritized to the rated order. If there is a conflict between rated orders where a contractor or subcontractor is already performing on another rated order and would not be able to meet the date of the newly requested rated order, then the newly requested order must be rejected with an alternate delivery date provided. Other reasons for rejection include:

• If the customer is unwilling or unable to meet regularly established terms
• If the order is for an item or service not provided by the contractor or subcontractor
• If the order is for an item used internally by the contractor or subcontractor which has not been sold for two years prior to the receipt of the rated order
• If the customer makes the item being ordered

The DPA further requires customers to be notified immediately if performance will be delayed.

The increasing volume of DPAS rated orders across all industries, the DPA’s complexity, and the risks of non-compliance require the special attention of contractors in the government’s supply chain. More information and comprehensive training on the DPA is available through the Department of Commerce website at the following link: Defense Priorities & Allocations System Program (DPAS) (doc.gov)

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