1. Hot Compliance Topics in the Supply Chain 1.Human trafficking 2.Conflict minerals 3.Counterfeit goods 4.Whistleblower / Suspension /Debarment Topic overview followed by audience quiz

2. F ORCED L ABOR AND H UMAN T RAFFICKING : C OMPLIANCE AND A CCOUNTABILITY Overview

3. The Old: FAR Subpart 22.17 Implements USG “ zero tolerance ” policy on trafficking in persons. Prohibits contractors, contractor employees, subcontractors, and subcontractor employees from—  (1) Engaging in severe forms of trafficking in persons;  (2) Procuring commercial sex acts;  (3) Using forced labor in the performance of the contract; Requires contractors and subcontractors to notify employees of the prohibited activities and disciplinary action for violations. Includes Mandatory Contract Clause FAR 52.222-50 (Feb 2009) Combating Trafficking in Persons

4. The New: Obama Executive Order “Strengthening Protections Against Trafficking in Persons in Federal Contracts” No. 13627, 77 Fed. Reg. 60029 (Sept. 25, 2012)

5. The New: NDAA Amendments “End Trafficking in Government Contracting Act” (ETGCA) Public Law 112–239

6. The New: NDAA Amendments Fraud in Foreign Labor Contracting 18 U.S.C. §1351(b) (b) WORK OUTSIDE THE UNITED STATES.—Whoever knowingly and with intent to defraud recruits, solicits, or hires a person outside the United States or causes another person to recruit, solicit, or hire a person outside the United States, or attempts to do so, for purposes of employment performed on a United States Government contract performed outside the United States, or on a United States military installation or mission outside the United States or other property or premises outside the United States owned or controlled by the United States Government, by means of materially false or fraudulent pretenses, representations, or promises regarding that employment, shall be fined under this title or imprisoned for not more than 5 years, or both.

7. Looking Ahead: A Revised, More Stringent FAR Clause; Mandatory Anti-Trafficking Compliance Programs; Annual Certifications; Elimination of Recruiting Fees; No Holding of Passports; Self-Reporting of Violations; Civil Litigation under 18 U.S.C. §1595; Extraterritorial Jurisdiction.

8. Conflict Minerals Overview

9. 9 US federal law requires listed companies to report products that contain “Conflict Minerals” (Gold, Tin, Tantalum, and Tungsten) - SEC rules Issued August 22, 2012 - January 2013 Implementation Date Conflict Regions include the Democratic Republic of the Congo and bordering countries - Listed Companies and their suppliers must conduct “reasonable country of origin” due diligence to determine source of metals - SEC filing due May 31, 2014 (covering calendar year 2013) Due diligence and reporting obligations expensive and time consuming - No de minimis exception - Source of origin difficult to know in complex supply chain - Law presumes ability to tie specific suppliers to specific products Most Issuers will likely need to file SEC Conflict Minerals Report - During first two years, issuers may identify source of origin as “undeterminable” (note that due diligence still required) - SEC Conflict Minerals Report required during two-year phase in period even if source of origin is “undeterminable” - After two-year phase in period, independent private sector audit may be required for Conflict Minerals Report Conflict Minerals Law - Background

10. 10 Conflict Minerals Region 10

11. Counterfeit Parts Overview

12. No U.S. Government export controlled content. No U.S.G. export restrictions apply Detection and Avoidance of Counterfeit Parts … New Requirements Relevant to DoD Contractors June 2013 - 12 NDAA 2012 § 818: “Detection and Avoidance of Counterfeit Electronic Parts” NDAA 2013 § 833: “Contractor Responsibilities in Regulations Relating to Detection and Avoidance of Counterfeit Electronic Parts” DFARS Case 2012-D055: “Detection and Avoidance of Counterfeit Electronic Parts” FAR Case 2012-032: “Higher-Level Contract Quality Requirements” FAR Case 2013-002: “Expanded Reporting of Nonconforming Supplies” NDAA 2012 § 818: “Detection and Avoidance of Counterfeit Electronic Parts” NDAA 2013 § 833: “Contractor Responsibilities in Regulations Relating to Detection and Avoidance of Counterfeit Electronic Parts” DFARS Case 2012-D055: “Detection and Avoidance of Counterfeit Electronic Parts” FAR Case 2012-032: “Higher-Level Contract Quality Requirements” FAR Case 2013-002: “Expanded Reporting of Nonconforming Supplies” The core … Emphasis on purchase from Original Component Manufacturers (OCMs) or their authorized distributors Apply “inspection, testing and authentication”, when parts are purchased from other than OCMs or authorized distributors Communicate findings of counterfeits encountered The core … Emphasis on purchase from Original Component Manufacturers (OCMs) or their authorized distributors Apply “inspection, testing and authentication”, when parts are purchased from other than OCMs or authorized distributors Communicate findings of counterfeits encountered

13. No U.S. Government export controlled content. No U.S.G. export restrictions apply Strengths … DoD to implement a risk based approach Emphasis on purchases from OCMs and “Trustworthy Suppliers” Adoption of internal systems to deter, detect, and avoid counterfeits Report counterfeits through GIDEP Imposed upon DOD as well as Industry Strengthened Customs inspections & enforcement Strengths … DoD to implement a risk based approach Emphasis on purchases from OCMs and “Trustworthy Suppliers” Adoption of internal systems to deter, detect, and avoid counterfeits Report counterfeits through GIDEP Imposed upon DOD as well as Industry Strengthened Customs inspections & enforcement Issues and unknowns… Treats all types of counterfeits equally Lacks clarity re “cost of rework or corrective action” No “safe harbor” if best practices used Focus is not on where the suspect material enters the DOD supply chain Lacks clarity re “Trusted Supplier” Silent re disposition of suspect parts Silent re support from OCMs Silent re DMSMS issues Issues and unknowns… Treats all types of counterfeits equally Lacks clarity re “cost of rework or corrective action” No “safe harbor” if best practices used Focus is not on where the suspect material enters the DOD supply chain Lacks clarity re “Trusted Supplier” Silent re disposition of suspect parts Silent re support from OCMs Silent re DMSMS issues June 2013 - 13 For analysis, see … A White Paper Regarding Department of Defense Implementation of Section 818 of the National Defense Authorization Act for Fiscal Year 2012 American Bar Association, Task Force on Counterfeit Parts (October 5, 2012) For analysis, see … A White Paper Regarding Department of Defense Implementation of Section 818 of the National Defense Authorization Act for Fiscal Year 2012 American Bar Association, Task Force on Counterfeit Parts (October 5, 2012) For guidance on “Compliance Programs”, see … Compliance Programs for Counterfeit Parts Avoidance and Detection Compliance Programs for Counterfeit Parts Avoidance and Detection Contract Management Magazine, NCMA (May 2013) For guidance on “Compliance Programs”, see … Compliance Programs for Counterfeit Parts Avoidance and Detection Compliance Programs for Counterfeit Parts Avoidance and Detection Contract Management Magazine, NCMA (May 2013) Detection and Avoidance of Counterfeit Parts … New Requirements Relevant to DoD Contractors

14. Increase in Whistleblower and Suspension/Debarment Activity Overview

15. 10 USC § 2409 and DFARS 203.9 Employee that provides evidence of misconduct may not be discharged, demoted, or otherwise suffer retaliation or reprisal Person who believes that they engaged in protected activity and was subjected to retaliation for that activity may submit a complaint to the cognizant IG IG investigates and makes report to agency head for determination Protection for Employees of Government Contractors 15

16. Protection for Employees of Government Contractors Recent changes – FY2013 NDAA Provisions – Effective date is July 2, 2013 – Extension to employees of civilian contractors – Extension to employees of subcontractors – Internal disclosures are covered -- now, protection is triggered by disclosure to a “management official or other employee of the contractor or subcontractor who has the responsibility to investigate, discover, or address misconduct” 16

17. Suspension and Debarment Activity 17