Pentagon contractors have concerns about new legal provisions intended to stop the flow of counterfeit electronic parts into the defense supply chain.
Cord Sterling, vice president for legislative affairs at the Aerospace Industries Association (AIA), said the defense-industry trade group is worried provisions in the fiscal year 2012 defense authorization act may unduly punish defense contractors that unwittingly use counterfeit parts in their systems.
“It’s almost like they’re saying…no matter what industry does to ensure there’s no counterfeit parts, that even if they follow all of (the Department of Defense’s) DoD’s practices, use suppliers that are trusted agents identified by the department, even if they go through all of that,…all the responsibility will come on the industry,” Sterling said. “And that’s different than in the past.”
Sterling said defense industry officials “fight and do everything we can to get rid of (the introduction of counterfeit parts), to eliminate it, to prevent it.”
“We’ve got a stake in it…and we want to make sure that equipment works correctly, and we usually catch it in the factories if there is something,” he said.
He argued if defense firms follow all the correct Pentagon procedures and use trusted agents, and still counterfeit parts get into their systems, the full responsibility shouldn’t fall on the companies. The new law eliminates a safe-harbor of sorts that previously shielded firms in such instances, he said.
“So there is a little bit of concern there,” he said. “We’ll work through that. A lot is going to be in the implementation phase.”
The counterfeit-related language in the Pentagon policy law came as a result of a Senate Armed Services Committee (SASC) that found more than 1,800 instances of such fake components that ended up in Pentagon systems. Committee staff found more than 100 individual cases of counterfeit parts, with the vast majority coming from China. During a Nov. 8, 2011 SASC hearing, Chairman Carl Levin (D-Mich.) quizzed U.S. defense contractors on the speed at which they notified the military when they found counterfeit parts in their systems (Defense Daily, Nov. 9, 2011).
The committee’s probe found counterfeit parts in the Navy’s SH-60B helicopter and P-8 Poseidon aircraft, the Air Force’s C-130J, C-27J and C-17 aircraft, and Army and Marine Corps helicopters including the AH-64 and CH-46.
The defense law for FY ’12, which President Barack Obama signed Dec. 31, 2011, clarifies acquisition rules to require that replacement and rework costs spurred by the use of counterfeit parts are paid by contractors and not the government. It also requires larger contractors and the Pentagon to create systems and procedures for detecting and avoiding such parts. It further sets parameters for which companies the Pentagon and its suppliers can buy electronic parts from, requires defense officials and contractors to notify the government in writing about the discovery of counterfeit parts.
Levin and SASC Ranking Member John McCain (R-Ariz.) added the counterfeit-parts provisions to the defense authorization bill during Senate floor debate in November 2011.