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Tribal Programs Win in Appeals Ruling

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Tribes operating services formerly run by the federal government should finally have their program administrative costs paid, following 17 years in which Congress capped funding for that purpose, a three-judge panel of the U.S. 10th Circuit Court of Appeals ruled 2-1.

The class action suit was brought by the Ramah Navajo Chapter, Oglala Sioux Tribe, and Pueblo of Zuni, with support from the National Congress of American Indians (NCAI), against Department of the Interior officials, after years of litigation during which an appeal for unpaid contract support costs (CSC) from 1994 onward was denied.

The lower court had said the government was not liable for CSC shortfalls when a lump-sum Congressional appropriation was insufficient, creating an apparent contradiction in which Indian self-determination law encouraged tribes to take over programs and mandated full funding of CSCs but Congress then failed to appropriate enough money to pay them.

“Historically CSC shortfalls have penalized tribes in the exercise of their self-determination rights under the law,” NCAI said in a policy statement. “CSCs are the key to self-determination for tribes—these funds ensure that tribes have the resources that any contractor would require to successfully manage decentralized programs.”

The Indian Self-Determination Act (ISDA) “represents the cornerstone of this nation’s federal policy toward tribes for more than one-quarter of a century,” the NCAI said, noting Congress subsequently found the single greatest hurdle for tribal administration of federal trust programs was the “consistent failure” of the Bureau of Indian Affairs and Indian Health Services to pay full fixed CSCs, amounting to “partial termination of the federal government’s trust responsibility.”

CSCs include program operational costs and indirect costs that may apply to more than one contract objective, generally calculated by multiplying the funding base by a negotiated rate. While the ISDA mandates full funding of the costs, it is “subject to the availability of appropriations,” the appeals court said of a phrase that became “highly significant” because of Congress’ ISDA funding decisions.

Beginning in 1994, the BIA, for example, began to track shortfalls in CSC funding, noting that in that year the shortage was expected to be at least $10 million and possibly as high as $25 million, reminding tribal contractors the BIA could only use the funds appropriated for the CSC account to meet indirect costs. Between that year and 2004, the CSC funding rate ranged from 77 to 93 percent of need.

But if funding shortages occur, the tribal contractors are independent entities “with independent rights and entitlements” and it doesn’t follow that they collectively, rather than the government, should have the risk of insufficient appropriations to pay each other, the court said.

In the present case, the government contended it could not pay full CSC needs to Ramah, Oglala, or Zuni Pueblo because CSC payments to other tribes had used up the entire appropriation.

“At base, the government’s argument rests on an improper conflation of over 600 tribes and tribal contractors into one amalgamated contractor,” the court said, noting the failure to appropriate enough funds to cover all contractors doesn’t relieve the government of liability.

Tribes may agree that contracts are not binding unless Congress appropriates funds for the year, but they do not agree to be bound by BIA or IHS allocation choices or contracts formed with other tribes, justices said.

The Supreme Court held in 2005 that “If the amount of an unrestricted appropriation is sufficient to fund the contract, the contractor is entitle to payment even if the agency has allocated the funds to another purpose or assumes other obligations that exhaust the funds.”

If the CSCs cannot be paid from annual agency appropriations, they could be recovered from a fund established under the Contract Disputes Act, which applies to the self-determination contracts.

Although Congress could revise the ISDA or limit appropriations on a contract-by-contract basis, “what the government cannot do is breach its contractual obligations and avoid liability based on an improper reading of the phrase ‘subject to the availability of appropriations,’” the court said.

Judge Harris L. Hartz, dissenting from Judges Monroe G. McKay and Carlos F. Lucero, said Supreme Court opinions establish that “by agreeing that payment is subject to the availability of appropriations, the contractor accepts the risk of congressional underfunding.”