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                                                       Calendar No. 294
108th Congress                                                   Report
                                 SENATE
 1st Session                                                    108-156

======================================================================



 
             DEFENSE PRODUCTION REAUTHORIZATION ACT OF 2003

                                _______
                                

  September 30 (legislative day, September 29), 2003.--Ordered to be 
                                printed

                                _______
                                

Mr. Shelby, from the Committee on Banking, Housing, and Urban Affairs, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 1680]

    The Committee on Banking, Housing, and Urban Affairs, 
having had under consideration an original bill to reauthorize 
the Defense Production Act of 1950, and for other purposes, 
having considered the same, reports favorably thereon and 
recommends that the bill do pass.

                               I. PURPOSE

    The Defense Production Reauthorization Act of 2003 
reauthorizes the Defense Production Act of 1950 for five years, 
until September 30, 2008, and amends the Defense Production Act 
of 1950 by incorporating into its text increased emphasis on 
the threat to U.S. national and economic security from 
terrorism. In addition, the bill makes explicit authority to 
use the Defense Production Act to protect critical 
infrastructure. Finally, the reauthorizing legislation 
clarifies the authority of the Executive Branch to collect 
information required to provide assessments of the nation's 
industrial base for national defense.

                 II. BACKGROUND AND DESCRIPTION OF BILL

    The Defense Production Act of 1950 authorizes the President 
to prioritize and allocate contracts with private industry for 
the purpose of promoting the national defense. In addition to 
the Act's authorities for prioritizing and allocating federal 
contracts, it also provides the Government the legal authority 
to guarantee financing for the recapitalization of private 
industry consistent with national security requirements. Over 
the years, the Act's authorities have been expanded to include 
crises resulting from natural disasters and from man-caused 
events not necessarily related to or categorized as an armed 
attack on the United States. Most notably, in 1994, the Robert 
T. Stafford Disaster Relief and Emergency Assistance Act 
(hereafter, The Stafford Act) was formally incorporated into 
the Defense Production Act of 1950, thereby ensuring that the 
underlying legal authorities would be available for crises 
other than direct military threats to the United States.
    Since the terrorist attacks on U.S. embassies in East 
Africa in 1998, the October 2000attack on the USS Cole in the 
port of Aden, and the September 11, 2001, attacks on the World Trade 
Center and the Pentagon, there has been increased emphasis in U.S. 
national security planning on the threat of continued terrorist 
attacks. Because terrorists seek out vulnerabilities in their intended 
victims when planning to strike, there has been increasing focus on the 
vulnerability of this nation's telecommunications systems, financial 
and banking networks, transportation systems, power grids, food and 
water supplies, and other elements of what is referred to as the 
nation's critical infrastructure.
    During a June 5, 2003, public hearing held by the Committee 
on Banking, Housing, and Urban Affairs, witnesses from the 
Administration testified that, in the view of the departments 
they represented, the Defense Production Act's authorities do 
apply to critical infrastructure protection and restoration. In 
response to a question as to whether the authorities of the 
Defense Production Act can be used to protect critical 
infrastructures, R. David Paulison, Director, Emergency 
Preparedness Division, U.S. Department of Homeland Security, 
stated: ``That is our understanding. It can be either civil or 
military. The Department of Defense uses it for military, and I 
think the other agencies here would use it for civil 
emergencies or disasters within the United States.''
    The Committee agreed with the view expressed by Mr. 
Paulison and other Administration witnesses and believed it 
important to make this authority explicit in the statute. In 
reaching this judgment, the Committee consulted the 1997 
recommendations of the President's Commission on Critical 
Infrastructure Protection as well as the analysis contained in 
the President's Report to Congress on Modernization of the 
Authorities of the Defense Production Act, also from 1997. The 
former, in its comprehensive look at statutory and 
organizational changes it deemed important for the future 
protection of the nation's critical infrastructure recommended 
the following:

        Congress could consider amending the DPA [Defense 
        Production Act] Declaration of Policy to include a 
        finding of how critical infrastructures are essential 
        to national security.

    The latter report, mandated by Congress, stated that, since 
the 1994 inclusion of the Stafford Act:

        Consequently, DPA authorities are available for meeting 
        requirements in a civil disaster--such as a 
        catastrophic earthquake or a terrorist attack [Emphasis 
        added]

    The Report to Congress stated that ``further amendments are 
required to have the declaration ofpolicy conform with evolving 
national defense policies.'' Combined with the conclusion of the 
Commission on Critical Infrastructure Protection, the Committee was 
convinced that amendments to the Defense Production Act were warranted. 
For this reason, the accompanying legislation amends the Findings and 
Declaration of Policy consistent with Committee concerns regarding 
critical infrastructure protection.
    During consideration of the bill, the Committee accepted by 
voice vote an amendment by Senator Bennett of Utah to change 
the definition of ``national defense'' in the Defense 
Production Act to include the phrase ``critical infrastructure 
protection and restoration.'' The Committee accepted the 
Senator's argument that this change was needed to ensure the 
Defense Production Act authorities are available for use in 
preparing for and responding to attacks on the nation's 
critical infrastructure. In addition, a definition of 
``critical infrastructure'' is added to the Act's text.
    Under the terms of the Defense Production Act (Section 
303(a)(6)(C)/50 USC 2093(a)(6)(C)), there is a maximum of $50 
million that can be allocated for individual programs. The 
Department of Defense has an ongoing program to recapitalize 
the nation's industrial base for radiation-hardened 
electronics. The fiscal year 2003 National Defense 
Authorization Act provided the department authority to allocate 
up to $106,000,000. In its budget request for fiscal year 2004, 
the Department of Defense requested additional budget 
authority, up to an aggregate total of $200,000,000, to 
complete the program. The Committee agrees that the additional 
funding is warranted and the accompanying legislation provides 
the requested budget authority.
    While the Committee agrees that additional funding is 
needed to recapitalize the nation's industrial base for base 
for radiation-hardened electronics, it is concerned regarding 
the Department of Defense's assessment of the state of the 
industrial base for these components. The department briefed 
Committee staff that two companies exist with the requisite 
capabilities. The Committee believes there may be more 
companies that possess the requisite capabilities, based upon a 
review of the Defense Department's recent history of awarding 
contracts for radiation-hardened electronic components. For 
this reason, the bill includes a requirement that the 
department report within six months of passage of the Defense 
Production Act of 2003 on its findings regarding that 
industrial base.
    The Department of Defense also requested that Section 707 
of the Defense Production Act, which indemnifies contractors 
against damages or penalties resulting from lawsuits filed as a 
result of the contractors' compliance with U.S. Government 
directives issued under Defense Production Act authorities, be 
made permanent. The Department justifies this request on the 
basis of its experiences when Civil Reserve Air Fleet carriers 
were exposed to potential liability from commercial customers 
after they were mobilized in support of Operations Desert 
Shield and Desert Storm despite the expiration of appropriate 
legal authorities. The Committee agrees that Section 707 should 
be made permanent.The Department of Commerce requested that a 
provision be added to the bill clarifying its authority to conduct 
investigations for the purpose of obtaining information necessary to 
conduct assessments on the capabilities of the United States industrial 
base to support national defense. Under Section 705 of the Defense 
Production Act, the department is provided authority to obtain 
information relative to the state of the defense industrial base. 
Additionally, Executive Order 12656 requires the Secretary of Commerce 
``to perform industry analyses to assess capabilities of the commercial 
industrial base to support the national defense . . .'' The department 
believes that the clarification it requested will remove any ambiguity 
regarding its authority to conduct industry studies as required. The 
Committee agrees that the requested amendment to Section 705 is 
warranted.

                             III. HEARINGS

    The Committee on Banking, Housing, Urban Affairs held a 
public hearing on reauthorization of the Defense Production Act 
on June 5, 2003. The following witnesses testified: Mr. Ronald 
Sega, Director, Office of Defense Research and Engineering, 
Department of Defense; Ms. Suzanne Patrick, Deputy Under 
Secretary of Defense for Industrial Policy, Department of 
Defense; Mr. Karan Bhatia, Deputy Under Secretary of Commerce 
for Industry and Security, Department of Commerce; Mr. R. David 
Paulison, Director, Preparedness, Emergency and Response 
Directorate, Department of Homeland Security; and Ms. Denise 
Swink, Acting Director for Energy Assurance, Department of 
Energy.

                      IV. COMMITTEE CONSIDERATION

    The Committee on Banking, Housing, and Urban Affairs met in 
open session on September 23, 2003, and ordered the bill 
reported, as amended.

              V. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

    Section 11(b) of rule XXVI of the Standing Rules of the 
Senate, and Section 403 of the Congressional Budget Impoundment 
and Control Act, require that each committee report on a bill 
contain a statement estimating the cost of the proposed 
legislation. The Congressional Budget Office has provided the 
following cost estimate and estimate of costs of private-sector 
mandates.

                    VI. REGULATORY IMPACT STATEMENT

    Because the legislation reauthorizes existing statutes, 
while providing no new authorities, the Committee has 
determined that a report on the regulatory impact of the 
legislation is not warranted. Further, because the existing 
statutes expire on September 30, 2003, the Committee believes 
that the requirement for their uninterrupted reauthorization 
supercedes the benefit of any analysis that would otherwise be 
performed pursuant to rule XXVI(b), were such analysis deemed 
warranted.