On 29 November 2011, the Senate approved an amendment by the bipartisan leadership of the Senate Armed Services Committee to strengthen protections against a flood of counterfeit electronic parts coming into the defense supply system. Sens. Carl Levin, D-Mich., and John McCain, R-Ariz., offered the legislation as an amendment to the National Defense Authorization Act (NDAA) for Fiscal Year 2012. The legislation is a response to a committee investigation that found more than 1,800 instances of counterfeit electronic parts in the defense supply chain. It now becomes part of the Senate’s version of the authorization act, passed on 1 December, and is subject to conference with the House.
On 8 December 2011, Supply & Demand Chain Executive hosted a web seminar on “Counterfeit Electronics and the Defense Authorization Bill”. Panel members discussed their respective views of the issues and implications associated with the Section 848 of the U.S. Defense Authorization Bill for FY2012. Panel members also described services offered by their organizations. The panel for this web seminar included …
- Marina Malenic – Aviation Reporter, Jane’s Defence Weekly
- Mark Snider – President and Founder, ERAI Inc.
- Kristal Snider – Vice President, ERAI Inc
- Dan Ellsworth – President and CEO, World Micro, Inc.
- Mark Northrup – VP of Advanced Technical Operations & Strategy, IEC Electronics
- Paul E. Hagen – Principal, Beveridge & Diamond, P.C.
- Glenn Bassett – Vice President, Supply Chain, IHS
- Thomas J. Dinges, CFA – Global EMS & ODM Research Practice, IHS iSuppli
- Sarah McDowall – Senior Analyst, Country Intelligence – Asia Pacific, IHS Global Insight
Here are my personal observations of the panel discussions …
The first panel discussion provided an overview of the Senate amendment to the NDAA and a timeline for requirements implementation. The remaining panels provided background information concerning the counterfeit parts problem, contributing factors and, to a limited degree, the supply chain considerations and risk mitigation approaches to avoiding counterfeit parts.
The Senate amendment to the FY2012 NDAA embraces many of the concepts to which many industry and US government subject matter experts subscribe and addresses many of the long-time impediments to addressing the challenge of counterfeit electronics in the defense supply chain. Panel members discussed some of these concepts, but this web seminar did not cover one of the key concepts included in the amendment – the purchase of parts “from the original manufacturers of the parts or their authorized dealers, or from trusted suppliers who obtain such parts exclusively from the original manufacturers of the parts or their authorized dealers” [see Sec 848 (a) (3) (A)]. Though the panel discussions included methods for selecting Independent Distributors (perhaps speculating on the requirements for “trusted suppliers”), the clear and distinct requirement to first pursue purchases from the original component manufacturer and its authorized distributors was noticeably absent from the panel discussions.
One topic that I hoped would be discussed during the web seminar was the panel’s view of the responsibilities of the Independent Distributor to assure the authenticity and integrity of the products it sells. While the web seminar touched upon DOD and contractor responsibilities described in the Senate amendment to the NDAA, the panelists did not discuss the degree to which the amendment addresses this fundamental issue.
At the time I prepared this review, conference with the House had concluded and the bill was expected pass the House and Senate by the end of the week. Should there be a follow up web seminar to discuss the final bill, I hope the discussions will include the topics above.