https://www.federalregister.gov/articles/2015/09/21/2015-23516/defense-federal-acquisition-regulation-supplement-detection-and-avoidance-of-counterfeit-electronic
Action
Proposed Rule.
Summary
DoD
is proposing to amend the Defense Federal Acquisition Regulation
Supplement (DFARS) to further implement a requirement of the National
Defense Authorization Act for Fiscal Year 2012, as modified by a section
of the National Defense Authorization Act for Fiscal Year 2015, that
addresses required sources of electronic parts for defense contractors
and subcontractors.
Comments on the proposed rule
should be submitted in writing to the address shown below on or before
November 20, 2015, to be considered in the formation of a final rule.
Submit comments identified by DFARS Case 2014-D005, using any of the following methods:
○
Regulations.gov: http://www.regulations.gov.
Submit comments via the Federal eRulemaking portal by entering “DFARS
Case 2014-D005” under the heading “Enter keyword or ID” and selecting
“Search.” Select the link “Submit a Comment” that corresponds with
“DFARS Case 2014-D005.” Follow the instructions provided at the “Submit a
Comment” screen. Please include your name, company name (if any), and
“DFARS Case 2014-D005” on your attached document.
○
Email: osd.dfars@mail.mil. Include DFARS Case 2014-D005 in the subject line of the message.
○Fax: 571-372-6094.
○Mail: Defense Acquisition Regulations System, Attn: Ms. Amy G. Williams, OUSD(AT&L)DPAP/DARS, Room 3B941, 3060 Defense Pentagon, Washington, DC 20301-3060.
Comments received generally will be posted without change to
http://www.regulations.gov, including any personal information provided. To confirm receipt of your comment(s), please check
www.regulations.gov,
approximately two to three days after submission to verify posting
(except allow 30 days for posting of comments submitted by mail).
Ms. Amy G. Williams, telephone 571-372-6106.
DoD is proposing to revise the
DFARS to further implement section 818 of the National Defense
Authorization Act (NDAA) for Fiscal Year (FY) 2012 (
Pub. L. 112-81), as modified by section 817 of the NDAA for FY 2015 (
Pub. L. 113-291).
On May 6, 2014, DoD published a final rule under DFARS Case 2012-D055,
entitled “Detection and Avoidance of Counterfeit Electronic Parts” (
78 FR 26092). That final rule constituted the initial partial implementation of section 818.
After publication of the final
rule under FAR Case 2012-D055, DoD published on May 9, 2014, a notice of
a public meeting, which was held on June 16, 2014, to address further
implementation of detections and avoidance of counterfeit electronic
parts. There were 79 registered attendees and eight presenters at the
public meeting, as well as robust discussion. Some of the issues raised
at the public meeting are addressed in this proposed rule, such as—
- Removal of embedded software or firmware from the definition of “electronic part”;
- Clarification of traceability expectations; and
- Additional guidance on determination of risk.
The rule proposes amendments to
DFARS 246.870 and a new clause at DFARS 252.246-70XX, Sources of
Electronic Parts, to further implement paragraph (c)(3) of section 818
of the NDAA for FY 2012, as modified by section 817 of the NDAA for FY
2015, which requires DoD to issue regulations establishing requirements
that DoD and DoD contractors and subcontractors, except in limited
circumstances, shall acquire electronic parts from trusted suppliers in
order to further address the avoidance of counterfeit electronic parts.
Because of the complexities
relating to use of trusted suppliers by DoD and the requirement of
section 818, paragraph (c)(3)(C), to establish qualification
requirements consistent with
10 U.S.C. 2319,
those aspects of section 818 will be addressed in a separate DFARS Case
2015-D020, DoD Use of Trusted Suppliers for Electronic Parts.
This proposed rule addresses
requirements for DoD contractors and subcontractors at all tiers, as set
forth in paragraphs (c)(3)(A), (B), and (D). Although some paragraphs
of section 818 only apply to contractors subject to the Cost Accounting
Standards (CAS), paragraph (c)(3) applies to all DoD contractors and
subcontractors, when obtaining electronic parts to be provided to DoD
under a DoD contract.
DoD proposes to include the new
clause at DFARS 252.246-70XX, Sources of Electronic Parts, as prescribed
at 246.870-3(b), whenever procuring—
(1) Electronic parts;
(2) End items, components, parts, or assemblies containing electronic parts; or
(3) Services, if the contractor
will supply electronic parts or components, parts, or assemblies
containing electronic parts as part of the service.
Unlike the clause at
252.246-7007, Contractor Counterfeit Electronic Part Detection and
Avoidance System, this new clause is not limited to contractors subject
to CAS and will apply to small business set-asides, since paragraph
(c)(3) of section 818 applies to all DoD-contractors and subcontractors
at all tiers that are providing electronic parts or assemblies
containing electronic parts. Therefore, the clause includes flowdown to
subcontracts, including subcontracts for commercial items.
DoD does not propose to expand
the requirements of DFARS 252.246-7007, or the associated clause DFARS
252.244-7001, Contractor Purchasing System Administration, Alternate I,
to non-CAS covered prime contractors, because paragraph (e)(1) of
section 818 specifically applies the requirements for a system for
avoidance and detection of counterfeit parts to “covered contractors.”
However, the DFARS flows down the system requirements to subcontractors
regardless of CAS coverage.
The clause DFARS 252.246-70XX includes new proposed definitions of “authorized dealer” and “trusted supplier.”
- DoD notes that “authorized dealer” does
not equate to “authorized reseller.” An authorized reseller is not
bound to obtain parts from the original manufacturer. The reseller can
obtain parts from an authorized dealer, an aftermarket manufacturer, or
independent distributor, for example. An “authorized dealer,” however,
has a contractual arrangement with the original manufacturer or current
design activity, including an authorized aftermarket manufacturer, to
buy, stock, repackage, sell, and distribute its product lines.
- The term “trusted supplier”
includes not only the original manufacturer, an authorized dealer for
the part, or a supplier that obtains the part exclusively from the
original component manufacturer of the part or an authorized dealer, but
also includes a supplier that a contractor or subcontractor has
identified as a trustworthy supplier, using DoD-adopted counterfeit
prevention industry standards and processes, including testing, in
accordance with section 818(c)(3)(A)(iii) and (D) of the NDAA for FY
2012, as modified by section 817 of the NDAA for FY 2015.
In addition to the requirements
to acquire electronic components from trusted suppliers, contractors and
subcontractors that are not the original manufacturer are required to
have a risk-based system to trace electronic parts from the original
manufacturer to product acceptance by the Government. If such
traceability is not feasible for a particular part, the contractor
system must provide for the consideration of an alternative part or
utilization of tests and inspections in order to avoid counterfeit
electronic parts. If it is not possible to obtain an electronic part
from a trusted supplier, the contractor is required to notify the
contracting officer. The contractor is then responsible for inspection,
testing, and authentication, in accordance with existing applicable
industry standards, of electronic parts obtained from sources other than
a trusted supplier.
The rule also proposes a
definition in DFARS 202.101 of “original manufacturer” to include the
“contract electronics manufacturer,” the “original component
manufacturer,” or the “original equipment manufacturer,” which are also
defined. The term “contract electronics manufacturer” includes
manufacturers that produce goods, using electronic parts, for other
companies on a contract basis under the label or brand of the other
organizations, or fabricate an electronic part under a contract with, or
with the express written authority of, the original component
manufacturer, based on the original components manufacturer's designs.
In addition, the rule proposes to
delete the sentence “The term ‘electronic part’ includes any embedded
software or firmware” from the definition of “electronic part.” Although
electronic parts may include embedded software or firmware, the
requirements of this rule are more applicable to hardware. Further
industry standards are still under development to address testing of
embedded software or firmware in electronic parts.
There are conforming changes to
DFARS clause 252.246-7007, Contractor Counterfeit Electronic Part
Detection and Avoidance System, in the definitions and processes for
traceability.
DoD intends to apply the
requirements of section 818(c)(3) to contracts at or below the
simplified acquisition threshold (SAT) and contracts for the acquisition
of commercial items, including commercial-off-the-shelf (COTS) items.
A. Applicability to Contracts at or Below the SAT
41 U.S.C. 1905
governs the applicability of laws to contracts or subcontracts in
amounts not greater than the SAT. It is intended to limit the
applicability of laws to such contracts or subcontracts.
41 U.S.C. 1905
provides that if a provision of law contains criminal or civil
penalties, or if the FAR Council makes a written determination that it
is not in the best interest of the Federal Government to exempt
contracts or subcontracts at or below the SAT, the law will apply to
them. The Director, DPAP, is the appropriate authority to make
comparable determinations for regulations to be published in the DFARS,
which is part of the FAR system of regulations.
DoD intends to determine that it
is in the best interest of the Federal Government to apply the rule to
contracts at or below the SAT, because a substantial percentage of
electronic parts are valued below the SAT. An exception for contracts at
or below the SAT would severely decrease the intended effect of the
statute and increase the risk of receiving counterfeit parts, which may
present a significant mission, security, or safety hazard.
B. Applicability to Contracts for the Acquisition of Commercial Items, Including COTS Items
41 U.S.C. 1906
governs the applicability of laws to contracts for the acquisition of
commercial items, and is intended to limit the applicability of laws to
contracts for the acquisition of commercial items.
41 U.S.C. 1906
provides that if a provision of law contains criminal or civil
penalties, or if the FAR Council makes a written determination that it
is not in the best interest of the Federal Government to exempt
commercial item contracts, the provision of law will apply to contracts
for the acquisition of commercial items. Likewise, 41 U.S.C. governs the
applicability of laws to COTS items, with the Administrator for Federal
Procurement Policy the decision authority to determine that it is in
the best interest of the Government to apply a provision of law to
acquisitions of COTS items in the FAR. The Director, DPAP, is the
appropriate authority to make comparable determinations for regulations
to be published in the DFARS, which is part of the FAR system of
regulations.
Since electronic parts are
generally COTS items, and studies have shown that a large proportion of
proven counterfeit parts were purchased as commercial items, including
COTS items, DoD intends to determine that it is in the best interest of
the Federal Government to apply the rule to contracts for the
acquisition of commercial items, including COTS items, as defined at FAR
2.101. An exception for contracts for the acquisition of commercial
items, including COTS items, would severely decrease the intended effect
of the statute and increase the risk of receiving counterfeit parts,
which may present a significant mission, security, or safety hazard.
Executive Orders (E.O.s) 12866
and 13563 direct agencies to assess all costs and benefits of available
regulatory alternatives and, if regulation is necessary, to select
regulatory approaches that maximize net benefits (including potential
economic, environmental, public health and safety effects, distributive
impacts, and equity).
E.O. 13563
emphasizes the importance of quantifying both costs and benefits, of
reducing costs, of harmonizing rules, and of promoting flexibility. This
is a significant regulatory action and, therefore, was subject to
review under section 6(b) of E.O. 12866, Regulatory Planning and Review,
dated September 30, 1993. This rule is not a major rule under
5 U.S.C. 804.
DoD expects that this proposed
rule may have a significant economic impact on a substantial number of
small entities within the meaning of the Regulatory Flexibility Act
5 U.S.C. 601,
et seq. Therefore, an initial regulatory flexibility analysis has been prepared and is summarized as follows:
This proposed rule further implements section 818 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2012 (
Pub. L. 112-81), as modified by section 817 of the NDAA for FY 2015.
The objective of this rule is to
avoid acquisition of counterfeit electronic parts by requiring DoD
contractors and subcontractors, except in limited circumstances, to buy
electronic parts from trusted suppliers, in accordance with section
818(c)(3) of the NDAA for FY 2012.
Based on Federal Procurement Data
System data for FY 2013 and 2014, DoD estimates that this rule will
apply to approximately 33,000 small entities that have DoD prime
contracts or subcontracts for electronic parts; end items, components,
parts, or assemblies containing electronic parts; or services, if the
contractor will supply electronic parts or components, parts, or
assemblies containing electronic parts as part of the service.
In addition to the requirements
to acquire electronic components from trusted suppliers, contractors and
subcontractors that are not the original manufacturer or authorized
dealer are required have a risk-based process to trace electronic parts
from the original manufacturer to product acceptance by the Government.
If that is not feasible, the Contractor shall have a process to complete
an evaluation that includes consideration of alternative parts or
utilization of tests and inspections commensurate with the risk. If it
is not possible to obtain an electronic part from a trusted supplier,
the contractor is required to notify the contracting officer. The
contractor is responsible for inspection, testing, and authentication,
in accordance with existing applicable industry standards, of electronic
parts obtained from sources other than a trusted supplier. Notifying
the contracting officer if it is not possible to obtain an electronic
part from a trusted supplier would probably involve a mid-level of
executive involvement.
No relevant Federal rules duplicate, overlap, or conflict with the proposed rule.
The rule does not duplicate, overlap, or conflict with any other Federal rules.
DoD was unable to identify any
significant alternatives that would reduce the economic impact on small
entities and still fulfill the requirements of the statute.
DoD invites comments from small
business concerns and other interested parties on the expected impact of
this rule on small entities.
DoD will also consider comments
from small entities concerning the existing regulations in subparts
affected by this rule in accordance with
5 U.S.C. 610. Interested parties must submit such comments separately and should cite
5 U.S.C. 610 (DFARS Case 2014-D005), in correspondence.
The rule contains information
collection requirements that require the approval of the Office of
Management and Budget under the Paperwork Reduction Act (44 U.S.C.
chapter 35). Accordingly, DoD has submitted a request for approval of a
new information collection requirement concerning “Detection and
Avoidance of Counterfeit Electronic Parts—Further Implementation” to the
Office of Management and Budget.
A. Public reporting burden for
this collection of information is estimated to average one hour per
response, including the time for reviewing instructions, searching
existing data sources, gathering and maintaining the data needed, and
completing and reviewing the collection of information.
The annual reporting burden estimated as follows:
Respondents: 1,000.
Responses per Respondent: 1.
Total Annual Responses: 1,000.
Preparation Hours per Response: 1 hour.
Total Response Burden Hours: 1,000.
B. Request for Comments Regarding Paperwork Burden.
Written comments and
recommendations on the proposed information collection, including
suggestions for reducing this burden, should be sent to Ms. Jasmeet
Seehra at the Office of Management and Budget, Desk Officer for DoD,
Room 10236, New Executive Office Building, Washington, DC 20503, or
email
Jasmeet_K._Seehra@omb.eop.gov,
with a copy to the Defense Acquisition Regulations System, Attn: Ms.
Amy G. Williams, OUSD(AT&L)DPAP/DARS, Room 3B941, 3060 Defense
Pentagon, Washington, DC 20301-3060. Comments can be received up to 60
days after the date of this notice, but comments to OMB will be most
useful if received by OMB within 30 days after the date of this notice.
Public comments are particularly
invited on: Whether this collection of information is necessary for the
proper performance of functions of the DFARS, and will have practical
utility; whether our estimate of the public burden of this collection of
information is accurate, and based on valid assumptions and
methodology; ways to enhance the quality, utility, and clarity of the
information to be collected; and ways in which we can minimize the
burden of the collection of information on those who are to respond,
through the use of appropriate technological collection techniques or
other forms of information technology.
To request more information on
this proposed information collection or to obtain a copy of the proposal
and associated collection instruments, please write to the Defense
Acquisition Regulations System, Attn: Ms. Amy G. Williams,
OUSD(AT&L)DPAP/DARS, Room 3B941, 3060 Defense Pentagon, Washington,
DC 20301-3060, or email
osd.dfars@mail.mil. Include DFARS Case 2014-D005 in the subject line of the message.
