CQSDI 2010 Understanding Risks in the DoD Supply Chain

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1 CQSDI 2010 Understanding Risks in the DoD Supply Chain Approved for Public Release 10-MDA-5240 (19 FEB 10) 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. 16 March 2010 Barry Birdsong Missile Defense Agency Parts and Materials Program Manager 1

Layered Ballistic Missile Defense 2010 Mission: To defend the United States, deployed forces, allies, and friends from ballistic missile attacks of all ranges in all phases of flight.

2 Layered Ballistic Missile Defense 2010 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 October 9, 2004 GBI (3 4) Vandenberg AFB UEWR Beale AFB AN/TPY-2 EWR Shemya, AK GBI (15 26) C2BMC Ft. Greely Aegis Ships (19 21) SM-3 Interceptors (35 61) ICBMs > 5,500 km SBX 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 September 17, 2009 UEWR Thule, Greenland UEWR THAAD Fire Units (1 2) Fylingdales, UK Hundreds of THAAD Interceptors (0 25) IRBMs /MRBMs 1,000-5,500 km Thousands of SRBMs < 1,000 km AN/TPY-2 Israel Shariki, Japan Patriot Fire Units (44 52) PAC-3 Interceptors ( ) SM-2 Interceptors ( 58 75) SRBM = Short Range Ballistic Missiles MRBM = Medium Range Ballistic Missiles IRBM = Intermediate Range Ballistic Missiles ICBM= Intercontinental Ballistic Missiles

3 System Configuration End Of FY 2010 End Of FY 2011 OPIR UEWR UEWR C2BMC EWR AN/TPY-2 Shemya, AK SBX Shariki, Japan GBI (26) C2BMC Ft. Greely UEWR C2BMC Thule Greenland Fylingdales, UK Ramstein, GE AN/TPY-2 Israel Beale AFB GBI (4) C2BMC Hawaii AN/TPY-2 (7) Vandenberg AFB Patriot Fire Units (52 56) PAC-3 Interceptors ( ) THAAD Fire Units (1 2) THAAD Interceptors (25 56) Aegis Ships (21 24) SM-3 Interceptors (61 85) SM-2 Interceptors ( 75) C2BMC = Command, Control And Battle Management Network EWR = Early Warning Radar OPIR = Overhead Persistent Infrared SBX = Sea-based X-Band Radar SM-2 = Standard Missile-2 Terminal Interceptor SM-3 = Standard Missile-3 Interceptor UEWR = Upgraded Early Warning Radar THAAD = Terminal High Altitude Area Defense

4 MDA PMAP Contents Applicable Documents (References) Government and Commercial PMP Management Structure, Roles, and Responsibilities PMP Board, PMP Control Board, PMAG PMP Requirement examples EEE Parts Quality Requirements Materials Corrosion Prevention Prohibited Parts and Materials PMP Quality Requirements PMP Procurement Management Radiation Hardness Assurance PMP Qualification COTS Management Failure Analysis Environmental Controls Handling Preservation, Packaging and Storage Appendices Derating PEM COTS Radiation Hardness Assurance Prohibited PMP PMAP Data Items Corrosion Prevention The Missile Defense Agency has a Director Approved Parts and Materials Requirements Document with Stringent Part Procurement Requirements 4

5 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 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 5

6 Vendor/Supplier Selection DO NOT PROCURE FROM NON-APPROVED SOURCES!! 6

7 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 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 7

8 Authorized vs. Unauthorized Distributors Research indicates that unauthorized distributors outnumber authorized distributors for several critical part types: Authorized Vs. Unauthorized Distributors Data Source: Electronics Source Book Potentiometers Passives Discretes Authorized Unauthorized Integrated Circuits 9 56 Microprocessors Total Number of Distributors 88% of listed IC distributors are unauthorized 8

9 Counterfeit Trends since 2004 % of reported counterfeits from ERAI database, 2004 to present All types of components are being counterfeited, even passives. 9

10 Counterfeit Trends: 2009 The largest increases in percentage of counterfeit electronic parts reports ( vs ) were: Tantalum Capacitors (1.5% to 6.2%) Transient Voltage Suppressors (1.0% to 1.5%) Thyristors / Varistors (0.3% to 1.5%) Data was gleaned from ERAI s Counterfeit parts database, started in High risk (suspect) entries were ignored. Over 1,300 entries were used. 10

11 Counterfeit Component Examples Same lot, different pin 1 marking, different leadframes. 11

the part was marked with a datecode 9748 (this is an invalid datecode by the way).

12 Don t Jump to Conclusions An ST Micro die is inside an Altera part? Apparent external date code is From an Altera in Jan 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 From an Altera PCN in Internal die appears to be

code and 0221 bottom-side date code (part failed

It s an authentic part an older part was

13 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 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. 13

14 Lessons Learned # 1 Contractors/subcontractors MUST NOT be allowed to purchase from independent distributors unless there is no option. 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. 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. 14

15 MDA Proactive Anti-Counterfeit Efforts MDA contributed to AS5553 Counterfeit Component Detection and Mitigation document ( ) 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 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

16 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 installing counterfeit 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 PMAP Paragraph (Supplier Selection) now apples to all Hardware Categories A-E Adds requirement for broker report to PMPCB for Ground and Sea Based Systems Does not apply to internal parts for COTS Assemblies or Hybrids Focus on Electronic Parts procurement practices

17 MDA Lessons Learned # 2 Preliminary Distributor Assessment Findings 1. 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. 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 17

18 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 18

19 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. 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. 19

20 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. 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

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Phased Adaptive Approach Overview For The Atlantic Council

Phased Adaptive Approach Overview For The Atlantic Council Distribution Statement A: Approved for public release; distribution is unlimited 12 OCT 10 LTG Patrick J. O Reilly, USA Director Missile Defense