COUNTERFEIT PREVENTION - Lockheed Martin Space

COUNTERFEIT PREVENTIONPAST, PRESENT AND FUTURECounterfeit Parts - LM Supplier Training Excellence Program (STEP)Bob BodemullerPrinciple Engineer, Supply Chain Quality

THE PROBLEMAnswer:We Do Counterfeit Prevention – Past, Present and FuturePIRA DAL202004007

HEADLINESCounterfeit Prevention – Past, Present and FuturePIRA DAL202004007

SOURCES OF COUNTERFEIT ELECTRONIC PARTS Evidence of tampering present Inconsistent surface texture (e.g. colordiscrepancy between the top, bottomand/or side of the part) Visible secondary coating/blacktoppingcascading over the side of the part (e.g.overspray, overflow)Counterfeit Prevention – Past, Present and FuturePIRA DAL202004007

CAN YOU TELL THE DIFFERENCE?Counterfeit Prevention – Past, Present and FuturePIRA DAL202004007

FAKE FOOD? Lobster - Inside Edition ran DNA tests on lobster dishes from 28 restaurants across the country.Thirty-five percent of the samples contained cheaper seafood (whiting and langoustine). Kobe beef - Only eight restaurants in the entire US serve real Kobe beef. Red snapper - According to an expert involved in DNA species testing, 94% of the time you order fishlabeled red snapper, it is actually a different fish (usually tilapia). A rule of thumb: If the fish is expensive and you haven't seen it displayedwhole, there's a good chance it's an imitation. Olive oil - retailers pass off other seed oils, including soybean oil, peanut oil, and sunflower-seed oil,as the real thing. Virgin olive oil and Italian olive oil are suspect Honey - More than 75% of the honey sold in US grocery stores contains ingredients other than purehoney, reports Food Safety News. Honey is frequently "watered down" and cut with corn or fructosesyrup to decrease costs.Counterfeit Prevention – Past, Present and FuturePIRA DAL202004007

CASE STUDY – KOBE STEEL –AUGUST 2017Counterfeit Prevention – Past, Present and FuturePIRA DAL202004007

CASE STUDY - TI PARTS FROM AMAZON – WHAT IWORRY ABOUTFrom the Arrow Electronics Website 12-10-18Minimum order is 200 partsCounterfeit Prevention – Past, Present and FuturePIRA DAL202004007

CASE STUDY - TI PARTS FROMAMAZON – WHAT I WORRY ABOUTFrom the Amazon Website 12-10-18Counterfeit Prevention – Past, Present and FuturePIRA DAL202004007

WHO FOUNDED DATAALCHEMY?Counterfeit Prevention – Past, Present and FuturePIRA DAL202004007

2018 Customs and Border Patrol IP Seizures MSRPNumber of SeizuresCommodityWearing /WalletsConsumer ElectronicsConsumer ProductsPharmaceuticals/Personal CareOptical MediaToysComputers/AccessoriesAll OthersNumber of SeizuresNumber of 35614874505,10533,810 (92/day)34,143 (93/day)Percentof Total18%14%13%11%10%8%7%2%1%1%15%IPR Seizure Statistics2009-2018Country of OriginPIRA DAL202004007

WHAT’S THE POINT? “We” are the ones who approve the supplier base andassist in making purchasing decisions! RISKS Economic Pressures CostScheduleMinimum buyseCommerce/P-cards Sources of parts Counterfeiting is profitable and growing/more profitable than drugs/low risk Organized crime is involved Counterfeits difficult to detect May not affect fit, form or function Typical tests and inspections may not detect counterfeitProfit margins are higher in counterfeiting than illegal drugs!Counterfeit Prevention – Past, Present and FutureShenzhen Electronics MallCounterfeiters are good & getting better They are fast and agile

PAST AND PRESENTWHERE HAVE WE BEEN AND WHERE ARE WEGOINGCounterfeit Prevention – Past, Present and FuturePIRA DAL202004007

LEGISLATIVE ACTIONS Section 818 of the 2012 NDAA Congressional law inserted into the National Defense Authorization Act Dec 2012 Modified in each new NDAA legislation FAR 2012-032 – Higher Level Quality Contract Requirements McCain/Leven Hearings 2011Released November 2014 DFARS 252.246-7007 Published May 2014/Revised Aug 2016 Implements section 818 DFARS 252.246-7008 – Published Aug 2016 Defines “Trusted Supplier” DFARS 2016-D010 – Published Aug 2016 Amends c)(2)(B) with regard to the allowability of costs of counterfeit electronic parts or suspect counterfeit electronic parts and the cost ofrework or corrective action that may be required to remedy the use or inclusion of such parts. DFARS 2016-D013 – Published 5/4/2018 use of contractor-approved suppliers subject to approval by DoD FAR 2013-002 – Published 11/22/19Per the DFARS, counterfeit prevention is partof the purchasing system and is audited aspart of the CPSR. require contractors and subcontractors to report to the Government-Industry Data Exchange Program certain counterfeit or suspectcounterfeit parts and certain major or critical nonconformances.Counterfeit Prevention – Past, Present and FuturePIRA DAL202004007

DFARS 252.246-7007 CRITERIASystem Criteria1. Training2. Inspection and test3. Processes to abolish proliferation4. TraceabilityDFARS 7008 Criteria5. Procurement controls6. Reporting and quarantining7. Identification and evaluation of suspect counterfeit8. Systems to detect and avoid (e.g. AS5553)9. Flow-down10.Process to keep informed11.Process for screening GIDEP report12.Control of obsolete electronic partsCounterfeit Prevention – Past, Present and FuturePIRA DAL202004007

DFARS 252.246-7008 TIERED APPROACHFOR SOURCING Category 1: Electronic parts that are in production or currently availablein stock. Category 2: Electronic parts that are not in production and not currentlyavailable in stock from a category 1 supplier. Category 3: Sources other than a category 1 or 2 as defined above Electronic parts from a subcontractor (other than the originalmanufacturer) that refuses to accept flowdown of DFARS 252.2467008 Cannot confirm that an electronic part is new or not previously usedand that it has not been comingled in supplier new production orstock with used, refurbished, reclaimed, or returned parts.Counterfeit Prevention – Past, Present and FuturePIRA DAL202004007ProductionObsoleteOthers

DFARS 252.246-7008 - SOURCES Category 1: The contractor shall obtain such parts from the original manufacturer their authorized suppliers or from suppliers that obtain such parts exclusively from the originalmanufacturers of the parts or their authorized dealers.Source Selection Category 2: The contractor shall obtain such parts from suppliersidentified by the contractor as contractor-approved suppliers, subject tocertain conditions (such as test and inspection). Category 3: The contractor may buy such electronic parts subject tocertain conditions.Counterfeit Prevention – Past, Present and FuturePIRA DAL202004007Source

COMMERCIAL PARTSThe Contractor shall include the substance of this clause, including thisparagraph (e), in subcontracts, including subcontracts for commercial itemsthat are for electronic parts or assemblies containing electronic parts,unless the subcontractor is the original manufacturer.246.870-3 Contract clausesUse the clause at 252.246-7008, Sources of Electronic Parts, in solicitations and contracts, includingsolicitations and contracts using FAR part 12 (Acquisition of Commercial Items) procedures for theacquisition of commercial items, when procuring—(1) Electronic parts;(2) End items, components, parts, or assemblies containingelectronic parts; or(3) Services, if the contractor will supply electronic parts or components, parts, or assemblies containingelectronic parts as part of the service.Counterfeit Prevention – Past, Present and FuturePIRA DAL202004007

How Has MFC Mitigated Counterfeit Risks?Counterfeit Prevention – Past, Present and FuturePIRA DAL202004007

INDUSTRY COMPLIANCE ARCHITECTUREA standards based approach for DFARS complianceSCMHTier 0 – Aerospace &Defense Supply ChainISO9001(QMS)AS9100(QMS)(QMS A&D)Certification SchemaICOP (AB / CB)AS9104Tier 1 - OEMAS6174AS5553(Electronics CP)(Materiel CP)Tier 2 - (MRO QMS)AS9120(Distributor QMS)AS9115(Software QMS)CAAPCertificationGovernancePolicyAS912117021. 9101PRI / Nadcap odityAS6xxx(AS6081)(AS6174)PRI e-Qual LearnAS6xxx(AS6171)ARP 6328(AS5553)Counterfeit Prevention – Past, Present and FutureAS9111CAAP Schema(EEE Test Methods)IEC/TS62668AS9101RecognizedDFARS 252.246-11FAA 14 CFR-21, 145EASA-21,145AS9100CertificationAS9110Tier 3 - Inspection & Test LabsAS6171Harmonize GloballyRegulatoryCertification(QMS General)CP Risk Management ARPCounterfeit Avoidance & DetectionBest Practices - ARPVerificationAS9100ISO9001Move guidance fromstandardsCounterfeit Avoidance & DetectionTraining CoursesQMSPIRA DAL202004007Recognized(AS5553)(AS6171)PRI eAudit.netCertificationsAudit findingsCertification ScopeDFARS 252.246-7007DFARS 252.246-7008DFARSFARFAA AC 21-29EASA SIB 2011-27UK MOD 24-135CAAPCertification

SAE COUNTERFEIT PREVENTIONSTANDARDS G-19 G-19A G-19AD G-19C G-19CI G-19D G-19TTestingAuthorized DistributionComplianceOCM, System Integrators, etc.Independent 6081AIR6273 G-21MaterialsCompliance 74/3July 2014April 2017In ballotTBD G-21BBatteriesAS7492TBDCounterfeit Prevention – Past, Present and FuturePIRA DAL202004007April 2018Aug 2014Jan 2014Sept. 2016Nov 2012July 2019

LOCKHEED MARTIN COORDINATEDAPPROACHSpace CRX-126, Counterfeit Prevention Procedure CorpDocs - counterfeit prevention flow down Supplier Wire FAQ’s Sustainability metrics for the annual LM sustainability report CorpCAAP program will be highlighted in the 2018 reportCorporate Counterfeit Prevention Working Group – meets everyother week AeroCoordinate counterfeit issues that affect all business elements, i.e.,was on committee that drafted and issued Honeywell GIDEP in Fall2018. GIDEP issued by Aeronautics U2 program.MFC PO Counterfeit Prevention Text Note MFC-PR-003Counterfeit Prevention – Past, Present and FuturePIRA DAL202004007MFCRMS

TERMS & CONDITIONS – CORPDOC 37. COUNTERFEIT WORK(a) The following definitions apply to this clause:"Counterfeit Work" means Work that is or contains unlawful orunauthorized reproductions, substitutions, or alterations thathave been knowingly mismarked, misidentified, or otherwisemisrepresented to be an authentic, unmodified part from theoriginal manufacturer, or a source with the express writtenauthority of the original manufacturer or current designactivity, including an authorized aftermarket manufacturer.Unlawful or unauthorized substitution includes used Workrepresented as new, or the false identification of grade, serialnumber, lot number, date code, or performance characteristics.Counterfeit Prevention – Past, Present and FuturePIRA DAL202004007

TERMS & CONDITIONS – CORPDOC 3ADFARS 252.246-7007 CONTRACTOR COUNTERFEIT ELECTRONIC PART DETECTION AND AVOIDANCESYSTEM (AUG 2016) (Paragraphs (a) through (e) apply. In paragraph (c)(2) Note 3 applies. Inparagraph (c)(6) Note 6 applies.)DFARS 252.246-7008 SOURCES OF ELECTRONIC PARTS (MAY 2018) (Applies if this contract is forelectronic parts or assemblies containing electronic parts, unless SELLER is the originalmanufacturer. Note 1 applies except in paragraph (d). Note 2 applies.Counterfeit Prevention – Past, Present and FuturePIRA DAL202004007

MFC TEXT NOTE MFC-PR-003Seller shall only purchase products to be delivered or incorporated as work to the Buyer directly fromi. the Original Component Manufacturer (OCM)ii. Original Equipment Manufacturer (OEM)iii. through an OCM/OEM authorized suppliers (distributor)iv. or from suppliers that obtain such parts exclusively from the original manufacturer of the parts or theirauthorized dealers with no intermediaries.Seller may use another source only if:i. the foregoing sources are unavailable,ii. Seller's inspection and other counterfeit risk mitigation processes will be employed to ensure the authenticity ofthe work,iii. the suppliers meet applicable DOD-adopted counterfeit prevention industry standards and processes (includingtests) and;iv. Seller obtains the advance written approval of Buyer.Counterfeit Prevention – Past, Present and FuturePIRA DAL202004007