Below is some excerpted information on a “Proposed Rule” relative to anti-counterfeiting measures required of DOD suppliers that has recently been published. Click on the title to go to the DOD’s web site for the complete regulation supplement.
It is clear that the problem of counterfeit parts flowing through the DOD supplier pipeline has the potential for very serious consequences to military personnel. While one might say that it is generally best if industries establish their own “rules of engagement”, counterfeiting is a problem that crosses so many industry lines, and – at least in this area – has such serious consequences – perhaps this is an area where government regulation is appropriate? What’s your opinion? What do you think of the DOD’s Proposed Rule?
FROM:
Federal Register/The Daily Journal of the United States Government
Defense Federal Acquisition Regulation Supplement: Detection and Avoidance of Counterfeit Electronic Parts (DFARS Case 2012-D055)
A Proposed Rule by the Defense Acquisition Regulations System on 05/16/2013
This article has a comment period that ends on 07/15/2013
Action
Proposed Rule
Summary
DoD is proposing to amend the Defense Federal Acquisition Regulation Supplement (DFARS) in partial implementation of a section of the National Defense Authorization Act for Fiscal Year 2012, and a section of the National Defense Authorization Act for Fiscal Year 2013, relating to the detection and avoidance of counterfeit electronic parts.
I. Background
DoD is proposing to revise the DFARS to partially implement section 818 (paragraphs (c) and (f)) of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2012 (Pub. L. 112-81, enacted December 31, 2011). Section 818 is entitled “Detection and Avoidance of Counterfeit Electronic Parts.” Paragraph (c) of section 818 requires the issuance of DFARS regulations addressing contractor responsibilities for detecting and avoiding the use or inclusion of counterfeit electronic parts or suspect counterfeit electronic parts, the use of trusted suppliers, and requirements for contractors to report counterfeit electronic parts and suspect counterfeit electronic parts. Paragraph (f) of section 818 contains the definitions of “covered contractor” and “electronic part.” Other aspects of section 818 are being implemented separately.
In addition, this proposed rule addresses the amendments to section 818 that were made by section 833, entitled “Contractor Responsibilities in Regulations Relating to Detection and Avoidance of Counterfeit Electronic Parts,” of the NDAA for FY 2013 (Pub. L. 112-239, enacted January 2, 2013).
II. Discussion Back to Top
The intent of section 818 is to hold contractors responsible for detecting and avoiding the use or inclusion of counterfeit electronic parts or suspect counterfeit electronic parts. Three specific areas were identified that required either modification or additions to DFARS in order to implement the requirements defined in section 818.
202.101 Definitions.
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Counterfeit part means—
(1) An unauthorized copy or substitute part that has been identified, marked, and/or altered by a source other than the part's legally authorized source and has been misrepresented to be from a legally authorized source;
(2) An item misrepresented to be an authorized item of the legally authorized source; or
(3) A new, used, outdated, or expired item from a legally authorized source that is misrepresented by any source to the end-user as meeting the performance requirements for the intended use.
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Electronic part means an integrated circuit, a discrete electronic component (including, but not limited to, a transistor, capacitor, resistor, or diode), or a circuit assembly (section 818(f)(2) of Pub. L. 112-81).
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Legally authorized source means the current design activity or the original manufacturer or a supplier authorized by the current design activity or the original manufacturer to produce an item.
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Suspect counterfeit part means a part for which visual inspection, testing, or other information provide reason to believe that a part may be a counterfeit part.
B. Contractor responsibilities. Detection and avoidance of counterfeit electronic parts or suspect counterfeit electronic parts. New policy on counterfeit parts is proposed to be added to DFARS subpart 246.8, Contractor Liability for Loss of or Damage to Property of the Government. The proposed new coverage includes a clause at DFARS 252.246-7007, Contractor Counterfeit Electronic Part Avoidance and Detection System. In addition, this rule proposes to add compliance (with the requirements for identifying, avoiding, and reporting counterfeit parts) to the existing requirements for the contractor's purchasing system. To that end, the rule proposes to modify the clause at DFARS 252.244-7001, Contractor Purchasing System Administration, to add system criteria for the contractor's purchasing system. It also proposes an alternate which adds systems criteria for a less comprehensive review of the contractor's purchasing system that targets review of those elements relating to the detection and avoidance of counterfeit electronic parts and suspect counterfeit electronic parts. The alternate is prescribed for use in solicitations and contracts that include the clause at 252.246-7007, but do not include the clause at FAR 52.244-2, Subcontracts.
(1) Unallowability of costs of rework and corrective action. A new subsection, DFARS 231.205-71, proposes to prohibit contractors from claiming, as a reimbursable cost under DoD contracts, the cost of counterfeit electronic parts or suspect counterfeit electronic parts or the cost of rework or corrective action that may be required to remedy the use or inclusion of such parts. However, section 833 of the NDAA for FY 2013 provides specific exceptions that would enable these costs to be reimbursed if (i) a contractor has a DoD-approved operational system to detect and avoid counterfeit parts; or the suspect counterfeit parts were provided as Government-furnished property; and (ii) the contractor has provided timely notice to the Government. These exceptions are included at DFARS 231.205-71(c) in the proposed rule.
(2) Government role. The Government's role in reviewing and monitoring the contractor's processes and procedures for detecting and avoiding counterfeit or suspect counterfeit electronic parts (see section 818(e)(2)(B)) is addressed as part of a contractor's purchasing system review (see proposed DFARS 244.303(b)).
FOR FURTHER INFORMATION CONTACT:
Ms. Meredith Murphy, Defense Acquisition Regulations System, OUSD(AT&L)DPAP/DARS, Room 3B855, 3060 Defense Pentagon, Washington, DC 20301-3060. Telephone 571-372-6098; facsimile 571-372-6101.