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.

A number of resources could have been used to specify requirements and implementation details for a contractor’s counterfeit electronic parts avoidance and detection system within the proposed rule:

The aerospace and defense industry developed an industry standard for counterfeit electronic parts avoidance, detection, mitigation, and disposition, which includes the central tenets of counterfeit electronic part prevention recommended by industry subject matter experts – SAE Aerospace Standard AS5553 [4]. This standard was adopted by DoD shortly after its original publication in 2009. AS5553 includes elements of a counterfeit electronic parts control plan that could have been used to articulate requirements and define implementation details within the proposed rule.

Section 818 of the National Defense Authorization Act for Fiscal Year 2012 (NDAA 2012) [5] requires the secretary of defense to “implement a program to enhance contractor detection and avoidance of counterfeit electronic parts” and include “processes for the review and approval of contractor systems for the detection and avoidance of counterfeit electronic parts and suspect counterfeit electronic parts.” Section 818(e) of the NDAA 2012 lists several elements that should be addressed within contractor policies and procedures. Though section 818(e) does not clearly define them, section 818 (c) provides insight into many of these elements that could have been incorporated into the proposed rule.

The 16 March 2012 memorandum on “Overarching DOD Counterfeit Prevention Guidance” [6] directs specific actions to prevent, detect, remediate, and investigate counterfeiting in the DoD supply chain. The content of this guidance memorandum could have been used to describe an acceptable contractor counterfeit electronic parts avoidance and detection system.

DOD has been evaluating contractor counterfeit detection and avoidance systems based on requirements of NDAA 2012 Section 818 and key industry standards. These evaluations cover purchasing and subcontract management, receiving and inspection, control of nonconforming material, and reporting. The criteria used for these evaluations could have been used to describe an acceptable contractor counterfeit electronic parts avoidance and detection system.

Despite the availability of suitable resources to do so, the proposed rule does not define the elements of a contractor’s counterfeit electronic parts avoidance and detection system, does not describe criteria for DoD’s approval, nor does it include the central tenets of counterfeit electronic part prevention recommended by industry subject matter experts. Instead, the proposed rule includes a list of “system criteria” for a “Contractor Counterfeit Electronic Part Avoidance and Detection System”. These criteria consist of the elements listed section 818(e) of the NDAA 2012:

  • The training of personnel.
  • The inspection and testing of electronic parts, including criteria for acceptance and rejection. Processes to abolish counterfeit parts proliferation.
  • Mechanisms to enable traceability of parts to suppliers.
  • Use and qualification of trusted suppliers.
  • The reporting of counterfeit electronic parts and suspect counterfeit electronic parts. [7]
  • The quarantining of counterfeit electronic parts and suspect counterfeit electronic parts.
  • Methodologies to identify suspect counterfeit parts and to rapidly determine if a suspect counterfeit part is, in fact, counterfeit.
  • The design, operation, and maintenance of systems to detect and avoid counterfeit electronic parts and suspect counterfeit electronic parts.
  • The flow down of counterfeit avoidance and detection requirements to subcontractors.

The proposed rule, however, does not define or describe expectations for any of these elements, nor does the rule include definitions of key terms.

There is likely a risk for wide disparity among different DoD evaluators in the interpretation of what constitutes an acceptable contractor counterfeit electronic parts avoidance and detection system. A number of contractors have already experienced variations in DoD interpretation and evaluations during recent reviews of contractor counterfeit detection and avoidance systems which is largely due to lack of specified, unified criteria on which to base these reviews.

Closing Remarks

The time table for public comment to this proposed rule (the public comment period ends 15 July 2013) will not provide sufficient time and opportunity to engage with key DoD thought leaders and policy makers to hammer out implementation details and criteria for an acceptable contractor counterfeit electronic parts avoidance and detection system. Before DoD proceeds with its implementation of the rule and its formal assessments, DoD should …

  1. Define the elements of a contractor’s counterfeit electronic parts avoidance and detection system, including the central tenets of counterfeit electronic part prevention recommended by industry subject matter experts,
  2. Describe criteria for DoD’s approval,
  3. Prepare and publish for public comment “Audit Guidance” associated with the assessment and approval of contractor counterfeit electronic parts avoidance and detection systems.

Henry Livingston


[1] Livingston, H., “Compliance Programs for Counterfeit Parts Avoidance and Detection”, Contract Management, National Contract Management Association, May 2013

[2] Proposed DFARS Rule on “Detection and Avoidance of Counterfeit Electronic Parts” (2013-11400)

[3] Contractor purchasing system review is “the complete evaluation of a contractor’s purchasing of material and services, subcontracting, and subcontract management from development of the requirement through completion of subcontract performance”. DCMA-INST 143 – Consent to Subcontract (March 19, 2013)

[4] SAE International Aerospace Specification AS5553, “Counterfeit Electronic Parts; Avoidance, Detection, Mitigation, and Disposition”

[5] Pub. L. 112-081, Section 818, “Detection and Avoidance of Counterfeit Electronic Parts.”

[6] Hon. Frank Kendall, “Overarching DOD Counterfeit Prevention Guidance” (March 16, 2012)

[7] We anticipate this will be described within a forthcoming proposed rule for FAR Case 2013-002, “Expanded Reporting of Nonconforming Supplies”

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