A former Department of Defense official says one particular piece of legislation could help America rebuild its supply chains and rely less on China, calling this a national imperative - here's how it would work

• Dr. Jerry McGinn is the executive director of the Center for Government Contracting in the school of business at George Mason University, and is a former career official in the Department of Defense.
• In order to address vulnerabilities exposed by the novel coronavirus outbreak, he says we must capitalize on provisions in the CARES Act to rewrite our public health supply chain.
• We need to stop relying on imports for critical health materials, particularly on China.
• As the CARES Act and Defense Production Act help bolster supplies in the short term, we should apply their funds for the long term.
• Click here for more BI Prime stories.

The societal and economic devastation wrought by COVID-19 is everywhere. The virus has also dramatically exposed significant weaknesses in our public health and pharmaceutical industrial base and supply chain, specifically our dependence on China for much of the material and production capacity essential for the COVID-19 response. How can we address these critical vulnerabilities?

In short, we need to closely examine the lessons from the current response, prioritize the key vulnerabilities in our industrial base, and then use the resources and expanded authorities in the CARES Act to recast our public health supply chain and industrial base to build resilience for the future.

Learn from the current response

Federal agencies are currently pursuing an all-of-the-above strategy for developing treatments and vaccines for COVID-19 and for acquiring and delivering PPE, ventilators, and other equipment to the places of greatest need. It is chaotic for sure and there will be plenty to criticize when analysts closely examine the response looking for lessons.

Initial shortages of N95 masks at US hospitals, for example, resulted in part from the fact that China produced approximately half of the world's masks prior to COVID-19 and their exports temporarily halted as the virus spread in China. Ventilator demand, meanwhile, dramatically outpaced domestic inventory and stockpiles and production will take time to catch up.

Federal obligations on COVID-19 have dramatically accelerated in recent days, however. Obligations almost tripled in the final week of March, for instance, going from around $636 million on March 24 to $1.9 billion on March 31. Rapid turn contract opportunities, with same or next day response due dates, have become increasingly common as agencies scramble to get needed equipment.

Beyond the highly-visible efforts, funding opportunities in areas such as 3D printing, biofabrication, and textiles as well as collaborative projects between biomedical technology companies and the army are underway. These efforts will help build industrial capacity to support the current response, but should also inform future planning. We need to carefully assess the rugby scrum of contracting efforts underway to determine which efforts are most successful at rapidly developing, producing, and delivering medical equipment and pharmaceuticals so we are prepared for the future.

Prioritize vulnerabilities

This crisis has starkly demonstrated how much of the pharmaceutical and public health supply chains are outside the United States. While innovative research and development efforts thrive domestically, production has largely moved overseas. In addition to masks, more than 90% of world's antibiotics are produced in China. Dependent relationships with non-transparent economies and undemocratic countries like China for these types of products are extremely problematic.

We found similar dependencies in the presidentially-directed whole of government review of the US manufacturing and defense industrial base during 2017-2018. Over decades, commercial market forces as well as Chinese state policy resulted in Chinese companies and state-owned enterprises having dominant or even sole source positions in materials such as rare earth elements and specialty chemicals.

While these materials are used principally in commercial products, they also have essential roles in advanced radars and precision-guided munitions. The priorities coming out of that review focused on addressing those Chinese dependencies first and foremost. Today's situation calls for a similar approach.

Recast our supply chain and industrial base

The COVID-19 pandemic has made it painfully clear that we cannot continue to rely on a public health industrial base and supply chain that is insufficiently robust and overly reliant on China. Fortunately, Congress has provided important resources and authorities in the CARES Act that will be extremely useful to recast how we produce, procure, and distribute critical pandemic response equipment in the future. Beyond the hundreds of billions of dollars for COVID-19 response efforts, anti-viral treatments, and vaccine research essential to defeat the virus, Congress also appropriated resources and expanded authorities that will play essential roles in securing our supply chains.

Top of that list is the $1 billion that was appropriated for the Defense Production Act fund. While the focus in the past few weeks has been on how the administration is or is not using the DPA distribution and allocation authority, another provision of the DPA gives the president the authority to "create, maintain, protect, expand, or restore industrial base capabilities essential for national defense" through grants, loans, purchases, and purchase commitments. That authority is used regularly, but the tremendous infusion into the DPA Fund - as well as a little-noticed executive order authorizing the use of these funds - will almost certainly lead to an extraordinary surge of DPA grants, loans, and other actions to spur, for example, the expansion of existing or the creation of new domestic production facilities for PPE or pharmaceuticals to reduce the reliance on Chinese sources.

The CARES Act also expanded the authority and raised the funding caps for HHS and DoD to more aggressively use Other Transactions Authority agreements, flexible contracting instruments that enable greater government and industry collaboration, to foster innovation on COVID-19 response efforts. The Act additionally expanded the materials in the strategic national stockpile to include medical equipment relevant for pandemic response. This will be critical for building up domestic reserves for use in a potential next wave of COVID-19 or a future public health crisis.

Recasting our public health supply chain and industrial base to reduce our reliance on China is truly a national imperative. We must learn from the current response to better plan and prepare for future crises. We must prioritize increasing domestic industrial capacity in those areas where we are dependent on Chinese sources. And we must effectively employ the new resources and authorities to increase our longer-term resilience in the wake of this horrific pandemic.

Get the latest coronavirus business & economic impact analysis from Business Insider Intelligence on how COVID-19 is affecting industries.