NDAA 2014 and “Additional Contractor Responsibilities in Regulations Relating to Detection and Avoidance of Counterfeit Electronic Parts”

This afternoon Representative Howard P. “Buck” McKeon, Chairman of the House Armed Services Committee, released his version of the National Defense Authorization Act for Fiscal Year 2014. The Subcommittee Markups can be found on the Committee webpage.

The Chairman’s markup includes further amendments to Section 818(c)(2)(B) of the National Defense Authorization Act for Fiscal Year 2012. …

Section 811—Additional Contractor Responsibilities in Regulations Relating to Detection and Avoidance of Counterfeit Electronic Parts

This section would amend section 818 of the National Defense Authorization Act for Fiscal Year 2012 (Public Law 112–81) to provide that the costs associated with the use of counterfeit electronic parts, and the subsequent cost of rework or corrective action that may be required to remedy the use or inclusion of such parts, are allowable costs under Department of Defense contracts if the counterfeit electronic parts were procured from an original manufacturer or its authorized dealer, or from a trusted supplier.

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Subtitle B—Amendments to General Contracting Authorities, Procedures, and Limitations

SEC. 811 [Log 51135]. ADDITIONAL CONTRACTOR RESPONSIBILITIES IN REGULATIONS RELATING TO DETECTION AND AVOIDANCE OF COUNTERFEIT ELECTRONIC PARTS.

Section 818(c)(2)(B) of the National Defense Authorization Act for Fiscal Year 2012 (Public Law 112–10 81; 125 Stat. 1493; 10 U.S.C. 2302 note) is amended—

(1) in clause (i), by inserting ‘‘electronic’’ after ‘‘avoid counterfeit’’; and

(2) in clause (ii), by striking ‘‘were provided’’ and inserting the following: ‘‘were—

‘‘(I) procured from an original manufacturer or its authorized dealer or from a trusted supplier in accordance with regulations described in paragraph (3); or

‘‘(II) provided’’.


This proposed amendment would introduce an exception that is potentially narrower than the amendment introduced by NDAA2013§833.

This proposal would make costs to remedy a counterfeit part quality escape allowable costs if the counterfeits were “procured from an original manufacturer or its authorized dealer or from a trusted supplier in accordance with regulations…”

The proposed DFARS on counterfeit electonic parts avoidance and detection does not define the term ‘trusted supplier’ and it is premature to speculate on where the rule making process will lead in this area.

An exception concerning counterfeits “procured from an original manufacturer or its authorized dealer” is an extremely narrow one. An exception with similar probability of occurrence might be a meteor strike on Capitol Hill.

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