Understanding Risks in the DoD Supply Chain

CQSDI 2010

Approved for Public Release10-MDA-5240 (19 FEB 10)

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16 March 2010Barry Birdsong

Missile Defense AgencyParts and Materials Program Manager

Distribution is unlimited.

Material cleared for public release can be reused in its original form any time, any place. Any updating, changing or combining of previously cleared material will form a new document that requires the material be re-submitted for a new public release clearance.

Layered Ballistic Missile Defense 2010

SBXUEWR

EWR

GBI (15→→→→26)C2BMC

ICBMs> 5,500 km

Mission:

“To defend the United States, deployed forces, allies, and friends from ballistic missile attacks of all ranges in all phases of flight.

To develop and deploy, as directed, a layered BMDS.”

DoD Directive 5134.9 October 9, 2004

Mission:

“To defend the United States, deployed forces, allies, and friends from ballistic missile attacks of all ranges in all phases of flight.

To develop and deploy, as directed, a layered BMDS.”

DoD Directive 5134.9 September 17, 2009

Beale AFB

UEWR

Thule,Greenland

UEWR

Fylingdales, UK

EWR

Shemya, AK

THAAD Fire Units ( 1→→→→2)THAAD Interceptors ( 0→→→→25)

Patriot Fire Units ( 44→→→→52)PAC-3 Interceptors ( 727→→→→791)

Aegis Ships (19→→→→21)

SM-3 Interceptors ( 35→→→→61)

SM-2 Interceptors ( ≈ 58→→→→75)

AN/TPY-2

IsraelAN/TPY-2

Shariki, Japan

GBI (3→→→→4)

Vandenberg AFB

Ft. Greely

Thousands of SRBMs

< 1,000 km

Hundreds of IRBMs /MRBMs1,000-5,500 km

SRBM = Short Range Ballistic MissilesMRBM = Medium Range Ballistic MissilesIRBM = Intermediate Range Ballistic Missiles ICBM= Intercontinental Ballistic Missiles

System Configuration End Of FY 2010 End Of FY 2011

EWR

AN/TPY-2

GBI (26)

OPIR

ThuleGreenlandC2BMC

C2BMCUEWR

UEWR

Fylingdales, UK

Ramstein, GE

AN/TPY-2

SBX

C2BMC = Command, Control And Battle Management NetworkEWR = Early Warning RadarOPIR = Overhead Persistent Infrared

Hawaii

Aegis Ships ( 21→→→→24)Patriot Fire Units ( 52→→→→56)PAC-3 Interceptors ( 791→→→→901)

SM-3 Interceptors ( 61→→→→85)

SM-2 Interceptors ( ≈ 75)SBX = Sea-based X-Band Radar SM-2 = Standard Missile-2 Terminal InterceptorSM-3 = Standard Missile-3 Interceptor

THAAD Fire Units ( 1→→→→2)THAAD Interceptors ( 25→→→→56)

C2BMCShariki, Japan

Shemya, AK

C2BMC

Ft. GreelyAN/TPY-2

Israel

AN/TPY-2 (7)

GBI (4)

Beale AFB

UEWR

Vandenberg AFB

UEWR = Upgraded Early Warning Radar THAAD = Terminal High Altitude Area Defense

• Applicable Documents (References)Government and Commercial

• PMP Management Structure, Roles, and Responsibilities

PMP Board, PMP Control Board, PMAG• PMP Requirement examples

EEE Parts Quality RequirementsMaterialsCorrosion PreventionProhibited Parts and MaterialsPMP Quality RequirementsPMP Procurement Management

MDA PMAP Contents

•AppendicesDeratingPEMCOTSRadiation Hardness AssuranceProhibited PMP PMAP Data ItemsCorrosion Prevention

PMP Procurement ManagementRadiation Hardness AssurancePMP QualificationCOTS ManagementFailure Analysis Environmental ControlsHandlingPreservation, Packaging and Storage

The Missile Defense Agency has a Director Approved Parts and Materials Requirements Document with Stringent Part Procurement Requirements

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PMAP Part Purchase Requirements

• Parts and materials shall not be purchased through brokers or non-franchised distributors without Government approval via a Program Office Parts Review Board– To obtain approval to buy from a part broker, a broker purchase report is

required:1. Reason why and verification that OEM or Franchised Distributor is not

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1. Reason why and verification that OEM or Franchised Distributor is not available

2. Product Verification plan and results (e.g. Destructive Physical Analysis, X-ray, Electrical Test, etc.)

3. Product Certificate of Conformance with traceability to OEM if available

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DO NOT PROCURE FROM NON-APPROVED

SOURCES!!

Vendor/Supplier Selection

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MDA Challenges

• Some MDA Contracts were awarded prior to PMAP approval

• Part Procurement and Supplier Selection requirements were not always flowed down to lowest level of Supply Chain

• Contractors were not always performing on-site audits of the brokers they were buying from, and were not always requiring inspection and/or test of broker bought product

• Parts Obsolescence forces procurement from Part Brokers

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• Parts Obsolescence forces procurement from Part Brokers

• Government mandates (small business, disadvantaged, etc.) can be misinterpreted by contractors to require purchase from part brokers

• 88% of IC distributors are not franchised or authorized by OEM

MDA has experienced Counterfeit Parts in Critical Hardware

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Authorized vs. Unauthorized Distributors

Research indicates that unauthorized distributors outnumber authorized distributors for several critical part t ypes:

Authorized Vs. Unauthorized Distributors

15

22

15

35

27

46

Discretes

Passives

Potentiometers

Authorized

Data Source: Electronics Source Book

88% of listed IC distributors are unauthorized

7

9

15

67

56

35

0 20 40 60 80

Microprocessors

Integrated Circuits

Discretes

Total Number of Distributors

Authorized

Unauthorized

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Counterfeit Trends since 2004

All types of components are being counterfeited, even passives.

% of reported counterfeits from ERAI database, 2004 to present 9

Counterfeit Trends: 2009

The largest increases in percentage of counterfeit electronic parts reports (2004-2008 vs 2009-2010) were:

• Tantalum Capacitors (1.5% to 6.2%)• Transient Voltage Suppressors (1.0% to 1.5%)• Thyristors / Varistors (0.3% to 1.5%)• Thyristors / Varistors (0.3% to 1.5%)

• Data was gleaned from ERAI’s Counterfeit parts database, started in 2004. High risk (suspect) entries were ignored. Over 1,300 entries were used.

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Counterfeit Component Examples

Same lot, different pin 1 marking, different leadfr ames.

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Don’t Jump to Conclusions

From an Altera e-mail in Jan 2009….“…the part was marked with a datecode 9748 (this is an invalid datecode by the way). For your information , we only started to use ST Micro die in year 2003…… This is

indeed a forgery part…”

An ST Micro die is inside an Altera part? Apparent external date code is 9748.

From an Altera PCN in 2001….

Internal die appears to be 2005

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Why Is It So Difficult?

Q. Is this a counterfeit part – 0644 top-side date code and 0221 bottom-side date code (part failed acetone swab test)?

A. No. It’s an authentic part – an older part was retested by the older part was retested by the OCM to a newer data sheet spec, and subsequently remarked.

Lesson Learned – OCMs do remark product occasionally. If it’s done with no intent to deceive, it is not counterfeiting.

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Lessons Learned # 1

Acceptable Reasons• Parts are no longer available from authorized sources.• The schedule cannot change, and necessitates a broker purchase to meet

lead time requirements.Unacceptable Reasons• We are saving component costs by using brokers.

Contractors/subcontractors MUST NOT be allowed to purchase from independent distributors unless there is no option.

• We are saving component costs by using brokers.• A schedule slip will be inconvenient for the customer.• This broker has a never sold us counterfeit product before.• Our purchasers didn’t have the time to find an authorized source.

Reduce the risk by:• Always buying from authorized sources if they’re available.• Finding distributors who are diligent about inspection and/or test.• Requiring a basic suite of inspection and test.

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MDA Proactive Anti-Counterfeit Efforts

• MDA contributed to AS5553 Counterfeit Component Detection and Mitigation document (2007-2009)

• Independent Distributor Assessments� Initiated in Dec 2008 to assess individual independent distributors’ capability for

providing authentic product.� Visited 34 independent distributors December 2008 to present.� March 2009: Enlisted NASA/JPL JAPC support, revised assessment form

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• FAR Revision Meeting (Dec 2008)� Presented in support of NASA request for changes to FAR requiring purchase of

electronic components from authorized sources• MDA Counterfeit Part Focus Day (January 26, 2009)

� Attended by MDA prime contractors.� Devoted a full day to counterfeit component presentations, including OEM,

independent distributor, Dept of Commerce, DLA, and Counter Intelligence briefs.

• Developed Policy Memorandum on Procurement of Parts June 2009

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MDA Policy Memo #50

• Policy Memo on Procurement of Electronic Parts signed by MDA Director 29 June 2009

• Purpose of MDA Policy memo is to reduce the risk of buying or installingcounterfeit parts

• Policy Memo applies to all Safety and Mission Critical Hardware• Policy Memo Expands current MDA PMAP requirements

– Applies to both new designs and new builds of current/heritage designs– Applies to both new designs and new builds of current/heritage designs– PMAP Paragraph 3.7.1 (Supplier Selection) now apples to all Hardware

Categories A-E

� Adds requirement for broker report to PMPCB for Gro und and Sea Based Systems

• Does not apply to internal parts for COTS Assemblies or Hybrids • Focus on Electronic Parts procurement practices

MDA Lessons Learned # 2

• Preliminary Distributor Assessment Findings1. Most distributors perform an acetone swab along with visual inspection.2. Many customers require no special testing. Most distributors test only what

the customer requires (beyond visual and acetone swab)3. Most distributors have access to parts via the same search routines (Broker

Forum, Net Components, etc.). The best ones filter this information via vendor surveys, past history, etc., to select the best sources.

4. Most customers do not conduct site visits of all their independent distributors.5. Few (less than 10%?) IDs have certification to an ESD handling standard

such as ANSI/ESD S20.20, although almost all of them claim “compliance”. such as ANSI/ESD S20.20, although almost all of them claim “compliance”. Most have wrist straps and grounded mats.

6. Some warehouses have open unshielded boxes with integrated circuits in tubes or reels (not ESD-bagged).

7. Have found warehouses in high-temp/high-humidity environments (90 degrees, no air conditioning).

8. The better-equipped business have electronic security at the doors, environmentally controlled warehouses, and multiple certifications. The lesser-equipped facility might be a garage.

Supply chain is weakest when brokers are used without verifying their capability to provide authentic product

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Find Distributors We Can Trust

• Review independent distributors most likely to provide reputable product (IDEA and filtered ERAI member companies).

• Obtain a listing of subcontractor’s qualified independent distributors.– Investigate the subcontractor’s independent distributors – Some companies have no web site, no listed phone number, and have been

reported to ERAI for insufficient funds on a purchase.

• Send a independent distributor assessment form/ questionnaire to independent distributors.

• Visited the independent distributors facilities to verify capabilities

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What the Best Independent Distributors Do

• Supplier Assessment– Search for product from franchised sources first.– Maintain robust search engines to find more product sources.– Diligently track data sources and company experiences to eliminate risky

sources.

• Quality Procedures– Maintain certification to quality and handling standards.– Maintain certification to quality and handling standards.

• Test and Inspection– Have trained inspectors and documented procedures for visually inspecting

product and checking for remarked/refurbished parts.– Ensure their customers know exactly which tests are being performed on

the product.

• Warranty– Provide robust warranties or guarantees regarding the authenticity of the

product they sell.

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Conclusions

• Buying from an IDEA or ERAI member does not guarantee good product.

• Many if not most independent distributors are not certified to a QMS standard (ex., ISO-9001, AS9120).

• Most independent distributors are not certified to an ESD handling standard (ex., ANSI/ESD S20.20).

• There are multiple tiers – some distributors may not be aware they are selling product which winds up in defense systems.

• There are multiple tiers – some distributors may not be aware they are selling product which winds up in defense systems.

• Many defense contractors do not assess their independent distributors through site visits.

• DoD requirement for minimal purchases from Small Disadvantaged Businesses can be counter productive in case of procuring from brokers

The supply chain must be understood and controlled at its lowest levels to ensure quality product and to reduce the risk of counterfeit parts

entering Weapon System inventories.20

END

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