[Federal Register Volume 79, Number 111 (Tuesday, June 10, 2014)]
[Proposed Rules]
[Pages 33164-33168]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-13336]



[[Page 33164]]

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 2, 7, 12, 46, and 52

[FAR Case 2013-002; Docket No. 2013-0002; Sequence No. 1]
RIN 9000-AM58


Federal Acquisition Regulation; Expanded Reporting of 
Nonconforming Items

AGENCY: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Proposed rule.

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SUMMARY: DoD, GSA, and NASA are proposing to amend the Federal 
Acquisition Regulation (FAR) to require expanded reporting of 
nonconforming items.

DATES: Interested parties should submit written comments to the 
Regulatory Secretariat at one of the addressees shown below on or 
before August 11, 2014 to be considered in the formation of the final 
rule.
    Public Meeting: A public meeting will be held on June 16, 2014, 
from 1:30 p.m. to 5:30 p.m., Eastern Standard Time at the National 
Aeronautics and Space Administration Headquarters Auditorium, 300 E 
Street SW., Washington, DC 20546. The visitor's entrance is on the West 
side of the building. A notice was published in the Federal Register at 
79 FR 27871 on May 15, 2014 on the subject of expanded reporting of 
nonconforming items. See the May 15, 2014 Federal Register for details 
on registering and attending.

ADDRESSES: Submit comments in response to FAR Case 2013-002 by any of 
the following methods:
     Regulations.gov: http://www.regulations.gov. Submit 
comments via the Federal eRulemaking portal by searching for ``FAR Case 
2013-002''. Select the link ``Comment Now'' that corresponds with ``FAR 
Case 2013-002.'' Follow the instructions provided at the ``Comment 
Now'' screen. Please include your name, company name (if any), and 
``FAR Case 2013-002'' on your attached document.
     Fax: 202-501-4067.
     Mail: General Services Administration, Regulatory 
Secretariat (MVCB), ATTN: Hada Flowers, 1800 F Street NW., 2nd Floor, 
Washington, DC 20405.
    Instructions: Please submit comments only and cite FAR Case 2013-
002, in all correspondence related to this case. All comments received 
will be posted without change to http://www.regulations.gov, including 
any personal and/or business confidential information provided.

FOR FURTHER INFORMATION CONTACT: Mr. Edward Loeb, Procurement Analyst, 
at 202-501-0650, for clarification of content. For information 
pertaining to status or publication schedules, contact the Regulatory 
Secretariat at 202-501-4755. Please cite FAR Case 2013-002.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD, GSA, and NASA are proposing to revise the FAR to expand 
Government and contractor requirements for reporting of nonconforming 
items in partial implementation of section 818 of the National Defense 
Authorization Act (NDAA) for Fiscal Year (FY) 2012 and implement 
requirements of the Office of Federal Procurement Policy (OFPP) Policy 
Letter 91-3, entitled ``Reporting Nonconforming Products,'' dated April 
9, 1991. While section 818 applied only to DoD, only to electronic 
products, and only to contractors covered by the Cost Accounting 
Standards (CAS), the FAR Council concluded that the principles 
expressed in section 818 should be applied beyond DoD, should not be 
limited to electronic products, and should not be limited to CAS-
covered contractors. Similarly, although OFPP Policy Letter 91-3 
requires agencies to report to the Government-Industry Data Exchange 
Program (GIDEP), the FAR Council determined that reporting would be 
much more timely and effective if contractors were to make the reports 
directly to GIDEP.
    The NDAA for FY 2012 (Pub. L. 112-81, enacted December 31, 2011) 
included section 818, entitled ``Detection and Avoidance of Counterfeit 
Electronic Parts''. However, the problem of counterfeit and 
nonconforming parts extends far beyond electronic parts and can impact 
the mission of all Government agencies. OFPP recognized this more than 
20 years ago when it published its Policy Letter 91-3, entitled 
``Reporting Nonconforming Products''. At that time, OFPP referenced FAR 
46.407, noting that contracting officers ordinarily are required to 
reject nonconforming products ``when the nonconformance adversely 
affects safety, health, reliability, durability, performance, 
interchangeability, or other contract objectives''. OFPP, in section 4 
of Policy Letter 91-3, specified that, ``Information shall be exchanged 
among agencies about nonconforming products. The existing Government/
Industry Data Exchange Program (GIDEP) operated by the Department of 
Defense will serve as the central data base for receiving and 
disseminating information about such products''.
    The changes proposed by this rule will help mitigate the growing 
threat that counterfeit items pose when used in systems vital to an 
agency's mission. The rule is intended to reduce the risk of 
counterfeit items entering the supply chain by ensuring that 
contractors report suspect items to a widely available database. 
Multiple credible sources of information demonstrate that counterfeit 
electronic parts are a severe and growing problem across the supply 
chain, including data reported by the Senate Armed Services Committee 
(SASC), a Department of Commerce (DoC) report entitled ``Defense 
Industrial Base Assessment: Counterfeit Electronic Parts'', and the 
GIDEP.
    The SASC reported in 2011 that it had identified 1,800 cases of 
counterfeiting, comprising roughly one million parts. The DoC reported 
in 2010 that 9,356 suspected cases of counterfeiting had been 
identified in the defense industrial supply chain in 2008, an almost 
three-fold increase since 2005. GIDEP data also supports an increase 
over the past decade in counterfeit components and assemblies used in 
the Government.
    Counterfeit parts are most commonly identified during product 
testing due to part failure or significantly degraded performance. 
Parts that do not fail product testing and remain undetected pose 
severe reliability and safety risks. Catastrophic failure of safety or 
mission critical electronic parts can potentially result in loss of 
life or loss of significant mission capabilities.
    The FAR, at 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. The 
terms major nonconformance and critical nonconformance are familiar to 
the quality assurance and contracting workforces and have been in use 
for decades.
    The proposed rule would build on the existing contractor inspection 
system

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requirements, utilizing the existing terminology, and would add a 
requirement for contractors to report to the GIDEP database a 
counterfeit item, a suspect counterfeit item, or an item that contains 
a major or critical nonconformance that is a common item and that 
constitutes a quality escape, as defined in FAR 46.101, that has 
resulted in the release of like nonconforming items to more than one 
customer.
    GIDEP has been in existence for over two decades and has a Web site 
at www.gidep.org. In that Web site, one can find the GIDEP reporting 
tools, including the reporting forms. The paperwork burden associated 
with completing and submitting the reporting forms is addressed 
thoroughly in the Paperwork Reduction Act section of this notice. In 
addition, the proposed rule includes new material under the ``contract 
administration'' topic of the contents of written acquisition plans 
(FAR 7.105(b)(19)). The acquisition plan should consider the risk-based 
quality assurance measures that are in place to identify and control 
major and critical nonconformances, e.g., higher-level quality 
standards or use of GIDEP.

II. Discussion and Analysis

    Amendments to FAR subparts 7.1, 12.2, 12.3, 46.1, 46.2, 46.3, 46.4, 
and 52 are proposed by this rule. The proposed changes are summarized 
in the following paragraphs.
    A. Subpart 7.1, Acquisition Plans: The requirements for contents of 
written acquisition plans are proposed to be amended, at FAR 
7.105(b)(19), to describe the risk-based Government quality assurance 
measures needed to identify and control major and critical 
nonconformances (see FAR 46.101) including the use of the GIDEP. 
Higher-level quality standards are one example that may be used to 
address the risk of nonconformance.
    B. Subpart 12.2, Special Requirements for the Acquisition of 
Commercial Items: This subpart is proposed to be amended to add a 
reference to FAR 12.208, Contract quality assurance, to alert 
contractors to the requirement to use GIDEP.
    C. Subpart 12.3, Solicitation Provisions and Contract Clauses for 
the Acquisition of Commercial Items: This subpart is proposed to be 
amended at FAR 12.301(d)(5) to require the clause at FAR 52.246-XX, 
Reporting Nonconforming Items, be included in solicitations and 
contracts.
    D. Subpart 46.1, General: Five new terms are defined at FAR 46.101:
    1. Common item. Because the term is defined and used differently in 
part 46 than in part 31 (see FAR 31.205-42, Termination costs), the 
definition at FAR 2.101 is proposed to be revised to exclude the 
definition in FAR 46.101 from the definition at FAR 2.101.
    2. Counterfeit item.
    3. Design activity.
    4. Quality escape. This is a new concept for procurement personnel 
but is well-known by quality assurance experts. It is necessary to 
differentiate between items that must be reported to GIDEP and those 
that need not be reported to GIDEP.
    5. Suspect counterfeit item.
    E. Subpart 46.1, General: FAR 46.102, Policy, is proposed to be 
revised to alert contractors of the requirement to use GIDEP.
    F. Subpart 46.1, General: FAR 46.105, Contractor responsibilities, 
would be revised to state that the contractor is responsible for using 
GIDEP for two purposes: (1) To report nonconforming items; and (2) to 
screen GIDEP reports to avoid the use of nonconforming items. The 
proposed changes show the linkage between supplier quality control and 
preventing quality escapes from being incorporated into the 
contractor's product. Inevitably, even the best quality control process 
will miss a percentage of nonconformances; this is the pivotal issue 
justifying mandatory GIDEP reporting.
    In the proposed rule, several conditions must exist to mandate 
reporting an item to GIDEP: It must be a counterfeit or suspect 
counterfeit item; or contain a major or critical nonconformance that is 
a common item and constitutes a quality escape from a lower level 
subcontractor or supplier that resulted in the release of nonconforming 
items to more than one customer.
    In addition, there are reporting requirements to the contracting 
officer. The circumstances requiring such reporting are different than 
those requiring reporting to GIDEP. The contracting officer does not 
need to be notified if the contractor identifies a major or critical 
nonconformance but corrects the problem prior to delivery. However, the 
contracting officer must be notified when a counterfeit or suspect 
counterfeit item is identified, without regard to whether the 
contractor intends to deliver the product containing the counterfeit or 
suspect counterfeit items. In such cases, the contracting officer will 
provide disposition instructions for the counterfeit or suspect 
counterfeit items in accordance with agency procedures. The contracting 
officer's disposition instructions may be informed by agency policy or 
investigative needs.
    G. Subpart 46.2, Contract Quality Requirements: A new sentence in 
FAR 46.202-1, Contracts for commercial items, is proposed to alert 
contractors of the requirement to use GIDEP.
    H. Subpart 46.3, Contract Clauses: A new section, FAR 46.317, 
Reporting nonconforming items, is proposed to prescribe the use of a 
new clause at FAR 52.246-XX, Reporting Nonconforming Items, in 
solicitations and contracts, for the acquisition of supplies, or 
services that include supplies when these items are--
    [cir] Delivered to the government;
    [cir] Acquired by the contractor for use in performing services, 
or;
    [cir] Furnished by the contractor for use by, or for the 
Government.
    I. Subpart 46.4, Government Contract Quality Assurance: The current 
FAR includes section 46.407, Nonconforming supplies or services. This 
section would be amended to add paragraph (h) stating, in part, that 
the contracting officer shall provide disposition instructions for 
counterfeit or suspect counterfeit items in accordance with agency 
policy.
    J. Subpart 52.2, Texts of Provisions and Clauses: A new clause 
would be added to require contractors to--
    1. Perform the reporting requirements summarized in the bullets 
above with regard to GIDEP and the contracting officer;
    2. Retain in its possession any items suspected or confirmed as 
counterfeit items;
    3. Screen GIDEP reports in order to avoid the use and delivery of 
items that are counterfeit or suspect counterfeit items or contain a 
major or critical nonconformance; and
    4. Include the substance of the clause in all subcontracts at any 
tier for supplies, or services that include supplies.
    In accordance with the NDAA for FY 2012 (Pub. L. 112-81), if the 
contract is with the Department of Defense, the clause would state that 
the contractor or any subcontractor providing a written report as 
required under the clause will not be subject to civil liability on the 
basis of such reporting, provided that, the contractor or any 
subcontractor made a reasonable effort to determine that the end item, 
component, part, or material contained electronic parts (i.e., an 
integrated circuit, a discrete electronic component or a circuit 
assembly) that were counterfeit items or suspect counterfeit items.

III. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory

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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.

IV. Regulatory Flexibility Act

    The change may have a significant economic impact on a substantial 
number of small entities within the meaning of the Regulatory 
Flexibility Act 5 U.S.C. 601, et seq. The Initial Regulatory 
Flexibility Analysis (IRFA) is summarized as follows:

    DoD, GSA, and NASA are proposing to amend the Federal 
Acquisition Regulation (FAR) to require expanded reporting of 
nonconforming items. This action is proposed in implementation of 
Office of Federal Procurement Policy (OFPP) Policy Letter 91-3 and 
in partial implementation of the National Defense Authorization Act 
for Fiscal Year 2012, section 818, entitled ``Detection and 
Avoidance of Counterfeit Electronic Parts.''
    The requirements in the proposed rule have the potential to 
impact any entity, small or large, that does business with the 
Federal Government because the proposed rule would apply to 
purchases of items, including commercial items and commercial off-
the-shelf items, and purchases under the simplified acquisition 
threshold. Therefore, any small business that contracts with a 
Federal agency could be impacted to at least some extent. 
Contractors do receive notifications from the GIDEP system which 
reduces the impact on small businesses. Contractors can enter a bill 
of goods into the system and GIDEP will alert them via email when a 
report has been submitted regarding an item on that list. The 
contractor will then have to log into GIDEP to review the report. 
Contractors can also log into the system and search reports by 
specific item or generally. Using data from the Federal Procurement 
Data System (FPDS), there were 107,178 such small entities in FY 
2010, 97,569 in FY 2011, and 85,502 small entities in FY 2012 doing 
business with the Federal Government.
    A contractor must report to the Government-Industry Data 
Exchange Program (GIDEP) at www.gidep.org when an item meets the 
following conditions under a Government contract:
    1. The item is counterfeit or suspect counterfeit; or
    2. Contains a major or critical nonconformance that:
    a. Is a common item; and
    b. Constitutes a quality escape that has resulted in the release 
of like nonconforming items to more than one customer.
    All of the above terms are defined at FAR 46.101.
    In addition, a contractor must report to the contracting officer 
under certain circumstances, which are different from those 
requiring the contractor to report to GIDEP, for example when a 
counterfeit or suspect counterfeit item is identified, without 
regard to whether the contractor intends to deliver the product 
containing the counterfeit or suspect counterfeit items. This is 
necessary so that the appropriate authorities, e.g., the Department 
of Justice or the agency Inspector General, can follow up with the 
item's supplier.
    The rule does not duplicate, overlap, or conflict with any other 
Federal rules. A number of alternatives were considered, as follows, 
but none were determined to meet the requirements of the statute and 
OFPP Policy Letter 91-3:
     Making the rule applicable only to DoD.
     Making the rule applicable only to electronic parts.
     Not applying the rule below the simplified acquisition 
threshold.
     Not applying the rule to purchases of commercial items 
or commercial off-the-shelf items.

    The Regulatory Secretariat has submitted a copy of the IRFA to the 
Chief Counsel for Advocacy of the Small Business Administration. A copy 
of the IRFA may be obtained from the Regulatory Secretariat. DOD, GSA, 
and NASA invite comments from small business concerns and other 
interested parties on the expected impact of this rule on small 
entities.
    DoD, GSA, and NASA will also consider comments from small entities 
concerning the existing regulations in subparts affected by the rule in 
accordance with 5 U.S.C. 610. Interested parties must submit such 
comments separately and should cite 5 U.S.C 610 (FAR Case 2013-002), in 
correspondence.

V. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. chapter 35) applies. The 
proposed rule contains information collection requirements. 
Accordingly, the Regulatory Secretariat has submitted a request for 
approval of a new information collection requirement concerning 
Expanded Reporting of Nonconforming Items to the Office of Management 
and Budget.
    A. Public reporting burden for this collection of information is 
estimated to average 3 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information. The estimate is based on data revealed in 
the U.S. Department of Commerce report and GIDEP data. In this report, 
12 percent of companies and organizations participating in the survey 
contacted GIDEP to report incidents of counterfeit or suspect 
counterfeit. The number of contractors that are registered in GIDEP for 
FY 2012 totaled 1,896. If this represents only 12 percent of the 
potential companies and organizations reporting into GIDEP then the 
total number of possible companies and organizations that could be 
reporting is approximately 15,800.
    The annual reporting burden estimated as follows:
    Respondents: 15,800.
    Responses per respondent: 30.
    Total annual responses: 474,000.
    Preparation hours per response: 3 hours.
    Total response Burden Hours: 1,422,000.
    B. Request for Comments Regarding Paperwork Burden.
    Submit comments, including suggestions for reducing this burden, 
not later than August 11, 2014 to: FAR Desk Officer, OMB, Room 10102, 
NEOB, Washington, DC 20503, and a copy to the General Services 
Administration, Regulatory Secretariat Division (MVCB), ATTN: Ms. Hada 
Flowers, 1800 F Street NW., Washington, DC 20405.
    Public comments are particularly invited on: whether this 
collection of information is necessary for the proper performance of 
functions of the FAR, and will have practical utility; whether our 
estimate of the public burden of this collection of information is 
accurate, and based on valid assumptions and methodology; ways to 
enhance the quality, utility, and clarity of the information to be 
collected; and ways in which we can minimize the burden of the 
collection of information on those who are to respond, through the use 
of appropriate technological collection techniques or other forms of 
information technology.
    Requesters may obtain a copy of the supporting statement from the 
General Services Administration, Regulatory Secretariat (MVCB), ATTN: 
Ms. Hada Flowers, 1800 F Street NW., Washington, DC 20405. Please cite 
OMB Control Number 9000-00XX, Expanded Reporting of Nonconforming 
Items, in all correspondence.

List of Subjects in 48 CFR Parts 2, 7, 12, 46, and 52

    Government procurement.


[[Page 33167]]


    Dated: June 3, 2014.
William Clark,
Acting Director, Office of Government-wide Acquisition Policy, Office 
of Acquisition Policy, Office of Government-wide Policy.

    Therefore, DoD, GSA, and NASA propose to amend 48 CFR parts 2, 7, 
12, 46, and 52 as set forth below:

0
1. The authority citation for 48 CFR parts 2, 7, 12, 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 2--DEFINITIONS OF WORDS AND TERMS

0
2. Amend section 2.101 in paragraph (b)(2) by revising the definition 
``Common item'' to read as follows.


2.101   Definitions.

* * * * *
    (b) * * *
    (2) * * *
    Common item means material that is common to the applicable 
Government contract and the contractor's other work, except that for 
use in part 46, see the definition in 46.101.
* * * * *

PART 7--ACQUISITION PLANNING

0
3. Amend section 7.105 by revising paragraph (b)(19) to read as 
follows:


7.105   Contents of written acquisition plans.

* * * * *
    (b) * * *
    (19) Contract administration. Describe how the contract will be 
administered. In contracts for services, include how inspection and 
acceptance corresponding to the work statement's performance criteria 
will be enforced. In contracts for supplies or service contracts that 
include supplies, describe the risk-based Government quality assurance 
measures in place to identify and control major and critical 
nonconformances (see 46.101) including the use of the Government-
Industry Data Exchange Program (GIDEP). Such measures may include, but 
are not limited to, higher-level quality standards.
* * * * *

PART 12--ACQUISITION OF COMMERCIAL ITEMS

0
4. Amend section 12.208 by adding a sentence to the end of the 
paragraph to read as follows:


12.208   Contract quality assurance.

    * * * In supply contracts and service contracts that include 
supplies, contractors shall be required to use the Government-Industry 
Data Exchange Program (GIDEP) (see 12.301(d)(4)).
0
5. Amend section 12.301 by adding paragraph (d)(5) to read as follows:


12.301   Solicitation provisions and contract clauses for the 
acquisition of commercial items.

* * * * *
    (d) * * *
    (5) Insert the clause at 52.246-XX, Reporting Nonconforming Items, 
as prescribed in 46.317.
* * * * *

PART 46--QUALITY ASSURANCE

0
6. Amend section 46.101 by adding, in alphabetical order, the 
definitions for ``Common item'', ``Counterfeit item'', ``Design 
activity'', ``Quality escape'', and ``Suspect counterfeit item'' to 
read as follows:


46.101   Definitions.

* * * * *
    Common item means an item that has multiple applications versus a 
single or peculiar application. Common items include, for example, raw 
or processed materials, parts, components, subassemblies, and finished 
assemblies that are commonly available products (such as 
nondevelopmental items, off-the-shelf items, National Stock Number 
items, or commercial catalog items).
* * * * *
    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 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.
    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 design responsibility has been transferred.
* * * * *
    Quality escape means a situation in which a supplier's internal 
quality control system fails to identify and contain a nonconforming 
condition.
* * * * *
    Suspect counterfeit item means an item for which credible evidence 
(including but not limited to, visual inspection or testing) provides 
reasonable doubt that the item is authentic.
* * * * *
0
7. Amend section 46.102 by adding a sentence to the end of paragraph 
(f) to read as follows:


46.102   Policy.

* * * * *
    (f) * * * In supply contracts and service contracts that include 
supplies, contractors shall be required to use the Government-Industry 
Data Exchange Program (GIDEP) (see 12.301(d)(4)); and
* * * * *
0
8. Amend section 46.105 by revising paragraph (a)(3); and adding 
paragraphs (e) and (f) to read as follows:


46.105   Contractor responsibilities.

    (a) * * *
    (3) Ensuring that vendors or suppliers of raw or processed 
materials, parts, components, subassemblies, and finished assemblies 
have an acceptable quality control system and that quality escapes from 
these vendors and suppliers are not incorporated into the contractor's 
final product; and
* * * * *
    (e) The contractor is responsible for screening reports in the 
Government-Industry Data Exchange Program (GIDEP) to avoid the use and 
delivery of items that are counterfeit or suspect counterfeit items or 
that contain a major or critical nonconformance.
    (f) The contractor is responsible for providing a written report--
    (1) To the contracting officer within 30 days from when the 
contractor becomes aware that any end item, component, subassembly, 
part, or material contained in supplies purchased by the contractor for 
delivery to, or for the Government is counterfeit or suspect 
counterfeit. If the contractor has the item(s) in its possession at the 
time of discovery, then the Contractor shall retain such item(s) until 
disposition instructions have been provided by the contracting officer; 
and
    (2) To the GIDEP within 60 days from when it becomes aware that an 
item purchased by or for the contractor for delivery to, or for the 
Government--
    (i) Is counterfeit or suspect counterfeit; or
    (ii) Contains a major or critical nonconformance that--
    (A) Is a common item; and
    (B) Constitutes a quality escape that has resulted in the release 
of like nonconforming items to more than one customer.

[[Page 33168]]

0
9. Amend section 46.202-1 by adding a sentence to the end of paragraph 
to read as follows:


46.202-1   Contracts for commercial items.

    * * * In supply contracts and service contracts that include 
supplies, contractors shall be required to use the Government-Industry 
Data Exchange Program (GIDEP) (see 12.301(d)(5)).

0
10. Add section 46.317 to read as follows:


46.317   Reporting nonconforming items.

    The contracting officer shall insert the clause at 52.246-XX, 
Reporting Nonconforming Items, in solicitations and contracts for the 
acquisition of supplies, or services that include supplies, that are--
    (a) Delivered to the Government;
    (b) Acquired by the contractor for use in performing services, or;
    (c) Furnished by the contractor for use by, or for the Government. 
If required by agency policy, the contracting officer may modify 
paragraph (c) but only to change the responsibility for the contractor 
to submit reports to the agency rather than to GIDEP, so that the 
agency instead of the contractor submits reports to GIDEP within the 
mandatory 60 days.

0
11. Amend section 46.407 by adding paragraph (h) to read as follows:


46.407   Nonconforming supplies or services.

* * * * *
    (h) The contracting officer shall provide disposition instructions 
for counterfeit or suspect counterfeit items in accordance with agency 
policy. In some cases, agency policy may require the contracting 
officer to direct the contractor to retain such items for investigative 
or evidentiary purposes.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
12. Amend section 52.213-4 by revising the date of the clause and 
paragraph (a)(2)(viii) to read as follows:


52.213-4   Terms and Conditions--Simplified Acquisitions (Other Than 
Commercial Items).

* * * * *

Terms and Conditions--Simplified Acquisitions (Other Than Commercial 
Items) (Date)

    (a) * * *
    (2) * * *
    (viii) 52.244-6, Subcontracts for Commercial Items (Date).
* * * * *

0
13. Amend section 52.244-6 by revising the date of the clause; 
redesignating paragraph (c)(1)(xi) as (c)(1)(xii); and adding a new 
paragraph (c)(1)(xi) to read as follows:


52.244-6   Subcontracts for Commercial Items.

* * * * *

Subcontracts for Commercial Items (Date)

* * * * *
    (c) * * *
    (1) * * *
    (xi) 52.246-XX, Reporting Nonconforming Items (Date), if 
flowdown is required in accordance with paragraph (e) of FAR clause 
52.246-XX.
* * * * *
0
14. Add section 52.246-XX to read as follows:


52.246-XX   Reporting Nonconforming Items.

    As prescribed in 46.317, insert the following clause:

Reporting Nonconforming Items (Date)

    (a) Definitions. As used in this clause--
    Common item means an item that has multiple applications versus 
a single or peculiar application. Common items include, for example, 
raw or processed materials, parts, components, subassemblies, and 
finished assemblies that are commonly available products (such as 
nondevelopmental items, off-the-shelf items, National Stock Number 
items, or commercial catalog items).
    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 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 nonconformance means 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.
    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 design responsibility has been transferred.
    Major nonconformance means 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.
    Quality escape means a situation in which a supplier's internal 
quality control system fails to identify and contain a nonconforming 
condition.
    Suspect counterfeit item means an item for which credible 
evidence (including but not limited to, visual inspection or 
testing) provides reasonable doubt that the item is authentic.
    (b) The Contractor shall provide written notification to the 
Contracting Officer within 30 days from when it becomes aware that 
any end item, component, subassembly, part or material contained in 
supplies purchased by the Contractor for delivery to, or for the 
Government is counterfeit or suspect counterfeit. If the Contractor 
has the item(s) in its possession at the time of discovery, then the 
Contractor shall retain such item(s) until disposition instructions 
have been provided by the Contracting Officer.
    (c)(1) The Contractor shall, as a part of the Contractor's 
inspection system or program for the control of quality, screen 
GIDEP reports to avoid the use and delivery of items that are 
counterfeit or suspect counterfeit items or contain a major or 
critical nonconformance.
    (2) The Contractor shall report to GIDEP within 60 days of 
becoming aware that an item purchased by or for the Contractor for 
delivery to, or for the Government--
    (i) Is counterfeit or suspect counterfeit; or
    (ii) Contains a major or critical nonconformance that--
    (A) Is a common item; and
    (B) Constitutes a quality escape that has resulted in the 
release of like nonconforming items to more than one customer.
    (3) The Contractor shall obtain the appropriate form at 
www.gidep.org and submit the form electronically to gidep@gidep.org.
    (d) If this is a contract with the Department of Defense, as 
provided in paragraph (c)(5) of section 818 of the National Defense 
Authorization Act for Fiscal Year 2012 (Pub. L. 112-81), the 
Contractor or subcontractor that provides a written report or 
notification under this clause shall not be subject to civil 
liability on the basis of such reporting, provided that the 
Contractor or any subcontractor made a reasonable effort to 
determine that the end item, component, part, or material contained 
electronic parts (i.e., an integrated circuit, a discrete electronic 
component (including, but not limited to, a transistor, capacitor, 
resistor, or diode), or a circuit assembly) that were counterfeit 
items or suspect counterfeit items.
    (e) The Contractor shall include the substance of this clause, 
including this paragraph (e), in all subcontracts for supplies, or 
services that include supplies, at any tier.


(End of clause)

[FR Doc. 2014-13336 Filed 6-9-14; 8:45 am]
BILLING CODE 6820-EP-P