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Supreme Court hears contract support case

WASHINGTON - The U.S. Supreme Court heard oral arguments Nov. 9 in a tribal
lawsuit against the federal government for reimbursement of contract
support costs, a case that has earned widespread attention in Indian
country and from contractors that do business with the government. Tribes
contend the government owes them millions of dollars in contract support
costs the government has never reimbursed, causing the tribes to divert
money from the basic health services Congress intended to fund. The
government argues that its obligation to provide contract support costs is
not ultimately binding because tribal self-determination contracts are
unique, or at least not the same as other contracts.

Amicus or "friend of the court" briefs in support of the Cherokee Nation
and Duck Valley Paiute-Shoshone Tribes have been filed not only by several
tribal organizations, as might have been anticipated, but also by the U.S.
Chamber of Commerce, the National Defense Industrial Association, and the
Aerospace Industries Association.

The Cherokee and Paiute-Shoshone seek reimbursement for the cost of
administering federal health programs, in fiscal years 1996 and 1997, under
self-determination contracts with the federal government. In the Indian
Self-Determination and Education Assistance Act of 1975, Congress has
directed the Department of Health and Human Services to pay for the
contract support costs of tribes, "subject to the availability of
appropriations." But the tribes were denied this funding in those years,
the department contends, because lack of available funds in its
appropriation from Congress meant other tribal programs would have suffered
if the Cherokee and Paiute-Shoshone had been reimbursed for the full cost
of administering their contract services.

Attorneys for the tribe, led by Lloyd B. Miller, argue the funding was
available within the department at large and should have been paid to the
tribes once DHHS agreed to reprogram other funding for that purpose, even
if that meant returning to Congress for additional appropriations. Lack of
contract support funding meant tribes had to divert funding from the direct
service provision intended by Congress. That violated contractual
obligations because no statutory limit had been placed on contract support
costs, and the department had many methods in place for reprogramming
appropriated funds to make good on the obligation.

The department's government attorneys, led by Sri Srinivasan with the
Justice Department, have argued that tribal government self-determination
contracts are unique, unlike federal contracts with non-tribal contractors,
and that the underlying inter-governmental agreements include language to
the effect that funding levels are subject to both available appropriations
- and to reductions, if full contract support funding for some tribes would
come at the expense of other tribes in a limited budget.

A court-issued preview summarized the significance of the case: "... Indian
tribal contractors ... want to know whether their governmental nature
somehow makes their contracts with the United States less enforceable than
federal contracts with nontribal contractors. Similarly, nontribal
contractors are concerned that the Supreme Court's resolution of the matter
could announce a sudden shift ... that allows [federal government] agencies
to avoid their contractual obligations by taking after-the-fact
discretionary steps to make appropriations 'unavailable' ... especially for
contractors who perform their obligations under cost reimbursement

A district court and two federal circuit courts have backed the government.
But the Cherokee Nation pressed a claim for contract support funding from
1994 - 1996 to the Interior Board of Contract Appeals, in keeping with a
provision of the Indian Self-Determination and Education Assistance Act of
1975. The board ruled for the tribe, leading the federal government to
appeal to the Federal Circuit, which upheld the board. The Supreme Court
must resolve the inconsistencies between the three circuit courts.

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One rule of thumb about the Supreme Court never changes: Predicting its
decisions is no way to make a living. But that said, on several occasions
during oral argument several justices seemed to be leaning toward the
tribal camp. In particular, Justice Stephen G. Breyer constructed
hypothetical situations for both attorneys in an attempt to find, out
whether or not the tribal contracts are unique compared with other federal
contracts. "There must be a simple yes or no answer to that."

But none was forthcoming, and in the end Breyer said he may be inclined to
uphold the Interior Board of Contract Appeals, which ruled against the
government. "They're supposed to know about contracts."

Srinivasan argued twice that core agency functions are inherently federal
and cannot be farmed out to tribes as a funded activity, leading Justice
John Paul Stevens to state that a firm distinction between funded federal
activities and inherent functions that don't have to be funded "makes the
contractual problem illusory" - presumably meaning that under such a
reading, no contract could prevent federal departments from defining funded
activities strategically in view of appropriations. "It seems to me you can
interpret what you're saying to mean the government didn't leave enough
room in the budget." Stevens seemed to be steering toward the view that
straightforward contractual obligations mean agencies should turn to
Congress, rather than short-changing contractors on support costs, when
their budgets come up short.

Justice David Souter seemed to second Stevens on that point. "We're going
to treat these contracts as contracts ... I don't see why that doesn't
trump committee reports" of Congress to the contrary that lack the force of

Justice Ruth Bader Ginsburg pointed out that in argumentation before lower
courts, the department has not responded to the question of what programs
for other tribes would have been harmed if the Cherokee and Paiute-Shoshone
had received their full contract support payments. But she also raised
concerns that the tribal position could institutionalize a "first
come-to-court, first served" attitude toward the budgets of Indian-specific
federal agencies.

Justice Antonin Scalia too dwelt on costs. "These are strange contracts,"
he said, elsewhere asserting that the agency turnover of governmental tasks
to tribes indeed makes tribal self-determination contracts unique. For
under self-determination contracts, agencies must encourage the takeover of
their functions by tribes, but cannot control the associated budget. "That
seems to be a strange way to run a railroad."

The Supreme Court does not schedule a date for its decisions.