During a Senate Banking Committee hearing prior to the Congressional recess, Sen. Bernie Moreno (R-OH) questioned Dr. John G. McGinn, Executive Director at the Greg and Camille Baroni Center for Government Contracting at the Costello College of Business at George Mason University, about the Defense Production Act.
00:00We'll first have our questions come from Senator Moreno. We'll take my spot and I'll take his later on.
00:07All right, perfect. Well, thank you, Chairman, for doing this, for having this very important session.
00:12It's something that's long overdue. So I'll start with you, Dr. McGinn.
00:17You talked about CFIUS, near and dear to my heart.
00:20As you know, CFIUS plays a critical role in reviewing inbound foreign investments, as you described.
00:25President Trump recognized a glaring loophole in the law, which currently does not cover greenfield investments,
00:33but rather only allows CFIUS to review investments of acquisitions of existing U.S. companies.
00:39I introduced a bipartisan bill called the Protect Act with my colleagues, Alyssa Slotkin and Senator Tim Sheehy,
00:45which would close this loophole and ensure that all greenfield and brownfield transactions from foreign countries of concern are reviewable by CFIUS.
00:52Do you believe that this would be helpful to better protect our national security for potentially harmful or threatening investments by foreign countries?
01:01Thank you for the question, Senator Moreno.
01:03As you know, CFIUS is an incredibly powerful tool for our government to protect national security interests.
01:12And greenfield investments have been a long been kind of not part of CFIUS because CFIUS looks at individual business transactions.
01:20But it is totally the prerogative of the Senate to consider adding that as a potential thing that should be covered under CFIUS.
01:29And I look forward for the conversation that you're going to have in deliberations on that
01:33and in working with the agencies to see the practical kind of ramifications of that and how that would be doable.
01:41Yeah, we'd love to have you take a look at the bill if you haven't already done it, and we'd love to get that across the finish line.
01:48You know, it's a rare bipartisan bill, and hopefully we can get that done.
01:51It's common sense.
01:52I'd love it.
01:52Along those same lines, you know, I understand that the DPA fund, which is held by Treasury but managed by the Department of Defense,
01:59used to be managed at an Air Force research laboratory housed at a place called the Wright-Patterson Air Force Base in Dayton, Ohio.
02:06But over the last two years, the Pentagon moved the management of the DPA fund out of Ohio
02:12and centralized it in a new management structure called the Defense Priorities and Allocation System.
02:18However, I heard concern that this new system does not adequately follow established contracting best practices.
02:25Dr. McGinn, could you talk about DPA's system's shortcoming and contrast them to the phenomenal world-class perfection management system in Dayton, Ohio?
02:38Not biased at all on that question, to be clear.
02:41Thank you, Senator.
02:42Yeah, so the Air Force is currently the executive agent for the conduct of Defense Protection Act Title III projects,
02:49and so, and they've delegated further to Wright-Patterson Air Force Research Lab to do the contracting execution of Title III projects,
02:59and so that is, but that is still the case, that they're doing that.
03:04The DPA fund is managed by the Department of Defense.
03:08I was not aware that it's, that that is not managed by, as far as I know, by Wright-Patterson itself,
03:15but by the Office of Secretary of Defense, so, so there hasn't been a movement to, to, to, of that degree,
03:22but the, the work, I've worked with the, the personnel at Wright-Patterson when I was in government,
03:27and they are phenomenal, and they continue to do phenomenal work.
03:31Yeah, they move the functions out, which the reality is we should move, moving functions in to centralize.
03:36That makes sense to have all that together.
03:38It makes, as you know, a lot of efficiencies, and I don't want to keep picking on you for questions,
03:42but we'll, we'll keep it going here. I'm particularly concerned that the powers that,
03:47over the last, excuse me, the last administration, the DPA powers were bastardized in a sense
03:54and expanded beyond congressional intention by the Biden White House in areas like green energy,
04:00for example, which was clearly a political move, not a national security move.
04:05Why is it critically important for DPA to maintain its focus on national defense
04:09in a nonpartisan way, and what dangers could arise if it doesn't to, to, to fortify political positions
04:16rather than national security positions?
04:19Great question, Senator. Yeah, I would, I would say the, the, as we've seen very clearly in this,
04:25in this hearing, DPA is a, a bipartisan supported authority,
04:31and it works best when it really focuses on those bipartisan kind of interest areas.
04:37And the real priority areas for DPA have been traditionally defense or national, true national emergency efforts.
04:44Now, if, when DPA is used in other ways, such as what you're referring to,
04:50it sometimes can become politically kind of charged.
04:53And if the DPA becomes politically charged, that is always really bad.
04:57And we, some of the things that we live with today, for instance, the cap on the DPA fund of $750 million,
05:04that is a result of a previous reauthorization of the DPA where there was a,
05:10some projects were done that were not agreed with politically that then led to the,
05:15the reauthorization to put more structure, more strictures around DPA.
05:20So, the, the, the, it is imperative to keep DPA focused on clear, bipartisan focused efforts.
05:28And there, if, if priorities are in other areas, that can be,
05:32there are other means to do those kind of, those kind of legislative efforts.
05:36I yield with, Mr. Chairman, I think that's, and for the ranking member,
05:39I think that's really important as we discuss DPA, that it becomes completely apolitical.
05:45And it's about protecting our country and not getting into political priorities and using funds that way.
