The Senate Armed Services Committee turned its spotlight last November on the problem of sup-par and counterfeit Chinese-made parts used in U.S. weapons programs, including Boeing’s new P-8A aircraft, the Marine Corps’ V-22 Osprey tilt-rotor aircraft, and the Navy’s Los Angeles-class nuclear submarine. Sens. Carl Levin and John McCain hammered away at China’s involvement and the fact the PRC government does nothing to stop it. But the following analysis, by experts at the University of Maryland’s Center for Advanced Life Cycle Engineering (CALCE), concludes that American businesses are the problem – not China.

Sen. John McCain, ranking member of the Senate Armed Services Committee, asserted during November hearings about counterfeit parts infesting American weapons that, “the Chinese government can stop” their manufacture and sale.

However, McCain fails to recognize (or is reluctant to acknowledge) that the root cause of the problem is not China, but rather the US.

Listening to the witnesses’ testimony at the hearing, anyone who worked in the defense electronics industry could not help but wonder what happened to the robust quality assurance and parts management systems that were mandated by government specifications during the Cold War.

The team at the Center for Advanced Life Cycle Engineering (CALCE) at the University of Maryland is routinely asked to investigate counterfeit electronics. CALCE has found that the responsibility for counterfeiting most often lies with unauthorized US suppliers (distributors and other mid-tier suppliers), as well as the prime contractors who fail to properly vet their suppliers and ascertain the sources of the parts that they buy.

These unscrupulous US companies often commission the counterfeiting of parts from foreign suppliers in Vietnam, the Philippines, Thailand, and China. Add to this mix the fact that the US off-shores its scrapped electronics to Chinese parts reclamation mills, and you have a supply source of obsolete electronics components coveted by US military suppliers.

Market forces have created a demand for counterfeit parts for US military systems, and, not surprisingly, suppliers have arisen to serve that market. The military market, with its constant demand for obsolete parts, the cost and schedule pressures placed on manufacturers, and the overall degradation of its supply chain management and supplier controls, has a created an environment that has allowed counterfeiting to flourish.

Semiconductor industry analysts at IHS iSuppli found a fourfold increase in incidences of counterfeit parts from 2009 to 2011, with US-based military and aerospace electronics firms reporting the bulk of these incidents. This marked the first time that the number of reported incidents in a single year exceeded 1,000 – a total that when you take into all the equipment involved, could include millions of purchased parts.

If any of these counterfeit parts were to find their way into systems fielded by the US military, the results could potentially be catastrophic.

For example, Raytheon Missile Systems purchased some 1,500 Intel flash memory (semiconductor) devices for incorporation into the Harm Targeting Systems (HTSs) installed in F-16 aircraft to take out enemy radar systems.

Raytheon purchased those parts from a U.S. broker, rather than from the original device manufacturer or its authorized distributor. Without checking the devices ahead of time, Raytheon installed those Intel chips on 28 circuit boards destined for HTS modules.

The military can be grateful that the boards immediately failed, because Raytheon had to examine the boards to determine the root cause of the problem. Only then did they learn that the parts were all counterfeit. The broker that Raytheon bought the parts from has since been charged with the selling of counterfeit parts, and the guilty parties have been sentenced.

The broker had literally given instructions to its Chinese suppliers on how to counterfeit, re-label, and ship parts to the U.S. Thus, the counterfeit parts were actually commissioned by an American company.

Without actual manufacturer supplied data, it is impossible to add up the corrective action costs for all the incidences of discovered counterfeit parts. However, CALCE’s data indicate that the costs to properly vet suppliers and components are reasonable compared to the remediation costs. CALCE has also demonstrated how risk analysis and reliability engineering evaluation can be applied to identify and vet components and suppliers.

The National Defense Authorization Act, signed on December 31, 2011, includes a provision to ensure the “Detection and Avoidance of Counterfeit Electronic Parts.”

This is a step in the right direction, but let there be no mistake: the responsibility for counterfeiting rests with American manufacturers. The anti-counterfeit provisions of the National Defense Authorization Act are based on trust – a trust that the manufacturers have lost over the last three decades. They will have to work hard and spend appropriately on infrastructure to regain the trust that was inherent in the defense procurement processes before the advent of commercial off-the-shelf equipment.

We are by no means advocating a return to the same cumbersome and costly supply chain management practices of the pre-COTS era. Rather, we submit that the government procurement establishment and the defense industrial base must jointly establish a more effective, but affordable, source control system – much like those of highly reliable consumer electronics producers such as Apple, Dell, and Intel.

This control system should inform buyers and systems manufacturers of the source of all parts and materials at every point in the supply chain. Given that this model has served the consumer industry well, there is no reason such a system could not be affordable and useful for the defense industrial base.