DoD awards $38M for custom microchips, highlighting critical domestic semiconductor needs

Contract Overview

Contract Amount: $37,995,672 ($38.0M)

Contractor: Globalfoundries U.S. 2 LLC

Awarding Agency: Department of Defense

Start Date: 2025-04-01

End Date: 2026-03-31

Contract Duration: 364 days

Daily Burn Rate: $104.4K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: THE TRUSTED FOUNDRY ACCESS (TFA) CONTRACT ACQUIRED SUPPLIES ASSOCIATED WITH APPLICATION SPECIFIC INTEGRATED CIRCUITS. (ASIC)

Place of Performance

Location: ESSEX JUNCTION, CHITTENDEN County, VERMONT, 05452

State: Vermont Government Spending

Plain-Language Summary

Department of Defense obligated $38.0 million to GLOBALFOUNDRIES U.S. 2 LLC for work described as: THE TRUSTED FOUNDRY ACCESS (TFA) CONTRACT ACQUIRED SUPPLIES ASSOCIATED WITH APPLICATION SPECIFIC INTEGRATED CIRCUITS. (ASIC) Key points: 1. Contract addresses a strategic need for specialized integrated circuits, crucial for defense systems. 2. The award signifies a commitment to bolstering domestic microelectronics manufacturing capabilities. 3. Competition was limited after exclusion of sources, potentially impacting price discovery. 4. Performance period is one year, suggesting a focus on immediate supply chain needs. 5. The firm-fixed-price structure aims to control costs for the government. 6. This contract supports the Defense Microelectronics Activity's mission to ensure access to advanced microelectronics.

Value Assessment

Rating: good

The contract value of $37.99 million for specialized integrated circuits appears reasonable given the strategic nature of the acquisition. Benchmarking against similar sole-source or limited-competition awards for custom ASICs is challenging due to the unique technical requirements and limited market. However, the firm-fixed-price contract type suggests an effort to manage costs effectively. The duration of one year indicates a focused procurement for immediate needs rather than a long-term strategic investment, which could be a point of comparison for future awards.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

This contract was awarded under 'Full and Open Competition After Exclusion of Sources.' This indicates that while the initial solicitation may have been open, specific sources were excluded, leading to a limited competition. The exact reasons for exclusion are not detailed but often relate to specialized capabilities, existing relationships, or national security concerns. With limited competition, the government may have had less leverage to negotiate the lowest possible price compared to a truly full and open competition with multiple bidders.

Taxpayer Impact: Limited competition can sometimes lead to higher prices for taxpayers as fewer vendors compete, potentially reducing the incentive for aggressive bidding. However, in cases of specialized defense needs, it may be necessary to ensure access to critical technologies.

Public Impact

The primary beneficiaries are the Department of Defense and its various branches, ensuring access to essential microelectronic components for advanced weapon systems and platforms. The contract delivers application-specific integrated circuits (ASICs) vital for specialized defense applications. The geographic impact is primarily within the United States, supporting domestic manufacturing and supply chain resilience. Workforce implications include supporting skilled labor in the semiconductor manufacturing sector, particularly in areas related to ASIC design and fabrication.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition raises concerns about potential price inflation and reduced innovation.
Lack of transparency regarding source exclusion criteria hinders a full assessment of fairness.
Dependence on a limited number of suppliers for critical defense components poses supply chain risks.

Positive Signals

Addresses a critical national security need for advanced microelectronics.
Supports domestic semiconductor manufacturing, enhancing supply chain security.
Firm-fixed-price contract provides cost certainty for the government.

Sector Analysis

The semiconductor industry is a cornerstone of modern technology, with the defense sector being a significant consumer of advanced microelectronics. The market for Application-Specific Integrated Circuits (ASICs) is highly specialized, often involving custom designs tailored to unique performance requirements. This contract fits within the broader landscape of government efforts to onshore critical manufacturing capabilities and reduce reliance on foreign sources for defense-critical components. Comparable spending benchmarks are difficult to establish due to the custom nature of ASICs, but significant investments are being made across the government to secure domestic semiconductor supply chains.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'ss' being false. The prime contractor, GLOBALFOUNDRIES U.S. 2 LLC, is a large entity. There is no explicit information provided regarding subcontracting plans for small businesses. This suggests that the primary focus is on securing the specialized manufacturing capability from a large, established provider, with potential limited direct impact on the small business ecosystem unless the prime contractor actively engages them for specific services or components.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management offices. The Defense Microelectronics Activity (DMEA) is responsible for ensuring access to microelectronics for the DoD. Accountability measures are embedded in the contract terms, including delivery schedules and quality specifications. Transparency is facilitated through contract award databases, though specific technical details and the rationale for source exclusion may be limited due to national security or proprietary concerns. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

DoD Microelectronics Strategy
CHIPS and Science Act Investments
Defense Production Act Council
Trusted Foundry Program
National Security Strategy

Risk Flags

Limited competition may lead to higher costs.
Potential supply chain vulnerability due to limited domestic sources.
Lack of detailed public information on source exclusion criteria.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $38.0 million to GLOBALFOUNDRIES U.S. 2 LLC. THE TRUSTED FOUNDRY ACCESS (TFA) CONTRACT ACQUIRED SUPPLIES ASSOCIATED WITH APPLICATION SPECIFIC INTEGRATED CIRCUITS. (ASIC)

Who is the contractor on this award?

The obligated recipient is GLOBALFOUNDRIES U.S. 2 LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Microelectronics Activity).

What is the total obligated amount?

The obligated amount is $38.0 million.

What is the period of performance?

Start: 2025-04-01. End: 2026-03-31.

What is the historical spending pattern for similar ASIC procurements by the Defense Microelectronics Activity?

Analyzing historical spending for similar ASIC procurements by the Defense Microelectronics Activity (DMEA) is crucial for context. While specific historical data for this exact contract is not provided, DMEA's mission involves securing advanced microelectronics for the DoD, often through sole-source or limited-competition contracts due to the specialized nature of ASICs. Past awards likely reflect a similar value range for custom chip development and fabrication, especially for components requiring high reliability and specific performance characteristics for defense applications. Trends may show increasing investment in domestic capabilities, driven by supply chain concerns and geopolitical factors. Benchmarking against previous DMEA contracts for ASICs would reveal if this $38 million award is within the expected range for such specialized, high-assurance components, considering factors like complexity, volume, and technology node.

How does the 'Full and Open Competition After Exclusion of Sources' process typically impact pricing and contractor selection for specialized defense components?

The 'Full and Open Competition After Exclusion of Sources' (FOCES) process is a nuanced approach to procurement. It begins with an intent to compete broadly but allows for the exclusion of specific sources based on defined criteria, often related to national security, unique capabilities, or existing security clearances. This exclusion inherently limits the pool of potential bidders. While it aims to ensure that only qualified and trusted entities participate, it can reduce competitive pressure compared to a truly open competition. Consequently, pricing might be higher as fewer vendors vie for the contract. Contractor selection focuses on meeting stringent technical, security, and capability requirements, prioritizing assurance over the lowest bid. For taxpayers, this means potentially higher costs for critical components but with a higher degree of confidence in supply chain security and technological suitability for defense needs.

What are the specific risks associated with relying on a limited number of domestic suppliers for critical defense microelectronics?

Relying on a limited number of domestic suppliers for critical defense microelectronics presents several significant risks. Firstly, it creates a bottleneck in the supply chain; any disruption at one of these key facilities, whether due to natural disaster, cyberattack, or operational issues, could halt the production of essential components for the DoD. Secondly, limited competition can lead to higher costs for the government as suppliers face less pressure to innovate or offer competitive pricing. Thirdly, it can stifle innovation; with fewer players, there's less incentive for aggressive research and development. Lastly, it concentrates national security risk. If a key supplier faces geopolitical pressure or decides to exit the market, the DoD's access to vital technology could be jeopardized, impacting readiness and strategic advantage.

What is the strategic importance of securing domestic ASIC manufacturing capabilities for the Department of Defense?

Securing domestic ASIC (Application-Specific Integrated Circuit) manufacturing capabilities is of paramount strategic importance for the Department of Defense (DoD). ASICs are custom-designed chips essential for advanced military systems, including radar, communication, guidance, and electronic warfare. Reliance on foreign foundries, particularly in regions with geopolitical instability, poses significant supply chain risks, including potential delays, intellectual property theft, and vulnerability to export controls. Domestic capabilities ensure greater control over production, enhance supply chain resilience, and protect sensitive technologies. This aligns with national security objectives to reduce dependence on potential adversaries and maintain a technological edge. Investments in domestic ASIC manufacturing, like this contract, are crucial for ensuring the DoD has reliable access to the cutting-edge microelectronics needed for future defense capabilities.

How does the firm-fixed-price (FFP) contract type benefit the government in this context?

The firm-fixed-price (FFP) contract type offers significant benefits to the government in the context of this $38 million award for specialized integrated circuits. Under an FFP contract, the contractor agrees to a set price for the work, regardless of the actual costs incurred. This shifts the cost risk from the government to the contractor. For the DoD, this provides budget certainty and predictability, making financial planning more straightforward. It incentivizes the contractor to manage its costs efficiently and to perform the work within the agreed-upon budget to maximize profit. Given the specialized and potentially complex nature of ASIC manufacturing, an FFP contract helps protect the government from cost overruns that could arise from unforeseen technical challenges or inefficiencies on the part of the contractor.

Industry Classification

NAICS: Manufacturing › Semiconductor and Other Electronic Component Manufacturing › Semiconductor and Related Device Manufacturing

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Government of ABU Dhabi

Address: 1000 RIVER ST, ESSEX JUNCTION, VT, 05452

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Foreign Owned, Foreign-Owned and U.S.-Incorporated Business, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $37,995,672

Exercised Options: $37,995,672

Current Obligation: $37,995,672

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HQ072723D0003

IDV Type: IDC

Timeline