Ramah Navajo Chapter v. Lujan, 94-2253

Decision Date08 May 1997
Docket NumberNo. 94-2253,94-2253
Citation112 F.3d 1455
Parties97 CJ C.A.R. 689 RAMAH NAVAJO CHAPTER, Plaintiff-Appellant, v. Manuel LUJAN, individually and as Secretary of the Interior; Eddie Brown, individually and as Assistant Secretary of the Interior; Marvin Pierce, individually and as Chief of Office of Inspector General, U.S. Department of the Interior; United States of America, Defendants-Appellees, Mississippi Band of Choctaw Indians, Amicus Curiae.
CourtU.S. Court of Appeals — Tenth Circuit

Michael P. Gross, of Roth, VanAmberg, Gross, Rogers & Ortiz, of Santa Fe, New Mexico, for appellant.

Jeffrica Jenkins Lee (Barbara C. Biddle with her on the brief), of the Department of Justice, Washington, D.C., for appellees.

Hans Walker, Jr., and Marsha Kostura, of Hobbs, Straus, Dean & Walker, Washington, D.C., for amicus curiae.

Before ANDERSON, HENRY, and BRISCOE, Circuit Judges.

BRISCOE, Circuit Judge.

Plaintiff Ramah Navajo Chapter, a sanctioned tribal organization of the Navajo Nation, filed this action seeking money damages, as well as injunctive and declaratory relief, from defendants for alleged violations of funding provisions in the Indian Self-Determination and Education Assistance Act, 25 U.S.C. § 450 et seq. The district court granted summary judgment in favor of defendants and plaintiff appeals. We reverse and remand for further proceedings.

I. Indian Self-Determination and Education Assistance Act

The Indian Self-Determination and Education Assistance Act (the Act), Pub.L. No. 93-638, 88 Stat. 2203 (codified at 25 U.S.C. §§ 450-450n) (1988 & Supp. V 1993), was signed into law by President Ford on January 4, 1975. The Act authorizes tribes to contract with the Secretary of the Department of the Interior and the Secretary of the Department of Health and Human Services to administer previously authorized programs otherwise directly administered by those departments. More specifically, under the Act, the Secretaries continue to provide direct services to a tribe until such time as the tribe chooses to enter into a "self-determination contract" to operate those services. At that point, the Secretaries are required to transfer resources and control of those programs to the tribe. The Act was intended to assure maximum participation by tribes in the planning and administration of federal services, programs, and activities for Indian communities.

Payment of indirect costs under the Act

In November 1975, the Secretary of the Interior promulgated regulations concerning funding for direct and indirect costs under self-determination contracts. In particular, the Secretary promulgated 25 C.F.R. § 271.54, which provides in pertinent part that a tribe "shall be entitled to be funded for direct and indirect costs under [a self-determination] contract," as provided in 25 C.F.R. Part 276, Appendix A. 25 C.F.R. § 271.54(f). In turn, Part 276, Appendix A, incorporates the provisions of Office of Management and Budget Circular A-87, which sets forth general principles for determining the allowability of direct and indirect costs under government contracts. Appendix A, pt. F, defines "indirect costs" as "those (a) incurred for a common or joint purpose benefiting more than one cost objective, and (b) not readily assignable to the cost objectives specifically benefited, without effort disproportionate to the results achieved." Appendix A, pt. F(2), further provides with respect to reimbursement of indirect costs:

In lieu of determining the actual amount of grantee departmental indirect cost allocable to a grant program, the following methods may be used:

a. Predetermined fixed rates for indirect costs. A predetermined fixed rate for computing indirect costs applicable to a grant may be negotiated annually in situations where the cost experience and other pertinent facts available are deemed sufficient to enable the contracting parties to reach an informed judgment (1) as to the probable level of indirect costs in the grantee department during the period to be covered by the negotiated rate, and (2) that the amount allowable under the predetermined rate would not exceed actual indirect cost.

Although Appendix A does not set forth a specific method for determining a "predetermined fixed rate" for indirect costs, the Secretary of the Interior apparently implemented an internal policy or formula for doing so. 1 Under this formula, the Secretary adds all funds that will be received by a tribe in a given fiscal year, including those not received in connection with a self-determination contract, into the denominator. The numerator is the amount of indirect costs the tribe is expected to incur in a given fiscal year. The numerator is divided by the denominator, resulting in an indirect cost rate. To produce the amount of indirect cost funding that will be provided to a tribe in a given fiscal year, the Secretary then multiplies the amount of direct cost funding under the self-determination contract by the indirect cost rate. 2

1988 Amendments to Act

In 1988, Congress amended the Act to address various problems that had arisen since its implementation, including problems involving funding of indirect costs. See S.Rep. No. 274, 100th Cong., 1st Sess. 2, 8-13 (1987) (outlining purpose of amendments and stating "the single most serious problem with the implementation of the Indian self-determination policy has been the failure of the Bureau of Indian Affairs and the Indian Health Service to provide funding for the indirect costs associated with self-determination contracts"). In particular, Congress added the following subsections to 25 U.S.C. § 450b, the "Definitions" section of the Act 3:

(g) "indirect costs" means costs incurred for a common or joint purpose benefiting more than one contract objective, or which are not readily assignable to the contract objectives specifically benefited without effort disproportionate to the results achieved;

(h) "indirect costs rate" means the rate arrived at through negotiation between an Indian tribe or tribal organization and the cognizant Federal agency.

In addition to these new definitional provisions, Congress added 25 U.S.C. § 450j-1, entitled "Contract funding and indirect costs," which provides in pertinent part 4:

(a)(1) The amount of funds provided under the terms of self-determination contracts entered into pursuant to this Act shall not be less than the appropriate Secretary would have otherwise provided for the operation of the programs or portions thereof for the period covered by the contract.

(2) There shall be added to the amount required by paragraph (1) contract support costs which shall consist of the reasonable costs for activities which must be carried on by a tribal organization as a contractor to ensure compliance with the terms of the contract and prudent management, but which--

(A) normally are not carried on by the respective Secretary in his direct operation of the program; or

(B) are provided by the Secretary in support of the contracted program from resources other than those under contract.

* * *

(d)(1) Where a tribal organization's allowable indirect cost recoveries are below the level of indirect costs that the tribal organizations should have received for any given year pursuant to its approved indirect cost rate, and such shortfall is the result of lack of full indirect cost funding by any Federal, State, or other agency, such shortfall in recoveries shall not form the basis for any theoretical over-recovery or other adverse adjustment to any future years' indirect cost rate or amount for such tribal organization, nor shall any agency seek to collect such shortfall from the tribal organization.

(2) Nothing in this subsection shall be construed to authorize the Secretary to fund less than the full amount of need for indirect costs associated with a self-determination contract.

Congress also amended 25 U.S.C. § 450k, entitled "Rules and regulations." In particular, Congress amended § 450k(b) to read as follows:

(1) Within three months from the date of enactment of this Act, the Secretary shall consider and formulate appropriate regulations to implement the provisions of this Act, with the participation of Indian tribes. Provided, That such proposed regulations shall contain all Federal requirements applicable to self-determination contracts and grants under this Act.

(2) Within six months from the date of enactment of this Act, the Secretary shall present the proposed regulations to the Select Committee on Indian Affairs of the United States Senate and to the Committee on Interior and Insular Affairs of the United States House of Representatives.

(3) Within seven months from the date of enactment of this Act, the Secretary shall publish proposed regulations in the Federal Register for the purpose of receiving comments from tribes and other interested parties.

(4) Within ten months from the date of enactment of this Act, the Secretary shall promulgate regulations to implement the provisions of this Act.

The underlying facts of this case

In fiscal year 1989, plaintiff had five self-determination contracts with the Department of Interior's Bureau of Indian Affairs (BIA) covering real estate, natural resources, law enforcement, Aid to Tribal Government, and water rights programs. The direct cost funding for these five contracts totaled $755,770. Plaintiff also had two contracts with the State of New Mexico for criminal justice and juvenile offender restitution programs. The funding for these two programs, which came from the U.S. Department of Justice under the Criminal Justice Assistance Act, 42 U.S.C. § 3754(b), totaled $62,927.

Plaintiff submitted an indirect costs proposal to the Department of Interior's Office of the Inspector General (OIG), the office responsible for negotiating the indirect costs rate with plaintiff and other tribes and tribal organizations under the Act. The proposal contained a suggested indirect costs...

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