Defense contractors aren’t ready to comply with anti-counterfeit rule

Many contractors admit they will be unable to immediately comply with a rule, taking effect by March 2014, that would require contractors to either develop a new system for detecting counterfeit electronic parts or forego payment.

The Pentagon is under pressure to address congressional concerns about the risk of weapons systems failing if adversaries or sloppy suppliers slip in unauthorized components.  That’s because the deadline for carrying out a 2011 defense authorization law  calling for anti-counterfeit regulations was almost two years ago.

But the military sector is unprepared for all the pending requirements, partly because the Defense Department has not offered an explanation for what an acceptable system must do.  Industry members told Pentagon officials as much earlier this summer during meetings and in written comments on a draft rule. Officials say they are reviewing company concerns but still plan to release the mandates during the first quarter of calendar year 2014.

“The rule will take effect when the final rule is published,” Defense spokesman Mark Wright said in an email on Aug. 8, 2013.

Keep reading this article at: http://www.nextgov.com/defense/2013/08/defense-sector-not-ready-comply-2014-anti-counterfeit-rule/68378

Counterfeits can kill U.S. troops — so why isn’t Congress and DoD doing more to stop it?

Sometime in the not-to-distant future, a submarine will sink. An air defense missile will detonate far from its intended target. A Seahawk helicopter will intercept a suicide speed boat headed for an aircraft carrier only to see its infrared targeting system goes dark.

These chilling scenarios won’t be the result of human error or terrorist plots: They will directly result from a $2 counterfeit electronic tucked deep within a billion-dollar military technology.

It’s not a matter of if, but when. Just this month, the Department of Justice indicted a Massachusetts man for selling counterfeit semiconductors to Navy contractors. Some of the fake parts were intended for nuclear submarines.

The vast majority of counterfeits discovered in military equipment are semiconductors, the stamp-sized silicon wafers that act as the “brains” of nearly every type of modern electronic system. The U.S. military is a huge consumer of these tiny products; a single F-35 Joint Strike Fighter jet is controlled by more than 2,500 semiconductors.

Keep reading this article at: http://www.defenseone.com/technology/2013/08/counterfeits-can-kill-us-troops-so-why-isnt-congress-and-dod-doing-more-stop-it/68381/

NASA engineer, defense contractor knowingly bought illicit software from Chinese conspirator

Chinese resident Xiang Li has pleaded guilty to copyright infringement and wire fraud charges connected to a bootleg software conspiracy that involved federal sector accomplices, U.S. authorities are expected to announce today in Wilmington, Del.

A NASA engineer and government contractor knowingly bought some of the $100 million worth of critical computer programs that Li copied from mainly American companies, according to court papers and officials.

Between April 2008 and June 2011, Li peddled ill-gotten software through the Web to colluding customers, including the U.S. public sector employees, according to court documents filed on Jan. 4. Software that retails for as much as $3 million sold for between $20 and $1,200 on the Internet shopping sites he maintained. The pirated software has uses for, among other things, defense, space exploration and explosive simulation.

See undercover videos of sting operation (courtesy Defense Video & Imagry Distribution System):

1. Avoiding Problems with Customs

2. Interacting with Customs

3. Ignoring victim company requests to cease & desist

Keep reading this article at: http://www.nextgov.com/cybersecurity/2013/01/nasa-engineer-defense-contractor-knowingly-bought-illicit-software-chinese-conspirator/60525/.

Pentagon directive targets fake parts, vulnerabilities in arms systems

A  new Pentagon directive is calling for new safeguards against fake parts and software vulnerabilities in arms and information systems. The mandate, which took effect Nov. 5, is likely to bring new momentum to funding of technology to protect military supply chains.

Signed by Teresa Takai, defense chief information officer, and Frank Kendall, under secretary of Defense for acquisition, technology and logistics, the directive asks for guidance, mechanisms and systems to control the security and configuration of software and hardware. It asks defense to push for new technology for “creating and identifying non-cryptologic software and hardware that is free from exploitable vulnerabilities and malicious intent.”

It calls for heads of defense units to come up with best practices to reduce occurrence of fake or compromised products. The order also asks for a way to give all critical components in systems an item unique identification so fakes can be better weeded out, and requires the implementation of test and evaluation protocols.

Keep reading this article at: http://www.nextgov.com/defense/2012/12/pentagon-directive-targets-fake-parts-vulnerabilities-arms-systems/59897/?oref=nextgov_today_nl.

GAO sting operation exposes pervasive counterfeit parts problem

Counterfeit electronic goods are readily attainable and pose a serious threat to users of U.S. weapons systems, including troops on the ground, according to the Government Accountability Office.

“Counterfeit parts – generally the misrepresentation of parts’ identity or pedigree – can seriously disrupt the Department of Defense supply chain, harm weapon systems integrity and endanger troops’ lives,” the GAO noted in a report issued to Congress in February and publicly released March 26.

The report centers on an investigation conducted by GAO in which the agency posed as a company buying military-grade electronic parts. GAO gained access to two platforms on which parts are bought and sold, requested quotes from numerous vendors and purchased 16 parts – all of which turned out to be fake after being tested by an independent lab. All of the 16 parts came from China.

GAO requested rare and/or obsolete parts as well as parts with made-up identification numbers. The counterfeit parts were re-marked with different numbers or manufacturer logos, deficient from military standards or had part numbers that do not actually exist and were completely bogus.

“These findings should outrage every American,” said Sen. Carl Levin (D-Mich.), chairman of the Senate Armed Services Committee, in a statement. “GAO’s finding that every single counterfeit part that they bought online came from suppliers in China, while not surprising, is deeply troubling. The Chinese government’s refusal to shut down counterfeiting that occurs openly in their country puts our national security and the safety of our military men and women at risk. Not only that, but it also costs thousands of American jobs.”

Congress’ inquiry into the counterfeit electronics problem started last November, when Levin and Sen. John McCain (R-Ariz.), SASC ranking member, drilled defense contractors on how the fake parts are ending up in U.S. military weapons systems. Levin and McCain also helped get provisions into the 2012 National Defense Authorization Act addressing the issue, holding contractors responsible for identifying and rectifying the presence of counterfeit parts in their goods.

Part of the problem is the globalization of manufacturing and reliance on commercial off-the-shelf technology and equipment, according to one DOD official who testified at a Capitol Hill hearing March 27.

“Although the globalization of the [information communications technology] sector has accelerated the pace of technological innovation, it has also raised national security concerns,” Mitchell Komaroff, DOD director of trusted mission systems and networks, said in written testimony submitted to the House Energy and Commerce Committee’s Subcommittee on Oversight and Investigations. “As a result of this diverse global supply chain, adversaries have more opportunities to corrupt technologies, introduce malicious code into the supply chain and otherwise gain access to the department’s military systems and networks.”

Beyond holding buyers responsible for counterfeit parts, provisions in the NDAA also aim to tighten inspection controls and institutionalize a public-private partnership to identify and deal with the fake parts. McCain and Levin pointed to those NDAA provisions as at least partial recourse to combat the problem.

“The Chinese government won’t act to stop counterfeiting carried out in their country,” Levin said. “Since China won’t act, we must. It is critical that Treasury and the Department of Homeland Security implement the authorities we gave them in the National Defense Authorization Act to stop counterfeit parts before they enter the country. There is too much at stake for us to delay.”

About the Author: Amber Corrin is a staff writer covering defense and national security for Federal Computer Week.  This article was published on Mar. 27, 2012 at http://fcw.com/articles/2012/03/27/gao-sting-investigation-china-counterfeit-parts.aspx?s=fcwdaily_280312.

Should contractors get blamed for counterfeit parts?

Top Capitol Hill officials want new rules that would hold contractors responsible for fake electronics that end up in U.S. weapons systems.

The plan came out during a day-long Senate Armed Services Committee hearing addressing the issue of counterfeit parts in the U.S. military supply chain.

Sen. John McCain (R-Ariz.), the committee’s ranking Republican, and Sen. Carl Levin (D-Mich.), committee chairman, were among the officials who questioned defense contractors on oversights that allowed the phony parts into the supply chain during the hearing, held Nov. 8. Levin stressed that the counterfeit goods are a “clear and present danger” and a “threat to our troops.”

“There is a flood of counterfeits and it is putting our military men and women at risk and costing us a fortune,” Levin said.

The two senators pledged that they would use the 2012 Defense Authorization Act, which McCain said he hoped would be taken up next week, to modify acquisition rules and make contractors responsible for the costs of replacing the fake parts. The hope is that contractors will implement tougher standards on their suppliers.

McCain said that encouraging small businesses to operate in the U.S. military supply chain has enabled the entry of fraudulent companies and parts.

McCain and Levin’s amendment may also include language for a new Pentagon certification process that would scrutinize the suppliers of components for military systems, Levin said.

A month-long congressional investigation yielded at least 1,800 cases of counterfeit electronics in U.S. weapons, with an estimated 1 million parts suspected of infiltrating the supply chain, according to the Washington Post. Counterfeit parts have resulted in millions of dollars in waste and have cost taxpayers heavily once contractors realize the parts must be replaced, the report said.

Brian Toohey, president of the Semiconductor Industry Association, told the committee that counterfeiting costs U.S. companies $7.5 billion per year and represents 11,000 lost jobs in U.S. industry.

Counterfeit parts have been found on at least 7 Air Force aircraft made by Boeing, Lockheed Martin and L-3, according to committee documents, and the Missile Defense Agency has encountered at least 7 incidents of counterfeit parts on its own systems, MDA Director Lt. Gen. Patrick O’Reilly testified.

O’Reilly said MDA has found 800 fake parts on one missile interceptor system, at a cost of over $2 million to replace them.

James Ives, assistant Pentagon inspector general for investigative operations, told the Associated Press via e-mail that the Pentagon’s Defense Criminal Investigative Service is conducting 225 investigations “involving potentially defective or substandard parts and components,” which could involve counterfeit products.

The Government Accountability Office has also been investigating counterfeit parts in DOD platforms, according to Richard Hillman, GAO managing director, forensic audits and investigative service.

“Counterfeit parts – generally those whose sources knowingly misrepresent the parts’ identity or pedigree – have the potential to seriously disrupt the DOD supply chain, delay missions, affect the integrity of weapon systems, and ultimately endanger the lives of our troops,” Hillman testified in a prepared statement. “Almost anything is at risk of being counterfeited, from fasteners used on aircraft to electronics used on missile guidance systems. There can be many sources of counterfeit parts as DOD draws from a large network of global suppliers.”

Hillman detailed GAO efforts in which the organization created a fictitious company that bought military-grade electronic parts. So far GAO has purchased 13 parts, seven of which have been tested so far and are suspected to be counterfeit.

About the Author: Amber Corrin is a staff writer covering defense and national security for Washington Technology.  Published Nov. 9, 2011 at http://washingtontechnology.com/articles/2011/11/08/sasc-hearing-counterfeit-parts-dod-supply-chain.aspx?s=wtdaily_101111.