HASC amends proposal for NDAA 2014 to expand exemption from liability associated with counterfeit electronic parts

The House Armed Services Committee’s proposal for NDAA2014 would amend NDAA2012 §818 to expand the conditions under which covered contractors can qualify for exemption from strict liability associated with rework and corrective action related to counterfeit electronic parts.

The proposed NDAA2014 would amend NDAA2012 §818 regarding contractor liability in two areas…

  1. electronic parts procured from an original manufacturer or its authorized dealer or from a trusted supplier (NDAA2014 §811), and
  2. obsolete electronic parts (NDAA2014 §812)

Should these amendments come to be, NDAA2012 §818(c)(2) would read as follows (emphasis has been added to identify amended language)…

(2) CONTRACTOR RESPONSIBILITIES- The revised regulations issued pursuant to paragraph (1) shall provide that–

(A) covered contractors who supply electronic parts or products that include electronic parts are responsible for detecting and avoiding the use or inclusion of counterfeit electronic parts or suspect counterfeit electronic parts in such products and for any rework or corrective action that may be required to remedy the use or inclusion of such parts;

(B) the cost of counterfeit electronic parts and suspect counterfeit electronic parts and the cost of rework or corrective action that may be required to remedy the use or inclusion of such parts are not allowable costs under Department contracts, unless–

(i) the covered contractor has an operational system to detect and avoid counterfeit electronic parts and suspect counterfeit electronic parts that has been reviewed and approved by the Department of Defense pursuant to subsection (e)(2)(B);

(ii) the counterfeit electronic parts or suspect counterfeit electronic parts 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 to the contractor as Government property in accordance with part 45 of the Federal Acquisition Regulation; and

(iii) the covered contractor provides timely notice to the Government pursuant to paragraph (4); and

(C) the cost of counterfeit electronic parts and suspect counterfeit electronic parts and the cost of rework or corrective action that may be required to remedy the use or inclusion of obsolete parts are not allowable costs under Department contracts, unless–

(i) the offeror’s proposal in response to a Department of Defense solicitation for maintenance, refurbishment, or remanufacture work identifies obsolete electronic parts and includes a plan to ensure trusted sources of supply for obsolete electronic parts, or to implement design modifications to eliminate obsolete electronic parts;

(ii) the Department elects not to fund design modifications to eliminate obsolete electronic parts; and

(iii) the contractor applies inspections and tests intended to detect counterfeit electronic parts and suspect counterfeit electronic parts when purchasing electronic parts from other than the original manufacturers or their authorized dealers, pursuant to paragraph (3).

With the exception of “Parts Obsolescence Issues”, the issues and gaps described in my earlier essay are not addressed by these proposed amendments.

More…

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One thought on “HASC amends proposal for NDAA 2014 to expand exemption from liability associated with counterfeit electronic parts

  1. Owen Peters says:

    An unfortunate amendment which hopefully will be challenged by the Senate and White House… “No type of company or organization has been untouched by counterfeit electronic parts. Even the most reliable of parts sources have discovered counterfeit parts within their inventories.” – U.S. DEP’T OF COMMERCE, DEFENSE INDUSTRIAL BASE ASSESSMENT: COUNTERFEIT ELECTRONICS (2010).

    Under Section 818 of NDAA2012, as written and passed, it seems that a contractor is always responsible for the authenticity of parts supplied to DoD no matter the source or circumstance. Encouraging the use of Original Manufactures, Authorized Distributors and Trusted Suppliers is of course the thing to do, but not at the cost of exemption from liability.

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