_______________________________________________ MOTION TO QUASH SUBPOENA DENIED: October 31, 1994 _______________________________________________ GSBCA 12823-COM UNISYS CORPORATION, Appellant, v. DEPARTMENT OF COMMERCE, Respondent. Michael R. Charness, J. Eric Andr , and Ronald B. Vogt of Howrey & Simon, Washington, DC, counsel for Appellant. Jerry A. Walz, Steven Carrara, Roxie Jamison Jones and Cecilia Carson, Office of the Assistant General Counsel for Finance and Litigation, Department of Commerce, Washington, DC, counsel for Respondent. Terry L. Albertson and Linda S. Bruggeman of Crowell & Moring, Washington, DC, counsel for subpoenaed subcontractor Computer Concurrent Corporation. BORWICK, Board Judge. Concurrent Computer Corporation (Concurrent) has moved to quash the Board subpoena, issued at the request of the Department of Commerce (Commerce), requiring production of documents revealing Concurrent's cost of spare parts covered by modifications 77, 111, and 122 of the Commerce's contract with the Unisys Corporation (Unisys) for the New Generation Radar (NEXRAD) contract. Concurrent, a subcontractor to prime contractor Unisys, and the supplier to Unisys of the spare parts at issue, has consistently refused during the administration of this contract and the price negotiations for modifications 77, 111 and 122, to provide cost and pricing data requested by the contracting officer. Concurrent, joined by Unisys here, argues that cost data is irrelevant because Commerce has accepted Concurrent's claim of a commerciality exemption for the modifications at issue and past modifications. Concurrent argues that the Government is estopped from obtaining by subpoena duces tecum those cost documents which the contracting officer, during the course of contract administration, was unable to obtain from either Unisys or Concurrent. We deny the motion.[foot #] 1 Unisys and Concurrent have not demonstrated a compelling case for the application of estoppel so as to persuade us to frustrate what seems to be a relevant line of inquiry at this early stage of proceeding. The documents which Commerce seeks are relevant to the subject matter and issues in the litigation in two respects. The discovery is relevant to Unisys's defense to Commerce's claim for a refund of over seven million dollars. That defense is based on the alleged similarity of Concurrent's spare parts to Concurrent's commercial parts. The discovery is also relevant to Commerce's calculation of the fair and reasonable prices for the spare parts. The discovery is thus reasonably calculated to lead to the discovery of admissible evidence. Rule 15(b).[foot #] 2 Background The appeal This appeal involves the pricing of spare parts for modifications 77, 111, and 122 of the NEXRAD contract. Concurrent is a major subcontractor to Unisys, the prime contractor for the NEXRAD contract. By decision dated March 29, 1994, the contracting officer, pursuant to clause H-3 of the NEXRAD contract, determined a fair and reasonable price for spare parts covered by the modifications. He concluded that the total lump sum fair and reasonable price for the spare parts was $27,610,695 and that Commerce had disbursed $34,980,852. The contracting officer thus sought a refund from Unisys of $7,370,157. Appeal File, Exhibit 152. Unisys has appealed this decision. Price determinations For Concurrent's parts covered by modification 77, the contracting officer determined the fair and reasonable price for parts numbered 27-189F01, 34-046F01, 97-249F00, and 92-59F00 based on market prices of identical items, plus a seventeen percent markup. All other parts were discounted using a forty- seven percent discount based on Unisys's purchase history of "similar to" and/or identical parts from Concurrent. Appeal File, Exhibit 152 (Modification 77 Explanation of CO Decision). ----------- FOOTNOTE BEGINS --------- [foot #] 1 We have been assisted in deciding the motion by the briefs and supporting materials filed by Commerce, Unisys and Concurrent. We were also assisted by the arguments made at the conference on the motion held on October 17, at which Commerce, Unisys and Concurrent orally presented their views. [foot #] 2 58 Fed. Reg. 69,246, 69,258 (1993) (to be codified at 48 CFR 6101.15(b)). ----------- FOOTNOTE ENDS ----------- For Concurrent's parts covered by modification 111, the contracting officer determined a fair and reasonable price for part numbers 17-852F00M00 and 35-910F00 by using a forty-seven percent discount based on Unisys's purchase history of "similar to" and/or identical parts from Concurrent and information provided by the Defense Contract Audit Agency (DCAA). Appeal File, Exhibit 152 (Modification 111 Explanation of CO Decision). For Concurrent's parts covered by modification 122, the contracting officer determined the fair and reasonable price for part numbers 09-227F00M00, 35-702F00M02, 35-941F00M01, 35-AAMF00M03, 35-ABIF09M00 and 93-ABRF00M00 based on results of a DCAA supplemental audit. The fair and reasonable price for part numbers 27-199F00M00, 27-204F00M00, 34-046F01M00, 97-249F00M00 and 92-623F00 were determined based on market prices of identical items, plus a seventeen percent markup. The fair and reasonable price for part numbers 35-732F00M02 and 35-ABIFF07M03 were based on Unisys's purchase history of "similar to" and/or identical spare parts from Concurrent. All other parts were based on a 39.79 percent discount, which was the weighted average between the DCAA supplemental audit recommendation and a market survey. Appeal File, Exhibit 152 (Modification 122, Explanation of CO Decision). Claims for exemption Concurrent submitted Claims for Exemption from Submission of Certified Cost or Pricing Data (SF 1412s) for modifications 77, 111, and 122. Unisys's Request for Admissions 22, 26, 37 and Commerce's Answers Admitting Same. For modification 77, Unisys contracting personnel informed Concurrent that Unisys had been advised that DCAA had accepted the SF 1412 for Modification 77. Appeal File, Exhibit 424. Unisys had also been orally advised by the contracting officer that the Government believed that Concurrent's SF 1412 for modification 77 was "acceptable." Unisys's Request for Admissions 21 and Commerce's Answer Admitting Same; Supplemental Appeal File, Exhibit 257. At oral argument, counsel for the Government stated that the Government's response to Unisys's Request for Admission 21 did not necessarily mean that the contracting officer accepted Concurrent's commerciality exemption for Modification 77. She said the response referred to the DCAA's initial audit finding, not to a determination by the contracting officer. For modification 111, in a business clearance memorandum dated April 30, 1993, Commerce's Administrative Contracting Officer determined that "a review of the purchase history and catalogue prices of Concurrent has shown that proposed costs are acceptable." Unisys's response to Board's Order on Further Proceedings, Attachment 1 at 6 (Sept. 27, 1994) (Unisys's Response). This business clearance memorandum was not signed by approving authority, Id., and the significance of the lack of approval is not clear at this time. Commerce had previously accepted Concurrent's SF 1412 for modifications 21, 24 and 25. Unisys's Request for Admission 8 and Commerce's Answers Admitting Same. Unisys, citing FAR 15.804-3(e), 48 CFR 15.804-3(e), argues that "These ACO [administrative contracting officer] approvals may be applied to the spares procured under Modification 122 to the extent the spares are the same as those procured under Modifications 21, 24, 25, 77 and 111." Unisys's Response at 2. Commerce has presented documentation which conflicts with Unisys's arguments that Concurrent's SF 1412s had been accepted. With respect to the negotiations on modifications 77, 111, and 122, Commerce advised Unisys by letter dated October 4, 1993: Pursuant to Concurrent's Claim for Exemption from Submission of Certified Cost and Pricing Data (SF 1412) submitted to the Government by [Unisys], assist field pricing audits were requested as part of the fact finding process. Based on the results of Concurrent's claim for exemption on the basis of commercial sales, we have determined that the request is not supported by the data submitted and that [Unisys] will be required to submit certified cost and pricing data to the Government in support of these negotiations. Commerce's Response to Board's Order on Further Proceedings, Attachment A at 1 (Sept. 27, 1994) (Commerce's response). The subpoena The parties in this appeal are in the process of discovery. At the request of Commerce, the Board issued a subpoena duces tecum, requiring the production of documents from Concurrent, including the following: 4. All documents relating to any and all technical reports, cost or pricing evaluations, or any other comparisons of parts, assemblies or catalogs designated by "M" and "P" for the NEXRAD program.[foot #] 3 5. Any contracts, subcontracts, ordering agreements, and requisitions between Concurrent and its subcontractors for parts or assemblies used in the NEXRAD program. 6. All documents that identify the cost of all items proposed by Concurrent in response to NEXRAD contract modifications 21, 24, 25, 66, 73 [sic], 111, and 122. ----------- FOOTNOTE BEGINS --------- [foot #] 3 The Board understands that the designations "M" and "P" refer to original manufactured parts and spare parts, respectively. ----------- FOOTNOTE ENDS ----------- Concurrent's Motion to Quash, Exhibit 1. Objections to the subpoena On August 30, 1994, Concurrent filed a motion to quash or modify the subpoena. Concurrent argues that, according to Unisys, the contracting officer reviewed and accepted Concurrent's SF 1412s and determined that the prices offered were fair and reasonable. Concurrent contends that FAR 15.804-3(f)(3) precludes Commerce from requesting cost or pricing data to determine the reasonableness of proposed prices. Concurrent further asserts that the data is irrelevant because the contracting officer did not rely on it in reaching the determination that the prices offered were fair and reasonable. Unisys joins with Concurrent and argues that Concurrent's cost data is irrelevant because Commerce did not consider or rely upon the data to analyze spare part prices or to determine the prices established in the contracting officer's final decision. In so arguing, Unisys relies on DCAA audit reports which concluded that Concurrent does not have a cost accounting system suitable to providing accurate cost and pricing data. Unisys also contends that Concurrent's cost data does not pertain to any of the issues before the Board in this appeal. Commerce notes that the contracting officer determined the proposed prices for the spare parts were unfair and unreasonable. Commerce assert that, before issuing the final decision, the contracting officer requested cost and pricing data since Concurrent's SF 1412s failed to demonstrate that the parts qualified for a commerciality exemption. Commerce also avers that Concurrent's SF 1412s are based upon commercial sales of "similar to" parts which Commerce believes had a lower actual market price than those listed on the spare parts price list for which Concurrent claims the exemption. Commerce contends that submission of certified cost and pricing data is needed to identify and justify the difference between the prices and relies on FAR 15.804-2(a)(1) in advancing this argument. Finally, Commerce contends that the cost and pricing data is relevant to the issues in this appeal because the data should have been submitted during negotiation of the modifications and is essential in determining whether the prices established by the contracting officer are fair and reasonable. Request for costs of complying with the subpoena Concurrent has requested that Commerce advance the cost of producing and photocopying the subpoenaed documents that it is required to produce. Concurrent asserts that it should not be forced to bear the burden of compliance because it is not a party to this appeal. Commerce avers that Concurrent is intimately involved with the purchase of parts that gave rise to this appeal and cannot be considered "a mere bystander to this train wreck." Commerce contends that Concurrent, while not a named party to the appeal, should bear all costs associated with producing the documents at issue. Discussion Scope of Discovery Board Rule 15(b) provides in pertinent part: Except as otherwise limited by order of the Board in accordance with these rules, the parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter in the pending case, whether it relates to the claim or defense of a party, including the existence, description, nature, custody, condition, and location of any . . . documents. Under this rule, the scope of discovery is broad. In construing our old rule 15(b), which has identical language to that portion of our current rule quoted above, we have held that "any discovery that may lead to information that could be considered by the tribunal is proper." Amdahl Corp., GSBCA 7859-P, 85-2 BCA 18,054, at 90,616, rev'd on other grounds, United States v. Amdahl Corp., 786 F.2d 387 (Fed. Cir. 1986). Thus, we have required a contractor to allow a Government audit of its records to ascertain the contractor's cost of performing work caused by a differing site condition, even though the contractor relied upon estimates to price its increased costs as the records to be audited related to the Government's defense against the contractor's claim. P.J. Maffei Building Wrecking Corp., GSBCA 7126(6000)-REIN, 84-1 BCA 16,930. The Board understands that Unisys (through Concurrent) claimed a commerciality exemption for all but six of the spare parts, based on the notion that the parts were "similar to" original manufactured parts that Concurrent supposedly sold commercially. Based on the assumed similarity of the spare parts to the commercial parts, Unisys and Concurrent refused to supply cost and pricing data requested by the Government and asserts that Commerce must accept the prices for the spare parts that Concurrent quoted Unisys and which Unisys passed on to the Government. The requested cost information is relevant to two essential issues in the case: (1) the fair and reasonable price of the spare parts (the Government claim) and (2) the similarity of the spare parts to commercial parts in the market place (Unisys's defense to the Government's claim). See Board Prehearing Memorandum of July 11, 1994. If the cost of the spare parts track the cost of the allegedly similar commercial items, Unisys's and Concurrent's positions on commerciality and fair and reasonable pricing for the spare parts are bolstered. If the cost of the spare parts vary from the similar commercial items, that variance might well lead one to conclude that the spare parts are not commercial items. Commerce has every right to discover documents bearing on these issues. Concurrent and Unisys argue that the information is not relevant because the contracting officer only conducted a price analysis, not a cost analysis. The contracting officer did so, we understand, only because of Concurrent's refusal to submit cost and pricing data during the course of price negotiations for these modifications. Of course, Board proceedings are de novo. Assurance Co. v. United States, 813 F.2d 1202, 1206 (Fed. Cir. 1987). Therefore, we are not restricted to considering only the evidence or legal theories presented to the contracting officer. Laidlaw Environmental Services (GS) Inc., ASBCA 45365, 93-3 BCA 26,128, at 129,884. We are bound to neither the contractor's nor the Government's view of the claim. Allen County Builders Supply, ASBCA 41836, 93-1 BCA 25,398, at 126,491-92. Put another way, an appeal from the contracting officer's decision opens the entire subject matter of that decision for the Board's consideration whether the contracting officer's decision was based on broad or narrow grounds. Jay P. Atmayer, et al. v. General Services Administration, GSBCA 12720, slip op. at 12 n. 9 (July 21, 1994); AVW Electronic Systems, Inc., DOT BCA 2696, 94-2 BCA 26,937, at 134,155. Consequently, the information before the contracting officer when he made his decision does not limit relevancy or the scope of discovery in these proceedings.[foot #] 4 Production of subpoenaed documents Pursuant to Board Rule 20(g), the Board may "(1) quash or modify the subpoena if it is unreasonable and oppressive or for other good cause shown, or (2) require the party in whose behalf the subpoena was issued to advance the reasonable cost of producing subpoenaed documentary evidence." The party moving to quash has a heavy burden as opposed to the showing that is required for a more limited form of relief. Information Consultants, Inc., GSBCA 8130-COM, 86-3 BCA 19,133, at 96,717; ----------- FOOTNOTE BEGINS --------- [foot #] 4 This is not a case of the Government seeking documents which do not exist. Concurrent, while it may not have an accounting system which is capable of accounting, identifying, or allocating elements of cost by project, contract, sales order or customer, does record the production cost of its spare parts. Concurrent admits that it "maintains accounting records of the factory costs for production of these spare parts." Concurrent Computer's Reply Brief in Support of Motion to Quash at 8. Such information is requested by the subpoena. We agree with Concurrent, however, that it does not have to create documents which do not now exist to comply with the subpoena. ----------- FOOTNOTE ENDS ----------- see also In re Coordinated Pretrial Proceedings in Petroleum Products Antitrust Litigation, 669 F.2d 620, 623 (10th Cir. 1982); Manufacturing Systems, Inc. v. Computer Technology, Inc., 99 FRD 335, 336 (E.D. Wisc. 1983). The Board will balance the hardship on the subpoenaed party against the hardship on the moving party if the subpoena was quashed. Information Consultants, 86-3 BCA at 96,717; see also Heritage Reporting Corp., GSBCA 10396, 90-3 BCA 22,977, at 115,387. Concurrent and Unisys argue that Commerce is estopped from examining Concurrent's cost and pricing data because Commerce accepted Concurrent's SF 1412s. Concurrent relies on Honeywell Federal Systems, Inc., ASBCA 39974, 92-2 BCA 24,966. In Honeywell, the board refused to look behind a contracting officer's written determination to accept Honeywell's SF 1412 even though several DCAA audits concluded that Honeywell was not entitled to the exemption. The contracting officer's written determinations were followed by fully priced contract modifications. The board thus concluded that the contracting officer acted within the scope of his authority and refused to re-examine the specifics of the decision to determine whether it was correct. Id. at 124,409-10. The estoppel argument advanced by Concurrent and Unisys is not so compelling as to preclude discovery of Concurrent's cost for the spare parts at issue. The record to date includes several internal Government documents which discuss whether Concurrent's SF 1412s should be approved. Many of these documents show an initial inclination to accept Concurrent's SF 1412s. Indeed, earlier SF 1412s related to other modifications had been accepted. However, the record does not now demonstrate that, as in Honeywell, the contracting officer finally determined to accept Concurrent's commerciality exemptions or followed such determination with fully priced modifications reflecting acceptance of Concurrent's prices based on the commerciality exemption. Rather, it appears that the contracting officer considered the SF 1412s insufficient and requested certified cost and pricing data to support the proposed prices for these modifications. See Commerce's Response, Attachment A. At the least, there is a factual dispute whether the contracting officer did accept Concurrent's SF 1412s.[foot #] 5 ----------- FOOTNOTE BEGINS --------- [foot #] 5 Unlike Honeywell, the modifications here were _________ unpriced. See Appeal File, Exhibits 10 (modification 77), 29 ___ (modification 111), 44 (modification 122) (all three modifications state that "[t]he stated dollars are ceiling amounts for this unpriced PIO in accordance with [clause] H-3"). In the case of unpriced modifications, the Government may require contractors to submit cost and pricing data when the Government has refused to accept the reasonableness of catalog prices. See ___ Sperry Flight Systems, ASBCA 17375, 74-1 BCA 10,648, at 50,553, _____________________ aff'd, 548 F.2d 915 (Ct. Cl. 1977). _____ ----------- FOOTNOTE ENDS ----------- Respondent's acceptance of earlier, unrelated modifications does not prevent it from reviewing cost and pricing data to support the contracting officer's decision. See Sperry Flight Systems v. United States, 548 F.2d 915, 923 (Ct. Cl. 1977) ("No facts are offered that would establish or even allow an inference that the Government, by having accepted plaintiff's catalog prices on past occasions, thereby intended to commit itself to continue such a practice into the future.") Cost of complying with the subpoena Subpoenaed parties can be required to absorb reasonable expenses associated with complying with administrative subpoenas. Securities and Exchange Commission v. Arthur Young & Co., 584 F.2d 1018, 1033 (D.C. Cir. 1978), cert. denied, 439 U.S. 1071 (1979). Reimbursement will be required when the financial burden of compliance exceeds that which the subpoenaed party should reasonably be made to bear. Id. What constitutes a reasonable burden will depend upon the circumstances of each case. Id. The Board has articulated seven factors which are to be weighed when determining whether to award the cost of compliance. Heritage Reporting Corp., 90-3 BCA at 115,389. These factors are: the witness' nonparty status; the scope of the discovery; the invasiveness of the request; the extent to which the producing party must separate responsive information from privileged or irrelevant material; the reasonableness of the costs of production; the extent to which the production disrupts the ordinary business of the producing party or requires the employment of additional personnel; and the extent to which the costliness of the production is entirely the product of the recordkeeping scheme of the producing entity. Id. Given the relevance of the subpoenaed documents, Concurrent has the burden of demonstrating the excessive cost of complying with the subpoena. Id. (citing Securities and Exchange Commission v. Arthur Young & Co., 584 F.2d at 1034 n.139). Concurrent avers that the substance of the subpoena issued by the Board mirrors, with the exception of the time frame involved, requests contained in an earlier subpoena served on it by Commerce's Office of Inspector General (OIG). It claims that producing and photocopying the more than 123,000 pages of documents it has already produced to the OIG will cost approximately $40,000. Concurrent's Motion to Quash, n. 40. It further alleges that it cost over $150,000 to produce the documents covered by the OIG subpoena and that it anticipates that it will cost a similar amount to produce documents covered by the Board's subpoena that were not included in the OIG subpoena. Id., n. 41. At the oral argument, however, Concurrent admitted that documents relating to Concurrent's cost of the spare parts at issue were not included in the documents produced to the Inspector General. Respondent has indicated that it will obtain from the OIG the documents which Concurrent has already produced. Thus, Concurrent's request that Commerce advance the costs associated with producing these documents is moot. With respect to the documents not produced in response to the OIG subpoena, e.g. documents relating to cost of the spare parts, Concurrent has only provided the Board with a rough estimate of the cost of compliance. Because we lack an estimate of the total number of documents involved or of the manhours needed to comply with the subpoena, we deny the request for advancement of costs without prejudice. Concurrent may request advancement or reimbursement of its costs of compliance, substantiating its estimated or incurred expenses, at such time as it desires, but no later that thirty days after it has produced all responsive documents. See Heritage Reporting Corp., 90-3 BCA at 115,389. Decision The motion to quash is DENIED. Concurrent shall, within twenty calendar days from the date of this opinion, produce the documents requested by Commerce to the extent that these documents have not already been produced to the Office of Inspector General. ________________________________ ANTHONY S. BORWICK Board Judge