Observations re Proposed Amendment to Section 818 of the NDAA for FY2012 (113th Congress, S.2410)

After studying this proposed amendment and comparing notes with informed colleagues, I offer the following observations and concerns.

My understanding from discussion with others who are also following this legislations is that the provision was proposed to avoid a disconnect with requirements regarding trusted or alternative suppliers under the Competition in Contracting Act. The proposed amendment as written, however, has the potential to undue the wisdom introduced in Section 818 of the NDAA for FY2012 and in the final rule under DFARS Case 2012-D055.

To my eye, the proposed amendment to Section 818 of the NDAA for FY2012 introduces via proposed 818(c)(3)(A)(iii) the ability to use “alternative suppliers” who would present the greatest risk of counterfeit part escapes, but without calling for qualification per proposed 818(c)(3)(C) and (D), and without any particular expectation for due diligence to avoid counterfeit electronic parts acquired through these “alternative suppliers”.

I also observe that, as written in the proposed amendment, while DoD may authorize its contractors to identify and use “their own identified trusted suppliers” with certain specific additional provisions, DoD itself is not required to comply with these provisions, i.e. 818(c)(3)(D) (i) standards and processes for identifying such trusted suppliers comply with established industry standards; (ii) the contractor or subcontractor assumes responsibility for the authenticity of parts; and (iii) the selection of such trusted suppliers is subject to review and audit.

The introduction of the expression “their own identified trusted suppliers” implies a contradiction of sorts. DoD trusted suppliers would not be considered trusted suppliers for use by industry without the provisions identified in 818(c)(3)(D) (i) , (ii), and (iii).

The final rule under DFARS case 2012-D055 applies a clear preference for use of parts from OCMs and authorized suppliers and when this cannot be accomplished the rule calls for due diligence to avoid counterfeits. This proposed amendment to Section 818 of the NDAA for FY2012 has the potential to undermine this wisdom.

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