SPE7LX17R0019_JA_REDACTED.pdf

JUSTIFICATION FOR OTHER THAN FULL AND OPEN COMPETITION

SOLICITATION SPE7LX-17- R-0019

DLA Land & Maritime Justification for Other Than Full & Open Competition

(AUG 2016)

For Official Use Only Source Selection Information-- See FAR 2.101 and 3.104

[X] ORIGINAL

[ ] ADDENDUM (attach copy of original J&A for add-ons or revisions)

i. The Defense Logistics Agency, DLA Land and Maritime, is the contracting activity.

ii. The action being approved is the acquisition of Generalized Emulation of Microcircuits (GEM) production services and the supply of Federal Supply Class (FSC) 5962 microcircuits on other than full and open competition basis. The proposed action is for the solicitation and award of a hybrid Cost-Plus Fixed Fee (CPFF) and Firm-Fixed-Price (FFP) effort, Requirements Type Contract (RTC) to SRI International (CAGE 03652) with a period of performance consisting of a five (5) year base period and one, six (6) month option period from February 01, 2019 through July 31, 2024.

iii. DLA requires a continuing source of supply for obsolete FSC 5962 microcircuits. Weapon systems throughout the Department of Defense continue to be adversely impacted by rapid changes in integrated circuit (IC) technologies, resulting in serious obsolescence problems. -

The GEM Program supports the warfighter with a cost-effective, long-term solution for obsolescence of FSC 5962 microcircuits. The GEM Program Office identified the minimum GEM Manufacturing Capability requirements that must be performed by the contractor to meet the Government’s needs to maintain, support, and enhance the GEM design, fabrication, and test technologies. The GEM Manufacturing Capability requirements are summarized below:

A. MIL-PRF-38535 (general performance specification) certified GEM device design and manufacturing capability. The requirement includes the capacity to produce and deliver microelectronic devices meeting the Form, Fit, Function, and Interface (F3I) requirements using the GEM technology in quantities required for the application(s).MIL-PRF-38535 specifications are outlined in the Statement of Work (SOW) paragraph 1.3.1.1.

B. Qualified Manufactured Listed (QML) Certified Integrated Circuit Fabrication Facility C. Maintain and improve emulation capabilities;

D. Design, manufacture and test microcircuits;

E. Have the capacity to produce and deliver replacement parts upon award; and F. Use Advanced Microcircuit Emulation (AME) technology developed by SRI International (03652) to enhance the current GEM Program arrays and fabrication processes. In addition, the vendor must possess the capability to transition the new technology developed under the current DLA AME R&D Contract, awarded to SRI International, to production under the DLA Land and Maritime GEM Production Contract.

DLA Land & Maritime Justification for Other Than Full & Open Competition

(AUG 2016)

For Official Use Only Source Selection Information-- See FAR 2.101 and 3.104

Estimated Value:

The total cost of this program is estimated to be and this value will serve as the contract ceiling price. The estimate was developed based on funding required for 20 GEM designs per year, projected GEM parts sales based on actual and anticipated sales, projected technology extension processes, and historical data from military customers and outside agencies. The GEM production costs incur through management, design, fabrication, packaging, testing, and engineering costs.

The following variables affect cost:

1. The number of new GEM designs per year;

2. The minimum numbers of base wafers and personalized wafers needed to sustain the fabrication and personalization capabilities.

3. The amount of resources used by SRI International. Resources include the number of designers employed by SRI International, their salaries, the number of designs each designer can complete, etc.;

and

4. Funding limitations and the availability of aftermarket suppliers result in fewer GEM designs. Fewer GEM designs results in even fewer sales.

Program Origination and Background:

DLA Land and Maritime seeks to procure successor GEM production services and the supply of Federal Supply Class (FSC) 5962 microcircuits. A microcircuit is a small circuit with a high equivalent circuit element density, which is considered as a single part composed of interconnected elements placed and/or formed on or within a single substrate to perform an electronic circuit function. The elements may be formed on or within a semiconductor material substrate; may consist of conductive film(s) formed on an insulating substrate; or may be a combination of one or both of these types with discrete elements. The term microcircuit ied to circuit devices including, Integrated Circuit Devices, Integrated Circuit

Modules, and Integrated Electronic Devices (Hybrid, Magnetic, Molecular, Opto-Electronic, and Thin Film).

microcircuit excludes -

(discrete miniaturized components), and items fabricated in the form of monolithic thick-film or thin-film

YR 1 - FY 19 YR 2 - FY 20 YR 3- FY 21 YR 4 - FY 22 YR 5 - FY 23

OPT YR6 - FY23

(6 MONTH

PERIOD)

Data Deliverables

Fixed -Price Delivery Orders

GEM SPE7X17R0019 FIVE (5) YEAR BASE PERIOD AND ONE (1) SIX MONTH OPTION PERIOD ESTIMATED TOTAL VALUE

CLINs

Core Effort

EST. TOTAL CLIN VALUE

Estimated Total Value

Estimated Total Value

Eng.Ser. Tech and Design Extensions Estimated Total Value

Warstopper Program Effort

GFP/GFE

Estimated Total Value

Estimated Total Value

Not a Separately Priced CLIN

Since the use of Warstopper Program Effort is unknown at this time, this CLIN was included on a contingency basis. Procurement Warstopper Funding (PWF) is used to fund this effort. The funding is reimbursable to DLA Land and Maritime and comes from DLA Headquarters. Since the Appropriation is Procurement (2 Year Funding) and DLA L&M cannot accept procurement funds. The funds are direct cited onto the GEM Contract.

DLA Land & Maritime Justification for Other Than Full & Open Competition

(AUG 2016)

For Official Use Only Source Selection Information-- See FAR 2.101 and 3.104 structures that in themselves are not functional electronic circuits (e.g., Capacitors, Resistors, Transistors, or

The microcircuit industry is characterized by short lifetimes for production technology processes (families).

The demand for faster and smaller microcircuits in the commercial market results in families with short lifetimes. Aggregate DoD requirements (direct and indirect) for microcircuits constitute less than 1% of the total microcircuit industry's market share. Microcircuits used by the military typically do not utilize the most current technology because many DoD weapon systems are aged and continue to be used past original expected lifetimes. Microcircuit insertion into DoD systems occurs late in the production life of given technologies due to the strict environmental, quality, and documentation requirements of weapon system platforms. The long lifetime of fielded weapon platforms result in a supportability problem when industry abandons a particular production technology process for a variety of reasons including low profitability, production equipment evolution, and technology evolution in raw production materials.

The GEM Program supports many major DoD weapon systems, including but not limited to the F-15 Eagle, F-16 Fighting Falcon, JointSTARS, Phalanx, AN/UKK44, PATRIOT, F/A-22, MLRS, Bradley Fighting Vehicle, F/A-18 Hornet, B1-B Bomber, AEGIS, MOPMS (modular Pack Mine System), AV-8 Harrier, and AIM-9G Sidewinder Missile weapon systems.

The Joint Technical Coordinating Group on Microcircuits (JTCG-MC) analyzed DoD’s microcircuit industry and coordinated a technical approach to solve DoD’s microcircuit obsolescence problems. The JTCG-MC commissioned the Microcircuit Emulation Program (MEP) to address DoD’s microcircuit obsolescence issues. In partnership with MEP, the DLA Manufacturing Technology (MANTECH) program successfully developed GEM Technology to satisfy all MEP goals. The GEM Program continues to be the only solution to DoD’s microcircuit obsolescence problems by providing Form, Fit, Function, and Interface (F3I) replacement parts for some obsolete ICs. The GEM Program has maintained weapons systems readiness levels by providing full-scale production of microelectronic devices meeting F3I requirements of the original devices. The GEM Program eliminates the time and costs associated with the redesign of the next higher assembly (NHA). The GEM Program capability maintains future emulated device availability by inventorying the microcircuit designs in the GEM design library, in lieu of part inventory.

DLA Land & Maritime Justification for Other Than Full & Open Competition

(AUG 2016)

For Official Use Only Source Selection Information-- See FAR 2.101 and 3.104

Previous Contract Iterations: As illustrated in the table below, since 1987 the Defense Logistics Agency (DLA) has entered into six (6) contracts with SRI International and Sarnoff Corporation for GEM Program requirements.

Contract Type Duration Awardee

DLA90087C3330 Research and Development

1987-1992 SRI International (03652) Prime Contractor Sarnoff Corporation (0DKS7) Sub Contractor

DLA90092D0049 Verification and Validation

1992-1997 SRI International (03652) Prime Contractor Sarnoff Corporation (0DKS7) Sub Contractor

SP070097D4002 Production I 1997-2002 Sarnoff Corporation (0DKS7) Prime Contractor

SP070002D1380 Production II 2002-2008 Sarnoff Corporation (0DKS7) Prime Contractor

SPM7MX08D4001 Production III 2008-2013 * SRI International (03652) Prime Contractor

SPM7MX13D0081 Production

IV

2013-2019 **SRI International (03652) Prime Contractor

* A modification issued by DCMA Philadelphia effective on January 26, 2011 incorporated a Novation Agreement revising the company name from Sarnoff Corporation (0DKS7) to SRI International (03652)

** A contract modification to the basic contract was executed to extend the period of performance nine (9) months from April 30,2018 to January 31, 2019

All four previous GEM production contacts were awarded using a J&A for other than full and open competition based on the following:

The existing GEM Design library “matched” to the existing emulation contractors proprietary wafer fabrication process.

The contractor’s established skilled engineers and their specialized understanding of the emulation technology.

The length of time and cost associated with the development of a production capability.

The existing QML wafer fabrication and testing processes can immediately accept orders once the contract has been awarded.

Please see Attachment #3 – J&As for the GEM Basic Contract SPM7MX13D0081 and GEM Contract Modification SPM7MX-13-D-0081-P00027 and Delivery Order 0134 Modification 17.

DLA Land & Maritime Justification for Other Than Full & Open Competition

(AUG 2016)

For Official Use Only Source Selection Information-- See FAR 2.101 and 3.104

Over the past 30 years, the GEM Program, and SRI International as the GEM contractor, successfully provided F3I replacement parts for DLA Land and Maritime, the military services, and their contractors. SRI International continues to develop and enhance GEM technology through the transition and utilization of any new Advanced Microcircuit Emulation (AME) technology on DLA Land and Maritime GEM Production Contracts. The GEM design library improved weapons system life cycle support by ensuring future availability of the device and manufacture parts as needed through a low volume on demand type manufacturing capability, in lieu of a one-time costly production runs. SRI International (03652) currently offers 735 microcircuit types listed on the GEM Website, http://www.gemes.com . All GEM devices meet the highest microcircuit reliability level, and GEM devices are used in more than 2,000 next higher Circuit Card Assemblies (CCAs). These CCAs are used in 375 DoD unique weapons systems. Over 110,000 GEM parts have been designed and delivered for the production and sustainment of DoD weapon systems. More than 2,200 successful insertion tests in NHA’s supported 375 weapons systems across all four branches of the military services.

iv. The statutory authority permitting other than full and open competition is:

10 U.S.C. 2304(c)(1) - Available from only one or a limited number of sources. It is necessary to limit competition and restrict this acquisition to SRI International (03652) in order to maintain essential engineering and research and development capability required for the GEM program. In particular:

Only Source with Unique GEM Design and Production Capability: SRI International is the only source with the capability and capacity to produce and deliver microelectronic devices meeting F3I requirements using GEM technology in quantities required for the application(s). SRI International significantly increased their capacity by expanding the facility from 6,000 to over 12,000 square feet.

Their IC Facility now operates on two shifts, five days a week, to develop new silicon IC technologies and deliver prototype product, low volume production, and engineering technology samples. SRI International maintains capacity to deliver GEM parts in support of DoD surge requirements. SRI International has demonstrated their capability and capacity by currently offering 735 microcircuit types used in 375 DoD unique weapons systems.

SRI International is the only company with detailed knowledge of GEM reverse engineering procedures, GEM design procedures, design tools, the GEM Design Library, GEM arrays, GEM fabrication processes, and GEM test procedures. SRI International’s capability for design and simulation, base wafer fabrication and base wafer personalization elements are unique to the industry. Other elements of GEM design and production capabilities exist within industry, but at this time no known viable commercial industrial alternatives meet the capabilities offered at SRI International. There is no known commercial (non-military) requirement identified for GEM emulation technologies. As discussed above, the commercial technology has moved past DoD’s requirements for replacement microcircuits, so commercial technology would not currently support DoD’s requirements. Please reference Attachment # 2 for a summary of SRI International’s unique GEM capability.

DLA Land & Maritime Justification for Other Than Full & Open Competition

(AUG 2016)

For Official Use Only Source Selection Information-- See FAR 2.101 and 3.104

Only Qualified Manufactured Listed (QML) Certified Integrated Circuit Fabrication Facility: SRI International is the only known supplier with a QML certified IC Fabrication Facility and 30 years of experience in fabricating GEM microcircuits. SRI International is the only source with the mature capability to deliver Class Q microcircuits. SRI International uses GEM Technology to interpret the detailed government or customer microcircuit specifications to fabricate microcircuits to exactly meet the military customers’ needs. SRI International’s IC Facility is used almost exclusively to fabricate GEM wafers. A wafer is the silicone disc that contains a grid of the microcircuit. The wafer is then sectioned into the individual dies and packaged. SRI International currently processes approximately 100 GEM wafers per year. SRI International has successfully delivered more than 110,000 QML or 888-B conforming microcircuits of 375 different specifications during 20 years of GEM production contracts. SRI International’s DLA Land & Maritime certified QML quality system controls the entire process. Based on the GEM Program’s history, the length of time to get a new source with the “generalized” production capability from wafer fabrication to device testing could be as long as 10 years if at all possible.

Emulation and Industry Experience: Any reduction or break in the program would likely result in one or more crucial skills being reassigned or lost permanently. The availability of qualified personnel possessing the required skills and experience to produce a GEM device is limited to SRI International’s current staff. SRI International has key personnel with 30+ years of emulation and Diminishing Manufacturers Sources and Material Shortages (DMSMS) industry experience. SRI International’s skilled engineers with specialized understanding of emulation technology are irreplaceable.

Around 25% of SRI International’s employees have advanced college degrees in either Electrical Engineering or Solid State Physics. The design personnel require highly skilled engineers. The engineers’ duties consist of microcircuit design techniques, reverse engineering, device characterization, test, and long-term design experience with the GEM library. It is necessary to have a senior experienced GEM designer familiar with GEM designs to detect design shortfalls and/or unanticipated device performance. The fabrication personnel requirement includes numerous skilled microcircuit technicians, competent process engineers, experienced GEM process diagnostician, and technical leaders. Finding alternate personnel with appropriate technical backgrounds and abilities to perform GEM capabilities would require extensive training to obtain proficiency in the specialized skills required to keep GEM technology viable. GEM technology is unique to the military/DoD because, unlike the commercial marketplace, the DoD is slow to adapt to microcircuit technology changes and keeps systems for decades.

Cost, Time, Risk Avoidance: In 1980, the average microcircuit’s product life ranged from five to ten years. As of today, the average microcircuit product life of 18 months is much shorter compared to DoD weapon system operation life cycles ranging from 20 to 40 years. Since 1980, the microcircuit industry total market value has approximately increased from $9.8B to $335B in 2015.

Today, DoD’s market share of GEM Parts is less than 1% of the entire microcircuit industry, generating insufficient sales volume for microcircuit manufacturers to yield high profit margins. It is only cost effective for microcircuit Original Equipment Manufacturers (OEMs) to invest in high production volumes. The OEM’s in the current industry continue to migrate to faster, smaller, and more complex manufacturing technologies to support the high sale volume of smart-phones, tablets, DLA Land & Maritime Justification for Other Than Full & Open Competition

(AUG 2016)

For Official Use Only Source Selection Information-- See FAR 2.101 and 3.104 televisions, and personal computers. The microcircuits manufactured today utilize advanced technology incompatible for use as replacements for older microcircuits.

The investment of time and funds required to develop another source are substantial and cannot guarantee similar levels of performance and support the GEM program capabilities currently in place. The Government avoids the estimated $6B to $8B cost to build and operate a Government-run fabrication facility by continuing the GEM capability with SRI International. Due to the required high-level of resources, A new GEM source of supply would have to validate their GEM capability before starting the production of GEM parts, which could take up to ten years. Considering the technical complexity of GEM requirements, the chances of a new source failing to meet requirements is high. Awarding the successor contract to SRI International avoids jeopardizing the existing industrial base and threatening our national defense readiness. The Government lacks sufficient requirements or resources to support two production sources for GEM.

Only Domestic Trusted Integrated Circuit Fabrication Facility: Since the majority of U.S. based microcircuit companies focus on commercial technologies to earn higher profit, they outsource microcircuit manufacturing overseas. Most microcircuits used in DoD weapon systems are determined obsolete by the manufacturer within 18 months of initial weapon system production. The unavailability of military-grade microcircuits and overseas manufacturing results in microcircuit obsolescence and increase of counterfeit devices. In 2003, the Office of Secretary of Defense (OSD) identified counterfeit devices as a major area of concern. OSD established a directive for the creation of the Defense Trusted Integrated Circuits Strategy (DTICS). The DTICS introduced trust as a minimum requirement in DoD Instruction 8500.2, DoD Information Assurance Implementation (February 6, 2003) and DoD Instruction 5200.44, Protection of Mission Critical Functions to Achieve Trusted Systems and Networks (TSN).

The Defense Microelectronics Activities (DMEA) is the program manager for the DoD Trusted Foundry program. The program provides a cost-effective means to assure the integrity and confidentiality of integrated circuits during design and manufacturing. The US Government receives access to leading edge microelectronics technologies for both Trusted and non-sensitive applications.

DMEA defines “Trusted” as the confidence in one’s ability to secure national security systems by assessing the integrity of the people and processes used to design, generate, manufacture and distribute national security critical components (i.e. microelectronics).

The DoD Trusted Foundry program uniquely provides the US Government with guaranteed access to leading edge trusted microelectronics services for the typically low volume needs of the US Government. DMEA and NSA co-fund the Trusted Foundry program to facilitate this. The Trusted Access Program Office (TAPO) facilitates and administers the contracts and agreements with industry to provide US Government users with:

DLA Land & Maritime Justification for Other Than Full & Open Competition

(AUG 2016)

For Official Use Only Source Selection Information-- See FAR 2.101 and 3.104

Leading edge foundry services including multi-project wafer runs, dedicated prototypes, and production in both high- and low-volume models;

A library of standard IP blocks; and Limited packaging and test services.

Following the OSD’s findings, the U.S. Senate Committee Armed Services provided a report on Counterfeit Electronic Parts on May 21, 2012. The U.S. Senate Committee Armed Services report identified the high risk of counterfeit parts from nondomestic suppliers, particularly from China. The risk of counterfeit microcircuits from non-domestic suppliers remains a major risk and area of concern at National Security level.

In 2007, the DoD Trusted Access Program Office (TAPO) accredited SRI International’s wafer foundry as a DoD Category 1 Trusted Foundry. SRI International is the only known domestic supplier with the capabilities required to support the GEM program. The award of the GEM Successor contract to SRI International as the continuing source will mitigate the risk of counterfeit microcircuits.

Nation’s Defense Readiness: Microcircuit obsolescence continues to threaten our national defense readiness. It is vital the GEM program continues without a break or interruption, since microcircuits are necessary for the proper functioning of all DoD military weapon systems.

Sole Source of Supply: Since inception of the GEM Program, all contracts have been awarded to Sarnoff or their parent company, SRI International. SRI International’s performance is rated satisfactory or better on all GEM Production contracts. SRI International’s on- time or early delivery rate on the current GEM Production Contract. There are zero technical complaints or problems regarding GEM microcircuits delivered under the current GEM Production contract, and SRI International earned the Defense Supply Center Columbus Supplier Excellence Gold Award for maintaining the highest performance standards.

DLA L&M has awarded 650+ orders via the GEM program, supporting multiple NSNs for 375 listed weapon systems. Past studies on DoD weapon system supported by the GEM program reveal that every microcircuit emulation performed is an enormous benefit to DoD. On average, each microcircuit emulation provides support to 98 weapon systems across the military services. The loss of industrial capability to produce GEM devices, solely developed and provided by SRI International, would result in serious degradation to the DoD’s mission readiness worldwide.

In sum, the Government will procure the GEM production requirement as a sole source procurement with SRI International (03652), while using “Other than Full and Open” competition in accordance with FAR 6.302-1, Only One Responsible Source or a Limited Number of Responsible Sources and No Other Supplies or Services Will Satisfy Agency Requirements. The statutory authority permitting this is 10 USC 2304 (c)(1). SRI International is the only known source of supply satisfying the government’s minimum requirements for the GEM Program.

SRI International’s demonstrated their GEM capability through delivery of 375+ unique microcircuit types since program inception. SRI International remains the sole continuing source of supplying GEM microcircuits for a five (5) -year and six (6) month follow-on production contract by:

DLA Land & Maritime Justification for Other Than Full & Open Competition

(AUG 2016)

For Official Use Only Source Selection Information-- See FAR 2.101 and 3.104

Possessing capability to deliver GEM Microcircuits meeting the F3I requirements in the quantities required for the applications.

Maintaining an on-site QML certified and Trusted Integrated Circuit Fabrication Facility Assigning key personnel with many years of emulation and DMSMS industry experience.

SRI International is the only known supplier with the mature capability to deliver Class Q microcircuits from a detailed controlling government or customer specification.

SRI International is the only known supplier with a QML certified Integrated Circuit Fabrication Facility (IC Facility) and 30 years of experience in GEM microcircuit fabrication.

SRI International is the only company with detailed knowledge of GEM reverse engineering procedures, design procedures, design tools, GEM Design Library, arrays, fabrication processes, and test procedures

v. Efforts to ensure that offers are solicited from as many sources as practicable are:

[X] On July 18, 2018, the solicitation was synopsized on FEDBIZOPS. On August 06, 2018, DLA Senior Counsel, Contracts (Land) advised the Acquisition Specialist that the Government is not required to issue on DIBBS for 30 days since this is a sole source procurement. On August 06, 2018, the Acquisition Specialist issued an amendment to the synopsis on FEDBIZOPS. The purpose of the amendment to the synopsis was to provide notice that the solicitation will not be posted on DIBBS. The Government will procure the GEM requirement as a sole source procurement. The Government will only negotiate with SRI International (03652). The solicitation will be made available upon request until September 20, 2018. All responsible sources may submit a capability statement or proposal, which shall be considered by the agency.

vi. I hereby determine that the anticipated cost to the Government will be fair and reasonable. The Contracting Officer anticipates the costs and prices will be fair and reasonable based on certified cost or pricing data and subsequent negotiations. The vendor’s cost proposal shall reflect clear, complete, and accurate cost data along with their financial plan for accomplishing the efforts contained within the technical proposal. The vendor’s cost proposal will be determined unacceptable if adequate cost data is not provided in an acceptable format. Based off SRI International’s past performance, it is anticipated that final, negotiated prices for the Basic Contract will be in line with pricing received under the past production contracts with SRI International. In addition, pursuant to the Advanced Agreement for the contract, the Contracting Officer Representative (COR) reviews cost data and conducts negotiations as necessary for each individual delivery order requirement issued against the basic contract. Individual requirements for specific NSNs start as a Purchase Request (PR). After the Acquisition Specialist exhaust all avenues to locate a source of supply for specific NSNs, the item is determined non-procurable. A typical reason for sources declining to quote are a significant decline in demand for the NSN and a subsequent decision by the source that it is no longer in their interest to continue to produce the item. Then a non-procurable item technical referral will sent to the Product Specialist that is assigned to the specific NSN. The Product Specialist reviews the NSN and coordinates with the Engineering Source Activity (ESA) to ensure no sources are available prior to awarding against the GEM contract.

DLA Land & Maritime Justification for Other Than Full & Open Competition

(AUG 2016)

For Official Use Only Source Selection Information-- See FAR 2.101 and 3.104

viii. Market Research/Efforts to Obtain Competition:

The results of the market research supports that SRI International is the only known source of supply that can satisfy the GEM Program requirements. SRI International has performed satisfactorily with delivering GEM Program F3I microcircuit devices on the current contract and past contracts. There are no other emulation technologies known to exist within the commercial industry that can satisfy the need for F3I replacement microcircuits. Please see the market research summary below.

On November 07, 2016, DLA Land and Maritime issued a 30-day Sources Sought Notice on FedBizOps. The purpose of the sources sought announcement was to gain knowledge of potential qualified sources that can provide emulated microelectronic devices to meet the needs of the DoD and DoD contractors for readiness and logistical support. SRI International and Trusted Semiconductor Solutions were the only vendors that responded to the November 07, 2016, Sources Sought Notice. A brief synopsis of each response is below:

a. SRI International (03652): SRI International expressed interest in continuing as the source for the GEM Program. On May 04, 2017 and as requested by the Acquisition Specialist, SRI International responded to the sources sought notice by providing a comprehensive 105-page document (Dated May 2017) titled Generalized “Emulation of Microcircuits (GEM) Capability: A Qualified Source for Microelectronic Device Emulation and Production”. This document describes the GEM design, manufacturing and delivery capability that SRI International offers. SRI International noted that they satisfy the Government’s GEM Program requirements, and stated: “SRI International has the capability to deliver GEM microelectronic devices (hereafter referred to as GEM Microcircuits) meeting the Form, Fit, Function, and Interface (F3I) requirements in the quantities required for the applications. This capability has been demonstrated by delivery of 375 unique microcircuit types during the first 20 years of the DLA Land and Maritime GEM Production Contracts.

by maintaining an on-site QML certified and Trusted Integrated Circuit Fabrication Facility and assign key personnel with many years of emulation and DMSMS industry experience.” In addition to a description of SRI International’s GEM Capability, this document includes; the GEM parts delivered to customers, GEM parts delivered to DLA by date, SRI International Sarnoff Certifications (MIL-PRF-38535 - Custom Microcircuit Certification and Laboratory Suitability Certificate) and resumes of SRI International Sarnoff’s GEM Program Manager. (See Attachment #3- SRI International’s Emulation of Microcircuits (GEM) Capability: A Qualified Source for Microelectronic Device Emulation and Production Document)

b. Trusted Semiconductor Solutions: There was one response received from small business, Trusted Semiconductor Solutions. Trusted Semiconductor was not interested in pursuing to become a source for the GEM Production Program. Rather, Trusted Semiconductor Solutions expressed interest in partnering with SRI Technology. Specifically, Trusted Semiconductor Solutions stated: “It looks like DLA has worked with SRI International for several years and plans to continue this partnership going forward. We are not interested in competing directly with SRI International, but rather working in collaboration with them.

DLA Land & Maritime Justification for Other Than Full & Open Competition

(AUG 2016)

For Official Use Only Source Selection Information-- See FAR 2.101 and 3.104

On December 06, 2017, Trusted Semiconductor Solutions emailed a short white paper on their capabilities in reference to Solicitation SPE7LX17R0019. Trusted Semiconductor Solutions’ capability statement was evaluated by the GEM Program Manager.

On December 12, 2017, the GEM Program Manager and the AME Program Manager responded to Trusted Semiconductor Solutions’ interest and capability. One of the primary goals of the GEM program has been to develop a permanent solution to the microcircuit obsolescence problem. The Government’s primary criterion for developing a permanent solution was to select one contractor who could control the means of GEM production to the greatest extent to avoid paying to solve the same problem two or three times. The primary/major root cause of microcircuit obsolescence is the profitability of specific NSNs or GEM parts and the overall profitability of the infrastructure needed to produce a specific GEM part. That infrastructure primarily consists of the physical manufacturing equipment and the specific GEM part’s required manufacture process. First-tier microcircuit companies who control the means of their production frequently decide whether to continue a specific manufacture process or to abandon a manufacture process due to low profitability. The Government selected SRI International as the GEM Programs source of supply because they owned the production facility and given its small size, Emulation would be its primary customer (i.e., little to no competing corporate requirements). Since SRI International is a non-profit organization, they will not abandon GEM part production due low profitability. In subsequent contracts, no potential bidder approached the level of control of the means of production possessed by SRI International.

Trusted Semiconductor has no appreciable control of the means of production. Lower-tier microcircuit companies, like Trusted Semiconductor, are often not informed that a capability they previously utilized (subcontracted) is no longer available. However, nothing stops Trusted from quoting on individual microcircuit RFQs in the acquisition normal process.

On April 02, 2018, DLA Land and Maritime re- issued a 15 day Sources Sought Notice on FedBizOps with a response date of April 16, 2018. The Sources Sought Notice was re-issued due to the date of the last notice and there were revisions made to the GEM Statement of Work (SOW). There were two vendors that responded to the April 02, 2018, Sources Sought Notice. A summary of their response is below:

a. SRI International (03652): On April 06, 2018, SRI International’s Deputy Director, Contracts/East Coast Operations, responded to the Sources Sought Notice via email. stated the following, “In reply to the FBO Notice of 2 April 2018 regarding solicitation number SPE7LX-17-R-0019, SRI confirms that we have the technical and management capability to perform the requirements set forth in the GEM Successor SOW and we intend to bid on the requirement. We confirm that the GEM design, manufacturing, and delivery capability detailed in our May 4, 2017 submission remains valid.”

b. Trusted Semiconductor Solutions: On April 13, 2018, , Vice President of Trusted Semiconductor Solutions, provided the following response to the sources sought notice via email, “Solicitation SPE7LX17R0019 states DLA is seeking sources, but then in the text it says this a sole source opportunity. I believe our company is a good fit to the requirements listed in the SOW, but if a supplier is already selected, we don’t need to submit a response. Can you clarify?” On May 02, 2018, the Acquisition

DLA Land & Maritime Justification for Other Than Full & Open Competition

(AUG 2016)

For Official Use Only Source Selection Information-- See FAR 2.101 and 3.104

Specialist asked to clarify their company’s intent and interest in this requirement. On May 03, 2018, stated, “We are interested in submitting a proposal as a source of supply for the GEM requirement.”

On May 07, 2018, the Acquisition Specialist requested to Trusted Semiconductor Solutions to provide, as a minimum, the following: (1) Demonstration of the design and manufacturing capability as described in the Statement of Work (SOW); (2) Demonstration of capability to deliver efforts/production under delivery orders as described in the Statement of Work (SOW). Information submitted should include qualifications related to experience, personnel and facilities; as well as any other specific and pertinent information as pertains to this particular area of procurement that would enhance the Government’s consideration and evaluation of the information submitted. On May 11, 2018, , Vice President of Trusted Semiconductor Solutions, provided white paper (capabilities) in response to the GEM SOW (See Attachment #4).

Trusted Semiconductor Solutions’ response was again evaluated by the GEM Program Manager (PM) and the GEM Contracting Officer Representative (COR). A summary of GEM PM and COR’s evaluation is below:

The GEM Design Library is owned by the Government and can be provided to other vendor(s) if necessary;

however, simply transferring the GEM Design Library to another vendor is insufficient for successful performance of the GEM program. To perform the GEM program, the vendor needs processes to use the GEM Design Library to design and manufacture F3I replacement parts for obsolete ICs. These processes are proprietary to the vendor; therefore, any new vendor would need to develop processes through silicon fabrication and full library characterization. Because SRI has both developed and/or had continuous access to the GEM Design Library, SRI already has in place the processes necessary to successfully perform F3I design and manufacture immediately upon contract award. In contrast, even if Trusted Semiconductor Solutions proposes a similar process, Trusted Semiconductor Solutions would need to ensure its processes’ capability after gaining access to the GEM Design Library before it could begin performance of the GEM Program. .

the commercial marketplace has moved past the technology needed to support the DoD’s microcircuits. The GEM program supports obsolete microcircuits / microcircuit technology, so

. The GEM Program requires processes to design and manufacture F3I replacement parts for obsolete parts specifically because the commercial marketplace cannot support the DoD’s requirements for these obsolete microcircuits. Because Trusted Semiconductor will need to design and confirm process capability after award and access to the GEM Design Library, it would be duplicative of

DLA Land & Maritime Justification for Other Than Full & Open Competition

(AUG 2016)

For Official Use Only Source Selection Information-- See FAR 2.101 and 3.104

SOLICITATION SPE7LX-17- R-0019

the efforts already performed by SRI International, constituting a wasteful expenditure, and would significantly delay performance. When fabricating microcircuits on an individual basis, the cost could range from $300K to several million dollars per microcircuit part-type, depending on complexity, and take more than one-year to produce.

SRI International has its own facility, and as the sole source of supply the Government has total control of fabrication of GEM parts. If an urgent requirement for a specific GEM part arises, the Government has the ability to shift SRI’s manufacturing schedule to meet military customers’ needs at any time. Trusted Semiconductor will need to rely on commercial foundries, so the Government would not be able to ensure urgent military requirements are performed as it would not have the same level control. In addition, commercial foundries have other more lucrative contracts to fulfill – as noted above, the DoD is less than 1% of the commercial marketplace. This increases risk that commercial foundries will not be interested in Trusted Semiconductor’s performance of the GEM Program.

Furthermore, the design libraries are a recipe on how to produce the designs with the equipment used. Each foundry will have to redesign the libraries to fit their capabilities. Once redesigned, each foundry’s design would have to be re-qualified. If the Government switched to Trusted Semiconductor Solutions, anything currently in process in the fabrication would be lost. Assuming Trusted Semiconductor Solutions could start immediately, that would be a 26-week loss of production and the costs associated with the current efforts. With the requirement of redesigning and re-qualifying each microcircuit design, the loss production could cost a year of production. Additionally, anything transitioned from the AME contract would have to be redesigned for the new foundries.

Finally, there is a high level of risk on the Government associated with a new contractor being able to overcome the cited engineering and technical problems associated with emulation of microcircuits. Based on the history of the GEM Program, the length of time to get a new GEM production capability from another source could take as long as 10 years given that the new source’s GEM capability is validated and conforms to the GEM Program’s minimum requirements. The GEM PM verified that

. In addition, the validation of a new source creates a high risk factor to the interruption of weapons system production and sustainment. Trusted Semiconductor Solution’s capability statement does not support that they currently have the proven or existing GEM capability to meet the Government’s minimum needs.

Please reference Attachment #5, which is the GEM Program Office’s evaluation of Trusted Semiconductor capabilities.

Information received regarding the commerciality of the item(s): The GEM Program requirement does not meet the definition of a commercial item per FAR 2.101. The GEM Program uses specialized technology to produce and deliver GEM parts no longer available in the commercial marketplace. The GEM Program’s production provided DLA the ability to provide fully qualified military grade microcircuits meeting customers’ requirements and performance parameters. The GEM Program satisfies DoD and DoD contractor’s needs by providing readiness and logistical support. The microcircuits emulated and supplied under past and current GEM contracts do not have direct commercial equivalents. The Contracting Office determines that the GEM Core Effort and Delivery Order effort are not commercial.

DLA Land & Maritime Justification for Other Than Full & Open Competition

(AUG 2016)

For Official Use Only Source Selection Information-- See FAR 2.101 and 3.104

Actions being taken to overcome barriers to competition:

[X] When FAR 6.302-1 is cited for follow-on acquisitions as described in 6.302-1(a)(2)(ii), an estimate of the cost to the Government that would be duplicated and how the estimate was derived.

The investment of time and funds required to develop another source would be substantial and would not guarantee the same level of performance and support of the GEM program currently provided by SRI International. Alternate personnel with appropriate technical backgrounds would need an extended familiarization period to become proficient in the specialized skills required to keep the GEM technology viable. The risk of failure of developing a second source is high. The funding required to develop another source would substantial. In addition, to develop a second source would require extensive amount of time. It is likely any new source would go through a research and development phase and verification and validation phase of five years each before entering a production phase. The capability to transition the new technology developed under the DLA AME R&D Contract to production under the DLA Land and Maritime GEM Production Contract would be greatly affected. Furthermore, the Government does not have sufficient requirements to support two production sources for GEM, and it would jeopardize the existing industrial base by awarding the contract to other than SRI International.

10. A listing of sources, if any, indicating an interest in the acquisition are: SRI International (03652) and Trusted Semiconductor Solutions

SOLICITATION SPE7X-17- R-0019

DLA Land & Maritime Justification for Other Than Full & Open Competition

(AUG 2016)

For Official Use Only Source Selection Information-- See FAR 2.101 and 3.104

I hereby certify that the information contained in this justification is accurate and complete to the best of my knowledge and belief. If not exceeding $700,000, this signature serves as the approval.

Date

Contracting Officer

APPROVAL/CERTIFICATION

I have reviewed and approve this justification:

Competition Advocate Signature

Head of Contracting Activity (HCA) Signature

Date

Date

APPROVAL REQUIREMENTS

[] Up to $700,000 Contracting Officer

[] $700,000 to $13,500,000 Competition Advocate

[X] $13,500,000 to $93,000,000 Head of Contracting Activity (HCA)

7/31/2018

BUNNELL.THOM

AS.L.1230144229

Digitally signed by

BUNNELL.THOMAS.L.12301442

Date: 2018.07.31 11:39:09 -04'00'

COUTURE.MAR

Y.E.1230253613

Digitally signed by

COUTURE.MARY.E.1230253613

Date: 2018.07.31 17:25:52 -04'00'

BROWN.MARK.AL

BERT.1041175032

Digitally signed by

BROWN.MARK.ALBERT.104117

Date: 2018.09.06 17:42:14 -04'00'