IT News and Views

Counterfeit Equipment

The Association of Service and Computer Dealers, International (ASCDI) and North American Association of Telecommunications Dealers (NATD) have banded together to work with manufacturers and law enforcement to eliminate the increased flow of counterfeit equipment into the IT supply chain.

A public hearing on a proposed federal rule to require government agencies to only accept bids from manufacturers or their authorized agents, thereby shutting out secondary market resellers, was held on December 12 in Washington DC. The proposed change represents a shift in the federal government’s acquisition practice affecting thousands of suppliers of goods and services. The proposed ruling can be found at edocket.access.gpo.gov/2008/E8-27275.htm.

Joseph Marion represented ASCDI and NATD and prefaced his remarks by introducing them as trade associations representing the interests of those who manufacture, buy, sell, lease and maintain new and used technology products. He pointed out that the secondary IT market of $312B consists of thousands of legitimate businesses and an estimated 100,000 end users.

Marion stated that sales to the federal government account for as much as 15% of secondary market revenues and this continues to provide large costs savings on refurbished and new IT products and services. He then expressed a number of concerns with the proposed rule change, questioning whether sole-sourcing is the best solution to avoid counterfeit products. This eliminates competition and can therefore maximize price and reduce quality. He argued that competition from the secondary market acts as a check and balance against the effects of sole-source procurement.

He explained that most manufacturers provide product inspections (sometimes called maintenance agreement qualification inspections) which can identify counterfeit products and components. He pointed out that the federal government is in the best position to require, as a condition for bidding, that manufacturers offer this inspection upon request. “Mandating such an inspection will allow secondary markets to compete for government acquisition contracts and afford the salutary benefits of competition while avoiding counterfeit products.”

The Civil Agency Acquisition Council and Defense Acquisition Regulations Council closed the public hearing by expressing appreciation for the presentations. They acknowledged that the proposed rule change was too narrow in focus and did not meet the acquisition needs of all government constituents which may require secondary markets to provide support. Both ASCDI and NATD have been called upon to submit supplemental public comment by January 20 together with proposed language addressing the concerns expressed during the hearing.

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