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Funding Shortfalls Didn't Excuse Duty to Pay Tribal Contractors

The United States Supreme Court reaffirmed the government's obligation to pay in full contract support costs to Indian tribes with whom it contracted for services under the Indian Self Determination and Education Assistance Act because insufficient appropriations to pay all tribal contractors did not relieve the government of its promise to pay individual tribal contractors in full. The ISDEA Act (25 USC 450 et seq.) requires the government to pay the full amount of "contract support costs" tribes incur in performing services that otherwise would have been provided by the government. However, during the 8 fiscal years at issue, appropriations covered only between 77 percent and 92 percent of the tribes' aggregate contract support costs. The government reduced the tribes' payments on a pro rata basis, and the tribes sued for breach of contract under the Contract Disputes Act.

Responsible for Full Amount Due

The five-Justice majority opinion by Justice Sotomayor rejected the government's attempts to distinguish Cherokee Nation of Oklahoma, et al. v. Leavitt, et al. (49 CCF ¶78,348). In that 2005 opinion, the Court held once "Congress has appropriated sufficient legally unrestricted funds to pay the contracts at issue, the [g]overnment normally cannot back out of a promise to pay on grounds of 'insufficient appropriations,' even if the contract uses language such as 'subject to the availability of appropriations,' and even if an agency's total lump-sum appropriation is insufficient to pay all the contracts the agency has made." According to the Court, this conclusion follows from the well-established principle that if a government contractor is one of several persons to be paid out of a larger appropriation sufficient to pay the contractor, the government is responsible for the full amount due under the contract, even if the agency exhausts the appropriation for other permissible ends. The government argued Cherokee Nation involved "unrestricted, lump-sum appropriations," while here, Congress appropriated a "not to exceed" amount for contract support costs. However, as explained in the Government Accountability Office's "Redbook," "[w]ords like 'not to exceed' are not the only way to establish a maximum limitation," and they do not provide a basis for distinguishing appropriations from those limited by a specific dollar amount.

Dissent: Discretion to Allocate

Writing for the dissent, Justice Roberts argued the majority's conclusion could not be squared with the "unambiguous" restrictions on the payment of contract support costs. According to the dissent, Congress restricted the amount of funds "available" to pay the contract support costs by imposing a cap on the total funds available for contract support costs in each fiscal year, and through 25 USC 450j-1(b), which provides "the Secretary [of the Interior] is not required to reduce funding for programs, projects, or activities serving a tribe to make funds available to another tribe." "Once the Secretary had allocated all the funds appropriated for contract support costs, no other funds could be used for that purpose without violating the 'not to exceed' restrictions in the relevant appropriations statutes." That left one other possible source --funds appropriated for contract support costs, but allocated to pay such costs incurred by other tribes. Those funds were also not "available" because they were "funding for programs, projects, or activities serving a tribe," and the Secretary was not required to reduce such funding "to make funds available to another tribe." Cherokee Nation was distinguishable because it involved an unrestricted appropriation for both "inherent federal functions" and contract support costs, whereas the appropriations at issue here capped support costs specifically. Because there were sufficient unrestricted funds to pay the claims in Cherokee Nation, they were not restricted by §450j-1(b). (Salazar, et al. v. Ramah Navajo Chapter, et al., SCt, 56 CCF ¶79,826)

(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )

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