FY2014 NDAA

H.R.1960: National Defense Authorization Act for Fiscal Year 2014
Latest Major Action:
7/8/2013 Received in the Senate. Read twice. Placed on Senate Legislative Calendar under General Orders. Calendar No. 126.
NOTE: The proposed amendments below were not included in the bipartisan agreement published 10 December 2013.
Source: Thomas.gov


SEC. 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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Section 818(c)(2)(B) of the National Defense Authorization Act for Fiscal Year 2012 (Public Law 112-81; 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’.


SEC. 812. AMENDMENTS 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 expand the conditions under which covered contractors can qualify for exemption from strict liability associated with rework and corrective action related to counterfeits of obsolete electronic parts.

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Section 818(c)(2) of the National Defense Authorization Act for Fiscal Year 2012 (Public Law 112-81; 10 U.S.C. 2302 note) is amended– (1) in subparagraph (A), by striking `and’ at the end; (2) in subparagraph (B), at the end of clause (iii), by striking the period and inserting `; and’; and (3) by adding at the end the following new subparagraph: `(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).’.



Should these amendments come to be, NDAA2012 Section 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).

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3 thoughts on “FY2014 NDAA

  1. Owen Peters says:

    Henry, Given the language and the unlikely event, is it your belief that if a contractor receives a non-obsolete counterfeit part from an authorized dealer they are exempt from liability?

    • Should the amendment proposed in NDAA2014 §811 come to pass, I would say yes, provided the contractor has a DoD approved ‘counterfeit electronic part avoidance and detection system’, and the contractor provides timely notice to the Government.
      Please note that DoD has not yet defined criteria for the ‘system’, mechanism for DoD approval of the ‘system, or provisions for ‘timely notice’.

      Per my earlier essay, this exemption is potentially very narrow depending on how DoD defines ‘trusted supplier’. http://wp.me/p263iE-Iw

  2. Dan Deisz says:

    When I read any of the proposed legislation, the term “trusted supplier” jumps out at me as the weak link unless ALL AUTHORIZED SOURCES ARE TRULY EXHAUSTED in a search for parts. This has to include obsolete parts because there are Authorized suppliers of obsolete components. There needs to be a list (dynamic of course) of AUTHORIZED SOURCES like exists on http://www.authorizeddirectory.com whereby the OCM’s have documented who their Authorized sources are. In my opinion, this list must be exhausted before reaching for “trusted suppliers”. Obsolete should not be an excuse to immediately reach for “trusted suppliers” if an Authorized source exists, nor should there be relief on a contractor just because a part has gone obsolete unless Authorized sources are exhausted.

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