Southcentral Foundation v. Roubideaux et al

Filing 77

ORDER: re Cross-Motions for Summary Judgment 44 and 48 . The parties shall meet and confer, within 30 days of the date of this Order, shall file, either separately or jointly, a status report regarding the proposed future proceedings necessary in this case. Signed by Judge Sharon L. Gleason on 09/23/2014. (AEM, CHAMBERS STAFF)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
SOUTHCENTRAL FOUNDATION, an
Alaskan corporation,
Plaintiff,
vs.
YVETTE ROUBIDEAUX, DIRECTOR,
U.S. INDIAN HEALTH SERVICE,
Defendant.

Case No. 3:13-cv-00164-SLG

ORDER RE CROSS-MOTIONS FOR SUMMARY JUDGMENT
At Docket 44, Plaintiff Southcentral Foundation (SCF) filed a Motion for Summary
Judgment. At Docket 48, Defendant Yvette Roubideaux, Director of the Indian Health
Service (Defendant or IHS), filed a Cross-Motion for Summary Judgment. IHS filed a
single memorandum of law in opposition to SCF’s motion and in support of its crossmotion, 1 and SCF filed a reply. 2 For the following reasons, the Court will grant in part and
deny in part both motions.
FACTUAL & PROCEDURAL BACKGROUND
This dispute concerns whether the Indian Self-Determination and Education
Assistance Act, 25 U.S.C. § 450 et seq. (the ISDA or Act) 3 applies to the funding of the
Methamphetamine and Suicide Prevention Initiative (MSPI) and the Domestic Violence

1

See Docket 47 (IHS Cross-Mot. and Opp’n).

2

See Docket 52 (Reply).

3

The Act is also known as the ISDEAA.

Prevention Initiative (DVPI), and whether IHS must provide for direct and indirect contract
support costs (CSCs) in addition to any amount included for CSCs in the base funding
IHS has provided to SCF for those programs. The dispute concerns one year of funding
for the two programs.
I. The ISDA.
The ISDA, enacted in 1975, provides that “[t]he Secretary [of the Department of
Health and Human Services (DHHS)] shall establish and carry out a program within [IHS]
. . . to be known as the ‘Tribal Self-Governance Program’ . . . .” 4 Pursuant to this program,
the federal government enters into contracts with Indian tribes, through which those tribes
provide programs, functions, services, and activities (PFSAs) that otherwise would have
been provided by the federal government. 5 Section 458aaa-4(b)(2)(F) describes the
types of PFSAs governed by the Act:
Such [PFSAs] (or portions thereof) include all [PFSAs] (or portions thereof),
including grants (which may be added to a funding agreement after an
award of such grants), with respect to which Indian tribes or Indians are
primary or significant beneficiaries, administered by [DHHS] through [IHS] .
. . under the authority of . . . any other Act of Congress authorizing any
agency of [DHHS] to administer, carry out, or provide financial assistance
to such a [PFSA] (or portions thereof) described in this section that is carried
out for the benefit of Indians because of their status as Indians. 6
With respect to PFSAs, the Act requires that the government provide the “amount
of funding that would have been appropriated for the federal government to operate the
programs if they had not been turned over to the Tribe”—this portion of funds is known

4

25 U.S.C. § 458aaa-1.

5

See 25 U.S.C. § 458aaa-4; Cherokee Nation of Okla. v. Leavitt, 543 U.S. 631, 634 (2005).

6

25 U.S.C. § 458aaa-4(b)(2).

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as the “secretarial amount.” 7 The government must also provide the “full amount” of
“contract support costs” (CSCs) incurred by the Indian tribe in performing the contracts. 8
“The Act defines ‘contract support costs’ as other ‘reasonable costs’ that a federal agency
would not have incurred, but which nonetheless ‘a tribal organization’ acting ‘as a
contractor’ would incur ‘to ‘ensure compliance with the terms of the contract and prudent
management.’”9 The Act further provides that CSCs “shall not duplicate any funding
provided” as part of the secretarial amount. 10
The ISDA provides guidance on how to interpret its provisions. For instance, the
Act states that “[e]xcept as otherwise provided by law, the Secretary shall interpret all
Federal laws, Executive orders, and regulations in a manner that will facilitate . . . the
inclusion of [PFSAs] (or portions thereof) and funds associated therewith, in the
agreements entered into under this section.” 11 Moreover, the Act states that “[e]ach
provision of this part and each provision of a compact or funding agreement shall be
liberally construed for the benefit of the Indian tribe participating in self-governance and
any ambiguity shall be resolved in favor of the Indian tribe.” 12

7

Cherokee Nation of Okla. v. United States, 190 F.Supp.2d 1248, 1258 (E.D. Okla. 2001),
rev’d on other grounds by Cherokee Nation of Okla. v. Leavitt, 543 U.S. 631 (2005); see also 25
U.S.C. § 450j-1(a)(1).
8

25 U.S.C. § 450j-1(a)(1)-(6); see also Salazar v. Ramah Navajo Chapter, 132 S. Ct. 2181,
2186 (2012).

9

Cherokee Nation of Okla. v. Leavitt, 543 U.S. 631, 635 (2005) (quoting § 450j-1(a)(2)).

10

25 U.S.C. § 450j-1(a)(3).

11

25 U.S.C. § 458aaa-11(a)(1).

12

25 U.S.C. § 458aaa-11(f).

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II. The Initial Congressional Appropriations for MSPI and DVPI.
Congress first appropriated funds for MSPI in fiscal year (FY) 2008. 13 Specifically,
in Public Law 110-161, Congress provided:
That $14,000,000 is provided for a methamphetamine and suicide
prevention and treatment initiative . . . . Provided further, That
notwithstanding any other provision of law, these funds shall be allocated
outside all other distribution methods and formulas at the discretion of the
Director of [IHS] and shall remain available until expended.
...
Provided further, That, notwithstanding any other provision of law, of the
amounts provided herein, not to exceed $271,636,000 shall be for
payments to tribes and tribal organizations for contract or grant support
costs associated with contracts, grants, self-governance compacts, or
annual funding agreements between the Indian Health Service and a tribe
or tribal organization pursuant to the [the ISDA], as amended, prior to or
during fiscal year 2008, of which not to exceed $5,000,000 may be used for
contract support costs associated with new or expanded self-determination
contracts, grants, self-governance compacts, or annual funding
agreements. 14
In the related House Report, the appropriations committee explained it “expects the
Director[] of [IHS] . . . to distribute this funding outside of the normal formulas and
methodologies to target the areas with the highest needs in Indian Country.” 15
For FY 2009, Congress again appropriated funds for MSPI, and added funds for
DVPI, again to “be allocated at the discretion of the Director of [IHS],” with provisions

13

Consol. Appropriations Act, 2008, Pub. L. No. 110-161, 121 Stat. 1844, 2135 (2007).

14

Id.

15

Dep’t of the Interior, Env’t, and Related Agencies Appropriations Bill, 2008, H.R. Rep. No.
110-187 (2007).
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concerning contract support costs. 16 Appropriations by Congress in later FYs contain
similar language. 17
III. The IHS Allocation of MSPI and DVPI Funds to SCF in Years Prior to FY 2012.
IHS decided to use a “pilot demonstration project” to distribute the MSPI and DVPI
funds through amendments to tribes’ existing ISDA contracts. 18 This distribution method
was used at the request of the tribes. 19 Funds were to be awarded based on a formula
that considered population, poverty burden, and disease burden in the various Indian
communities. 20 Prior to receiving MSPI or DVPI funding, tribes were required to submit
scopes of work and budgets for the initiatives.
During initial negotiations, IHS made clear that it did not intend to pay CSCs for
MSPI (and later DVPI) funding. A January 2010 letter from IHS to the Chairman of the
IHS Tribal Self-Governance Advisory Committee stated:

16

Omnibus Appropriations Act, 2009, Pub. L. No. 111-8, 123 Stat. 524, 735 (2009).

17

See Dep’t of the Interior, Appropriation, Pub. L. No. 111-88, 123 Stat. 2904, 2945 (over $16
million for MSPI and $10 million for DVPI to “be allocated at the discretion of the Director of
[IHS]”); Consolidated Appropriations Act, 2012, Pub. L. No. 112-74, 125 Stat. 786, 1027-28
(2012) (remaining funds for MSPI and DVPI to “be allocated at the discretion of the Director of
[IHS]”).

18

Docket 18 at 2 ¶¶ 6-7 (9/13/13 Decl. of Beverly Cotton); Docket 5-1 at 4 (6/2/09 Letter from
Tribes to IHS). The briefing on the motions for summary judgment references documents filed
in conjunction with the briefing on the initial motion for preliminary injunction. See exhibits filed
at Dockets 5 & 17. At Docket 56, IHS filed the administrative record. Many of the relevant
documents appear to be identical. The Court, like the parties’ briefing on summary judgment,
cites primarily to the originally filed documents.

19

Docket 5-1 at 4 (6/2/09 Letter from Tribes to IHS) (the tribes “particularly appreciate the
agency approving the use of amendments to our existing contracts and funding agreements
rather than requiring competitive grant proposals for our projects”).
20

See Docket 17-5 at 5 (5/3/10 DHHS IHS Report to Congress, MSPI); Docket 21 at 2 ¶ 7
(9/13/13 Decl. of Rose Weahkee).
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[I]n the case of the MSPI, additional . . . CSC[] funds were not available
because the IHS had allocated all available CSC funds to existing Tribal
contracts and compacts. The statutory “cap” on CSC precluded the IHS
from allocating additional direct or indirect CSC than Congress had
appropriated under the CSC line item or from allowing Tribes to build direct
or indirect CSC into their proposal budgets. 21
Plaintiff SCF is a tribal organization that is authorized to participate in the selfgovernance compacting process under the ISDA. 22 Along with other tribes, after the
MSPI appropriation, SCF sought MSPI (and later DVPI) funding. The first relevant
amendment to the SCF Funding Agreement (FA) was Amendment Number 11 to the
FY 2009 FA, signed by both parties in September 2009. The amendment explicitly
provided: “No contract support cost (CSC) funding is associated with the MSPI funds, and
nothing in the FA or the associated compact creates a promise on the part of the IHS to
pay the SCF CSC funding in connection with the MSPI funds.” The amendment further
stated that “SCF still wishes to contract for the MSPI funds and can conduct the MSPIfunded project or activity, despite the absence of CSC funding,” and that IHS would
include any CSC need associated with MSPI in the annual CSC Shortfall Report to
Congress. 23
But while the contract amendment indicated that there was no CSC funding, SCF
Vice President (VP) of Finance and Chief Financial Officer (CFO), Lee Olson, asserts that

21

Docket 5-1 at 11 (1/13/10 Letter IHS to Chairman, IHS Tribal Self-Governance Advisory
Committee). This appears to conflict with Mr. Olson’s statement that, “[p]rior to 2013, IHS had
never singled out ‘direct’ [CSCs] as a category of contract support for which MSPI and DVPI
program funds were not eligible.” Docket 6 at 10 ¶ 21 (8/21/13 Decl. of Lee Olson).

22

Docket 6 at 2-3 ¶ 5 (8/21/13 Decl. of Lee Olson).

23

Docket 5-1 at 8-10 (FY 2009 FA Am. 11 for MSPI).

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the budgeting for the MSPI initiative reflected, at least in part, a different reality. Mr. Olson
explains that although he was told by IHS during the first year of MSPI funding that SCF
could not include indirect CSCs in its budget, SCF did include the “full cost of SCF’s fringe
benefits,” 24 which represents at least some portion of direct CSCs. Mr. Olson asserts that
SCF submitted its MSPI budgets in the same manner each year, including fringe benefits
and omitting indirect costs.
Amendment Number 10 to the FY 2010 FA, signed by both parties in August
2010, provided funding to SCF for Year Three MSPI (FY 2010). 25 It incorporated the
terms of Amendment Number 11 to the FY 2009 FA concerning MSPI.
Amendment Number 14 to the FY 2010 FA, signed by both parties in September
2010, provided funding to SCF for Year One DVPI (FY 2009). It included nearly identical
language to Amendment Number 11 to the FY 2009 FA concerning MSPI. 26 However,
VP and CFO Mr. Olson explains that in contrast to the MSPI budgets, SCF included both
indirect and direct CSCs in its budget requests for DVPI, as IHS never instructed SCF
that it could not do so. 27

24

See Docket 28 at 2 ¶¶ 3-5.

25

Docket 5-1 at 13 (FY 2010 Am. 10 for MSPI).

26

Docket 5-1 at 14-17 (FY 2010 FA Am. 14 for DVPI).

27

Docket 28 at 2 ¶ 6 (9/20/13 Supp. Decl. of Lee Olson).

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Amendment Number 10 to the FY 2011 FA, signed by the parties in July and
August 2011, provided funding to SCF for Year Two DVPI (FY 2010). 28

In this

amendment, the parties agreed to different language concerning CSCs:
Contract Support Cost (CSC) funding under this FA will be calculated and
paid in accordance with [ISDA] Sections 508(c), 519(b), and 106; IHS CSC
Policy . . .; and any Congressional restrictions in appropriations or other
statutes. In accordance with these authorities and subject to available
appropriations for CSC, the parties agree that under this Amendment [SCF]
will receive direct CSC in the amount of $0 and indirect CSC in the amount
of $0 . 29
Although the parties agreed to this revised amendment language, SCF’s budget requests
for FY 2011 included CSCs in the same manner as previous years (i.e., including both
direct and indirect CSCs in the DVPI budget). 30
As indicated in the original amendment, IHS reported CSC shortfalls to Congress.
In IHS’s Fiscal Year 2010 Report to Congress on Funding Needs for Contract Support
Costs of Self-Determination Awards (Based on Fiscal Year 2009 Data), IHS reported to
Congress “a total CSC need of $3,685,676 associated with FY 2009 MSPI-funded
projects.” 31 IHS’s Fiscal Year 2011 and 2012 Reports to Congress indicated a CSC

28

Docket 5-2 at 1-4 (FY 2011 Am. 10 for DVPI).

29

Docket 5-2 at 2 (FY 2011 FA Am. 10 for DVPI).

30

Docket 28 at 2-3 ¶¶ 5, 7 (9/23/13 Supp. Decl. of Lee Olson).

31

IHS FY 2010 Report to Congress on Funding Needs for CSCs of Self-Determination Awards
(Based on FY 2009 Data), available at http://www.ncai.org/policy-issues/tribalgovernance/budget-and-approprations/contract-support/IHS_FY_2010_CSC_Shortfall_Report__2009_Narrative_and_Data.pdf.
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shortfall, but did not indicate what amount of shortfall, if any, was due to the MSPI and
DVPI programs. 32
IV. The FY 2012 Amendments.
The current litigation concerns the 2012 fiscal year. In July 2012, IHS informed
SCF that it had been awarded DVPI funding (Year Three funding) totaling $482,554.33
And in August 2012, IHS informed SCF that SCF had been awarded MSPI funding (Year
Four funding) totaling $599,596. 34
IHS and SCF then unsuccessfully attempted to negotiate the language concerning
CSCs for the contract amendments. Negotiations continued into 2013, focusing on direct
and indirect CSCs and how the FA contract amendments would reflect the potential for
CSC payment. 35 The Court focuses on a limited exchange of letters prior to the initiation
of this litigation:

32

See IHS FY 2011 Report to Congress on Funding Needs for CSCs of Self-Determination
Awards (Based on FY 2010 Data) CORRECTED, available at http://www.ncai.org/policyissues/tribal-governance/budget-and-approprations/contractsupport/FY2011_IHS_CSC_Report.pdf; IHS FY 2012 Report to Congress on Funding Needs for
CSCs of Self-Determination Awards (Based on FY 2011 Data), available at
http://www.ncai.org/policy-issues/tribal-governance/budget-and-approprations/contractsupport/FY2012_IHS_CSC_Report.pdf.
33

Docket 6 at 7 ¶ 14 (8/21/13 Decl. of Lee Olson); see also Docket 5-2 at 5 (7/13/12 email IHS
to SCF concerning release of $482,554 in DVPI funds for DVPI Year 3).

34

Docket 6 at 6 ¶ 13 (8/21/13 Decl. of Lee Olson); see also Docket 5-2 at 15 (8/21/12 email
IHS to SCF concerning release of $599,596 in MSPI funds for MSPI Year 4).

35

See, e.g., Docket 17-8 at 1-2 (8/2/12 Letter SCF to IHS); Docket 5-2 at 15 (8/21/12 email
from IHS); Docket 5-3 at 8 (12/19/12 through 1/9/13 emails between SCF and IHS); Docket 5-3
at 17 (1/10/13 Email SCF counsel to IHS); Docket 5-3 at 19 (4/12/13 Letter Tahsuda, IHS, to
Leaders); Docket 28-1 at 1-2 (4/23/13 Letter SCF to IHS); Docket 5-5 at 9-10 (6/25/13 Letter
Olson, SCF to Roubideaux, IHS concerning final offer); Docket 5-6 at 1 (8/7/13 Letter
Roubideaux, IHS, to Gottlieb, SCF).
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In August 2012, SCF sent to IHS a Revised Year 4 Funding proposal for MSPI. 36
As in previous years, SCF did not include indirect CSCs in its MSPI budget. 37 However,
SCF included various personnel costs and fringe benefits, i.e., at least some direct
CSCs. 38 SCF’s August 2012 MSPI proposed budget provided, in part: 39
Sub-total Personnel

$356,352

Sub-total Fringe (percentages
on personnel salaries)

$133,826

Total All Categories (the sum of $599,596
personnel, fringe, travel, and
supplies)
Around that time, SCF also provided IHS with SCF’s proposed budget for Year 3 DVPI
(FY 2013). As in previous years, SCF included both direct and indirect CSCs in its DVPI
budget, which provided, in part: 40
Total Personnel (sum of
salaries and fringe on salaries)

$226,211

Total Direct Costs (sum of
personnel, travel, program
supplies, contractual, and
other)

$397,871

Indirect Costs

$84,682

36

Docket 56-14 at 1.

37

Docket 28 at 2 ¶ 4 (9/20/13 Supp. Decl. of Lee Olson).

38

See Docket 56-14 at 18; Docket 28 at 4 ¶ 12 (9/20/13 Supp. Decl. of Lee Olson).

39

Docket 56-14 at 18.

40

Docket 56-15 at 21.

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Total (sum of “Total Direct
Costs” and “Indirect Costs”)

$482,554

After additional negotiations, on April 12, 2013, the Agency Lead Negotiator (ALN)
for IHS indicated through a letter to Alaska tribes and tribal organizations that IHS would
not agree to estimate an amount for direct CSCs for MSPI and DVPI funding. The
negotiator explained that IHS’s position was that paying direct CSCs was improper
because the MSPI and DVPI programs are non-recurring and because payment of direct
CSCs would be duplicative of what IHS had already agreed to pay for fringe benefits in
the MSPI and DVPI awards. 41
Soon after, on April 23, 2013, through two separate letters sent to different
representatives at IHS, SCF provided IHS with revised MSPI and DVPI budget
proposals. 42 The revised MSPI proposal provided, in part: 43
Sub-total personnel

$392,142

Sub-total fringe

$98,036 (25% of $392,142)

Total all categories (sum of
personnel, sub-total fringe,
travel, supplies, and other)

$599,596

The revised MSPI budget also sought the following additional funds:
Indirect on MSPI funds

41

$206,861 (34.5% of $599,596)

See Docket 5-6 at 4; see also Docket 5-3 at 19 (4/12/13 Letter Tahsuda, IHS, to Leaders).

42

Docket 28-1 at 1-2 (4/23/13 Letter SCF to IHS, attaching revised MSPI budget); Docket 28-1
at 3-4 (4/23/13 Letter SCF to IHS, attaching revised DVPI budget).
43

Docket 28-1 at 2 (4/23/13 Letter SCF to IHS, attaching revised MSPI budget).

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Indirect on MSPI Other Funds

$16,632 (34.5% of Direct Costs
of $48,209, which appear on
the budget without calculations)

In additional columns, the revised budget reflected “Actual Cost of Fringe & Indirect” of
$146,245, and “Paid by Other Sources” of $48,209. Mr. Olson’s August 2013 declaration
explains how he calculated “Paid by Other Sources,” also referred to as direct CSCs on
MSPI, 44 and describes the $48,209 as the “net amount due” in direct support costs for
the MSPI program. Overall, while SCF’s prior MSPI budget in August 2012 appears to
have requested a total of $599,596, SCF’s revised MSPI budget in April 2013 appears to
request a total of $871,298 ($599,596 + $206,861 + $48,209 + $16,632).
The revised DVPI proposal provided, in part: 45
Total FTE’s/Salaries

$251,377

Total Fringe

$62,846 (25% of $251,377)

Total Direct Costs

$482,554

Indirect Costs of Requested
Funds

(not specified)

Total

$482,554

Unlike the MSPI budget, the April 2013 DVPI budget proposal did not specify an additional
amounts for indirect costs.

44

In an affidavit filed with the Court, Mr. Olson explains: Sub-total personnel is $392,142, and
SCF’s total fringe benefit costs for these personnel is 37.3% (37.3% of $392,142 is $146,269,
though Mr. Olson’s declaration states it is $146,245). IHS applies a 25% offset (i.e., 25% of
$392,142 is $98,036). Thus, SCF calculated a “net amount due” of $48,209 in direct CSCs for
MSPI ($146,269 – $98,036 = $48,209). Docket 6 at 13-14 ¶ 30 (8/21/13 Decl. of Lee Olson).
45

Docket 28-1 at 4 (4/23/13 Letter SCF to IHS, attaching revised DVPI budget).

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Mr. Olson’s August 2013 declaration asserts that the revised April 2013 DVPI
budget clearly excluded indirect and direct CSCs from the base amount. 46 And yet while
no numerical value appears on the April 2013 DVPI budget for indirect CSCs, the revised
budget included a request for fringe costs of $62,846 in the base amount. Mr. Olson’s
August 2013 declaration appears to suggest that in its April 2013 budget proposal, SCF
requested that IHS pay to SCF $124,016 in indirect CSCs (25.7% of $482,554), $42,734
in additional direct CSCs (calculated from total salaries), plus $10,983 in indirect CSCs
on direct CSCs (25.7% of $42,734), 47 in addition to the base funding of $482,554 for
DVPI. These additional requests are not evident in SCF’s April 2013 budget submission.
On June 25, 2013, SCF sent to IHS a letter titled “Final Offers regarding MSPI and
DVPI Amendments to [SCF]’s FY 2012 [FA].” 48 SCF maintains this letter constituted
SCF’s final offer, pursuant to 25 U.S.C. § 458aaa-6(b), which provides that where “the
Secretary and a participating Indian tribe are unable to agree, in whole or in part, on the
terms of a compact or funding agreement,” the tribe may submit a “final offer.” 49
In the letter, SCF indicated as follows:
•

46

For MSPI. During previous negotiations, “the ALN [for IHS] proposed” that the
contract amendment provide for $206,861 for indirect CSCs and $0 for direct
CSCs. SCF requested total CSCs of $271,702, including $48,209 for direct

Docket 28 at 5 ¶ 16 (9/20/13 Supp. Decl. of Lee Olson).

47

Docket 6 at 14 ¶ 31 (8/21/13 Decl. of Lee Olson). In an affidavit filed with the Court, Mr.
Olson explains: Total approved program-budgeted salaries for DVPI is $251,377, and SCF’s
total fringe benefit costs for these budgeted salaries is 42% (42% of $251,377 is $105,578).
IHS applies a 25% offset (i.e., 25% of $251,377 is $62,844). Thus SCF requested an additional
$42,734 in direct CSCs for DVPI ($105,578 – $62,844 = $42,734). Docket 6 at 14 ¶ 31.

48

Docket 5-5 at 9-10 (6/25/13 Letter Olson, SCF to Roubideaux, IHS).

49

See 25 U.S.C. § 458aaa-6(b) & (d).

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CSCs and $223,493 for indirect CSCs (which includes indirect CSCs on the
funding amount and on direct CSCs).
•

For DVPI. The “ALN proposed” that the contract amendment provide for
$124,106 for indirect CSCs and $0 for direct CSCs. SCF requested total CSCs
of $177,733, including $42,734 for direct CSCs and $134,999 for indirect CSCs
(which includes indirect CSCs on the funding amount and on direct CSCs).

With respect to both MSPI and DVPI, SCF further stated “SCF disagrees with the ALN’s
rejection of any estimated requirement of direct CSC and the related indirect CSC on the
direct CSC.” 50 But it is not clear in the record that the ALN had proposed the referenced
$206,861 or $124,106 amounts. In its June 25 letter, SCF also responded to an IHS
concern that IHS had expressed in previous negotiations: that IHS could not pay direct
CSCs because direct CSCs are recurring, while the MSPI and DVPI projects are nonrecurring. SCF asserted that IHS would be able to decline to pay MSPI and DVPI direct
CSCs in future years pursuant to 25 U.S.C. § 450j-1(b)(2)(E) if MSPI and DVPI were no
longer funded, as that section permits a reduction in funding upon “completion of a
contracted project, activity, or program.” 51
Also on June 25, 2013, SCF sent a letter to the Director of the Alaska Area Native
Health Service in Anchorage, Alaska, along with draft amendment language, containing
a more limited request for funding. SCF sent this letter pursuant to 25 U.S.C. § 458aaa6(c)(1)(D), which allows the Secretary to sever and assign portions of funding where the
Secretary otherwise rejects a final offer.

The draft amendment language that SCF

submitted in that letter sought only the base funding amounts for the two programs and

50

Docket 5-5 at 10 (6/25/13 Letter Olson, SCF to Roubideaux, IHS).

51

Docket 5-5 at 9-12 (6/25/13 Letter Olson, SCF to Roubideaux, IHS).

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recognized that the tribe’s indirect CSC requirements were $206,861 for MSPI and
$124,016 for DVPI. 52
On August 7, 2013, IHS responded to SCF’s June 25, 2013 “final offer” letter. 53
IHS maintained that SCF’s letter was not a valid final offer under the ISDA because the
Act did not apply to the funds at issue. 54 And IHS indicated that even if the letter were a
proper final offer governed by the Act, IHS would reject the final offer for the following
reasons:
IHS asserts SCF’s proposal is not a proper final offer because it is not the
result of prior negotiations. Pursuant to 25 U.S.C. § 450j-1(a)(3)(B), “[o]n an annual
basis, . . . the tribe or tribal organization shall have the option to negotiate with the
Secretary the amount of funds that the tribe or tribal organization is entitled to receive.” 55
A “final offer” should be submitted if “the Secretary and a participating Indian tribe are
unable to agree, in whole or in part, on the terms of a compact or funding agreement.” 56
IHS’s August 2013 letter maintains that “SCF never made the proposal included in its
letter to the [Alaska Area Native Health Service]” and “SCF offers no explanation of how
it reached the amount of direct and indirect CSC need that it proposes in its [June 2013]
letter.” 57

52

Docket 5-5 at 1 (6/25/13 Letter SCF to IHS providing severed proposal).

53

Docket 5-6 at 1 (8/7/13 Letter Roubideaux, IHS, to Gottlieb, SCF, rejecting final offer).

54

Docket 5-6 at 2-4 (8/7/13 Letter Roubideaux, IHS, to Gottlieb, SCF, rejecting final offer).

55

25 U.S.C. § 450j-1(a)(3)(B).

56

See 25 U.S.C. § 458aaa-6(b) & (d).

57

Docket 5-6 at 4 (8/7/13 Letter Roubideaux, IHS, to Gottlieb, SCF, rejecting final offer).

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IHS asserts it was “unable to determine if any of the CSC are duplicative of
costs included in the MSPI/DVPI awards.” 58 IHS asserts that although “certain portions
of fringe benefits and some forms of insurance” may be eligible to be paid as direct CSCs,
“SCF’s budgets for the MSPI/DVPI already include these costs.”59 IHS provides an
example: the initial DVPI Year 3 budget included a line item for “indirect costs” of $84,682,
while the revised budget did not (including only a “-”). However, the final total dollar
amount remained the same, “which leads the IHS to conclude that the award funded
SCF’s full costs.” 60 Thus, IHS maintained that further negotiations were required to
ensure that IHS was not paying duplicate CSCs.
IHS asserts payment of direct CSCs would violate IHS policy concerning
direct CSCs. IHS asserts that MSPI and DVPI are pilot demonstration projects funded
through one-time, non-recurring funds. Direct CSCs generally cover only recurring costs.
IHS asserts that it cannot pay recurring direct CSCs for a program that could be
terminated. 61 Moreover, because SCF’s proposal for indirect CSCs on direct CSCs is
contingent upon IHS accepting SCF’s proposal for direct CSCs, IHS would not increase
indirect CSCs in the requested manner.

58

Docket 5-7 at 5.

59

Id.

60

Id.

61

Docket 5-7 at 6.

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HIS concluded its August 2013 letter by indicating that it “is open to resuming
negotiations regarding SCF’s indirect CSC estimates need amounts.” 62
V. The Current Dispute.
On August 21, 2013, SCF initiated this action against IHS, and filed a motion
seeking preliminary injunctive relief. 63 The Complaint sought the following relief:
(A) An immediate injunction compelling IHS to enter into two contract
amendments awarding to SCF the subject MSPI and DVPI program funds
in the amounts of $599,596 and $482,554, respectively, and to compel the
immediate payment of these funds;
(B) An immediate injunction compelling IHS to specify in the foregoing
contract amendments SCF’s right to $223,493 and $134,999, respectively,
in “indirect” contract support costs associated with the referenced MSPI and
DVPI program funds;
(C) An immediate injunction compelling IHS to specify in the foregoing
contract amendments SCF’s right to $48,209 and $42,734, respectively, in
“direct” contract support costs associated with the referenced MSPI and
DVPI program funds.
SCF also sought a preliminary injunction, 64 which the Court denied on October 23,
2013. 65 And SCF sought attorneys’ fees and “further relief as the interests of justice and
equity may require.”
On September 10, 2013, while this litigation was pending, the parties entered into
two contract amendments—Amendment Number 15 to FY 2012 FA for Year 4 MSPI

62

Docket 5-7 at 8.

63

Docket 1 (Complaint); Docket 3 (Mot. Preliminary Injunction); Docket 5 (SCF Memorandum).

64

At oral argument on the motion for a preliminary injunction, SCF clarified that it was seeking
mandamus relief in the form of an order requiring immediate payment of MSPI and DVPI
funding. Docket 37 at 1, 8 (Order Denying Motion for Immediate Injunctive Relief).
65

Docket 37 (Order Denying Motion for Immediate Injunctive Relief).

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and Amendment Number 14 to FY 2012 FA for Year 3 DVPI, awarding SCF MSPI and
DVPI program funds in the amounts of $599,596 and $482,554, respectively. Through
these amendments, SCF has received the relief it requested in Part (A) of its Complaint.
The amendments address CSCs as follows:
The provision of this agreement regarding contract support costs has been
reserved per [IHS]’s letter dated August 7, 2013, and the appeal of that
decision by [SCF] in Southcentral Found. v. Roubideaux, 3:13-cv-00164SLG (D. Alaska filed Aug. 21, 2013). Notwithstanding execution of this
agreement, both parties may continue to litigate the contract support costs
issues identified in IHS’s August 7, 2013 letter and may choose to appeal
any final order issued pursuant to such litigation. 66
The budget submitted with Amendments 14 and 15 does not indicate whether any of the
$599,596 for MSPI or $482,554 amounts was intended to include CSCs. 67 It appears
that the parties agreed to disagree as to what amount, if any, of the funds awarded would
be allocated to indirect and direct CSCs.
The motions for summary judgment were filed in December 2013 and January
2014. Oral argument was heard on March 28, 2014. 68 The remainder of this Order
considers whether SCF is entitled to the relief sought in (B) and (C) of SCF’s complaint.
JURISDICTION
The parties agree that the Court has jurisdiction to hear this case pursuant to 25
U.S.C. § 450m-1 and 28 U.S.C. § 1331.

66

Docket 17-1 at 4-6 (FY 2012 FA Am. 15 for MSPI); Docket 17-2 at 3-6 (FY 2012 FA Am. 14
for DVPI).
67

Docket 17-1 at 1.

68

Docket 58 (Minutes); Docket 63 (Transcript).

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STANDARD OF REVIEW
The parties dispute what standard of review applies. IHS asserts: (1) that IHS’s
allocation of MSPI and DVPI funding is “beyond judicial review”; and (2) regardless of
whether the ISDA governs, the Court should apply the Administrative Procedures Act
(APA) standard of review, determining only whether IHS’s decision was “arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with law.” 69 SCF
asserts that the ISDA governs and similar cases support application of a de novo standard
of review. 70
I.

The Lincoln Rule does not apply.
IHS cites Lincoln v. Vigil for the proposition that “[t]he allocation of funds from a

lump-sum appropriation like IHS’s is an administrative decision committed to agency
discretion” and is “beyond judicial review.” 71 In Lincoln, the Supreme Court considered
whether IHS’s decision to cancel the Indian Children’s Program, a pilot project for
disabled Indian children, was within the agency’s discretion and not subject to judicial
review under the APA. There, Congress had allocated funds to IHS without specifically
mentioning the Indian Children’s Program. 72

The Supreme Court held that “[t]he

allocation of funds from a lump-sum appropriation is . . . traditionally regarded as
committed to agency discretion.” And because there was no legally binding obligation on

69

Docket 47 at 8-9, 12, 22 (IHS Cross-Mot. and Opp’n).

70

Docket 44 at 33 (Mot.); Docket 52 at 4-5 (Reply).

71

Docket 47 at 12 (IHS Cross-Mot. and Opp’n) (citing Lincoln v. Vigil, 508 U.S. 182, 192
(1993)).

72

508 U.S. at 186.

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IHS’s lump-sum appropriation from Congress, the Court held that the decision to
terminate the program was likewise within IHS’s discretion. 73
Here, in contrast, Congress’s appropriations to IHS specifically indicated that the
funds should be used for MSPI and DVPI. Moreover, as noted by SCF, SCF is not
challenging IHS’s allocation of funds for MSPI and DVPI, but only IHS’s assertion that it
is not bound by 25 U.S.C. § 450j-1(a)(2), which would require IHS to pay CSCs related
to MSPI and DVPI in addition to the appropriated program funds. 74 For both of these
reasons, IHS’s argument regarding the Lincoln rule is unpersuasive.
II.

The ISDA governs MSPI and DVPI funding.
The parties dispute whether the ISDA governs appropriations for MSPI and DVPI.

SCF asserts the Court should apply a de novo standard of review pursuant to the ISDA
and case law. IHS asserts that the ISDA does not apply, and that the Court should apply
the APA standard of review regardless. IHS reasons that if the ISDA governs MSPI and
DVPI funding, the ISDA does not include a standard of review, so the APA standard of
review applies; and if the ISDA does not govern MSPI and DVPI funding, the APA
standard of review is appropriate because the Court would be reviewing a general agency
determination. 75 To determine the standard of review (and the substantive issues of this
dispute), the Court must first determine whether the ISDA applies.

73

Id. at 194.

74

Docket 52 at 2-3 (Reply).

75

Docket 47 at 23-24.

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A. The language of the ISDA and the Congressional appropriations support the
conclusion that the ISDA governs MSPI and DVPI funding.
SCF asserts that the text of the ISDA provides that the Act applies to all PFSAs
that are “carried out for the benefit of Indians because of their status as Indians.” 76 SCF
asserts “[t]he MSPI and DVPI initiatives plainly fit the controlling language of the ISDA.” 77
Furthermore, SCF asserts that, pursuant to 25 U.S.C. § 458aaa-11, the Secretary is
required to facilitate inclusion of programs under the ISDA, and to resolve any ambiguity
in the Act in favor of Indians. 78
IHS asserts that Congress did not intend that MSPI and DVPI be governed by the
ISDA. 79 IHS observes that Congress appropriated these funds “notwithstanding any
other provision of law” to be distributed “outside all other distribution methods and
formulas at the discretion of the Director of [IHS].” 80 Thus, IHS maintains Congress
intended IHS to fashion a program outside of the ISDA’s funding scheme. 81
The Court concludes, as indicated in the Court’s August 1, 2014 denial of SCF’s
Second Motion for Preliminary Injunction, that the ISDA governs. 82 The Court does not
read the “notwithstanding” language in Congress’s appropriations of MSPI and DVPI

76

Docket 44 at 22 (Mot.) (quoting 25 U.S.C. § 458aaa-4(b)(2)(F)).

77

Docket 44 at 22.

78

Docket 44 at 22-23.

79

Docket 47 at 11 (IHS Cross-Mot. and Opp’n).

80

Consol. Appropriations Act, 2008, Pub. L. No. 110-161, 121 Stat. 1844, 2135 (2007);
Omnibus Appropriations Act, 2009, Pub. L. No. 111-8, 123 Stat. 524, 735 (2009).

81

Docket 47 at 10-11 (IHS Cross-Mot. and Opp’n).

82

See Docket 76 (Order).

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funds as broadly as asserted by IHS so as to place these programs entirely outside of the
ISDA.

For Congress did not, as IHS asserts, “authoriz[e] IHS to administer the

MSPI/DVPI notwithstanding any other law” 83—rather, Congress only authorized IHS to
“allocate [the funds] outside all other distribution methods and formulas at the discretion
of the Director of [IHS].” 84 Both parties acknowledge that Congress intended the MSPI
and DVPI funds “to target the areas with the highest needs in Indian Country.” 85
Presumably, that is precisely the reason Congress gave IHS this discretion to allocate
these funds among the tribes.
Moreover, even if the Congressional appropriations language were ambiguous,
the Court agrees with SCF that the ISDA should be “liberally construed for the benefit of
the Indian participating in self-governance,” and that this requires that the Court “facilitate
. . . the inclusion” of programs within the ISDA. 86 The MSPI and DVPI are programs
intended to help Indians, and are therefore included with the ISDA. 87

The Court finds

the scope of the “notwithstanding” language is limited, and provides IHS with discretion

83

See Docket 47 at 11 (emphasis added).

84

See Consol. Appropriations Act, 2008, Pub. L. No. 110-161, 121 Stat. 1844, 2135 (2007)
(emphasis added).

85

Dep’t of the Interior, Env’t, and Related Agencies Appropriations Bill, 2008, H.R. Rep. 110187 (2007) (Congress expected IHS “to distribute this funding outside of the normal formulas
and methodologies to target the areas with the highest needs in Indian Country.”); Docket 47 at
11 (IHS Cross-Mot. and Opp’n) (“Congress did not intend for every tribe to benefit from the
initiatives . . . .”).
86

25 U.S.C. § 458aaa-11(a)(1) & (f).

87

See 25 U.S.C. § 458aaa-4(b)(2)(F).

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only with respect to which tribes to allocate funds among the various Indian tribes. It does
not permit a wholesale abandonment of the ISDA by the IHS with respect to these funds.
B. IHS’s remaining arguments concerning inapplicability of the ISDA are
unpersuasive.
IHS asserts that MSPI and DVPI cannot be governed by the ISDA because IHS’s
method of distributing these funds differs from its method of distributing other ISDA
funds. 88 But if, in fact, IHS has adopted a method of distributing these funds to the tribes
that is inconsistent with the ISDA, that cannot serve as a basis for finding the Act
inapplicable.
IHS also asserts that requiring IHS to follow the ISDA’s provisions regarding CSCs
“makes no sense” because it means that “Congress gave IHS leave to ignore the
requirements of subsection (a)(1), under which IHS would identify a share for every tribe,
but not subsection (a)(2) of 25 U.S.C. § 450j-1, which directs the payment of CSC.”89
Instead, IHS asserts that the ISDA requires an all or nothing approach: “IHS either had
the authority to . . . determine which contractors to fund, the amount of each award, and

88

Docket 47 at 6-7, 18-19 (IHS Cross-Mot. and Opp’n). For instance, IHS asserts that IHS
required tribes to submit budgets to receive MSPI and DVPI funding, which tribes need not do
for other ISDA funds, and that urban tribes were eligible for MSPI and DVPI funds, while they
were ineligible for other ISDA funds.
IHS also asserts that the “conflict of law provisions” make it clear the agreements are governed
by their own terms rather than the ISDA. But this would not resolve the current dispute because
no contract yet governs the current dispute and the prior contracts are ambiguous. Even if
amendments in the initial years were unambiguous, see, e.g., Docket 5-1 at 8-10 (Am. No. 11 to
the FY 2009 FA re: MSPI for FY 2008 and 2009), the language of more recent Amendment No.
10 to the FY 2011 FA concerning DVPI ambiguously stated that CSCs would be “calculated and
paid in accordance with . . . the [ISDA].” Docket 5-2 at 1-2. Moreover, any ambiguity must be
interpreted in favor of the tribes. See 25 U.S.C. § 458aaa-11(a)(1) and (f).

89

Docket 47 at 21 (IHS Cross-Mot. and Opp’n).

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the instrument to fund each award, or the Agency had no authority to take any of those
actions.”90 The Court disagrees. Congress specifically provided that IHS could direct
these particular program funds to the communities with the most need, but it did not
specifically authorize IHS to disregard the other requirements of the ISDA.
This conclusion is both consistent with the ISDA—which requires the Secretary to
“facilitate” inclusion of programs under the ISDA 91—and the language of the
appropriations.
III.

The Standard of Review.
Generally, judicial review of federal agency administrative decisions is governed

by the Administrative Procedures Act, particularly where the statute at issue does not
provide for a standard of review. 92 Here, however, the statute does provide a standard
of review, as it requires the Secretary to “demonstrate[e] by clear and convincing
evidence the validity of the grounds for rejecting the offer.”93
DISCUSSION
SCF submitted a final offer in June 2013 which IHS rejected in August 2013. In
this regard, 25 U.S.C. § 458aaa-6(c) provides as follows:
If the Secretary rejects a final offer, she must provide:

90

Docket 47 at 22.

91

See 25 U.S.C. §§ 458aaa-4(b)(2) & 458aaa-11(a)(1).

92

United States v. Carlo Bianchi & Co., 373 U.S. 709, 715 (1963).

93

25 U.S.C. § 458aaa-6(d); see also 25 U.S.C. § 458aaa-17 (“In any appeal (including civil
actions) involving decisions made by the Secretary under this part, the Secretary shall have the
burden of proof of demonstrating by clear and convincing evidence—(1) the validity of the
grounds for the decision made; and (2) that the decision is fully consistent with provisions and
policies of this part.”). See also 25 U.S.C. § 450m-1(a).
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(A) a timely written notification to the Indian tribe that contains a specific
finding that clearly demonstrates, or that is supported by a controlling legal
authority, that—(i) the amount of funds proposed in the final offer exceeds
the applicable funding level to which the Indian tribe is entitled under this
part. 94
The Secretary must also provide “technical assistance to overcome the objections” and
a hearing, although the tribe may elect instead to initiate an action in federal district court
pursuant to 25 U.S.C. § 450m-1(a), 95 as SCF did here. In addition, if the Secretary rejects
a final offer, pursuant to 25 U.S.C. § 458aaa-6(c)(1)(D), she must “provide . . . the Indian
tribe with the option of entering into the severable portions of a final proposed compact
or funding agreement, or provision thereof, (including a lesser funding amount, if any),
that the Secretary did not reject, subject to any additional alterations necessary to confirm
the compact or funding agreement to the severed provisions.”
At issue is whether IHS has met its statutory burden of proof when it rejected SCF’s
final offer. In this regard, 25 U.S.C. § 458aaa-6(d) provides as follows:
[T]he Secretary shall have the burden of demonstrating by clear and
convincing evidence the validity of the grounds for rejecting the offer (or a
provision thereof) made under subsection (b) [defining final offers] . . . . 96
Here, the two programs and the two types of CSCs at issue—direct and indirect—warrant
separate analysis.

94

25 U.S.C. § 458aaa-6(c)(1)(A)(i).

95

25 U.S.C. § 458aaa-6(c)(1).

96

25 U.S.C. § 458aaa-6(d); see also 25 U.S.C. § 458aaa-17 (“In any appeal (including civil
actions) involving decisions made by the Secretary under this part, the Secretary shall have the
burden of proof of demonstrating by clear and convincing evidence—(1) the validity of the
grounds for the decision made; and (2) that the decision is fully consistent with provisions and
policies of this part.”).
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A. Indirect CSCs on MSPI.
In IHS’s August 2013 letter, IHS indicated that it rejected SCF’s final offer because
SCF violated the Act by failing to negotiate its proposal, and that “[u]nlike several other
Alaska T/TO that did negotiate CSC amounts for their MSPI/DVPI awards, SCF never
made the proposal included in its letter to the [Alaska Area Native Health Service].” 97
SCF responds that IHS’s argument that the proposed contract language was never fully
negotiated must fail because “[t]he matter came to a head with a final offer precisely
because the negotiations failed . . . . [IHS’s] argument reads the final offer process right
out of the statute” and “ignores the inconvenient fact that SCF tried to negotiate amounts
for CSCs for almost a year.” 98 On this point, the Court agrees with SCF. The parties
unsuccessfully negotiated for many months, and at some point, SCF must be entitled to
make a final offer.
Moreover, from review of SCF’s April 2013 budget submission, IHS’s statement
that SCF had never before submitted its June proposal appears to be inaccurate—SCF’s
April 2013 letter contains the same proposal as the June 2013 final offer for MSPI. IHS
concedes that it did not consider the April 2013 proposal in making its August 2013
decision because the ““revised budget was addressed to an individual who was no longer
employed at IHS at the time.” 99 But IHS’s statement that it did not consider SCF’s April

97

Docket 5-7 at 4.

98

Docket 44 at 43.

99

Docket 47 at 34 n.123 (IHS Cross-Mot. and Opp’n).

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2013 proposal does not constitute “clear and convincing evidence [of] the validity of the
grounds for rejecting [SCF’s] offer.”100
IHS asserts that “SCF offers no explanation of how it reached the amount of direct
and indirect CSC need that it proposes in its letter.”101 However, SCF’s April 2013 MSPI
proposal and its June final offer proposal for indirect CSCs on MSPI are both quite
straightforward: SCF requested $206,861, 34.5% of $599,596. And SCF submitted a
severed request that identified this amount of funds. 102 In SCF’s more recent briefing, it
asserts that 34.5% is the proper indirect CSC rate for an on-site program like MSPI, which
correlates with rates “issued by the DHHS Division of Cost Allocation.” 103 IHS does not
seem to dispute that this rate is proper. IHS asserts only that the rate is just “one part of
the indirect CSC negotiation,” as CSC negotiations would have required that SCF “submit
its approved rate” and supporting documents as well as underlying calculations. 104 But
the burden was on IHS to provide “notification” with “a specific finding” explaining why
“the amount of funds proposed in the final offer exceeds the applicable funding level to
which [SCF wa]s entitled. 105 With respect to the MSPI indirect CSCs, IHS’s August 2013

100

25 U.S.C. § 458aaa-6(d).

101

Docket 5-7 at 4.

102

Docket 5-5 at 1 (6/25/13 Letter SCF to IHS providing severed proposal); Docket 5-5 at 10
(6/25/13 Letter SCF to HIS providing Final Offers).
103

Docket 44 at 43 (Mot.).

104

Docket 47 at 31-32.

105

25 U.S.C. § 458aaa-6(c)(1)(A)(i).

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letter falls short of meeting this burden, and also does not provide any “technical
assistance” as to how SCF could have corrected its request. 106
Accordingly, with respect to the indirect CSCs for MSPI, IHS has failed to meet its
burden to provide “clear and convincing evidence [of] the validity of the grounds for
rejecting [SCF’s] offer.” 107

The Court will grant in part SCF’s motion for summary

judgment and will require that IHS provide a revised MSPI contract amendment that
specifies SCF’s right to a minimum of $206,861 in indirect CSCs associated with the MSPI
program funds. This is a portion of the relief requested in Part (B) of SCF’s Complaint. 108
B. Direct CSCs on MSPI.
With respect to direct CSCs on MSPI, the Court finds merit to IHS’s argument that
SCF “originally included all costs that, in [SCF’s] review, would otherwise qualify as direct
CSC in the MSPI budget.” 109 For it appears that SCF included at least some direct CSCs
in its August 2012 MSPI budget request and it then set out a different amount for these
direct costs in its April 2013 request. 110

Accordingly, IHS has provided clear and

convincing evidence for its rejection of SCF’s proposal with respect to direct CSCs for
MSPI—additional payments may have been duplicative with amounts already included in
the base funding amount. The Court further notes that SCF failed to clearly explain its

106

See 25 U.S.C. § 458aaa-6(c)(1)(B).

107

Id.

108

Docket 1 (Complaint). As acknowledged by SCF, this litigation would not cause IHS to
immediately pay any sums of money to SCF. Docket 44 at 2.

109

Docket 47 at 34 (citing Docket 28 ¶ 3 (9/20/13 Supp. Decl. of Lee Olson)).

110

Docket 56-14 at 18 (SCF’s August 2012 MSPI proposed budget); Docket 28-1 at 2 (4/23/13
Letter SCF to IHS, attaching revised MSPI budget).
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MSPI direct CSC calculations in either its April or June 2013 budget proposals. The April
2013 budget reflects that SCF seeks $48,209 for certain direct costs, but without
explanation. SCF asserts that the “Director [of IHS] could easily determine if the amounts
met ‘the definition of CSC’ or are ‘in excess of the applicable funding level’” from the
documents that SCF submitted to IHS.” 111 The Court disagrees. The reasoning provided
in Mr. Olson’s August 2013 declaration is not apparent in either the April 2013 budget or
the June 2013 final offer letter, and the Court has inadequate information to evaluate
SCF’s assertion that IHS simply should have known the correct amount. Furthermore,
SCF’s reliance on calculations subsequently provided in this litigation do not provide an
adequate basis to find that the Secretary failed to meet her burden in rejecting this
component of the June final offer in August 2013. In short, IHS has demonstrated that
SCF is not entitled to court-ordered direct CSCs for the MSPI at this juncture. 112
C. Indirect and Direct CSCs on DVPI.
IHS’s August 2013 letter provided several explanations for rejecting SCF’s
proposal, which the Court finds persuasive with respect to DVPI funding.
First, unlike the April 2013 MSPI budget proposal which specifically indicated that
SCF sought 34.5% of total costs in indirect CSCs for MSPI, SCF’s April 2013 DVPI budget
proposal indicates that indirect CSCs for DVPI are “-”. This does not provide IHS with a
clear indication of SCF’s indirect cost calculations.

111

Docket 44 at 43 (Mot.).

112

IHS acknowledges, however, that “if indirect CSC were determined to be appropriate under
the statute, the application of indirect cost rate to direct cost base may be appropriate.” Docket
5-7 at 7 n.7. This would appear to be an appropriate subject for future negotiations that should
be readily resolved.
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Second, there is no indication in the record that SCF clearly informed IHS of its
intention to use the rate of 25.7% for off-site indirect CSCs for DVPI. It appears that Mr.
Olson’s August 2013 declaration is the first time that SCF set out its proposed 25.7% offsite indirect CSC rate for DVPI. Likewise, although Mr. Olson’s August 2013 declaration
provides calculations concerning direct CSCs for DVPI, these numbers do not appear in
the April 2013 budget, and are presented without explanation in the June 2013 letter.
This supports IHS’s position that the proposed rate had not been presented in
negotiations and that SCF failed to provide support for its proposal.
Third, IHS has presented strong evidence for its determination that “the amount
of funds proposed in the final offer exceeds the applicable funding level to which [SCF
wa]s entitled under th[e ISDA].”113 IHS’s August 2013 letter clearly expressed its concern
that SCF was seeking duplicate payments. As noted above, SCF’s initial DVPI budget
calculated “Total Direct Costs” of $397,871 and “Indirect Costs” of $84,682, totaling
$482,554. 114 And yet the revised April 2013 DVPI budget included “Total Direct Costs”
of $482,554 with a “-” for “Indirect Costs on Requested Funds.”115 IHS explains that
“[a]lthough . . . SCF removed the ‘indirect costs’ lines in its DVPI budget, . . . the total
dollar amount budgeted and awarded is the same, and SCF did not appear to revise its
scope of work to reduce services.” 116 SCF cites Seneca Nation of Indians v. U.S.

113

See 25 U.S.C. § 458aaa-6(c)(1)(A)(i)).

114

Docket 56-15 at 21.

115

Docket 17-12 at 1-2.

116

Docket 47 at 33 (IHS Cross-Mot. and Opp’n).

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Department of Health & Human Services for the proposition that “it is not SCF’s burden
to justify the validity of its position.” 117 But in Seneca Nation, IHS completely failed to
respond to the tribe’s proposed amendments.

In contrast, here, IHS provided its

reasoning in the August 2013 letter. The Court finds, in light of the record, that IHS’s
denial of SCF’s final offer for DVPI indirect CSCs on the basis of concerns of duplicative
CSC payment was justified. 118
Fourth, SCF does not contest that it had included both indirect and direct CSCs in
its budget requests for DVPI, as IHS never instructed SCF that it could not do so. 119 SCF
asserts that IHS has improperly categorized MSPI and DVPI as “full-cost recovery”
programs, for which IHS may require that “any fixed overhead requirements must . . .
come out of the amounts provided for program funding.” 120

But the appropriation

language permitted IHS to require a tribe to use a certain portion of the base funds “not
to exceed” certain dollar amounts for CSCs. 121

117

Docket 44 at 44 (quoting Seneca Nation of Indians v. U.S. DHHS, 945 F.Supp.2d 135, 151
(D.D.C. 2013), appeal dismissed, 13-5219, 2013 WL 6818212 (D.C. Cir. 2013)).

118

The Court notes, however, that if the total budget was $397,871, exclusive of indirect CSCs,
and if indirect CSCs were to be paid on that full amount, then $84,682 would be only about
17.5% (i.e., $482,554-$397,871 = $84,682, and $84,682 is only 17.5% of $397,871). This
appears to be lower than the typical off-site indirect CSC rate. See Docket 6 at 12-13 ¶ 6
(8/21/13 Decl. of Lee Olson). But other calculations may have been required. The Court simply
cannot make a determination, based upon the current records, as to whether that was an
appropriate calculation.
119

Docket 28 ¶ 6 (9/20/13 Supp. Decl. of Lee Olson). At the same time, SCF excluded “indirect
administrative costs” from the MSPI budgets. Docket 28 at 5 ¶ 14.

120

Docket 44 at 35 (Mot.).

121

Consol. Appropriations Act, 2008, Pub. L. No. 110-161, 121 Stat. at 2135; Omnibus
Appropriations Act, 2009, Pub. L. No. 111-8, 123 Stat. at 735; Dep’t of the Interior,
3:13-cv-00164-SLG, Southcentral Foundation v. Roubideaux
Order re Cross-Motions for Summary Judgment
Page 31 of 33

For the foregoing reasons, IHS has provided clear and convincing reasons for its
rejection of SCF’s final offer concerning both the indirect and direct CSCs for DVPI.
CONCLUSION
Under the ISDA, SCF is entitled to CSCs for MSPI and DVPI funds. IHS declined
to adopt amendments to SCF’s ISDA contract because the parties could not agree on
contract amendment language concerning CSCs. In August 2013, IHS rejected SCF’s
June 2013 final offer, but has failed to provide clear and convincing evidence to support
one component of its declination—the indirect contract support costs for the MSPI funding
in the amount of $206,861. IHS should have offered SCF the opportunity to enter a
severable portion of the agreement with respect to indirect CSCs for MSPI, but it did not
do so. See 25 U.S.C. § 458aaa-6(c)(1)(D). Accordingly, the Court grants in part SCF’s
motion for summary judgment, and for the same reasons, the Court denies in part IHS’s
cross-motion for summary judgment.

IHS shall provide a revised MSPI contract

amendment to SCF that recognizes SCF’s right to a minimum of $206,861 in additional
funding for indirect CSCs associated with MSPI program funds.
In its August 2013 letter, IHS satisfied its burden with respect to the rejection of
indirect and direct CSCs for DVPI and direct CSCs for MSPI. Accordingly, the Court
denies in part SCF’s motion for summary judgment and grants in part IHS’s cross-motion

Appropriation, Pub. L. No. 111-88, 123 Stat. at 2945; Consolidated Appropriations Act, 2012,
Pub. L. No. 112-74, 125 Stat. at 1027-28.

3:13-cv-00164-SLG, Southcentral Foundation v. Roubideaux
Order re Cross-Motions for Summary Judgment
Page 32 of 33

for summary judgment. The parties are directed to further negotiate in an effort to reach
a resolution on each of those topics. 122
For the foregoing reasons, IT IS ORDERED as follows:
1. Plaintiff Southcentral Foundation’s Motion for Summary Judgment at Docket
44 is GRANTED in part and DENIED in part.
2. Defendant Yvette Roubideaux, Director, U.S. Indian Health Service, CrossMotion for Summary Judgment at Docket 48 is GRANTED in part and DENIED
in part.
3. The parties shall promptly meet and confer and, within 30 days of the date of
this Order, shall file, either separately or jointly, a status report regarding the
proposed future proceedings necessary in this case.
DATED this 23rd day of September 2014
/s/ Sharon L. Gleason
United States District Judge

122

See 25 U.S.C. § 450m-1.

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