A search for overly broad keywords such as "CNO" and "computer network attack" would be tantamount to conducting a manual search through thousands of folders and then reading each document in order to determine whether the document pertains to a contract.
That could be network folders (ie: directories) and Word documents, they never said anything was on "paper". The way I read that quote was that they've got heaps of contracts, stored in lots of directories, and even if they did a search they'd have to read each document returned to see if it was a contract pertaining to the FOI request. They're trying to say that's too burdensome, which in theory gives them a way of not supplying the information. In practice, a judge might decide they should be able to do the search in a reasonable amount of time, and force them to comply.