Information Systems and Networks Corporation v. United States

Information Systems and Networks Corporation (ISN) (plaintiff) subcontracted with the United States Air Force (government) (defendant) to convert the government’s existing PFORMS database onto a new mainframe computer. The government’s statement of work (SOW) required that the converted PFORMS system support multiple users. ISN used TSO/ISPF software for the conversion, which did not support multiple users. ISN delivered the converted PFORMS system to the government on time. The government notified ISN that the system was inadequate because it did not support multiple users. The government sent ISN a Show Cause Notice, demanding that ISN justify its failure to timely deliver an adequate PFORMS system or face default. Seven months later, after minimal communications with ISN, the government terminated ISN’s subcontract for default. ISN filed a breach-of-contract action under the Contract Disputes Act (CDA), seeking to convert the default termination into a termination for the convenience of the government. ISN moved for partial summary judgment on liability, arguing that (1) the government’s design specifications required use of the TSO/ISPF software; (2) because TSO/ISPF does not support multiple users, the government’s design specifications made adequate performance impossible; and (3) the government waived its right to terminate ISN’s contract for default-in-delivery because it failed to terminate ISN’s contact within a reasonable timeframe. The government countered, arguing that (a) the government chose the TSO/ISPF software based on ISN’s advice; and (b) the Show Cause Notice clearly indicated that the government did not intend to waive its right to terminate ISN’s contract for default-in-delivery.