DFARS clause 252.246-7008, RMA returns and stock rotation material

The following was included in correspondence I sent to the SIA and ECIA this afternoon …

DFARS Case 2014-D005 amended DFARS clause 252.246-7007, Contractor Counterfeit Electronic Part Detection and Avoidance System, and introduced a new clause that will apply to non-CAS covered contracts and flow downs – 252.246-7008, Sources of Electronic Parts.

The amendment to DFARS clause 252.246-7007 states that the flowdown is not to apply to Original Component Manufacturers (OCMs). Though an apparent error needs to be fixed, the new clause 252.246-7008 is not to be flowed down to OCMs either. I view this as a good thing generally and have been a proponent of context sensitive flowdowns rather the one size (tries to) fit all situation we had before this amendment was released in August.

That said, there is a provision within 252.246-7008 that will affect Authorized Distributors  (ADs) and will also reach OCMs. Take a look at 252.246-7008(b)(3)(i)(B) and at 252.246-7008(b)(3)(ii)(A). … 

“…Take the actions in paragraphs (b)(3)(ii) through (b)(3)(iv) of this clause if the Contractor…” [among other things] “… cannot confirm that an electronic part … has not been comingled in supplier new production or stock with … returned parts”

I am aware of some ADs that continue to put RMA returns back into stock.  I am also aware of OCMs who put RMA returns back into stock. 252.246-7008 will be flowed down to ADs and in cases where they comingle RMA returns with “new production or stock”, contractors will be obligated to notify their customers of such cases. Furthermore, the contractor will be responsible for authentication. If a contractor buys parts directly from an OCM and that OCM comingles RMA returns with “new production or stock”, the contractor will have the same notification and authentication obligations.

I anticipate that ADs will be discussing this issue with OCMs with whom they have authorization agreements. Where an AD segregates RMA returns from its customers, this does not address materiel it acquires from OCMs that may include RMA returns the OCM returned to its stock.

Thus far in response to this, a few OCMs have told me that they do not have a counterfeit part escape risk with RMA returns because of how they disposition RMA returns and the steps taken to validate RMA returns they choose to reintroduce into stock. Of course, I would expect these precautionary measures would be in place. That does not, however, address the obligation a military contractor now has to inform its customers of such comingling and for the authentication of these parts since the contractor has no way of knowing when RMA returns may be supplied or how to identify them.

This issue, I presume, would also extend to stock rotation material.

I urge you to review this new DFARS clause 252.246-7008 in light of the handling of RMA returns and stock rotation material and discuss how the MIL-Aero semiconductor industry intends to address it.

In any event, you should anticipate that contractors will introduce flows downs to address the RMA and stock rotation material issue I describe here.

Thank you,

Henry Livingston


Earlier blog posts help to describe how the handling of Return Material Authorization (RMA) returns and stock rotation material fit into this picture…

The Escape That Never Happens (A Leak in Authorized Distribution)

Circuitous Paths

 

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4 thoughts on “DFARS clause 252.246-7008, RMA returns and stock rotation material

  1. Andre Oliveira says:

    We see all this movement in the defense industry, I wonder when the civil aviation authorities will take this matter more seriously and create a formal requirement for commercial aircraft.

  2. Henry,

    DFARS 252.246-7008, “Sources of Electronic Parts,” includes the following flow-down requirement:

    “(e) Subcontracts. The Contractor shall include the substance of this clause, including this paragraph (e), in subcontracts, including subcontracts for commercial items that are for electronic parts or assemblies containing electronic parts, unless the subcontractor is the original manufacturer.”

    In contrast, DFARS 252.246-7007, “Contractor Counterfeit Electronic Part Detection and Avoidance System,” includes the following flow-down requirement:

    “(e) The Contractor shall include the substance of this clause, excluding the introductory text and including only paragraphs (a) through (e), in subcontracts, including subcontracts for commercial items, for electronic parts or assemblies containing electronic parts.”

    The carve-out text “unless the subcontractor is the original manufacturer” in paragraph (e) of DFARS 252.246-7008, “Sources of Electronic Parts,” is not in paragraph (e) of DFARS 252.246-7007, “Contractor Counterfeit Electronic Part Detection and Avoidance System.”

    Do you know why there is a carve-out from the flow-down requirement in DFARS 252.246-7008 when the subcontractor is the original manufacturer but there is no such carve-out in DFARS 252.246-7007?

    • Richard,

      The DFARS as previously written compelled contractors and their subcontractors to flow down counterfeit avoidance and detection requirements to the manufacturers of assemblies containing electronic parts and to the manufacturers of electronic parts. This has been met with universal resistance from electronic part manufacturers and, in my opinion, justifiably so.

      Though it is not clear as written in the amended clauses today, discussions with some of the DOD people involved in the rule making activity confirm that requirements within these clauses are not expected to be flowed down to the original part manufacturer, i.e. manufacturers of electronic parts vs manufacturers who integrate electronic parts into their products. This is consistent with with my personal opinions about context sensitive flow down. A number of us are expecting to see further amendments to clarify this.

      Since ‘7007 requires the clauses of ‘7008, the carve-out is really included in ‘7007 as well.

      NOTE: My understanding is that while ‘7007 continues to apply only to CAS covered contractors, the reach of ‘7008 is not limited in to CAS covered contractors.

  3. Richard Kuyath says:

    The fact the carve out language is in -7008 but not in -7007 cuts against an interpretation that it also applies to 7007. DoD needs to amend -7007 to add the carve out.

    The -7007 clause applies to all subcontracts (including those for COTS items and commercial items) for electronic parts or assemblies containing electronic parts, which are placed under CAS-covered DoD prime contracts.,

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