Steve Charles

OPINION

DOD says it needs a trusted supplier plan, but one already exists

It can't be easy for Defense Department managers these days. Everything is in flux as the Pentagon tries to figure out multi-year timelines for everything from the size of the forces to how to get clean financial audits for the armed services. But there's one quandary that the leadership is trying too hard to solve on its own.

I'm talking about rules, or more precisely, the lack of rules to detect and prevent counterfeit electronic parts from entering the DOD supply chain as required by Section 818 of the Defense Authorization Act of 2012. Yep, even though we're deep into fiscal 2014, the Defense acquisition authorities still haven't issued the required implementing rules.

DOD is supposed to define “counterfeit,” and “suspect counterfeit”; institute a risk-based approach to minimizing the impact of bad parts; and establish remediation and sanctioning processes for suppliers who sell counterfeit parts. The necessary DFARS were to have been written, commented on, and finalized more than a year and a half ago.

Equally important is Section 818’s call to establish criteria for trusted supplier standards that would apply to contractors, subcontractors, and everyone to the outer reaches of the government supply chain. It specifically references “established industry standards” for processes for identifying trusted suppliers.

At a meeting with industry in late March, officials promised a long-awaited rule to change the purchasing systems of prime contractors with cost accounting systems. The trouble is, the promised 181-page rule won’t cover the typical suppliers of the riskiest electronic components. For that, a second rule is in process to define how suppliers of such items are to be trusted. Based on all the comments from all the different perspectives, it looks like this could take a while.

Sadly, it doesn’t need to be this way. You can find long-established industry best practices for risk-based management in the acquisition of parts no longer available from OEMs or their authorized distributors. Airlines, for one, figured out this problem decades ago when they faced an onslaught of phony mil-spec connectors and more recently in the 1990’s when they dealt with bogus electronic parts.

In my opinion, the best practices for independent suppliers are enshrined in Society of Automotive Engineers (SAE) standard AS6081.  The latest revision is fairly new -- November 2012. A whole ecosystem of suppliers, certifiers and training exists around AS6081. How come DOD doesn’t simply reference this standard in its rulemaking and be done with it?

I suspect the quandary stems from a zero-tolerance tone in the statute combined with DOD’s desire to accommodate as many suppliers as possible.  So what will constitute trust? Will it be the rigor of the trusted foundry certifications required of the Defense Microelectronics Activity (DMEA)?

 Or will “Trusted Supplier” become a legal gotcha for suppliers who are forced to compete on price in the absence of risk-based requirements and industry-grade standards and certifications?

“There are no 100 percent guarantees, but you have to start somewhere,” says Travis Thoman of Secure Components, an independent distributor. “If a buyer is asked to procure a part no longer available from the Original Component Manufacturer (OCM) or their authorized distributors, he or she is forced into the secondary market. This is where repair parts come from. This is where the risk is and this is where DOD contractors are asked to buy parts based on a part number for the lowest price.”

It would be easy for DOD to hold suppliers to the highest standards and certifications. But for the schema to be risk-based, buyers must bear half the burden. How deeply a part needs to be tested depends on whether it’ll be used to fix an officers club pinball machine or a seat ejection circuit on a fighter jet. No one but the buyer should define the level of assurance required to make a part technically acceptable. DOD needs to pick an applicable industry standard and train to it. Those in industry who can’t step up will not be trusted.

Here’s a company blog on the AS6081 standard and how it helps organizations avoid buying counterfeit parts--especially those that are no longer available from OEM/OCM-authorized sources. This all seems very straightforward to me and I’m hoping DOD will be able to thread the needle on this rulemaking soon.

Way back in the summer of 2011, Congress estimated that more than 1 million parts in the government supply chain were counterfeit.

Experts say the threat continues to grow. Meanwhile the word count of proposed rules climbs, and the months go by.

About the Author

For the past two decades Mr. Charles has helped hundreds of technology manufacturers succeed in the government marketplace. His breadth and depth of expertise on every dimension of the government technology ecosystem provide technology manufacturers with a strategy and clear focus for the greatest success. Mr. Charles is adept at mapping technology product lifecycles and revenue models with appropriate channel and contract vehicle strategies in light of current procurement law, regulations and policy. He receives glowing reviews from the training workshops he facilitates to help sales teams understand the sales tactics needed to address each step in the government acquisition process. Mr. Charles is actively involved in government-industry associations including TechAmerica, ACT-IAC, Coalition for Government Procurement, and the National Contract Management Association. He meets regularly with leaders in government and industry to increase understanding and positive action. Mr. Charles co-authored The Inside Guide to the Federal IT Market, a how-to book for technology companies selling to the government. He is regular contributor to Washington Technology.

Reader Comments

Tue, May 6, 2014 KELLI KERR Florida

I wish the DOD would compile a list of us Trusted Suppliers so that fair competition can be opened back up. We have missed many opportunities by being cut off of approved vendor lists...only because the larger OEMs are only putting a few on their lists. If the DOD would trust IDEA members or make a governing body for us all to register to...then fair competition can open back up...among TRUSTED SUPPLIERS...like us..Defense Suppliers of Electronic Components.

Thu, Apr 24, 2014 ddeisz

While AS6081 does exist, one has to be very careful when talking about the standard without declaring to what level of testing within AS6081 is being done. Too often, only the visual (level A) inspections are being done. Too often, we have people talking about Authenticity as though it is Reliability and they are not the same. The Level A visual testing of AS6081 tells you absolutely nothing about the Reliability of the part. It's never has easy as just spouting off a standard and training to it. DoD needs to adopt the language of the semiconductor industry (Authorized) while leaving the Trusted title to those in the DMEA program.

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above

What is your e-mail address?

My e-mail address is:

Do you have a password?

Forgot your password? Click here
close
SEARCH
 Top 100 Slideshow
contracts DB

Trending

  • Dive into our Contract Award database

    In an exclusive for WT Insider members, we are collecting all of the contract awards we cover into a database that you can sort by contractor, agency, value and other parameters. You can also download it into a spreadsheet. Read More

  • Is SBA MIA on contractor fraud? Nick Wakeman

    Editor Nick Wakeman explores the puzzle of why SBA has been so silent on the latest contractor fraud scandal when it has been so quick to act in other cases. Read More

Webcasts