Federal Acquisition Regulation: Reporting of
Nonconforming Items to the GovernmentIndustry Data Exchange Program
Publication info: The Federal Register / FIND ; Washington , Vol. 84, Iss. 226, (Nov 22, 2019).
ProQuest document link
FULL TEXT
Source: DEPARTMENT OF DEFENSE
Final rule.
CFR Part: "48 CFR Parts 1, 2, 7, 46, and 52"
RIN Number: "RIN 9000-AM58"
Citation: "84 FR 64680"
Document Number: "FAC 2020-02, FAR Case 2013-002; Docket No. FAR-2013-0002, Sequence No. 1"
Page Number: "64680"
"Rules and Regulations"
Agency: "Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and
Space Administration (NASA)."
SUMMARY: DoD, GSA, and NASA are issuing a final rule amending the Federal Acquisition Regulation (FAR) to
require contractors and subcontractors to report to the Government-Industry Data Exchange Program certain
counterfeit or suspect counterfeit parts and certain major or critical nonconformances.
DATES:
Effective: December 23, 2019.
FOR FURTHER INFORMATION CONTACT: Ms. Marilyn E. Chambers, Procurement Analyst, at 202-285-7380, or by
email at marilyn.chambers@gsa.gov, for clarification of content. For information pertaining to status or publication
schedules, contact the Regulatory Secretariat Division at 202-501-4755. Please cite FAC 2020-02, FAR Case 2013002.
SUPPLEMENTARY INFORMATION:
I. Background DoD, GSA, and NASA published a proposed rule at 79 FR 33164 on June 10, 2014, in the Federal
Register, to implement sections 818(c)(4) and (c)(5) of the National Defense Authorization Act (NDAA) for Fiscal
Year (FY) 2012 (Pub. L. 112-81, 10 U.S.C. 2302 Note), which required DoD contractors and subcontractors to report
counterfeit or suspect counterfeit electronic parts purchased by or for DoD to the Government-Industry Data
Exchange Program (GIDEP).
The Presidential Memorandum on Combating Trafficking in Counterfeit and Pirated Goods, issued April 3, 2019,
states that "[c]ounterfeit trafficking . . . may threaten national security and public safety through the introduction
of counterfeit goods destined for the Department of Defense and other critical infrastructure supply chains."
Accordingly, the Federal Government must improve coordinated efforts to protect national security from the
dangers and negative effects of the introduction of counterfeit goods. This rule furthers that aim by requiring
contractors to screen for and report critical nonconformances, including counterfeits and suspect counterfeits,
which may impede the performance of mission critical systems, where high level quality standards are essential to
protect the integrity of systems requirements, and are necessary for national defense or critical national
infrastructure.
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 1 of 27
The U.S. Intellectual Property Enforcement Coordinator's Annual Intellectual Property Report to Congress, dated
February 2019, reiterated: "Counterfeiting is a significant challenge that can impair supply chains for both the
public and private sectors. In the context of the U.S. Government, acquiring products or services from sellers with
inadequate integrity, security, resilience, and quality assurance controls create significant risks, from a national
security and mission assurance perspective as well as from an economic standpoint (due to the increased costs
to American taxpayers). Counterfeiting can have particularly significant consequences for the Department of
Defense (DoD) supply chain, by negatively affecting missions, the reliability of weapon systems, the safety of the
warfighter, and the integrity of sensitive data and secure networks." (Appendix, p.51.) This rule is likely to have a
positive impact on national security and critical infrastructure where the Government procures elements of the
infrastructure, for example, Federal Aviation Administration air traffic control systems, Department of Agriculture
food safety equipment, all national defense programs, Department of Transportation monitoring of transportation
systems, Department of Energy monitoring of power generation and distribution networks, etc.
By reporting in GIDEP, contractors are able to share knowledge of counterfeits and critical nonconformances
which reduces the risk of counterfeit and other nonconforming items entering the supply chain and being used in
high value, mission critical defense, space, or critical infrastructure systems where system failure could threaten
national security through the loss of satellite-based critical information, communication and navigation systems,
or other systems resulting in the loss of the ability to control connected systems or secure information within
those systems. Counterfeits are not produced to meet higher-level quality standards required in mission critical
applications and are a significant risk in causing failures to systems vital to an agency's mission. For weapons,
space flight, aviation, and satellite systems, these failures can result in the death, severe injuries, and millions of
dollars in system damage or loss. For example, if counterfeits are installed in a missile's guidance system, such
missile may not function at all, may not proceed to its intended target, or may strike a completely unintended
location resulting in catastrophic losses. Critical nonconforming and counterfeits items may cause failures in
navigation or steering control systems, planes and flight control. Counterfeits can create "backdoors" into
supposedly secure programmable devices which could be exploited to insert circuit functions to steal information
and relay it to third parties or command or prevent the device from operating as designed. Defense, space, and
aviation systems in particular must meet rigorous component specifications; failure of even a single one can be
catastrophic causing serious problems and placing personnel and the public in harm's way.
GIDEP is a widely available Federal database. Timely GIDEP reporting and screening allows all contractors to
promptly investigate and remove suspect parts from the supply chain and to ensure that suspect parts are not
installed in the equipment which would result in experiencing high failure rates. With this knowledge, contractors
can also avoid costs resulting from production stoppage, high failure rates, rework, or lost time due to
maintenance turnaround to remove and replace failed parts. This effect is magnified by the fact GIDEP permits
contractors to learn from the experiences of others across industry.
This rule concentrates on complex items with critical applications where the failure of the item could injure
personnel or jeopardize a vital agency mission. In accordance with the Office of Federal Procurement Policy
(OFPP) Policy Letter 91-3, all Government agencies use GIDEP as the central data base for receiving and
disseminating information about nonconforming products. Contractor participation has been largely voluntary.
This rule requires contractors to screen and report major or critical nonconformances in order to reduce the risk of
counterfeit and other nonconforming items entering the supply chain and impacting the performance of mission
critical items where item failure could result in loss of high value items or loss of life.
GIDEP is a cooperative activity between government and industry participants seeking to reduce and ultimately
eliminate expenditures of resources by sharing technical information essential during research, design,
development, production and operational phases of the life cycle of systems, facilities and equipment. Since
GIDEP's inception, participants have reported over $2.1 billion in cost avoidance. That means without GIDEP,
participants could have potentially realized additional expenses of over $2.1 billion. In many cases, these costs
could have been passed on to the U.S. Government. In addition to reporting cost avoidance, participants also
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 2 of 27
reported how the information helped keep production lines running, preserved readiness or avoided dangerous
situations. This reporting by GIDEP participants is for the purpose of illustrating the value of sharing information
when common items have issues that could impact safety, reliability, readiness and ownership costs.
Proper utilization of GIDEP data can materially improve the total safety, quality and reliability of systems and
components during the acquisition and logistics phases of the life cycle and reduce costs in the development and
manufacture of complex systems and mission critical equipment.
Examples of the value of this reporting include discovery of counterfeiting operations that supplied parts to many
defense and other Government contractors and removal from the supply chain of-* Faulty rivets that could have caused military aircraft failure in flight;
* Counterfeit electronic parts that would have caused a $100M failure of a satellite in orbit;
* Counterfeit bolts securing overhead gantry cranes in a Government industrial facility;
* Counterfeit raw stock materials (aluminum, steel, and titanium) supplied over a decade and used in structural
applications across defense and civil systems and infrastructure;
* Counterfeit refrigerant with explosive properties that led to explosions and fire on several commercial ships;
* Uncertified electronic connectors that shut down large parts of the defense and space industrial base
production for 6 months until solutions to certification could be devised.
What all these examples have in common is that the items in question are largely commercially available common
piece parts or small assemblies that are used throughout the industrial base and in most defense, space, and
critical infrastructure programs and can easily enter any supply stream.
In the proposed rule, the FAR Council extended coverage outside of DoD to other Government agencies, other
types of parts, and other types of nonconformance. The FAR Council proposed this because the problem of
counterfeit and nonconforming parts extends far beyond electronic parts and can impact the mission of all
Government agencies, such as NASA and the Department of Energy, and mission critical systems such as
avionics, satellites, space flight systems, and nuclear facilities. The final rule still applies across all agencies and
to parts other than electronics, but there was some reassessment of costs and benefits, so that rather than
applying to all supplies, in addition to the requirements for section 818(c)(4) with regard to electronic parts for
DoD, the rule focuses on supplies that require higher-level quality standards or are determined to be critical items
(definition added). This and other de-scoping efforts (see preamble sections II.A. and II.B.1.) reduced the estimated
responses from 474,000 to 5,166 responses, and reduces the estimated burden hours from 1,422,000 hours to
30,986 hours, so that information is obtained where it is most critically needed.
A public meeting was held June 16, 2014. Public comments were received from 14 respondents (including
respondents who provided written statements at the public meeting).
II. Discussion and Analysis
The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (the Councils) reviewed
the comments in the development of the final rule. A discussion of the comments and the changes made to the
rule as a result of those comments are provided as follows.
A. Summary of Significant Changes From the Proposed Rule
1. Applicability. The final rule is significantly descoped.
* It does not apply to contracts and subcontracts for the acquisition of commercial items, including commercially
available off-the-shelf (COTS) items.
* Section 818(c)(4) of the NDAA for FY 2012 will not apply to contracts and subcontracts at or below the
simplified acquisition threshold (SAT).
* Rather than applying to all supplies, in addition to the requirements for section 818(c)(4) with regard to
electronic parts for DoD, the rule focuses on supplies that require higher-level quality standards or are determined
to be critical items (definition added).
* The rule also exempts medical devices that are subject to the Food and Drug Administration reporting
requirements at 21 CFR 803; foreign corporations or partnerships that do not have an office, place of business, or
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 3 of 27
paying agent in the United States; counterfeit, suspect counterfeit, or nonconforming items that are the subject of
an on-going criminal investigation, unless the report is approved by the cognizant law-enforcement agency; and
nonconforming items (other than counterfeit or suspect counterfeit items) for which it can be confirmed that the
organization where the defect was generated (e.g., original component manufacturer, original equipment
manufacturer, aftermarket manufacturer, or distributor that alters item properties or configuration) has not
released the item to more than one customer.
* Flowdown to subcontracts is similarly descoped. The contractor is prohibited from altering the clause other
than to identify the appropriate parties.
2. Definitions. In FAR 46.101 and the FAR clause 52.246-26, Reporting Nonconforming Items, the definition of
"quality escape" is deleted. A definition of "critical item" is added.
3. Prohibited disclosures. The FAR clause 52.246-26 states explicitly the GIDEP policy that GIDEP reports shall not
include trade secrets or confidential commercial or financial information protected under the Trade Secrets Act, or
any other information prohibited from disclosure by statute or regulation.
4. Timeframe for notification to the contracting officer. In paragraph (b)(2) of FAR 52.246-26, the timeframe for
contractor notification to the contracting officer of a counterfeit or suspect counterfeit item is revised from 30 to
60 days, for consistency with the statute.
B. Analysis of Public Comments
1. Scope/Applicability
a. Limit Scope to Statutory Requirement, or at Least Exclude Nonconformances
Comment: Sections 818(c)(4) and (c)(5) of the National Defense Authorization Act (NDAA) for Fiscal Year (FY)
2012 apply to all defense contractors and subcontractors who become aware, or have reason to believe, that any
item purchased by or for DoD may contain counterfeit or suspect counterfeit electronic parts. The proposed rule
applied the reporting requirements Governmentwide to all supplies (not just electronic parts) and addressed all
major or critical nonconformances as well as counterfeit or suspect counterfeit items.
* Multiple respondents recommended limiting scope of the mandatory reporting rule to the statutory
requirement: Counterfeit electronic parts and suspect counterfeit electronic parts from defense suppliers. Some
respondents thought the rule should only apply to contractors/subcontractors covered by the cost accounting
standards (CAS). One respondent recommended that FAR Case 2013-002 be withdrawn and a DFARS case be
proposed instead. Another respondent stated that significant research has identified the problems and risks of
counterfeit electronic part infiltration into the defense supply chain, but is concerned whether the benefits of such
broad expansion of the scope of the rule justify the additional burdens and costs it will impose, not just on
industry, but on the Government as well.
* Several respondents questioned the statutory authority for extending requirements to contractors for items
that are not counterfeit. These respondents indicated that GIDEP reporting should be strictly limited to counterfeit
items. These respondents stated that counterfeiting and nonconformance are two distinct problems that require
different solutions. Another respondent indicated that expanding GIDEP reporting to include quality issues could
also reduce the overall effectiveness of the GIDEP system for combating counterfeit-part proliferation and
recommended "deleting the requirement for contractor reporting of nonconformances into GIDEP and, instead,
continuing the process of deferring to the contracting officer to make the determination regarding which
nonconformances should be reported to GIDEP".
Response: As stated in the preamble to the proposed rule, the problem of counterfeit and other nonconforming
parts extends far beyond electronic parts and can impact the mission of all Government agencies. The Councils
note that, despite an erroneous statement in the preamble to the proposed rule, the statutory requirement for
reporting to GIDEP is not limited to CAS-covered contractors and subcontractors but applies to all defense
contractors and subcontractors. By requiring contractors to report to GIDEP counterfeit or suspect counterfeit
items, as well as common items that have a major or critical nonconformance, the rule will reduce the risk of
counterfeit items or items with major or critical nonconformance from entering the supply chain. Reducing the risk
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 4 of 27
of potential damage to equipment, mission failure, and even injury or death of personnel is a matter of national
security, particularly for DoD and NASA, improving operational readiness of personnel and systems. It supports the
national security pillars of readiness, safety and reliability of systems and personnel. The FAR Council has the
authority under 40 U.S.C. 101 and 121, and 41 U.S.C. 1303, to prescribe Governmentwide procurement policies in
the FAR.
However, in response to public comments, after weighing the risks of failure against the cost of compliance with
this rule, the final rule has significantly descoped the applicability (see FAR 46.317) of FAR clause 52.246-26, so
that it applies only to acquisition of-* Items that are subject to higher-level quality standards in accordance with the clause at FAR 52.246-11, HigherLevel Contract Quality Requirement;
* Items that the contracting officer, in consultation with the requiring activity, determines to be critical items (see
FAR 46.101) for which use of the clause is appropriate;
* Electronic parts or end items, components, parts, or assemblies containing electronic parts, if this is an
acquisition by, or for, the Department of Defense, as provided in paragraph (c)(4) of section 818 of the NDAA for FY
2012 (Pub. L. 112-81) that exceeds the SAT; or
* Services, if the contractor will furnish, as part of the service, any items that meet the above-specified criteria.
The clause will not be required in contracts for the acquisition of commercial items (see paragraph II.B.1.b.) or the
acquisition of medical devices that are subject to the Food and Drug Administration reporting requirements at 21
CFR 803 (see paragraph II.B.5.e.).
Even if the clause is included in the contract, the contractor is not required to submit a report to GIDEP (see FAR
52.246-26(c)) if-* The Contractor is a foreign corporation or partnership that does not have an office, place of business, or fiscal
paying agent in the United States (see paragraph II.B.3.b.);
* The contractor is aware that the counterfeit suspect counterfeit or nonconforming item is the subject of an ongoing criminal investigation, unless the report is approved by the cognizant law-enforcement agency (see
paragraph II.B.7.b.); or
* For nonconforming items (other than counterfeit or suspect counterfeit items), it can be confirmed that the
organization where the defect was generated (e.g., original component manufacturer, original equipment
manufacturer, aftermarket manufacturer, or distributor that alters item properties or configuration) has not
released the item to more than one customer.
b. Exclude Commercial Items, Including Commercially Available Off-the-Shelf (COTS) Items
Comment: Multiple respondents commented that the proposed rule is overly burdensome for commercial item
providers, both prime contractors and subcontractors. One respondent stated that application of the regulation to
commercial-item contractors is inconsistent with the Federal Acquisition Streamlining Act of 1994 (FASA) and
FAR part 12, because the regulation is not required by statute or Executive order and is not consistent with
customary commercial practice. One respondent commented that the proposed rule appears intended to build on
the contractor inspection systems already required by the FAR, but that this assumption may not be reasonable for
commercial item contractors.
Response: Based on public comments the clause is no longer prescribed for use in contracts for the acquisition of
commercial items using FAR part 12 procedures.
c. Extent of Flowdown
Comment: Several respondents opposed the mandatory flowdown of the reporting requirement clause to all
subcontractors and suppliers to all tiers within the supply chain. One respondent suggested that even the process
of communicating its provisions to those required to comply will be significant. Another respondent stated that the
rule should not flow down to providers of COTS items.
Response: The flowdown in the final rule has been significantly reduced. Consistent with the criteria for application
of the clause at the prime level, the clause only flows down to subcontracts for-PDF GENERATED BY SEARCH.PROQUEST.COM
Page 5 of 27
* Items subject to higher-level quality standards in accordance with the clause at FAR 52.246-11, Higher-Level
Contract Quality Requirement;
* Items that the contractor determines to be critical items for which use of the clause is appropriate;
* Electronic parts or end items, components, parts, or materials containing electronic parts if the subcontract is
valued at more than the SAT, and if this is an acquisition by, or for, the Department of Defense, as provided in
paragraph (c)(4) of section 818 of the NDAA for FY 2012 (Pub. L. 112-81); or
* The acquisition of services, if the subcontractor will furnish, as part of the service, any items that meet the
above-specified criteria.
The clause does not flow down to subcontracts for-(i) Commercial items; or
(ii) Medical devices that are subject to the Food and Drug Administration reporting requirements at 21 CFR 803.
d. Exclude Acquisitions Below the Micro-Purchase Threshold
Comment: One respondent suggested that the way the proposed rule was written, it is overly broad in its
applicability. To mitigate this, the respondent suggested making the reporting requirements inapplicable to
acquisitions for which the value of the acquired supplies is at or below the micro-purchase threshold.
Response: The proposed rule was not applicable to supplies at or below the micro-purchase level. This continues
to be the case in the final rule.
e. Exclude "Consumable" Supplies
Comment: One respondent was concerned that the proposed clause at FAR 52.246-26, Reporting Nonconforming
Items, will be required in all contracts for supplies and services. Therefore, the respondent recommended adding
the word "non-consumable" to the texts of FAR 7.105(b)(19), 12.208, 46.102(f), 46.202-1, and 46.317, hence
reducing the scope and application of the rule.
Response: In response to the widespread concern that the rule was too broad and burdensome, the application
and scope of the final rule have been significantly reduced so that it is not applicable to all supplies and services.
However, the requirements of section 818(c)(4) of the NDAA for FY 2012 require application to all electronic parts
or end items, components or materials containing electronic parts in acquisitions by or for DoD, (except for
acquisitions of commercial items or at or below the simplified acquisition threshold). Electronic parts are often
consumable items. Therefore, "consumables" cannot be removed as a group from the final rule's reporting
requirements. Class IX consumables encompass many electrical and electronic parts, components, and
subassemblies used on today's military systems.
f. Exclude "Suspect Counterfeit" Items
Comment: One respondent requested elimination of the requirement to report "suspect counterfeit" items from the
rule if COTS items were not excluded from the rule.
Response: The Councils have excluded COTs items from the rule, but retained the requirement to report "suspect
counterfeit" items within the scope and applicability of this rule. At the time of the initial report to GIDEP, most
items are still in the category of suspect counterfeit items and the fact that an item is suspected of being
counterfeit is useful information for the Government and industry to have because suspect counterfeits have the
potential to impact safety, performance, and reliability and as such pose a risk.
g. Exclude "Major Nonconformance"
Comment: One respondent indicated concern that the definition of "major nonconformance" includes language
that could be read to reach run-of-the-mill warranty issues. The respondent questioned what types of
nonconformances are of such significant concern as to warrant imposition of the reporting requirement on every
supplier at any tier in the supply chain. The respondent proposed that the reporting obligation be limited to critical
nonconformances. Even if this limitation is adopted, the respondent is still concerned that a lower-tier supplier
would not have sufficient information about the intended use of a part to be able to determine whether a
nonconformance is "critical."
Response: The application of the final rule is not limited to critical nonconformances as requested by the
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 6 of 27
respondents, but also includes major nonconformances because it is difficult to draw the distinction between a
major nonconformance and a critical nonconformance. Whether a nonconformance is major or critical depends on
the application. What constitutes only a major nonconformance for one application may constitute a critical
nonconformance for another application. Therefore, it is important to also share the data on major
nonconformances in GIDEP. Some of the respondent's concerns may be alleviated by the overall reduced scope of
the rule, e.g., excluding commercial items, including commercially available off-the-shelf (COTS) items, and
reducing flowdown to subcontracts (also see paragraphs II.B.2.a. thru c.)
h. Report When Counterfeit Items Are Offered for Sale by Nonauthorized Distributors
Comment: One respondent proposed that the GIDEP program be expanded to allow manufacturers the ability to
report instances in which companies become aware that potentially counterfeit items are offered for sale by
nonauthorized distributors.
Response: The final rule has not been changed and the GIDEP program has not been expanded to allow
manufacturers the ability to report instances in which they become aware that potentially counterfeit items are
offered for sale by nonauthorized distributors. The fact that a part is provided by an unauthorized distributor may
indicate that a part is "potentially" counterfeit, but credible evidence (including but not limited to visual inspection
and testing) is required to determine that a part is "suspect counterfeit."
i. Embedded Products, Such as Binary Code or Downloaded Apps
Comment: One respondent was concerned that DoD rules for counterfeit and suspect counterfeit electronic parts
now include "embedded software or firmware" within their ambit. The respondent therefore requested clarification
of the applicability of reporting on binary code or downloaded apps that are stored in a contractor's data system.
This respondent suggested that the ability to discover flaws in embedded "products" was not part of section 818
and its inclusion in the detection and avoidance systems rules will cause gaps in the reporting process.
Response: The concern of the respondent with regard to applicability to embedded software or firmware is no
longer a problem because in response to comments at a public meeting held on June 16, 2014 (after the
submission of this comment), the subsequent final DFARS rule published on August 2, 2016 (81 FR 50635), under
DFARS Case 2014-D005 entitled "Detection and Avoidance of Electronic Parts--Further Implementation," removed
the statement about "embedded software or firmware" from the definition of "electronic part." The FAR rule does
not address embedded software or firmware in the definition of counterfeit or suspect counterfeit items.
2. Definitions
a. "Nonconformance"
Comment: Two respondents requested more clarity as to what constitutes nonconformance, especially in regard
to electronic parts. One respondent opined that the rule must identify what types of "nonconformances" are of
such significant concern as to warrant imposition of this reporting obligation on every supplier at any tier in the
Government supply chain. Without sufficient clarity regarding what constitutes a "major nonconformance," there is
risk that suppliers will err on the side of over reporting.
Response: The respondent's concern with regard to imposing the reporting obligation on every supplier at any tier
is no longer valid because the rule no longer applies to all supplies. The clause prescription has been revised in the
final rule so that the clause will not be included in a contract except as provided in the response in paragraph
II.B.1.a.
With regard to the meaning of the terms "critical nonconformance" and "major nonconformance," these terms are
not new to this rule, but have been used in the FAR for many years and are commonly understood in the quality
assurance field. FAR 46.101, defines a "critical nonconformance" as a nonconformance that is likely to result in
hazardous or unsafe conditions for individuals using, maintaining, or depending upon the supplies or services; or is
likely to prevent performance of a vital agency mission. It defines a "major nonconformance" to mean a
nonconformance, other than critical, that is likely to result in failure of the supplies or services, or to materially
reduce the usability of the supplies or services for their intended purpose. As with other items, a nonconforming
electronic part is one which does not meet the requirements for its intended use. Quality standards for electronic
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 7 of 27
parts are widely understood in the industry. No further explanation of the terms has been added to the final rule.
Comment: According to one respondent, the final DFARS rule published on May 6, 2014, defines a "counterfeit
electronic part" as a knowingly misrepresented part and defines a "suspect counterfeit electronic part" as an item
that a (presumably) higher-tier supplier had credible evidence to believe was knowingly misrepresented by a lowertier supplier or the counterfeit maker. The respondent believed that same standard, i.e., an intent to deceive, should
be applied to reporting a nonconforming item because the qualifiers to the definitions add no substantive
information to allow a supplier to adopt a useful model to identify when a nonconforming part must be reported.
Response: The FAR definitions in the final rule were not changed in response to this comment because the intent
to deceive only applies to counterfeit parts. The FAR proposed rule definitions of "counterfeit item" and "suspect
counterfeit item" are similar to the DFARS definitions of "counterfeit electronic part" and "suspect counterfeit
electronic part." The definition of "counterfeit item," where misrepresentation is an element, is distinct from the
definitions of an item with a critical or major nonconformance, which do not address misrepresentation. The
nonconformance definitions purposely do not include an "intent to deceive" and are based solely on whether there
is a major or critical nonconformance. It does not matter what the contractor's intent was, but only what the
quality of the item is.
Comment: One respondent stated that the criticality of nonconformance is often application-specific and industry
has no way to determine with certainty if another contractor is using a part in a manner that might cause a major
or critical nonconformance. The respondent believes the rule mandates that Government contractors understand
the design, relevance, and impact of nonconformance(s) on all other systems and Government contracts.
Response: The contractor is not required to determine how a part might be used in another application by another
contractor. The rule creates a contract clause, which will be included in appropriate contracts requiring contractors
to report under specific conditions where the item is being used in a specific application being purchased under
the contract. No change has been made in the final rule as a result of this comment.
b. "Common Item"
Comment: Several respondents opined that the definition of "common item" is overbroad, susceptible to many
interpretations, and needs further clarification. One respondent noted the current definition stated that it is difficult
to imagine any item (other than a one-of-a-kind part) that would not be a "common item."
Response: FAR 46.203(c)(1) currently notes that a "common item" has multiple applications whereas, in contrast, a
peculiar item has only one application. In the proposed rule, the term was defined in the clause at 52.246-26 to
make it more prominent and easier to find, with added examples. In the final rule, the Councils have retained the
definition in the clause, but removed the examples from the definition of "common item" as they were not
necessary and may have caused confusion.
c. "Quality Escape"
Comment: Two respondents stated that the term "quality escape" was broad and confusing, did not serve to clarify
what would rise to the level of being a reportable event, and may result in duplicative reporting.
Response: Based on the comments received, the Councils have removed the term "quality escape" from the rule.
d. "Substance of the Clause"
Comment: One respondent contended that the indefinite meaning of the phrase "substance of this clause"
threatens to introduce enormous complexity into already difficult negotiations between higher-tier and lower-tier
contractors regarding the scope of reporting obligations that such lower-tier subcontractors are required to
assume. Higher-tier contractors could justifiably insist on imposing quality-control and reporting requirements that
go well beyond those specified in the proposed clause to ensure that they fulfill their own obligations under the
clause.
Response: The Councils removed the phrase "substance of the clause" and added language at paragraph (g)(3) of
the clause to state that the contractor shall not alter the clause other than to identify the appropriate parties. In
addition, the Councils revised the flowdown language to add specificity on how the clause requirements are to be
flowed down to applicable subcontracts and listed circumstances, such as for commercial items, where the clause
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 8 of 27
would not flow down.
e. "Becomes Aware"
Comment: One respondent noted that there is no definition of the term "becomes aware," so a standard needs to
be established that recognizes that there are many touch points in a supply chain where a counterfeit or suspect
counterfeit part could potentially be discovered and thus potentially many points where the reporting requirement
might legitimately surface.
Response: The Councils have revised paragraph (b)(2) of the clause to specify that written notification is required
within 60 days of "becoming aware or having reason to suspect through inspection, testing, record review, or
notification from another source (e.g., seller, customer, third party)" that an item is counterfeit or suspect
counterfeit. A similar change was made in paragraph (b)(4), with regard to notification to GIDEP.
3. Government-Industry Data Exchange Program (GIDEP)
a. Access for Contractors to Government-Only Reports
Comments: Two respondents expressed concern regarding the Government's submission of GIDEP reports that
are shared exclusively with other Government agencies and not with industry. They are requesting that these
reports be shared with industry to improve industry's ability to avoid and detect counterfeits.
Response: This comment did not result in a change to the final rule, because information considered sensitive by
DoD concerning nonconforming or suspect counterfeit items may need to be temporarily withheld from the
broader GIDEP industry membership and published in GIDEP with the distribution limited only to U.S. Government
activities. However, to minimize the impact of restricting access to this information, DoD activities responsible for
these reports are expected to release information when deemed appropriate.
b. Access for Foreign Contractors
Comments: Several respondents expressed concern regarding the current limits of GIDEP membership and the
crucial need for their foreign suppliers to have access to GIDEP data.
One respondent expressed concern that by not including foreign suppliers in GIDEP that this rule would create a
barrier to trade since foreign suppliers could not comply with the GIDEP related requirements.
Response: The Councils have determined that the inclusion of foreign contractors reporting into GIDEP would be
beyond the manageable scope of this rule. Therefore, the final rule states that foreign contractors and
subcontractors are not required to submit or screen GIDEP reports. As a result, the applicability of the rule has
been further reduced.
However, it is possible for a foreign contractor or subcontractor to work through a U.S. contractor that is a member
of GIDEP and can act as a liaison between the foreign contractor and GIDEP.
c. Capacity
Comments: One respondent questioned whether GIDEP is sufficiently resourced to meet the demands of the
increased participation that this rule would require.
Response: In anticipation of increased participation as a result of this rule, GIDEP has done an internal assessment
of how it will handle this increase. For the near term, GIDEP will redirect current in-house resources and will
reprioritize current workload to accommodate the estimated demand. For the long term, GIDEP is modernizing its
policies, procedures, and information technology to increase capacity to meet this and future needs. In addition
the rule has been descoped to reduce reporting requirements.
d. Search Capability And Screening
Comments: One respondent expressed concern with the GIDEP search capability to identify all suspect counterfeit
reports in the GIDEP database based on a specific identifier. Request was made for GIDEP to provide a specific
data field to be included in all suspect counterfeit reports that would serve as a unique identifier to facilitate the
search process.
One respondent opined that reviewing, or screening, of GIDEP reports for suspect counterfeit electronic parts by
contractors and Government is often geared "not to find" affected parts, stating if only the exact part number and
lot/date code is checked for impact, there is little chance of detecting all counterfeit parts. The respondent
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 9 of 27
suggested the rule be revised to instruct contractors to screen for similar parts purchased or installed from the
named supplier.
Response: The search capability of GIDEP is outside the scope of this rule and no change to the rule has been
made. It should be noted that GIDEP search capability, although dated, is very powerful and accesses a fully
indexed database. GIDEP members are able to perform searches based on simple keywords, phrases, or on
specific discrete fields such as manufacturer, part number, and supplier. GIDEP also provides a service for its
members called Batch Match. A GIDEP member can provide a list of parts, which GIDEP will use to automatically
search the database for an exact match to any reference that meets the provided criteria. If an applicable
document is found, the member is provided with a list of document references. This matching can be performed
one time or on an ongoing daily basis.
e. Reporting
i. Guidance To Limit Duplicative Reports, i.e., Who in the Supply Chain Reports
Comments: Several respondents expressed concern that the proposed rule as written would require multiple
parties in the same supply chain to create duplicate reports of the same counterfeit, suspect counterfeit or
nonconforming part discovery.
One respondent recommended that the reporting obligation be imposed upon only the organization that delivered
the nonconforming item, not the entity or entities that received the nonconforming item. Another respondent
recommended that the first point in time in the supply chain where "actual knowledge" can be established may be
the proper point for disclosure and reporting to GIDEP.
Response: The organization that becomes aware or has reason to suspect, such as through inspection, testing,
record review, or notification from another source (e.g., seller, customer, third party), that an item purchased by the
contractor for delivery to, or for, the Government is counterfeit or suspect counterfeit, or that a common item has a
major or critical nonconformance, is responsible for ensuring a GIDEP report is prepared and submitted.
Duplicative nonconformance or counterfeit reports in GIDEP are defined as events that have the same part
number, manufacturer, or supplier, the same lot or date code, and same technical facts. To save resources in the
dispositioning of duplicate reports any event deemed to be a duplicate of a previously reported incident will be
referenced in the "Comment" area of the GIDEP report. Events involving the same part number and manufacturer
that had previously been reported to GIDEP may be documented with a new GIDEP report having a reference to
that earlier report so that GIDEP users may reevaluate the disposition previously taken. This type of
documentation also provides opportunities for Federal agencies to better understand issues within their supply
chains. No changes were made to the final rule as a result of this comment.
ii. Inaccurate or False Reports
Comments: Several respondents stated the need to ensure that any inaccurate or improper information is
corrected or removed from the GIDEP reports.
Response: The mechanics of how GIDEP corrects or removes inaccurate reports is outside the scope of this rule
and no change to the rule has been made. Once a report is submitted to GIDEP and entered into the database so
that it is visible to the GIDEP community it becomes a permanent record in the GIDEP information system. Once
the record is visible to the community, users begin to make decisions and take action based on the report's
content. In order to facilitate its use, the report becomes a historical record that can be referenced for as long and
as frequently as needed. If an error or an inaccuracy is discovered the originator of the document can correct it
through the use of an amendment record. The amendment is displayed with the original record and is made part of
the document's history. This way, the most current and accurate information is made available and preserved for
the GIDEP community's use.
iii. Nonconformance Reports
Comments: Two respondents expressed "uncertainty about when the 60-day clock starts running" for submitting
GIDEP reports. The respondents questioned whether nonconforming items are to be reported immediately, or only
after failure analysis is performed by the manufacturer. Another respondent recommended that the "Government
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 10 of 27
maintain current GIDEP reporting requirements for key information to include in nonconformance reports."
Response: The final rule has modified the proposed rule to state that the contractor shall submit a report to GIDEP
within 60 days of "becoming aware or having reason to suspect, such as through inspection, testing, record review,
or notification from another source (e.g., seller, customer, third party) that an item purchased by the contractor for
delivery to, or for, the Government is "counterfeit or suspect counterfeit item" or "a common item that has a major
or critical nonconformance". The 60-day period begins when the contractor first becomes aware or has reason to
suspect that an item is a counterfeit or suspect counterfeit item or has a major or critical nonconformance.
iv. Reports to Contracting Officer Versus Reports to GIDEP
Comments: Several respondents expressed concern about the creation of dual and duplicate reporting
requirements, i.e., reporting counterfeit or suspect counterfeit parts to the contracting officer as well as to GIDEP.
One respondent recommended that the rule only address GIDEP reporting. One respondent stated that the rule
gives no guidance on what information is to be provided to the contracting officer. The respondent asked whether
a copy of the GIDEP form would suffice. Another respondent requested further clarification on the rationale for the
dual reporting with regard to counterfeit or suspect counterfeit parts.
Response: In the proposed rule, paragraph (b)(2) of the clause at FAR 52.246-26 required the contractor to report
counterfeit or suspect counterfeit items to the contracting officer. This requirement has been retained in the final
rule because section 818(c)(4) requires contractors and subcontractors to report counterfeit or suspect counterfeit
electronic parts to "appropriate Government authorities and the Government-Industry Data Exchange Program."
The contracting officer needs to be aware of issues that arise on the contract. With regard to content of the report,
a copy of the GIDEP report would suffice.
v. Automatic Bulletins
Comments: One respondent recommended that "GIDEP should be configured to automatically issue bulletins to
industry when reports are input into the system in order to provide the maximum opportunity for contractors to
reduce the real-time risk of counterfeit, suspect counterfeit or nonconforming items entering the supply chain."
Response: This is outside the scope of this rule and no change to the rule has been made. However, GIDEP
provides a number of ways to inform industry of recently published reports:
* A Batch Match service allows users to load their parts into GIDEP and to be informed via email whenever new
published reports may impact their parts.
* Weekly report summaries and part numbers are pushed out to industry via email links.
* A daily XML feed of data tailored to meet industry's specific data requirements is also available.
GIDEP training emphasizes the capabilities of the various notifications systems available to industry.
vi. Instructions, Training, and Assistance
Comment: One respondent requested clarification as to how GIDEP reporting for counterfeit and suspect
counterfeit electronic parts will work. Several respondents expressed concern that many contractors do not
currently use the GIDEP database and will not be familiar with how to report to GIDEP.
Response: The operation of GIDEP is outside the scope of this rule and no change to the rule has been made.
However, it should be noted, to better understand how GIDEP reporting works and become familiar with how to
report to GIDEP, support is provided in a variety of ways to assist users.
Instructions: To assist GIDEP users in submitting suspect counterfeit reports, Chapter 7 of the GIDEP Operations
Manual "Failure Experience Data" provides detailed instructions on how to complete a suspect counterfeit report.
Appendix E "Instruction for Reporting Suspect Counterfeit Parts" provides detailed instructions on completing each
field of the GIDEP Forms 97-1 and 97-2. Chapter 7 is available for download from the GIDEP public website.
Training:
* Various GIDEP instructional modules are provided as online web-based training.
* Training clinics are held where GIDEP members can attend to get personal hands-on training by GIDEP
Operations Center personnel.
* Quarterly classroom training is held at the GIDEP Operations Center.
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 11 of 27
* Training is also available remotely through web-conferencing.
Help Desk: For the day-to-day issues and questions that may come up, the GIDEP Operations Center has a Help
Desk.
f. Contractor Responses to Reports
Comments: One respondent expressed the need for industry to be able to provide feedback to GIDEP Reports.
Response: The operation of GIDEP is outside the scope of this rule and no change to the rule has been made.
However, it is the standard GIDEP process for suppliers and/or manufacturers named in GIDEP reports to be given
15 working days to provide their response. Their response is then included in the release of the GIDEP report. If
anyone should take issue with a report or believe they have additional information regarding a given report, they
are free to discuss their information with the original submitter who, in turn, can amend their submitted report if
they believe it is warranted. The GIDEP database also allows for the capture of individual GIDEP member
comments in the comment field associated with each report.
4. Potential Adverse Impact
a. Increased Costs May Outweigh Benefits
Comment: Several respondents were concerned that the expansion of the statutorily mandated reporting and
review requirements creates an unnecessary burden on industry that will result in increased costs to the
Government with benefits unlikely to outweigh those increased costs. One respondent stated that the added
compliance burdens will likely make future contracting opportunities cost-prohibitive for businesses of all sizes.
Several respondents were concerned that the significant burden of the proposed rule may dissuade new
companies (both prime and subcontractors) from entering the public sector market or cause companies to remove
themselves from the Federal market place. Particularly commercial and COTS suppliers at the lower-tier may
choose to exit the market.
Response: The final rule has been significantly descoped, including removal of applicability of FAR 52.246-26 to
commercial prime contracts and exclusion of flowdown to subcontracts for commercial items. In addition, the rule
no longer applies to all supplies. (See response in paragraph II.B.1.a.).
Furthermore, the information collected during normal quality assurance inspection, testing, record review, or
notification from another source (e.g., seller, customer, third party) is the information that is needed for a GIDEP
report. Therefore, no changes are required to existing quality-assurance systems. In fact, the information required
is a subset of that collected for the quality assurance contract compliance efforts and so only excerpts from the
Quality Assurance system report are needed in the GIDEP report. The benefits of sharing this information will be
the reduction of risks presented by counterfeit and nonconforming items in the supply chain. In turn, this will
protect mission critical items and avoid failures impacting national security.
b. Expanded Acquisition Planning Requirements
Comment: One respondent was concerned by the expanded acquisition planning requirements proposed at FAR
7.105(b)(19). According to the respondent, there are multiple quality standards in various sectors of the
marketplace and, in still others, there are no standards at all. If this rule were to apply only to major systems, it
might be possible to identify the standards in the various industry sectors involved, but this would require a
number of levels of expertise that individual acquisition shops may not possess. The respondents foresee that the
Government will face challenges in implementation.
Response: The final rule has amended the proposed text at FAR 7.105(b)(19), since the rule no longer applies to all
supplies or service contracts that include supplies. The final rule requires that the acquisition plan address
whether high-level quality standards are necessary in accordance with FAR 46.202, and whether the supplies to be
acquired are critical items in accordance with FAR 46.101, rather than requiring that the acquisition plan address
for all supplies "the risk-based Government quality assurance measures in place to identify and control major and
critical nonconformances".
c. Civil Liability
Comment: Various respondents commented on the "safe harbor" from civil liability that may arise as a result of
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 12 of 27
reporting to GIDEP, provided that the contractor made a reasonable effort to determine that the items contained
counterfeit electronic parts or suspect counterfeit electronic parts. This safe harbor in the proposed rule is
provided by section 818(c)(5) of the NDAA for FY 2012, applicable only to contracts awarded by or for the
Department of Defense, and only applicable to reporting of counterfeit electronic parts or suspect counterfeit
electronic parts.
Several respondents supported the safe harbor provisions, but had some concern that it may encourage
contractors to err on the side of reporting to GIDEP, rather than analyzing whether the nonconformance is a critical
or major nonconformance, and whether the nonconformance is genuine.
Some respondents, expressed concern that expanding the rule beyond the original Congressional intent leaves
industry open to significant civil liability, which Congress could not have intended. According to two respondents,
the rule should not be extended beyond the original statutory scope until Congress provides safe harbor for the
expanded scope of the rule. Some respondents recommended that the rule should afford civil immunity to all
contractors covered by the rule, or even legal indemnification.
According to one respondent, lack of safe harbor may disincentivize contractors from reporting. Several other
respondents were concerned that, absent safe harbor provisions for authorized supply chains, the Government
may find its access to authorized sellers limited.
Response: With regard to concern that contractors or subcontractors will be "erring on the side of reporting to
GIDEP" because of protection against civil liability, the contractor or subcontractor is only exempted from civil
liability provided that the contractor or subcontractor "made a reasonable effort to determine that the report was
factual."
Section 818(c)(5) of the NDAA for FY 2012 is limited by its language to immunity from civil liability to defense
contractors and subcontractors, only with regard to reporting of counterfeit or suspect counterfeit electronic parts.
It does not provide a legal basis to hold civilian agency contractors immune from civil liability in accordance with
the plain language of the statute. Immunity is an exemption from liability that is granted by law to a person or
class of persons. There has to be a legal basis to release a contractor from liability either under the contract,
pursuant to a statute, or in accordance with common law. Granting an immunity from liability is achieved by law-either by the legislature pursuant to statute, or by the courts under common law (e.g., a common law defense to a
lawsuit that the contractor asserts before the courts), or in accordance with contract terms and conditions. The
FAR Council is not authorized to expand the statutory liability provisions (in this case immunity from civil liability)
beyond the statutory language, or to include indemnification. Therefore, there were no changes from the proposed
rule as a result of these comments.
d. De Facto Debarment or Suspension
Comment: One respondent was concerned that reporting of contractors and subcontractors may include reporting
of third-party items. The respondent is concerned that the entity whose item is reported to GIDEP is effectively
debarred or suspended from Government contracting unless and until cleared.
Response: The focus of suspension and debarment is on the responsibility of the contractor or subcontractor. The
focus of GIDEP is on the conformance of a part, which may or may not reflect badly on the contractor or
subcontractor. Before a report is submitted to GIDEP for publication, the manufacturer of the item or the supplier
of the suspect counterfeit part is given the opportunity to provide their perspective on the issues presented in the
report. Often, the information presented includes how the part manufacturer is being improved to resolve the
concerns or how the supplier who provided the suspect counterfeit part is improving their quality assurance
processes or procurement practices. Most GIDEP reports provide an opportunity for a positive perception of the
entity. There were no changes from the proposed rule as a result of this comment.
5. Conflicts or Redundancies
a. Mandatory Disclosure Requirements at FAR 52.203-13
Comment: Several respondents were concerned about differentiation between expanded GIDEP reporting and
mandatory disclosure under FAR clause 52.203-13. One respondent stated that it is their understanding that the
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 13 of 27
DoD Inspector General (DoDIG) Office of Contract Disclosure has taken the position that contractors are obliged to
report "any discovery of counterfeit electronic parts and non-conforming parts." This respondent noted that if the
FAR clause is in the contract and if they find credible evidence of fraud committed somewhere in the supply chain,
they would report it to the DoDIG via the contract disclosure process. However, it is not clear to the respondent
that when these conditions are not present, that they must still report to the DoDIG. One respondent asked for
clarification of the obligation of contractors under the contemplated expanded reporting requirement and the
requirement at FAR 52.203-13. Another respondent requested that the FAR Council "expressly state that any
reporting required under the rule does not implicate or trigger any requirements to notify the IG under . . . FAR part
3.10." Two respondents cited to the DoD statement in the preamble to the final DFARS rule for DFARS case 2012D055 that the mandatory disclosure process suggests that the contractor has committed an ethical code of
conduct violation, whereas the GIDEP reporting is not meant to imply a violation of this nature.
Response: Counterfeit or suspect counterfeit parts, by definition, probably involve fraud at some tier of the supply
chain. The evidence that led to the conclusion that the part was counterfeit or suspect counterfeit should provide
the credible evidence required by FAR 52.203-13 that would require disclosure to the IG. Nonconforming parts, on
the other hand, do not necessarily involve the fraud or other criminal violations or civil false claims violations listed
at FAR 52.203-13, and therefore may, but do not necessarily, trigger the disclosure requirement under FAR 52.20313.
The fact that the clause is not in the contract may relieve the contractor from the specific requirement to report the
credible evidence of fraud to the IG. However, although the clause at FAR 52.203-13 is only included in contracts in
accordance with the clause prescription at FAR 3.1004, the requirements at FAR 3.1003(a)(2) state that, whether
or not the clause is applicable, a contractor may be suspended and/or debarred for knowing failure to timely
disclose to the Government, in connection with the award, performance, or closeout of a Government contract
performed by the contractor or a subcontract award thereunder, credible evidence of a violation of Federal criminal
law involving fraud or a violation of the Civil False Claims Act.
Although the mandatory disclosure under FAR 52.203-13 indicates an ethical code of conduct violation at some
tier by some entity, that does not equate to an ethical violation by the contractor that is reporting the violation.
Therefore, there was no change from the proposed rule as a result of these public comments.
b. FAR Part 46 Quality Assurance Conflicts or Redundancies
Comment: Two respondents expressed concerns that the additional reporting is redundant and extending
reporting to other areas duplicates controls already in place. One respondent stated that contractors are already
required to report uncorrected nonconformances.
Response: While quality management systems standards require reporting of nonconformances in some
instances, GIDEP reporting is not redundant because the GIDEP reporting is to the larger acquisition community
thereby providing other acquisition activities an opportunity to mitigate disruptions caused by suspect and known
counterfeit items. FAR part 46 and the Quality Management Systems Standards require reporting to the customer
only. Therefore, there was no change from the proposed rule as a result of these public comments.
c. DI-MISC-81832, Data Item Description: Counterfeit Prevention Plan (21 Jan 2011) Issued by National
Reconnaissance Office (NRO)
Comment: One respondent stated that the proposed rule is in conflict with Data Item Description, DI-MISC-81832
COUNTERFEIT PREVENTION PLAN (21 JAN 2011). The contractor is not required by the DID to notify the suppliers
that the items are suspect counterfeit.
Response: The clause does not require the contractor to notify the suppliers. It requires reporting to the
contracting officer and GIDEP. Therefore, there was no change from the proposed rule as a result of these public
comments.
d. GIDEP Failure Experience Data (FED) Operations Manual
i. Notifying More Than One Customer on Single-Use Item
Comment: One respondent noted that the proposed rule is in conflict with the GIDEP Operating Manual. The
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 14 of 27
respondent stated that the GIDEP Operating Manual does not require reporting of items "acquired for a specific
application or use, and known not to be used by anyone else," whereas the rule conflicts with this.
Response: The GIDEP Operations Manual does not conflict with either the proposed or the final rule. The rule
requires reporting of major or critical nonconformances to GIDEP only for "common items," which term is defined
at FAR 46.101 to mean an item that has multiple applications versus a single or peculiar application. The
Operations Manual states "Items and services uniquely acquired for a specific application or use, and known not to
be used by anyone else, will not be reported through GIDEP. If you are unsure whether the item may be similar to
one used for another application modified only by the color or slight change of form or fit, you should report the
nonconforming item or service using the applicable form."
If parts are procured from sources open to or available to the broader industrial base, then it is likely others have
procured the same part and it should be reported.
ii. GIDEP Community Collaboration
Comment: Two respondents stated that the GIDEP manual already contains a reporting process that many
involved with Federal contracting already use. One respondent does not support changes to the reporting process
documented in the manual. According to the respondent: "All enhancements and changes to reporting
requirements should be implemented through the GIDEP membership community where Government and industry
advisory groups collaborate, pilot, and execute reporting requirement changes."
Response: This FAR rule is not changing the GIDEP process. In some instances the rule now requires mandatory
reporting, rather than voluntary reporting, but does not change how to report. No change from the proposed rule is
required as a result of these comments.
e. Food and Drug Administration MedWatch Database
Comment: One respondent stated that the intent of the rule is for information to be exchanged among agencies
about nonconformance. This goal is served by the Food and Drug Administration MedWatch database for products
regulated by the Food and Drug Administration that present a risk to health.
Response: The final rule no longer applies to acquisition of items reported in the Food and Drug Administration's
MedWatch database due to the change to the clause prescription at 46.317(b)(2) and the change to the clause
flowdown at 52.246-26(g)(2)(ii).
6. Safeguards
a. Proprietary Data Under Trade Secrets Act
Comments: One respondent expressed concern whether adequate measures and processes are in place to ensure
that proprietary data or information protected under the Trade Secrets Act shall not be reported.
Response: It is GIDEP policy that submitted reports should not contain proprietary data. To make this prohibition
explicit, the final rule adds a new paragraph (d) to the clause at FAR 52.246-26, which states that submitted
reports are not to include "trade secrets or confidential commercial or financial information protected under the
Trade Secrets Act." It is the practice of GIDEP that all GIDEP reports are screened upon receipt for information
labelled as proprietary data or information protected under the Trade Secrets Act. If this data is found, it is brought
to the attention of the submitter. If the submitter of the report is insistent upon including the proprietary data, a
written release is obtained.
b. Impact on Ongoing Criminal Investigation
Comments: One respondent recommended that the proposed rule should provide "clear guidance as to when a
report should not be made if a criminal investigation is in-process and reporting could impact such investigation."
Response: The final rule has been modified at FAR 52.246-26(c)(2) to add the statement that a GIDEP report
should not be submitted when the contractor is aware that the issue it is reporting is being investigated unless the
report has been approved by the cognizant law enforcement agency.
c. Export-Controlled Data
Comments: One respondent expressed concern whether adequate measures and processes are in place to ensure
that "export controlled data is not inadvertently released to unauthorized parties."
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 15 of 27
Response: The final rule revised the clause at 52.246-26(b)(1) and (c)(1) to clarify that the GIDEP reporting and
screening requirement does not apply if the contractor is a foreign corporation or partnership that does not have
an office, place of business, or fiscal paying agent in the United States. Since foreign corporations will not be
allowed to screen or submit GIDEP reports, export-controlled data will not be inadvertently released to
unauthorized parties as a result of this rule. Further, when applying for access to GIDEP, all applicants are required
to agree to the GIDEP Operations Manual, Chapter 2, Appendix A, "GIDEP Terms and Conditions" that include the
following--"Safeguard GIDEP data in accordance with the Security and Technology Transfer regulations of the U.S.
and Canadian Governments. The U.S. regulations are located at 15 CFR chapter VII, subchapter C "Export
Administration Regulations". For example, these regulations include rules covering access by and disclosure to
foreign nationals employed at the businesses within the United States or Canada.
7. Additional Guidance
a. Disposition of Counterfeit Parts
Comments: One respondent recommended that the Government establish and communicate-(1) An official position about what a recipient of suspect/actual counterfeit parts should do with the material when
it discovers/determines that it may be counterfeit;
(2) Procedures the Government would prefer industry follow in securing suspect counterfeit electronic parts and
preserve the chain of custody; and
(3) Guidance addressing how long after a company notifies the Government of its conclusion that industry should
retain suspect counterfeit electronic parts.
Response: FAR 46.407(h) provides that the contracting officer shall provide disposition instructions for counterfeit
or suspect counterfeit items in accordance with agency policy. Agency policy may require the contracting officer
to direct the contractor to retain such items for investigative or evidentiary purposes. Also, FAR 52.246-26(b)(3)
directs the contractor to retain counterfeit or suspect counterfeit items in its possession at the time of discovery
until disposition instructions have been provided by the contracting officer. Therefore, no changes from the
proposed rule are required.
b. Law Enforcement Lead
Comments: One respondent noted that industry would prefer a single Federal law enforcement agency as a point
of contact for questions, understanding best practices, referrals, etc. Industry would look to this agency for
purposes of reporting and investigation of events such as discovery of counterfeit electronic parts and
recommended that GIDEP be the mechanism by which notification to such law enforcement is conducted.
Response: This recommendation is outside the scope of this case and no change is made to the final rule.
c. Cooperation Between Original Component Manufacturers (OCMs) and Contractors
Comments: One respondent addressed difficulties with obtaining sufficient information from the OCM to suspect
an item is counterfeit. The respondent indicated that industry benefits, under certain circumstances, from
attempting to authenticate electronic parts procured from other than "trusted suppliers" when the OCM
cooperates. Such circumstances include-(1) The parts in question are electronic components for items contained in fielded systems previously sold to the
Government years earlier and are now needed to support replacement or additional requirements for those same
systems;
(2) The OCM no longer manufactures the part in question;
(3) Neither the OCM nor its authorized distributors have the part in stock; and
(4) There is not enough time or inventory to engage authorized aftermarket manufacturers.
According to the respondent, OCMs occasionally refuse to verify such information as lot number, date code, and
trademark of suspect counterfeit parts citing that (1) the reporting company did not purchase the part in question
from the OCM; (2) taking time to assess the part costs the OCM money; and (3) the risk to the OCM involved in
terms of liability to the seller of the part if the OCM's input to the reporting company is incorrect. The respondent
recommended that the Government allow industry to bring its requests for such information from OCMs to Federal
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 16 of 27
law enforcement to obtain the information from the OCM or encourage OCMs to cooperate with industry in the
collective public good.
Response: It is outside the scope of this case and the authority of the Councils to require OCMs to provide
information to another entity with regard to suspect counterfeit parts; therefore, no change is made to the final
rule.
8. Technical Corrections/Comments
Comment: According to one respondent, the FAR text should reference 12.301(d)(5) rather than 12.301(d)(4) for
the requirement to include the clause FAR 52.246-26, Reporting Nonconforming Items.
Response: The respondent is correct. However, this issue is no longer relevant, as this clause is no longer required
for acquisitions of commercial items.
Comment: One respondent commented that if the proposed rule is intended to require flowing down FAR 52.24626 to commercial-item subcontracts awarded under commercial-item prime contracts, then the FAR Council
should propose corresponding amendments to FAR 52.212-5(e).
Response: The respondent is technically correct. However, the final rule no longer applies to contracts for the
acquisition of commercial items using FAR part 12 procedures, nor does the rule flow down to subcontracts for
commercial items.
Comment: One respondent stated that the proposed rule and clause use the term "contractor" at some points and
"Contractor" at other points.
Response: In accordance with FAR drafting conventions, the term "contractor" is not capitalized in the FAR text,
but in a clause it is capitalized to indicate the prime contractor.
9. Phased Implementation
a. Adequate Time To Develop Practices, Processes, and Tools
Comment: One respondent proposed a phased implementation approach to allow adequate time for the supply
base to develop practices, processes, and tools to comply with the requirements. This would allow for system
access and training needs of companies newly reporting in GIDEP and for existing participants' to establish
internal protocols to ensure accurate, timely and complete GIDEP reporting.
Response: The Councils do not agree that a phased implementation approach is necessary and no change is made
to the final rule. The GIDEP system is well established and support is provided in a variety of ways to assist users.
Instructions are provided in the GIDEP Operations Manual found on the GIDEP website, along with information on
instructional modules and web-based training. Additionally, the GIDEP Operations Center has a Help Desk to assist
users. These tools will assist with compliance and reduce the need to develop extensive practices, processes, and
internal protocols.
b. Limit Reporting Requirement
Comment: Two respondents proposed a phased-in approach initially limited to reporting counterfeit and suspected
counterfeit parts and only later expanded once the processes for implementing such systems are established and
functioning.
Response: Because the final rule has been significantly descoped there is no need for a phased-in approach and
no change was made to the rule concerning a phased-in approach.
c. Expanded Access to GIDEP
Comment: One respondent proposed the FAR Council delay implementation of the rule or make GIDEP
participation voluntary until access to GIDEP is more broadly available, specifically to non-U.S. and non-Canadian
companies who do not presently have access to the system.
Response: The final rule does not extend access to foreign contractors. It has been determined that the inclusion
of foreign contractors would be beyond the manageable scope of this rule. Therefore, the final rule adds the
statement in paragraphs (b)(1) and (c)(1) of the clause at 52.246-26 that foreign contractors are not required to
submit or screen GIDEP reports.
d. Commercial Item Contractors' Exemption
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 17 of 27
Comment: One respondent proposes to exempt commercial item contractors, their subcontractors and suppliers
from the initial applicability of the rule.
Response: The final rule was revised to no longer apply to acquisition of commercial items and does not require
flowdown to subcontracts for the acquisition of commercial items.
10. "Major Rule" Under 5 U.S.C. 804
Comment: One respondent disagreed with the statement in the preamble to the proposed that this is not a major
rule under 5 U.S.C. 804. The respondent cites the value of current industry investments to secure supply chains
and ensure product integrity, increased costs to the Government customer for compliance, and the additional
liability costs imposed on the Government industrial base and information and communication technology
sectors.
Response: It is not the decision of the FAR Council whether a rule is a major rule, but it is, by the definition at 5
U.S.C. 804, the decision of the Office of Information and Regulatory Affairs (OIRA). OIRA determined that the
proposed rule was not a major rule. This final rule has significantly less effect than the proposed rule (e.g.,
estimated burden hours reduced from 1,422,000 to 30,966 hours), so is even less likely to be considered a major
rule. As defined in 5 U.S.C. 804, "major rule" means any rule that the Administrator of the Office of Information and
Regulatory Affairs of the Office of Management and Budget finds has resulted in or is likely to result in-(A) An annual effect on the economy of $100,000,000 or more;
(B) A major increase in costs or prices for consumers, individual industries, Federal, State, or local government
agencies, or geographic regions; or
(C) Significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability
of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets.
Quality assurance systems already have methods of analyzing and dealing with nonconformances; therefore, the
bulk of the process in gathering information on nonconforming parts is already happening (e.g., FAR 52.246-2,
Inspection of Supplies--Fixed Price; or 52.246-3, Inspection of Supplies--Cost-Reimbursement).
11. Small Business Impact
Comment: One respondent asserted the analysis of the costs and impacts of the proposed rule are greatly
underestimated and that small businesses most assuredly will be impacted as the proposed rule requires a system
for ongoing review of GIDEP, audit, investigation, and reporting; and investigation and reporting to GIDEP and the
contracting officer. The respondent pointed out that small businesses have limited resources--both in terms of
personnel and financial resources--to establish systems necessary to engage in these kinds of continuous
monitoring, auditing, investigating, and reporting activities.
Another respondent stated that, although the proposed rule addresses an important objective--to mitigate the
threat that counterfeit items pose when used in systems vital to an agency's mission--the rule imposes significant
new monitoring and reporting requirements that will pose particular challenges for small businesses. The
respondent stated that the proposed rule was likely to increase costs for smaller businesses. The respondent cited
examples, such as by requiring them to significantly increase quality assurance and compliance investments in
order to remain at some tier in the Government supply chain, increasing liability costs associated with compliance
failures, and increasing costs associated with the heightened risk of application of the exclusionary authority. This
respondent also opined that in the section 818 regulatory process, the rulemakings have had the net effect of
higher-tiered Federal contractors trimming their supply chains to eliminate companies unable or unwilling to
implement flowdown policies or that cannot immediately demonstrate well in advance of entering supplier
agreements that they have the capabilities demanded by the various section 818 rules. Ultimately, the by-product
of this and other section 818 rulemakings is that they disproportionately and negatively impact small businesses
through reduced participation in the Federal market and reduced Federal funding.
Response: The significant descoping of the applicability of this rule both at the prime and subcontract level,
including removal of the applicability of the clause to commercial prime contracts, and removal of the flowdown
requirements to subcontracts for commercial items (see paragraphs II.B.1.a. through II.B.1.c.) will greatly reduce
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 18 of 27
the impact on small businesses. Additionally, the rule does not require application of section 818(c)(4) to DoD
contracts and subcontracts that do not exceed the SAT. Furthermore, while this rule may require small businesses
to implement new business practices, these practices will have the beneficial effect of making the business more
competitive as potential prime contractors and business partners see the firm has instituted practices to avoid
passing on counterfeits and items with major or critical nonconformances.
The Councils have revised the rule to lessen burden and reduced reporting requirements to the maximum extent
while still getting information necessary to protect items that require higher-level quality standards, critical items,
and electronic parts for DOD from counterfeit parts and major or critical nonconformances. Changes to the rule
include: Focusing on supplies that require higher-level quality standards or are determined to be critical items,
excluding foreign contractors and commercial items. Commercial items include COTS items. This and other
descoping efforts (see preamble sections II.A. and II.B.1.) reduced the estimated responses from 474,000 to 5,166
responses, and reduces the estimated burden hours from 1,422,000 hours to 30,986 hours, so that information is
obtained where it is most critically needed.
Comment: One respondent was concerned that adding negotiations over quality assurance may further distort the
playing field to hurt small businesses attempting to retain a degree of control in their operations when negotiating
with prime contractors. Conversely, lower-tier subcontractors, particularly commercial item contractors and small
business entities, may assert that they do not have (and cannot afford to have) the sophisticated internal control
systems necessary to detect and categorize the types of nonconforming conditions that require reporting to
GIDEP. Neither the proposed clause nor the proposed regulation offers any guidance for resolving such conflicts.
Response: Part of the concern of the respondent was that higher-tier contractors could insist on imposing quality
control and reporting requirements that go well beyond those specified in the proposed clause to ensure that they
fulfill their own obligation under the clause. In the final rule, paragraph (g)(3) of the clause at 52.246-26 revises the
flowdown language to restrict changes to the clause (see paragraph II.B.2.d.).
12. Information Collection Requirements
Comment: Various respondents commented on the estimate of the information collection requirement in the
preamble to the proposed rule.
Several respondents stated that the burden is currently underestimated. According to a respondent, the estimate
of 474,000 reports underestimates the potential burden of the expanded reporting requirements because it failed
to account for the growth in GIDEP reporting entities and relies on the number of companies currently participating
in GIDEP.
Various respondents commented that 3 hours per report was substantially underestimated. One respondent noted
that any incident must be identified, investigated, and reported. Procedures need to be followed, individuals with
expertise need to be consulted, tests need to be performed and reports to memorialize findings of the review need
to be prepared and filed. Another respondent noted that a single report can take up to 100 hours to complete,
including significant legal review. Another respondent commented that the "very low estimate" seems to ignore the
significant time and costs associated with training, implementation, and the risks of liability.
Response: DoD, GSA, and NASA have completely revised the estimated number of reports per year because the
rule has been significantly descoped and data was also reviewed regarding the current number of participating
contractors and the current number of reports submitted, resulting in an estimate of 51,657 participating
contractors submitting 5,166 reports per year.
Industry already has all the information necessary to prepare a GIDEP report, based on existing quality assurance
systems and procedures. However, in response to the industry comments and after discussions with subject
matter experts, DoD, GSA, and NASA have reconsidered the number of estimated hours to prepare, review, and
submit the report at an average of 6 hours per report (see section VII of this preamble).
III. Applicability to Contracts at or Below the Simplified Acquisition Threshold (SAT) and for Commercial Items,
Including Commercially Available Off-the-Shelf (COTS) Items
A. Applicability to Contracts at or Below the SAT
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 19 of 27
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, which includes DoD, 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 FAR Council has not made this determination. Therefore, section
818(c)(4) of Public Law 112-81 will not be applied below the SAT at either the prime or subcontract level. However,
the Governmentwide policy, which is not required by statute, with regard to items that require higher level quality
standards and critical items (including electronic parts), will be applied below the SAT, because for such parts,
counterfeit or nonconforming parts of any dollar value can still cause hazardous or unsafe conditions for individual
using the equipment and can lead to mission failure.
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 and subcontracts for the acquisition of commercial
items, and is intended to limit the applicability of laws to contracts and subcontracts 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. 1907 governs the applicability of laws to the acquisition of COTS items, with the Administrator
for Federal Procurement Policy serving as the decision authority in determining whether it is not in the best
interest of the Government to exempt contracts for COTS items from a provision of law.
The FAR Council and the Administrator for Federal Procurement Policy have not made these determinations with
regard to application of section 818(c)(4) of Public Law 112-81 to contracts and subcontracts for the acquisition of
commercial items and COTS items, respectively. This final rule will not apply the requirements of section 818(c)(4)
of Public Law 112-81 or the Governmentwide policy to prime contracts for the acquisition of commercial items
using FAR part 12 procedures and will not flow the clause FAR 52.246-26 down to subcontracts for the acquisition
of commercial items.
IV. Expected Costs
DoD, GSA, and NASA have performed a regulatory cost analysis on this rule. The following is a summary of the
estimated public and Government costs. Currently, there is no FAR requirement for contractors to exchange
information about counterfeit, suspect counterfeit or major or critical nonconforming items in a Governmentwide
database. This final rule establishes the requirement for contractors to search for and share information on such
items in GIDEP. Specifically, the rule adds a new FAR clause at 52.246-26, Reporting Nonconforming Items, that
includes a requirement for contractors to: (1) Screen GIDEP for items which may have critical or major
nonconformances or items that are counterfeits or suspect counterfeits; and (2) report to GIDEP and the
contracting officer within 60 days of becoming aware or having reason to suspect--such as through inspection,
testing, record review, or notification from another source (e.g., seller, customer, third party)--that an end item
purchased by the contractor for delivery to, or for, the Government is counterfeit or suspect counterfeit. These
screening and reporting requirements apply to contracts that are: (1) Subject to higher-level quality standards in
accordance with the clause at FAR 52.246-11, Higher-Level Contract Quality Requirement; (2) for critical items; or
(3) for acquisitions over the simplified acquisition threshold of electronic parts or end items, components, parts, or
assemblies containing electronic parts, by, or for the Department of Defense.
By sharing this information in GIDEP, both the Government and contractors will benefit from knowing about and
avoiding items with critical or major nonconformances, or items that are counterfeits or suspect counterfeits.
Sharing this information in GIDEP will reduce the risk of having such items in the supply chain for mission critical
items where failure would endanger an agency mission, cause catastrophic failures, or endanger human health
and the environment. Although unable to quantify the benefits of this rule, the Government expects reduction in
the high costs of potential damage to equipment, mission failure, and even injury and death of personnel.
The following is a summary of the estimated public and Government cost savings calculated in perpetuity in 2016
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 20 of 27
dollars at a 7-percent discount rate:
Summary Public Government Total
Present Value $ 209,045,344.99 $ 4,007,342.86 $ 213,052,687.85
Annualized Costs 14,633,174.15 280,514.00 14,913,688.15
Annualized Value Costs (as of 2016 if Year 1 is 11,945,028.99 228,982.98 12,174,011.97
2019)
To access the full regulatory cost analysis for this rule, go to the Federal eRulemaking Portal at
https://www.regulations.gov, search for "FAR Case 2013-002," click "Open Docket," and view "Supporting
Documents."
V. Executive Orders 12866 and 13563
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.
VI. Executive Order 13771
This rule is an E.O. 13771 regulatory action. The total annualized value of the cost is $14,913,688.15. Details on the
estimated costs can be found in section IV. of this preamble.
VII. Regulatory Flexibility Act
DoD, GSA, and NASA have prepared a Final Regulatory Flexibility Analysis (FRFA) consistent with the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq. The FRFA is summarized as follows:
This rule partially implements section 818 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY)
2012 (Pub. L. 112-81, 10 U.S.C. 2302 Note), requiring regulations regarding the definition, prevention, detection and
reporting of actual or suspected counterfeit electronic parts in the Government-Industry Data Exchange Program
(GIDEP) system. Section 818(c)(4) was directed specifically at the reporting of counterfeit or suspect counterfeit
electronic parts by Department of Defense (DoD) contractors and subcontractors; however, the Civilian Agency
Acquisition Council and the Defense Acquisition Regulations Counsel (the Councils) consider the problem of
nonconforming and counterfeit parts to be significant across the Federal Government and, therefore this rule
applies to all applicable Federal contracts.
Respondents expressed concern about the scope of the proposed rule and the potential difficulty of tracking and
reporting, especially for small businesses.
* One respondent asserted that the analysis of the costs and impacts of the proposed rule were greatly
underestimated and that small business most assuredly will be impacted as the proposed rule requires a system
for ongoing review of GIDEP, audit, investigation, and reporting to GIDEP and the contracting officer. The
respondent pointed out that small businesses have limited resources--both in terms of personnel and financial
resources--to establish systems necessary to engage in these kinds of continuous monitoring, auditing,
investigating, and reporting activities.
* Another respondent stated that the proposed rule was likely to increase cost for smaller businesses. The
respondent cited examples, such as by requiring them to significantly increase quality assurance and compliance
investments in order to remain at some tier in the Government supply chain, increasing liability costs associated
with compliance failures, and increasing costs associated with the heightened risk of application of the
exclusionary authority.
In response to these concerns, the Councils significantly descoped the rule, both at the prime and the subcontract
level. The final rule no longer applies to contracts or subcontracts for the acquisition of commercial items.
Additionally, the rule does not require application of section 818(c)(4) to DoD contracts and subcontracts that do
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 21 of 27
not exceed the simplified acquisition threshold (see FAR 46.317(a) and 52.246-26(g)(1)).
The removal of the flowdown requirements will greatly reduce the impact on small businesses. While this rule may
require small businesses to implement new business practices involving screening GIDEP reports or reporting in
GIDEP if a mission critical nonconforming item is discovered, we do not expect the incident of finding mission
critical nonconformances to be frequent. These practices will have the beneficial effect of making the business
more competitive as potential prime contractors and business partners see that the firm has instituted practices
to avoid passing on counterfeit parts and items with critical nonconformances.
One respondent was concerned that adding negotiations over quality assurance may further distort the playing
field to hurt small businesses attempting to retain a degree of control in their operations when negotiating with
prime contractors. Conversely, lower-tier subcontractors, particularly commercial-item contractors and smallbusiness entities, may assert that they do not have (and cannot afford to have) the sophisticated internal control
systems necessary to detect and categorize the types of nonconforming conditions that require reporting to
GIDEP. Neither the proposed clause nor the proposed regulation offers any guidance for resolving such conflicts.
Part of the concern of the respondent was that higher-tier contractors could insist on imposing quality control and
reporting requirements that go well beyond those specified in the proposed clause to ensure that they fulfill their
own obligation under the clause. This issue has been resolved through amendment of the flowdown language to
restrict changes to the clause.
The rule applies to contracts that have higher-level quality assurance requirements (FAR 52.246-11), contracts for
critical items, and DoD contracts for electronic parts that exceed the simplified acquisition threshold (other than
commercial items). The total number of contractors and subcontractors to which the rule will apply is estimated to
be 51,657. Of this number, it is estimated 42,153 or 82 percent will be small businesses, of which approximately 10
percent may be required to submit a GIDEP report in a given year.
This rule requires screening of GIDEP reports; written notice to the contracting officer within 60 days of becoming
aware through inspection or testing of counterfeit or suspect counterfeit parts for delivery to, or for, the
Government; and reporting of counterfeit and suspect counterfeit items and common items that have a critical or
major nonconformance into GIDEP.
The Government vitally needs a program to protect its critical assets from the threat of loss and especially where
failure of the item could injure personnel or jeopardize a vital agency mission. The Councils carefully weighed the
stated concerns of businesses against the serious impact parts with major or critical nonconformances may have
on critical items.
As described above, the Councils minimized the economic impact on small entities consistent with the stated
objects of the rule by descoping the rule significantly to the maximum extent possible while maintaining the ability
to track and avoid counterfeit, suspect counterfeit items and common items that have a critical or major
nonconformance.
Interested parties may obtain a copy of the FRFA from the Regulatory Secretariat Division. The Regulatory
Secretariat Division has submitted a copy of the FRFA to the Chief Counsel for Advocacy of the Small Business
Administration.
VIII. Paperwork Reduction Act
The Paperwork Reduction Act (44 U.S.C. chapter 35) applies. The rule contains information collection
requirements. OMB has cleared this information collection requirement under OMB Control Number 9000-0187,
titled: "Reporting of Nonconforming Items to the Government-Industry Data Exchange Program." Due to the major
descoping of the final rule, the approved estimated number of responses is substantially less than the estimated
responses in the preamble to the proposed rule. However, the number of hours per response has been increased to
6 hours.
Respondents: 5,166.
Responses per respondent: 1.
Total annual responses: 5,166.
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 22 of 27
Preparation hours per response: 6.
Total response burden hours: 30,996.
List of Subjects in 48 CFR Parts 1, 2, 7, 46, and 52 Government procurement.
William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of Acquisition Policy, Office of Government-wide
Policy.
Therefore, DoD, GSA and NASA are issuing a final rule amending 48 CFR parts 1, 2, 7, 46, and 52 as set forth below:
1. The authority citation for parts 1, 2, 7, 46, and 52 continues to read as follows:
Authority:40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 U.S.C. 20113.
PART 1--FEDERAL ACQUISITION REGULATIONS SYSTEM
2. In section 1.106 amend the table by adding in numerical sequence, the entry for "52.246-26" to read as follows:
1.106OMB approval under the Paperwork Reduction Act.
*****
FAR segment OMB control No.
*******
52.246-26 9000-0187
*******
PART 2--DEFINITIONS OF WORDS AND TERMS
3. Amend section 2.101 in paragraph (b) by revising the definition "Common item" to read as follows:
2.101 Definitions.
*****
(b) * * *
Common item means material that is common to the applicable Government contract and the contractor's other
work, except that for use in the clause at 52.246-26, see the definition in paragraph (a) of that clause.
*****
PART 7--ACQUISITION PLANNING
4. Amend section 7.105, in paragraph (b)(19) by adding a new sentence to the end of the paragraph to read as
follows:
7.105 Contents of written acquisition plans.
*****
(b) * * *
(19) * * * In contracts for supplies or service contracts that include supplies, address whether higher-level quality
standards are necessary (46.202) and whether the supplies to be acquired are critical items (46.101).
*****
PART 46--QUALITY ASSURANCE
5. Amend section 46.101 by adding, in alphabetical order, the definitions "Counterfeit item", "Critical item",
"Design activity", and "Suspect counterfeit item" to read as follows:
46.101 Definitions.
*****
Counterfeit item means an unlawful or unauthorized reproduction, substitution, or alteration that has been
knowingly mismarked, misidentified, or otherwise misrepresented to be an authentic, unmodified item from the
original manufacturer, or a source with the express written authority of the original manufacturer or current design
activity, including an authorized aftermarket manufacturer. Unlawful or unauthorized substitution includes used
items represented as new, or the false identification of grade, serial number, lot number, date code, or performance
characteristics.
Critical item means an item, the failure of which is likely to result in hazardous or unsafe conditions for individuals
using, maintaining, or depending upon the item; or is likely to prevent performance of a vital agency mission.
PDF GENERATED BY SEARCH.PROQUEST.COM
Page 23 of 27
*****
Design activity means an organization, Government or contractor, that has responsibility for the design and
configuration of an item, including the preparation or maintenance of design documents. Design activity could be
the original organization, or an organization to which...
Purchase answer to see full
attachment