Dynamics Research Corp. v. Dept. of Job & Family Servs.

[Cite as Dynamics Research Corp. v. Dept. of Job & Family Servs., 2012-Ohio-3999.]
Court of Claims of Ohio
The Ohio Judicial Center
65 South Front Street, Third Floor
Columbus, OH 43215
614.387.9800 or 1.800.824.8263
www.cco.state.oh.us
DYNAMICS RESEARCH CORPORATION
Plaintiff/Counter Defendant
v.
THE OHIO DEPARTMENT OF JOB AND FAMILY SERVICES, et al.
Defendants/Counter Plaintiffs
Case No. 2010-06231
Judge Joseph T. Clark
DECISION
{¶ 1} Plaintiff/counter defendant, Dynamics Research Corporation (DRC),
brought this action against defendants/counter plaintiffs, Ohio Department of Job and
Family Services (ODJFS) and Ohio Department of Administrative Services (DAS)
(collectively, the state).1 Both parties allege claims for breach of contract and unjust
enrichment. The issues of liability and damages were bifurcated and the case
proceeded to trial on the issue of liability.2
{¶ 2} DRC entered into a contract with the state to design and implement a
software application (Statewide Automated Child Welfare Information System or
SACWIS) to manage Ohio’s child welfare system. The contract, as amended, was to
expire on April 10, 2009. After DRC had implemented the application, but before all of
its work was complete, the state issued a letter informing DRC that it was exercising its
option to terminate the contract for convenience on February 27, 2009.
1
DRC’s February 10, 2012 motion for leave to file a brief in excess of the page limitation is
GRANTED instanter.
2
DRC’s February 17, 2012 motion for leave to supplement the record is DENIED.
Case No. 2010-06231 -2- DECISION
{¶ 3} The contract provides that DRC is entitled to compensation for work that
was performed prior to the time of termination. The relevant portion of the request for
proposals (RFP) states, in pertinent part, as follows:
{¶ 4} “If the termination is for the convenience of the State, the Contractor will be
entitled to compensation for any work on the Project that the Contractor has performed
before the termination. Such compensation will be the Contractor’s exclusive remedy in
the case of termination for convenience and will be available to the Contractor only once
the Contractor has submitted a proper invoice for such, with the invoice reflecting the
amount determined to be owing to the Contractor by the State. The State will make that
determination based on the lesser of the percentage of the Project completed or the
hours of work performed in relation to the estimated total hours required to perform the
entire applicable unit(s) of Work.” (Emphasis added.) (DRC Exhibit 1, Page 82.)
{¶ 5} Both the scope of the work that was to be performed on the project and the
compensation that DRC was to receive are specified in the contract documents. The
general terms and conditions of the contract documents contain a “Statement of Work”
which provides as follows:
{¶ 6} “The RFP and the Contractor’s Proposal (Collectively referred to as the
‘RFP’) are a part of this Contract and describe the work (the ‘Project’) the Contractor will
do and any materials the Contractor will deliver (the ‘Deliverables’) under the Contract.”
(DRC Exhibit 1, Page 76.)
{¶ 7} With regard to compensation, the RFP provides that DRC was to be paid
upon completion of certain “Tasks,” which are defined portions of work that were to be
Case No. 2010-06231 -3- DECISION
reviewed and approved by the state. DRC would not be paid until “complete and
satisfactory performance of the Project or in the case of milestone payments * * * all
relevant parts of the Project tied to the applicable milestone. Payment of the Fee is also
contingent on the Contractor delivering a proper invoice and any other documents
required by the RFP.” Id. The court has previously determined that DRC submitted
invoices for Tasks 1-10 and that the state subsequently approved the invoices and paid
DRC for completing the associated tasks. See Decision June 23, 2011.
{¶ 8} At the time of termination, DRC had already exceeded the “estimated total
hours required to perform.” There is no dispute that a calculation of “the percentage of
the Project completed” would yield the lesser of the two measures set forth in the
contract and, therefore, such calculation is required to determine the amount of
additional compensation, if any, that is owed to DRC.
{¶ 9} The state argues that DRC failed to deliver a software application that
complied with all mandatory federal functionality requirements. Tresa Young stated that
she was hired by the state in July 2008 as the project manager. Young testified that the
software application’s financial module does not meet the federal functionality
requirements. Additionally, Young identified several “defects” regarding case tracking
including failure to merge multiple referrals and data entry problems. According to
Young, the federal government determined that the system is not compliant with federal
guidelines. Young asserted that the state spent an additional $10 million to correct
“defects” in the system.3
3
DRC’s July 14, 2011 motion in limine is DENIED.
Case No. 2010-06231 -4- DECISION
{¶ 10} Task 3 of the RFP addresses the federal functionality requirements;
however, as the court has previously determined, DRC submitted an invoice for Task 3
and the state subsequently approved the invoice and paid DRC for completing the task.
See Decision June 23, 2011.
{¶ 11} The state also asserts that the software application never successfully
completed the mandatory performance testing specified in Task 10. Eric Glenn, the
state’s contract supervisor for the RFP, testified that the state never accepted the
software application. Glenn asserted that pursuant to Task 10, the software application
is required to operate for 30 consecutive days without material issues during the
“performance period.” See DRC Exhibit 1, Pages 53-55. If a material issue is
discovered, then the performance period would stop and the performance period would
begin again from the beginning. See DRC Exhibit 1, Page 90. If the software
application successfully completed the performance period, the state would accept the
system. Id. Glenn testified that as of February 21, 2009, 742 defects were identified in
the system. Glenn stated that the defects were categorized as either critical, high,
medium, or low and that 522 of the defects were high, while 17 were considered critical.
{¶ 12} Task 10 of the RFP addresses performance testing and provides as
follows: “Upon completion of the Statewide implementation, submission of the
Implementation Report, and successful completion of the performance period defined in
Attachment Three, Part Five: Acceptance and Maintenance, the Contractor will present
Ohio SACWIS to the State for acceptance. The system presented for acceptance must
account for all required functionality, training, conversion, documentation and any other
Case No. 2010-06231 -5- DECISION
requirements of this RFP.” (Emphasis added.) (DRC Exhibit 1, Page 55.) Attachment
Three, Part Five, Acceptance and Maintenance provides: “there will be a period for
performance testing of the Project. During the performance period, the State, with the
assistance of the Contractor, will perform acceptance testing. * * * [T]he Project must
meet the standard of performance required by the RFP for 30 consecutive calendar
days.” (DRC Exhibit 1, Page 90.) The contract provides that the state will perform the
30-day acceptance testing during Task 10 of the project. DRC submitted an invoice for
Task 10 and the state subsequently approved the invoice and paid DRC for completing
the task.
{¶ 13} Although the state points to various contract provisions for the proposition
that it may review work that it has previously accepted, none of the provisions cited
support its assertion that tasks DRC performed which had been subsequently accepted
and approved for payment by the state were subject to further review as to the value of
the work. Moreover, this court has already determined that any claim for cover by the
state fails as a matter of law inasmuch as DRC was not terminated for cause. In short,
the state has not presented the court with any convincing evidence to support its
contention that it paid for work that DRC did not perform.
{¶ 14} Regarding the percentage of the project completed, DRC asserts that it
had completed 99.5 percent of the project when the state terminated the contract for
convenience. At the time of termination, DRC had not received the final two payments
for post implementation support and the final payment under the holdback provision.
Case No. 2010-06231 -6- DECISION
(DRC Exhibit 2, Page 160.) The state argues that DRC’s calculation fails to allocate
any costs for correcting the “defects” in the system.
{¶ 15} Pursuant to Amendment 16, the total payment for post implementation
support is divided into 10 payment milestones due upon completion of the work at the
end of each month. (DRC Exhibit 2, Page 160.) The parties agreed to a fixed price for
completing post implementation support for all ten months, including March and April
2009. Id. DRC received payments for each month with the exception of the final two
months: March and April 2009. According to the RFP, upon termination for
convenience “the Contractor will be entitled to compensation for any work on the Project
that the Contractor has performed before the termination.” (DRC Exhibit 1, Page 82.)
Accordingly, DRC is not entitled to either of the payment milestones allocated for post
implementation support work for March and April 2009.
{¶ 16} Regarding the holdback provision, Kathleen Baird, an executive for DRC,
testified that such a payment is routine in the industry and ensures that the contractor
will finish the job. According to Baird, no level of effort is associated with the holdback
payment milestone and it represents only a percentage of the total contract price. Baird
stated that the state failed to pay the final holdback payment, which is “[d]ue upon
completion of month 10 [of post implementation support,]” identified in Amendment 16.
(DRC Exhibit 2, Page 160.)
{¶ 17} The evidence shows that the total holdback payment was divided into four
separate payments to be paid at various points during the project. Id. Pursuant to
Amendment 16, one such payment was made upon completion of month four of post
Case No. 2010-06231 -7- DECISION
implementation support, and the final payment was to be made upon completion of
month 10 of post implementation support. Id. DRC received all holdback payments
except for the final payment. DRC completed work for eight months of post
implementation support; however, the state only remitted the payment associated with
the first four months of post implementation support. Amendment 16 provides that the
final holdback payment is “[d]ue upon completion of month 10 [of post implementation
support].” Id. Accordingly, DRC worked for four of the remaining six months associated
with the final holdback payment. Inasmuch as Amendment 16 divides payments by
months completed rather than days of work completed, DRC completed two-thirds of
the final period of post implementation support. Consequently, DRC is entitled to two-
thirds of the final holdback payment.
{¶ 18} Inasmuch as DRC has proved its claim for breach of contract, its claim for
unjust enrichment must fail. Alternatives Unlimited-Special, Inc. v. Ohio Dept. of Edn.,
10th Dist. No. 08AP-396, 2008-Ohio-6427, ¶23.
Case No. 2010-06231 -8- DECISION
Court of Claims of Ohio
The Ohio Judicial Center
65 South Front Street, Third Floor
Columbus, OH 43215
614.387.9800 or 1.800.824.8263
www.cco.state.oh.us
DYNAMICS RESEARCH CORPORATION
Plaintiff/Counter Defendant
v.
THE OHIO DEPARTMENT OF JOB AND FAMILY SERVICES, et al.
Defendants/Counter Plaintiffs
Case No. 2010-06231
Judge Joseph T. Clark
JUDGMENT ENTRY
{¶ 19} This case was tried to the court on the issue of liability. The court has
considered the evidence and, for the reasons set forth in the decision filed concurrently
herewith, judgment is rendered in favor of DRC as to both its claim and the state’s
counterclaim. A case management conference is set for May 25, 2012, at 11:30 a.m.,
to discuss further proceedings. The court shall initiate the conference via telephone.
Case No. 2010-06231 -9- DECISION
_____________________________________
JOSEPH T. CLARK
Judge
cc:
Amy S. Brown James J. Hughes III
Randall W. Knutti Francisco E. Luttecke
Assistant Attorneys General Maria J. Armstrong
150 East Gay Street, 18th Floor 100 South Third Street
Columbus, Ohio 43215-3130 Columbus, Ohio 43215-4291
003
Filed May 8, 2012
To S.C. Reporter August 31, 2012