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GAO: DoD Needs Better Intel on Fake Parts

February 16, 2016 (Photo Credit: Bettina Chavanne/Lockheed Martin Corporation)

WASHINGTON — The Defense Department needs to bolster its oversight of defense agencies to ensure they are adequately reporting suspected counterfeit parts to keep them out of the supply chain via the Government-Industry Data Exchange Program (GIDEP), a new report from the Government Accountability Office concluded.

The 2011 National Defense Authorization Act directed the DoD to disseminate rules for reporting suspected counterfeit parts, and two years later the DoD issued an agencywide policy that included mandatory reporting of suspect and counterfeit materials.

The number of reports from fiscal 2011 and 2015 peaked at just over 250 in 2011, dropping to around 125 in 2012. For the last three years, the total has hovered around or under 50.

“The DOD supply chain is vulnerable to the risk of counterfeit parts — which can have serious consequences. To effectively identify and mitigate this risk, DOD and its defense contractors need data on the existence of counterfeit parts in their supply chain; whether those be suspected or confirmed counterfeit,” the report stated. “Three years after GIDEP reporting became mandatory, we found evidence that this system may not be effective as an early warning system to prevent counterfeit parts from entering the supply chain.”

The report, published Feb. 16, identified several agencies, including the US Army, Air Force and Missile Defense Agency, which had not reported a single incident of suspicious materials between 2011 and 2015. Roughly 40 percent of the overall reports, 207 out of 526 total, came from independent distributors, with three companies accounting for 103 reports, according to the GAO publication.

“In addition, one-third of all suspect counterfeit GIDEP reports—178 of 526—were submitted by original equipment manufacturers, with 122 of these 178 reports submitted by two manufacturers, while government agencies submitted only 43 reports,” the report stated. The Navy submitted more than half of the 40 reports submitted by the DoD.

Part of the problem, according to the GAO, is that the DoD has not implemented an oversight program to ensure that agencies are complying with reporting requirements. The report recommends putting a system in place, as well as having the undersecretary for acquisition, technology and logistics (ATL) develop a standardized process for determining how much evidence is needed to trigger the reporting requirement and guidance for when GIDEP reports should receive limited distribution.

The DoD concurred with each of those suggestions, although it balked at the suggestion that the Pentagon’s ATL office should clarify the criteria by which the DoD will assess contractors’ detection efforts.

Email: aclevenger@defensenews.com.

Twitter: @andclev

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