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Aug 16 -- The Department of Health and Human Services (HHS) is issuing a Notice of Proposed Rule Making (NPRM) to establish standards and procedures by which it may require acceptance and priority performance of certain contracts or orders to promote the national defense over other contracts or orders with respect to health resources. This proposed rule also sets new standards and procedures by which HHS may allocate materials, services, and facilities to promote the national defense. Consideration will be given to comments received on or before September 15, 2023.

This proposed rule implements HHS's administration of priorities and allocations actions with respect to health resources and establishes the Health Resources Priorities and Allocations System (HRPAS). The HRPAS covers health resources pursuant to the authority under section 101(a) of the Defense Production Act (DPA) of 1950 as delegated to the Secretary of HHS (Secretary) by Executive Order (E.O.) 13603. On September 26, 2022, the Secretary delegated to the Assistant Secretary for Preparedness and Response (the ASPR) within the Administration for Strategic Preparedness and Response (ASPR), the authority under section 201 of E.O. 13603 to exercise priorities authority under section 101 of the DPA. This delegation authorized the ASPR, on behalf of the Secretary, to approve DO—[—[M1–M9] priority rating requests for health resources that promote the national defense. This delegation excludes the authority to approve all priorities provisions for health resources that require DX—[—[M1–M9] priority ratings. The Secretary retains all other authorities delegated by the President in E.O. 13603.

The HRPAS has two principal components: priorities and allocations. Under the priorities' component, the Secretary is authorized to place priority ratings on contracts or orders for health resources to support programs which have been determined by the Department of Defense, Department of Energy, or Department of Homeland Security as necessary or appropriate to promote the national defense in accordance with section 202 of E.O. 13603. Through the HRPAS rule, HHS may also respond to requests to place priority ratings on contracts or orders (requiring priority performance of contracts or orders) for health resources, as specified in the DPA, if the necessity arises. Under the priorities' component, certain contracts or orders between the government and private parties or between private parties for the production or delivery of health resources are required to be prioritized over other contracts or orders to facilitate expedited production or delivery in promotion of the U.S. national defense. The Secretary retains the authority for allocations. Under the allocations' component, materials, services, and facilities may be allocated to promote the national defense. . . .

HRPAS is a program established in accordance with the DPA and E.O. 13603 that supports national defense needs (for health resources), including emergency preparedness initiatives, by addressing essential civilian needs through the placing of priority ratings on contracts and orders for items and services or allocating resources, as necessary. Although a specific Presidential disaster declaration is not required, the ability to prioritize or allocate items or services requires a determination be made in accordance with section 202 of E.O. 13603, (except as provided in section 201(e) for use of the allocations authority) that the program or programs are necessary or appropriate to promote national defense, including emergency preparedness. The HRPAS outlines several conditions that must be met in order for HHS to undertake an allocation order, which include a finding under section 101(b) of the DPA that such a material is a scarce and critical material essential to the national defense and that the requirements of the national defense for such material cannot otherwise be met without creating a significant dislocation of the normal distribution of such material in the civilian market to such a degree as to create appreciable hardship. The President must approve the finding, in accordance with section 201(e) of E.O. 13603, before the Secretary may use the allocation authority. . . .
 
HHS is currently reviewing activities under the “health resources” jurisdiction for priorities and allocations support to promote the national defense, under the authority of the DPA and Executive Order 13603. HHS may exercise its priorities and allocations authorities for items or services that fall under the current approved programs, while the review for activities under the “health resources” jurisdiction is ongoing. . . .
 
The HRPAS, as part of the FPAS, has two principal components: priorities and allocations. Under the priorities component, contracts and orders between the government and private parties or between private parties for the production or delivery of health resources are required to be given priority over other contracts to facilitate expedited production and delivery in promotion of the U.S. national defense. Under the allocations component, materials, services, and facilities may be allocated to promote the national defense. For both components, the term “national defense” ' is defined broadly and includes emergency preparedness activities conducted pursuant to title VI of the Stafford Act and critical infrastructure protection and restoration priorities authorities. Priorities, allocations, and other authorities delegated to the Secretary in E.O. 13603, but not covered by this regulation may be re-delegated by the Secretary. The Secretary delegated the authority for DO priority ratings to the ASPR. The Secretary retains the authority for DX priority ratings and for allocations. . . .

Prior to the COVID–19 pandemic, HHS had minimally exercised its prioritization authority for contracts and orders and had not exercised its allocation authorities. To date, HHS has exercised title I priorities authorities approximately 70 times in responding to the COVID–19 pandemic to prioritize contracts thus ensuring rapid industrial mobilization for critical health resources (including N95 facemasks, vaccines, therapeutics, and diagnostics) to meet urgent emergency preparedness and response requirements. In response to the initial wave of the COVID–19 pandemic, HHS leveraged its allocations authority, in conjunction with a DX rated order, to re-distribute N–95 facemasks that were seized by the U.S. Customs and Border Protection. Several health resource materials have been identified as essential in responding to the COVID–19 pandemic and these items, such as personal protective equipment (PPE), ventilators, medical countermeasures, and ancillary supplies are in high demand. Therefore, a priority rating was necessary to provide the quantities of these health resources within a specified timeframe to respond to the COVID–19 pandemic. Additionally, in response to the infant formula shortage in the summer of 2023, HHS issued three priority rated orders to help ensure timely delivery of key ingredients to infant formula manufacturers.

The NPRM has two principal components: prioritization and allocation. Under prioritization, HHS, or its Delegate Agency, designates certain orders as one of two possible priority levels. Once so designated, such orders are referred to as “rated orders.” The recipient of a rated order must give it priority over an unrated order or an order with a lower priority rating as necessary to meet the delivery requirement of the rated order. A recipient of a rated order must place orders at the same priority level with suppliers and subcontractors for supplies and services necessary to fulfill the recipient's rated order. The suppliers and subcontractors must treat the request from the rated order recipient as a rated order with the same priority level as the original rated order. The rulemaking does not require recipients to fulfill rated orders if the price or terms of sale are not consistent with the price or terms of sale of similar non-rated orders. The rulemaking provides protection against claims for actions taken in, or inactions required for, compliance with the rulemaking.

Although rated orders could require a firm to fill one order prior to filling another, they will not necessarily require a reduction in the total volume of orders. The regulations also do not require the recipient of a rated order to reduce prices or provide rated orders with more favorable terms than a similar non-rated order. Under these circumstances, the economic effects on the rated order recipient of substituting one order for another are likely to be mutually offsetting, resulting in no net economic impact.

Allocations could be used to control the general distribution of materials or services in the civilian market. Specific allocation actions that HHS might take are as follows:

1. Set-aside: an official action that requires a person to reserve materials, services, or facilities capacity in anticipation of receipt of rated orders.
2. Directive: an official action that requires a person to take or refrain from taking certain actions in accordance with its provisions. A directive can require a person to stop or reduce production of an item; prohibit the use of selected materials, services, or facilities; or divert the use of materials, services, or facilities from one purpose to another.
3. Allotment: an official action that specifies the maximum quantity of a material, service, or facility authorized for a specific use to promote the national defense.

FRN: https://www.federalregister.gov/d/2023-15952

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