SYSTEM DEVELOPMENT
January 2013 2013 NDAA signed
November 2011 Senate hearings on counterfeits
December 2011 2012 NDAA signed
May 2013 Proposed revisions to DFARS are issued
March 2013 DoD issues DFARS supplement
July 2013 DFARS public comment period ends
Figure 2
Through a series of laws and initiatives, the Government has drawn a line in the sand against counterfeits.
related to counterfeit incursions, must be able to demonstrate “an operational system to detect and avoid counterfeit parts and suspect counterfeit parts that has been reviewed and approved” by the DoD in order to avoid complete liability for replacing counterfeit parts, an expense that could run into the billions of dollars. This regulation puts the onus on contractors to include safeguards in their systems or risk being held financially responsible for any counterfeits that make their way into military projects, and is considered an improvement and a more balanced approach over the previous regulation, which somewhat unrealistically placed all responsibility on the contractor. These safeguards have been further defined in the May 2013 proposed revisions to the Defense Federal Acquisition Regulation System (DFARS) outlined below.
National Security Strategy
Figure 3
Shown here are some of the leading industry and government agencies leading the fight against counterfeit components.
nally established to improve inventory and acquisition of military equipment, the IUID central registry has increasingly become an important check against unwanted counterfeits by cataloguing supplier and parts data (description, part number, serial number, manufacturer, etc.) and making it easily accessible to government auditors. All suppliers must adhere to the data requirements. A complementary effort was instituted in November 2012 by the Defense Logistics Agency (DLA) to require DNA 34
COTS Journal | July 2013
marking of all semiconductors sold to the DoD. This directive was met with opposition by industry groups who argued that the DNA marking was itself able to be counterfeited and this only exacerbates the problem. Discussion between the DLA and industry groups are continuing. A revised set of regulations, carried over from the 2012 Act, holds contractors responsible for the impact of counterfeits in the military supply chain. Contractors, who in the 2012 Act were for the first time held liable for civil and criminal penalties
The prevention of counterfeit parts is explicitly included under the “national security strategy for national technology and the industrial base.” In short, counterfeits are seen as a threat to national security, and will be fought with whatever means necessary. In March 2013 the DoD updated the Defense Federal Acquisition Regulation Supplement (DFARS) to the Federal Acquisition Regulation (FAR). The updates are part of measures intended to regulate the detection and avoidance of counterfeit electronic parts as a portion of the NDAA regulations, which specifically spell out new requirements for analyzing, assessing and acting on reports of counterfeit electronic parts and suspect counterfeit electronic parts, and holding contractors accountable. In order to encourage the reporting of counterfeits, which has lagged due to fear of liability among companies, the NDAA specifically protects procurements professionals and their companies from civil liability based on reporting a suspect counterfeit part. This underscores the increased emphasis on reporting as another tool in the fight against counterfeits. The DoD has been tasked with sharing accountability for counterfeits with suppliers, as long as that supplier agrees to source parts only from original manufacturers or their authorized distributors. In May 2013, the DoD released its pro-