Free Response - 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 ) CORP., ) ) Plaintiff, ) ) v. ) No. 01-459-GWM ) (Judge George W. Miller) THE UNITED STATES, ) ) Defendant. ) ____________________________________) DEFENDANT'S RESPONSES TO PLAINTIFF'S PROPOSED FINDINGS OF FACT Pursuant to the Court's October 12, 2005 order, defendant, the United States, respectfully submits these responses to plaintiff's proposed findings of fact. 1. 2. Defendant agrees. Defendant disagrees. The testimony in the first sentence of the proposed finding does not address whether the Air Force would "act promptly to fulfill whatever decision the SBA reached" (PPPF1 ¶ 1 [emphasis added]), but states as follows without referring to any timetable for action: Q: A: [W]hat did you expect the Air Force to do as a result of the SBA's decision on August 31, 1999? To terminate the Desktop V contract.

Tr. 35:2-4. The exhibit cited in the first sentence of the proposed finding (PX2 16) also does not address whether the Air Force would "act promptly," but instead states that "the Air Force is not required to terminate IDP until the appeal process has been completed and a final SBA decision to terminate is issued." PX 16 (emphasis added). Defendant also disagrees that the Air Force "delayed" issuing a decision, as

1 2

"PPPF" refers to plaintiff's proposed findings of fact, filed December 12, 2005. "PX" refers to plaintiff's trial exhibits. 1

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plaintiff asserts in the second sentence of its proposed finding. Plaintiff's own witness acknowledged in the cited testimony that termination would be effective only "once the SBA decision became final" on September 20, 1999. Tr.3 36:1-3; DPFF4 ¶ 8. Plaintiff's counsel, as well as its director of contracts, also stated that the SBA decision was not final until September 20, 1999. DPFF ¶¶ 9-10. The contracting officer promptly sent a notice of termination on October 8, 1999. DPFF ¶ 11. Defendant also disagrees that the contracting officer issued a partial termination, as plaintiff asserts in the third sentence of this proposed finding. The October 8, 1999 notice of termination states that the Desktop V contract "is completely terminated." PX 33 (emphasis added). 3. Defendant disagrees with the first sentence of the proposed finding. One of the exhibits cited by plaintiff (PX 15) demonstrates that the Air Force did not seek to "avoid the need to terminate," as plaintiff asserts in the proposed finding, but instead requested that "IDP agree to a no cost termination for convenience." PX 15. Defendant also disagrees with the second sentence of the proposed finding. The Air Force did not "threaten" to default and debar IDP, but advised IDP that if it breached its warranty obligations, "the consequences could include a request for debarment for IDP and Dunn Computer." PX 26-2 (emphasis added). 4. At no time after the contracting officer issued her termination notice on October 8, 1999, did she provide IDP with any reasonable basis to believe that the Air Force would "negotiate" its insistence that IDP continue to perform the warranty and upgrade services required in the contract. Tr. 44:7-22, 47:3-23. Plaintiff's own counsel stated in

the exhibit cited by plaintiff (PX 26) that in response to IDP's proposals, the Air Force "rejected everything, and, indeed, never responded at all except to say `no.'" PX 26-1
3 4

"Tr." refers to the transcript of the October 11, 2005 trial in this case. "DPFF" refers to defendant's proposed findings of fact, filed December 12, 2005. 2

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(emphasis in original). The Air Force made clear in its October 8, 1999 termination notice that it expected IDP to continue to provide warranty services for the goods already sold and delivered. PX 33. The contracting officer reinforced this message in her meeting with IDP soon after issuing the termination notice. DPFF ¶ 14. 5. The contracting officer made clear long before April 2000 that she would not agree to release IDP from its obligation to perform the warranty services. DPFF ¶¶ 1112, 14. The October 8, 1999 termination notice, and IDP's meeting soon thereafter with contracting officer Kay Walker provided clear notice to IDP that it should document the costs of performing the warranty services if it intended to file a claim to recover those costs. PX 33; DPFF ¶ 14. 6. Defendant is at present unaware of any facts to controvert this proposed finding, but notes that on numerous occasions between October 8, 1999 and April 11, 2000, IDP refused to perform or delayed performing warranty services. PX 25-1, PX 30-1. 7. Defendant notes that plaintiff has cited no testimony or exhibits in support of this proposed finding, which confirms that plaintiff is unable to prove with any acceptable degree of reliability the costs that it allegedly incurred. 8. Plaintiff has not proved how it calculated the amount of time that it asserts its employees spent performing warranty services for Desktop V. DPFF ¶¶ 26-27. Even though "IDP did not engage in a time and materials business," IDP could have used time sheets to track its labor costs after October 8, 1999, but chose not to do so. DPFF ¶¶ 1920. As discussed above, IDP received clear notice that it should document its labor costs using time sheets if it intended to recover these costs from defendant. Def. Resp. to PPPF ¶ 5. 9. IDP's Chief Financial Officer, Kevin Murphy, testified that he relied upon David Costello to determine how much time certain IDP employees allegedly spent performing warranty services for the Desktop V contract. DPFF ¶ 28. Mr. Costello, who supervised 3

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the employees, testified that he was relying upon the affidavits that were prepared in April 2001 (PX 2) as the basis for his testimony about the warranty services work allegedly performed by certain IDP employees. DPFF ¶ 37. 10. Mr. Costello testified that he spent between one-third and one-half of his time performing warranty services for the Desktop V contract. DPFF ¶ 29-31. 11. Mr. Costello did not explain how he calculated that Dario Uruburo spent 75 percent of his time performing warranty services for the Desktop V contract. DPFF ¶ 35. Mr. Costello testified that his assertion that Mr. Uruburo spent "most of his time" on the Desktop V contract was based entirely upon the April 2001 affidavits (PX 2). DPFF ¶¶ 36-37. 12. Mr. Costello testified that his assertion about how much time Paul Seyfrit spent performing warranty services for the Desktop V contract was based entirely upon the April 2001 affidavits (PX 2). DPFF ¶¶ 38-39. 13. Mr. Costello testified that his assertion about how much time Sean Mahoney spent performing warranty services for the Desktop V contract was based entirely upon the April 2001 affidavits (PX 2). DPFF ¶ 40. 14. 15. Defendant is at present unaware of any facts to controvert this proposed finding. Mr. Costello did not explain how he calculated that Jesse Harris spent "half his time" on Desktop V work. DPFF ¶ 41. 16. Mr. Costello testified that Vicki Hiers "ran the help desk" that served all 13 contracts for which IDP performed warranty services, but he did not explain how he calculated that Ms. Hiers spent 75 percent of her time on Desktop V work. DPFF ¶ 42. 17. Mr. Costello did not explain how he calculated that Brian Anderson spent 50 percent of his time on Desktop V work. DPFF ¶ 43. 18. IDP did not determine how much time its employees allegedly spent performing warranty services for the Desktop V contract until April 2001, a year after the services 4

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were performed, by which time four of the eight employees had left. DPFF ¶¶ 21-23. 19. The testimony cited by plaintiff does not support the proposed finding that IDP terminated the employment of Dario Uruburo, Sean Mahoney, Julio Manyari, and Jesse Harris "in or around the beginning of May 2001." Mr. Murphy testified that in April 2001 when IDP prepared the affidavits (PX 2) regarding how much time its employees allegedly spent performing warranty services for the Desktop V contract, "we attempted to contact those four individuals and were unsuccessful" because their employment had already been terminated after the Desktop V work wound down in May 2000. 20. Only 33.3 percent of the service calls opened during the period August 1999 through April 2000 were for the Desktop V contract. DPFF ¶ 17. 21. Defendant agrees that the DCAA audit report stated that "[w]e take no exception to the employee wages" (PX 10-10), but disagrees that the audit report ever "accepted the accuracy of these numbers" as an accurate representation of the costs that IDP allegedly incurred to perform warranty services for the Desktop V contract from September 1999 through April 2000. The DCAA audit report questioned in their entirety the warranty labor costs claimed by IDP, in part because DCAA was "unable to verify the time allocation percentages due to a lack of supporting documentation." PX 10-10; DPFF ¶¶ 82-87. 22. Defendant is at present unaware of any facts to controvert this proposed finding, but notes that any alleged costs not included in plaintiff's certified claim are irrelevant to this suit, and lie outside the scope of this Court's jurisdiction. 23. Defendant agrees that PX 1 records how plaintiff applied the time allocation percentages that it developed in April 2001 to its labor costs to arrive at its claim for the alleged labor costs of performing warranty services for the Desktop V contract during the period September 1999 through April 2000. PX 1. Defendant disagrees that plaintiff is entitled to recover any labor costs, particularly the approximately $19,500.00 in labor 5

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costs incurred during the period before the termination notice issued on October 8, 1999. DPFF ¶ 44. 24. Mr. Larry Tatem, the DCAA Branch Manager who was the lead auditor for the audit of IDP, testified that he and the other DCAA auditor, Ms. Sharon Parr, did not consider interviewing IDP's employees to determine how many hours they had worked to perform warranty services for the Desktop V contract "because we prefer to see some type of records that would support the hours that the employees actually worked." Tr. 253:10-12; DPFF ¶ 73-74, 80, 83-85. Moreover, at least four of the employees who allegedly performed warranty services for the Desktop V contract ­ Dario Uruburo, Sean Mahoney, Julio Manyari, and Jesse Harris ­ had left IDP by the time that Mr. Tatem and Ms. Parr arrived at IDP's offices in early 2002 to conduct the audit. DPFF ¶ 22. 25. The testimony cited by plaintiff does not support plaintiff's assertion that IDP employees did not make service calls to perform warranty services for the Desktop V contract. Tr. 192-96. Defendant also disagrees that any exhibits demonstrate that any of the warranty services work performed for IDP by third-party vendors was performed for purposes of the Desktop V contract. 26. Mr. Murphy testified that Astronautics Corporation of America was hired by IDP "primarily" to perform warranty services for the Desktop V contract (Tr. 52:6), but he did not specify just how much of Astronautics' work was dedicated to the Desktop V contract. 27. Although Mr. Murphy testified that there were no complaints about the work performed by Astronautics, he did not specify whether he was referring to the work that Astronautics allegedly performed for the Desktop V contract, or other work that Astronautics performed for IDP. Tr. 106:8-10. 28. Astronautics' invoices for warranty services performed outside the continental United States were larger than the invoices for services that Astronautics performed 6

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within the continental United States. PX 4-6 through PX 4-25. However, the invoices for services performed within the continental United States for the months claimed by plaintiff ­ August 1999 through February 2000 ­ are still a very substantial portion of plaintiff's claim, and total $63,720.00 before the 85 percent allocation figure is applied to them. PX 4-6, 4-10, 4-11, 4-18, 4-22, 4-23, and 4-25. The testimony cited in the third sentence of the proposed finding does not support the proposed finding that "[a]ll international calls for Astronautics" are related to the Desktop V contract. Mr. Murphy only referred to the invoice for a single month, testifying "you look at February [2000] where all our international work is for Desktop V." Tr. 142:1-2. Except for the March 15, 2000 invoice for services performed during February 2000 within the continental United States (PX 37), IDP has failed to identify any documents that confirm what proportion of the services Astronautics performed for purposes of the Desktop V contract either within or outside the continental United States. 29. PX 4 summarizes the Astronautics invoices through February 2000 totaling $213,914.00, which plaintiff asserts it was billed by Astronautics for performing warranty services for the Desktop V contract. PX 4. Defendant disagrees that plaintiff is entitled to recover any of these costs, particularly the $69,407.60 that plaintiff seeks for work that Astronautics performed in July, August, and September 1999, before the termination notice issued on October 8, 1999. DPFF ¶ 60. The cost of the inventory that IDP allegedly bartered with Astronautics for services performed in March and April 2000 was not included in plaintiff's certified claim, and thus is irrelevant to this suit and lies outside the scope of this Court's jurisdiction. 30. The testimony cited in the first sentence of this proposed finding does not support the assertion that "virtually all" of Astronautics' charges were for the Desktop V contract, nor does that phrase appear in the testimony. Tr. 216. In the cited passage, Mr. Costello testified that 85 percent was an accurate amount of Astronautics' charges that were 7

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allocable to the Desktop contract. Id. 216:14-17. However, Mr. Costello admitted during cross-examination that the 85 percent figure was not based upon totaling the detailed records attached to Astronautics' invoices, even though he had testified during his direct examination that he "went through all the invoices. DPFF ¶¶ 67-68. Instead, Mr. Costello agreed that the 85 percent figure was just an estimate, which he developed by arriving at what he thought was the number of Astronautics service calls performed for purposes of the Desktop V contract, and then dividing it into the total number of service calls that Astronautics performed for IDP. DPFF ¶ 66. Even though the detailed records attached to the invoices was available to him at the time that he developed his estimate, he did not want to perform the data entry function of totaling the detailed records because it was too laborious. DPFF ¶ 68. 31. Plaintiff asserts that "[n]ot all" of the Astronautics invoices that it offered as evidence have the "attached backup" that Mr. Costello failed to total, suggesting that the backup is available for at least some of the invoices. However, IDP was only able to locate (on the last business day before trial) the backup for one of the Astronautics invoices, the March 15, 2000 invoice for services performed within the continental United States during February 2000 (PX 4-25). Tr. 98:3-102:7 (describing PX 37). Plaintiff asserts that the backup was provided to DCAA auditor Robin Wesnofske, implying that Ms. Wesnofske took the material because the documents "have gone missing" sometime after DCAA performed its audit. However, Mr. Murphy admitted that he has no reason to believe that Ms. Wesnofske removed the documents from IDP's offices, where she reviewed them, and before leaving she returned all folders. DPFF ¶¶ 96-99. He also conceded that because the backup that accompanied the March 2000 Astronautics invoice (PX 37) were only found one week before trial while IDP was "cleaning up," that it was possible that IDP had misplaced similar detailed records that accompanied other invoices. DPFF ¶ 101. Mr. Murphy acknowledged that during 8

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discovery, IDP had searched for and failed to locate the same sort of detailed records supporting invoices for the months before August 1999, even though IDP would normally retain those records, and IDP never granted the DCAA auditors access to those documents. DPFF ¶ 103. Larry Tatem, the DCAA Branch Manager who completed the audit of IDP, testified that he requested documents to support IDP's claimed third-party vendor warranty costs, but that IDP never provided the documents. DPFF ¶ 86-87, 90. There is no support in the cited testimony (Tr. 280) for IDP's assertion that Mr. Tatem never discussed "the matter" with Ms. Wesnofske, as plaintiff asserts in the final sentence of this proposed finding. Mr. Tatem simply testified that he did not discuss with Ms. Wesnofske the work that she had done on the audit (Tr. 279:1-3), and that he had no personal knowledge about any discussions between Ms. Wesnofske and Ms. Parr about the audit (Tr. 280:10-23). 32. It appears that the document that plaintiff refers to as "backup materials" to an invoice for "international work" is itself a different type of Astronautics invoice for time and material service calls, which does not provide any guidance to the nature of the missing backup to the other monthly Astronautics invoices. PX 4-13 to 4-17. The fivepage document, dated December 22, 1999, is invoice number 144254 for "time and material service calls" in Germany during the month of November 1999 that total $960.00. PX 4-17. Plaintiff has also included in PX 4 another Astronautics invoice dated December 22, 1999 for warranty services performed outside the continental United States during November 1999 that total $18,430.00. PX 4-19. That invoice, like all the other monthly Astronautics invoices for "ON-SITE PER CALL WARRANTY MAINTENANCE FOR OCONUS LOCATIONS" (PX 4-7, 4-9, 4-12, 4-20, 4-24, and 4-26) states "(SEE ENCLOSED MANIFEST AND MRF FOR BILLING BREAKOUT)." PX 4-19. IDP 9

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has been unable to locate any of the backup for these monthly Astronautics invoices for services performed outside the continental United States, so there is no documentary support for plaintiff's assertion that "100%" of these services calls were for the Desktop V contract. Defendant agrees that the backup for the February 2000 bill shows that 18 of 23, or approximately 78 percent, of the service calls performed by Astronautics within the continental United States during that month were for the Desktop V contract. PX 37; Tr. 130:2-140:22. 33. Defendant agrees that PX 5 summarizes plaintiff's claim for services allegedly performed by Accutek. Defendant disagrees that these costs are recoverable, particularly the $193.60 that plaintiff seeks for services performed before the termination notice issued on October 8, 1999. DPFF ¶ 72. 34. Defendant agrees with this proposed finding, and notes that Mr. Costello admitted that just like with the Astronautics invoices, totaling the Accutek invoices would also yield a more precise figure for what percentage of the services performed by Accutek were for the Desktop V contract. DPFF ¶ 71. 35. 36. Defendant is at present unaware of any facts to controvert this proposed finding. IDP's explanations of the "analysis" that it supposedly conducted to arrive at the 45 percent figure for its claimed Federal Express costs were contradictory. Mr. Murphy testified during his direct examination that "we were able to pull a list of all the service orders that had a Federal Express tracking number associated with it, and it was about 45 percent of the volume during that period." Tr. 116:23-117:1 (emphasis added). However, the only IDP list of service orders that shows Federal Express tracking numbers records that approximately 23 percent of the total number of closed service orders have Federal Express tracking numbers. PX 12; DPFF ¶¶ 47-48. Mr. Murphy later testified that IDP had based its analysis upon invoices that had a 10

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Federal Express tracking number. DPFF ¶ 49. However, the Federal Express invoices produced by IDP do not show any twelve-digit Federal Express tracking numbers like those on PX 12, nor any other information about the weight or destination of the packages shipped, but only show the total amount charged by Federal Express for shipping services. DPFF ¶ 50. Mr. Murphy agreed on cross-examination that none of the Federal Express invoices produced by IDP show any information regarding particular shipments, such as how many packages were sent to a particular destination, or where were the destinations. DPFF ¶ 51. Defendant disagrees that plaintiff is entitled to recover any of the Federal Express costs that it seeks, particularly the $13,421.70 plaintiff seeks for Federal Express costs incurred before the termination notice issued on October 8, 1999. 37. Defendant disagrees that plaintiff has carried its burden to prove that the $245,974.15 that plaintiff seeks for third-party warranty service providers is properly allocable to the Desktop V contract. DPFF ¶¶ 45-72. Plaintiff's characterization of its calculation of damages as "conservative" is contradicted by its failure to use any accurate method to arrive at the 85, 45, and 10 percent figures it used to allocate its total costs to the Desktop V contract. Id. If plaintiff had accurately recorded its costs contemporaneously, it would not need to rely upon estimates and approximations that it now seeks to characterize as "conservative." 38. Defendant disagrees that plaintiff suffered the amount of damages claimed in PX 1. DPFF ¶¶ 16-72. 39. Defendant disagrees with the first two sentences of this proposed finding. Mr. Tatem testified that he spent five days at IDP's offices "ensuring that [DCAA auditor] Sharon [Parr] reviewed the warranty cost and shipping cost." DPFF ¶ 75. During this time, he discussed with Ms. Parr what conclusions she formed about warranty costs. Id. He instructed her how to handle IDP's claim for warranty costs, and requested documents 11

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to support the claim. DPFF ¶¶ 88, 90. With respect to the final sentence of this proposed finding, while Mr. Tatem agreed that "there is nothing illegal about reconstructing records" (Tr. 267:4-5), he testified that costs should be tracked as they are incurred because "[i]t's very difficult to go back six months to a year to try to reconstruct[] those costs." Tr. 58:23-25. Mr. Tatem testified that IDP should have set up an accounting number to track the costs. DPFF ¶ 79.

Respectfully submitted, PETER D. KEISLER Assistant Attorney General DAVID M. COHEN Director

OF COUNSEL: E. MICHAEL CHIAPARAS Acting Director Contract Disputes Resolution Center Defense Contract Management Agency 10500 Battleview Parkway, Suite 105 Manassas, VA 20109 JOHN T. LAURO 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

January 20, 2006

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CERTIFICATE OF SERVICE I certify under penalty of perjury that on this 20th day of January, 2006, a copy of the foregoing "DEFENDANT'S RESPONSES TO PLAINTIFF'S PROPOSED FINDINGS OF 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