How a 1950s-era law has become a flashpoint for the US arms industry

The Pentagon and Capitol Hill are split over the future of the Defense Production Act, a Korean War-era law that helps the U.S. quickly ramp up key industries.

The budget associated with the landmark legislation has been critical in past national security emergencies — hastening the production of everything from armored vehicles during the Iraq War to vaccines during the coronavirus pandemic. And it’s now helping surge America’s defense industry, which has shown atrophy as the country supports wartime partners in Ukraine and Israel.

But amid that effort, the Defense Production Act has become a proxy fight over the future of America’s defense industry, and how the country should prioritize the billions of dollars it’s using to rebuild it.

At issue is how much money the Pentagon wants for the act’s investment account, known as Title III, and how exactly it will be spent. For months, congressional offices have been frustrated that Pentagon officials were asking for too little and planning to invest it on projects they considered too speculative.

Those concerns went public in early August, when the Senate released its defense spending bill for the upcoming fiscal year, which begins Oct. 1. Senators would more than double the Pentagon’s request, but only if the money goes toward a list of projects outlined in the bill — an unusual step for an account that the Pentagon typically controls.

“I wouldn’t be happy with it” if the bill became law, said a defense official, referring to the prescriptive language. “Every program manager on the planet always wants more flexibility.”

Still, the official said that concerns over the Defense Production Act, which extend beyond Congress, were valid. Some of the Pentagon’s top priorities for the account are longer-term, the official acknowledged, and it hasn’t yet proven that it can keep pace with how fast the budget has grown.

This story is based on interviews with current and former Pentagon officials and multiple congressional aides, most of whom were allowed to speak anonymously to discuss sensitive budget numbers and negotiations. Defense News also reviewed closely held but unclassified documents that showed the Pentagon’s requests over time.

They described a growing and shared belief in the value of the Defense Production Act, one of the Pentagon’s few flexible accounts that can quickly help rebuild parts of the U.S. defense industry. But as that mission becomes more urgent, so too are debates over how to best accomplish it.

“You can run all the strategies [for the defense industry] you want” one congressional aide told Defense News. “All that matters is this. This is the strategy.”

‘One good game’

In essence, the Defense Production Act lets the Pentagon skip a line.

When the DOD wants to build more weapons it normally asks defense firms for a higher number, and those companies then order more parts in order to build them. The trouble with this process is twofold: one, it can take a long time to increase supply, and two, it can run into bottlenecks when there aren’t enough parts, such as ball bearings or rocket motors.

Under Title III of the Defense Production Act, the Pentagon can avoid this process. Instead of waiting for the market to activate lower-level suppliers, the Defense Department can invest in them directly.

“That account was very helpful in the ramp up for Ukraine,” said Chris Michienzi, a former Pentagon official who helped lead the department’s surge in aid to Kyiv.

In response, the Pentagon has been asking for larger DPA budgets. In fiscal year 2024 alone, defense officials requested $968 million, up around $300 million from the year before. Congress heavily trimmed that number, though, passing a little under $600 million in its FY24 defense budget, plus more in a defense supplemental this April.

The cuts came in large part because Congress doubted whether the Defense Department could handle the money.

“There’s just a shortage of people processing these projects,” said a second congressional aide.

The Defense Department has tried to fix those shortages. It’s increased the staff that handles DPA cases and created a new contracting pathway for such projects. In fiscal year 2024, the defense official said, the Pentagon executed $850 million of DPA funding — almost as much as during the coronavirus pandemic, a national emergency.

The official estimated the Defense Department can now handle at least $1 billion each year, but acknowledged they still need to prove it.

“It’s one good game, essentially,” the defense official said.

All in on biomanufacturing

Congress’ concern over the account began to grow earlier this year as the Pentagon was writing its plans to spend DPA funding.

In March, according to documents reviewed by Defense News, the DOD listed its priorities for the account in a spreadsheet. Most of the money would go to traditional areas of the defense industry: fixing supply chains, building chemical plants, powering munitions and building important parts, like solid rocket motors.

Once Congress passed its long-delayed defense spending bill in March, though, that list changed.

A category for “biomanufacturing” rose by $213 million to a total of $273 million for this fiscal year. To make room, other priorities such as castings and forgings, microelectronics and parts to build hypersonic weapons were trimmed or cut entirely.

Biomanufacturing is a broad, long-term sector, described in multiple White House and Pentagon strategies. The goal is less to build specific things than to find a new and more efficient way to build them — almost like 3D printing, the defense official said. If successful, the U.S. could be a leader in a cleaner, cheaper production method for things from the chemicals that ignite munitions to the protein powder that goes into meals for soldiers.

With the initial $60 million in spending, the Pentagon was trying to better understand what the sector could offer.

Congressional aides that spoke for this story didn’t have an issue with that goal. Instead, they argued that biomanufacturing began to displace other priorities — a complaint that grew louder with the Pentagon’s budget request for the next fiscal year.

The Defense Department asked for far less in DPA funding — $393 million compared to almost $1 billion the year before. And biomanufacturing would take up a larger share of the spending, around $250 million or two-thirds of the total budget.

“It’s not that biomanufacturing is inherently bad or that we don’t think it’s credible,” the first aide said. “It’s more that there are more urgent needs.”

The House’s defense spending bill proposed a $53 million increase to the DPA account but didn’t mention any other concerns. The Senate’s, though, entirely cut new money for biomanufacturing, while offering more than $500 million for the account in other priorities.

The Pentagon isn’t likely to cede authority on an account it usually controls. The official speaking earlier defended the smaller budget request for FY25, citing how much Congress trimmed the year before.

And despite “difficult choices” required to spend more money on biomanufacturing, the official argued, the sector remains a top priority for the administration. The Defense Production Act is also the kind of versatile account that could help grow a new part of the industrial base, the official said.

This debate likely won’t be settled until the fall, after the Pentagon and Congress regroup and reach a deal. Regardless, the Defense Department will likely to start the fiscal year on a short-term funding bill given the presidential election in November.

By that point, the Pentagon will have spent the first $60 million on biomanufacturing, the defense official said. It likely won’t be able to execute the remaining $213 million until early next year.

“If I was looking inside this investment portfolio from the outside, and I had the questions that you’re asking about biomanufacturing and execution, I would do the same thing that the [Senate] did,” the defense official said.