Magazine article National Defense

Proposed Rules on Counterfeit Parts Puts Onus on Industry

Magazine article National Defense

Proposed Rules on Counterfeit Parts Puts Onus on Industry

Article excerpt

* If implemented, new Defense Department regulations could leave contractors to foot the bill for the use of counterfeit parts.

The Defense Federal Acquisition Regulation Supplement 2012-D055 would add a new section to regulations prohibiting contractors from being reimbursed for the cost of actual or suspected counterfeit electronic parts. It would also keep contractors from receiving reimbursements for work done to correct any problems resulting from counterfeit parts.

Steve Charles, executive vice president and co-founder of immixGroup Inc., characterized the regulations as "Congress putting the burn back on industry [and] all the suppliers and distribution partners without a lot of details on how to ... mitigate risk."

ImmixGroup helps technology companies sell hardware and software to the government.

"The proposed regulation asks prime contractors to develop a system for detection and avoidance of counterfeit parts," he continued. "Industry has some concerns because it doesn't provide much guidance about what will be an acceptable system."

Companies had until July 15 to formally comment on the proposed rule, including the definitions for what constitutes actual or suspected counterfeit electric parts.

"In the definition for counterfeit parts ... there seems to be a difference between the statute and the proposed rule," Charles said. He expected industry would focus on this language--specifically on what constitutes a "legally-authorized source."

Contracts and subcontracts with small businesses are exempt from the rules, but small companies in the supply chain of a large prime will have to abide by the regulations, according to the notice in the Federal Register. …

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