FY2012 NDAA – Obsolescence Management and Its Relationship to Counterfeit Electronic Part Avoidance

Section 818 of the FY2012 NDAA requires DOD to establish requirements for a contractor or subcontractor to notify its DOD customer when electronic parts are obtained from any source other than the original manufacturer or its authorized dealer. The continued demand for parts known to be obsolete is one scenario where DOD and its contractors can anticipate when it will be necessary to make such purchases unless obsolete parts are eliminated from electronic equipment designs.

Defense and aerospace products are particularly vulnerable to counterfeit parts due to part obsolescence. Microelectronics products, in particular, have life cycles far shorter than the defense / aerospace products that use them. When obsolete parts are not eliminated from product designs, independent distributors are often used to obtain components that are no longer in production. While changes to procurement practices will reduce the number of purchases from higher risk suppliers, the prominence of through-life support contracts will make part obsolescence a larger challenge and counterfeits a possibly bigger problem for DOD and defense companies in the future.

Obsolescence management and its relationship to counterfeit electronic part avoidance is generally known to DOD and it contractors.  It has been a prominent topic at DMSMS & Standardization conferences for the past several years. Training and awareness programs established by the Defense Acquisition University describe the relationship between obsolescence management and counterfeit electronic part avoidance. A presentation by the US Navy at the December 2008 public meeting on FAR Case 2008-019, Authentic Information Technology Products, included a discussion on this topic. It was also discussed extensively during the November 2011 U.S. Senate Armed Services Committee Hearing to receive testimony on the Committee’s investigation into counterfeit electronic parts in the Department of Defense supply chain. In order to reduce the likelihood of having to purchase parts through riskier supply chains, defense electronics producers and their customers recognize the need to proactively manage the life cycle of electronic products versus the life cycles of the parts used within them. Customers, however, are often constrained regarding their ability to support and fund approaches to eliminate the use of obsolete components.

The following recommendations are offered to DOD as it develops policy and changes to regulations in response to Section 818 of the FY2012 NDAA:

When feasible, support and fund approaches to eliminate or mitigate the use of obsolete electronic parts.

Require proposals for production and support contracts to identify obsolete electronic parts and to establish a plan to either assure trusted sources of supply for obsolete electronic parts, or to implement design modifications to eliminate obsolete electronic parts.

Include provisions such that the identification of obsolete electronic parts at the time of proposal for production and support contracts serve as notification to DOD of anticipated potential use of electronic parts purchased from suppliers other than the original component manufacturer (OCM) or its authorized dealers.

Include provisions such that costs to remedy a counterfeit part escape will be considered allowable costs provided all of the following conditions are met …

  1. The contractor’s proposal identifies obsolete electronic parts and includes a plan to assure trusted sources of supply for obsolete electronic parts, or to implement design modifications to eliminate obsolete electronic parts.
  2. The DOD customer elects not to fund or otherwise entertain design modifications to eliminate obsolete electronic parts.
  3. The contractor applies inspections and tests intended to detect counterfeit electronic parts when purchasing electronic parts from other than the OCM or its “authorized dealer”.
  4. A counterfeit electronic part escapes detection, despite the application of inspections and tests intended to detect counterfeit electronic parts.

Such approaches will provide the opportunity for DOD and its contractors to establish plans for addressing part obsolescence and to balance the cost of design modifications to eliminate obsolete parts vs. the risk of seeking obsolete parts through riskier supply chains and the cost to mitigate those risks.

© Henry Livingston

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