Free Response to Proposed Findings of Uncontroverted Fact - District Court of Federal Claims - federal

Case 1:01-cv-00459-GWM

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS ____________________________________ INTERNATIONAL DATA PRODUCTS CORPORATION ) ) ) ) Plaintiff, ) ) vs. ) ) THE UNITED STATES OF AMERICA ) ) Defendant. ) ____________________________________)

No. 01-459C (Judge George W. Miller)

DEFENDANT'S RESPONSES AND OBJECTIONS TO PLAINTIFF'S PROPOSED FINDINGS OF UNCONTROVERTED FACTS Pursuant to Rule 56(h)(2) of the Rules of the Court of Federal Claims ("RCFC"), defendant, the United States, respectfully files the following responses and objections to plaintiff's proposed findings of uncontroverted fact: 1. IDP, a computer equipment manufacturer and seller, entered the 8(a) program in 1994. USAF 0862. In or about October 1995, the company submitted a proposal to the Department of the Air Force ("DAF") for the award of an 8(a) contract to provide computers to the Air Force as part of what was known as the Desktop V procurement. In that proposal, IDP explained that to meet DAF's requirements for extensive and prompt deliveries, the company would maintain described "inventory levels" to satisfy those needs. USAF 0919. Moreover, "to ensure the timely delivery of warranty support services worldwide" IDP would assure "on site sparing of parts and whole systems ("ready to use") for remote sites." USAF 0914. Defendant's Response to Plaintiff's Proposed Finding of Uncontroverted Fact No. 1 Defendant agrees with the first and second sentences of this proposed finding. Defendant agrees that the cited page of IDP's proposal stated that "[m]inimum inventory levels are set based on anticipated needs," but disagrees that the cited page "described"

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what inventory levels IDP would maintain, and disagrees further that the cited page explained that particular inventory levels were set as a result of the Government's "requirements for extensive and prompt deliveries." Defendant agrees with the fourth sentence of this proposed finding, but notes that the cited page also states that IDP would provide "36-month software warranty as described in Section 5 of this volume." Pl. App. USAF 0914.

2.

In May 1997, the Air Force awarded a contract to IDP in the Desktop V procurement ("DTV Contract"). See USAF 1284-1285. The contract explicitly incorporated IDP's proposal as the contract's "performance requirement." USAF 1564 (Contract Clause C.4). Defendant's Response to Plaintiff's Proposed Finding of Uncontroverted Fact No. 2 Defendant agrees.

3.

The DTV Contract was an indefinite-delivery, indefinite-quantity (ID/IQ) agreement. USAF 1288 (Contract Clause B. 1). The Contract incorporates DFARS 252.211-7000 (Termination- Commercial Items) (May 1991). USAF 1597. Defendant's Response to Plaintiff's Proposed Finding of Uncontroverted Fact No. 3 Defendant agrees.

4.

Originally, the DTV contract provided as follows with respect to Government ordering requirements: B.2 CONTRACT MINIMUM/MAXIMUM a. In the base year of the contract, the minimum amount for award will be $100,000. Orders beyond the minimum will be determined by user needs. b. The specific services, products, and quantities will be identified on each delivery 2

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order. The exercise of an option does not re-establish the contract minimum. c. A maximum of $1,685 million is established for all three contracts including the option amounts, broken out as follows: 1. A maximum of 1,685 million is established for this contract for ordering by the Department of the Air Force and other Department of Defense components. 2. A maximum of twenty percent (20%) of the total estimated of contract award is established for all three contracts for ordering by other Federal Civilian Agencies. d. Proposals for a single CLIN/Sub-Line Item Number (SLIN), or group thereof, and for quantities for less than those in the Price Evaluation Model (PEM) will not be accepted and will be ineligible for award. Offerors must propose on all CLINs/SLINs in Section B. USAF 1289. Defendant's Response to Plaintiff's Proposed Finding of Uncontroverted Fact No. 4 Defendant agrees.

5.

IDP's competitor, Dynamic Decisions, Inc. ("DDI"), another 8(a) participant, sued to enjoin IDP's contract. In September 1997, the United States District Court for the District of Columbia approved a settlement agreement, USAF 4526-4531, providing for

under

DTV awards to both IDP and DDI, with each firm limited to $100 million in orders its contract. Specifically, pursuant to the settlement, the Court ordered as follows: Immediately upon award of the DDI Desktop V contract, the Air Force shall modify the estimated quantities in both the IDP and DDI Desktop V contracts to reflect estimated quantities, the value of which cannot exceed $100 million including options and modifications.

USAF 4528. Defendant's Response to Plaintiff's Proposed Finding of Uncontroverted Fact No. 5 Defendant agrees.

6.

In modifying the DTV contract to comply with the Federal court order, the DAF 3

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amended Clause B.2 to provide as follows: B.2 CONTRACT MINIMUM/MAXIMUM

a. In the base year of the contract, the minimum amount for award will be $100,000. Orders beyond the minimum will be determined by user needs. b. The specific services, products, and quantities will be identified on each delivery order. The exercise of an option does not re-establish the contract minimum. c. In accordance with the terms and conditions of the Settlement Agreement dated value of $100M. The Contractor shall immediately notify the Air Force, in writing, when 80% of this estimate is reached. The Contractor shall not accept any orders which exceed the estimated quantities valued at $100M unless authorized by the Contracting Officer to do so. d. A maximum of $729,010,929 is established for this contract including the option amounts, broken out as follows: 1. A maximum of $729,010,929 is established for this contract for ordering by the Department of the Air Force and other Department of Defense components. 2. A maximum of 20% is established for this contract for ordering by other Federal Civilian Agencies. e. Proposals for a single CLIN/Sub-Line Item Number (SLIN), or group thereof, and for quantities for less than those in the Price Evaluation Model (PEM) will not be accepted and will be ineligible for award. Offerors must propose on all CLINs/SLINs in Section B. USAF 4514. Defendant's Response to Plaintiff's Proposed Finding of Uncontroverted Fact No. 6 Defendant agrees.

7.

In drafting this modified language, DAF explained as follows: 3. The settlement agreement only requires the Air Force to reduce the estimated quantities of the two DT-V 8(a) contract. This does not require the Contracting Officer to reduce the maximum value of the contracts. This was done intentionally, to permit us to award the contracts at full value so as to minimize the risk of a successful post-award protest. It also may permit us later to increase the estimated quantities back to the contact maximum if we can garner the appropriate approvals to do so. Because there remains that possibility, the maximum value of the contracts should not be reduced, and, in my opinion, the contract maximum is the proper amount to report to Congress. In my 4

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opinion, it is better to report approximately $905 million then order $100 million that it would be to report $100 million then order $905 million. 4. There is no guarantee that we will ever order the maximum contract value. However, the contractors are obligated to deliver up to the stated maximum if the government orders that much. Reducing the maximum value of the contracts would reduce the scope of the contractors' obligations under the contracts. The FAR establishes the scope of the contractors' obligations as the maximum stated in their respective ID/IQ contracts. The contract shall require the Government to order and the contractor to furnish at least a stated minimum quantity of supplies or services and, if and as so ordered, the contractor to furnish any additional quantities, not to exceed a stated maximum. The contracting officer may obtain the basis for the maximum from records of pervious requirements and consumption, or by other means, but the maximum quantify should be realistic and based on the most current information. FAR 16.504(a)(1) (emphasis added). In this case, we are not misleading the contractors. They understand that the settlement agreement reduces the estimated quantifies. However, they also want the possibility left open that those quantities may rise in the future. In fact, I believe DDI has threatened to sue if we reduce the maximum value of their contract because of the disastrous effects they believe it would have on their suppliers' pricing. Moreover, the FAR permits potential offerors to protest delivery orders which exceed a contractual maximum: No protest under Subpart 33.1 is authorized in connection with the issuance or proposed issuance of an order under a task order contract or delivery order contract except for a protest on the grounds that the order increases the scope, period, or maximum value of the contract. FAR 16.505(a)(7). Therefore, we want to be careful to avoid lowering the contract maximum values. USAF 4519-4520. Defendant's Response to Plaintiff's Proposed Finding of Uncontroverted Fact No. 7 Defendant agrees that plaintiff has accurately quoted a portion of an Air Force legal memorandum that was inadvertently produced during discovery, and that analyzed the contracting officer's proposed changes to Section B.2 of the Desktop V contract. 8. During the course of contract performance, IDP maintained extensive inventories to

satisfy user needs for prompt services and products. DCMA 00348-00350 (excerpt from DCAA Audit Report). 5

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Defendant's Response to Plaintiff's Proposed Finding of Uncontroverted Fact No. 8 Defendant agrees that during the course of contract performance, IDP was required to meet contractual requirements for delivering services and products, but disagrees that the cited portions of the March 4, 2002 Defense Contract Audit Agency ("DCAA") report characterized IDP's inventories as "extensive" or stated that they were required "to satisfy user needs for prompt services and products." 9. In 1998, Dunn Computer Corporation, a non-8(a) company, purchased IDP. See USAF 2339. Pursuant to the Small Business Act, the purchase of IDP by Dunn required that DAF terminate IDP's DTV contract because IDP would no longer be owned by an 8(a) eligible owner. The statutory requirement states as follows: (A) Subject to the provisions of subparagraph (B) [which provides for waivers in certain situations, including when contract termination would severely impair attainment of the agency's program objectives or missions], a contract (including options) awarded pursuant to this subsection shall be performed by the concern that initially received such contract. Notwithstanding the provisions of the preceding sentence, if the owner or owners upon whom eligibility was based relinquish ownership or control of such concern, or enter into any agreement to relinquish such ownership or control, such contract or option shall be terminated for the convenience of the Government, except that no repurchase costs or other damages may be assessed against such concerns due solely to the provisions of this subparagraph. 15 U.S.C. § 637(a)(21). Defendant's Response to Plaintiff's Proposed Finding of Uncontroverted Fact No. 9 Defendant agrees.

10.

On February 20, 1998, the Assistant Secretary of the Air Force (Acquisition), asked the SBA to waive the requirement that the Air Force terminate IDP's contract for the convenience of the government because IDP was no longer owned and controlled by the owners upon whom its 8(a) eligibility was based. The letter provides the Air Force's justification for the requested waiver. The request states: 6

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. . . I believe there are compelling reasons to issue the waiver of termination. Since award of the contract, IDP's performance has been excellent and we view them as a valued supplier. Under the contract, the Air Force currently has $17.6M worth of orders with IDP and is expected to place many more orders over the next several years. A significant amount of those orders are for the purchase of computer equipment to facilitate deployment of the Standard Procurement System (SPS) across the Air Force. SPS is a DoD-wide program to replace all existing legacy information and database programs within the procurement environment with a common operating system and is considered key to achieving the Deputy Secretary of Defense's initiative of a paper-free acquisition process. Prior to awarding any SPS orders to IDP, the Air Force evaluated information from several firms to ensure we would get a quality product, on-time and at a fair price. We have achieved all three IDP. To transition to the next low offeror, a large business, would require an additional $ 3M in FY98 and $ 7M over the life of the SPS program. This does not include the SPS programmatic time impact of placing orders with another firm. This time impact would delay the Air Force at least 45 days in being ready to deploy SPS. In addition, the President, Vice President, managers, and employees of IDP will remain in place under Dunn Computers Inc., giving me every confidence we will receive the same high quality we receive from IDP now. The termination of IDP would have significant mission impact on the Air Force and DoD achieving their goals and objectives under this program. USAF 2341-2342. Defendant's Response to Plaintiff's Proposed Finding of Uncontroverted Fact No. 10 Defendant agrees.

11.

The SBA denied the DAF's waiver request, and IDP appealed the denial to the SBA's Office of Hearings and Appeals. On August 31, 1999, SBA's OHA denied the Appeal. See In the Matter of International Data Products Corp., SBA-OHA Dkt. No. BDPW-9810-14-05. Neither DAF nor IDP further appealed the matter. Accordingly, SBA's final decision denied DAF the right to waive the statutory 8(a) requirement that DAF terminate IDP's DTV contract. Defendant's Response to Plaintiff's Proposed Finding of Uncontroverted Fact No. 11 7

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Defendant agrees.

12.

On October 8, 1999, DAF issued two termination notices to IDP with respect to the DTV Contract. USAF 3413-3418. DAF stated in its termination notices that it continued to hold IDP responsible with respect to "rights and liabilities of the parties, arising under the contract or otherwise, concerning defects, guarantees or warranties relating to any articles or component parts furnished to the Government by the Contractor under the contract or this agreement, [and] the rights and liabilities of the parties concerning software upgrades as required by Section C of the contract." USAF 3418. Pursuant to these notices, DAF continued to demand that IDP provide warranty and software upgrade services under its now terminated DTV contract. Defendant's Response to Plaintiff's Proposed Finding of Uncontroverted Fact No. 12 Defendant agrees with the first two sentences of this proposed finding. Defendant agrees that consistent with the October 9, 1999 termination notices, the Government continued to require that IDP provide warranty and upgrade services for products that had already been ordered and paid for. DPFUF ¶ 19.

13.

IDP filed timely claims for termination costs and for a ruling by the Contracting Officer that IDP was not obligated to provide continuing upgrade and warranty support. See Defendant's Proposed Findings of Uncontroverted Facts at ¶¶ 20, 23. Defendant's Response to Plaintiff's Proposed Finding of Uncontroverted Fact No. 13 Defendant agrees.

14.

The Contracting Officer denied the claims, and these appeals followed. See Defendant's Proposed Findings of Uncontroverted Facts at ¶¶ 21, 24. 8

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Defendant's Response to Plaintiff's Proposed Finding of Uncontroverted Fact No. 14 Defendant agrees. Respectfully submitted, PETER D. KEISLER Assistant Attorney General DAVID M. COHEN Director

OF COUNSEL: E. MICHAEL CHIAPARAS Deputy Director Contract Disputes Resolution Center Defense Contract Management Agency 10500 Battleview Parkway, Suite 105 Manassas, VA 20109 MAJ. JACQUELINE POSNER Trial Attorney Commercial Litigation Division Air Force Legal Services Agency 1501 Wilson Boulevard Arlington, VA 22209

s/ Deborah A. Bynum DEBORAH A. BYNUM Assistant Director

s/ John H. Williamson JOHN H. WILLIAMSON Trial Attorney Commercial Litigation Branch Civil Division Department of Justice Attn: Classification Unit, 8th Floor 1100 L Street, N.W. Washington, D.C. 20530 Tele: (202) 307-0277 Fax: (202) 307-0972 E-mail: [email protected] Attorneys for Defendant

October 15, 2004

9

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CERTIFICATE OF SERVICE I certify under penalty of perjury that on this 15th day of October, 2004, a copy of the foregoing "DEFENDANT'S RESPONSES AND OBJECTIONS TO PLAINTIFF'S PROPOSED FINDINGS OF UNCONTROVERTED FACT" was filed electronically. I understand that notice of this filing will be sent to all parties by operation of the Court's electronic filing system. Parties may access this filing through the Court's system. /s John H. Williamson