NAVSEA Material Fraud and Counterfeit Materiel Manager Naval Sea Systems Command (NAVSEA) Counterfeit Materiel “DRAFT” Policy and Ongoing Mitigations Wayne Moss NAVSEA Material Fraud and Counterfeit Materiel Manager 202-781-0733 wayne.moss@navy.mil July 2016 Good morning – thank you for the opportunity to speak today about my organization and the efforts we currently have underway to manage suppliers and improve the quality of materials being procured in support of ship construction and maintenance. My name is Randy Onders and I am the Director of the Supplier Product Quality Group at Naval Sea Systems Command. Distribution Statement A: Approved for Release. Distribution is unlimited.

Counterfeit Materiel Awareness Training Training Outline Definition and Policy Materiel at Risk Technical Risk Management Process- Identify and Mitigate Acquisition and Procurement Mitigation Industry Standards for Counterfeit Avoidance Documentation and Reporting Ongoing NAVSEA Mitigations

Definition and Policy DON Counterfeit Materiel Definition Counterfeit Materiel - Items that are unauthorized copies or substitutes that have been identified, marked, or altered by a source other than the items’ legally authorized source or have been misrepresented to be authorized items of the legally authorized source. DON Counterfeit Materiel Prevention Risk-based approach to identify and prevent the introduction of materiel that is at high risk of counterfeiting. Preventative measures Early detection processes Strengthened surveillance procedures Accountable oversight commensurate with the end use application of the materiel in the system or its criticality. Report suspect/counterfeit on a Product Quality Deficiency Report (PQDR)in the Product Data Reporting & Evaluation Program (PDREP) and to Government-Industry Data Exchange Program (GIDEP).

Materiel at Risk Critical Components that support Trusted Systems and Networks Controlled Inventory Items (CII) Critical Safety Items (CSI) Critical Application Items (CAI) Materiel identified by the responsible engineering support activity prior to initial supportability analysis Materiel that is at high risk of counterfeiting NOTE: Electronic semi- conductors/microchips and precision bearings are generally considered high risk depending on type and application.

Technical Risk Management Process-Identify and Mitigate Preliminary Design Review Criticality of the materiel Application Susceptibility to counterfeiting Product’s life cycle Engineering technical reviews In-service reviews. Engineering change proposal process Consider all items meeting the definition of “critical materiel” as defined in slide 4 , as high risk for counterfeiting Risk Management Plan or the Systems Engineering Plan Program Protection Plan Life Cycle Sustainment Plan (LCSP)

Acquisition and Procurement Mitigation DFARS 246.870 is enacted for all applicable procurements (252.246-7007 Contractor Counterfeit Electronic Part Detection and Avoidance Systems- CAS covered contracts only). Procurements where DFARS 246.870 does not apply: Critical or High Risk Materiel Materiel that is currently in production or currently available: Authorized sources. Authorized sources are the original manufacturer, a source with the express written authority of the original manufacturer or current design activity, or an authorized aftermarket manufacturer. Materiel that is not in production or currently available from authorized sources: Suppliers that meet appropriate counterfeit avoidance criteria. Counterfeit avoidance criteria can be found in the Industry Standards identified in slide (7). Contractor to notify the contracting officer when materiel cannot be obtained from an authorized source. Contractor to take mitigating actions to authenticate the materiel if purchased from another source.

Industry Standards for Counterfeit Avoidance Industry Standards for counterfeit avoidance criteria risk mitigation information. This not an inclusive list. SAE AS5553A, “Counterfeit Electronic Parts; Avoidance, Detection, Mitigation, and Disposition” of January 2013. Adopted by DoD. SAE AS6462, “AS5553, Counterfeit Electronic Parts; Avoidance, Detection, Mitigation, and Disposition Verification Criteria” of November 2012. SAE AS6081, “Fraudulent/Counterfeit Electronic Parts: Detection, Mitigation, and Disposition – Distributors” of November 2012. Adopted by DoD. SAE ARP6178, “Fraudulent/Counterfeit Electronic Parts; Tool for Risk Assessment of Distributors” of December 2011. SAE AS6174A, “Counterfeit Materiel; Assuring Acquisition of Authentic and Conforming Materiel” of July 2014. Adopted by DoD. SAE AS6301, “Compliance Verification Criterion Standard for SAE AS6081, Fraudulent/Counterfeit Electronic Parts: Avoidance, Detection, Mitigation, and Disposition – Distributors” of January 2014.

Documentation and Reporting Initiate a PQDR - Product Data Reporting and Evaluation Program (PDREP) to document Suspect Counterfeit Materiel https://pdrep.csd.disa.mil/pdrep/ezdr.do. Current process will result in a Product Quality Deficiency Report (PQDR). Use the Detailed Cause Code “5AS” for suspected Counterfeit Materiel. Notify your Supervisor, Chain of Command, Contracting Officer and NCIS (local or NAVSEA). NAVSEA NCIS Agent Amanda Burke (202) 491-9232; by web tip www.ncis.navy.mil or by text tip (anonymous): Text “NCIS” plus your tip information to 274637 (CRIMES). Save the suspected counterfeit materiel and all packaging, paperwork, and certificate of conformance. Quarantine the suspected counterfeit materiel so it can be tested and validated. Electronic/Electrical/Mechanical Counterfeit Testing is performed at DON Center of Excellence for Counterfeit Testing, NSWC Crane. POC: Raminder Singh, raminder.singh@navy.mil, 812-854-3829 or Fred Schipp, fredrick.schipp@navy.mil, 812-854-5848. Support Screening/Action points from the PQDR process and NCIS during the investigation until completion. Once validated as “Counterfeit” Action Point forwards the PQDR to GIDEP as a AAN (Alert Action Notice). Destroy materiel only after all legal actions have been completed as directed by Screening/Action points from the PQDR process (directed from legal and investigative services).

Ongoing NAVSEA Mitigations Counterfeit Materiel Awareness Training for NAVSEA and all Field Commands. Added Counterfeit Awareness Training to the NAVY 2M Microelectronics Training Class. Drafting NAVSEA Counterfeit Prevention Policy, TBI CY17. Counterfeit Materiel Prevention Guidebook (provides counterfeit indicators, examples of items that are highly counterfeited, and other detailed information for counterfeit materiel mitigation). To be issued as NAVSO Document. NAVSEA Contract Clause Book, Section C-Text Provision, Prevention of Counterfeit Materiel for Critical Materiel and Materiel that is at High Risk of Counterfeiting (NAVSEA). Adding Counterfeit Inspection Indicators to Corporate RI (TRIM and TRIP for Level 1 material). Electronic/Electrical/Mechanical Counterfeit Testing is performed at DON Center of Excellence for Counterfeit Testing, NSWC Crane. Assessment and development of industry Counterfeit Electronics Identification Test Equipment, NSWC Crane. Integrated NCIS Agent assigned to SEA 06P. Conducting Operations/Investigations to expose CM issues. Benchmarking with other Commands/Organizations for best Counterfeit Materiel Control Plans and practices.

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