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Law360 (May 12, 2020, 9:41 PM EDT) -- The Federal Emergency Management Agency issued a rule Tuesday setting out standards for when health care and medical contracts supporting national defense can or will be prioritized over other federal contracts, a response to the ongoing COVID-19 crisis.
The interim final rule establishes a new Emergency Management Priorities and Allocations System, or EMPAS, with standards and procedures for prioritizing certain federal contracts and the allocation of "materials, services, and facilities" in support of the national defense, FEMA said.
The agency noted that although the interim rule, issued under Section 101 of the Defense Production Act, or DPA, is a direct response to the pandemic and focuses on emergency preparedness and the health and medical resources needed to respond to COVID-19, it will continue to apply in the future in both emergency and nonemergency situations.
"FEMA believes that it is critical to ensure that FEMA has an established set of EMPAS regulations available for immediate use in the event that the president delegates to [the U.S. Department of Homeland Security] or FEMA additional priorities and allocations authorities in the future, including during an emergency situation," it said.
Specifically, the rule lays out when FEMA or other federal agencies can place priority ratings on federal contracts or orders for health and medical resources — like personal protective equipment or ventilators — and what those priority ratings are, including that especially important orders can take precedence over the "DX" rating currently used for orders considered to be "of the highest national priority."
The rule can be used to help third parties outside the government obtain critical health and medical supplies, and it outlines how long contractors have to respond to emergency orders — the minimum time frame FEMA must give potential contractors is six hours — as well as possible penalties for those that refuse to comply, which include criminal fines or imprisonment.
EMPAS will become part of the Federal Priorities and Allocations System, or FPAS, which is a broader body of regulations implementing Section 101(a) of the DPA, a 1950 statute that gives the president broad authority to address issues deemed necessary for "the national defense."
Section 101(a) specifically allows the president to require that federal contracts or orders for national defense take priority over any other contract, with companies considered capable of performing those contracts also required to take those deals and give preference to that work over any of their other contracts.
Under an April 1 executive order intended to help stop the spread of COVID-19, President Donald Trump delegated his Section 101(a) authority for health and medical resources to DHS, FEMA's parent agency, which in turn handed the issue to FEMA.
FEMA has been given the lead role in coordinating the federal response to the coronavirus, although it indicated in a contract solicitation withdrawal notice on Sunday that it is trying to hand off at least some of its coronavirus-related purchasing responsibilities to the Defense Logistics Agency.
Given the context of trying to fit the new interim rule into the FPAS, it is designed to be consistent with current rules in place under that system, particularly those most relevant to the pandemic, which are already used by FEMA, the agency said.
That includes the U.S. Department of Commerce's Defense Priorities and Allocations System rules and the U.S. Department of Health and Human Services' Health Resources Priorities and Allocations System, according to FEMA. Where there is a clash between the existing rules, FEMA favored the provisions that give it the most flexibility and speed to respond to emergencies, it said.
The rule, set to be formally published in the Federal Register on Wednesday and go into effect immediately, will be open for comment for 30 days, with a formal final rule to follow later on.
--Editing by Haylee Pearl.
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