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  • Question

    I don't see anything in the FAR that specifically requires the contractor to address counterfeit parts (beyond IT parts). What in the FAR/DFARS requires the contractor to do anything about counterfeit parts? Thanks!


    Answer

    1. The FAR reference quoted below in pertinent part are applicable to this response.

    FAR 46.105 -- Contractor Responsibilities
    (a) The contractor is responsible for carrying out its obligations under the contract by--
      (2) Tendering to the Government for acceptance only those supplies or services that conform to contract requirements;
      (3) Ensuring that vendors or suppliers of raw materials, parts, components, subassemblies, etc., have an acceptable quality control system;

    (c) The control of quality by the contractor may relate to, but is not limited to--
      (1) Manufacturing processes, to ensure that the product is produced to, and meets, the contract’s technical requirements;
      (5) Fabrication and delivery of products, to ensure that only conforming products are tendered to the Government;

    2. The following references are also applicable to this response:
      a. USD/AT&L Memo dated Mar 12, 2012, Overarching DoD Counterfeit Prevention Guidance
    https://dap.dau.mil/policy/Lists/Policy Documents/Attachments/10854/Counterfeit-Prevention-Guidance.pdf  
    or at
    www.dmsms2012.com/images/Counterfeit-Prevention-Guidance.pdf

      b. The National Defense Authorization Act for Fiscal Year 2012 (H.R. 1540)
    Sec. 818. Detection and avoidance of counterfeit electronic parts
    http://www.gpo.gov/fdsys/pkg/BILLS-112hr1540enr/pdf/BILLS-112hr1540enr.pdf

    3. While this inquiry does not provide any information pertaining to the technical requirements of the contract, we would surmise that these requirements would not permit the delivery of supplies that contained any counterfeit parts. Therefore, pursuant to FAR 46.105 as described above, the contractor’s responsibility is to tender to the Government for acceptance only those supplies that conform to contract requirements and to institute quality control systems that ensure that the product is produced to, and meets the contract’s technical requirements. Consequently, we would argue that the FAR clearly states, by the express reference to meeting the contract’s technical requirements, that the contractor may not deliver nonconforming products that contain counterfeit parts (i.e., “do something” about counterfeit parts).

    4. Additionally, there have been recent developments that will impose more express requirements on contractors in the near future to detect and prevent the introduction of counterfeit material into DoD systems. In the Reference 2.b USD/AT&L memorandum, Mr. Kendall states that “Counterfeit items are a serious threat to the safety and operational effectiveness of Department of Defense (DoD) systems. … The Department is developing … policy and strategies designed to detect and prevent the introduction of counterfeit materiel.” As a result, DoD is working on appropriate changes to DFARS that will direct specific actions to prevent, detect, remediate, and investigate counterfeiting in the DoD supply chain. These regulations will focus on mission critical components, critical safety items, electronic parts, and load bearing mechanical parts.

    5. These forthcoming changes to the DFARS are driven in large part by the Reference 2.b National Defense Authorization Act for Fiscal Year 2012 which was signed into law in January 2012. Among other things, this law mandates DoD to impose additional regulations on contractors to detect and avoid the use of counterfeit parts (just to name a few).

    Sec. 818. Detection and avoidance of counterfeit electronic parts
    (c) REGULATIONS.—
    (1) IN GENERAL.—Not later than 270 days after the date of the enactment of this Act, the Secretary shall revise the Department of Defense Supplement to the Federal Acquisition Regulation to address the detection and avoidance of counterfeit electronic parts.

    (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; and

      (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.

    (3) TRUSTED SUPPLIERS.—The revised regulations issued
    pursuant to paragraph (1) shall—
      (A) require that, whenever possible, the Department and Department contractors and subcontractors at all tiers—
      (i) obtain electronic parts that are in production or currently available in stock from the original manufacturers of the parts or their authorized dealers, or from trusted suppliers who obtain such parts exclusively from the original manufacturers of the parts or their authorized dealers; and
      (ii) obtain electronic parts that are not in production or currently available in stock from trusted suppliers;

      (B) establish requirements for notification of the Department, and inspection, testing, and authentication of electronic parts that the Department or a Department contractor or subcontractor obtains from any source other than a source described in subparagraph (A);

    (4) REPORTING REQUIREMENT.—The revised regulations issued pursuant to paragraph (1) shall require that any Department contractor or subcontractor who becomes aware, or has reason to suspect, that any end item, component, part, or material contained in supplies purchased by the Department, or purchased by a contractor or subcontractor for delivery to, or on behalf of, the Department, contains counterfeit electronic parts or suspect counterfeit electronic parts report in writing within 60 days to appropriate Government authorities and the Government-Industry Data Exchange Program (or a similar program designated by the Secretary).

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