Mitigating Threats of Counterfeit Materials in the Capital Projects Industry

RT-307 Topic Summary
RT 307


Counterfeit, fraudulent, and suspect items (CFSI) continues to be a threat to the capital projects industry. The research team reconfirmed the status of the CFSI threat, while at the same time updating and expanding upon the research of RT-264, Product Concerns in Low-cost Sourcing Countries, which documented the variety, scope, and impact of CFSI. The research team utilized a multi-staged approach in its objective to develop a methodology to mitigate the presence and effects of the CFSI in the capital project supply chain.

RT-307 focused on the development of the CFSI Risk Mitigation Framework, which includes a tool that can be utilized to identify and assess CFSI risk, as well as a catalog of 19 risk mitigation strategies. In addition, the team proposed a two-phase collaborative initiative to align CFSI mitigation actions across the construction industry by consolidating CFSI data from across the industry and channeling it into data exchange programs. Ultimately, this would be used to increase industry awareness of CFSI and mitigate infiltration via information sharing and data analysis of CFSI trends and patterns.

Key Findings and Implementation Tools

1 : Summary of Research Stages and Outcomes

The nature of the capital projects industry necessitates a construction specific approach to mitigating CFSI incidents. 

The capital projects industry is particularly vulnerable to CFSI because its characteristics and exigencies so differentiate it from other industries (e.g., unrepeatable projects, high initial investments, long payback periods, multiple-party involvement, and tight profit margins).

The research team developed the CFSI Framework through methodical research of CFSI incidents and existing mitigation strategies. The research consisted of four distinct stages which are described in detail in the research summary. (RS307-1, p.5) 

Reference: (RS307-1)

2 : Detection of CFSIs

More than half (53%) of the identified CFSIs were detected after completion. The mostly widely reported CFSI continues to be bulk items. (RS307-1, p. 6) 

  • The high rate of CFSI detection after installation and completion (e.g., 53 percent) highlights the need for comprehensive training of personnel to prevent the introduction of CFSI into the supply chain. 
  • The findings of RT-307 re-confirmed those of RT-264. In both cases, valves, fasteners, bolts, and pipe were found to be some of the most widely reported CFSI.
Reference: (RS307-1)

3 : CFSI Risk

Surveys and interviews confirmed that counterfeiting continues to be a complex and dynamic threat to the construction industry. 

The research team noted the following key points based upon analysis of the survey results:

  • The absence of training suggests that companies that did not report CFSI incidents may not have discovered counterfeit items that were in fact present. Thus, it is reasonable to assume that the incidence of CFSI and its consequences are much greater than reported.
  • The general lack of reporting allows counterfeit items and counterfeiters to continue to plague the industry.
  • The industry and CII have a unique opportunity to employ a collaborative information-sharing system as a measure to prevent CFSI incidents.

A detailed discussion of the survey results can be found in the research summary (RS307-1, p. 1).

Reference: (RS307-1)

4 : Risk Identification

No single method can – by itself – effectively prevent infiltration of CFSI into the supply chain. 

Survey respondents identified a wide range of methods and technologies that are being used to mitigate the introduction of CFSI. In line with this, the research included 19 risk mitigation strategies in the CII Catalog of CFSI Risk Mitigation Strategies, which is contained in the CII CFSI Risk Mitigation Framework. (RS307-1, p. 11) 

Reference: (RS307-1)

5 : Survey

Survey respondents look to CII to provide guidelines and act as a conduit for aggregation and sharing of CFSI information in order to avoid legal concerns. (The aggregation and sharing could be managed by an organization other than CII, but it necessitates meeting provisions to assure no legal issues.) 

Both the main and the follow up surveys showed that:

  • Survey respondents viewed the risk associated with CFSI as important, but did not agree on the next steps needed to mitigate this risk.
  • Survey respondents were reluctant to share CFSI data in a common database, but expressed interest in CFSI guidelines provided by CII.

This suggests that it may be important for CII to offer specific ways to share useful information, while avoiding associated legal concerns related to data-sharing. In line with this, the team identified existing data exchange initiatives (e.g., EPRI, iNEMI, GIDEP, and ERAI) that may serve as a model for such an effort.

Ultimately, the research concluded that any data-aggregation and -sharing effort must be managed in such a manner that it balances the need for privacy against the need for useful data. 

Reference: (RS307-1)

6 : CFSI Risk Mitigation Framework

The research team proposed a comprehensive risk-based framework for the mitigation of CFSI risk in the capital projects industry; this approach is structured around risk identification, risk assessment, risk mitigation, and risk communication. (RS307-1, p. 12) 

This framework consists of four components, which are described in detail in the research summary:

  • The risk identification component provides a common structured format for the collection of information that may be used to analyze risk scenarios and mitigation actions. 
  • The risk assessment component is designed to gauge the risk of CFSI infiltration into the project supply chain. 
  • The risk mitigation component consists of a catalog of 19 risk mitigation strategies.
  • The risk communication component is used to communicate the identified risk and create the awareness needed to help mitigate the threat of CFSI at both the supply chain and industry levels.
Reference: (RS307-1)

7 : Two-phased Collaborative Initiative

The research team developed a two-phase collaborative initiative to align CFSI mitigation actions across the construction industry. The two phases consist of: 1) application of the CFSI Framework at the CII membership level, with its eventual expansion to the construction industry 2) a collaborative CFSI initiative centered at CII. (RS307-1, p. 11)

The proposed CFSI collaborative initiative provides the basis for CII to act as this industry-level champion. This initiative, which would be modeled on existing CII safety initiatives, is envisioned as the focal point for actions to reduce the threat of CFSI entry at the industry level.

The initiative consists of a two-phase approach which is described in detail in the research. The initial phase would focus on CFSI mitigation at company level, while the second phase would focus on industry level CFSI mitigation.

Reference: (RS307-1)

8 : Implementation Tool #1

IR307-2, CFSI Risk Mitigation Tool

Consists of an Access database tool that was developed to support the CII CFSI Risk Mitigation Framework; it may be used to help identify and quantify CFSI risk and which may be used to select CFSI risk mitigation strategies. This tool contains the CII Catalog of CFSI Risk Mitigation Strategies.
Reference: (IR307-2)

Key Performance Indicators

Improved quality, Reduced rework

Research Publications

Mitigating Threats of Counterfeit Materials in the Capital Projects Industry - RR307-11

Publication Date: 04/2016 Type: Research Report Pages: 112 Status: Reference

Counterfeit Materials Database - IR307-2

Publication Date: 10/2014 Type: Implementation Resource Pages: 28 Status: Tool

Mitigating Threats of Counterfeit Materials in the Capital Projects Industry - RS307-1

Publication Date: 09/2014 Type: Research Summary Pages: 28 Status: Supporting Product

Presentations from CII Events

Plenary Session - Mitigating Threats of Counterfeit Materials in the Capital Projects Industry

Publication Date: 08/2014 Presenter: Max Casada Number of Slides: 13 Event Code: AC14

Implementation Session - Mitigating Threats of Counterfeit Materials in the Capital Projects Industry

Publication Date: 08/2014 Presenter: Joe Gomen Number of Slides: 39 Event Code: AC14

Session - Mitigating Threats of Counterfeiting in the Capital Projects Industry

Publication Date: 09/2014 Presenter: Number of Slides: 67 Event Code: PIW914