US DoD implements procurement regulations intended to combat counterfeit parts

On May 16, 2013, the Department of Defense (DoD) issued the first in a series of anticipated proposed rules implementing the congressional mandate in Section 818 of the National Defense  Authorization Act (NDAA) for Fiscal Year 2013 that DoD adopt procurement regulations to address the detection and avoidance of counterfeit parts in DoD’s supply chain. The Proposed Rule addresses some of the pending questions concerning DoD’s implementation of Section 818. The proposed regulations, for instance, reveal that DoD does not intend to extend the reach of the rules beyond electronic parts, at least for the immediate future. But the Proposed Rule seems to raise or avoid as many questions as it answers, falling short of the hope that it might provide clarity on the most pressing issues, including DoD’s intentions with respect to designating “trusted suppliers” and what will be expected of prime contractors in managing their respective supply chains.

This specific rulemaking serves three primary purposes:

  • establishing the scope of the regulations by defining “electronic part” and “counterfeit part;”
  • introducing a DFARS Part 231 cost principle that would preclude most DoD contractors from recovering costs associated with purchasing or remediating counterfeit electronic parts; and
  • requiring certain DoD contractors subject to the Cost Accounting Standards (CAS) to establish and maintain a “counterfeit electronic parts avoidance and detection system”…

If you are registered and logged in to the site, click on the link below to read the rest of the Hogan Lovells briefing. If not, please register or sign in with your details below.