N00164_18RGM66_REDACTED_FBO.pdf

DEPARTMENT OF THE NAVY

CRANE DIVISION

NAVAL SURFACE WARFARE CENTER

300 HIGHWAY 361

CRANE INDIANA 47522-5001

IN REPLY REFER TO:

J&A Number: CR-180037 Code: GXM

P . R. Number:N0016418RGM66

CLASS JUSTIFICATION AND APPROVAL (CJ&A)

FOR USE OF OTHER THAN FULL AND OPEN COMPETITION

JUSTIFICATION

1. Contracting Activity

Naval Sea Systems Command, Naval Surface Warfare Center, Crane Division (NSWC Crane) Contracts Division (Code 022 ).

2. Description of the Action Being Approved

Award of a Basic Ordering Agreement (BOA) on an other than full and open competition basis for Strategic Radiation Hardened Microelectronics (SRHM) fabrication and engineering services in support of the Off ice of the Secretary of the Defense (OSD) to Honeywell Aerospace - Plymouth (Honeywell) .

Authority to act under this CJ&A expires 08 June 2023, or five (5) years after BOA award, whichever date comes first .

3. Description of Supplies / Services

Honeywell shall provide production, engineering and sustainment support for SRHM products. Honeywell shall provide engineering support in the production of SRHM technologies to ensure the viability of the next generation of U.S. strategic programs

Honeywell shall manufacture SRHM using Radiation-Hardening By Process (RHBP) fabrication. Radiation-Hardening By Design (RHED ) may also be incorporated into their SRHM designs. The manufactured components will be tested, verified, documented, stored and maintained in working condition at the Honeywell facility in Plymouth, Minnesota prior to shipment to various DoD-supported programs. This

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J&A Number: CR-180037

BOA will ensure that the only remaining on-shore, in-house Defense Microelectronics Activity (DMEA) -accredited Trusted producer of RHBP SRHM components is available for strategic nuclear weapon systems in compliance with the Fiscal Year (FY) 2018 National Defense Authorization Act (NDAA) as discussed in Paragraph 5.

Additionally, as the requirements of the U.S . strategic deterrent and nuclear modernization programs continue to solidify, it will be necessary for Honeywell to maintain its capability to support these programs well past the initial design age of the production equipment currently employed at the Honeywell facility. Design age means the equipment in Honeywell's facility is past its expected lifetime. To ensure the Honeywell facility can meet this requirement, it will be necessary to invest in the upgrade of existing fabrication lines, including procurement of equipment to support current and future operations and Department of Defense (DoD) requirements.

The DoD's minimum needs have been verified by the certifying technical and requirements personnel .

Estimated funding for the BOA with a five-year ordering period is as follows:

Title III* Total Year 1 Year 2 Year 3 Year 4 Year 5 Total $93,000,000 *Note: Defense Production Action (DPA) Title III supports the financing of technologies deemed essential for national defense .

4. Statutory Authority Permitting Other Than Full and Open Competition

10 U.S.C. 2304(c) (3) Industrial Mobilization.

5. Rationale Justifying Use of Cited Statutory Authority

As described in FAR 6.302-3(a) (2) (i), full and open competition need not be provided when it is necessary to award a contract to a particular source in order to maintain

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J&A Number: CR-18003 7 a facility , producer, manufacturer, or other supplier available for furnishing supplies or services to achieve industrial mobilization. It is the DoD's intent to preserve Honeywell as a Trusted Supplier of SRHM components using its RHBP fabrication capacity , as well as RHBD in their SRHM designs .

The U.S . Congress stipulated, via the FY 2018 NDAA, Section 1670, the DoD must certify to Congress by 31 December 2020 the "capability to produce or acquire strategic radiation hardened trusted microelectronics, consistent with Department of Defense Instruction 5200.44, is operational and available to supply necessary microelectronic components for necessary radiation environments involved with the acquisition of delivery systems for nuclear weapons". In so certifying, the DoD must prove by 2020 that it has a Trusted source of SRHM into the foreseeable future. In order to meet this certification requirement, the foundry source must be a DMEA accredited Trusted Supplier. The products must be qualified to a strategic radiation-hardened level of at least the currently fielded strategic delivery systems .

In addition, the 2018 Nuclear Posture Review (NPR) requires implementation of a broad range of ongoing and new programs of record for near, medium, and far term strategic modernization to assure the v iability of the U. S . Strategic Triad that will provide deterrence through the mid-2040s against known or projected strategic threats. The NPR findings further require assuring and maintaining a robust industrial base to provide the highest technological capabilities for these strategic initiatives. One of the most critical elements for modernization and sustainment of strategic nuclear weapon system programs of record is to assure a viable proven supply base is maintained for uninterrupted design, development, and production of SRHM components at the highest levels of production-demonstrated

SRHM.

In 2002, Honeywell and received a total of to modernize each company's semiconductor foundry for the purpose of advancing and preserving domestic sources for this critical technology, i.e . , RHBP. In 2013, the shutdown leaving Honeywell as the only trusted integrated RHBP facility in the U.S. Honeywell is also certified by DLA and listed on the Qualified Manufacturer List(QML) QML-38535 .

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Currently, Honeywell's fabrication lines operate at the 800, 350, and 150 nanometer technology nodes. While these node sizes are largely obsolete, SRHM components using these processes are necessary for the U.S. strategic deterrent assets currently in operation as well as those planned in the future. Additionally, Honeywell's Plymouth fabrication facility has been certified as a member of the QML, which is a lengthy and costly process. To leverage the large investment to date in SRHM components produced at Honeywell, as well as maintain the production-qualification of these parts to meet nuclear surety requirements, the existing Honeywell RHBP production lines and capabilities must be maintained. Additionally, Honeywell is capable of producing components using a Silicon-on-Insulator process, which adds significant radiation-hardness .

Because the technology capability described above is aged, commercial foundries do not possess the ability to produce components at these node sizes any more as they have advanced to smaller node size process technology to maintain their market competiveness and commercial relevance. While the smaller process node sizes allow for fabrication of more advanced components at lower production cost in high volumes, these advances are often detrimental to the radiation hardness of components that are produced, which risks system survivability. Also, most foundries will not accept changes to their processes and/ or low volume U.S . Government · orders since both can negatively impact their ability to produce components in the most economical and commercially-viable manner possible.

On 28 November 2017, Honeywell issued a call for Last-Time Buy (LTB) orders for its SRHM products and services, signaling it plans to shut down its in-house SRHM fabrication operations. Honeywell cited low demand for the SRHM components and high fixed costs of running the foundry as reasons to cease operations after fulfillment of customer LTB orders. Considering existing market demand and production levels, Honeywell estimates its annual costs to sustain the foundry at a viable level are approximately an additional per year . Strategic programs are anticipated to begin purchasing Honeywell SRHM parts starting in FY 2023, resulting in a reduced Title III funding requirement of in Year Five of the ordering period.

In 2016, the Institute for Defense Analyses (IDA) conducted an independent study under contract number HQ0034-14-D-0001

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to analyze the semiconductor industrial base for the DoD. The IDA study is included as an attachment to this document. The study found the costs for new advanced semiconductor fabrication facilities have grown significantly over recent years. A foreign-based company announced the opening of a non-SRHM facility for the production of semiconductors at a cost of $14 billion. In addition, the annual operation and sustainment cost of these commercial state-of-the-art fabrication facilities can cost as much as $6 billion per year.

By comparison, the costs associated with preserving the Honeywell foundry is far more cost-effective and lower risk than other alternatives; particularly since the goal is to sustain existing production lines that can continue to manufacture production-qualified parts.

The DoD anticipates a much higher demand for SRHM components than the current market bears, by to support the

. To prevent the loss of the only domestic, Trusted source for SRHM components, OSD DPA/Title III Program Office and NSWC Crane developed technical requirements and an acquisition strategy to utilize the DPA Title III program to preserve the Honeywell foundry capabilities.

The DPA/ Title III Program Office, as part of OSD, carries out Presidential Directives focused on creating, maintaining, and advancing domestic production capabilities for essential national defense resources. The Title III Program Office uses specially appropriated, no-year funding to carry out its directives. DPA Title III funding will be used on this BOA to sustain the Honeywell foundry to meet the FY18 NDAA deadline, 2018 NPR, and future defense program requirements.

As described in FAR 6.302-3(b) (1) (ii), the authority in FAR 6.302-3(a) (2) (i) may be appropriate when necessary to prevent the loss of a supplier's ability and employees' skills.

Honeywell possesses the requisite engineering staff, skilled production personnel, equipment and expertise to design, development, and manufacture SRHM components for use in strategic deterrence systems. Honeywell's workforce has the knowledge in understanding and intellectual property related to the mitigation of the effects of nuclear detonation on microelectronics to support SRHM components production. This critical workforce is currently at risk based on the planned facility closure.

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As described in FAR 6.302-3(b) (1) (iv) (A), the authority in FAR 6.302-3(a) (2) (i) is also appropriate to maintain the required domestic capability for production of critical supplies by limiting competition to items manufactured in the U.S. or its outlying areas. Honeywell is located in the U.S.

and is the only DMEA-accredited manufacturer of the Trusted SRHM components used by the DoD. Further, due to use in strategic nuclear weapon systems, foreign sources are not authorized.

The market demand for DMEA-accredited Trusted SRHM components is not large enough to incentivize further private investment in the necessary facilities, equipment, and workforce.

Additionally, there is a long learning curve and large capital investment required to produce SRHM components.

Despite the large Government investment in Honeywell's foundry, the closure of the BAE foundry and Honeywell's call for LTB indicates the market for these products is dependent on continued DoD demand and investment to be sustainable/viable .

Given above, an alternate source would not be able to stand up a full RHBP capability, be DMEA Trust - accredited, and reliably manufacture production-qualified parts at the strategic hardness level of parts that are currently fielded in time to meet the FY 2018 NDAA Section 1670 deadline of December 31, 2020. Consequently, Honeywell is the only source capable of meeting this requirement by the FY18 NDAA Section 1670 deadline.

6. Description of Efforts Made to Solicit Offers from as Many Of ferors as Practicable

A Request for Information (RFI) Sources Sought was posted on the Federal Business Opportunities (FEDBIZOPS) website on 30 March 2018 . The RFI stated the Navy's intention to award a BOA to Honeywell using the cited authority and posted the draft statement of work for reference . There were three responses to the Sources Sought .

The three sources providing timely responses were (1) Honeywell Aerospace in Plymouth, MN; (2)

; and, (3) . On 17 May

2018, a fourth response was received from in partnership with

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. The RTA evaluated the submitted responses from all four companies and determined only Honeywell addressed all needs and can provide solutions to meet the requirements. On 21 May 2018, the Contracting Officer sent letters to the other three respondents stating why their RFI responses did not satisfy the Government requirements . confirmed receipt of the letter on 24 May 2018, confirmed receipt on 22 May 2018, and confirmed receipt on 25 May 2018. As other viable sources emerge, they will be added to this J&A, by an addendum, and future requirements will be competed amongst the viable sources.

Therefore, Honeywell was the only source deemed capable of satisfying the Government's needs within the time period required by FY 2018 NDAA Section 1670. Additional market research has not been conducted as it is not practicable for any company other than Honeywell to provide the required services within the timeframe required .

Individual or classes of orders to be issued under this BOA will be published on the FEDBIZOPS website . Any responses received will be considered.

7 . Determination of Fair and Reasonable Costs

The Contracting Officer will determine the anticipated cost to the Government for the supplies and services covered by the CJ&A to be fair and reasonable. Defense Contract Management Agency pricing assistance will be requested along with Honeywell's certificate of current cost and pricing to support the fair and reasonable cost determination .

8. Actions to Remove Barriers to Competition

For the reasons set forth in paragraphs 5 and 6, NSWC Crane has no plans at this time to compete future contracts for the types of supplies and services covered by this document. The circumstances surrounding the need to obtain the required supplies and services without providing full and open competition will be reviewed annually. As other potential sources emerge, NSWC Crane will assess whether competition for future requirements is feasible .

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CERTIFICATIONS AND APPROVAL

TECHNICAL/REQUIREMENTS CERTIFICATION (FAR 6.303-2(b))

I certify that the facts and representations under my cognizance, which are included in this justification and its supporting acquisition planning data, including Acquisition Plan No. 18-006, except as noted herein, are complete and accurate to the best of my knowledge and belief.

Signature Phone No. Date

REQUIREMENTS COGNIZANCE:

Signature Phone No . Date

LEGAL SUFFICIENCY REVIEW (NMCARS 5206.303(90))

I have determined this justification is legally sufficient.

Phone No . Signature Date

CONTRACTING OFFICER CERTIFICATION (FAR 6.303-2(a) (12))

I certify that this justification is accurate and complete to the best of my knowledge and belief.

APPROVAL BLOCK (FAR 6.304 for Approving Official)

Upon the basis of the above justification, I hereby approve, as Senior Executive of the STRL, the solicitation of the proposed procurement described herein using other than full and open competition, pursuant to the authority of 10 U.S.C. 2304(c) (3) .

Senior Executive of the STRL rett Seidle, Crane Technical Director Phone No. Date

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