United States Court of Appeals
for the Federal Circuit
__________________________
ARCTIC SLOPE NATIVE ASSOCIATION, LTD.,
Appellant,
v.
KATHLEEN SEBELIUS, SECRETARY OF HEALTH
AND HUMAN SERVICES,
Appellee.
__________________________
2010-1013
__________________________
Appeal from the Civilian Board of Contract Appeals in
case nos. 294-ISDA, 295-ISDA, 296-ISDA, and 297-ISDA,
Administrative Judges Candida S. Steel and Jeri Kaylene
Somers.
___________________________
Decided: December 15, 2010
___________________________
LLOYD B. MILLER, Sonosky, Chambers, Sachse, En-
dreson & Perry, LLP, of Washington, DC, argued for
appellant. With him on the brief were DONALD J. SIMON,
ARTHUR LAZARUS, JR., and PENG YU. Of counsel on the
brief were CARTER G. PHILLIPS and JONATHAN F. COHN,
Sidley Austin LLP, of Washington, DC.
JACOB A. SCHUNK, Trial Attorney, Commercial Litiga-
tion Branch, Civil Division, United States Department of
ARCTIC SLOPE v. HHS 2
Justice, of Washington, DC, argued for appellee. On the
brief were TONY WEST, Assistant Attorney General,
JEANNE E. DAVIDSON, Director, DONALD E. KINNER, Assis-
tant Director, and SAMEER YERAWADEKAS, Attorney. Of
counsel on the brief was SEAN DOOLEY, Senior Attorney,
Office of the General Counsel, Public Health Division,
United States Department of Health and Human Ser-
vices, of Washington, DC.
__________________________
Before LOURIE, BRYSON, and DYK, Circuit Judges.
DYK, Circuit Judge.
Arctic Slope Native Association (“ASNA”) filed suit
against the Secretary of Health and Human Services
(“Secretary”) for breach of contract, alleging that the
government failed to pay ASNA’s so-called contract sup-
port costs shortfall for fiscal years 1999 and 2000. The
Secretary argued that the obligation to pay, under the
contract and the statute, was subject to the availability of
appropriations and that there were no available appro-
priations because Congress had provided that the appro-
priations available for the funding of contract support
costs were “not to exceed” specified amounts. The Civil-
ian Board of Contract Appeals (“the Board”) granted
summary judgment for the Secretary. Arctic Slope Native
Ass’n, Ltd. v. Dep’t of Health & Human Servs., CBCA 294-
ISDA, et al., 09-2 BCA ¶ 34,281 (C.B.C.A. Oct. 1, 2009).
We affirm.
BACKGROUND
I
This case is the latest in a long-running dispute be-
tween the various Indian tribes and the Secretary con-
cerning the Secretary’s obligation to pay contract support
3 ARCTIC SLOPE v. HHS
costs. This dispute has led to decisions by the Supreme
Court and this court. See, e.g., Cherokee Nation of Okla.
v. Leavitt, 543 U.S. 549 (2005) [hereinafter Cherokee II],
aff’g sub nom, Thompson v. Cherokee Nation of Okla., 334
F.3d 1075 (Fed. Cir. 2003) [hereinafter Cherokee I]; Bab-
bitt v. Oglala Sioux Tribal Pub. Safety Dep’t, 194 F.3d
1374 (Fed. Cir. 1999), cert. denied, 530 U.S. 1203 (2000).
Briefly, the Indian Self-Determination Act (“ISDA”),
Pub. L. No. 103-413, 108 Stat. 4250 (codified at 25 U.S.C.
§§450–450n), as amended in 1994, authorizes the Secre-
tary to enter into contracts with tribes, under which the
tribes supply health services that a government agency
would otherwise provide, id. § 450f(a)(1). This case con-
cerns indirect costs under the contracts for fiscal years
1999 and 2000. Indirect costs are “administrative or
other expense[s] related to the overhead incurred by the
tribal contractor in connection with the operation of the
Federal program . . . .” Id. § 450j-1(a)(3)(A)(ii). The Act
and the contract entered into pursuant to the Act require
that the Secretary pay the tribal contractors’ indirect
costs. Id. § 450j-1(a). These indirect costs include the
secretarial amount, id. § 450j-1(a)(1), and contract sup-
port costs, id. § 450j-1(a)(2). See also Cherokee II, 534
U.S. at 634–35. The secretarial amount is the amount the
Secretary would have expended had the government itself
run the program. The secretarial amount does not in-
clude the additional indirect costs that the tribes incur in
their operation of the programs, which the Secretary
would not have directly incurred (i.e., the cost of adminis-
trative resources that the Secretary could draw from
other government agencies). These additional indirect
costs, which are not included in the secretarial amount,
are referred to as contract support costs. See 25 U.S.C. §
450j-1(a)(2); Cherokee II, 534 U.S. at 635.
ARCTIC SLOPE v. HHS 4
Both under the ISDA and the contracts, the govern-
ment’s obligation to pay contract support costs is “subject
to the availability of appropriations.” 25 U.S.C. § 450j-
1(b); Joint App. 133 (incorporating § 450j-1(b) into the
contract). Additionally, “the Secretary is not required to
reduce funding for programs, projects, or activities serv-
ing a tribe to make funds available to another tribe or
tribal organization . . . .” 25 U.S.C. § 450j-1(b). Congress
has been reluctant to appropriate the amount necessary
to pay the full amount of contract support costs, and the
Secretary has accordingly declined to pay contract sup-
port costs not funded by appropriations. The Secretary
has urged that the “availability of appropriations” clause
justified the failure to pay.
A similar dispute arose previously for fiscal years
1994 through 1997. See Cherokee II, 543 U.S. at 634–35;
Cherokee I, 334 F.3d at 1079. The Secretary did not deny
the promise to pay, nor the failure to pay, but argued that
the legal obligation to pay arose “if, and only if, Congress
appropriated sufficient funds, and that, in this instance,
Congress failed to do so.” Cherokee II, 543 U.S. at 636.
The Secretary admitted that the relevant appropriations
acts did not include an explicit cap on appropriations, but
nonetheless argued that “specific recommendations of
funding amounts for contract support costs in the appro-
priations committee reports” were sufficient to impose a
cap. Cherokee I, 334 F.3d at 1083. Both the Supreme
Court and this court rejected the argument that commit-
tee report language is sufficient to impose a cap, holding
specifically that “restrictive language contained in Com-
mittee Reports is not legally binding.” Cherokee II, 543
U.S. at 646; see Cherokee I, 334 F.3d at 1085. “[I]n order
for a statutory cap to be binding on an agency, it must be
carried into the legislation itself; such a cap cannot be
5 ARCTIC SLOPE v. HHS
imposed by statements in committee reports or other
legislative history.” Cherokee I, 334 F.3d at 1085.
This court held, and the Supreme Court affirmed, that
where there are “no statutory caps on available appro-
priations, the Secretary [is] not excused from meeting his
contractual obligations by the availability clause of sec-
tion 450j-1(b).” 1 Cherokee I, 334 F.3d at 1093; see Chero-
kee II, 543 U.S. at 641. “[I]f the amount of an unrestricted
appropriation is sufficient to fund the contract, the con-
tractor is entitled to payment even if the agency has
allocated the funds to another purpose or assumes other
obligations that exhaust the funds.” Cherokee II, 543 U.S.
at 641. Absent explicit restriction, an agency is generally
permitted to reprogram funds within a lump-sum appro-
priation. U.S. Gov’t Accountability Office, Principles of
Federal Appropriations Law 2-25 (3d ed. 2006) [hereinaf-
ter GAO Redbook]. Thus, where there is no “statutory cap
or other explicit statutory restriction,” the Secretary is
required to reprogram funds if doing so is necessary to
fund the contract. Cherokee I, 334 F.3d at 1086.
The Secretary further argued that under § 450j-1(b)
there was no obligation to reprogram funds to pay the
claims at issue because “doing so would require a reduc-
tion of funds for programs serving other tribes.” Id. at
1083. This court and the Supreme Court found this
1 Section 450j-1(b) provides in relevant part that:
Notwithstanding any other provision in this subchap-
ter, the provision of funds under this subchapter is
subject to the availability of appropriations and the
Secretary is not required to reduce funding for pro-
grams, projects, or activities serving a tribe to make
funds available to another tribe or tribal organization
under this subchapter.
25 U.S.C. § 450j-1(b).
ARCTIC SLOPE v. HHS 6
argument unpersuasive because “the relevant congres-
sional appropriations contained other unrestricted funds .
. . sufficient to pay the claims at issue” that would not
require a reduction in funding for programs serving other
tribes. Cherokee II, 543 U.S. at 641 (emphasis added); see
Cherokee I, 334 F.3d at 1093.
II
After the dispute arose with respect to fiscal years
1994 through 1997, Congress acted to impose a statutory
cap on funding for contract support costs in fiscal years
1999 and 2000. The appropriations act for fiscal year
1999 provided that “notwithstanding any other provision
of law, of the amounts provided herein, not to exceed
$203,781,000 shall be for payments . . . for contract or
grant support costs.” 2 Omnibus Consolidated & Emer-
gency Supplemental Appropriations Act, 1999, Pub. L.
No. 105-277, 112 Stat. 2681, 2681-279 (1998) (emphasis
added) [hereinafter 1999 Appropriations Act]. Similarly,
the appropriations act for fiscal year 2000 provided that
“notwithstanding any other provision of law, of the
amounts provided herein, not to exceed $228,781,000 shall
be for payments . . . for contract or grant support costs.”
Consolidated Appropriations Act, 2000, Pub. L. No. 106-
113, 113 Stat. 1501, 1501A-182 (1999) (emphasis added)
[hereinafter 2000 Appropriations Act]. The Conference
Report viewed this language as imposing a statutory cap,
specifically approving our earlier decision in Oglala Sioux.
H.R. Conf. Rep. No. 106-479, 494–95 (1999). There, as
discussed below, we explicitly held that “not to exceed”
2 Congress also imposed a statutory cap phrased in
“not to exceed” language for fiscal year 1998, but claims
for contract support costs in fiscal year 1998 are not
involved in this litigation. See Department of the Interior
and Related Agencies Appropriations Act, Pub. L. No.
105-83, 111 Stat. 1543, 1583 (1997).
7 ARCTIC SLOPE v. HHS
language was sufficient to impose a statutory cap. Oglala
Sioux, 194 F.3d at 1376, 1379–80.
III
Beginning in fiscal year 1999, ASNA entered into a
self-governance contract with the Secretary, which re-
mained in effect during fiscal years 1999 and 2000. The
contract does not specify funding amounts for contract
support costs, but instead refers to separate Annual
Funding Agreements. For each fiscal year, the contract
requires the Secretary to pay the full amount of contract
support costs specified in the Annual Funding Agreement,
“[s]ubject only to the appropriation of funds by [Congress]
and to adjustments pursuant to [25 U.S.C. § 450j-1(b)].”
Joint App. at 133–34. ASNA does not claim that the
Secretary failed to pay the secretarial amount, or the
contract support costs specified in the Annual Funding
Agreements—approximately $1.29 million for fiscal year
1999 3 and approximately $3 million for fiscal year 2000. 4
3 The annual funding agreement for fiscal year
1999 initially identified zero funding for contract support
costs, but was later amended to add $297,059 in direct
and $902,263 in indirect, non-recurring contract support
costs. The agreement was amended again to add $72,662
in direct and $21,697 in indirect, non-recurring contract
support costs. Arctic Slope, 09-2 BCA ¶ 34,281, slip op. at
4a.
4 The annual funding agreement for fiscal year
2000 initially identified $5,254,412 in recurring base
funds (including recurring contract support costs) and
$902,263 in non-recurring contract support costs. The
agreement was amended several times to add additional
contract support costs, resulting in a total of $896,483 in
direct contract support costs and $2,162,108 in indirect
contract support costs. Arctic Slope, 09-2 BCA ¶ 34,281,
slip op. at 4a–5a.
ARCTIC SLOPE v. HHS 8
ASNA claims instead that the Secretary has failed to pay
ASNA’s contract support cost shortfall—the difference
between the amount of support costs specified in the
Annual Funding Agreement and ASNA’s actual expendi-
tures.
ASNA submitted claims for its contract support cost
shortfall—$2,028,723 for fiscal year 1999 and $621,530
for fiscal year 2000. The contracting officer did not issue
a decision on these claims. Thus, they were deemed
denied under 41 U.S.C. § 605(c)(5). On appeal, the Board
concluded that ASNA “is entitled to be paid its full [con-
tract support costs] requirement only as long as appro-
priations are legally available to do so,” and found that
“funds were no longer available with which to pay claims”
because of the statutory cap imposed by the “not to ex-
ceed” language. Arctic Slope, 09-2 BCA ¶ 34,281, slip op.
at 10a. Accordingly, the Board granted the Secretary’s
motion for summary judgment. ASNA timely appealed
and this court has jurisdiction pursuant to 41 U.S.C. §
607(g)(1)(A) and 28 U.S.C. § 1295(a)(10).
DISCUSSION
This court reviews the Board’s legal determinations
de novo. See Lear v. Siegler Servs., Inc., v. Rumsfeld, 457
F.3d 1262, 1265–66 (Fed. Cir. 2006). The question of
whether the ISDA and the contracts entered into pursu-
ant to that Act require payment of ASNA’s contract
support costs shortfall is a question of law. See id. at
1266.
I
Like the contract at issue in Cherokee, the contract
here contains an availability clause (i.e., the contract is
subject to the appropriation of funds by Congress). See
Cherokee I, 334 F.3d at 1082. In stark contrast to Chero-
9 ARCTIC SLOPE v. HHS
kee, however, where the Secretary unsuccessfully relied
on committee report language to impose a cap, here there
is a statutory cap on funding for contract support costs
phrased in traditional not to exceed language. As the
Government Accountability Office has noted, the phrase
“not to exceed” is a standard phrase used to express
Congress’s intent to designate a given amount as the
maximum available amount for a particular purpose. See
GAO Redbook 6-32. The opinions of the Government
Accountability Office, as expressed in the GAO Redbook,
note that “the most effective way to establish a maximum
(but not minimum) earmark is by the words ‘not to exceed’
or ‘not more than.’” Additionally, the Comptroller Gen-
eral has recognized that “not to exceed” language “is
susceptible of but one meaning”—it restricts agency
spending by establishing the maximum amount that an
agency may spend. 64 Comp. Gen. 263, 264 (1985). The
opinions of the Government Accountability Office and the
Comptroller General, while not binding, are “expert
opinion[s], which we should prudently consider.” Delta
Data Sys. Corp. v. Webster, 744 F.2d 197, 201 (D.C. Cir.
1984); see also Lincoln v. Vigil, 508 U.S. 182, 192 (1993)
(relying on GAO Redbook at 6-159).
Our court (explicitly) and the Supreme Court (implic-
itly) have recognized that “not to exceed” language im-
poses a binding statutory cap. In Oglala Sioux, the
appropriations act contained traditional “not to exceed”
language. 194 F.3d at 1376. This court explicitly held
that “not to exceed” language was sufficient to impose a
statutory cap. Id. at 1380. The tribe argued that, despite
the statutory cap, it was entitled to full funding of its
contract support costs. Id. at 1378. We rejected that
argument, holding that the availability clause in § 450j-
1(b) limits the Secretary’s ability to bind the government
ARCTIC SLOPE v. HHS 10
beyond the statutory cap; thus, the Secretary may not
reallocate funding beyond that limit. Id. at 1379–80.
Subsequently, in Cherokee I we also noted that “Con-
gress generally uses standard phrases to impose a statu-
tory cap,” the most common of which is the phrase “not to
exceed.” 334 F.3d at 1084. We characterized the “not to
exceed” language in Oglala Sioux as “a statutory cap on
appropriations that excused the agency from paying full
contract support costs,” id. at 1083, and concluded that in
Cherokee there was no statutory cap because “[t]he appro-
priations acts at issue . . . do not include ‘not to exceed
language,’” id. at 1089. Further, we stated that “if there
is a statutory restriction on available appropriations for a
program, either in the relevant appropriations act or in a
separate statute, the agency is not free to increase fund-
ing for that program beyond that limit.” Id. at 1084. The
Supreme Court decision in Cherokee did not disagree,
assuming that “not to exceed” statutory language was
sufficient to impose a statutory cap even though commit-
tee reports were not. See Cherokee II, 543 U.S. at 642.
The Court made clear that reallocation of funds may be
prohibited where Congress protects the funds using
“statutory earmarks.” Id. Thus, we conclude that the
“not to exceed” language in the appropriations acts for
fiscal years 1999 and 2000 imposes a statutory cap on
funding for contract support costs, such that the Secretary
is not permitted to make payments beyond the maximum
specified in the appropriations acts.
II
ASNA appears not to dispute the fact that the “not to
exceed” language imposes a statutory cap. However,
ASNA argues that “not to exceed” language, in essence,
limits recovery only in cases involving a line-item appro-
11 ARCTIC SLOPE v. HHS
priation for a single contract. 5 ASNA contends that the
“not to exceed” language imposes no limit on the Secre-
tary’s contractual liability in this case because the total
appropriation is sufficient to satisfy the obligation to the
ASNA, even though insufficient to satisfy the combined
obligations to all the tribes. Under ASNA’s theory, each
tribe could sue separately, and the aggregate recovery
would exceed the statutory cap. ASNA contends that the
decision of our predecessor court in Ferris v. United
States, 27 Ct. Cl. 542 (1892), supports its position. It does
not.
In Ferris, the court held that where the appropriation
covers multiple contracts, the contractor may sue for
breach if the appropriation is sufficient to cover the
contract at issue, even if not sufficient for all purposes.
Id. at 546. The court stated specifically that “[a] contrac-
tor who is one of several persons to be paid out of an
appropriation is not chargeable with knowledge of its
administration, nor can his legal rights be affected or
impaired by its maladministration or by its diversion,
whether legal or illegal, to other objects.” Id. (emphasis
added). Thus, the insufficiency of an appropriation does
not “cancel [the government’s] obligations, nor defeat the
rights of other parties” unless the contractor has notice of
a limitation on appropriations. Id.
There are important differences between this case and
Ferris. In Ferris, the contractor had no notice of the
limited nature of the appropriation, and the court de-
clined to charge “[a] contractor who is one of several
5 See Sutton v. United States, 256 U.S. 575, 581
(1921). In Sutton, the Supreme Court held that where the
appropriation is for a specific project, the contractor is
deemed to have notice of the limitation on appropriations
and has no right to recover for work done in excess of the
appropriation.
ARCTIC SLOPE v. HHS 12
persons to be paid out of an appropriation . . . with knowl-
edge of its administration.” 27 Ct. Cl. at 546. The GAO
Redbook notes that in situations like Ferris, where the
contractor is “one party out of several to be paid from a
general appropriation,” the contractor is not deemed to
have notice because “the contractor is under no obligation
to know the status or condition of the appropriation
account.” GAO Redbook at 6-44. As we have noted,
subsequent to Ferris, “subject to the availability of appro-
priations” language was adopted to change the Ferris rule
by providing the required notice to the contractor. For
example, our predecessor court noted in C. H. Leavell &
Co. v. United States, 530 F.2d 878, 892 (Ct. Cl. 1976)
(citing Ferris, 27 Ct. Cl. at 542), that before the incorpora-
tion of “subject to the availability of appropriations”
language into Army Corps of Engineers contracts, “a
failure on the part of Congress for any reason to fund an
existing Government contract was held to be a breach of
contract.” The court further noted that “subject to the
availability of appropriations” provisions were included in
contracts to overcome the Ferris rule by providing notice
to the contractor of the limitation on funding. Id. at 892.
The present contract includes such an availability of
funds provision; the contract explicitly states that CSC
funding is subject to the availability of appropriations.
Joint App. at 133.
ASNA, however, contends that both this court’s deci-
sion in Cherokee I and the Supreme Court’s decision in
Cherokee II hold that the Ferris rule applies even where
the contract and statute include subject-to-availability
language. 6 This is partly correct in that subject-to-
6 ASNA seeks to read Ferris more broadly based on
the Supreme Court’s description of the tribes’ argument in
Cherokee, but the tribes’ argument is not adopted by the
13 ARCTIC SLOPE v. HHS
availability language does not excuse the failure to pay in
the absence of a statutory cap and where the Secretary
has the ability to reallocate funds from non-contract uses.
Cherokee II, 543 U.S. 641; Cherokee I, 334 F.3d at 1093–
94. But here there is a statutory cap and no ability to
reallocate funds from non-contract uses. In Ferris the
appropriations act did not contain a statutory cap with
respect to the project in question and there was no finding
that funds could not be reallocated from discretionary
spending to satisfy contractual obligations. See Ferris, 27
Ct. Cl. at 546; An Act Making Appropriations for the
Construction, Repair, Preservation, and Completion of
Certain Works on Rivers and Harbors, and for Other
Purposes, ch. 181, 20 Stat. 363, 364, 370, 372 (1879). But
a statutory cap bars such reallocation. Adopting ASNA’s
approach would effectively defeat the statutory cap be-
cause the Secretary would be obligated to pay a total
amount of tribal obligations exceeding the cap. 7
Court. See Cherokee II, 543 U.S. at 549. There the Court
stated:
The Tribes and their amici add . . . that as long as
Congress has appropriated sufficient legally unre-
stricted funds to pay the contracts at issue, the Gov-
ernment normally cannot back out of a promise to
pay on the 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. See
Ferris v. United States, 27 Ct.Cl. 542, 546 (1892).
Cherokee II, 543 U.S. at 637.
7In re Newport News Shipbuilding & Dry Dock Co.,
55 Comp. Gen. 812 (1976), is not to the contrary. In
Newport News, the government argued that the total
ARCTIC SLOPE v. HHS 14
Moreover, such reallocation from one tribe to another
would be particularly inappropriate here in light of the
statutory language specifically providing that the Secre-
tary need not reallocate funds from one tribe to another, a
provision that did not appear in Ferris (where there was
no language dealing with reallocation among contracts).
See 25 U.S.C. § 450j-1(b). Here § 450j-1(b) provides that
“the Secretary is not required to reduce funding for pro-
grams, projects, or activities serving a tribe to make funds
available to another tribe or tribal organization.” 25
U.S.C. § 450j-1(b). In Cherokee, both the Supreme Court
and this court were careful to point out that such realloca-
tion from one tribe to another was not required because
there were other unrestricted funds available that would
not require the Secretary to utilize funds devoted to
another tribe. Cherokee II, 543 U.S. at 641; Cherokee I,
334 F.3d at 1093. This court, for example, declined to
decide “how much money was obligated to [funding an-
other tribe] and, therefore, unavailable” because the
relevant congressional appropriations contained other
funds not subject to the restriction of § 450j-1(b) which
were sufficient to pay full contract support costs to the
tribe. Cherokee I, 334 F.3d at 1093. Here there are no
such unrestricted funds.
In view of the statutory cap, we hold that the Ferris
approach is inapplicable. The availability of funds provi-
appropriation was not available for the contract at issue
because language in the committee report divided the
total appropriation among several contracts. Id. at 818–
19. As in Cherokee, this argument was rejected. The
Comptroller General stated that “subdivisions of an
appropriation contained in the agency’s budget request or
in committee reports are not legally binding . . . unless
they are specified in the appropriation act itself.” Id. at
819–20. Thus, the entire appropriation was available to
fund the contract at issue. Id. at 822.
15 ARCTIC SLOPE v. HHS
sion coupled with the “not to exceed” language limits the
Secretary’s obligation to the tribes to the appropriated
amount. The Secretary is obligated to pay no more than
the statute appropriates. See Oglala Sioux, 194 F.3d at
1378; Ramah Navajo School Bd., Inc. v. Babbitt, 87 F.3d
1338, 1345 (D.C. Cir. 1996). Here the appropriated
amount has been paid to the tribes. The method of allo-
cating funds among the various tribes is not at issue.8
III
Alternatively ASNA argues that the Secretary
breached the contract by not requesting sufficient appro-
priations. ASNA asserts that “[t]he law does not permit
an agency to enter into contracts limited to available
appropriations, secure the benefits of the contractor’s
services, but fail even to seek appropriations sufficient to
pay the contracts in full.” Appellant’s Br. 51. Even if this
issue had been properly raised below, which we doubt, it
is without merit.
The case on which ASNA relies, S.A. Healy Co. v.
United States, 576 F.2d 299, 300 (Ct. Cl. 1978), involved a
situation in which the “plaintiff was awarded a fixed price
[construction] contract,” which included an availability
8 Even though the Secretary is under no obligation
to reallocate funds from one tribe to benefit another, the
Secretary may have a duty to allocate funds among the
tribes in a rational, non-discriminatory way. See Winston
Bros. Co. v. United States, 130 F. Supp. 374, 380 (Ct. Cl.
1955) (holding that where the agency “allocates the funds
on a rational and non-discriminatory basis and they prove
insufficient, the Government is not liable for harm result-
ing from the shortage”); but see Lincoln v. Vigil, 508 U.S.
182, 193 (1993) (“As long as the agency allocates funds
from a lump-sum appropriation to meet permissible
statutory objectives . . . the decision to allocate funds is
committed to agency discretion by law.”). We need not
decide that issue in this case.
ARCTIC SLOPE v. HHS 16
clause. The plaintiff sought a monetary award for losses
incurred due to a shutdown of work allegedly “caused by
[the government’s] failure to request and secure sufficient
funds from Congress.” Id. However, in holding that the
contractor should not bear the risk of loss, the court relied
on the fact that “the contractor was not warned of the lack
of funding.” Id. at 306.
In this case, it is not clear that the Secretary failed to
request adequate funding. The Secretary requested a
given amount for contract support costs in both fiscal year
1999 and fiscal year 2000. See President’s Budget for
Fiscal Year 1999 (1998), Budget App. 403; President’s
Budget for Fiscal Year 2000 (1999), Budget App. 434. As
it turns out, additional funds were required in both years.
As required by statute, the Secretary “prepare[d] and
submit[ted] to Congress an annual report . . . includ[ing] .
. . an accounting of any deficiency in funds needed to
provide required contract support costs to all contractors
for the fiscal year for which the report is being submit-
ted.” 9 25 U.S.C. § 450j-1(c). Despite notice of the short-
fall, Congress chose to impose a statutory cap on funding
for contract support costs. See 1999 Appropriations Act,
112 Stat. 2681, 2681-279; 2000 Appropriations Act, 113
Stat. 1501, 1501A-182 (1999). In fact, the committee
report for the original version of the 2000 Appropriations
Act specifically acknowledged that because “contract
support costs . . . have outpaced available funding . . . [w]e
have reached a point at which we can no longer offset
9 See Office of Tribal Programs, Indian Health Service Contract Sup-
port Cost Data, at 5 (Aug. 27, 1999), available at
http://wwwncai.org/fileadmin/contract_support/IHS_Contract_Support_Data_
FY1999.pdf; Office of Tribal Programs, Indian Health Service Contract
Support Costs Shortfall Report, at 1, available at
http://wwwncai.org/fileadmin/contract_support/FY2000_CSC_Shortfall_Repo
rt.pdf.
17 ARCTIC SLOPE v. HHS
these costs . . . by continuing to downsize the Federal
bureaucracy in IHS.” H.R. Rep. No. 106-222, 112–13
(1999). 10 The committee report further stated that Con-
gress “cannot afford to appropriate 100% of contract
support costs at the expense of basic program funding for
tribes.” Id.
But whether or not the Secretary could take further
action to request additional funding, the contractor was
expressly warned of the risk that funding would be inade-
quate. The contract explicitly specified that funding may
be inadequate to fully fund the Secretary’s obligations.
See Joint App. at 150–51. Under such circumstances
there can be no breach resulting from an alleged failure to
request adequate funding.
Accordingly, we conclude that ASNA is not entitled to
payment of its shortfall for fiscal years 1999 and 2000. 11
10 Appropriations for Indian Health Services for fis-
cal year 2000 were initially proposed in H.R. 2466, 106th
Cong. (1st Sess. 1999). The original bill provided that
“notwithstanding any other provision of law, of the
amounts provided herein, not to exceed $238,781,000 shall
be for payments to tribes and tribal organizations for
contract or grant support costs for fiscal year 2000.” H.R.
2466 (emphasis added). The final bill, as enacted, re-
duced the amount appropriated for contract support costs
by approximately $10 million, but the provisions relating
to contract support costs remained virtually unchanged in
all other respects. See 2000 Appropriations Act, 113 Stat.
1501, 1501A-182.
11 Before the Board, ASNA argued that unexpended
funds for each of the two years in question were available,
and that these amounts were later returned to the Treas-
ury. The amounts were $179,539 for fiscal year 1999 and
$137,013.51 for fiscal year 2000. The Board held that
these amounts were not available because they were
returned to the Treasury. That holding appears to con-
flict with our holding in Cherokee I that the proper ques-
ARCTIC SLOPE v. HHS 18
AFFIRMED
tion is “whether funds were available for the Secretary to
meet his contract obligations, not whether those funds
remain available now.” 334 F.3d at 1092. However, while
mentioned in the Statement of the Case of ASNA’s open-
ing briefs, the availability of the lapsed funds was not
argued and thus not properly raised. See SmithKline
Beecham Corp. v. Apotex Corp., 439 F.3d 1312, 1319 (Fed.
Cir. 2006); Becton Dickinson & Co. v. C.R. Bard, Inc., 922
F.2d 792, 800 (Fed. Cir. 1990).