Addressing Counterfeit Parts in the DoD Supply Chain

Abstract

This report provides an exploration of the issue of counterfeit parts within the defense supply chain. It discusses the impact of the rapid globalization of the defense industry on the proliferation of counterfeit parts; describes various manifestations of counterfeiting in the commercial sector, with particular emphasis on electronic parts and components; assesses the current and potential threat of counterfeit parts infiltrating DoD's acquisition chain, including analyzing areas of highest vulnerability and risk; analyzes how some industries (e.g., pharmaceuticals and aerospace) address the counterfeit parts issue; reviews DoD efforts to mitigate this threat across the acquisition cycle; and explores the challenges involved in implementing anti-counterfeiting procedures across the DoD's supply chain. Recommendations include that the US strive to retain its design capabilities for critical technologies and that DoD should: 1) require contractors to rely on recognized standards, such as SAE AS5553, in devising their counterfeit detection and mitigation procedures. 2) enforce quality assurance standards, recognizing that nonconforming parts threaten weapons system integrity and may lead to costly remediation. 3) encourage the use of existing deterrents (e.g., tamper-proof packaging, x-ray inspection) while developing new anti-counterfeiting technologies. 4) debar suppliers who repeatedly furnish parts or components containing counterfeit parts. 5) require foreign companies to report suspect counterfeits using the GIDEP and provide penalties for non-compliance 6) focus on best value, as opposed to lowest cost, in its acquisition of critical technologies. 7) minimize the impact of obsolescence by using parts and components for which multiple sources exist.