Free Answer - District Court of Federal Claims - federal

Case 1:06-cv-00310-TCW

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS TEKNOWLEDGE CORPORATION, ) ) Plaintiff, ) ) v. ) ) THE UNITED STATES, ) ) Defendant. )

No. 06-310C (Judge Thomas C. Wheeler)

DEFENDANT'S ANSWER For its answer to plaintiff's first amended complaint, defendant admits, denies and alleges as follows: 1. Admits the allegation contained in paragraph 1 that Teknowledge has a place of

business at 1800 Embarcadero Road, Palo Alto, CA 94303; denies the remainder of the allegations contained in paragraph 1 for lack of knowledge or information sufficient to form a belief as to the truth of the matters asserted. 2. 3. Admits. The allegations contained in the first sentence of paragraph 3 are conclusions of

law to which no response is required; to the extent they may be deemed allegations of fact, they are denied. The allegations contained in the second sentence of paragraph 3 are conclusions of law and plaintiff's characterization of this action to which no response is required; to the extent that they may be deemed allegations of fact, they are denied. 4. The defendant admits that the contracts under which this dispute has arisen and

under which the plaintiff is a prime contract are: N66001-98-C-8500, N66001-98-D-8506/0006, N66001-98-D-8506/0008, N66001-00-C-8074, F30602-97-C-0145, F30602-99-C-0138, F3060200-C-0164, F30602-00-C-0057, F30602-00-C-0200, F30602-00-0202, F30602-00-C-0171,

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F30602-00-C-0218. The defendant further admits that the contract under which this dispute has arisen in which the plaintiff is a subcontractor are: F30602-00-C-0160 (Subcontract No. 00-C0160-05), F30602-96-2-0224 (Subcontract No. 057715), F30602-99-1-0542 (Subcontract No. 057715), F30602-99-1-0524 (Subcontract No. 057804), and F30602-96-2-0192 (Subcontract No. 057798). The defendant otherwise denies the allegations contained in paragraph 4. 5. Denies the allegations contained in the first and second sentences of paragraph 5

for lack of knowledge or information sufficient to form a belief as to the truth of the matters asserted. Defendant denies the allegations contained in the third sentence of paragraph 5 that the term, "dual use," has any relevant meaning within the context of Government contracting or the current dispute; denies the remainder of the allegations contained in the third sentence of paragraph 5. 6. Denies the allegation contained in the first sentence of paragraph 6 for lack of

knowledge or information sufficient to form a belief as to the truth of the matters asserted. Denies the remainder of the allegations contained in paragraph 6. Defendant avers that the $885,430 to which Teknowledge refers in the third sentence of paragraph 6 represents Teknowledge's amortization of software "production" costs previously capitalized by Teknowledge. 7. 8. Denies. Denies the allegation contained in the first sentence of paragraph 8 that the term,

"dual use," has any relevant meaning within the context of Government contracting or the current dispute; denies the remainder of the allegations contained in the first sentence of paragraph 8 for lack of knowledge or information sufficient to form a belief as to the truth of the

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matters asserted. Denies the allegations contained in the second sentence of paragraph 8. 9. Denies the allegations contained in paragraph 9 for lack of knowledge or

information sufficient to form a belief as to the truth of the matters asserted 10. Defendant is not aware of a current agency called the "Advanced Project

Research Agency." Assuming that Teknowledge is referring to the Defense Advanced Research Projects Agency, defendant denies the allegations contained in the first sentence of paragraph 10 for lack of knowledge or information sufficient to form a belief as to the truth of the matters asserted. 11. Denies the allegations contained in paragraph 11 for lack of knowledge or

information sufficient to form a belief as to the truth of the matters asserted. 12. Admits the allegations contained in the first sentence of paragraph 12 to the

extent supported by Defense Contract Audit Agency (DCAA) Draft Audit Report No. 042812001A10100024 cited, which is the best evidence of its contents; otherwise denies the allegations contained in the first sentence of paragraph 12. Denies the allegations contained in the second sentence of paragraph 12; defendant avers that the DCAA questioned what Teknowledge erroneously identified as amortized software "development" costs and proposed to reclassify those costs to the G&A base as direct product costs. Denies the allegations contained in the third sentence of paragraph 12; defendant avers that DCAA questioned other costs included in Teknowledge's indirect rates. 13. Defendant specifically denies that the term, "dual use," has any relevant meaning

within the context of Government contracting or the current dispute. Defendant admits the allegations contained in paragraph 13 that, on or about January 21, 2005, Teknowledge

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responded to the draft audit; denies the remainder of the allegations contained in paragraph 13 14. Admits the allegations contained in the first sentence of paragraph 14. Admits the

allegations contained in the second sentence of paragraph 14 to the extent supported by DCAA Audit Report No. 04281-2001A10100024, "Report on Audit of Indirect Cost Rates and Direct Costs for Calendar Year 2001,"1 cited, which is the best evidence of its contents; otherwise denies the allegations contained in the second sentence of paragraph 14. Denies the allegations contained in the third sentence of paragraph 14. Defendant avers that Audit Report No.042812001A10100024 questioned the allocation of amortized software production costs, erroneously identified by Teknowledge as software development costs, and recommended classifying those costs to the G&A base as direct product costs of the TekPortalTM (Tek) product line. Denies the allegations contained in the fourth sentence of paragraph 14. Defendant avers that Audit Report No. 04281-2001A10100024 also questioned other direct and indirect costs included in Teknowledge's Calendar Year 2001 incurred cost proposal. 15. Admits the allegation contained in paragraph 15 that, on July 25, 2005, DCMA

issued a Contracting Officer's Intent to Disallow Costs; denies the remainder of the allegations contained in paragraph 15. 16. Admits the allegations contained in paragraph 16 that, on behalf of Teknowledge,

Mr. William W. Holder, whom Teknowledge claims is a financial expert, submitted an undated letter to DCMA; denies the remainder of the allegations contained in paragraph 16. 17. Admits the allegations contained in the first sentence of paragraph 17 to the

extent supported by the contracting officer's final decision cited, which is the best evidence of its

1

"Federal" is not part of the title of the audit report. -4-

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contents; otherwise denies the allegations contained in the first sentence of paragraph 17. Denies the allegations contained in the second sentence of paragraph 17. Defendant avers that the contracting officer's final decision disallowed the allocation of $273,776 in amortized software production costs, previously capitalized by Teknowledge and included in the Government overhead pool, and reclassified those costs to the G&A base as direct costs of the Tek product line. Denies the allegations contained in the third sentence of paragraph 17. Defendant avers that the contracting officer's final decision demanded the payment of $285,565 (not $285,656), which included the disallowed amortizations and the related G&A costs and Costs of Money. COUNT I 18. The defendant re-avers and incorporates each of the responses to each of the

foregoing paragraphs of the complaint as if repeated fully. 19. 20. 21. 22. 23. Denies. Denies. Denies. Denies. Denies. PRAYER FOR RELIEF 24. 25. 26. 27. Denies. Denies. Denies the plaintiff is entitled to the relief requested, or to any relief whatsoever. Denies each and every allegation not previously admitted or otherwise qualified.

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Respectfully submitted, PETER D. KEISLER Assistant Attorney General

/s/ David M. Cohen DAVID M. COHEN Director

OF COUNSEL: STACY PROCTER Defense Contract Management Agency Carson, CA 90746

/s/ Sheryl L. Floyd SHERYL L. FLOYD Senior Trial Counsel Commercial Litigation Branch Civil Division Department of Justice Attn: Classification Unit 8th Floor 1100 L Street, N.W. Washington, D.C. 20530 Tele: (202) 307-0282 Attorneys for Defendant

JUNE 23, 2006

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CERTIFICATE OF FILING I hereby certify that on this 23rd day of JUNE, 2006, a copy of the "DEFENDANT'S ANSWER" 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/ Sheryl L. Floyd