DoD Proposes Cost Allowability Rule For Correcting Counterfeit Electronic Parts

The Department of Defense ("DoD") recently proposed to make specified costs allowable that are associated with discovering and correcting counterfeit or suspect counterfeit electronic parts.  DoD's proposed rule would amend the Defense Federal Acquisition Regulation Supplement ("DFARS") to implement the National Defense Authorization Act ("NDAA") for Fiscal Year 2016.

The proposed rule provides that certain costs associated with counterfeit or suspect counterfeit electronic parts may be allowable if three conditions are met:

1. The counterfeit or suspect counterfeit electronic parts were obtained by the contractor in accordance with the regulations described in section 818 of the 2012 NDAA regulations. The 2012 NDAA required covered contractors to implement counterfeit part detection and avoidance systems; to purchase electronic parts from trusted suppliers, where possible; and to report counterfeit or suspect counterfeit electronic parts within 60 days to