The Defense Production Act: A Playbook for Industrial Policy in 2026

By Marcus D. Holloway, Editor in Chief | Strata Intelligence

The last time Washington moved this deliberately to shape domestic production capacity, automakers were retooling assembly lines for tanks. That comparison is no longer hyperbole - it is, increasingly, the operating framework. As the defense budget climbs, as semiconductor fabs break ground in Arizona and Ohio, and as pharmaceutical supply chains get audited at the federal level, the Defense Production Act (DPA) has graduated from emergency statute to standing industrial policy instrument. For manufacturing executives who assumed this was a procurement story, it is time to recalibrate. This is a capacity story, a workforce story, and ultimately a competitive positioning story.

1. What the DPA Actually Is - And What It Has Become

Enacted in 1950 during the Korean War, the Defense Production Act granted the executive branch authority to direct private industry toward national security priorities. For most of its history, it was invoked rarely - a blunt instrument kept in reserve for genuine crises. The COVID-19 pandemic changed that calculus permanently.

Between 2020 and 2023, the DPA was invoked to accelerate ventilator production, personal protective equipment, vaccines, and critical minerals processing. The Biden administration expanded its application further: invoking it for clean energy manufacturing, domestic battery production, and rare earth supply chain development. The current trajectory under the second Trump administration points toward even more muscular application - specifically targeting defense-industrial base expansion, reshoring of precision components, and reducing single-source dependencies on Chinese suppliers.

The key mechanisms manufacturing operators need to understand:

• Title I (Priorities and Allocations): Allows the government to require companies to accept and prioritize federal contracts over commercial orders. If you hold a rated order under the Defense Priorities and Allocations System (DPAS), you are legally required to fulfill it ahead of commercial business.
• Title III (Expansion of Productive Capacity): Provides financial incentives - loans, loan guarantees, purchase commitments, and direct subsidies - to encourage domestic production of materials and components deemed critical to national security.
• Title VII (General Provisions): Enables voluntary agreements and coordination among industry players that might otherwise raise antitrust concerns - a provision increasingly relevant for semiconductor and defense prime coordination.

For plant managers and operations directors, Title I is not abstract policy. It is the mechanism by which a rated government order can legally supersede your commercial delivery commitments. Understanding your DPAS rating exposure is no longer optional.

2. The Industrial Sectors Under Active DPA Pressure

The federal government is not applying DPA authority uniformly. It is concentrating force in a defined set of strategic sectors. Executives in these industries are already feeling the pressure - and in many cases, the opportunity.

2.1 Defense-Industrial Base: Munitions and Precision Manufacturing

The war in Ukraine exposed a structural deficiency in Western munitions production that cannot be fixed through procurement alone. 155mm artillery shells became the defining bottleneck - production capacity that had atrophied over three decades of post-Cold War drawdown. The Army has worked with defense primes and second-tier manufacturers to expand propellant and shell production, with facilities in states including Pennsylvania, Iowa, and Texas being brought back online or expanded.

Companies like General Dynamics Ordnance and Tactical Systems and BAE Systems are central to this push, but the real action is happening one tier down - at the precision machining shops, metal fabricators, and specialty coatings facilities that feed the primes. If you operate in that tier and are not actively engaged with your prime's supply chain development office, you are already behind.

2.2 Semiconductors and Advanced Electronics

The CHIPS and Science Act and the DPA are functionally complementary instruments in semiconductor policy. While CHIPS provides the capital incentives, the DPA provides the priority authority. Intel's Fab 52 and Fab 62 in Chandler, Arizona, TSMC's Phoenix fabs, and Samsung's Taylor, Texas facility are all operating within a policy environment where federal leverage is explicit and ongoing.

The downstream implication for manufacturing executives is significant: as domestic fab capacity comes online, the pressure to source domestically qualified components and packaging will intensify. Companies operating in electronics manufacturing services, PCB fabrication, and advanced packaging - particularly those serving aerospace and defense - should anticipate rated order exposure and supply prioritization requirements that did not exist five years ago.

2.3 Critical Minerals and Battery Supply Chains

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This is perhaps the most structurally complex sector under DPA pressure. The United States has world-class mineral deposits but atrophied processing infrastructure. The gap between extraction and refined material suitable for battery manufacturing remains a significant vulnerability.

MP Materials at Mountain Pass in California represents the leading domestic rare earth processing effort. Piedmont Lithium and Albemarle are central to domestic lithium supply development. The DPA Title III funding directed toward these and related efforts signals that Washington views this not as a market problem but as an infrastructure problem - one that requires government commitment to de-risk private capital.

For battery manufacturers, EV component suppliers, and defense electronics producers, the message is clear: domestic qualification requirements are tightening, and supply chain provenance documentation will increasingly be a compliance obligation, not a voluntary disclosure.

3. A Framework for Assessing Your DPA Exposure and Opportunity

This is where the policy analysis becomes operational. Manufacturing executives should work through the following four-part framework when evaluating their position relative to current DPA activity.

Framework: The DPAS Readiness Assessment

1. Rated Order Inventory: Audit your current and anticipated contract backlog for DPAS-rated orders (DO or DX ratings). Understand which of your customers holds prime contracts with rated order authority. A DX-rated order sits at the top of the national priority system - above commercial obligations and above DO-rated orders.

2. Capacity Constraint Mapping: Identify the production bottlenecks in your facility that would limit your ability to fulfill a surge in rated orders. This is not a hypothetical exercise. Bottlenecks in CNC machining capacity, specialty heat treatment, or qualified personnel represent real operational risk if a rated order arrives unexpectedly.

3. Title III Qualification Assessment: Evaluate whether your production capabilities or expansion plans could qualify for Title III incentives. The bar for Title III funding is high - it requires demonstrating that private capital alone will not achieve the needed capacity expansion on the required timeline - but for capital-intensive investments in qualified sectors, it is worth a formal review.

4. Supplier Tier Vulnerability Analysis: Map your sub-tier suppliers for single-source dependencies in rated-order-relevant materials. Your compliance with a rated order is only as strong as your supply chain's ability to deliver. Proactive sub-tier engagement is a risk mitigation strategy, not an administrative overhead.

4. The Workforce Dimension That Policy Misses

Every DPA-driven capacity expansion runs directly into the same wall: qualified manufacturing labor is not elastic. You cannot invoke a statute that creates skilled machinists, certified welders, or experienced process engineers. This is the policy gap that no Title III investment solves on its own.

The National Apprenticeship Act reauthorization efforts and the Department of Defense's Skilled Technical Workforce initiatives are meaningful, but they operate on multi-year timelines. In the near term, manufacturing executives executing DPA-relevant capacity expansions are competing for the same finite pool of qualified talent - often in geographic markets where that pool is already strained.

The companies that will execute successfully are those treating workforce development as a capital investment, not a line-item cost. That means formal apprenticeship programs, community college articulation agreements, and - increasingly - retention bonuses tied to security clearance attainment for defense-relevant roles. This is not HR strategy. It is operational capacity planning.

5. The Geopolitical Forcing Function

It would be analytically incomplete to discuss DPA deployment in 2026 without acknowledging the geopolitical context that is accelerating it. The Taiwan Strait remains the defining industrial risk scenario for electronics and semiconductor supply chains. The war in Europe has validated, in the most concrete terms possible, the cost of allowing defense production capacity to atrophy. China's dominance in rare earth processing, battery cell manufacturing, and certain categories of precision components represents a structural dependency that both political parties now treat as unacceptable.

This is the forcing function that elevates the DPA from a legal instrument to a strategic planning variable. The question for manufacturing executives is not whether industrial policy will intensify - it will. The question is whether your organization is positioned to benefit from that intensification or disrupted by it.

The companies that will define American manufacturing competitiveness in the next decade are making that determination now - in capital allocation meetings, in workforce planning sessions, and in the contract review conversations that determine which customers and which rated orders they are prepared to serve.

Executive Summary

• The Defense Production Act has evolved from emergency instrument to standing industrial policy tool, with active application across defense, semiconductors, and critical minerals.
• Title I (rated order priority), Title III (capacity incentives), and Title VII (voluntary agreements) each carry distinct operational implications for manufacturers.
• Munitions, advanced electronics, and battery supply chains are the three sectors under most concentrated DPA-driven pressure in the current environment.
• The DPAS Readiness Assessment framework - covering rated order inventory, capacity constraints, Title III qualification, and sub-tier vulnerability - provides a structured starting point for operational positioning.
• Workforce development is the binding constraint that policy cannot directly solve; executives must treat it as a capital investment.

American industrial policy has found its instrument. The Defense Production Act is no longer a contingency plan - it is the architecture. The manufacturers who understand its mechanics, have mapped their exposure, and have aligned their capital and workforce strategies accordingly will not simply survive the next wave of industrial mobilization. They will be the ones executing it.

Strata Intelligence covers American manufacturing at the intersection of operations, policy, and competitive strategy. Marcus D. Holloway is Editor in Chief.