Monthly Archives: May 2013

A paper on “Contractor Responsibility: Toward An Integrated Approach To Legal Risk Management”

In recent essays, I have discussed how counterfeit parts avoidance and detection has emerged as an area of business and legal risk that aerospace and defense (A&D) contractors should incorporate into compliance programs. The following article describes the current landscape of heightened US Government demands for contractor responsibility and provides a backdrop for issues I have described about the imbalanced approach to counterfeit prevention described within the proposed DFARS rule on “Detection and Avoidance of Counterfeit Electronic Parts”….

Contractor Responsibility: Toward An Integrated Approach To Legal Risk Management” By Steven A. Shaw, Mike Wagner, and Robert Nichols (March 2013)

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Counterfeit Prevention Clauses and Potential False Claims Act Exposure

In an earlier essay, I described how the pace and exuberance of counterfeit prevention requirements flow down activity on the part of prime and upper tier contractors has accelerated with the introduction of NDAA2012§818. Many observe that it has become commonplace for a number of prime and upper tier contractors to include overly broad counterfeit parts clauses in their purchase order term and conditions, largely due to speculation on the details of forthcoming regulations.

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U.S. IPEC Intellectual Property Spotlight, March-April 2013 Edition

From the U.S. Intellectual Property Enforcement Coordinator …

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COTS and Challenges to Implementing the Proposed DFARS Rule on “Detection and Avoidance of Counterfeit Electronic Parts”

In its June 2000 report on “Commercial Item Acquisition: Considerations and Lessons Learned“, DoD advises that the use of commercial items “frequently means embracing commercial business practices that are embedded in the commercial item” and “many DoD requirements must be adjusted to accommodate both the vendor’s anticipated uses of the commercial item and the vendor’s business practices”. The Proposed DFARS Rule on “Detection and Avoidance of Counterfeit Electronic Parts”, however, fails to address these realities.

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iNEMI Webinar: Tools to Assess Risk of Counterfeit Use | iNEMI

“This webinar from the iNEMI Counterfeit Components Assessment project group provides a comprehensive view of the problem by surveying the possible points of entry in the supply chain and assessing the impact of counterfeit components on the industry at various points of use. The group has developed three easy-to-use risk assessment methodologies that can be used by suppliers, end users and equipment providers to quantify the risk of counterfeit use for their products or parts. These tools cover three areas: the risk of counterfeit use, risk of untrusted supply sources, and counterfeit loss and total cost estimations. …”

More at iNEMI.

FAR / DFAR Case Update (24 May 2013)

Status updates from the 24 May ‘Open Cases Reports’ …

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Parts Obsolescence Issues and the Proposed DFARS Rule on “Detection and Avoidance of Counterfeit Electronic Parts”

Obsolete parts and its relationship to the counterfeit electronic part threat is generally known to DoD and it contractors. It has been a prominent topic at various aerospace & defense industry conferences, symposiums, and training programs which have been heavily attended to DoD personnel. This relationship was also discussed in the U.S. Senate Armed Services Committee “Report of the Inquiry into Counterfeit Electronic Parts in the Department of Defense Supply Chain” [1]. The proposed DFARS rule on “Detection and Avoidance of Counterfeit Electronic Parts” fails to address the vulnerability created by continued demand for obsolete parts and fails to address the increasing constraints on DoD regarding its ability to support and fund approaches to eliminate the use of obsolete parts.

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Missing Definition of ‘Trusted Supplier’ in the proposed DFARS Rule on “Detection and Avoidance of Counterfeit Electronic Parts”

The Federal Register Notice concerning the proposed DFARS Rule on “Detection and Avoidance of Counterfeit Electronic Parts” [1] describes partial implementation of the National Defense Authorization Act for Fiscal Year 2012 [2], including “the use of trusted suppliers” [3]. Within its criteria for an acceptable “Contractor Counterfeit Electronic Part Avoidance and Detection System”, the proposed rule includes “Use and qualification of trusted suppliers”. The proposed rule, however, does not include a definition for the term “trusted supplier”, nor does the new DoD counterfeit prevention policy [4] include a definition for this term.

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Criteria for a “Contractor Counterfeit Electronic Part Avoidance and Detection System” Introduced in the Proposed DFARS Rule on “Detection and Avoidance of Counterfeit Electronic Parts”

A recent article prepared by this author and published by the National Contract Management Association [1] describes how counterfeit parts avoidance and detection has emerged as an area of business and legal risk that aerospace and defense (A&D) contractors should incorporate into compliance programs. Since the publication of this article, a propose DFARS rule on “Detection and Avoidance of Counterfeit Electronic Parts” [2] was released for public comment. The proposed rule introduces a requirement for contractors to “establish and maintain an acceptable counterfeit electronic part avoidance and detection system”. A contractor’s failure to do so “may result in disapproval of the purchasing system by the contracting officer and/or withholding of payments.” According to the proposed rule, DoD will assess a contractor’s counterfeit electronic parts avoidance and detection system as part of DoD’s contractor purchasing system review (CPSR) [3]. The proposed rule, however, fails to define criteria for a contractor’s counterfeit electronic parts avoidance and detection system and DoD has not yet made this criteria available for public comment in advance of implementation.

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