The Defense Production Act: Assessing the Ukraine Arms Shortage

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| Aug 3, 2022

Biggerstaff - Defense Production Act

As Ukraine continues to defy early predictions of how long it can resist Russia’s invading forces, Ukraine’s partners are facing a growing dilemma. Supplies of arms and munitions critical to Ukraine’s resistance are dwindling. Other nations are deciding whether to continue arming Ukraine or to preserve those arms for their own defense. Canada and Germany, both members of the NATO defense alliance, expressed concerns earlier this year about sending arms to Ukraine at the expense of their own military readiness. The United States, by far the leading external contributor to Ukraine’s defense, is thus far continuing to provide lethal arms. But at what expense and risk?

The United States has transferred over 6,500 Javelin anti-tank missiles to Ukraine. One analyst estimates these transfers have exhausted at least one-third of DoD’s supply. The United States has similarly depleted one-quarter of its Stinger missile inventory. These shortages do not only present a near-term risk to the United States’ ability to continue arming Ukraine or its capacity to respond to emergent threats. They suggest that the nation’s industrial base is underprepared for a large-scale, high-intensity conflict – such as a NATO-American entry into the Russo-Ukraine conflict or a potential armed conflict with China over Taiwan.

For instance, it may take at least 32 months to replenish the U.S. Stinger supply. In a war with a near-peer competitor, critics say, the United States likely will not have months to ramp up production of Javelins and other weapons. The situation has led some to question why the Biden administration has yet to invoke the Defense Production Act to energize the defense sector to better meet defense needs. In their eyes, the current arms shortage should be an impetus for overhauling the defense industrial base to solve the Ukraine shortage over the near term and more significant sustainment challenges over the long.

This post provides an overview of the Defense Production Act’s authorities and limitations and assesses whether the Act is a viable option for tackling current and future defense challenges. Although these challenges apply to arms other than Javelins or Stingers, the current missile shortage is a helpful lens through which to view the Act’s potential and limitations. To place the discussion in context, the post begins with a brief history of U.S. security assistance to Ukraine.

Security Assistance to Ukraine

At the outbreak of Russia’s 2014 invasion, the Obama administration declined to supply Ukraine with lethal arms or munitions. Instead, the United States provided non-lethal aid such as night vision devices, blankets, radios, and medical and protective equipment. In 2018, the Trump administration changed course when it included lethal equipment and munitions in its security assistance packages to Ukraine.

The United States has provided this assistance through a variety of authorities. Foreign Military Sales and Direct Commercial Sales, for example, supply Ukraine with arms and equipment from defense manufacturers’ inventories. The DoD has also transferred unused, on-hand equipment to Ukraine through the Excess Defense Articles Program. These programs are relatively routine, albeit seldom operating at a scale the conflict in Ukraine requires.

The Biden administration is also using its Presidential Drawdown Authority, which in an “unforeseen emergency” permits the use of DoD’s stock of supplies to rapidly provide allies with critical equipment and munitions (see Foreign Assistance Act of 1961, § 506). The speed and flexibility of drawdowns have made them a critical tool in the Biden administration’s response to Ukraine’s emergent needs as the war develops and strategies and tactics evolve. Whereas other programs can take weeks or months, drawdowns can transfer items much more quickly. Since August 2021, the United States has executed 14 equipment drawdowns, including Javelin and Stinger missiles, armored vehicles, patrol boats, grenade launchers, machine guns, and, most recently, High Mobility Artillery Rocket Systems (HIMARS) to extend the range of Ukraine’s standard artillery platforms. The transfers are valued at over $5 billion.

As noted, these actions have generated concern, for the United States is not only depleting commercially available supplies and equipment, but also its military stockpiles. Congress has increased the annual cap for FY22 from $100 million to $11 billion, indicating more drawdowns may be on the way.

The Defense Production Act

Like the Second World War-era War Powers Acts (1941 and 1942), the Defense Production Act of 1950, passed during the Korean War, provided the President broad and flexible authority to prepare, mobilize, and stabilize the defense industry to ensure the national defense. As it pertains to the current situation, the President can use several authorities to regulate arms production.

First, the President can direct the prioritization of defense-related contracts ahead of other contracts and the allocation of resources to facilitate their performance. The Act provides:

The President is authorized (1) to require that performance under contracts or orders (other than contracts of employment) which he deems necessary or appropriate to promote the national defense shall take priority over performance under any other contract or order, and, for the purpose of assuring such priority, to require acceptance and performance of such contracts or orders in preference to other contracts or orders by any person he finds to be capable of their performance, and (2) to allocate materials, services, and facilities in such manner, upon such conditions, and to such extent as he shall deem necessary or appropriate to promote the national defense. (§ 101(a))

The DoD uses prioritization thousands of times a year, including for missile systems, by annotating priority codes on its contracts with defense contractors (see 15 C.F.R. § 700.3). The DoD can also prioritize contracts to which it is not a party, such as a contract between a manufacturer and Ukraine.

Allocations, by contrast, require specific presidential findings that the materials concerned are scarce, and are used far less frequently. The President can use allocation authority to order a company to reserve materials or services in order to fill prioritized contracts, direct the company to produce or not produce an item, or specify a maximum quantity of material it can use. For example, President Truman invoked the Defense Production Act to ensure a steady supply of steel, copper, aluminum, and other materials critical to the national defense during the Korean War. Beyond the military context, the Trump administration used its prioritization and allocation authorities to ramp up the production of ventilators and N-95 masks in response to the COVID-19 pandemic, and the Biden administration used them to increase baby formula supplies in the face of a recent shortage.

Next, the Act provides a variety of options with which to incentivize the defense industry to “create, maintain, protect, expand, or restore domestic industrial base capabilities essential for the national defense.” These incentives include direct loans or loan guarantees (see § 301), which have not been used in over three decades. More commonly used incentives include direct purchases, purchase commitments, subsidy payments, and “encouragement” or “development” provisions (see § 303). The President must make specific findings, however, before an agency can enter into a contract pursuant to these authorities. As part of its clean energy platform, the Biden administration invoked its incentive authority outside the DoD to strengthen the industrial base for “large-capacity batteries for the automotive, e-mobility, and stationary sectors.”

Thus, the Act provides several authorities that could help address current shortages, like missiles, as well as longer-term challenges.

Assessment: Opportunities and Limitations

Prioritization

One could argue that the Biden administration should use its authority to prioritize existing contracts or require the acceptance of new contracts to address the shortage. But prioritization would be unlikely to have an immediate impact on arms shipments to Ukraine. There is no civilian market for anti-aircraft or anti-tank missiles, so there are no competing contracts to prioritize. Forcing defense manufacturers to accept new contracts would also be unnecessary because contractor reluctance is not the obstacle. Instead, the problem is a lack of available parts and materials, an increasingly globalized supply chain, and aging weapon systems. Much of the shortage in missiles seems to be linked to a lack of demand by DoD that, in turn, has made component parts scarce.

Thus, prioritization would help if there were orders for parts to prioritize, which is not the current case, for instance, with missiles. On the other hand, prioritization could prove potent in an armed conflict with a strategic competitor that requires massive mobilizations of other strategic materials such as steel or petroleum.

Allocation

Similarly, one may argue that the President should use his allocation authority to regulate supply chains to ensure defense contractors receive the downstream components needed to ramp up production of exhausted missiles and other munitions. It is unclear, however, how squarely this authority would address the Ukraine problem. As an example, Raytheon’s challenge with ramping up Stinger production is not that other firms are competing for component parts, as was the case in the pandemic response and baby formula shortage, but rather an insufficient supply of parts across the market. Therefore, allocation orders would provide minimal relief.

While prior administrations may have viewed the use of allocation authority as intrusive and unnecessary with respect to the military operations of the 1990s and 2000s, an armed conflict with a strategic competitor might require a return to the larger-scale industrial buildups reminiscent of World War II and the Cold War. If so, allocations could prove instrumental in rationing strategic supplies such as petroleum, steel, copper, and other materials.

Incentives

In contrast to prioritization and allocation authorities, the Act’s incentive authorities show more promise in resolving both short- and long-term challenges. To account for the missile shortfall, for example, Raytheon may re-engineer the Stinger’s electronics to use more readily available parts. In conjunction, the Office of the Under Secretary of Defense for Acquisition and Sustainment has announced that a portion of a $600 million Ukraine aid package will be used to fund incentive programs to “mitigate [defense industrial base] constraints to enable faster missile production in order to resupply U.S. stocks transferred to Ukraine.” Potential programs include next-generation electronics related to missile systems’ electronic fire controls and safety mechanisms, as well as fabrication and component requirements.

As for the long-term, a review of current incentive programs indicates that the DoD is laying the foundations for a more flexible defense industrial base that can respond to the challenges of an armed conflict with a strategic competitor. Current areas of investment opportunity include fuel and engine technology for hypersonic missiles (see, e.g. here), chemicals used in solid rocket fuel, and production capacity expansion for Virginia class submarines. The fact that these programs are oriented toward the Pacific, not Eastern Europe, indicates that the White House and DoD are, at a minimum, examining how the Defense Production Act can prepare the defense industry for more elevated future threats.

Conclusion

In summary, the Defense Production Act’s authorities are broad, but are not a panacea for every production problem. For instance, the Act is unlikely to provide immediate relief to the current missile shortage because prioritization and allocation can only do so much when components are scarce or obsolete. Incentive programs are encouraging, but are not a tool for quick surges. Investments and innovation take time to germinate. Accordingly, the Act is more useful in addressing larger-scale or longer-term sustainment challenges. What remains to be seen is how the defense industry’s struggle with current challenges will serve as a stress test to identify lessons learned for addressing security challenges on the horizon.

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Major William C. Biggerstaff is a military professor at the Stockton Center for International Law at the U.S. Naval War College, where he co-teaches a course on the Law of Armed Conflict.

 

Photo credit: Mil.gov.ua