• Increase font size
  • Default font size
  • Decrease font size
Home News Archive The Power of The Defense Production Act to Compel

The Power of The Defense Production Act to Compel

E-mail Print PDF

§ 2155. Investigations; records; reports; subpoenas; right to counsel

(a) The President shall be entitled, while this Act … is in effect and for a period of two years thereafter, by regulation, subpoena, or otherwise, to obtain such information from, require such reports and the keeping of such records by, make such inspection of the books, records, and other writings, premises or property of, and take the sworn testimony of, and administer oaths and affirmations to, any person as may be necessary or appropriate, in his discretion, to the enforcement or the administration of this Act and the regulations or orders issued thereunder. The authority of the President under this section includes the authority to obtain information in order to perform industry studies assessing the capabilities of the United States industrial base to support the national defense.

Presidential Executive Order (March 16, 2012)

Sec. 802General.  (a)  Except as otherwise provided in section 802(c) of this order, the authorities vested in the President by title VII of the Act, 50 U.S.C. App. 2151 et seq., are delegated to the head of each agency in carrying out the delegated authorities under the Act and this order, by the Secretary of Labor in carrying out part VI of this order, and by the Secretary of the Treasury in exercising the functions assigned in Executive Order 11858, as amended.

(b)  The authorities that may be exercised and performed pursuant to section 802(a) of this order shall include:

(1)  the power to redelegate authorities, and to authorize the successive redelegation of authorities to agencies, officers, and employees of the Government; and

(2)  the power of subpoena under section 705 of the Act, 50 U.S.C. App. 2155, with respect to (i) authorities delegated in parts II, III, and section 702 of this order, and (ii) the functions assigned to the Secretary of the Treasury in Executive Order 11858, as amended, provided that the subpoena power referenced in subsections (i) and (ii) shall be utilized only after the scope and purpose of the investigation, inspection, or inquiry to which the subpoena relates have been defined either by the appropriate officer identified in section 802(a) of this order or by such other person or persons as the officer shall designate.

“This use of DPA sets a dangerous precedent. This appears to be a fishing expedition rather than a real risk assessment process, with no clear objective as to how the data will be used and sets a dangerous precedent of government demanding private information without clear and compelling reason. 

“By demanding corporate information under threat of fines and imprisonment, the Government is changing the fundamental nature of the relationship between it and the private sector from one of a public-private partnership to potential adversaries.

“This use of DPA could have a chilling effect on needed information sharing between the public and private partnerships and thus compromise our longer term security.

“There is no assurance available from government that the information garnered through this process will be adequately secured. We have been unable to determine who will have access to the data, how the data will be used and under what authority, how long it will be retained, and whether it will be adequately protected.

We are mindful that much of the data in the current requests is valuable and proprietary.”

-- The Internet Security Alliance (July 27, 2011) (Link here)

BIS_LogoThe foregoing excerpts and quotes are intended to provide background for the news that the Department of Commerce’s Bureau of Industry and Security (BIS) recently proposed to amend the Code of Federal Regulations to codify its policies and procedures “for conducting surveys to obtain information in order to perform industry studies assessing the U.S. industrial base to support the national defense”. The proposed CFR section would clarify and emphasize the power granted to BIS by the Defense Production Act to issue surveys to any American businesses and to compel those businesses to provide the requested data in the requested timeframe.

And by “compel” we mean –

If a person does not comply with a survey, BIS may serve a subpoena upon that person to compel compliance. If the person still does not comply, the government may apply to the U.S. district court in any district in which the person is found, resides or transacts business for an order requiring such person to comply. The district court has authority to punish any failure to comply with the order as contempt of court. Persons who are convicted of willfully failing to comply with a survey or other request for information may be fined not more than $10,000 or imprisoned for not more than one year, or both.

According to the notice of proposed rulemaking, there is no impact on any business because the new CFR section does not impose any requirements that are not already imposed as a matter of law.

That may be true, but we bet that when a business that is well-removed from prime contracting with the Federal government receives a survey from BIS requesting lots and lots of detailed information the business considers to be proprietary, then the first phone call is going to be to the attorneys.

Compliance professionals should keep in mind the power of the Federal government to ask questions and to compel answers—even in such an arcane area as an analysis of the U.S. industrial base. In our experience, the first reaction to such information requests—whether they originate from BIS, DCMA or DCAA—is to say “No.” Generally, people want to protect sensitive information and they do not trust government employees to treat the information provided with the same care as the company employees do (or as the company employees should do). In this case, the questions may come from a relatively unknown source and may be received by an organization that doesn’t do business with the Feds. We can easily envision scenarios where the BIS survey is shunted to an Admin’s desk and lost, or where it is tossed into the circular file. We trust that after reading this article, compliance folks have been sensitized to the need to treat the survey questions with the same respect and diligence one would treat an official audit request. Failure to comply or to provide “adequate” responses may lead to legal unpleasantness, in much the same manner as failing to comply with an official audit request may lead to legal unpleasantness.

An interesting aspect of BIS’ power under the Defense Production Act is that it reaches beyond Federal contractors and beyond corporations and beyond not-for-profit businesses—and even into other governmental entities. According to the proposed rule, the questions may even be directed at “units of the U.S. Government (including the District of Columbia Government and the governments of the territories and possessions)”. It may be a very unsettling experience for an employee of the U.S. Government to receive an official survey from another USG entity. But that employee is required to comply and to provide the requested survey data timely, just as commercial businesses are required to comply.

The Defense Production Act of 1950: now 65 years old and still impacting how the business of the U.S. Government is conducted.



Effective January 1, 2019, Nick Sanders has been named as Editor of two reference books published by LexisNexis. The first book is Matthew Bender’s Accounting for Government Contracts: The Federal Acquisition Regulation. The second book is Matthew Bender’s Accounting for Government Contracts: The Cost Accounting Standards. Nick replaces Darrell Oyer, who has edited those books for many years.