The FAR Council recently issued a Final Rule on the Reporting of Nonconforming Items to the Government-Industry Data Exchange Program (GIDEP) to address supply chain risks from counterfeit and nonconforming goods. The Rule goes into effect on December 23, 2019. While the Final Rule on its face addresses counterfeit and nonconforming parts, the GIDEP program is potentially more onerous than meets-the-eye.

GIDEP is a U.S. Government funded and managed voluntary information exchange program among government and industry participants.  Its members include, among others, dozens of government agencies such as the Department of Defense, General Services Administration, and N.A.S.A. There are also hundreds of industrial organizations manufacturing parts, components, and equipment for the government agency participants.  Using GIDEP data helps governments and manufacturers identify risks, promote safety and reliability, and maximizes resources.

To address supply chain risks from counterfeit and nonconforming goods, the Final Rule requires the inclusion of a new Clause (FAR 52.246-26) in solicitations and contracts for the acquisition of goods or services involving: (1) “critical” items and items subject to “higher-level quality standards”; and (2) Department of Defense acquisitions of electronic items above the simplified acquisition threshold (currently $250,000).

Commercial items are exempt.  Under the Rule, contractors are required to screen the GIDEP database as part of their quality control programs, and report to the Contracting Officer (“CO”) and the GIDEP database within 60 days of “becoming aware or having reason to suspect” that an item is a counterfeit part; and submit reports to GIDEP (but not to the CO) when they detect a major or critical nonconformance in a “common item”.

While the FAR clause on its face requires only limited reporting and is described by the FAR council as “significantly de-scoped” from the version proposed in 2014, as a practical matter, all covered contractors are now effectively required to become GIDEP members.  The new Rule requires contractors to screen the GIDEP database, but access to the database is available only to GIDEP members.  Becoming a member requires, among other things, that the contractor designate a GIDEP representative and submit an annual Utilization Report. Considering the foregoing, the Final Rule is potentially a significant regulatory burden hidden under the guise of a more-limited quality and counterfeit reporting requirement.

Thus, in the coming weeks, Contractors should assess whether and to what extent the new reporting requirements will apply to their operations and make any necessary updates to timely comply with the new Rule. A good starting point is the Frequently Asked Questions on the GIDEP website.

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