On July 11, the Defense Department purchased its way to become the largest shareholder of MP Materials in an effort to bolster the production of rare earth magnets used in many forms of modern technology, both civilian and military.
However, it did so in an unethical manner, and failed to demonstrate transparency during the process. The Defense Department has not held a press conference about the deal with MP Materials, and it has offered scant details about the public-private partnership.
On August 10, the Defense Department released a bizarre memo that violated the civil-military separation that America has long enjoyed by repeatedly praising Trump.
“Since his first term in office, and for decades prior to that as a private citizen, President Trump has been clear that economic security is national security. To that end, the President directed the DoD to use its authorities and capital tools to confront the threat posed by the CCP.
U.S. Department of Defense
In the financial filings of MP Materials, it is revealed that the Defense Department utilized an obscure provision of the Defense Production Act (DPA) “to sidestep standard and routine procurement and contracting laws.”
The megadeal is advancing unburdened by the Federal Acquisition Regulation, Cost Accounting Standards, the Competition in Contracting Act and the Truthful Cost or Pricing Data Statute, according to the company’s financial filings.
E&E News
The Defense Department was not forthcoming with this information, which was only found in the MP Materials filings. While legal, the Defense Department exploited the emergency authority granted by the DPA to bypass typical federal standards.
However, the Defense Department must always comply with the Anti-Deficiency Act, even when the DPA is triggered. The Anti-Deficiency Act prevents all agencies from using more money than Congress appropriated for them. The Defense Department-MP Materials deal cost about $3.5 billion, which is more money than was appropriated for it. While this appears to be illegal, it puts the Defense Department in a more “lawless space,” as it is “constrained only by the availability of funds and a national security need, however a president defines it.” In other words, Trump or any other President could bypass the Anti-Deficiency Act whenever he wants, which is a significant legal loophole.
The decision to utilize government resources to bolster rare earth production is not unjustified, as China has extorted other countries and corporations with its 90% rare earth magnet monopoly. However, doing so in a manner that is unaccountable to the public may jeopardize such efforts if voters turn against public-private efforts to increase rare earth output.
