[Federal Register Volume 85, Number 4 (Tuesday, January 7, 2020)]
[Proposed Rules]
[Pages 663-668]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27714]


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NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1812, 1831, 1846, and 1852

RIN 2700-AE38


NASA Federal Acquisition Regulation Supplement: Detection and 
Avoidance of Counterfeit Parts (NFS Case 2017-N010)

AGENCY: National Aeronautics and Space Administration.

ACTION: Proposed rule.

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SUMMARY: NASA is proposing to amend the NASA Federal Acquisition 
Regulation Supplement (NFS) to add new text that requires covered 
contractors and subcontractors at all tiers to use electronic parts 
that are currently in production and purchased from the original 
manufacturers of the parts, their authorized dealers, or suppliers who 
obtain such parts exclusively from the original manufacturers of the 
parts or their authorized dealers. If the contractor does not purchase 
electronic parts as described above, they must purchase the parts from 
a NASA identified supplier or contractor-approved supplier. The 
contractor will then assume responsibility and be required to inspect, 
test and validate authentication of the parts. The contractor will also 
be required to obtain traceability information and provide this 
information to the contracting officer upon request. The selection of 
contractor-approved suppliers is subject to review and audit by the 
contracting officer.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before March 9, 2020, to be considered in 
the formation of a final rule.

ADDRESSES: Submit comments identified by NFS Case 2017-N010, using any 
of the following methods:
    [cir] Regulations.gov: http://www.regulations.gov. Submit comments 
via the Federal eRulemaking portal by entering ``NFS Case 2017-N010'' 
under the heading ``Enter keyword or ID'' and selecting ``Search.'' 
Select the link ``Submit a Comment'' that corresponds with ``NFS Case 
2017-N010'' Follow the instructions provided at the ``Submit a 
Comment'' screen. Please include your name, company name (if any), and 
``NFS Case 2017-N010'' on your attached document.
    [cir] Email: [email protected]. Include NFS Case 2017-N010 
in the subject line of the message.
    [cir] Mail: National Aeronautics and Space Administration, 
Headquarters, Office of Procurement, Policy, Training and Pricing 
Division, Attn: Dorice Kenely, LP-011, 300 E Street SW, Washington, DC 
20546-0001.

FOR FURTHER INFORMATION CONTACT: Dorice Kenely, NASA HQ, Office of 
Procurement, Policy, Training and Pricing Division, LP-011, 300 E 
Street SW, Washington, DC 20456-0001. Telephone 202-358-0443; facsimile 
202-358-3082.

SUPPLEMENTARY INFORMATION: 

I. Background

    This proposed rule implements section 823(c)(2)(B) of Public Law 
115-10, the National Aeronautics and Space Administration Transition 
Authorization Act of 2017. In this Section Congress stated it found in 
a 2012 Investigation by the Committee on Armed Services counterfeit 
electronic parts in the Department of Defense supply chain. From 2009 
through 2010 the investigation uncovered 1,800 cases and over 1,000,000 
counterfeit parts. This exposed the threat counterfeit parts pose to 
service members and national security. Since 2010, the Comptroller 
General of the United States has discussed in three reports the risks 
and challenges associated with counterfeit parts and counterfeit 
prevention at both the Department of Defense and NASA, including 
inconsistent definitions of counterfeit parts, poorly targeted quality 
control practices, and other potential

[[Page 664]]

barriers to improvements to these practices.
    With this rule, NASA is proposing to revise the NASA Federal 
Acquisition Regulation Supplement (NFS) to add new text requiring a 
covered contractor, defined as a contractor supplying an electronic 
part or a product that contains an electronic part, and their 
subcontractors at all tiers to use electronic parts that are currently 
in production and purchased from the original manufacturers, their 
authorized dealers, or suppliers who obtain such parts exclusively from 
the original manufacturers of the parts or their authorized dealers. If 
the contractor does not purchase electronic parts as described above 
they must purchase the parts from a NASA identified supplier or 
contractor-approved supplier. The contractor then assumes 
responsibility and be required to inspect, test and validate 
authentication of the part. The contractor will also be required to 
obtain traceability information and provide this information to the 
contracting officer upon request. The selection of contractor-approved 
suppliers is subject to review and audit by the contracting officer.

II. Discussion

    The following NFS subparts, 1812 ``Acquisition of Commercial 
Items'', 1831 ``Contract Cost Principles and Procedures'' and 1846 
``Quality Assurance'' are being revised to add language to implement 
the requirements of the NASA Transition Authorization Act of 2017 by: 
Defining the term counterfeit electronic parts (1846 ``Quality 
Assurance''); requiring covered contractors and subcontractors at all 
tiers to use parts that are currently in production and purchased from 
the original manufacturers of the parts, their authorized dealers, or 
suppliers who obtain such parts exclusively from the original 
manufacturers of the parts or their authorized dealers and identifying 
requirements when the contractor doesn't use those electronic parts 
(1846 ``Quality Assurance''); and making the cost of corrective actions 
involving counterfeit parts unallowable unless the contractor meets the 
requirements stated in the proposed policy (1831 ``Contract Cost 
Principles and Procedures'').
    The additional definitions within the proposed policy to the NFS 
can be found in the DFARS 252.246-7007 and 252.246-7008, addressing the 
same subject, Detection and Avoidance of Counterfeit Parts. The 
proposed changes to the NFS will apply to all procurements involving 
electronic parts, end items, components, parts, or assemblies 
containing electronic parts, or services, if the covered contractor 
will supply electronic parts or components, parts, or assemblies 
containing electronic parts as part of the service.
    NASA is aware of one occurrence of a suspect counterfeit part 
within the last 17 years, as reported in Government Industry Data 
Exchange Program (GIDEP). Given what appears to be a low occurrence of 
counterfeit parts in NASA procurements, NASA anticipates the proposed 
rule will impose a limited burden on NASA contractors.

III. Expected Impact of the Proposed Rule and Differentiation From FAR 
Council Rule on GIDEP

    Both the FAR final rule entitled, ``Federal Acquisition Regulation: 
Reporting of Nonconforming Items to the Government-Industry Data 
Exchange Program (FAR Case 2013-002)'' published at 84 FR 64680, and 
this NFS rule pertain to the topic of counterfeit parts and suspected 
counterfeit parts, however discernable differences do exist between the 
two rule as they are implementing separate acts. The FAR rule is 
implementing 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) while the NFS rule is implementing section 823 of the 
National Aeronautics and Space Administration Transition Authorization 
Act of 2017 (Pub. L. 115-10).
    The following highlights the similarities and differences between 
these two rules:

Applicability--Commercial/COTS and SAT

    The FAR Council determined that the FAR rule does not apply to 
commercial items, including commercially available off-the-shelf (COTS) 
items, or to contract at or below the simplified acquisition threshold 
(SAT). NASA has determined that the NFS rule applies to commercial 
items, including COTS items, and to contracts at or below the SAT. 
Section 823 of the National Aeronautics and Space Administration 
Transition Authorization Act of 2017 (Pub. L. 115-10) does not provide 
for any exemptions to the requirements being implemented via this rule.

Scope

    While both rules pertain to the topic of counterfeit parts and 
suspected counterfeit parts, the rules differ in the scope of items to 
which the regulations apply. The FAR rule has a broader application in 
the types of items that are covered under the new requirements. 
Specifically, the FAR rule is applicable to all items that are subject 
to higher-level quality standards in accordance with the clause at FAR 
52.246-11, Higher-Level Contract Quality Requirement; all items that 
the contracting officer, in consultation with the requiring activity 
determines to be critical items for which use of the clause is 
appropriate; and for the acquisition of services, if the contractor 
will furnish, as part of the service, any items that meet the criteria 
specified in paragraphs (a)(1) through (a)(2) of this section. In 
addition, the FAR rule covers acquisitions that exceeds the simplified 
acquisition threshold and are by, or for, the Department of Defense for 
electronic parts or end items, components, parts, or materials 
containing electronic parts. Based on the requirements of section 823 
of the National Aeronautics and Space Administration Transition 
Authorization Act of 2017 (Pub. L. 115-10), the NFS rule applies only 
to electronic parts for use in a safety or mission critical 
applications.

Reporting/Notification

    The FAR rule requires two reporting requirements which are 
currently cleared under OMB Control number 9000-0187 titled Reporting 
of Nonconforming Items to the Government-Industry Data Exchange Program 
(FAR Case 2013-002)--FAR Sections affected: 52.246-26. One requirement 
is the submission of a report to GIDEP when the contractor 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 a counterfeit or suspect 
counterfeit item or a common item that has a major or critical 
nonconformance.
    The second reporting requirement is a notification to the 
contracting officer after 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 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. While the NFS rule does not include 
a GIDEP reporting requirement, like the FAR rule, the NFS rule does 
include a requirement to notify the contracting officer when the 
contractor becomes aware, or has reason to suspect, that any end item, 
component, part or material contained in supplies purchased by NASA, or 
purchased by a covered contractor or

[[Page 665]]

subcontractor for delivery to, or on behalf of, NASA, contains a 
counterfeit electronic part or suspect counterfeit electronic part.

Allowability of Costs

    As required by section 823(c)(2)(B), of the National Aeronautics 
and Space Administration Transition Authorization Act of 2017 (Pub. L. 
115-10), the NFS rule establishes that costs related to counterfeit 
parts, suspect counterfeit parts, or any corrective action that may be 
required to remedy the use or inclusion of such parts is unallowable 
unless a specific set of criteria is met. The FAR rule does not address 
the allowability of costs as it relates to the counterfeit parts, 
suspect counterfeit parts, or any corrective action that may be 
required to remedy the use or inclusion of such parts.

Supply Chain Sources

    As required by section 823(c), of the National Aeronautics and 
Space Administration Transition Authorization Act of 2017 (Pub. L. 115-
10), the NFS rule establishes required sources for both electronic 
parts that are in production or currently available in stock and 
separately electronic parts are not in production or currently 
available in stock from suppliers. The FAR rule does not address 
sources of items.

IV. Applicability to Commercial Item Acquisitions, Including 
Commercially Available Off-the-Shelf (COTS) Items, and Acquisitions 
Below the Simplified Acquisition Threshold (SAT)

    The objective of this rule is to implement section 823 of the 
National Aeronautics and Space Administration Transition Authorization 
Act of 2017 (Pub. L. 115-10). Section 823 does not limit the 
application of the requirements of the statue to non-commercial 
contracts or contracts above the simplified acquisition threshold. 
Consistent with 41 U.S.C. 1905, 1906 and 1907, the NASA Assistant 
Administrator for Procurement has determined that it is in the best 
interest of NASA to apply section 823 to the acquisition of commercial 
items, including COTS items, and those requirements below the SAT.

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 which was subject to review 
under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated 
September 30, 1993. This is not a major rule under 5 U.S.C. 804.

VI. Executive Order 13771

    This proposed rule is not expected to be subject to the 
requirements of E.O. 13771 because it is expected to result in no more 
than de minimus costs.

VII. Regulatory Flexibility Act

    NASA does not expect this proposed rule to have a significant 
economic impact on small entities within the meaning of the Regulatory 
Flexibility Act, 5 U.S.C. 601 et seq. An initial regulatory flexibility 
analysis has been prepared and is summarized below.
    The rule will apply to all ``covered contractors.'' Covered 
contractors, as defined by Public Law 115-10 are contractors, including 
small entities, that supply an electronic part, or a product that 
contains an electronic part to NASA. While the rule will apply to all 
classes of small business, it will not necessarily affect those 
business because the rule requires reporting only when nonconforming 
defective and/or suspect counterfeit parts are present or there is 
suspicion that counterfeit parts are present in the supply chain. Since 
this rule requires contractors and subcontractors to purchase 
electronic parts that are currently in production from the original 
manufacturer, the authorized dealers or suppliers who obtain parts 
exclusively from the original manufacturer or for products that are not 
currently in production use of a NASA identified contractor, NASA 
believes that there is very little risk that a contractor or 
subcontractor will have a counterfeit part in the supply chain and thus 
very little risk that a small contractor will have to report. As 
reported in FPDS, NASA has had contract obligations with 3,120, 3,023 
and 2,805 small business contractors in 2016, 2017 and 2018, 
respectively and no counterfeit parts were found in the supply chain. 
Further, based on the initial scope of the rule, NASA has assessed the 
number of commercial item acquisitions for electronic items procured 
above and below the simplified acquisition threshold and believe the 
impact of this proposed rule will be minimal. An analysis of data for 
the last three fiscal years from the FPDS revealed the following:

------------------------------------------------------------------------
                                                          Total dollar
                                          Number of         amount of
                                           actions           actions
------------------------------------------------------------------------
                                  2019
------------------------------------------------------------------------
Electronic Commercial Items.........               131       $17,810,644
Under the SAT.......................               110         6,348,554
Above the SAT.......................                21        11,462,089
------------------------------------------------------------------------
                                  2018
------------------------------------------------------------------------
Electronic Commercial Items.........               275        38,516,656
Under the SAT.......................               229        10,922,058
Above the SAT.......................                46        27,594,598
------------------------------------------------------------------------
                                  2017
------------------------------------------------------------------------
Electronic Commercial Items.........               526        38,020,457
Under the SAT.......................               498        16,934,479
Above the SAT.......................                28        21,085,978
------------------------------------------------------------------------


[[Page 666]]

    NASA invites comments from small business concerns and other 
interested parties on the expected impact of this rule on small 
entities.
    The policy requires covered contractors and subcontractors to 
notify the applicable NASA contracting officer in writing not later 
than 30 calendar days after the date the covered contractor becomes 
aware, or has reason to suspect, that any end item, component, part or 
material contained in supplies purchased by NASA, or purchased by a 
covered contractor or subcontractor for delivery to, or on behalf of, 
NASA, contains a counterfeit electronic part or suspect counterfeit 
electronic part.
    The proposed rule also requires covered contractors and 
subcontractors to purchase electronic parts that are currently in 
production from the original manufacturer, their authorized dealers or 
suppliers who obtain parts exclusively from the original manufacturer 
or their authorized dealers. Electronic parts that are not currently in 
production or available in stock shall be obtained from NASA identified 
suppliers or contractor-approved suppliers and the contractor assumes 
responsibility for the authenticity, inspection, testing and 
traceability of the part. Contractor-approved suppliers are subject to 
review and audit by the CO.

VIII. Paperwork Reduction Act

    This proposed rule contains information collection requirements 
that requires the approval of the Office of Management and Budget under 
the Paperwork Reduction Act (44 U.S.C. chapter 35). Accordingly, NASA 
has submitted a request for approval of a new information collection 
requirement associated with NFS Case 2017-N010 Detection and Avoidance 
of Counterfeit Parts to the Office of Management and Budget.
    Public reporting burden for this collection of information is 
estimated to be 2 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 annual reporting burden is estimated as follows based on:
    Respondents: 1.
    Responses per Respondent: 1.
    Total Annual Responses: 1.
    Preparation Hours per Response: 2.
    Total Response Burden Hours: 2.
    Data reported via GIDEP, reveals that NASA has had only one alert 
of suspect counterfeit parts associated with a NASA contract within the 
last 17 years. Additionally, GIDEP alerts across the government have 
decreased since 2011 to the present. Both the one NASA specific GIDEP 
alert over the course of 17 years, and the downward trend of GIDEP 
alerts across the government substantiate the expected burden amounts.

List of Subjects in 48 CFR: Parts 1812 ``Acquisition of Commercial 
Items''; 1831 ``Contract Cost Principles and Procedures''; 1846 
``Quality Assurance'': 1852 Provisions and Clauses.

    Government procurement.

Geoffrey Sage,
NASA FAR Supplement Manager.

    Accordingly, NASA proposes to amend 48 CFR parts 1812, 1831, 1846, 
and 1852 as follows:

0
1. The authority citation for parts 1816, 1832, and 1852 continues to 
read as follows:

    Authority:  51 U.S.C. sec. 20113(a) and 48 CFR chapter 1.

PART 1812--ACQUISITION OF COMMERCIAL ITEMS

0
2. Amend section 1812.301 by--
0
a. Redesignating paragraph (f)(i)(T) as paragraph (f)(i)(U); and
0
b. Adding a new paragraph (f)(i)(T).
    The addition reads as follows:


1812.301   Solicitation provisions and contract clauses for the 
acquisition of commercial items.

    (f)(i) * * *
    (T) 1852.246-74, Counterfeit Electronic Part Detection and 
Avoidance.
* * * * *

PART 1831--CONTRACT COST PRINCIPLES AND PROCEDURES

0
3. Add section 1831.205-70 to read as follows:


1831.205-70  Costs related to counterfeit electronic parts and suspect 
counterfeit electronic parts.

    (a) Scope. This section implements the requirements of section 
823(c)(2)(B), the NASA Transition Authorization Act of 2017 (Pub. L. 
115-10).
    (b) The costs of counterfeit electronic parts, suspect counterfeit 
electronic parts, and any corrective action that may be required to 
remedy the use or inclusion of such parts are unallowable, unless--
    (1)(i) The covered contractor, as defined in section 1846.7001, has 
an operational system to detect and avoid counterfeit electronic parts 
and suspect counterfeit electronic parts that has been reviewed and 
approved by NASA or the Department of Defense pursuant to 48 CFR 
244.303; and
    (ii) The covered contractor, including subcontractors, notifies the 
applicable NASA contracting officer in writing in accordance with 
1846.7002(c); or
    (2) The counterfeit electronic parts or suspect counterfeit 
electronic parts were provided to the covered contractor as Government 
property in accordance with part 45 of the Federal Acquisition 
Regulation.

PART 1846--QUALITY ASSURANCE

0
4. Add subpart 1846.70 consisting of sections 1846.7000 through 
1846.7003 to read as follows:

Subpart 1846.70--Counterfeit Electronic Part Detection and 
Avoidance


1846.7000  Scope of subpart.

    This subpart implements section 823(c), the NASA Transition 
Authorization Act of 2017 (Pub. L. 115-10).
    (a) Prescribes policy and procedures for preventing counterfeit 
electronic parts and suspect counterfeit electronic parts from entering 
the supply chain when procuring electronic parts or end items, 
components, parts, or assemblies that contain electronic parts; and
    (b) Applies to electronic parts when their presence in the NASA 
supply chain poses a danger to United States government astronauts, 
crew, and other personnel and a risk to the agency overall.
    (c) Contracting officers, in consultation with the requiring 
activity, are responsible for making a determination concerning the 
applicability of this section and the appropriate use of the prescribed 
contract clauses.


1846.7001  Definitions.

    ``Authentic part'' means a new and unmodified part produced by the 
original component manufacturer, or a source with the express written 
authority of the original manufacturer or current design activity, 
including an authorized aftermarket manufacturer.
    ``Authentication'' means a process to verify that a part is not 
counterfeit or suspect counterfeit.
    ``Authorized aftermarket manufacturer'' means an organization that 
fabricates an electronic part under a contract with, or with the 
express written authority of, the original component manufacturer based 
on the original component manufacturer's designs, formulas, and/or 
specifications.

[[Page 667]]

    ``Authorized supplier'' means a supplier, distributor, or an 
aftermarket manufacturer with a contractual arrangement with, or the 
express written authority of, the original manufacturer or current 
design activity to buy, stock, repackage, sell, or distribute the part.
    ``Contract manufacturer'' means a company that produces goods under 
contract for another company under the label or brand name of that 
company.
    ``Contractor-approved supplier'' means a supplier that does not 
have a contractual agreement with the original component manufacturer, 
but has been qualified as trustworthy by a contractor or subcontractor 
as having met prescribed counterfeit electronic part detection and 
avoidance system criteria using established counterfeit prevention 
industry standards and processes.
    ``Covered contractor'' means a contractor that supplies an 
electronic part, or a product that contains an electronic part, to 
NASA.
    ``Counterfeit electronic part'' means an unlawful or unauthorized 
reproduction, substitution, or alteration that has been knowingly 
mismarked, misidentified, or otherwise misrepresented to be an 
authentic, unmodified electronic part 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 electronic parts represented as new, or the false 
identification of grade, serial number, lot number, date code, or 
performance characteristics.
    ``Electronic part'' means a discrete electronic component, 
including a microcircuit, transistor, capacitor, resistor, or diode, 
that is intended for use in a safety or mission critical application.
    ``Original component manufacturer'' means an organization that 
designs and/or engineers a part and is entitled to any intellectual 
property rights to that part.
    ``Original equipment manufacturer'' means a company that 
manufactures products that it has designed from purchased components 
and sells those products under the company's brand name.
    ``Original manufacturer'' means the original component 
manufacturer, the original equipment manufacturer, or the contract 
manufacturer.
    ``Suspect counterfeit electronic part'' means an electronic part 
for which credible evidence (including, but not limited to, visual 
inspection or testing) provides reasonable doubt that the electronic 
part is authentic.


1846.7002  Policy.

    The government and its contractors and subcontractors at all tiers 
are required to obtain electronic parts as prescribed in this section, 
whether the electronic parts are procured as discrete items or 
contained in an assembly.
    (a) The covered contractor and subcontractors at all tiers shall 
obtain electronic parts that are in production or currently available 
in stock from--
    (1) The original manufacturers of the parts;
    (2) Their authorized dealers; or
    (3) Suppliers who obtain such parts exclusively from the original 
manufacturers of the parts or their authorized dealers.
    (b) If electronic parts are not in production or currently 
available in stock from suppliers as stated in paragraph (a) of this 
section, the covered contractor shall obtain electronic parts from NASA 
identified suppliers or contractor-approved suppliers for which--
    (1) The covered contractor assumes responsibility for the 
authenticity of parts; and
    (2) The covered contractor performs inspection, testing and 
authentication of parts; and
    (3) The covered contractor obtains traceability information for the 
electronic parts (e.g., data code, lot code, serial number) and 
provides this information to the contracting officer upon request; and
    (4) The selection of contractor-approved suppliers is subject to 
review and audit by the contracting officer.
    (c) The covered contractor, including subcontractors, shall notify 
the applicable NASA contracting officer in writing not later than 30 
calendar days after the date the covered contractor becomes aware, or 
has reason to suspect, that any end item, component, part or material 
contained in supplies purchased by NASA, or purchased by a covered 
contractor or subcontractor for delivery to, or on behalf of, NASA, 
contains a counterfeit electronic part or suspect counterfeit 
electronic part.


1846.7003   Contract clause.

    For acquisitions with covered contractors as defined in section 
1846.7001, use the clause at 1852.246-74, Contractor Counterfeit 
Electronic Part Detection and Avoidance, in solicitations and 
contracts, when procuring--
    (a) Electronic parts;
    (b) End items, components, parts, or assemblies containing 
electronic parts; or
    (c) Services, if the covered contractor will supply electronic 
parts or components, parts, or assemblies containing electronic parts 
as part of the service.

PART 1852--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
5. Add section 1852.246-74 to read as follows:


1852.246-74   Contractor Counterfeit Electronic Part Detection and 
Avoidance.

    As prescribed in 1846.7003, use the following clause:

Contractor Counterfeit Electronic Part Detection and Avoidance. (DATE)

    (a) Definitions. As used in this clause--
    ``Authentic part'' means a new and unmodified part produced by 
the original component manufacturer, or a source with the express 
written authority of the original manufacturer or current design 
activity, including an authorized aftermarket manufacturer.
    ``Authentication'' means a process to verify that a part is not 
counterfeit or suspect counterfeit.
    ``Authorized aftermarket manufacturer'' means an organization 
that fabricates a part under a contract with, or with the express 
written authority of, the original component manufacturer based on 
the original component manufacturer's designs, formulas, and/or 
specifications.
    ``Authorized supplier'' means a supplier, distributor, or an 
aftermarket manufacturer with a contractual arrangement with, or the 
express written authority of, the original manufacturer or current 
design activity to buy, stock, repackage, sell, or distribute the 
part.
    ``Contract manufacturer'' means a company that produces goods 
under contract for another company under the label or brand name of 
that company.
    ``Contractor-approved supplier'' means a supplier that does not 
have a contractual agreement with the original component 
manufacturer, but has been qualified by the contractor or 
subcontractor approved by the contractor or government as having met 
prescribed counterfeit electronic part detection and avoidance 
system criteria using established counterfeit prevention industry 
standards and processes.
    ``Counterfeit electronic part'' means an unlawful or 
unauthorized reproduction, substitution, or alteration that has been 
knowingly mismarked, misidentified, or otherwise misrepresented to 
be an authentic, unmodified electronic part 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 electronic parts represented as new, or 
the false identification of grade, serial number, lot number, date 
code, or performance characteristics.
    ``Electronic part'' means a discrete electronic component, 
including a microcircuit, transistor, capacitor, resistor, or diode, 
that is intended for use in a safety or

[[Page 668]]

mission critical application (section 823 (d)(2) of Pub L. 115-10).
    ``Original component manufacturer'' means an organization that 
designs and/or engineers a part and is entitled to any intellectual 
property rights to that part.
    ``Original equipment manufacturer'' means a company that 
manufactures products that it has designed from purchased components 
and sells those products under the company's brand name.
    ``Original manufacturer'' means the original component 
manufacturer, the original equipment manufacturer, or the contract 
manufacturer.
    ``Suspect counterfeit electronic part'' means an electronic part 
for which credible evidence (including, but not limited to, visual 
inspection or testing) provides reasonable doubt that the electronic 
part is authentic.
    (b) Sources of Electronics Parts. In accordance with section 
823(c)(3), the NASA Transition Authorization Act of 2017 (Pub. L. 
115-10), the covered contractor shall--
    (1) Obtain electronic parts that are in production by the 
original manufacturer or an authorized aftermarket manufacturer or 
currently available in stock from--
    (i) The original manufacturers of the parts;
    (ii) Their authorized dealers; or
    (iii) Suppliers who obtain such parts exclusively from the 
original manufacturers of the parts or their authorized dealers;
    (2) If electronic parts are not in production or currently 
available in stock from suppliers as stated in paragraph (b) of this 
clause, the covered contractor shall obtain electronic parts from 
NASA identified suppliers or contractor-approved suppliers for 
which--
    (i) The covered contractor assumes responsibility for the 
authenticity of parts; and
    (ii) The covered contractor performs inspection, testing and 
authentication of parts; and
    (iii) The covered contractor obtains traceability information 
for the electronic parts (e.g., data code, lot code, serial number) 
and provides this information to the contracting officer upon 
request; and
    (iv) The selection of contractor-approved suppliers is subject 
to review and audit by the contracting officer.
    (c) Notification. The covered contractor, including 
subcontractors, shall notify the NASA contracting officer in writing 
not later than 30 calendar days after the date the covered 
contractor becomes aware, or has reason to suspect, that any end 
item, component, part or material contained in supplies purchased by 
NASA, or purchased by a covered contractor or subcontractor for 
delivery to, or on behalf of, NASA, contains a counterfeit 
electronic part or suspect counterfeit electronic part.
    (d) Costs related to counterfeit electronic parts and suspect 
counterfeit electronic parts. In accordance with section 
823(c)(2)(B), the NASA Transition Authorization Act of 2017 (Pub. L. 
115-10), the costs of counterfeit electronic parts and suspect 
counterfeit electronic parts and the costs of rework or corrective 
action that may be required to remedy the use or inclusion of such 
parts are unallowable, unless--
    (1) The covered contractor has a system to detect and avoid 
counterfeit electronic parts and suspect counterfeit electronic 
parts that has been reviewed and approved by NASA or the Department 
of Defense pursuant to 48 CFR 244.303; and
    (2) The covered contractor, including a subcontractor, notifies 
the applicable NASA contracting officer in writing in accordance 
with paragraph (c) of this clause; or
    (3) The counterfeit electronic parts or suspect counterfeit 
electronic parts were provided to the covered contractor as 
Government property in accordance with part 45 of the Federal 
Acquisition Regulation.
    (e) Subcontracts. The covered contractor shall insert this 
clause, including this paragraph (e), in subcontracts for (1) 
Electronic parts; (2) End items, components, parts, or assemblies 
containing electronic parts; or (3) Services where the covered 
contractor will supply electronic parts or components, parts, or 
assemblies containing electronic parts as part of the service, 
including subcontracts for commercial items that are for electronic 
parts or assemblies containing electronic parts, unless the 
subcontractor is the original manufacturer. The covered contractor 
shall not alter the clause other than to identify appropriate 
parties.
    (f) Corrective Action. In the event that the covered contractor 
supplies a counterfeit electronic part, suspect counterfeit 
electronic part or end item, component, or assembly containing a 
counterfeit electronic part to NASA, the covered contractor shall 
take such corrective actions as the Administrator considers 
necessary to remedy the use or inclusion of additional counterfeit 
electronic parts, suspect counterfeit electronic part or end items, 
components, or assemblies containing a counterfeit electronic part.
(End of clause)
[FR Doc. 2019-27714 Filed 1-6-20; 8:45 am]
 BILLING CODE 7510-13-P