Free Status Report - District Court of Federal Claims - federal

Case 1:02-cv-00796-FMA

Document 56

Filed 08/18/2005

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS INFORMATION SYSTEMS & NETWORKS CORPORATION, Plaintiff, v. THE UNITED STATES, Defendant. ) ) ) ) ) ) ) ) ) )

No. 02-796C (Judge Allegra)

DEFENDANT'S STATUS REPORT Pursuant to the Court's order of August 5, 2005, defendant submits this status report setting forth the discovery necessary for the Government to defend against the claim set forth in plaintiff's proposed amendment to the complaint. On May 16, 2005, the parties submitted a joint status report. In that report, plaintiff Information Systems & Networks Corporation ("ISN") asserted that its claimed damages consisted of two elements: (1) the costs incurred by ISN on the ECP, and (2) the "unpaid profit on the basic contract due to the costs incurred by ISN on the ECP." In its motion to amend the complaint filed on May 18, 2005, ISN represented that one half of its claimed damages arises out of the "ECP portion" of ISN's case, and the other half of its claimed damages is for "the unpaid profit from the fully performed firm fixed price contract." In addition to these descriptions of the proposed amendment, ISN's proposed amended complaint alleges that the contract at issue was a firm, fixed-price contract in the amount of $4,416,645 and that the "agreed upon profit was ten percent (10%) of the Contract costs or $441,665." Amended Complaint, ¶ 5. It additionally alleges that the Government breached its duty of good faith and fair dealing by "adopting the results of the DCAA Audit Report on the claim without taking into account the underlying facts and failing to provide the DCAA the

Case 1:02-cv-00796-FMA

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Filed 08/18/2005

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accurate facts and documentation so as to enable the DCAA to perform an appropriate audit." Amended Complaint, ¶ 17(e). Finally, not only does the amended complaint seek to add a claim for profit, but it also appears to add a claim for settlement expenses. See Amended Complaint, ¶¶ 12, 13, 29, and 30 (seeking an equitable adjustment for ECP change costs, profit, and "other costs"). If the Court allows the proposed amendment, the Government would likely reaudit the claim. The individual who audited the claim in 1996 is no longer employed by the DCAA, and his current whereabouts are unknown at this time. As a result, the Government is currently unable to produce a witness who could competently testify as to the audit of ISN's claim. Moreover, in the original audit, the Defense Contract Audit Agency ("DCAA") qualified its opinions, in part, because it had not received an estimate to complete. In the above-reference joint status report, ISN alleges that it provided an estimate to complete (even though it also alleges that the contract was fully performed). Accordingly, we would attempt to obtain this information and to assess its effect upon the previously stated opinions of the DCAA. In addition, the DCAA questioned the profit sought by ISN, in part, based upon its finding that the contract was significantly underbid. This finding was based upon discussions between the DCAA auditor and the ISN program manager and the auditor's notes from his review of ISN's contract administration files. Thus, the Government would seek production of the contract administration files, which may or may not still exist, and it would seek to depose ISN's former program manager and others who may have been involved in the preparation of ISN's bid. In this regard, we believe that none of the individuals who worked on this contract are currently employed by ISN, and their whereabouts may be unknown. The Government would also

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Case 1:02-cv-00796-FMA

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Filed 08/18/2005

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propound written discovery to definitize the damages sought and to obtain particulars as to the alleged agreement to pay ISN "profit" in the amount of ten percent of the contract price. Finally, the Government would seek to depose ISN as to the basis of this new claim. Respectfully submitted,

PETER D. KEISLER Assistant Attorney General DAVID M. COHEN Director s/ Brian M. Simkin BRIAN M. SIMKIN Assistant Director s/ Doris S. Finnerman DORIS S. FINNERMAN Trial Attorney Commercial Litigation Branch Civil Division Department of Justice Attn: Classification Unit 8th Floor 1100 L Street, N.W. Washington, D.C. 20005 Phone:(202) 307-0300 Fax: (202) 305-7643 Attorneys for Defendant

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