Free Motion for Summary Judgment - District Court of Federal Claims - federal

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS ____________________________________ ) INTERNATIONAL DATA PRODUCTS ) CORP., ) ) Plaintiff, ) ) v. ) No. 01-459C ) (Judge George W. Miller) THE UNITED STATES, ) ) Defendant. ) ____________________________________) DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

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 Attorney Commercial Litigation Division Air Force Legal Services Agency 1501 Wilson Boulevard Arlington, VA 22209 DEBORAH A. BYNUM Assistant Director

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

July 21, 2004

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TABLE OF CONTENTS INDEX TO APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii STATEMENT OF CASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 I. II. Nature Of Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Statement Of Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

STATEMENT OF ISSUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 SUMMARY OF ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 I. II. III. Legal Standard For Summary Judgment Pursuant to RCFC 56 . . . . . . . . . . . 6 The Government Is Not Liable For Costs That IDP Incurred In Hopes Of Receiving Orders Beyond The Contract Minimum of $100,000 . . . . . . . . 7 The Government Is Not Liable For The Costs That IDP Incurred In Providing Warranty Services and Software Upgrades That The Government Had Paid For . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

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INDEX TO APPENDIX Tab 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Page July 21, 2004 Declaration of John Williamson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 May 5, 1997 contract award for Desktop V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section B of Desktop V (conformed copy) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section C of Desktop V (conformed copy) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section I of Desktop V (conformed copy) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 DFARS 252.211-7000 "Termination ­ Commercial Items" (May 1991) . . . . . . . . . 66 Order 0001 for Desktop V (as modified) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 IDP Proposal, Section 2 ­ Cost and Pricing Data . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 IDP Proposal, Section 4 ­ Order Processing Support . . . . . . . . . . . . . . . . . . . . . . . 100 Sorted and totaled IDP accounts receivable spreadsheet for Desktop V . . . . . . . . . 102 IDP accounts receivable spreadsheet for Desktop V . . . . . . . . . . . . . . . . . . . . . . . . 206 September 16, 1999 email from contracting officer to IDP . . . . . . . . . . . . . . . . . . . 317 September 17, 1999 email exchange between IDP and contracting officer . . . . . . . 318 September 23, 1999 letter from IDP counsel to contracting officer . . . . . . . . . . . . 319 September 30, 1999 email exchange between contracting officer and IDP . . . . . . . 320 October 8, 1999 termination notices from contracting officer to IDP . . . . . . . . . . . 322 April 11, 2000 letter from IDP to contracting officer . . . . . . . . . . . . . . . . . . . . . . . 327

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TABLE OF AUTHORITIES CASES Abatement Contracting Corp. v. United States, 58 Fed. Cl. 594 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Dot Systems, Inc. v. United States, 231 Ct. Cl. 765 (1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 J. Cooper & Associates, Inc. v. United States, 53 Fed. Cl. 8 (2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Mason v. United States, 615 F.2d 1343, 222 Ct. (1980) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Textron Def. Sys. v. Widnall, 143 F.3d 1465 (Fed. Cir. 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Travel Centre v. Barram, 236 F.3d 1316 (Fed. Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 8 United Int'l Investigative Servs., Inc. v. United States, 56 Fed. Cl. 619 (2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Varilease Technology Group, Inc. v. United States, 289 F.3d 795 (Fed. Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 7 REGULATIONS 48 C.F.R. § 16.504(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 48 C.F.R. § 16.504(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 48 C.F.R. § 49.603-1(b)(7)(v) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 RULES RCFC 56(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 6

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS ____________________________________ ) INTERNATIONAL DATA PRODUCTS ) CORP., ) ) Plaintiff, ) ) v. ) No. 01-459C ) (Judge George W. Miller) THE UNITED STATES, ) ) Defendant. ) ____________________________________) DEFENDANT'S MOTION FOR SUMMARY JUDGMENT Pursuant to Rule 56(c) of the Rules of the United States Court of Federal Claims ("RCFC"), defendant, the United States, respectfully requests that the Court enter summary judgment in favor of the United States upon the ground that there are no genuine issues as to any material facts, and the Government is entitled to judgment as a matter of law. In support of this motion, defendant relies upon this brief and its accompanying appendix, defendant's Proposed Findings of Uncontroverted Fact ("DPFUF"), and the pleadings. STATEMENT OF CASE I. Nature Of Case This case involves a fixed-price, indefinite-delivery, indefinite-quantity ("IDIQ") contract to provide computer systems, computer and warranty services, and software products and upgrades to the Air Force and other Federal agencies. Compl.1 ¶ 5; Def. App.2 8; DPFUF ¶ 4. On May 5, 1997, the Air Force awarded Contract F01620-97-D-001 ("Desktop V") to plaintiff International Data Products ("IDP"), then a small minority-owned business and participant in the United States Small Business Administration's ("SBA") 8(a) program. Compl. ¶¶ 4-5; Def. App. 4; DPFUF ¶ 1-2.

"Compl. ¶ ____" refers to paragraphs in the complaint that plaintiff filed in its second suit, No. 03-2515. "Def. App. ____" refers to the Appendix to Defendant's Motion for Summary Judgment filed with and in support of this brief.
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The Desktop V contract consisted of one base year and four one-year options, and required the Government to place a minimum quantity of $100,000 in orders during the base year only. Compl. ¶ 5; Def. App. 8; DPFUF ¶¶ 5-6. The contract stated that the Government's exercise of an option would not re-establish the contract minimum for the option period. Def. App. 8; DPFUF ¶ 7. The contract set the maximum quantity of orders as $729,010,929. Def. App. 8; DPFUF ¶ 8. The contract required IDP to provide products "and bundled support services" identified in IDP's proposal and in Sections B and C of the contract. Def. App. 10-11; DPFUF ¶ 9. IDP's proposal listed products with a "3-yr warranty." Def. App. 90; DPFUF ¶ 11. Unit prices for products, including warranties and other bundled support services, were stated in Section B of the contract. Def. App. 18-25; DPFUF ¶ 8. In February 1998, IDP informed the SBA of IDP's owners' intention to sell their IDP stock to Dunn Computer Corporation, a non-8(a) concern. Compl. ¶ 6; DPFUF ¶ 15. As a result, the Small Business Act required the Government to terminate for convenience the Desktop V contract. Compl. ¶ 7; DPFUF ¶ 15. The SBA denied the Air Force's request for a waiver of the statutory 8(a) requirement that the Government terminate the Desktop V contract with IDP, and the denial was sustained by the SBA's Office of Hearings and Appeal. Compl. ¶¶ 8, 10; DPFUF ¶16. On October 8, 1999, the contracting officer notified IDP that the contract was terminated for convenience, and that the termination did not affect the warranties and upgrades for products purchased by the Government. Compl. ¶ 11; DPFUF ¶ 19; Def. App. 322-23. On May 5, 1997, the award date of the contract, the Government placed an initial order of $109,575, later modified to $100,436. Def. App. 69, 87; DPFUF ¶ 13. By the time the Desktop V contract was terminated in October 1999, the Government had ordered and paid IDP for over $35 million in products during the almost two and one-half years of the contract, more than 350 times the contract minimum of $100,000. Def. App. 157; DPFUF 2

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¶ 14. By letter dated April 11, 2000, IDP notified the Air Force that IDP would no longer provide software upgrades and warranty services. Def. App. 327-28; DPFUF ¶ 20. In the letter, IDP demanded a contracting officer's final decision regarding whether the Government continued to hold IDP liable for warranty services and software upgrades. Id.; Compl. ¶ 13. The contracting officer's final decision, dated August 8, 2000, denied IDP's claim. Compl. ¶ 14; DPFUF ¶ 21. IDP filed this suit on August 7, 2001, seeking a declaratory judgment "that defendant may not hold IDP to the DTV contractual provisions which could otherwise require IDP to provide warranty and software upgrade services to [the Government]." Compl. (No. 01-459) ¶ 17; DPFUF ¶ 22. On September 18, 2002, IDP filed a certified claim with the contracting officer, seeking termination costs that IDP claimed it was owed by the Government. Compl. ¶ 13; DPFUF ¶ 23. The claim sought $1,247,915 for inventory and restocking costs, $440,990 for warranty services and software upgrades provided after the contract was terminated, and $40,300 for executive, legal, and accounting time spent preparing and prosecuting IDP's termination settlement proposal. Compl. ¶ 13; DPFUF ¶ 23. A contracting officer's final decision issued November 15, 2002, that denied IDP any termination costs. Compl. ¶ 14; DPFUF ¶ 24. On October 30, 2003, IDP filed a second suit in this Court, No. 03-2515C, seeking the termination costs sought in its certified claim. Id. ¶ 16; DPFUF ¶ 25. By order of this Court dated March 23, 2004, the second suit was consolidated with this one. II. Statement Of Facts We respectfully refer the Court to Defendant's Proposed Findings of Uncontroverted Facts. STATEMENT OF ISSUES 1. Whether the Government is liable for inventory, restocking, and settlement

proposal costs if the Government satisfied the Desktop V contract minimum before the 3

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contract was terminated. 2. Whether the Government is liable for the costs of warranty services and

software upgrades that IDP continued to provide, after the contract was terminated, for products that the Government had already ordered and paid for. SUMMARY OF ARGUMENT The Government bears no liability for IDP's inventory, restocking, and settlement proposal costs. The Federal Circuit and its predecessors have ruled repeatedly that once the Government purchases the minimum quantity stated in an IDIQ contract, such as the Desktop V contract, the Government satisfies its legal obligations pursuant to the contract. The Desktop V contract set a minimum quantity of $100,000 for the base year of the contract, and expressly stated that there was no contract minimum for the option periods. The Government satisfied the contract minimum with its very first order, for $109,735, which was placed on May 5, 1997, the effective date of the contract. When the contract was terminated almost two and one-half years later, in October 1999, the Government had ordered and paid IDP for over $35 million of products. The Desktop V contract did not require the Government to pay IDP for its inventory, restocking, or any other costs that IDP incurred after the Government satisfied the contract minimum. The Desktop V contract expressly stated that it was a firm fixed-price IDIQ contract. When it entered the contract, IDP assumed the risk that the Government might choose not to order more than the $100,000 contract minimum. IDP was required to price its products so that it covered all its costs within the contract minimum. Thus, the Government is not liable for any costs that IDP incurred in expectation of receiving orders in excess of $100,000. Once the Government had ordered the minimum quantity, the contract permitted the Government to choose not to place any more orders for the remainder of the contract's term, without assuming any liability for inventory or other costs that IDP might incur in hopes of receiving orders beyond the contract minimum. 4

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The liability for IDP's inventory and its other asserted costs does not shift to the Government because it terminated for convenience the contract during the second option year, rather than allowing the option year to run out without placing any more orders. The termination for convenience clause incorporated by reference into the Desktop V contract with IDP stated that "[i]n no event shall the sum of the termination amounts payable and any amounts paid for items delivered under the contract exceed the total contract price." Because the Desktop V contract was an IDIQ contract, the total contract price that the Government was required to pay was $100,000. Thus, because the Government had ordered and paid far in excess of $100,000 when the contract was terminated in October 1999, no termination payments are owed to IDP as a result of the termination for convenience. As in any IDIQ contract, if the Government has met the contract minimum, no termination payments are payable. Requiring the Government to make termination payments to IDP would be particularly inappropriate in this case, because the termination for convenience was entirely attributable to IDP. It was the decision of IDP's owners to sell their stock to Dunn Computer Corporation that rendered IDP ineligible to participate in the SBA 8(a) program, and triggered the statutory requirement that the Government terminate for convenience the Desktop V contract. The Air Force pursued all available means to avoid terminating the contract, first requesting that the SBA waive the requirements of the Small Business Act, and then appealing the SBA's denial of the waiver request to the SBA's Office of Hearings and Appeals. In October 1999, when the SBA compelled the termination for convenience of the Desktop V contract, the Government had exceeded the contract minimum 350 times over, and thus had satisfied all its obligations to IDP. The happenstance that the contract was terminated for convenience after the Government exceeded the contract minimum, rather than expiring without any further orders being placed by the Government, should not make 5

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the Government liable for the termination costs IDP asserts, especially when it was IDP's own actions that resulted in the termination for convenience. The Government is also not liable for IDP's costs for continuing to provide warranty services and software upgrades for products that were ordered and paid for before the Desktop V contract was terminated. The unit prices for products in the contract included the cost of warranty services and software upgrades that IDP was required to provide pursuant to the warranty provision in the contract. Thus, IDP has already received full payment from the Government for the costs of providing these warranty services and software upgrades. In the October 8, 1999 termination notices sent by the contracting officer, the Government expressly reserved from the termination IDP's obligation to continue providing the warranty services and software upgrades for products that the Government had already ordered and paid for. Thus, any post-termination costs that IDP incurred to perform the warranty services and software upgrades remain the liability of IDP, not the Government. Indeed, rather than seeking more money from the Government, IDP should pay the Government for the warranty services and product upgrades that IDP failed to deliver, and that the Government was required to obtain from other sources. ARGUMENT I. Legal Standard For Summary Judgment Pursuant To RCFC 56 Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. RCFC 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The present case does not center on any dispute of facts, but rather involves a conflict of interpretation of the clauses of an IDIQ contract. "Contract interpretation is a question of law generally amenable to summary judgment." Varilease Technology Group, Inc. v. United States, 289 F.3d 795, 798 (Fed. Cir. 2002) (citing Textron Def. Sys. v. Widnall, 143 F.3d 1465, 1468 (Fed. Cir. 1998)). In the absence of a dispute of material fact, and because the Government is entitled to judgment as a 6

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matter of law for the reasons discussed hereafter, summary judgment in favor of the United States is appropriate. II. The Government Is Not Liable For Costs That IDP Incurred In Hopes Of Receiving Orders Beyond The Contract Minimum of $100,000 The starting point for analyzing plaintiff's claim for termination costs is that the Desktop V was an IDIQ contract. The first sentence of Section B.1.a. of the contract stated that "[t]his is a firm fixed-price (FFP), indefinite delivery, indefinite quantity (ID/IQ) contract." Def. App. 8; DPFUF ¶ 4. Desktop V complied with the requirements for an enforceable IDIQ contract set forth in the Federal Acquisition Regulations ("FAR"): "the contract must require the Government to order and the contractor to furnish at least a stated minimum quantity of supplies or services." 48 C.F.R. § 16.504(a)(1). Section B.2.a. of the contract stated that "in the base year of the contract, the minimum amount for award will be $100,000." Def. App. 9; DPFUF ¶ 6. Section B.2.b. stated that "the exercise of any options does not re-establish the contract minimum." Def. App. 9; DPFUF ¶ 7. Id. The Federal Circuit has ruled that in an IDIQ contract, "[m]inimum quantities are not required to be associated with each option period." Varilease, 289 F.3d at 800. The Desktop V contract also met the FAR requirement that for an IDIQ contract to be binding, "the minimum quantity must be more than a nominal quantity." 48 C.F.R. § 16.504(a)(2). The IDIQ contract at issue in Varilease, like the Desktop V contract, contained a minimum quantity of $100,000 for the basic period only, and no contract minimums for the options periods. Varilease, 289 F.3d at 797. Although the Federal Circuit did not specifically address whether $100,000 was more than a nominal quantity, it implicitly approved this amount by ruling that the contract "clearly sets forth the essentials of an ID/IQ contract." Id. at 799. In another case involving an IDIQ contract, the Federal Circuit treated as enforceable an IDIQ contract whose minimum quantity was much lower: "sales that would lead to $100 in revenue." Travel Centre v. Barram, 236 F.3d 1316, 1319 (Fed. Cir. 2001). 7

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This Court has ruled specifically that a contract minimum of $50,000.00 in supplies and services in an IDIQ contract was "more than a nominal amount." Abatement Contracting Corp. v United States, 58 Fed. Cl. 594, 604 (2003). Thus, the contract minimum of $100,000 in the Desktop V contract was more than a nominal amount. The Federal Circuit decisions in Varilease and Travel Centre, and earlier decisions by the Court of Claims, establish that once the Government meets the contract minimum set in an IDIQ contract, it has no further legal obligations under the contract. In Varilease, the Federal Circuit ruled that the Government's "only obligation was to order at least the minimum quantity of relevant computer maintenance during the initial six-month term of the contract." Varilease, 289 F.3d at 800-01. Likewise, in Travel Centre, the Federal Circuit ruled that the Government "was only required to purchase the minimum quantity stated in the contract ­ sales that would lead to $100 in revenue." Travel Centre, 236 F.3d at 1319. Because the Government placed over $500,000 in orders, whether a five per cent or ten percent commission were applied to the sales, the contractor had earned either over $25,000 or $50,000 in revenue, many times the $100 contract minimum. Id. The court concluded that because the Government "met the legal requirements of the [IDIQ] contract at issue," the contractor was "not entitled to any legal relief, including damages." Id. at 1319-20; accord Mason v. United States, 615 F.2d 1343, 1346 n.5, 222 Ct. Cl. 436 (1980) ("If the contract contains such a minimum quantity clause, the buyer is required to purchase at least this minimum amount, but this is the extent of his legal obligation."); J. Cooper & Assocs., Inc. v. United States, 53 Fed. Cl. 8, 23 (2002) (finding that the Government had "no legal obligation to compensate JC & A beyond the minimum guarantee in the [IDIQ] contract"); Abatement, 58 Fed. Cl. at 604 ("with the purchase of at least the [IDIQ] Contract minimum, the government's obligations thereunder were extinguished."). The Government assumes no liability in an IDIQ contract for any costs that the 8

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contractor may incur in expectation of receiving orders beyond the contract minimum. By entering an IDIQ contract, a contractor assumes the risk that the Government may not place any orders beyond the minimum quantity set in the contract, and must ensure that it can recover its costs if the Government does not exceed the contract minimum. As this Court has explained in a case involving an IDIQ contract, "the bidder, especially one as experienced as [plaintiff], bore the risk of adequately recovering its costs within the boundaries of the fixed price that it bid." United Int'l Investigative Servs., Inc. v. United States, 56 Fed. Cl. 619, 629 (2003). The Court of Claims stated similarly that "a contractor cannot sign a[n IDIQ] contract which allocates the risk to it and then 4 years later come to this court, having lost its gamble, and insist that the risk be placed on the Government." Dot Systems, Inc. v. United States, 231 Ct. Cl. 765 (1982). Here, it is indisputable that the Government exceeded the contract minimum of $100,000 at least 350 times over, having ordered and paid for more than $35 million in products by October 8, 1999, the date that the Desktop V contract was terminated. Def. App. 157; DPFUF ¶ . Any inventory or restocking costs that IDP incurred anytime after the Government exceeded the contract minimum were entirely the responsibility of IDP pursuant to the terms of the contract. Like the contractor in United Int'l, IDP was an experienced bidder. Its proposal stated that it had served the Government "over the past twelve years." Def. App. 88; DPFUF ¶ 3. Because the Desktop V contract was a firm fixed-price IDIQ contract, IDP was required, in preparing the unit prices that it proposed, to ensure that it would recover its costs even if the Government only placed the minimum quantity of $100,000 in orders. The Desktop V contract provides no basis for IDP to recover the inventory and restocking costs that it seeks, or its costs for preparing and prosecuting its settlement proposal. The termination for convenience clause that was incorporated by reference into the contract, DFARS 252.211-7000 (March 1991), stated that "[i]n no event shall the sum of the 9

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termination amounts payable and any amounts paid for items delivered under the contract exceed the total contract price." Def. App. 67, ¶ (b)(5); DPFUF ¶ 12. No termination amounts were payable upon the termination for convenience of the Desktop V contract, because the Government had already met and far surpassed the contract minimum of $100,000 when the contract was terminated for convenience in October 1999. Thus, the Government is not liable for IDP's inventory and restocking costs, or its costs in preparing and prosecuting its settlement proposal. III. The Government Is Not Liable For The Costs That IDP Incurred In Providing Warranty Services and Software Upgrades That The Government Had Paid For IDP also seeks to recover costs that it alleges it incurred to provide warranty services and software upgrades after the Desktop V contract was terminated in October 1999. The contract contained a warranty clause that required IDP to provide different types of warranty services and software upgrades for products sold under the contract: The Contractor shall provide users with a minimum 3 year, on-site, full parts and labor warranty for all offered products (excluding software) which includes CLINS 0001-0005. The Contractor shall provide users with a minimum 5 year (4 years on-site, 5th year return to IDP) full parts and labor warranty for all offered products (excluding software) for SLINS 0007AA through 0007CE. For SLINS0007DA through 0007DU, contractor shall provide a three year on site, 24 hour fix or replace on hardware warranty, and a two year upgrade warranty on software. Computer system, printers, and peripherals shall be user expandable and maintainable without voiding the Contractor provided warranty. The warranty coverage shall be worldwide and provide for no charge problem reporting 24 hours per day, 7 days per week. The warranty shall provide for repairing or replacing products (excluding software) and prompt return to customer service after problem notification. Def. App. 45, § C.3.6.1 "Warranty" (emphasis in original); DPFUF ¶ 10. The contract also required IDP to provide products "and bundled support services" identified in IDP's proposal and in Sections B and C of the contract. Def. App. 10-11; DPFUF ¶ 9. Unit prices for products, including warranties and other bundled support services, were stated in Section B of the contract. Def. App. 18-25; DPFUF ¶ 9. Before the Desktop V contract was terminated, IDP had already received payment for

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the costs of the warranty services and software upgrades that it now seeks to recover. These costs were included in the unit prices for products ordered and paid for by the Government. Once the contract was terminated, IDP sought to be released from these contractual obligations that it had been fully paid to perform, without offering to refund to the Government the amounts paid for warranty services and software upgrades that IDP failed to deliver. If the Court grants IDP the relief that it seeks, IDP would be unjustly enriched, because the Government would be required to pay IDP a second time for the warranty services and software upgrades that were included in the products already paid by the Government. In the two termination notices sent on October 8, 1999, the contracting officer preserved the Government's contractual right to require that IDP continue delivering the warranty services and software upgrades for which the Government had paid. Both notices stated: This termination will not affect the 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, nor the rights and liabilities of the parties concerning software upgrades as required by Section C of the contract. Def. App. 322-23; DPFUF ¶ 19. The termination notices closely tracked the language in the Federal procurement regulations that expressly provide that a contract can be completely terminated without terminating the contractor's responsibility to honor its warranties. FAR 49.603-1(b)(7)(v) contains a form for "Fixed-price contracts ­ complete termination" that reserves: "(v) All rights and liabilities of the parties, arising under the contract or otherwise, and 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." 48 C.F.R. § 49.6031(b)(7)(v). The October 8, 1999 termination for convenience did not terminate IDP's 11

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responsibility to continue to deliver warranty services and software upgrades for which it had already been paid by the Government. "While termination effectively puts an end to further performance, it must not be supposed that a termination cancels or extinguishes all liability on the part of the contractor." McBride and Touhey, 4A Government Contracts § 30.50(3). The Government is not liable for any costs that IDP incurred in delivering warranty services and software upgrades after the contract was terminated. IDP had already been paid to fulfill its contractual obligations. The Government should not be required to pay IDP again. If anything, IDP should reimburse the Government whatever costs it incurred in obtaining from other sources the warranty services and software upgrades that IDP failed to provide.

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CONCLUSION For the foregoing reasons, defendant respectfully requests that the Court grant defendant's motion for summary judgment, dismiss plaintiff's complaint, and grant such other relief as the Court sees fit. 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 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

July 21, 2004

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CERTIFICATE OF SERVICE I certify under penalty of perjury that on this 21st day of July, 2004, a copy of the foregoing "DEFENDANT'S MOTION FOR SUMMARY JUDGMENT" 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

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS ____________________________________ ) INTERNATIONAL DATA PRODUCTS ) CORP., ) ) Plaintiff, ) ) v. ) No. 01-459C ) (Judge George W. Miller) THE UNITED STATES, ) ) Defendant. ) ____________________________________) DEFENDANT'S PROPOSED FINDINGS OF UNCONTROVERTED FACT Pursuant to Rule 56(h)(1) of the Rules of the United States Court of Federal Claims, defendant submits the following proposed findings of uncontroverted facts: I. Desktop V Contract 1. On May 5, 1997, the Air Force awarded Contract F01620-97-D-001 ("Desktop

V") to plaintiff International Data Products ("IDP"). Compl.1 ¶5; Def. App.2 8. 2. IDP was a small minority-owned business and participant in the United States

Small Business Administration's ("SBA") 8(a) program. Compl. ¶ 4. 3. IDP's proposal stated that it had served the Government "over the past twelve

years." Def. App. 100. 4. Section B.1.a. of the Desktop V contract stated that "[t]his is a firm fixed-

price (FFP), indefinite delivery, indefinite quantity (ID/IQ) contract providing commercial computer systems and bundled support services to support general purpose applications which will satisfy portable, desktop, and server computer needs common throughout the Air Force, other Department of Defense (DoD) agencies (excluding Navy & Army), and as directed by GSA, other Federal civilian agencies." Def. App. 8.

"Compl. ¶ ____" refers to paragraphs in the complaint that plaintiff filed in its second suit, No. 03-2515. "Def. App. ____" refers to the Appendix to Defendant's Motion for Summary Judgment filed with and in support of this brief.
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5. Compl. ¶ 5. 6.

The Desktop V contract consisted of one base year and four one-year options.

Section B.2.a. of the Desktop V contract stated that "[i]n the base year of the

contract, the minimum amount for award will be $100,000.00." Def. App. 9. 7. Section B.2.b. of the Desktop V contract stated that "[t]he exercise of an

option does not re-establish the contract minimum." Def. App. 9. 8. Section B.2.d of the Desktop V contract stated that "[a] maximum of

$729,010,929 is established for this contract including option amounts." Def. App. 9. 9. Section B.3 of the Desktop V contract stated that IDP would provide products

"and bundled support services." Def. App. 10-11. Section B also contained unit prices for the products provided by IDP, including warranties and other bundled support services. Id. 18-25. 10. Section C.3.6.1 ("Warranty") of the Desktop V contract required IDP to

provide different types of warranty services and software upgrades for products sold under the contract: The Contractor shall provide users with a minimum 3 year, on-site, full parts and labor warranty for all offered products (excluding software) which includes CLINS 0001-0005. The Contractor shall provide users with a minimum 5 year (4 years on-site, 5th year return to IDP) full parts and labor warranty for all offered products (excluding software) for SLINS 0007AA through 0007CE. For SLINS0007DA through 0007DU, contractor shall provide a three year on site, 24 hour fix or replace on hardware warranty, and a two year upgrade warranty on software. Computer system, printers, and peripherals shall be user expandable and maintainable without voiding the Contractor provided warranty. The warranty coverage shall be worldwide and provide for no charge problem reporting 24 hours per day, 7 days per week. The warranty shall provide for repairing or replacing products (excluding software) and prompt return to customer service after problem notification. Def. App. 45, § C.3.6.1 "Warranty" (emphasis in original). 11. Def. App. 90 . 12. Section I of the Desktop V contract incorporated by reference a termination 2 Section 2 of IDP's proposal listed IDP products with a "3 yr warranty."

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for convenience clause, DFARS 252.211-7000 (March 1991), that stated that "[i]n no event shall the sum of the termination amounts payable and any amounts paid for items delivered under the contract exceed the total contract price." Def. App. 50, 67 (¶ (b)(5)). II. Orders and Payments By The Government 13. On May 5, 1997, the award date of the contract, the Government placed an

initial order of $109,575, later modified to $100,436. Def. App. 69, 87. 14. By the time the Desktop V contract was terminated on October 8, 1999, the

Government had ordered and paid IDP for at least $35 million in products. Def. App. 157. III. Termination for Convenience 15. In February 1998, IDP informed the SBA of IDP's owner's intention to sell

their IDP stock to Dunn Computer Corporation, a non-8(a) concern. Compl. ¶ 6. As a result, the Small Business Act required the Government to terminate for convenience the Desktop V contract. Id. ¶ 7. 16. The SBA denied the Air Force's request for a waiver of the statutory 8(a)

requirement that the Government terminate the Desktop V contract with IDP, and the denial was upheld by the SBA's Office of Hearings and Appeal. Compl. ¶¶ 8, 10. 17. By email dated September 16, 1999, the contracting officer, Ms. Kay Walker,

sent an email to Mr. James Crowther, IDP's Director, Contracts. Ms. Walker proposed a "no cost" termination for convenience of the Desktop V contract. Def. App. 317. 18. By email dated September 16, 1999, Mr. Crowther stated that he could not

formally respond to Ms. Walker's proposal until IDP received "the government's official T/C notice." Def. App. 320. Mr. Crowther's email referred to his email to Ms. Walker dated September 17, 1999 (Def. App. 318), and a letter to Ms. Walker from counsel for IDP dated September 23, 1999, which suggested that warranty work "could be performed under a time and material contract." Def. App. 319. 19. By two letters dated October 8, 1999, the contracting officer notified IDP that 3

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the contract was terminated for convenience, and that the termination did not affect the warranties and upgrades for products purchased by the Government. Compl. ¶ 11. Both letters stated: This termination will not affect the 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, nor the rights and liabilities of the parties concerning software upgrades as required by Section C of the contract. Def. App. 322, 323. 20. By letter dated April 11, 2000, IDP notified the Air Force that IDP would no

longer provide software upgrades and warranty services. Def. App. 327-28. In the letter, IDP demanded a contracting officer's final decision regarding whether the Government continued to hold IDP liable for warranty services and software upgrades. Id.; Compl. ¶ 13. IV. First Lawsuit 21. The contracting officer's final decision, dated August 8, 2000, denied IDP's

claim. Compl. ¶ 14. 22. IDP filed this lawsuit on August 7, 2001, seeking a declaratory judgment "that

defendant may not hold IDP to the DTV contractual provisions which could otherwise require IDP to provide warranty and software upgrade services to [the Government]." Compl. (No. 01-459) ¶ 17. V. Second Lawsuit 23. On September 18, 2002, IDP filed a certified claim with the contracting

officer, seeking termination costs that IDP claimed it was owed by the Government. Compl. ¶ 13. The claim sought $1,247,915 for inventory and restocking costs, $440,990 for warranty services and software upgrades provided after the contract was terminated, and $40,300 for executive, legal, and accounting time spent preparing and prosecuting IDP's termination settlement proposal. Id. 24. A contracting officer's final decision issued November 15, 2002, that denied 4

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IDP any termination costs. Id. ¶ 14. 25. On October 30, 2003, IDP filed a second lawsuit in this Court, No. 03-2515C,

seeking the termination costs sought in its certified claim. Compl. ¶ 16. 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 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

July 21, 2004

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CERTIFICATE OF SERVICE I certify under penalty of perjury that on this 21st day of July, 2004, a copy of the foregoing "DEFENDANT'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

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