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DOD Should Leverage Ongoing Initiatives in Developing Its Program to Mitigate Risk of Counterfeit Parts

GAO-10-389: Published: Mar 29, 2010. Publicly Released: Apr 28, 2010.

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Counterfeit parts--generally those whose sources knowingly misrepresent the parts' identity or pedigree--have the potential to seriously disrupt the Department of Defense (DOD) supply chain, delay missions, and affect the integrity of weapon systems. Almost anything is at risk of being counterfeited, from fasteners used on aircraft to electronics used on missile guidance systems. Further, there can be many sources of counterfeit parts as DOD draws from a large network of global suppliers. Based on a congressional request, GAO examined (1) DOD's knowledge of counterfeit parts in its supply chain, (2) DOD processes to detect and prevent counterfeit parts, and (3) commercial initiatives to mitigate the risk of counterfeit parts. GAO's findings are based on an examination of DOD regulations, guidance, and databases used to track deficient parts, as well as a Department of Commerce study on counterfeit parts; interviews with Commerce, DOD, and commercial-sector officials at selected locations; and a review of planned and existing efforts for counterfeit-part mitigation.

DOD is limited in its ability to determine the extent to which counterfeit parts exist in its supply chain because it does not have a departmentwide definition of the term "counterfeit" and a consistent means to identify instances of suspected counterfeit parts. While some DOD entities have developed their own definitions, these can vary in scope. Further, two DOD databases that track deficient parts--those that do not conform to standards--are not designed to track counterfeit parts. A third governmentwide database can track suspected counterfeit parts, but according to officials, reporting is low due to the perceived legal implications of reporting prior to a full investigation. Nonetheless, officials we met with across DOD cited instances of counterfeit parts, as shown in the table below. A recent Department of Commerce study also identified the existence of counterfeit electronic parts within DOD and industry supply chains. DOD is in the early stages of developing a program to help mitigate the risks of counterfeit parts. DOD does not currently have a policy or specific processes for detecting and preventing counterfeit parts. Existing procurement and quality-control practices used to identify deficient parts are limited in their ability to prevent and detect counterfeit parts in DOD's supply chain. For example, several DOD weapon system program and logistics officials told us that staff responsible for assembling and repairing equipment are not trained to identify counterfeit parts. Some DOD components and prime defense contractors have taken initial steps to mitigate the risk of counterfeit parts, such as creating risk-assessment tools and implementing a new electronic parts standard. Also facing risks from counterfeit parts, individual commercial sector companies have developed a number of anticounterfeiting measures, including increased supplier visibility, detection, reporting, and disposal. Recent collaborative industry initiatives have focused on identifying and sharing methods to reduce the likelihood of counterfeit parts entering the supply chain. Because many of the commercial sector companies produce items similar to those used by DOD, agency officials have an opportunity to leverage knowledge and ongoing and planned initiatives to help mitigate the risk of counterfeit parts as DOD develops its anticounterfeiting strategy.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: As DOD develops its anticounterfeit program, the Secretary of Defense should leverage existing anticounterfeiting initiatives and practices currently used by DOD components and industry to establish guidance that includes a consistent and clear definition of counterfeit parts and consistent practices for preventing, detecting, reporting, and disposing of counterfeit parts;

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: DOD implemented this recommendation by issuing guidance and policy on counterfeit parts. In March 2012, DOD issued a memorandum to the Secretaries of the Military Departments and the Directors of Defense Agencies, "Overarching DOD Counterfeit Prevention Guidance." In April 2013, DOD issued DOD Instruction 4140.67, "DOD Counterfeit Prevention Policy." These documents contain a consistent and clear definition of counterfeit parts.

    Recommendation: As DOD develops its anticounterfeit program, the Secretary of Defense should disseminate this guidance to all DOD components and defense contractors.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: DOD implemented this recommendation by issuing guidance and policy. In March 2012,DOD issued a memorandum, "Overarching DOD Counterfeit Prevention Guidance." In April 2013, DOD issued DOD Instruction 4140.67, "DOD Counterfeit Prevention Policy." Both the guidance and policy contain language to facilitate flow down of these anti-counterfeit activities to the defense contractors, through practices and contract clauses. DOD is in the final stages of completing the DFARS amendment for counterfeit parts.

    Recommendation: As DOD develops its anticounterfeit program, the Secretary of Defense should analyze the knowledge and data collected to best target and refine counterfeit-part risk-mitigation strategies.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: DOD has developed a plan of action and milestones (POA&M) based on initial analysis of its collective knowledge of counterfeiting practices. The POA&M covers a 4-year period through the end of FY 2014 and includes a process for continuing to share and analyze information on counterfeiting activity across the DOD supply chain to further refine the strategy.

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