The Extent of Counterfeit Parts in DOD’s Supply Chain Is Unknown

		DOD Does Not Have a Common Definition for Counterfeit Parts

DOD lacks a departmentwide definition of the term counterfeit. In the absence of  a departmentwide definition of counterfeit parts, some DOD entities  have developed their own. DOD Databases Do Not Capture Data on Counterfeit Parts

The two primary databases DOD uses to report deficient parts—the  Product Data Reporting and Evaluation Program (PDREP) and the Joint  Deficiency Reporting System (JDRS)—have data fields that enable users  primarily to track information on deficient parts, but neither is designed  specifically to track counterfeit parts. As definitions of “counterfeit” vary within DOD, they  generally refer to instances in which individuals or companies knowingly  misrepresent the identity or pedigree of a part. However, several DOD officials told us that staff responsible  for assembling and repairing systems and equipment may not have the  expertise to identify suspect counterfeit parts outside of those that  demonstrate performance failures because they are not trained to identify  counterfeit parts and have limited awareness of the issue. However, DOD does not have a consistent  method to identify parts as counterfeit when they are sent for disposal. Some DOD Components and Contractors Have Taken Initial Steps to Address Counterfeit Parts

In the absence of a departmentwide policy, some DOD components and  their contractors have supplemented existing procurement and quality- control practices to help mitigate the risk of counterfeit parts in the DOD  supply chain. A Number of Commercial Initiatives Exist to Mitigate the Risk of Counterfeit Parts in Supply Chains

		Companies Have Developed Anticounterfeiting Practices to Address Vulnerabilities to Counterfeit Parts

As supply chains across industries are also vulnerable to the risk of  counterfeit parts, we met with selected companies representing  commercial aerospace, electronics, and automotive sectors that have  taken measures to address the counterfeiting challenges they face. The symposium  also provided information on technical tools and methods to detect and  prevent counterfeit parts. Conclusions

As DOD draws from a large network of suppliers in an increasingly global  supply chain, there can be limited visibility into these sources and greater  risk of procuring counterfeit parts, which have the potential to threaten  the reliability of DOD’s weapon systems and the success of its missions. Collaboration with  government agencies, industry associations, and commercial-sector  companies that produce items similar to those used by DOD and have  reported taking actions to mitigate the risks of counterfeit parts in their  supply chains offers DOD the opportunity to leverage ongoing and planned  initiatives in this area. The Department of Commerce’s comments are  reprinted in appendix IV. We met with officials from the DOD Acquisition and Technology, Logistics  and Material Readiness, Supply Chain Integration office; the DOD Defense  Logistics Agency and its Supply Centers located in Columbus, Ohio;  Philadelphia, Pennsylvania; and Richmond, Virginia; the Army, Navy, Air  Force, and Missile Defense Agency; and five defense prime contractors— BAE, Boeing, Lockheed Martin, Northrop Grumman, and Raytheon—to  discuss (1) their definition of the term counterfeit,(2) their procedures and  practices for obtaining knowledge of counterfeit parts, (3) databases  available for documenting instances of counterfeit or suspect counterfeit  parts, (4) their knowledge of the existence of counterfeit parts, and   (5) instances of counterfeit parts within the DOD supply chain. To further examine the processes that DOD has in place to detect and  prevent counterfeit parts from entering its supply chain, we conducted a  case study of DOD weapon programs and interviewed program officials as  well as several logistics support providers.
Why GAO Did This Study

Counterfeit parts--generally those whose sources knowingly misrepresent the parts' identity or pedigree--have the potential to seriously disrupt the Department of Defense (DOD) supply chain, delay missions, and affect the integrity of weapon systems. Almost anything is at risk of being counterfeited, from fasteners used on aircraft to electronics used on missile guidance systems. Further, there can be many sources of counterfeit parts as DOD draws from a large network of global suppliers. Based on a congressional request, GAO examined (1) DOD's knowledge of counterfeit parts in its supply chain, (2) DOD processes to detect and prevent counterfeit parts, and (3) commercial initiatives to mitigate the risk of counterfeit parts. GAO's findings are based on an examination of DOD regulations, guidance, and databases used to track deficient parts, as well as a Department of Commerce study on counterfeit parts; interviews with Commerce, DOD, and commercial-sector officials at selected locations; and a review of planned and existing efforts for counterfeit-part mitigation.

What GAO Found

DOD is limited in its ability to determine the extent to which counterfeit parts exist in its supply chain because it does not have a departmentwide definition of the term "counterfeit" and a consistent means to identify instances of suspected counterfeit parts. While some DOD entities have developed their own definitions, these can vary in scope. Further, two DOD databases that track deficient parts--those that do not conform to standards--are not designed to track counterfeit parts. A third governmentwide database can track suspected counterfeit parts, but according to officials, reporting is low due to the perceived legal implications of reporting prior to a full investigation. Nonetheless, officials we met with across DOD cited instances of counterfeit parts, as shown in the table below. A recent Department of Commerce study also identified the existence of counterfeit electronic parts within DOD and industry supply chains. DOD is in the early stages of developing a program to help mitigate the risks of counterfeit parts. DOD does not currently have a policy or specific processes for detecting and preventing counterfeit parts. Existing procurement and quality-control practices used to identify deficient parts are limited in their ability to prevent and detect counterfeit parts in DOD's supply chain. For example, several DOD weapon system program and logistics officials told us that staff responsible for assembling and repairing equipment are not trained to identify counterfeit parts. Some DOD components and prime defense contractors have taken initial steps to mitigate the risk of counterfeit parts, such as creating risk-assessment tools and implementing a new electronic parts standard. Also facing risks from counterfeit parts, individual commercial sector companies have developed a number of anticounterfeiting measures, including increased supplier visibility, detection, reporting, and disposal. Recent collaborative industry initiatives have focused on identifying and sharing methods to reduce the likelihood of counterfeit parts entering the supply chain. Because many of the commercial sector companies produce items similar to those used by DOD, agency officials have an opportunity to leverage knowledge and ongoing and planned initiatives to help mitigate the risk of counterfeit parts as DOD develops its anticounterfeiting strategy.