Although the Defense Federal Acquisition Regulation Supplement (DFARS) has undergone yet another revision, proponents of authorized distribution say that the measure still does not go far enough to protect the electronics industry from counterfeit components.
The Electronics Components Industry Association, which represents electronics distributors and their suppliers, commented in December on the most recent revision to DFARS Case 2014-D005. In effect, the ECIA said definitions pertaining to distribution and common supply chain practices are still unclear.
To address the deficits in the wording of the DFARS ruling, ECIA’s December comments focus on “[…] five specific areas: (1) Authorized dealer; (2) Trusted supplier; (3) Policy; (4) Traceability; (5) Flow down requirements.” The issues at stake, as Robin Gray, COO and general counsel for ECIA offered:
ECIA believes that the most effective method for avoiding counterfeit electronic parts is to purchase these parts from the original manufacturer and their authorized distributors, and authorized aftermarket distributors and manufacturers. […] Consequently, ECIA recommends, in keeping with its […] recommendations, that the proposed DFARS be amended to reflect the “safe harbor” of buying from “legally authorized sources” and that the processes/procedures for detecting and avoiding counterfeit electronic parts only be used for acquisitions from unauthorized sources (i.e., sources other than “legally authorized sources”).
ECIA and other industry organizations have said there must be a clear and direct relationship between DFARS rulings’ terminology and the industry’s actual supply chain operations, definitions, critical terminology distinctions, and best in class anti-counterfeit methodologies. By aligning the legal processes and procedures with actual supply chain processes and terminology, the end goal to further assist DoD in their efforts to “[…] preserve the integrity of the electronic component supply chain” has a greater likelihood of impact and of success.
Each of ECIA’s points can be understood as narrowing the scope of the existing terminology DFARS (continues) to employ. In the ECIA open letter, the discussion and suggestions enter into the nuances between “authorized dealer” (DFARS) versus “authorized distributor” (ECIA); what “trusted” and “trustworthy” mean, and how, as Gray added, “‘trusted’ and ‘trustworthy’ do not equate to authenticity or performance.” The points pertaining to policy and traceability relate directly to the issues of procurement, from the issues of what constitutes exhaustive sourcing and searches (related directly to the issues of who is a “trusted supplier” and what is “currently available stock” versus “parts that are not in production”). The ECIA requests refinement in these critical points because the use of terms informs the processes for sourcing and the requirements/responsibilities placed on contractors when sourcing.
However, the nuances of “dealer” (DFARS) versus the ECIA and industry term “distributor” need to be aligned. Similarly, tightening the use of the terms “trusted” and “trustworthy” to name sourcing partners who are “authorized distributors” is critical and must have a more narrow scope, according to ECIA. As Gray summarized the ECIA position:
ECIA believes that the most effective method for avoiding counterfeit electronic parts is to purchase these parts from the original manufacturer and their authorized distributors, and authorized aftermarket distributors and manufacturers (.e., “legally authorized sources”). Purchasing from any other source significantly increases the likelihood of acquiring counterfeit parts. Consequently, ECIA recommends […] that the proposed DFARS be amended to reflect the “safe harbor” of buying from “legally authorized sources” and that the processes/procedures for detecting and avoiding counterfeit electronic parts only be used for acquisitions from unauthorized sources (i.e., sources other than “legally authorized sources”).
Finally, revisions to the Flow Down requirements present a slight departure in the ECIA’s discussion. The contention pertains to the additional and arguably unnecessary costs for “component manufacturers” (OCMs) to provide flow down requirements on the parts they manufacture. Clearly, this is a logical argument and speaks to the issue of how the semiconductor and electronics supply chain operates currently. As component makers are the source of the parts, the requirement adds cost and time to the entire supply chain at a point in the chain where counterfeiting is least likely to have occurred, namely at the point of manufacturing.
Certainly, both DFARS and ECIA have as their focus the continuous improvement and safeguarding of the semiconductor and electronics supply chain, particularly for critical DoD component sourcing. How this goal is to be realized and the formulaic rules encoded that will set the supply chain’s processes and procedures, along with the significant recourse for those who do not abide are still being debated. Accurate nomenclature is not simply another inter-organizational thumb-wrestling match, there are real ramifications and lives are at stake should substandard and/or counterfeit parts not be curbed from entering DoD part acquisition.
In sum, as ECIA argues, there is great value in tightening the sourcing rules for DoD procurement of electronic components, however, there must be alignment with the positive and successful processes, procedures, and hence, terminology, existing in the actual semiconductor and electronics supply chain today. ECIA stands by the hierarchy of sourcing in naming “legally authorized sources” (OEM, OCM and their authorized distributors) as the primary source and “trusted supplier.”