Ramah Navajo Chapter v. Salazar

FILED
United States Court of Appeals
Tenth Circuit
PUBLISH
May 9, 2011
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
Clerk of Court
TENTH CIRCUIT

RAMAH NAVAJO CHAPTER;
OGLALA SIOUX TRIBE; PUEBLO OF
ZUNI, for themselves and on behalf of a
class of persons similarly situated,

Plaintiffs–Appellants,

v.

KENNETH SALAZAR, Secretary of the
Interior; LARRY ECHO HAWK,
Assistant Secretary of the Interior; MARY
L. KENDALL, Acting Chief of Office of No. 08-2262
Inspector General, U.S. Department of the
Interior1; UNITED STATES OF
AMERICA,

Defendants–Appellees,

and

THE NATIONAL CONGRESS OF
AMERICAN INDIANS,

Amicus Curiae.

1
Pursuant to Fed. R. App. P. 43(c)(2) Kenneth Salazar is substituted for former
Secretary of the Interior, Dirk Kempthorne; Larry Echo Hawk is substituted for former
Assistant Secretary of the Interior, Eddie Brown; and Mary L. Kendall is substituted for
former Chief of Office of Inspector General, Marvin Pierce.
 Appeal from the United States District Court
for the District of New Mexico
(D.C. No. 1:90-CV-00957-LH-KBM)

Michael Paul Gross, Esq., M. P. Gross Law Firm, P.C., Santa Fe, New Mexico (C. Bryant
Rogers, VanAmberg, Rogers, Yepa, Abeita & Gomez, LLP, Santa Fe, New Mexico; and
Lloyd Benton Miller, Sonosky, Chambers, Sachse, Miller & Munson, Anchorage, Alaska
with him on the briefs) for Plaintiffs-Appellants.

John Samuel Koppel, Appellate Staff, Civil Division (Tony West, Assistant Attorney
General; Gregory J. Fouratt, U.S. Attorney; and Barbara C. Biddle, Appellate Staff, Civil
Division, with him on the briefs) U.S. Department of Justice, Washington, DC, for
Defendants-Appellees.

Geoffrey D. Strommer and Stephen D. Osborne, Hobbs, Straus, Dean & Walker, LLP,
Portland, Oregon, and John Dossett, General Counsel, National Congress of American
Indians, Washington, D.C., filed an Amicus Curiae brief for National Congress of
American Indians, in support of Plaintiffs-Appellants.

Before LUCERO, McKAY, and HARTZ, Circuit Judges.

LUCERO, Circuit Judge.

We are faced with an apparent contradiction. Pursuant to the Indian Self-

Determination and Education Assistance Act (“ISDA”), the United States enters into self-

determination contracts with Indian tribes and tribal organizations “for the planning,

conduct and administration of programs or services which are otherwise provided to

Indian tribes and their members pursuant to Federal law.” 25 U.S.C. § 450b(j). These

agreements include contract support costs (“CSCs”) which are the “reasonable costs for

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activities that must be carried on by a tribal organization as a contractor to ensure

compliance with the terms of the contract and prudent management,” but would not be

paid by the Secretary of the Interior if the federal government operated the contracted

program directly. § 450j-1(a)(2). Congress has mandated that all self-determination

contracts provide full funding of CSCs, see § 450j-1(g), but has nevertheless failed to

appropriate funds sufficient to pay all CSCs every year since 1994, instead capping

appropriations at a level well below the sum total of CSCs. See, e.g., Dep’t of the

Interior & Related Agencies Appropriations Act, 1995, Pub. L. No. 103-332, tit. I, 108

Stat. 2499, 2511 (1994).

These funding shortfalls have threatened tribal programs designed to fulfill the

congressionally mandated goal of the ISDA to “enhance the progress of Indian people

and their communities.” 25 U.S.C. § 450(a)(1). Contracts for programs absolutely

essential to self-government, such as law enforcement, economic development, and

natural resource management, have become “unworkable” in the words of a tribal

representative. As a result, several tribes and tribal organizations brought suit seeking to

collect the promised, but unappropriated, CSCs.

The government urges us to affirm the district court and resolve the

ISDA/appropriations contradiction by holding that the phrase “subject to the availability

of appropriations,” included in both the ISDA, see § 450j-1(b), and all self-determination

contracts, see § 450l(c), unambiguously eliminates the government’s obligation to pay

CSCs unless Congress appropriates funds to pay all CSCs on every self-determination
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contract. Plaintiffs counter that the phrase “subject to the availability of appropriations”

must be interpreted from the perspective of the individual contractor, not by reference to

all contractors who might lay claim to a given appropriation. In other words, only

Congressional funding decisions—not discretionary allocation decisions made by an

agency—can render an appropriation unavailable.

Following a recent Supreme Court case addressing a nearly identical issue, we

conclude that plaintiffs’ interpretation is reasonable. As the Court held in Cherokee

Nation of Oklahoma v. Leavitt, 543 U.S. 631 (2005), “if the amount of an unrestricted

appropriation is sufficient to fund the contract, the contractor is entitled to payment even

if the agency has allocated the funds to another purpose or assumes other obligations that

exhaust the funds.” Id. at 641 (quotation omitted). Following our canon of construction

requiring that an act be construed in favor of a reasonable interpretation advanced by a

tribe, see Ramah Navajo Chapter v. Lujan, 112 F.3d 1455, 1462 (10th Cir. 1997), and the

ISDA’s requirement that contracts be construed in favor of the contractor, 25 U.S.C.

§ 450l(c), we hold that the government remains liable because the annual CSC

appropriations were sufficient to cover any individual contract.

Exercising jurisdiction under 28 U.S.C. § 1291, we reverse the district court’s

grant of summary judgment in favor the government and remand for further proceedings.

I

This appeal comes after nearly two decades of litigation under the ISDA by

Ramah Navajo Chapter (“Ramah”). The statutory and administrative landscape provides
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an important backdrop for our legal analysis.

A

Prior to the ISDA, educational and governmental services were provided directly

by the federal government to the hundreds of federally recognized tribes in the United

States. Acknowledging that “Federal domination of Indian service programs has served

to retard rather than enhance the progress of Indian people,” 25 U.S.C. § 450(a)(1),

Congress enacted the ISDA to “permit an orderly transition from the Federal domination

of programs for, and services to, Indians to effective and meaningful participation by the

Indian people in the planning, conduct, and administration of those programs and

services,” § 450a(b). The ISDA reaffirms the “Federal Government’s unique and

continuing relationship with, and responsibility to, individual Indian tribes and to the

Indian people as a whole.” § 450a(a). It pursues a goal of Indian “self-determination by

assuring maximum Indian participation in the direction of educational as well as other

Federal services to Indian communities so as to render such services more responsive to

the needs and desires of those communities.” Id.

Pursuant to the ISDA, the Secretary of the Interior and the Secretary of Health and

Human Services are directed to enter into self-determination contracts upon the request of

a tribe, provided that the request satisfies several statutory criteria. See §§ 450b(i),

450f(a). The Secretary must provide the amount that the agency “would have otherwise

provided for the operation of the programs or portions thereof for the period covered by

the contract.” § 450j-1(a)(1). These contracts effectively transfer responsibility for
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various programs from federal agencies to the tribes themselves, while maintaining

federal funding of the programs.

Congress soon recognized that providing only the funds the Secretary would have

spent operating a given program created a “serious problem” because those funds do not

cover “federally mandated annual single-agency audits, liability insurance, financial

management systems, personnel systems, property management and procurement systems

and other administrative requirements.” S. Rep. No. 100-274, at 8 (1987), reprinted in

1988 U.S.C.C.A.N. 2620, 2627. As a result, tribal resources “which are needed for

community and economic development must instead be diverted to pay for the indirect

costs associated with programs that are a federal responsibility.” Id. at 9, reprinted in

1988 U.S.C.C.A.N. at 2628. Congress accordingly amended the ISDA to require full

funding of CSCs. See Indian Self Determination Act Amendments of 1987, Pub. L. No.

100-472, § 205, 102 Stat. 2285, 2292-94 (1988).

CSCs include “direct program expenses for the operation of the Federal program

that is the subject of the contract,” 25 U.S.C. § 450j-1(a)(3)(A)(i), and “any additional

administrative or other expense related to the overhead incurred by the tribal contractor in

connection with the operation of the Federal program, function, service, or activity

pursuant to the contract,” § 450j-1(a)(3)(A)(ii). The latter category appears to correspond

to “indirect costs” which are defined as the “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
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achieved.” § 450b(f). Indirect costs are generally calculated by multiplying the “contract

funding base” by the “indirect cost rate,” a negotiated figure. See § 450b(b), (g); S. Rep.

No. 100-274, at 9, reprinted in 1988 U.S.C.C.A.N. at 2628 (“Tribal indirect cost rates are

negotiated and approved according to OMB guidelines by the Department of the Interior

Office of Inspector General.”).

Under the revised ISDA, CSC funding “shall be added to the amount” the

Secretary would have spent on the program subject to a self-determination contract. 25

U.S.C. § 450j-1(a)(2) (emphasis added). Another section of the ISDA provides that

“[u]pon the approval of a self-determination contract, the Secretary shall add to the

contract the full amount of funds to which the contractor is entitled under [§ 450j-1(a)].”

§ 450j-1(g) (emphasis added). However, the ISDA twice states that entitlement to self-

determination contract funding is “subject to the availability of appropriations.”

§§ 450j(c)(1), 450j-1(b). It further provides that “the Secretary is not required to reduce

funding for programs, projects, or activities serving a tribe to make funds available to

another tribe or tribal organization under this [Act].” § 450j-1(b).

The phrase “subject to the availability of appropriations” has become highly

significant because of Congress’ ISDA funding decisions. In 1994, Congress began

capping CSC funding. The 1994 appropriations act for the Department of the Interior

allocated nearly $1.5 billion to the Bureau of Indian Affairs (“BIA”), but provided that

“not to exceed $91,223,000 of the funds in this Act shall be available for payments to

tribes and tribal organizations for indirect costs associated with contracts or grants or
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compacts authorized by the Indian Self-Determination Act.” Dep’t of the Interior &

Related Agencies Appropriations Act, 1994, Pub. L. No. 103-138, tit. I, 107 Stat. 1379,

1390-91 (1993). The Conference Report on the appropriations bill suggested Congress

was apprehensive about the growth of CSCs:

The managers remain very concerned about the continued growth in
contract support costs, and caution that it is unlikely that large increases for
this activity will be available in future years’ budgets. It is also a concern
that significant increases in contract support will make future increases in
tribal programs difficult to achieve.

H.R. Conf. Rep. No. 103-299, at 28 (1993). A Senate Report accompanying the

following year’s appropriations act noted “that significant shortfalls exist for fiscal year

1994 contract support funding,” but advised that the “shortfalls should be treated as one-

time occurrences and should not have any impact on determining future indirect cost

rates.” S. Rep. No. 103-294, at 57 (1994).

Despite this expectation, funding shortfalls for CSCs were repeated every fiscal

year from 1994 to 2001. Later appropriations acts, usually passed at the beginning of the

fiscal year, used the phrase “contract support costs” rather than “indirect costs,” but each

included the same “not to exceed” language. See tit. I, 108 Stat. at 2511; Omnibus

Consol. Rescissions & Appropriations Act of 1996, Pub. L. No. 104-134, 110 Stat. 1321,

1321-170 (1996); Omnibus Consol. Appropriations Act, 1997, Pub. L. No. 104-208, 110

Stat. 3009, 3009-192 (1996); Dep’t of the Interior & Related Agencies Appropriations

Act, 1998, Pub. L. No. 105-83, tit. I, 111 Stat. 1543, 1554 (1997); Omnibus Consol. &

Emergency Supplemental Appropriations Act, 1999, Pub. L. No. 105-277, 112 Stat.
-8-
2681, 2681-245 (1998); Consol. Appropriations Act, 2000, Pub. L. No. 106-113, 113

Stat. 1501, 1501A-148 (1999); Dep’t of the Interior & Related Agencies Appropriations

Act, 2001, Pub. L. No. 106-291, tit. I, 114 Stat. 922, 934 (2000).

B

Following the passage of each appropriations act, the BIA issued a notice in the

Federal Register discussing the CSC shortfalls. The 1994 notice warned of “a shortfall of

at least $ 10,000,000 in FY 1994 and possibly a shortfall as high as $ 25,000,000.”

Distribution of Fiscal Year 1994 Contract Support Funds, 58 Fed. Reg. 68,694, 68,694

(Dec. 28, 1993). It also reminded tribal contractors that the BIA “can only utilize the

amount appropriated for the [CSC] account to meet indirect cost needs.” Id. Because of

the projected shortfall, the BIA requested “a report showing the amounts provided to

cover prior year shortfalls, the amounts and percentages funded for current year contracts

and a revised detailed need request” from each area office. Id. The agency hoped to

provide instructions “advising each area of the level to be applied to each contract,”

around May 1, 1994. Id.

Notices published for subsequent years similarly requested interim reports on CSC

need at some point during the operative fiscal year. After receiving the reports, and well

into the fiscal year for which funding was provided, the BIA would calculate the amount

of the shortfall and provide CSC funding on a uniform, pro-rata basis. See Distribution

of Fiscal Year 1995 Contract Support Funds, 59 Fed. Reg. 55,318 (Nov. 4, 1994);
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Distribution of Fiscal Year 1996 Contract Support Funds, 61 Fed. Reg. 16,106 (Apr. 11,

1996); Distribution of Fiscal Year 1997 Contract Support Funds, 62 Fed. Reg. 1468 (Jan.

10, 1997); Distribution of Fiscal Year 1998 Contract Support Funds, 63 Fed. Reg. 5398

(Feb. 2, 1998); Distribution of Fiscal Year 1999 Contract Support Funds, 64 Fed. Reg.

2658 (Jan. 15, 1999); Distribution of Fiscal Year 2000 Contract Support Funds, 65 Fed.

Reg. 10,100 (Feb. 25, 2000); Distribution of Fiscal Year 2001 Contract Support Funds,

66 Fed. Reg. 15,275 (Mar. 16, 2001).

The Department of Interior appropriation for fiscal year 1995, for example, was

passed on September 30, 1994, the last day of fiscal year 1994. The BIA requested initial

reports of CSC need by December 1, 1994. Distribution of Fiscal Year 1995 Contract

Support Funds, 59 Fed. Reg. 55,318 (Nov. 4, 1994). After receiving these initial reports,

the BIA disbursed 75 percent of the total amount reported. Id. It requested a second set

of reports by July 10, 1995, and planned a final distribution of the remainder of CSC

funds well into the fiscal year—“on or about July 31, 1995 [ten months into the fiscal

year], on the basis of these reports.” Id. “If the reports indicate that [the appropriated

sum] will not be sufficient to cover the entire need, this amount will be distributed so that

all offices receive the same percentage of their reported need for distribution at this same

percentage.” Id. The BIA funded 91.74 percent of the actual CSCs on each self-

determination contract in fiscal year 1995. Between 1994 and 2004, the CSC funding

rate ranged from 77 to 93 percent for each fiscal year.

C
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 Plaintiffs Ramah and the Oglala Sioux Tribe (“Oglala”) are parties to long-term

“mature” self-determination contracts of indefinite duration with the United States

pursuant to the ISDA. See 25 U.S.C. § 450b(h). Like all self-determination contracts,

plaintiffs’ agreements expressly incorporate the ISDA. They further provide that the

ISDA and “each provision of this contract shall be liberally construed for the benefit of

the contractor.” A section titled “FUNDING AMOUNT” states:

Subject to the availability of appropriations, the Secretary shall make
available to the Contractor the total amount specified in the annual funding
agreement incorporated by reference in subsection (f)(2). Such amount
shall not be less than the applicable amount determined pursuant to section
106(a) of the Indian Self-Determination and Education Assistance Act (25
U.S.C. 450j-1).

The annual funding agreements (“AFAs”), incorporated by reference in the mature

contracts, describe attachments containing “terms that identify the programs, services,

functions, and activities to be performed or administered, the general budget category

assigned, the funds to be provided, and the time and method of payment.” As their name

implies, AFAs are renegotiated each year. Like the main self-determination contracts,

AFAs include language discussing the availability of appropriations.

Ramah’s 2000 AFA2 sets out “Tentative FY 2000 Funding” for various programs

and activities “using FY 99 funding levels.” The AFA also uses a tentative indirect cost

rate, adopting the last rate approved by the Office of Inspector General, which occurred

2
Oglala’s AFAs are substantially similar.

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in calendar year 1998.3 The AFA explains:

Indirect Cost rate[s] for Calendar Year 1999 and 2000 have not been
completed yet with the Office of Inspector General. As of the date of
submittal of this AFA, neither has the Chapter completed its Calendar Year
2000 Indirect Cost proposal. The last approved IDC rate was for CY 1998
at 86.4%. Based on this last approved rate, Ramah Navajo Chapter
requests that the CY 1998 IDC negotiated final rate be used to temporarily
fund IDC at 100% level. NOTE*: (Funding of the amount shall be subject
to the availability of appropriation. . . .). As soon as funding has been
appropriated and sub-allotted to the Ramah Navajo Agency, funds will be
added to the AFA.

(i) Direct Contract Support Costs are to be negotiated within the
first ninety, (90) days of the new contract term and shall be funded from the
BIA’s Indian Self-Determination Fund as soon as resources can be made
available, but not later than September 30, 2000. The Contractor reserves
the right to annually renegotiate its need for Direct Contract Support Costs
in accordance with Sec. 106(a)(3)(B) of the Act [25 U.S.C. § 450j-
1(a)(3)(B)]. Funding of the amount needed shall be subject to the
availability of appropriations.

(ii) Outstanding Indirect Cost issues from past fiscal years which
Ramah Navajo Chapter has not received will be subject to continuing
discussion until resolved.

....

. . . Funding for additional contract support costs shall be added to the AFA
for the Contractor which includes Indian Self-Determination Fund direct
and indirect type costs. The amount of Indirect Cost Funding shall be
based upon the Contractor’s Indirect Cost Agreement which is applicable to
this period of performance.

3
The indirect cost rate is distinct from the CSC funding rate. One, the indirect
cost rate, is multiplied by the non-CSC contract amount to reach an estimate of indirect
cost CSCs. See Cherokee, 543 U.S. at 635. The other, the CSC funding rate, is the
percentage of total CSC need for which Congress actually appropriated funds.

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 As these provisions make clear, Ramah faced two levels of uncertainty at the time

it entered into the AFA. First, the indirect cost rate was subject to negotiation and

approval by the Office of Inspector General, meaning that the amount of the contract was

undetermined. Second, even after the amount of the AFA was finalized, the actual

payment forthcoming from the BIA was unknown because the agency did not determine

the CSC funding rate until the fiscal year was well underway. Ramah did not receive

notice of the exact amount of contract funding until the last month of each fiscal year. As

an accounting consultant to Ramah and Oglala describes it, this system “allowed one

party to the contract, the government, to set the price after the service has been performed

by the other party.”

D

Ramah originally brought this class action in 1991 seeking to alter the manner in

which the BIA calculated indirect cost rates. After this court held in favor of plaintiffs,

see Ramah Navajo Chapter, 112 F.3d at 1455, the parties entered into several partial

settlement agreements, see Ramah Navajo Chapter v. Norton, 250 F. Supp. 2d 1303

(D.N.M. 2002); Ramah Navajo Chapter v. Babbitt, 50 F. Supp. 2d 1091 (D.N.M. 1999).

During these settlement negotiations, Oglala intervened as plaintiffs. The Pueblo of Zuni

also intervened later in the proceedings.

This appeal arises from a motion for summary judgment filed by plaintiffs in

February 2000, seeking a declaration that they are entitled to unpaid CSCs from fiscal

year 1994 forward. Plaintiffs sought relief pursuant to the Contract Disputes Act, 41
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U.S.C. §§ 601-13, after exhausting their administrative remedies. See 25 U.S.C.

§ 450m-1(d). The government cross-moved for summary judgment, contending that its

CSC obligation was dependent upon Congress appropriating funds sufficient to pay CSCs

on every self-determination contract. These competing cross-motions were stayed

pending the outcome of Cherokee Nation of Oklahoma v. Thompson, 311 F.3d 1054

(10th Cir. 2002), rev’d sub nom. Cherokee Nation of Oklahoma v. Leavitt, 543 U.S. 631

(2005).

After receiving supplementary briefing on the impact of Cherokee, the district

court granted the government’s motion. It held that “the United States is not liable for

shortfalls in contract payments when Congress has specified an insufficient ‘not to

exceed’ lump sum appropriation.” Plaintiffs timely appealed.

II

We review the grant of summary judgment de novo. Atl. Richfield Co. v. Farm

Credit Bank of Wichita, 226 F.3d 1138, 1148 (10th Cir. 2000). A party is entitled to

summary judgment only if, viewing the evidence in the light most favorable to the non-

moving party, the movant is entitled to judgment as a matter of law. Id.

A

In construing the statute at issue, we begin with its plain text. See Chickasaw

Nation v. United States, 208 F.3d 871, 876 (10th Cir. 2000). “If the terms of the statute

are clear and unambiguous, they are controlling absent rare and exceptional

circumstances.” Id. “We also take into account the broader context of the statute as a
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whole when ascertaining the meaning of a particular provision.” Conrad v. Phone

Directories Co., 585 F.3d 1376, 1381 (10th Cir. 2009) (quotation omitted).

If a statute is ambiguous, we “look to traditional canons of statutory construction

to inform our interpretation.” Id. (citation omitted). One such canon is particularly

important in this case: In deciding between two reasonable interpretations, “the canon of

construction favoring Native Americans controls over the more general rule of deference

to agency interpretations of ambiguous statutes. . . . The result, then, is that if the [Act]

can reasonably be construed as the Tribe would have it construed, it must be construed

that way.” Ramah Navajo Chapter, 112 F.3d at 1462 (quotation and citations omitted).

This canon, grounded in the trust relationship between the federal government and Indian

tribes, applies with equal force to interpretations of contracts. See Felix S. Cohen,

Handbook of Federal Indian Law 224-25 (1982 ed.) (“Statutes, agreements, and

executive orders dealing with Indian affairs have been construed liberally in favor of

establishing Indian rights. . . . These canons play an essential role in implementing the

trust relationship between the United States and Indian tribes . . . .”). The ISDA, its

legislative history, and the self-determination contracts at issue confirm the applicability

of this canon to the present dispute. See 25 U.S.C. § 450l(c) (terms of model agreement

included in all self-determination contracts provide that “each provision of the [ISDA]

and each provision of this Contract shall be liberally construed for the benefit of the

Contractor” (model agreement § (a)(2))); S. Rep. No. 100-274, at 3 reprinted in 1988

U.S.C.C.A.N. at 2622 (“[F]ederal action toward Indians as expressed in treaties,
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agreements statutes, executive orders, and administrative regulations is construed in light

of the trust responsibility.”).

B

We are presented with competing interpretations of the phrase “subject to the

availability of appropriations.” The government argues that the phrase unambiguously

limits the plaintiffs’ entitlement to CSC funding to a pro rata share determined by

multiplying individual CSC need by the ratio of total CSC appropriations to total CSC

need. Plaintiffs contend that “availability” refers to the ability of the government to pay a

particular tribe’s CSCs, not its ability to pay all tribes’ CSCs. Under this construction,

the phrase voids the government’s obligation on a given contract only if Congress fails to

appropriate enough funds to pay that particular contract. In essence, the dispute asks

whether we must take into account the Secretary’s discretionary funding of other

contractors in determining whether the appropriation is “available” for a particular

contract.

The terms of the ISDA and the contracts do not definitively answer this question.

The phrase “subject to the availability of appropriations” could refer, as the government

urges, to whether Congress has appropriated sufficient funds to pay the aggregate of

hundreds of self-determination contracts. This formulation would require a court to await

an agency’s allocation of an appropriation before determining whether funds are

available. However, the phrase could also refer, as the tribes contend, to a limitation on

an individual contract without reference to other self-determination contracts.
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Fortunately, although the statutory and contractual language does not dictate one party’s

position over the other, we do not write on a blank slate.

III

We begin with three principles set down by the Supreme Court. First, a

“fundamental principle of appropriations law is that where Congress merely appropriates

lump-sum amounts without statutorily restricting what can be done with those funds, a

clear inference arises that it does not intend to impose legally binding restrictions.”

Lincoln v. Vigil, 508 U.S. 182, 192 (1993) (quotation omitted). Second, there is no

merit to the “claim that, because of mutual self-awareness among tribal contractors,

tribes, not the Government, should bear the risk that an unrestricted lump-sum

appropriation would prove insufficient to pay all contractors.” Cherokee, 543 U.S. at 640

(citation omitted). Third, “if the amount of an unrestricted appropriation is sufficient to

fund the contract, the contractor is entitled to payment even if the agency has allocated

the funds to another purpose or assumes other obligations that exhaust the funds.” Id. at

641 (quotation omitted).

A

The first principle relevant to this dispute is that of unfettered agency discretion in

distributing appropriations. “A lump-sum appropriation leaves it to the recipient agency

(as a matter of law, at least) to distribute the funds among some or all of the permissible

objects as it sees fit.” Lincoln, 508 U.S. at 192 (quoting Int’l Union, United Auto.,

Aerospace & Agric. Implement Workers of Am. v. Donovan, 746 F.2d 855, 861 (D.C.
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Cir. 1984)). Although an agency may create ill will by ignoring congressional intent as

expressed in legislative history, “[a]s 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.” Lincoln, 508 U.S. at 193 (quotation omitted).

The Court’s discussion of “permissible statutory objectives,” id., implicates the

concept of legal availability. In In re LTV Aerospace Corp., 55 Comp. Gen. 307 (1975),

the Comptroller General explained the rule later adopted explicitly by the Lincoln Court,

see 508 U.S. at 192, 193, by reference to this concept:

If the Congress desires to restrict the availability of a particular
appropriation . . . , such control may be effected by limiting such items in
the appropriation act itself. . . . In the absence of such limitations an
agency’s lump sum appropriation is legally available to carry out the
functions of the agency.

In re LTV Aerospace Corp., 55 Comp. Gen. at 319.4

The General Accounting Office describes “legal availability” as follows:

[D]ecisions are often stated in terms of whether appropriated funds are or
are not “legally available” for a given obligation or expenditure. This is
simply another way of saying that a given item is or is not a legal
expenditure. Whether appropriated funds are legally available for
something depends on three things:

1. the purpose of the obligation or expenditure must be authorized;

2. the obligation must occur within the time limits applicable to the

4
Comptroller General opinions are not binding, but provide “expert opinions,
which we should prudently consider.” Cherokee Nation, 334 F.3d at 1084 (quotation
omitted).

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 appropriation; and

3. the obligation and expenditure must be within the amounts Congress has
established.

1 U.S. Gen. Accounting Office, Principles of Federal Appropriations Law 4-6 (3d ed.

2004) (the “GAO Redbook”).5

The import of Lincoln to the case at bar is that the Secretary was free to disburse

the funds appropriated by Congress in any manner the Secretary chose, provided that the

funds were legally available for the expenditures chosen. Thus, for example, the

Secretary could have provided CSC funding on a first-come, first-served basis, covering

the entire CSC need for those tribes and tribal organizations with the oldest contracts.

Similarly, the Secretary could have selected those contracts that covered the most

essential services and paid full CSC need to those contractors. And of course, the

Secretary’s chosen course of action, disbursing a pro-rata share to all contractors, was

permissible because the funds were legally available to be used on CSCs.

We recognize that a divided panel of the D.C. Circuit ruled that the ISDA requires

pro-rata funding in the event of limited appropriations. See Ramah Navajo School Board

v. Babbitt, 87 F.3d 1338, 1349 (D.C. Cir. 1996). Although the panel majority is

5
Like Comptroller General opinions, the GAO Redbook is not binding but offers
persuasive agency analysis. See Star-Glo Assocs., LP v. United States, 414 F.3d 1349,
1354 (Fed. Cir. 2005) (“In considering the effect of appropriations language both the
Supreme Court and this court have recognized that the General Accounting Office’s
publication, Principles of Federal Appropriations Law (hereinafter the ‘GAO Redbook’)
provides significant guidance.” (citations omitted)).

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somewhat opaque, it appears to hold that pro rata distribution is required because full

funding of individual CSCs is mandated when Congress appropriates enough funds to

cover all contracts. See id. at 1348 (“[T]he Act informs the Secretary exactly how the

full funding should be allocated, and that method provides a meaningful standard by

which to review the Secretary’s dissemination of the insufficient funds as well.”). We are

not persuaded by this reasoning.

The ISDA text simply states that “[t]he Secretary shall add to the contract the full

amount of” CSCs, and that “the Secretary is not required to reduce funding for programs,

projects, or activities serving a tribe to make funds available to another tribe or tribal

organization.” 25 U.S.C. § 450j-1(b), (g). To hold that these provisions unambiguously

require pro rata funding if Congress fails to provide enough money to pay all CSCs

stretches the statutory text far beyond its breaking point. Although a pro rata distribution

is attractive as a Solomonic solution to the problem of a statutory mandate and budgetary

limitations, viewing it as a requirement runs afoul of Lincoln. See 508 U.S. at 193.

The dissent in Ramah Navajo School Board provides a far more compelling

treatment of the issue. It cites Lincoln for the proposition that “requiring close adherence

to a ‘formula’ is flatly improper where the Secretary has express statutory discretion over

the allocation of a fund.” Ramah Navajo Sch. Bd., 87 F.3d at 1355 (Silberman, J.,

dissenting). Because the ISDA provides no statutory guidance in the event that

appropriations fall below total CSC need, Lincoln stands for the proposition that the

Secretary has “unreviewable discretion” in allocating the funds. Ramah Navajo Sch. Bd.,
-20-
87 F.3d at 1355 (Silberman, J., dissenting). With respect to 25 U.S.C. § 450j-1(b), which

states that the Secretary is not required to reduce funding to one tribe to pay another, the

dissent points out that the Secretary necessarily takes from one tribe to pay another

whenever funding falls short of total need regardless of the selected allocation method.

“Obviously, anytime the Secretary is asked to increase his proposed funding for one or

more tribes out of a limited appropriation, he necessarily must reduce funding for the rest.

There is no escaping the zero sum game.” Ramah Navajo Sch. Bd., 87 F.3d at 1354

(Silberman, J., dissenting).

We agree with the Ramah Navajo School Board dissent: “the Secretary is under

no legal obligation in the event of a shortfall to meet any particular ratio of distribution

among the tribes.” Id. at 1353(Silberman, J., dissenting).

B

The second concept key to our disposition can be simply stated, but is too easily

ignored: The tribes and tribal contractors with ISDA contracts are independent entities

with independent rights and entitlements. There are over 600 tribes and tribal entities

with self-determination contracts, ranging from small Alaskan villages to the immense

Navajo Nation, and including tribal consortiums such as the Great Lakes Indian Fish and

Wildlife Commission. They are not a single conglomerated entity simply because each

lays claim to a portion of the same appropriation any more than all federal highway

contractors represent a single, undifferentiated mass.

In Cherokee, the Supreme Court roundly rejected the government’s “claim that,
-21-
because of mutual self-awareness among tribal contractors, tribes, not the Government,

should bear the risk that an unrestricted lump-sum appropriation would prove insufficient

to pay all contractors.” Cherokee, 543 U.S. at 640 (citation omitted). In rejecting this

argument, the Court cited Ferris v. United States, 27 Ct. Cl. 542 (1892), a venerable

Court of Claims opinion which sets forth the traditional rule regarding the effect of

insufficient appropriations:

A contractor 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. An appropriation
per se merely imposes limitations upon the Government’s own agents; it is
a definite amount of money intrusted to them for distribution; but its
insufficiency does not pay the Government’s debts, nor cancel its
obligations, nor defeat the rights of other parties.

Id. at 546 (citing Dougherty v. United States, 18 Ct. Cl. 496 (1883)). Dougherty,

the case upon which Ferris relies, explained the salient distinction between multi-

contract appropriations and single-contract appropriations:

[W]hen one contract on its face assumes to provide for the execution of all
the work authorized by an appropriation, the contractor is bound to know
the amount of the appropriation, and cannot recover beyond it; but we have
never held that persons contracting with the Government for partial service
under general appropriations are bound to know the condition of the
appropriation account at the Treasury or on the contract book of the
Department. To do so might block the wheels of the Government. The
statutory restraints in this respect apply to the official, but they do not affect
the rights in this court of the citizen honestly contracting with the
Government.

Dougherty, 18 Ct. Cl. at 503 (citation omitted).

The distinction identified in Dougherty remains valid; we now generally refer to
-22-
appropriations as falling into one of two categories: line-item or lump-sum. “A lump-

sum appropriation is one that is made to cover a number of specific programs, projects, or

items. (The number may be as small as two.) In contrast, a line-item appropriation is

available only for the specific object described.” 2 GAO Redbook at 6-5; see also id. at

6-6 (“[A] lump-sum appropriation is simply one that is available for more than one

specific object.”).

It may be tempting to consider all tribes’ claims to an appropriation collectively, to

view tribal self-determination contract funds as a single line-item appropriation, and to

assume that because funds were insufficient to pay all tribal contractors they were

unavailable to each contractor, but Cherokee, Ferris, and Dougherty prohibit such

analytical shortcuts.

C

Finally, we must consider Cherokee’s guidance that “if the amount of an

unrestricted appropriation is sufficient to fund the contract, the contractor is entitled to

payment even if the agency has allocated the funds to another purpose or assumes other

obligations that exhaust the funds.” 543 U.S. at 641 (quotation omitted).

In Cherokee, the Court considered an issue nearly identical to that under review:

the Cherokee plaintiffs sought to collect CSC payments for contracts funded by

appropriations that lacked an annual cap. The government took the position that “it is

legally bound by its promises if, and only if, Congress appropriated sufficient funds, and

that, in this instance, Congress failed to do so.” 543 U.S. at 636. Plaintiffs countered that
-23-
“as long as Congress has appropriated sufficient legally unrestricted funds to pay the

contracts at issue, the Government normally cannot back out of a promise to pay on

grounds of ‘insufficient appropriations.’” Id. at 637. This is true, they argued, “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.” Id.

The Court agreed with plaintiffs, quoting the Ferris rule. Cherokee, 543 U.S. at

637-38 (quoting Ferris, 27 Ct. Cl. at 546). It noted that the ISDA “reflects a

congressional concern with Government’s past failure adequately to reimburse tribes’

indirect administrative costs and a congressional decision to require payment of those

costs in the future.” Cherokee, 543 U.S. at 639. Turning to the “subject to the

availability of appropriations” language, the Court stated:

Language of this kind is often used with respect to Government contracts.
This kind of language normally makes clear that an agency and a
contracting party can negotiate a contract prior to the beginning of a fiscal
year but that the contract will not become binding unless and until Congress
appropriates funds for that year. It also makes clear that a Government
contracting officer lacks any special statutory authority needed to bind the
Government without regard to the availability of appropriations.

Id. at 643 (citations omitted).

Relying on Ferris, the Court held that the “subject to the availability of

appropriations” language did not help the government “[s]ince congress appropriated

adequate unrestricted funds here.” Cherokee, 543 U.S. at 643. It rejected the

government’s argument that appropriations were “unavailable to pay contract support
-24-
costs because the Government had to use those funds to satisfy . . . the costs of inherent

federal functions, such as the cost of running the Indian Health Service’s central

Washington office.” Id. at 641-42 (quotation omitted). “This argument cannot help the

Government,” the Court determined, “for it amounts to no more than a claim that the

agency has allocated the funds to another purpose, albeit potentially a very important

purpose.” Id. at 642.

Cherokee accordingly held that an agency’s decision to allocate legally available

funds to some other permissible purpose does not render an appropriation unavailable

with respect to an ISDA contract.

IV

In light of the foregoing principles, there are two potential interpretations of the

effect of the “subject to the availability of appropriations” proviso. The first option

would be to hold that funds are unavailable to an individual ISDA contractor because the

Secretary spent to the CSC cap. In other words, the availability of appropriations would

be determined after the Secretary, under his discretion, allocated CSC appropriations, and

thus availability would turn on the Secretary’s decisions. Under this interpretation, as

long as the Secretary spends to the CSC cap, the Secretary may determine whether and to

what extent the appropriation is available for each individual contractor.

Our second option would be to hold that the availability of appropriations to fund

a specific contract must be determined without reference to the Secretary’s discretionary

allocation. If an appropriation is legally available to fund a particular contract, then the
-25-
“subject to the availability of appropriations” condition is satisfied with respect to that

contract. On this reading, each tribe is bound only by congressional funding choices as to

its contract, not by the Secretary’s allocation choices.

We conclude that the latter interpretation is reasonable and most consistent with

Cherokee.

A

The appropriations at issue in Cherokee and those under consideration in this case

share important characteristics. First, they are lump-sum appropriations because they

were “made to cover a number of specific programs, projects, or items.” 2 GAO

Redbook at 6-5. As the GAO Redbook discusses, the Comptroller General has applied

this interpretation of “lump-sum” even when an appropriation covers only two, closely-

related items.6 The key legal principle applicable to lump-sum appropriations is that “as

6
In Newport News Shipbuilding & Dry Dock Co., 55 Comp. Gen. 812 (1976), the
Comptroller General concluded that an appropriation covering expenditures for only two
ships constituted a lump-sum expenditure. Id. at 821-22. According to the GAO,

[t]he terms “lump-sum” and “line-item” are relative concepts. The $244
million appropriation in the Newport News case could be viewed as a line-
item appropriation in relation to the broader “Shipbuilding and Conversion”
category, but it was also a lump-sum appropriation in relation to the two
specific vessels included. This factual distinction does not affect the
applicable legal principle.

Continued . . .
-26-
long as the agency allocates funds from a lump-sum appropriation to meet permissible

statutory objectives,” federal law “gives the courts no leave to intrude. To that extent, the

decision to allocate funds is committed to agency discretion by law.” Lincoln, 508 U.S.

at 193 (quotations and alteration omitted). In Cherokee, the lump-sum appropriation

included the entire budget for the Department of the Interior; in this case, it includes the

CSCs for more than 600 contracts.

Second, although the appropriations under consideration in this case explicitly cap

a category of spending (CSCs), the appropriations at issue in Cherokee did the same.

Unlike the “not to exceed” language regarding CSCs, e.g., tit. I, 108 Stat. at 2511, the

appropriations considered in Cherokee provided that a certain amount was appropriated

“[f]or expenses necessary to carry out” various programs, e.g., tit. II, 107 Stat. at 1408.

But in both instances, the legal effect of the language is to cap appropriations for the

authorized expenditures at a certain level. “Words like ‘not more than’ or ‘not to exceed’

are not the only ways to establish a maximum limitation. If the appropriation includes a

specific amount for a particular object (such as ‘for renovation of office space,

$100,000’), then the appropriation establishes a maximum that may not be exceeded.” 2

GAO Redbook 6-29 (citing 36 Comp. Gen. 526 (1957); 19 Comp. Gen. 892 (1940); 16

Comp. Gen. 282 (1936)).

Third, with respect to the availability of the appropriations, the government argues

2 GAO Redbook at 6-15 (emphasis added).

-27-
as it did in Cherokee that the appropriation is not available because the funds were

exhausted by other objects for which the appropriation was legally available. In

Cherokee the government claimed that it could not pay full CSC need to the Shoshone-

Paiute and Cherokee Nation because “the costs of inherent federal functions, such as the

cost of running the Indian Health Service’s central Washington office,” 543 U.S. at 641-

42 (quotation omitted), had consumed the appropriation. In the present case, the

government contends it cannot pay full CSC need to Ramah, Oglala, and Pueblo of Zuni

because CSC payments to other tribes have used up the entire appropriation.

But the Supreme Court rejected this argument in Cherokee, deeming the

government’s position “no more than a claim that the agency has allocated the funds to

another purpose, albeit potentially a very important purpose.” Id. at 642. As the Court

made clear, “if the amount of an unrestricted appropriation is sufficient to fund the

contract, the contractor is entitled to payment even if the agency has allocated the funds

to another purpose or assumes other obligations that exhaust the funds.” Id. at 641

(quotation omitted).

The government does not advance a compelling argument suggesting the result in

this case must be different. It notes that Congress capped total CSC spending, but this

does not explain why Ramah, Oglala, Pueblo of Zuni, or any one contractor could not be

paid full CSC need. In Cherokee, the Court rejected the argument that the Secretary’s

discretionary allocation of funding for objects for which an appropriation was legally

available rendered the appropriation unavailable for other objects. See 543 U.S. at 641.
-28-
Yet that is precisely the argument advanced by the government. In both instances, the

government claims that an appropriation is unavailable for a particular plaintiff’s contract

because the Secretary used the funds on other permissible expenditures.7 The other

expenditures at issue in Ramah were less similar to the plaintiffs’ contracts than the other

expenditures in this case. But nothing in Cherokee suggests that the similarity between

two objects for which an appropriation is legally available controls the issue under

consideration, nor do we see a basis in logic for treating such similarity as dispositive.8

The government focuses on the Cherokee Court’s use of the term “unrestricted

appropriation,” but we read this phrase as referring to restrictions that would render funds

legally unavailable to pay the plaintiff’s specific contracts. In this case, as in Cherokee,

7
Although, in contrast to Cherokee, the other permissible expenditures in this case
are also statutorily mandated, see 25 U.S.C. § 450j-1(a)(2), the government cannot escape
liability for one mandatory expenditure by appealing to its obligation to pay another
without rendering the term “mandatory” meaningless.
8
Although the dissent takes issue with our interpretation of Cherokee, it does not
provide a meaningful distinction between the present situation and that considered by the
Supreme Court in that case. (See Dissenting Op. 32-36.) It notes that the appropriations
here are insufficient to cover all ISDA contracts, but the funds in Cherokee were
similarly insufficient to cover all objects for which the appropriation was available.
The dissent suggests that our interpretation must be incorrect because the
Cherokee Court might have avoided some of the government’s arguments more easily
otherwise. (Dissenting Op. 33.) But the Court’s selection of one doctrinal path does not
lend itself to the inference that all other paths to the same result are infirm. “The
authority of the case cannot properly be overthrown by showing, even if it could be
shown, that the court might have reached the same result upon some other ground than
that which in truth it adopted as the basis of its decision.” Union Tank Line Co. v.
Wright, 249 U.S. 275, 293 (1919) (Pitney, J., dissenting); see also United States v.
Mitchell, 271 U.S. 9, 14 (1926) (“It is not to be thought that a question not raised by
counsel or discussed in the opinion of the court has been decided merely because it
existed in the record and might have been raised and considered.”).

-29-
there is no statutory restriction that would preclude the Secretary from using appropriated

funds to pay full CSC need to the individual contractors bringing suit.

The government also cites the ISDA’s language that “the Secretary is not required

to reduce funding for programs, projects, or activities serving a tribe to make funds

available to another tribe or tribal organization under this [Act].” § 450j-1(b). But as

discussed in Section III.A, supra, the Secretary always reduces funding from one tribe to

pay another when appropriations fall short of total CSC need. Under the present pro rata

system, each tribe’s CSC funding is reduced by a certain percentage and made available

to other tribes. The appropriations acts under consideration plainly required such

reductions regardless of the discretionary decisions made by the Secretary. “There is no

escaping the zero sum game.” Ramah Navajo Sch. Bd., 87 F.3d at 1354 (Silberman, J.,

dissenting).9

At base, the government’s argument rests on an improper conflation of over 600

tribes and tribal contractors into one amalgamated contractor. For example, it argues that

“in the face of a congressionally-capped appropriation, the agency simply could not

lawfully pay plaintiffs the full amount of their CSCs.” But this is incorrect. The

Secretary possessed the discretion to pay any individual plaintiffs full CSC need. For

example, in fiscal year 1998, Congress appropriated “not to exceed $105,829,000” for

9
Although the dissent relies on this provision for its contrary interpretation, it does
not grapple with the fact that § 450j-1(b) is necessarily violated whenever Congress
appropriates less than total CSC need. (See Dissenting Op. 32-33.)

-30-
CSCs. Tit. I, 111 Stat. at 1554. The largest individual CSC entitlement that year was less

than $14 million, and the second largest was under $4 million. It appears the government

is relying on the fact that the appropriations were insufficient to pay all contractors, but as

Cherokee held, there is no merit to the “claim that, because of mutual self-awareness

among tribal contractors, tribes, not the Government, should bear the risk that an

unrestricted lump-sum appropriation would prove insufficient to pay all contractors.”

543 U.S. at 640 (citation omitted).

Ferris and Dougherty provide a bright-line formula that avoids uncertainty in

government contracting: If more than one contractor is covered by an appropriation, the

failure to appropriate funds sufficient to pay all such contractors does not relieve the

government of liability. As Dougherty held, determining whether liability attaches based

on such unfettered discretion in the disbursing agent sows uncertainty among contractors

that could “block the wheels of the Government.” 18 Ct. Cl. at 503. Instead of

considering the discretionary actions of the disbursing agency, the availability of

appropriations is determined by congressional action. As the Supreme Court explained in

Cherokee, by signing contracts “subject to the availability of appropriations,” the tribes

agreed “that the contract will not become binding unless and until Congress appropriates

funds for that year.” 543 U.S. at 643 (emphasis added). In other words, the tribes agreed

to be bound by congressional funding choices. But government contractors do not agree

to be bound by the allocation choices of the disbursing agency or the contracts formed

with other tribes and tribal entities
-31-
 No case cited by the government contravenes the Ferris/Dougherty doctrine.

Although the government relies upon several cases in which the government escaped

liability, each involved a single-contract appropriation. See Sutton v. United States, 256

U.S. 575, 577-79 (1921) ($20,000 appropriation for a specific dredging project proved

insufficient to pay the sole contractor); Bradley v. United States, 98 U.S. 104, 111-12

(1878) (line-item appropriation to pay lease for a post office); Shipman v. United States,

18 Ct. Cl. 138, 146 (1883) (single contractor appropriation for a road project which

specified “that the work to be done and the materials to be furnished under this agreement

shall be restricted to the amount allowed by Congress for this purpose” (emphasis

omitted)).

We are also cognizant of the close parallel between the plaintiffs’ interpretation of

the phrase “subject to the availability of appropriations,” and the well-established concept

of legal availability. See 1 GAO Redbook at 4-6. Legal availability does not depend on

the appropriation of funds sufficient to cover all similar expenditures. The GAO

Redbook does not ask whether total obligations and expenditures are within

congressionally established limits, it asks whether “the obligation and expenditure” at

issue is “within the amounts Congress has established.” Id. The Court’s acceptance of

the Cherokee Nation’s understanding of appropriations law strongly supports this

construction: “as long as Congress has appropriated sufficient legally unrestricted funds

to pay the contracts at issue, the Government normally cannot back out of a promise to

pay on grounds of ‘insufficient appropriations,’ even if the contract uses language such as
-32-
‘subject to the availability of appropriations.’” Cherokee, 543 U.S. at 637 (emphasis

added).

Newport News illustrates this point. That case considered the amount that was

legally available for construction of a certain ship, the DLGN 41. The Navy requested

$152.3 million for the ship, and $92 million for a second ship, the DLGN 42. Newport

News, 55 Comp. Gen. at 816. Congress appropriated the full amount, $244.3 million,

without specifying the breakdown between the two ships. Id. The Navy subsequently

authorized an expenditure of $30.4 for the DLGN 42. Id. Despite the apparent intent of

subdividing the expenditure between the two ships, and the fact that the Navy had already

authorized a portion of the funds to be used on the DLGN 42, the Comptroller General

held that the entire $244.3 million was legally available for the DLGN 41. Id. at 821.

This result could not have occurred if the concept of legal availability depended on

the sufficiency of an appropriation to cover all expenditures authorized by it; money

spent on the DLGN 42 obviously cannot also be spent on the DLGN 41. But the federal

courts have consistently guarded the integrity of the federal contracting system by

holding that the insufficiency of a multi-contract appropriation to pay all contracts does

not relieve the government of liability if the appropriation is sufficient to cover an

individual contract. See Ferris, 27 Ct. Cl. at 546; Dougherty, 18 Ct. Cl. at 503.

B

The Federal Circuit, recently considering the same issue we confront, concluded

that a plaintiff in the same position as Ramah, the Arctic Slope Native Association
-33-
(“ASNA”), could not recover unpaid CSCs because the “availability of funds provision

coupled with the ‘not to exceed’ language limits the Secretary’s obligation to the tribes to

the appropriated amount.” Arctic Slope Native Ass’n v. Sebelius, 629 F.3d 1296 (Fed.

Cir. 2010).10 The court recognized the plaintiff’s argument that the government’s

liability remained “because the total appropriation is sufficient to satisfy the obligation to

the [plaintiff], even though insufficient to satisfy the combined obligations to all the

tribes,” id. at 1303, but as the foregoing quote demonstrates, it nevertheless analyzed the

issue as the Secretary’s ability to pay all contractors, discussing only the “Secretary’s

obligation to the tribes,” id. at 1304 (emphasis added).

Rather than answering the question of whether the availability of appropriations

must be considered from the perspective of individual tribes and tribal contractors, the

Federal Circuit’s analysis presumes from the outset that the answer is no. The court

distinguishes Cherokee on the ground that “here there is a statutory cap and no ability to

reallocate funds.” Arctic Slope Native Ass’n, 629 F.3d at 1304. But this assertion only

begs the question. Although it is true that the Secretary cannot reprogram funds from a

more general appropriation once the CSC funding cap is reached, it is equally true that

the Secretary was empowered to fund all of ASNA’s CSCs by reallocating away from

other contractors. In the same vein, the court concluded that the appropriations were not

available to ASNA because “the appropriated amount has been paid to the tribes.” Id.

10
Following publication of this opinion, we requested supplemental briefing from
the parties.

-34-
But ASNA’s full CSC need was legally available to be paid from the relevant

appropriations. Whether those funds were paid to “the tribes” does not tell us whether

ASNA was entitled to payment.11

The Federal Circuit briefly discusses the ISDA’s statement that “the Secretary is

not required to reduce funding for programs, projects, or activities serving a tribe to make

funds available to another tribe or tribal organization.” Arctic Slope Native Ass’n, 629

F.3d at 1304 (quoting 25 U.S.C. § 450j-1(b)). But the court does not grapple with the

logical impossibility of complying with this provision in the event of insufficient funding.

See Arctic Slope Native Ass’n, 629 F.3d at 1304-05. Regardless of the manner in which

the Secretary chooses to allocate less than full CSC funding among the tribes and tribal

contractors, some tribes will be paid at the expense of others. See Ramah Navajo Sch.

Bd., 87 F.3d at 1354 (Silberman, J., dissenting). That is, the plaintiffs’ preferred

allocation method and the government’s pro rata method result in exactly the same level

of compliance with § 450j-1(b).

Arctic Slope Native Association also attempts to distinguish Ferris because the

Ferris contract did not include a “subject to the availability of appropriations clause.”

Arctic Slope Native Ass’n, 629 F.3d at 1303-04. The Federal Circuit concluded that this

11
The dissent replicates this error. It would hold that Ramah’s contractual
obligation depends on “the availability of sufficient appropriations to pay for contract-
support costs on all the Secretary’s ISDA contracts.” (Dissenting Op. 28 (emphasis
added).) But this is precisely the theory of “mutual self-awareness among tribal
contractors” rejected in Cherokee. 543 U.S. at 640.

-35-
clause was inserted into contracts to overcome the rule of Ferris. Arctic Slope Native

Ass’n, 629 F.3d at 1303. This conclusion is curious in light of the Supreme Court’s

repeated citations to Ferris in Cherokee. See 543 U.S. at 637, 640, 641, 643. In

particular, we cannot square the Federal Circuit’s conclusion with the Court’s reliance on

both Ferris and Lincoln for the proposition that “if the amount of an unrestricted

appropriation is sufficient to fund the contract, the contractor is entitled to payment even

if the agency has allocated the funds to another purpose or assumes other obligations that

exhaust the funds.” Cherokee, 543 U.S. at 641 (quotation omitted, citing Lincoln, 508

U.S. at 192; Ferris, 27 Ct. Cl. at 546). By citing Lincoln’s discussion of unfettered

agency discretion in allocating an appropriation among objects for which an

appropriation is legally available, 508 U.S. at 192, and Ferris’s rule that a “contractor

who is one of several persons to be paid out of an appropriation” cannot have “his legal

rights . . . affected or impaired by its maladministration or by its diversion, whether legal

or illegal, to other objects,” 27 Ct. Cl. at 546, the Court strongly suggested that the Ferris

rule applies to lump sum appropriations even if the contracts for which the appropriation

is legally available contain “subject to the availability of appropriations” clauses.12

12
One other circuit decided the issue presented in the same manner as the Federal
Circuit. See Ramah Navajo Sch. Bd. v. Babbitt, 87 F.3d 1338, 1345 (D.C. Cir. 1996).
And the Federal Circuit previously held consistently with Arctic Slope Native
Association. See Babbitt v. Oglala Sioux Tribal Pub. Safety Dep’t, 194 F.3d 1374, 1378
(Fed. Cir. 1999). Both of these prior cases, however, predate Cherokee, and neither
mentions Ferris. Because neither case contains a persuasive analysis of Cherokee or
Ferris, which are strongly probative if not controlling, and because the reasoning in those
Continued . . .
-36-
 Finally, we note that Arctic Slope Native Association suggested a third potential

general rule regarding the effect of “subject to the availability of appropriations” clauses

with respect to lump-sum appropriations. See Arctic Slope Native Ass’n, 629 F.3d at

1305 n.8. The court cites Winston Bros. Co. v. United States, 130 F. Supp. 374 (Ct. Cl.

1955), a Court of Claims trial court decision which held “where the agency authorized to

spend the appropriation allocates the funds on a rational and non-discriminatory basis and

they prove insufficient, the Government is not liable for harm resulting from the

shortage.” Id. at 380. Under this interpretation, an agency’s disbursement of a lump-sum

appropriation could render an appropriation unavailable, but only if the agency’s

allocation is irrational or discriminatory. But as the Federal Circuit seemed to recognize,

Arctic Slope Native Ass’n, 629 F.3d at 1305 n.8, such an interpretation is flatly

inconsistent with Lincoln’s holding that an agency’s discretionary allocation of a lump-

sum appropriation is non-reviewable. 508 U.S. at 191-92.

V

For the foregoing reasons, we conclude that a “subject to the availability of

appropriations” clause frees the government of liability only when congressional

decisions standing alone—not discretionary agency actions—make funds unavailable for

a specific contract. As the Cherokee Court made clear, we must be hesitant to stray from

the usual definition of “subject to the availability of appropriations” without very good

cases is very similar to that of Arctic Slope Native Association, we do not address them
separately.

-37-
reason. It is “important to provide a uniform interpretation of similar language used in

comparable statutes, lest legal uncertainty undermine contractors’ confidence that they

will be paid, and in turn increase the cost to the Government of purchasing goods and

services.” Cherokee, 543 U.S. at 644. Nevertheless, in exceptional cases, courts have

given the phrase unique import. In Blackhawk Heating & Plumbing Co. v. United States,

224 Ct. Cl. 111 (1980), the court was faced with one such “convincing argument for a

special, rather than ordinary, interpretation,” Cherokee, 543 U.S. at 644.

In Blackhawk, the government and plaintiff entered into a settlement agreement

intended to resolve disputed claims with respect to the construction of a Veterans

Administration hospital. 224 Ct. Cl. at 115-16. As is common, the government’s

obligation was made “contingent upon the availability of appropriated funds from which

payment in full can be made.” Id. at 118. Unlike the case at bar, however, the

government presented substantial evidence regarding the negotiation of the agreement,

and the parties’ understanding of specific terms. The parties and their attorneys engaged

in several discussions of the above-quoted contingency, and at the execution of the

settlement agreement, the government’s attorney explained that “if there were an

affirmative action by the Congress that would prevent the Administrator from paying,”

the government’s obligation would not attach. Id. at 120. The plaintiff shrugged and

signed the agreement. Id. Later, Congress did take affirmative action to prevent payment

of a portion of the settlement agreement. Id. at 123. Based on the powerful parol

evidence of the parties’ intent, the court interpreted the ambiguous contingency term to
-38-
free the government from liability. Id. at 134.

In Arctic Slope Native Association, the Federal Circuit cited another case in

which a court deviated from the traditional rule: C. H. Leavell & Co. v. United

States, 530 F.2d 878 (Ct. Cl. 1976). See Arctic Slope Native Ass’n, 629 F.3d at

1303. That case considered a contract with a lengthy appropriations condition

that, like Blackhawk, may have provided a reason to stray from the general rule.

The contract at issue in C. H. Leavell contained a subsection (b) indicating that

“[f]rom funds heretofore appropriated, the sum of $ 75,000.00 is available for

payments to the Contractor.” 530 F.2d at 894. It further stated:

[if] it becomes apparent to the Contracting Officer that the balance of this
allocation and any allocation for this and any subsequent fiscal years during
the period of this contract is less than that required to meet all payments
due and to become due the Contractor because of work performed or to be
performed under this contract, the Contracting Officer may provide
additional funds for such payments if there be funds available for such
purpose. The Contractor will be notified in writing of any additional funds
so made available. However, it is distinctly understood and agreed that the
amount of funds stated in (b) above is the maximum amount the
Government insures will be available during the current fiscal year and the
Government is in no case liable for payments to the Contractor beyond this
amount prior to having notified the Contractor in writing of any additional
funds that can be made available. Accordingly, no progress schedule will
be approved . . . which contemplates progress requiring funds in excess of
the amounts stated to be available in (b) above for the current fiscal year
and no progress schedule will be approved for any ensuing fiscal year
which contemplates progress requiring funds in excess of the amount
allocated by the Contracting Officer from funds subsequently made
available.

Id. The C. H. Leavell contract may have conditioned the contractor’s entitlement on the

discretionary decisions made by the contracting officer based on the repeated references
-39-
to the officer’s allocations. In this case, the government does not point to any language

suggesting the plaintiffs agreed to be bound by the Secretary’s choices.

Indeed, the government does not identify any compelling factors that would

militate in favor of straying from the usual rule here. Nothing in the self-determination

contracts or the AFAs that appear in the record unambiguously dictate the government’s

position; they merely repeat the phrase “subject to the availability of appropriations,” or

similar terms such as “subject to the availability of funding.” One provision in the 2001

AFA requires Oglala to bill the BIA in an amount discounted by the actual CSC funding

rate. But this provision is nothing more than an acknowledgment that the BIA would not

provide full funding in that year, not an indication that the tribes were agreeing to limit

the government’s liability.13

The Ramah 2000 AFA is more illuminating. It includes an explicit

acknowledgement that whether the tribe would receive funding for prior years’ shortfalls

was an open question. By 2000 and 2001, the Oglala and Ramah contractors knew the

BIA would not pay their costs in full during the relevant fiscal year, but as a Ramah

plaintiff representative explained by affidavit, her tribe “always understood that the

contract amount represents an entitlement under the Self-Determination Act, even if

13
Perhaps even this much cannot be read into the billing provision. The most
logical reading is that it is simply referring to the 75 percent to be paid up front by the
BIA, established earlier in the agreement. The earlier reference is followed by the
promise that the “balance of funds will be added as soon as it becomes available subject
to congressional appropriation.”

-40-
payment is delayed until Congress makes the necessary appropriation.” Unlike the shrug

of the shoulders by the contractor in Blackhawk, Ramah has been vigorously shaking its

head for over a decade now.14

The government also argues that Cherokee is distinguishable from this case and a

“special” reading is required because Congress indicated its intent to underfund CSCs

across the board. See Cherokee, 543 U.S. at 634 (“The Government refers to legislative

history, but that history shows only that Executive Branch officials would have liked to

exercise discretionary authority to allocate a lump-sum appropriation too small to pay for

all the contracts that the Government had entered into; the history does not show that

Congress granted such authority.” (citation omitted)). The government contends that,

here, the allocation of too small a lump-sum to fund all CSCs was an affirmative act by

Congress indicating its intent to curtail full payment of valid CSCs. Although the

legislative history suggests some congressional concern with the growth of CSCs,15 see

H.R. Conf. Rep. No. 103-299, at 28, the inference drawn by the government is too weak

to overcome the strong preference for giving words a consistent meaning in order to

14
The dissent repeatedly suggests that the tribes knew or should have known that
they would not receive full CSC funding. (Dissenting Op. 28, 29, 32.) The former
contention is contradicted by tribal officials’ statements in the record. The latter is
unsupportable in light of the principles of appropriations and contracts law discussed
herein.
15
For an investigation into the efficiency of tribal utilization of CSCs, see Bureau
of Indian Affairs and National Congress of American Indians, Report of the BIA/Tribal
Work Group on Tribal Need Assessment (June 1999).

-41-
ensure stability of government contracting. See Cherokee, 543 U.S. at 644; Dougherty,

18 Ct. Cl. at 503.

This is particularly true in light of the canons discussed supra. The traditional rule

is that parties are presumed to contract with knowledge of existing law. See, e.g., In re

Doctors Hosp. of Hyde Park, Inc., 337 F.3d 951, 959 (7th Cir. 2003); Williams v. Stone,

109 F.3d 890, 896 (3d Cir. 1997); Storts v. Hardee’s Food Sys., Nos. 98-3285 & 98-

3320, 2000 U.S. App. LEXIS 6307, at *45 (10th Cir. Apr. 6, 2000) (unpublished); Gen.

Accident Ins. Co. v. First Nat’l Bank & Trust Co. of Tulsa, Nos. 90-5259 & 91-5009,

1993 U.S. App. LEXIS 26789, at *13 (10th Cir. Oct. 12, 1993) (unpublished). The

reasonableness of the expectations of the parties must be viewed in light of the trust

doctrine and the canon in favor of the tribes’ construction, the Ferris rule, the traditional

meaning of “legal availability,” and the Cherokee Court’s interpretation of identical

language. We hold that the tribes’ interpretation of the contracts and the statute is quite

reasonable.

VI

Lastly, we address the government’s appeal to the Appropriations Clause and the

Anti-Deficiency Act. The Anti-Deficiency Act provides:

An officer or employee of the United States Government . . . may not—

(A) make or authorize an expenditure or obligation exceeding an
amount available in an appropriation or fund for the expenditure or
obligation; [or]

(B) involve [the] government in a contract or obligation for the
-42-
 payment of money before an appropriation is made unless authorized by
law . . . .

31 U.S.C. § 1341(a)(1). The government claims that these provisions bar the Secretary

from paying total CSCs, and that they strip the United States of liability to individual

contractors above the contractor’s pro rata share. We agree with the first proposition, but

disagree with the second.

As to liability, the ISDA permits the Secretary to enter into self-determination

contracts prior to Congress appropriating funds, although the contracts are made subject

to the availability of appropriations. The statute explicitly provides that “[t]he Secretary

is directed, upon the request of any Indian tribe by tribal resolution, to enter into a self-

determination contract or contracts with a tribal organization to plan, conduct, and

administer programs or portions thereof.” 25 U.S.C. § 450f(a)(1). The ISDA further

states that “the provision of funds under this Act is subject to the availability of

appropriations.” § 450j-1(b). The model contract portion of the ISDA, § 450l, indicates

that self-determination contracts “become effective upon the date of the approval and

execution by the Contractor and the Secretary,” and repeats the “[s]ubject to the

availability of appropriations” language with respect to funding amount. Id. (model

contract § (b)(2), (4)).

Reading these provisions together, it is clear that the Secretary is “authorized by

law” to “involve [the] government in a contract or obligation for the payment of money

before an appropriation is made.” 31 U.S.C. § 1341(a)(1)(B). The “subject to the

-43-
availability of appropriations” language would be rendered meaningless unless the

contract was signed prior to congressional appropriations. Of course, the United States’

liability is made contingent upon the availability of appropriations, but as discussed

above, that condition was satisfied in each of the years at issue because Congress

appropriated enough funds to pay CSCs on any individual contract. See Part IV, supra.

We agree with the government that the appropriations bills prohibit the Secretary

from paying the sum total of all CSCs from the agency appropriations. But the United

States’ liability is not coterminous with the Secretary’s ability to pay. As explained in

Dougherty, the Anti-Deficiency Act restrains “the official, but [it does] not affect the

rights in this court of the citizen honestly contracting with the Government.” 18 Ct. Cl. at

503 (citing the original Anti-Deficiency Act, Rev. Stat. § 3679).

This brings us to the Appropriations Clause, which states: “No Money shall be

drawn from the Treasury, but in Consequence of Appropriations made by Law.” U.S.

Const. art. 1, § 9, cl. 7. If the plaintiffs’ CSCs cannot be paid from the annual agency

appropriations, the government argues, how can plaintiffs collect without violating the

Appropriations Clause? The answer is straightforward: By recovering from the

Judgment Fund established pursuant to 31 U.S.C. § 1304. See 25 U.S.C. § 450m-1(d)

(Contracts Disputes Act applies to self-determination contracts); 41 U.S.C. § 612 (a)

(judgments arising under Contract Disputes Act paid from Judgment Fund).

The government contends that Congress could not have intended this inefficient

system of compensation. On one level, it is true that Congress likely did not intend to
-44-
pay CSCs from the Judgment Fund. But we must consider the legal effect of Congress’

intentional acts, and those acts compel the result. Congress passed the ISDA,

guaranteeing funding for necessary CSCs, and its appropriations resulted in an on-going

breach of the ISDA’s promise. The Court in Cherokee recognized the possible remedy

urged by plaintiffs, noting that agencies faced with insufficient appropriations must

sometimes exhaust the appropriation and “leav[e] the contractor free to pursue

appropriate legal remedies [including the Judgment Fund] arising because the

Government broke its contractual promise.” 543 U.S. at 642-43 (citations omitted).16

This result leaves Congress with several options to avoid liability. See U.S. Gen.

Accounting Office, Indian Self Determination Act: Shortfalls in Indian Contract Support

Costs Need to be Assessed 54-63 (1999) (discussing potential congressional solutions to

the CSC shortfall dilemma). Congress can revise the ISDA to remove the guarantees of

full CSC funding contained in 25 U.S.C. § 450j-1(a)(1) and (g). See N.Y. Airways, Inc.

v. United States, 177 Ct. Cl. 800, 808 (1966) (cited with approval in Cherokee, 543 U.S.

at 642) (Congress could avoid liability caused by insufficient appropriations “by

16
The government also argues that the Judgment Fund is not an appropriate
remedy because the Secretary will be required to reimburse the fund for any judgment
resulting from a self-determination contract. But this argument ignores the full text of the
reimbursement provision, which requires an agency to reimburse the fund “out of
available funds or by obtaining additional appropriations for such purposes.” 41 U.S.C.
§ 612(c) (emphasis added); see also 2 GAO Redbook at 6-41 to 42 (“If an agency finds
itself [unable to pay a contract], unless it has transfer authority or other clear statutory
basis for making further payments, it has little choice but to seek a deficiency or
supplemental appropriation from Congress, and to adjust or curtail operations as may be
necessary.” (footnote omitted)).

-45-
changing the substantive law under which the [contractual obligation was set], rather than

by curtailing appropriations”). Alternatively, Congress could limit appropriations on a

contract-by-contract basis. See Dougherty, 18 Ct. Cl. at 503 (“[W]hen one contract on its

face assumes to provide for the execution of all the work authorized by an appropriation,

the contractor is bound to know the amount of the appropriation, and cannot recover

beyond it . . . .”). What the government cannot do is breach its contractual obligations

and avoid liability based on an improper reading of the phrase “subject to the availability

of appropriations.”17

VII

For the foregoing reasons, we REVERSE the grant of summary judgment in favor

of the government and REMAND for further proceedings consistent with this opinion.

17
Plaintiffs raise additional arguments, several of which are considered in the
dissent. (See Dissenting Op. 12-15, 39-42.) Although we do not disagree with much of
that discussion, we need not reach the remaining issues given our holding as to the
meaning of the phrase “subject to the availability of appropriations.”

-46-
08-2262 - Ramah Navajo Chapter v. Salazar

HARTZ, Circuit Judge, dissenting:

I respectfully dissent. There is much in the majority opinion with which I

agree. And the result advocated by the government is not easy to swallow—the

BIA hands over programs to tribal organizations but then does not reimburse the

organizations for the full costs of running the programs. But in my view

congressional intent is clear, all parties should have understood (and indeed did

understand) that intent, and we must construe the contracts at issue in accordance

with that understanding. The majority opinion’s approach strikes me as too

formalistic in relying on a sharp division between line-item and lump-sum

appropriations. It renders futile the spending cap imposed by Congress. And to

the extent that the majority opinion relies on Cherokee Nation v. Leavitt, 543 U.S.

631 (2005), for support, it fails to explain why the Supreme Court found it

necessary to address in its opinion so many issues that would be irrelevant if the

Court had embraced the view of government contracts that the majority opinion

adopts.

I. BACKGROUND

The majority opinion provides a thorough discussion of the relevant

statutory and administrative background. In this section I will focus on the

statutory context and a few facts that illuminate the parties’ necessary

understanding of their contractual relationship.
 First, beginning in fiscal year 1994, Congress set a maximum limit on how

much the BIA could allocate from its budget for contract-support costs (termed

“indirect costs” in that appropriations act, and “contract-support costs”

thereafter). This was a change from prior-year appropriations, which had

provided a designated amount for contract-support costs but had not prohibited

the BIA from supplementing that amount with unrestricted funds available in the

remainder of the appropriation to the BIA. (The appropriations-bill language at

issue in Cherokee Nation was essentially the same as in the pre-1994 BIA

appropriations.) Ordinarily, there would be no great difficulty in an agency’s

complying with such a spending cap. The agency could simply refuse to enter

into more contracts than it had the money to pay for. But that course was

unavailable to the BIA under the ISDA. If a tribal organization wished to take

over an eligible program from the BIA, the BIA had to relinquish its control and

fund the organization’s takeover, except in quite limited circumstances. See 25

U.S.C. § 450f(a)(2). 1 And the BIA’s contract with the tribal organization to fund

the program could not exclude contract-support costs. See id. § 450j-1(a). The

congressional limitation on contract-support costs could therefore be effectuated

by the BIA only by refusing to pay costs that would otherwise be mandated by

statute. In other words, when Congress capped contract-support expenditures, it

1
I should note, however, that for fiscal year 1999, Congress prohibited new
or expanded ISDA contracts. See Pub. L. No. 105-277, § 328, 112 Stat. 2681,
291-92.

-2-
necessarily understood that the cap must override what would otherwise have

been statutory commands to pay contract-support costs in full on each contract

mandated by the ISDA.

Second, there was no secret that the BIA planned to pay only a portion of

contract-support costs on each ISDA contract. As set forth in the majority

opinion, some months after enactment of each of the relevant appropriations bills,

the BIA would publish a notice in the Federal Register stating the amount of

contract-support appropriations that it had received and explaining the allocation

method should that amount be insufficient to pay for all contract-support costs

negotiated in its ISDA contracts. The notice for fiscal year 1994 also forecast the

magnitude of the potential shortfall in contract-support funding:

Using FY 1993 experience which resulted in a total CSF [contract-
support fund] need of approximately $85,000,000, we project a
shortfall of at least $10,000,000 in FY 1994 and possibly a shortfall
as high as $25,000,000. It is important to restate that the Bureau can
only utilize the amount appropriated for the CSF account to meet
indirect cost needs. That is, the Bureau can no longer reprogram
funds from other Bureau accounts to cover CSF shortfalls.

58 Fed. Reg. at 68694. Notices in later years did not project the amount of

shortfalls; but their language (indeed, their very purpose) warned tribal

organizations of the possibility of insufficient funding.

All notices described essentially the same method for distributing contract-

support funds in the event of a shortfall. A specified sum (or nothing at all, see

64 Fed. Reg. at 2659 (fiscal year 1999)) was set aside for new or expanded

-3-
contracts; such contract-support funds were usually to be distributed on a first-

come, first-served basis. See, e.g., 62 Fed. Reg. at 1470 (fiscal year 1997). For

ongoing or existing contracts, in the event of a shortfall “the amount available

shall be distributed pro rata, so that all contractors and compactors receive the

same percentage share of their reported need.” 66 Fed. Reg. at 15276 (fiscal year

2001).

The notices further advised that the BIA would not distribute the tribal

organizations’ final contract-support payments until about July 31, well after they

were supposed to have begun performance under their contracts. 2 In practice, the

tribal organizations often were not told precisely how much each would be paid in

contract-support funds until late September. Between fiscal years 1994 and 2001,

the tribal organizations were paid 77% to 92% of their contract-support costs. 3

2
See, e.g., 59 Fed. Reg. at 55318 (fiscal year 1995); 63 Fed. Reg. at 5399
(fiscal year 1998); 66 Fed. Reg. at 15276 (fiscal year 2001). But see 58 Fed. Reg.
at 68694 (notice for fiscal year 1994, stating that the final distribution of
contract-support funds will be made “around May 1”).
3
It is worth noting that even if there had been no statutory cap on contract-
support costs, full payment would likely not have been made until well after
performance of the contract had begun. The contract-support costs were typically
expressed as a percentage of an agreed-on base amount rather than in dollar
terms. The percentage—called the indirect-cost rate—was negotiated with the
Inspector General of the Department of the Interior. See 25 U.S.C. § 450b(g)
(“‘indirect cost rate’ means the rate arrived at through negotiation between an
Indian tribe or tribal organization and the appropriate Federal agency”); S. Rep.
No. 100-274, as reprinted in 1988 U.S.C.C.A.N. at 2628 (“Tribal indirect cost
rates are negotiated and approved according to OMB guidelines by the
Department of Interior Office of Inspector General.”). The product of that rate
(continued...)

-4-
 The AFAs recognized that contract-support costs might not be fully paid.

Although the template for AFAs may have changed over the years and the AFAs

in the record may not be representative in various respects, they are illustrative of

how tribal organizations and the BIA dealt with the tentativeness of contract-

support funding. The Oglala AFA for calendar year 2001 is quite explicit. Its

section entitled “Program and Budget” includes the following paragraph:

. Contract Support Funds shall be provided by the Bureau of Indian
Affairs, subject to the availability of funding, in accordance with the
Indirect Cost Negotiation Agreement between the Contractor and the
Office of the Inspector General, and in accordance with Bureau of
Indian Affairs policies and procedures pertaining to the distribution
of Contract Support Funds.

J. App., Vol. IV at 900 (emphasis added). A paragraph entitled “Billings for

Indirect Cost” in the “Administration Data” section explicitly recognizes that

3
(...continued)
and the base amount is intended to be the best approximation of what the indirect
contract-support costs are. See 2 C.F.R. pt. 225 (OMB Guidelines). The
negotiation to establish the indirect-cost rate was ordinarily conducted after
execution of the AFA. Ramah’s controller explained:
Our indirect cost rates are usually not determined by agreement until
well after the commencement of the federal fiscal year and
sometimes not until after it is concluded. The principal reason is that
indirect cost proposals must be accompanied by single agency audits
for the year ending two years prior to the fiscal year for which the
application is being made. However, in practice it has proven
impossible for us to finalize our audits prior to the commencement of
the federal fiscal year in question.

J. App., Vol. II at 266–67.

-5-
Oglala may be reimbursed for only a percentage of the indirect contract-support

costs computed by using the indirect-cost rate. It states:

The contractor shall bill for Indirect Cost earned on his
voucher\invoice showing the following, for the period covered by the
voucher\invoice:
1. Total direct cost expenditures.
2. Less Exclusions.
3. Times Indirect Cost Rate. 4

4
The preceding paragraph, which is entitled “Negotiated Indirect Cost
Rates,” describes how the parties are to arrive at a rate:
1. The allowable indirect costs under this contract shall be
obtained by applying negotiated indirect cost rates to bases
agreed upon by the parties, as specified below.
2. Negotiation of indirect cost rates by the Contractor and the
cognizant audit agency shall be undertaken as promptly as
practicable after receipt of the Contractor’s indirect cost
proposal.
3. Allowability of cost and acceptability of cost allocation
methods shall be determined in accordance with OMB Circular
A-87.
4. The results of each negotiation shall be set forth in an Indirect
Cost Negotiation Agreement, such agreement shall become a
part of this contract by reference. The agreement shall
specify:
(a) The agreed indirect cost rate(s);
(b) The base to which to the rate(s) apply;
(c) The periods for which the rate(s) apply; and,
(d) The specific items treated as exclusions or any changes
in the items previously agreed to be treated as
exclusions.
5. The Contractor is to be reimbursed for all allocable and
allowable indirect costs incurred in performance of this
contract, subject to any statutory limitations applicable.
6. Any failure by the parties to agree on any indirect cost rate(s)
or applicability of the rate(s) to the bases under this provision
shall be considered a dispute concerning a question of fact for
decision by the Awarding Official within the meaning of the
(continued...)

-6-
 4. Times percentage of rate funded by BIA.
5. Indirect Cost earned for the period covered.
(1) – (2) X (3) X (4) = (5).

Id. at 920 (emphasis added). In other words, the full amount of indirect contract-

support costs will be reduced by multiplying it by a “percentage of rate funded by

BIA.” This computation follows the same steps as those for indirect-contract-

support-cost computations set forth in the BIA’s notice of “Distribution of Fiscal

Year 2001 Contract Support Funds.” See 66 Fed. Reg. at 15276.

Not only were the tribal organizations on notice that contract-support costs

may not be fully funded, but their representatives may even have acquiesced in

the shortfall, recognizing that in light of limited willingness of Congress to fund

programs benefitting Native Americans, other needs should take priority over

contract-support costs. A study by the GAO reported that there were two reasons

for underfunding contract-support costs:

First, it is difficult for [the BIA and the Indian Health Service] to
predict what the total need for indirect cost funding will be in
advance. The agencies do not know which tribes will be contracting
which programs, at what level the contracted programs will be
funded, and what a tribe’s indirect cost rates will be. Second, in
addition to the difficulty of predicting the future contract support
requirements, the agencies have had other funding priorities in recent
years. For example, BIA’s priorities have been to seek additional
appropriations for law enforcement to reduce crime on the
reservations and for Indian education.

4
(...continued)
clause of the contract entitled “Disputes”.

J. App., Vol. IV at 919–20. The indirect-cost rate is not an issue in this appeal.

-7-
J. App., Vol. III at 541. Those priorities are to be set after consultation with the

Native American community. See 25 U.S.C. § 450j-1(i) (“On an annual basis, the

Secretary shall consult with, and solicit the participation of, Indian tribes and

tribal organizations in the development of the budget for the . . . Bureau of Indian

Affairs (including participation of Indian tribes and tribal organizations in

formulating annual budget requests that the Secretary submits to the President for

submission to Congress . . .).”). 5

Another good indication that everyone understood, or should have

understood, that the appropriations cap would require reductions in contract-

support payments in all the BIA’s ISDA contracts can be found in a brief

submitted some 16 years ago by one of the law firms representing Plaintiffs in

this appeal. In Ramah Navajo School Board., Inc. v. Babbitt, 87 F.3d 1338 (D.C.

5
It is also worth noting that the contracts give tribal organizations the right
to suspend performance if they become insecure about payment:

The Contractor shall not be obligated to continue performance that
requires an expenditure of funds in excess of the amount of funds
awarded under this Contract. If, at any time, the Contractor has
reason to believe that the total amount required for performance of
this Contract or a specific activity conducted under this Contract
would be greater than the amount of funds awarded under this
Contract, the Contractor shall provide reasonable notice to the
appropriate Secretary. If the appropriate Secretary does not take
such action as may be necessary to increase the amount of funds
awarded under this Contract, the Contractor may suspend
performance of the Contract until such time as additional funds are
awarded.

25 U.S.C. § 450l(c) (Model Agreement § 1(b)(5)).

-8-
Cir. 1996), the school board successfully challenged how the Secretary of the

Interior apportioned to the tribes the restricted contract-support appropriations for

fiscal year 1995. (The plaintiffs in that case did not challenge, as in this case, the

failure to pay full contract-support costs.) The Secretary had set a June 30, 1995,

deadline for submitting proposals for indirect-cost rates. Tribal organizations that

missed the deadline would receive only 50% (instead of 75%) of full funding on

the first round of distribution. See 59 Fed. Reg. at 55318 (fiscal year 1995). In

the second round the remaining funds would be apportioned pro rata to the

deadline-compliant tribal organizations, who ultimately received more than 90%

of full funding. See Ramah Navajo Sch. Bd., 87 F.3d at 1343. The brief

submitted by counsel for the school board asserted: “Congress in the [ISDA] and

the contemporaneous appropriation statutes clearly intend[ed] an even, across-the-

board reduction in all tribal contracts in the event of an appropriations shortfall.”

Appellant’s Brief at 27, Ramah Navajo Sch. Bd., Inc. v. Babbitt, Nos. 95-5334,

95-5348) (D.C. Cir. Nov. 15, 1995) (footnote omitted).

II. ANALYSIS

Given the obvious intent of Congress, which was communicated by the BIA

to tribal organizations receiving ISDA funds and was surely understood by them,

affirmance of the district court is required unless some legal doctrine overrides

congressional intent. In my view, however, the governing doctrine confirms the

need for affirmance.

-9-
 A. Congressional Appropriations and Government Contractual
Liability

The Appropriations Clause of the United States Constitution states, “No

Money shall be drawn from the Treasury, but in Consequence of Appropriations

made by Law.” U.S. Const. art. 1, § 9, cl. 7. To prevent the Executive from

forcing its hand by incurring contractual debts on behalf of the United States,

Congress has enacted the Anti-Deficiency Act which, with certain limited

exceptions, prohibits federal agencies from contracting for more than what

Congress appropriates. See 31 U.S.C. § 1341(a)(1)(A), (B). The Act states in

part:

An officer or employee of the United States Government . . . may
not—
(A) make or authorize an expenditure or obligation exceeding
an amount available in an appropriation or fund for the
expenditure or obligation; [or]
(B) involve [the] government in a contract or obligation for the
payment of money before an appropriation is made unless
authorized by law . . . .

Id. § 1341(a)(1). Consequently, government contracts generally are not binding

until Congress appropriates the necessary funds. See Cherokee Nation, 543 U.S.

at 643.

On occasion, however, a law may grant a government officer or employee

what is known as “contract authority”—that is, the authority to enter into a

contract that is binding regardless of whether Congress appropriates sufficient

money to cover the contract. See Train v. City of New York, 420 U.S. 35, 39 n.2

-10-
(1975); see generally I General Accounting Office, Principles of Federal

Appropriations Law p. 2-6 (3d ed. 2004) (GAO Redbook). In that event, if the

appropriation turns out to be inadequate, the contractor can sue the government

for underpayment. See GAO Redbook at p. 2-7. A grant of contract authority,

however, must be clear. As stated in 31 U.S.C. § 1301(d): “A law may be

construed to make an appropriation out of the Treasury or to authorize making a

contract for the payment of money in excess of an appropriation only if the law

specifically states that an appropriation is made or that such a contract may be

made.”

Plaintiffs make two principal arguments in support of their claim to full

payment of ISDA contract-support costs: They assert (1) that the Secretary had

contract authority to bind the government to pay contract-support costs regardless

of the sufficiency of appropriations, and (2) that even if the Secretary lacked

contract authority, the congressional appropriation for contract-support costs was

sufficient for each separate contract, so that the government is bound even if there

were insufficient funds to pay the total of such costs for all ISDA contracts. I

first address contract authority.

B. Did the BIA have Contract Authority for Contract-Support
Costs?

Plaintiffs contend that Congress granted the Secretary contract authority to

enter into ISDA contracts when it directed the Secretary to pay in full the

-11-
contract-support costs on ISDA contracts (regardless of the adequacy of

appropriations for those costs). They acknowledge the following language of 25

U.S.C. § 450j-1(b) that limits the provision of funds to what is appropriated:

Notwithstanding any other provision in this subchapter [the entire
ISDA], the provision of funds under this subchapter is subject to the
availability of appropriations and the Secretary is not required to
reduce funding for programs, projects, or activities serving a tribe to
make funds available to another tribe or tribal organization under this
subchapter.

(Emphasis added). They argue, however, that this language does not limit the

government’s financial obligation for contract-support costs.

To begin with, Plaintiffs remind us that the ISDA’s legislative history

reflects congressional intent that tribes not be penalized by government

underpayment of contract-support costs. See S. Rep. 100-274, as reprinted in

1988 U.S.C.C.A.N. at 2628 (“the Committee believes strongly that Indian tribes

should not be forced to use their own financial resources to subsidize federal

programs.”). They then point to two ISDA provisions suggesting a categorical

government obligation. The first is § 450j-1(a)(2), which states:

There shall be added to the amount required by paragraph (1) [(the
Secretarial amount)] contract support costs which shall consist of an
amount for 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

-12-
 (B) are provided by the Secretary in support of the contracted
program from resources other than those under contract.

(Emphases added). The other is § 450j-1(g) (added to the ISDA six years after

enactment of the subject-to-availability language of § 450j-1(b)), which speaks of

contract-support costs as an entitlement:

Upon the approval of a self-determination contract, the Secretary
shall add to the contract the full amount of funds to which the
contractor is entitled under subsection (a) of this section, subject to
adjustments for each subsequent year that such tribe or tribal
organization administers a Federal program, function, service, or
activity under such contract.

(Emphasis added). 6 In light of this mandatory language, Plaintiffs contend that

the subject-to-availability restriction on “the provision of funds under this

subchapter,” § 450j-1(b), must limit only payments by the Secretary, not the

government’s ultimate liability. Under their construction of the statute, “payment

of the full amount by the Secretary is subject to available appropriations to make

6
In addition, Plaintiffs rely on § 450j-1(d)(2), which states: “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.” But this provision explicitly applies only to subsection (d) of § 450j-1.
See id. § 450j-1(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.”). The provision does not
purport to have any effect on the subject-to-availability language of § 450j-1(b).
Thus, I fail to see any relevance of § 450j-1(d)(2) to the present dispute.

-13-
those payments, but if such appropriations are not available then the underpaid

contract obligation remains in place and the government remains liable in

damages.” Aplt. Br. at 49–50.

Plaintiffs’ argument is interesting, but unpersuasive. They do not explain

why there would be any reason to include in the ISDA a provision saying that the

Secretary cannot pay out money that has not been appropriated. Such a provision

would seem superfluous. If such payments are not barred by the Constitution’s

Appropriations Clause, then the Anti-Deficiency Act should do the trick. One

could also wonder what good Congress thought it would accomplish by restricting

payments by the Secretary but not the liability of the government. The effect on

the overall federal budget would be the same whether the money comes from the

Secretary’s budget or from the fund used to pay judgments for the government’s

breach of contractual duties. See 31 U.S.C. § 1304 (judgment fund). When

Congress says that “the provision of funds under this subchapter [the ISDA] is

subject to the availability of appropriations,” 25 U.S.C. § 450j-1(b), it must mean

that the government’s obligation on ISDA contracts is limited by the amount

appropriated.

As for the addition of § 450j-1(g) several years after enactment of the

subject-to-availability language in § 450j-1(b), if subsection (g) were intended to

limit the reach of that language in subsection (b), one would expect Congress to

have been explicit about it, as required by 31 U.S.C. § 1301(d) (contract authority

-14-
must be “specifically state[d]”). Yet Congress did not bother to amend § 450j-

1(b) to say that the subject-to-availability provision that otherwise applies to the

entire ISDA does not apply to contract-support costs.

Most importantly, Plaintiffs’ construction of the subject-to-availability

provision is contrary to the Supreme Court’s view. Referring to § 450j-1(b),

Cherokee Nation said:

Language of this kind is often used with respect to Government
contracts. This kind of language normally makes clear that an
agency and a contracting party can negotiate a contract prior to the
beginning of a fiscal year but that the contract will not become
binding unless and until Congress appropriates funds for that year. It
also makes clear that a Government contracting officer lacks any
special statutory authority needed to bind the Government without
regard to the availability of appropriations.

543 U.S. at 643 (citations omitted; emphasis added). I therefore conclude that the

Secretary did not have contract authority to bind the government to pay full

contract-support costs regardless of the adequacy of appropriations.

I now turn to Plaintiffs’ argument that there were available funds to pay

each tribal organization’s contract-support costs in full.

C. Were Funds Available for Full Payment of Contract-Support
Costs?

Plaintiffs’ principal argument is not predicated on the Secretary’s alleged

contract authority to bind the government to pay contract-support costs in full.

Rather, they contend that sufficient appropriations were “available” to pay each

individual tribal organization’s contract-support costs in full, so the government

-15-
cannot escape liability by relying on the insufficiency of appropriations to pay the

total of such costs for all tribal organizations. Aplt. Br. at 1.

Before addressing the decisions relied upon by Plaintiffs, I would note two

classic Supreme Court opinions on the enforceability of unfunded contracts. They

establish that a contractual subject-to-availability provision ordinarily forecloses

recovery of otherwise promised payment in excess of appropriations; that is, by

agreeing that payment is subject to the availability of appropriations, the

contractor accepts the risk of congressional underfunding.

Bradley v. United States, 98 U.S. 104 (1878), concerned the lease of a

building for government use. In accordance with statutes barring federal agencies

from entering into contracts for amounts exceeding appropriations, see id. at

107–08, the three-year lease stated that it was “subject to an appropriation by

Congress for the payment of the rental herein stipulated for, and that no payment

shall be made to [Bradley] on account of such rental until such appropriation shall

be available,” id. at 105–06 (internal quotation marks omitted). During the first

two full years of the lease term, Congress appropriated $4,200, the full contract

price, specifically for the lease; but in the last year it appropriated only $1,800.

See id. at 108 (the first-year appropriation also included rental for the first three

weeks of the lease, which were in the prior fiscal year). The Court rejected the

claim for the balance by Bradley’s successor. It said that the parties’ intent, as

evidenced by the lease’s availability provision, was that the lessor would not be

-16-
paid until appropriations became available. See id. at 112. That provision placed

the underfunding risk on the lessor:

Public officers, . . . having no funds in the treasury and being without
authority to bind the United States, can only agree to pay the
stipulated rental, provided the money is appropriated by Congress,
and if the lessor, voluntarily and without any misrepresentation or
deception, enters into a lease on those terms, he must rely upon the
justice of Congress.

Id. at 117.

Sutton v. United States, 256 U.S. 575 (1921), teaches a similar lesson. The

government contracted with the Hillsboro Dredging Company (whose assets were

later assigned to Sutton as bankruptcy trustee) to conduct dredging and excavation

work for a harbor-improvement project. See id. at 577. Hillsboro was to be paid

at unit rates. See id. Congress appropriated $23,000 for the project. See id.

“The appropriation was ample to defray the cost at [the agreed-on unit] rates,

assuming that the quantities of material to be removed did not greatly exceed the

estimates presented by the specifications.” Id. A statute limited the

government’s contractual obligations to the amount of appropriations. See id. at

579 (“‘No act of Congress hereafter passed shall be construed to authorize the

execution of a contract involving the payment of money in excess of

appropriations made by law, unless such act shall in specific terms declare an

appropriation to be made or that a contract may be executed.’” (quoting 34 Stat.

697, 764 (1906); ellipses omitted)). Accordingly, the contract provided that

-17-
“within the limits of available funds the United States reserves the right to require

the removal of such yardage as will complete the work, be it more or less than the

quantities above estimated.” Id. at 577 (ellipses and internal quotation marks

omitted). When it was discovered that the government inspector had

underestimated the amount of work performed, work was halted. See id. But by

that time the amount owed at unit rates substantially exceeded the congressional

appropriation. See id. Sutton sued for the balance. See id. at 578. The Court

held that “the contractor cannot recover for work done in excess of the

appropriation.” Id. at 581. “The Secretary of War was . . . without power to

make a contract binding the government to pay more than the amount

appropriated. Those dealing with him must be held to have had notice of the

limitations upon his authority.” Id. at 579.

Plaintiffs argue that Bradley and Sutton are distinguishable because they

concern only “restricted single-purpose appropriations” in which Congress has

“designate[d] a specifically-appropriated sum for a given undertaking.” Aplt. Br.

at 28. This case, they say, concerns instead a “lump-sum appropriation[],” id.,

which, although “capped at some level,” is “without limitation available for

multiple projects or contractors . . . and is thus ‘unrestricted,’” id. at 30. They

contend that “[i]n the lump-sum situation . . . , an agency’s exhaustion of an

appropriation without fully paying the contract at issue . . . does not bar the

contractor from recovering damages for the non-payment.” Id. at 26–27

-18-
(emphasis omitted). In other words, “the government may be held liable for

failing to pay a contractor in full out of an appropriation sufficient to pay that

contractor, even though the appropriation is insufficient to pay all of the contracts

the agency has made.” Id. at 27.

For support of their position, Plaintiffs rely in part on the Supreme Court’s

decision in Cherokee Nation, 543 U.S. 631, which awarded the plaintiffs in that

case their full contract-support costs for ISDA contracts with the Secretary of

Health and Human Services (HHS). I will discuss Cherokee Nation more fully

later. For now, suffice it to say that the holding in that case is not helpful to

Plaintiffs’ argument. True, the contracts were, as here, subject to the availability

of appropriations. See id. at 640–41. And, as here, the government argued that

Congress did not appropriate enough money to cover the full contract-support

costs for all ISDA contracts. See id. at 636. But unlike our case, the

appropriations acts had not used restrictive not-to-exceed language with respect to

contract-support costs. (The acts were like the pre-1994 BIA appropriations acts.)

Thus, the HHS Secretary’s contract-support spending was not statutorily

restricted. And because there were sufficient unrestricted funds (in addition to

the funds specifically appropriated for contract-support costs) available to cover

the contract-support costs on the HHS Secretary’s ISDA contracts with the

plaintiffs, the Court held that the subject-to-availability provision did not limit the

government’s liability. See id. at 643 (“Since Congress appropriated adequate

-19-
unrestricted funds here, [the] phrase [‘subject to the availability of

appropriations’], if interpreted as ordinarily understood, would not help the

Government.”). To be sure, Plaintiffs here rely not just on the holding in

Cherokee Nation but also on some of the Court’s language regarding the

government’s liability on contracts paid for out of lump-sum appropriations.

Before I turn to that language, however, it will be helpful first to analyze other

relevant case law and to review the specific context of the dispute before us.

Most helpful to Plaintiffs is the holding in a lower-court decision cited with

approval by Cherokee Nation. In summarizing propositions not disputed by the

parties in that case, the Supreme Court cited Ferris v. United States, 27 Ct. Cl.

542, 546 (1892), for its statement that “[a] contractor 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.”

Cherokee Nation, 543 U.S. at 637–38. Plaintiffs argue that under this Ferris

doctrine, each tribal organization is entitled to full payment of its contract-

support costs because the congressional appropriation for contract-support costs

was many times greater than their individual amounts, and it is irrelevant to any

particular tribal organization that the Secretary may have overcommitted the total

appropriation by entering into other contracts. In my view, however, this

argument takes Ferris too far.

-20-
 Ferris considered a contract between the government and Ferris to dredge

100,000 cubic yards of material from the Delaware River. See 27 Ct. Cl. at

542–43, 545. When the contract was executed, the agency allotted to it $37,000

out of a congressional appropriation for improvement of the river. See id. at

542–43. But the government halted work when only 35,494 cubic yards of

material had been removed because the appropriation had been exhausted. See id.

at 545–46. Ferris was fully paid $9,500 for the work performed; but he sought

lost profits for the work that he was prevented from performing by the order to

stop. See id. at 543, 545–46. The court awarded him $6,510 in damages. See id.

at 547. Exhaustion of appropriated funds, it explained,

justified the officer in charge, but does not justify the [government]
in not providing funds for carrying out and discharging [its] legal
obligations. A contractor 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. An appropriation per se merely imposes limitations
upon the Government’s own agents; it is a definite amount of money
intrusted to them for distribution; but its insufficiency does not pay
the Government’s debts, nor cancel its obligations, nor defeat the
rights of other parties.

Id. at 546 (emphasis added).

This quoted proposition might appear to control the result here. After all,

each tribal organization executing an ISDA contract would know that the

congressional appropriation for contract-support costs was far more than

sufficient to cover those costs for its own contract, and the organization would

-21-
not be “chargeable with knowledge of [the] administration [of that appropriation],

nor c[ould] [its] legal rights be affected or impaired . . . by its diversion . . . to

other objects.” Id.

But one must not read too much into Ferris. It is, in essence, simply a case

about contract interpretation. The legality of the contract was not at issue. Nor

was there any doubt that the officer in charge was forbidden from making

additional payments to Ferris once the appropriation was exhausted; the court

noted that the officer was “justified” in stopping the work. Id. The sole question

was the extent to which the government was bound on its contract with Ferris. To

answer that question, courts follow the dictum that “[w]hen the United States

enters into contract relations, its rights and duties therein are governed generally

by the law applicable to contracts between private individuals.” Franconia

Assocs. v. United States, 536 U.S. 129, 141 (2002) (internal quotation marks

omitted). Context, of course, is critical in interpreting contracts. What Ferris

said is that in the circumstances of that case, where the government contracted to

pay for certain work and sufficient funds to pay for the work had been

appropriated (and even allocated to the contract), then the contractor could take

the contractual promise as binding; the contractor did not need to worry about

whether the funds would be reallocated while it was performing the contract.

This would have been a reasonable assumption by the parties; and ordinarily it

-22-
would be a reasonable construction of such a contract even if it contained subject-

to-availability-of-appropriations language. See Cherokee Nation, 543 U.S. at 637.

In other contexts, however, a court could properly interpret similar

language differently. The effect of context is well-illustrated by the opinion of

the Court of Claims in Blackhawk Heating & Plumbing Co. v. United States, 622

F.2d 539 (1980), an opinion cited repeatedly by the Supreme Court in Cherokee

Nation. It is worthwhile to describe Blackhawk in detail. The case concerned an

agreement between the Veterans Administration (VA) and a contractor to resolve

a dispute regarding cost overruns for construction of a hospital. See id. at 541.

The parties settled on a compromise payment of $10.3 million. See id. The

amount was to be paid in two installments: $8 million within 40 days of

settlement, and $2.3 million within 90 days of settlement. See id. at 544. To pay

the settlement, the VA needed to transfer (“reprogram”) funds that had been

earmarked for other projects. See id. at 542. This was done, and the VA then

sent letters notifying some congressional committees (those involved in VA

appropriations) of the reprogramming. See id. at 543. But several members of

Congress, after reviewing a GAO report on the settlement, wrote to the VA

expressing concern about the payments. See id. at 544. When the VA decided to

go forward with the settlement anyway, Congress enacted legislation retroactively

barring any VA settlements exceeding $1 million absent an independent audit

(which had not been prepared for the Blackhawk settlement), although the

-23-
conference report on the legislation agreed that up to $6 million could be

advanced on settlements that predated the law’s effective date. See id. at 544–45.

The law was enacted on January 3, 1974; and on the same day the VA paid $6

million of the initial $8 million installment required by the settlement, about three

weeks after it was due. See id. at 543, 545. The VA made no further payments.

See id. at 546.

Blackhawk sued the VA for the unpaid settlement amounts plus interest.

See id. The lawsuit turned on the meaning of Article 8 of the agreement, which

stated: “The Government’s obligation hereunder is contingent upon the

availability of appropriated funds from which payment in full can be made.” Id.

at 542 (internal quotation marks omitted). The parties agreed on the meaning to

some extent. They both thought that Article 8 at least made the agreement

contingent on the VA’s reprogramming funds initially earmarked for other

construction purposes, although it was everyone’s understanding that the

contingency was highly likely to occur. See id. at 542–43, 546–47.

The VA contended, however, that Article 8 further limited its liability in

two ways: (1) its obligation was contingent on approval of the reprogramming by

congressional committees notified of it beforehand, see id. at 546–47, and (2) it

was conditioned on there being no “affirmative action by the Congress that would

prevent the [VA] from paying,” id. at 550. After examining the relevant statutory

and regulatory framework, the parties’ course of dealing, and communications

-24-
between the parties, the court disagreed with the VA on the first limitation but

agreed on the second.

In rejecting the VA’s claim that Article 8 made payment to the contractors

conditional on approval of reprogramming by the pertinent congressional

committees, the court observed that no statute required such approval, no VA

regulation stated that reprogramming would not go forward without

congressional-committee consent, and no practice or policy of the VA prohibited

unconsented-to programming. The court said that notification to the committees

was merely a courtesy to maintain good relations with Congress. Moreover, it

found that no one representing the VA had ever told Blackhawk that committee

approval was necessary for reprogramming, and in none of the prior settlement

agreements between Blackhawk and the VA had committee approval of

reprogramming been raised as a consideration. See id. at 547–50.

As for the VA’s contention that Article 8 made payment conditional on

Congress’s not acting to prevent payment, the court found the issue a close one,

but sided with the VA. Crucial to this conclusion was evidence of what happened

at the meeting to execute the settlement. At the meeting a VA attorney mentioned

that Article 8 would limit the government’s liability should Congress

affirmatively prevent the agency from paying. See id. at 543. To this statement

the contractor merely shrugged and said nothing. See id. The parties then signed

-25-
the agreement. See id. The court said that the contractor’s shrug “was both an

acknowledgment of understanding and a dismissal of concern.” Id. at 551.

The court’s ultimate ruling gave each party a partial victory. Article 8

relieved the VA of liability on the second installment of $2.3 million, which came

due after Congress enacted the legislation limiting the VA’s settlement payments;

but the VA remained liable on the balance of the first installment of $8 million

because it came due before the legislative enactment, when the agency had funds

available with which to pay. See id. at 552–53.

For present purposes, the lesson of Blackhawk is that the court did not

confine its analysis to the abstract meaning of “contingent upon the availability of

appropriated funds”; it construed the language in light of the relevant statutes and

(nonexistent) regulations, the policies and practices of the agency, and the

communications between the parties.

Adopting this perspective, I now turn to Plaintiffs’ ISDA contracts. First,

consider the statutory context. As discussed above, congressional enactments

alerted tribal organizations to the likelihood of shortfalls. The appropriation for

every pertinent year set an upper limit on what could be provided for contract-

support costs. Whereas in Ferris the government presumably could have avoided

overcommitting its limited appropriation by refusing to execute additional

contracts, the Secretary had no such discretion. The ISDA requires the Secretary

(1) to approve all tribal requests to execute ISDA contracts (unless certain narrow

-26-
statutory grounds justify refusal), see 25 U.S.C. § 450f(a)(1), (2); and (2) to pay

(subject to the availability of appropriations) the full amount of contract-support

costs for each such contract, see id. § 450j-1(a)(2), (b). Because the amount of

contract-support costs was thus a matter over which the Secretary had essentially

no control, the only purpose for capping those costs would be to reduce them

below what would otherwise be required by the ISDA.

Moreover, the Secretary gave tribal organizations repeated official notices

that the restricted appropriations for contract-support costs had not been adequate

and were expected to be inadequate for full funding, so that contingency plans

had been made regarding how to apportion funds if they turned out to be

inadequate. An annual notice in the Federal Register advised that the BIA would

need to determine whether the appropriated funds for contract support would

suffice to pay contract-support costs for all ISDA contracts and, if not, the BIA

would pay only a pro rata portion of the costs. Every contracting organization

well knew that its contract-support costs had not been paid in full for the prior

year; and the notices would have had scant purpose had the BIA expected the

appropriation to be adequate. Thus, unlike Ferris, the tribal organizations knew

what to expect. I am not saying that giving notice can by itself relieve an agency

of an obligation to pay. If the money is there, the agency must pay, as in

Cherokee Nation. Rather, the point is that if legislation precludes full payment,

-27-
the contractor cannot rely on Ferris if the contractor has proper notice of the

problem.

In short, even though a government contractor ordinarily may not be

chargeable with knowledge of the administration of the appropriation that funds

the contract, it cannot close its eyes to the clear implication of statutory funding

restrictions, official information publicly promulgated on the subject, and the

historical course of dealing. Whether an appropriation can be viewed as a line

item or a lump sum is a relevant part of the context, but only a part. Given the

context here, a reasonable person construing the AFAs at issue would understand

that the Secretary was promising to pay only the portion of contract-support costs

that could be funded by the restricted congressional appropriation for such costs

on all ISDA contracts. To be sure, ambiguities in contracts with Indian tribes

should be resolved in favor of the tribes. See 25 U.S.C. § 450l(c) (Model

Agreement § 1(a)(2)). But that rule does not apply here because of the clarity of

the meaning of “subject to the availability of appropriations” in the present

context. That language means that the government’s contract-support-cost

obligation is subject to the availability of sufficient appropriations to pay for

contract-support costs on all the Secretary’s ISDA contracts.

My view is supported by three opinions of two other circuits regarding the

availability of contract-support costs in light of the not-to-exceed language in the

appropriation acts. Two opinions predate Cherokee Nation; but I see nothing in

-28-
them contrary to the Supreme Court’s analysis. And what is most important about

the decisions is not so much their ultimate conclusions as their construction of the

legislation, which was what I have said would be the reasonable interpretation by

a tribal organization entering into an ISDA contract with the BIA.

I have already mentioned Ramah Navajo School Board, 87 F.3d 1338. In

that opinion the court interpreted the ISDA’s subject-to-availability provision to

mean that “each Tribe had a right only to the amount of CSF [contract-support

funding] it would have received under a legal allocation plan.” Id. at 1346. It

then held that the allocation plan would be legal only if it were pro rata for all

tribal organizations. See id. at 1349. It found support in “[t]he legislative history

of the 1995 Act[, which] indicates that Congress, aware that it had appropriated

an insufficient amount for full CSF funding, intended for the agency to deal with

the shortfall through a pro rata reduction.” Id. I agree that organizations

contracting with the Secretary would have understood that none of them would

receive full contract-support-cost funding if the restricted appropriation was

insufficient to pay full costs for all of them. And, as I said earlier, the plaintiffs

in Ramah Navajo School Board so understood the law. See Appellant’s Brief at

27, Ramah Navajo Sch. Bd., Inc. v. Babbitt, Nos. 95-5334, 95-5348 (D.C. Cir.

Nov. 15, 1995).

In Babbitt v. Oglala Sioux Tribal Public Safety Department, 194 F.3d 1374

(Fed. Cir. 1999), the court addressed, and rejected, a claim seeking the same

-29-
relief as in our case—full payment of contract-support costs despite a not-to-

exceed appropriation and a subject-to-availability proviso. The plaintiff raised an

estoppel argument, asserting that it had detrimentally relied on § 450j-1(g)’s

entitlement language. But the court said that it was unreasonable for the plaintiff

to expect full payment of indirect contract-support costs because the subject-to-

availability provisos in § 450j-1(b) and the model contract unequivocally

informed it otherwise. See id. at 1380.

The third opinion, of course, is Arctic Slope Native Assn’n, Ltd. v.

Sebellius, 629 F.3d 1296 (Fed. Cir. 2010). In a thoughtful opinion by the court

most conversant with federal contract law, the identical issue raised in this case

was resolved in favor of the government.

In sum, I conclude that in the context of the appropriation statutes for the

years in question, the ISDA, and the parties’ course of dealing, the subject-to-

availability language of Plaintiffs’ ISDA contracts meant that the contract-support

costs for each would need to be reduced if the appropriation for contract-support

costs was inadequate to pay such costs on all ISDA contracts.

I disagree with Plaintiffs’ contention that the Cherokee Nation opinion

requires otherwise. In that case the plaintiffs successfully sued for full payment

of their contract-support costs for ISDA contracts with the Indian Health Service

(IHS) (under the HHS Secretary) for fiscal years 1994 through 1997. See

Cherokee Nation, 543 U.S. at 634. Congress had appropriated between $1.277

-30-
billion and $1.419 billion each year for the IHS “to carry out” the ISDA. Id. at

637 (internal quotation marks omitted). “These appropriation Acts contained no

relevant statutory restrictions,” id., in contrast to appropriations to the BIA for

ISDA purposes during those years, which contained caps on contract-support

funding.

As Plaintiffs read Cherokee Nation, it stands for the proposition that

because the appropriation for contract-support costs was more than adequate to

pay those costs for any particular tribal organization, the subject-to-availability

requirement was satisfied for each individual contract and the government is

liable. But, as I have previously noted, Cherokee Nation does not so hold. In that

case the available funds sufficed to pay the total of contract-support costs for all

contracts at issue.

I must acknowledge, however, that the Cherokee Nation opinion did

endorse the general proposition (which, the Court observed, the government had

not contested) relied on by Plaintiffs—that “as long as Congress has appropriated

sufficient legally unrestricted funds to pay the contracts at issue, the Government

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.” Id.

Accordingly, said the Court, the government was bound in that case unless it

-31-
could “show something special about the promises . . . at issue,” id. at 638,

keeping in mind the importance of “provid[ing] a uniform interpretation of . . .

language [similar to ‘subject to the availability of appropriations’], lest legal

uncertainty undermine contractors’ confidence that they will be paid, and in turn

increase the cost to the Government of purchasing goods and services,” id. at 644.

But what compels a different outcome here is the presence of “something

special,” id. at 638, that was not present in Cherokee Nation—namely, the context

discussed at length above to show that tribal organizations must have understood

that caps in the appropriation acts could (and almost certainly would) require a

percentage reduction in payment of contract-support costs. Recall that the ISDA

does not give the Secretary discretion to refuse to enter into an ISDA contract or

to refuse to pay contract-support costs. Thus, the language of the annual

appropriations acts that set a limit on the funds available for contract-support

costs could have no purpose other than to require underpayment of contract-

support costs in ISDA contracts. And because the Secretary could not beggar one

tribal organization (by reducing its contract-support costs) to pay the full

contract-support costs for another organization, see 25 U.S.C. § 450j-1(b) (“[T]he

Secretary is not required to reduce funding for programs, projects, or activities

serving a tribe to make funds available to another tribe or tribal organization

under [the ISDA].”), Congress must have contemplated a reduction for all tribal

organizations. Indeed, if we were to apply to the present context the Ferris

-32-
doctrine as interpreted by Plaintiffs, the dollar limitations in the appropriations

acts would be empty gestures. Because the government would still owe full

contract-support costs on each ISDA contract, the caps would be irrelevant. We

should refrain from interpreting statutory language in a way that renders it

impotent. See Fed. Trade Comm’n v. Accusearch, Inc., 570 F.3d 1187, 1198

(10th Cir. 2009) (“Under a long-standing canon of statutory interpretation, one

should avoid construing a statue so as to render statutory language superfluous.”

(internal quotation marks omitted)). I would adopt the more natural interpretation

of the statutory scheme, which, as noted above, has been adopted in three other

circuit opinions and even endorsed by the plaintiffs in one of the cases.

Moreover, Cherokee Nation does not preclude my interpretation. On the

contrary, the discussion in that opinion of several arguments made by the

government suggests that the Court was unwilling to endorse the rigid view of

Ferris adopted by Plaintiffs here—namely, that so long as the appropriation for

contract-support costs was greater than the amount of such costs in an individual

ISDA contract, the subject-to-availability condition is not triggered and the

government is liable. If Cherokee Nation had, as Plaintiffs contend, embraced

their view of Ferris, it would have been unnecessary for the Court to address

those arguments by the government; after all, the Ferris doctrine, as understood

by Plaintiffs, would have guaranteed the Cherokee Nation’s victory regardless of

the merits of the other arguments. It is therefore instructive to examine some of

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the grounds on which the Court rejected the government’s arguments against

applying the general Ferris rule in that case, because the things that the Court

found missing in Cherokee Nation are present here.

First, in concluding that ISDA contracts should be treated like ordinary

procurement contracts, the Court wrote that it had “found no indication that

Congress believed or accepted the Government’s current claim that, because of

mutual self-awareness among tribal contractors, tribes, not the Government,

should bear the risk that an unrestricted lump-sum appropriation would prove

insufficient to pay all contractors.” Cherokee Nation, 543 U.S. at 640 (emphasis

added). Here, however, we confront restricted lump-sum appropriations that set a

maximum expenditure for contract-support costs; and, perhaps more importantly,

the context (as I have previously explained) unambiguously shows that Congress

intended, and the tribal organizations were on notice and understood, that the

restriction would reduce the contract-support costs to which each was otherwise

entitled, thereby imposing on them the risk of an inadequate appropriation.

Second, the Court rejected the government’s reliance on the language in

§ 450j-1(b) that “the Secretary is not required to reduce funding for programs,

projects, or activities serving a tribe to make funds available to another tribe or

tribal organization under [the ISDA],” because no such reduction was necessary.

The Court observed that the plaintiff tribes’ claims could be paid out of

unrestricted funds that had gone for government, not tribal, operations. See id. at

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641–42. In stark contrast, here the funds necessary to pay one tribal

organization’s contract-support costs in full would have to come from money that

would otherwise go to another contractor because of the appropriations cap on

contract-support costs.

Third, the Court rejected the government’s argument that the subject-to-

availability language of § 450j-1(b) gave the Secretary “authority . . . to adjust

funding levels based on appropriations”; it observed that the government could

point to no supporting statutory language and that the legislative history merely

showed that “Executive Branch officials would have liked to exercise

discretionary authority to allocate a lump-sum appropriation too small to pay for

all the contracts that the Government had entered into[, but] the history does not

show that Congress granted such authority.” Id. at 643–44 (internal quotation

marks omitted). True, the appropriations caps in this case likewise do not confer

discretion on the Secretary. But what the Secretary sought discretion to do in

Cherokee Nation is compelled here. The Secretary is forbidden to use for contract

support any funds in the BIA lump-sum appropriations above the capped amounts.

Fourth, and finally, the Court said that the government could not rely on a

1999 statute setting limits on contract-support costs based on earlier committee

reports. The statute said:

Notwithstanding any other provision of law the amounts appropriated
to or earmarked in committee reports for the Indian Health Service

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 for payments to tribes for contract support costs are the total amounts
available for fiscal years 1994 through 1998 for such purposes.

Id. at 645 (brackets, ellipses, emphasis, and internal quotation marks omitted).

The Court said that it would be reasonable to interpret this language to forbid

payment to the plaintiff tribes; but it adopted another interpretation to avoid

construing the statute as having a retroactive effect. In the case before us,

however, restrictions in the appropriations acts are not being applied

retroactively.

To be sure, Cherokee Nation does not definitively endorse the

government’s position in this case. But it certainly did not adopt Plaintiffs’

position, either. If it had, the Supreme Court could have short-circuited much of

its discussion by simply saying that the government’s arguments were beside the

point, because even granting all those arguments, there was certainly a sufficient

appropriation to pay the contract-support costs of any single tribal organization.

As just one example, it would not have had to decide whether to interpret the

1999 statute to apply retroactively, because the plaintiffs in that case would have

prevailed anyway.

Accordingly, I reject Plaintiffs’ contention that language in Cherokee

Nation, even if not the holding, compels judgment in their favor.

I now turn to Plaintiffs’ two remaining arguments that their ISDA contracts

require full payment of their contract-support costs. One argument is that their

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ISDA contracts incorporate the provisions of the ISDA; and because the ISDA

requires full payment of contract-support costs, each contract does so as well. I

reject this argument because, as already explained at length, the ISDA does not

require full payment. Full payment is conditioned on the availability of funds.

See 25 U.S.C. §§ 450j(c)(1), 450j-1(b).

Plaintiffs’ other argument is that their construction of the ISDA contracts is

compelled by an admission in a government brief in another case. The issue in

Southern Ute Indian Tribe v. Leavitt, 497 F. Supp.2d 1245 (D.N.M. 2007), was

whether the IHS could be compelled to enter into a new ISDA contract with the

Southern Utes even though all funds appropriated for contract-support costs for

the year had already been contractually committed. In a brief filed on December

19, 2005, the government made the following statements: (1) “[T]he issue here is

whether IHS is potentially liable for contract support costs once it signs on the

dotted line. Given the decision in Cherokee [Nation], IHS at a minimum was

reasonable in its belief that by entering a new self-determination contract with

plaintiff, it might be implicitly promising to pay contract support costs in excess

of Congressional appropriations,” J. App., Vol. VII at 1670 (Reply in Support of

Defendants’ Motion for Summary Judgment at 6, Southern Ute, 497 F. Supp. 2d

1245); (2) “According to the [Supreme] Court [in Cherokee Nation], the language

[of 25 U.S.C. § 450l(c) (Model Agreement § 1(b)(4))] gave IHS ‘no legal right to

disregard its contractual promises,’ even in the absence of available

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appropriations,” id. at 4; and (3) “Thus, contrary to [Southern Ute’s] claim,

defendants might be held liable for plaintiff’s contract support costs despite the

inclusion of the [subject-to-availability] clause in their contract,” id. Plaintiffs

contend that these statements amount to an admission that their interpretation of

their ISDA contracts is plausible, even reasonable, and that therefore we must

adopt that interpretation because of the rule that we interpret ambiguities in ISDA

contracts in favor of the tribes. See 25 U.S.C. § 450l(c) (Model Agreement

§ 1(a)(2)).

I disagree. The contract-interpretation issue in Southern Ute was quite

distinct from what confronts us. The context of the dispute was as follows: The

IHS had informed the Southern Utes that there were no more funds available for

contract-support costs. See Southern Ute, 497 F. Supp.2d at 1248–49. The IHS

was willing to enter into a contract with the tribe for new services but only if the

tribe waived its rights to contract-support costs. See id. at 1250. The tribe

refused to execute a waiver. See id. The question then became whether the IHS

could therefore refuse to enter into a contract with the tribe. See id. at 1252. The

IHS was concerned that its executing the standard contract in that context would

amount to a binding promise to pay contract-support costs despite the absence of

appropriated funds to pay for those costs. See id. The quoted statements from the

government’s brief were to explain why the IHS was concerned. In my view, the

context of the contract-interpretation issue before us is sufficiently different that

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nothing in the government’s Southern Ute brief amounts to a concession of

ambiguity regarding our issue.

D. Are Plaintiffs Entitled to Recovery Because of Executive’s
Failure to Request Adequate Appropriation?

Plaintiffs’ final argument is that the government is liable for full payment

because the executive failed to request the needed funding from Congress. They

rely on S. A. Healy Co. v. United States, 576 F.2d 299 (Ct. Cl. 1978). The

holding in Healy, however, is quite fact-specific; and the general rule stated in the

opinion would not apply here. In that case, Healy and the government executed a

fixed-price construction contract in November 1970, before Congress

appropriated funds. See id. at 300–02. The contract contained the following

subject-to-availability clause:

Under the contract to be entered into under these specifications, the
liability of the United States is contingent on the necessary
appropriations being made therefor by the Congress and an
appropriate reservation of funds thereunder. Further, the
Government shall not be liable for damages under this contract on
account of delays in payments due to lack of funds.

Id. (internal quotation marks omitted). The contract was also governed by the

Reclamation Project Act of 1939, which provided that “‘the liability of the United

States [on its project contracts] shall be contingent upon appropriations being

made therefor.’” Id. at 303 (quoting 43 U.S.C. § 388).

On December 22, 1970, Healy (as required by the contract) submitted a

proposed schedule of forecasted earnings that set forth, among other things,

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$4,887,000 for fiscal year 1972. See id. at 301. The contracting officer approved

this schedule in February 1971 and Healy promptly began construction. See id.

Meanwhile, in late January 1971 the President sent his proposed budget to

Congress; but he requested only $1,800,000 for Healy’s contract for fiscal year

1972. See id. at 302. Not until July 1971 did the contracting officer notify Healy

how much had been requested. See id. Healy protested that the requested amount

was “‘totally inadequate’” and, on inquiring about the possibility of a

supplemental appropriation, was told that prospects were bleak. Id.

Nevertheless, Healy decided to proceed to the extent possible and continued with

construction until September 22, 1971, when funds were exhausted. See id.

Three months later, Congress approved a supplemental appropriation request that

provided enough money to cover Healy’s earnings for fiscal year 1972. See id.

In January 1972 the government notified Healy that more money was available,

and construction resumed. See id.

Despite the contractual and statutory subject-to-availability provisions, the

court awarded damages to Healy. See id. It reasoned that the contract did not

unambiguously state that the contractor had to bear “the full risk of a funds

shortage” when the shortage was the agency’s fault; and it found that the

government agency was at fault for not requesting a sufficient appropriation to

pay the contractor. Id. at 304; see id. at 305. Consequently, the contractor was

entitled to damages caused by the work stoppage between when appropriated

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funds were exhausted and when a supplemental appropriation bill was enacted.

See id. at 302, 307–08.

The court described its holding as a narrow one. It said that it was not

suggesting that the “executive branch was contractually obligated to request from

[Congress] appropriations adequate to fund continued performance.” Id. at 307.

Rather, it held

only that (a) a contract will not be construed to throw all the cost and
loss necessarily incident to such a decision on the contractor, and
none of it on the party whose decision caused the loss, unless clauses
of the contract require that result without ambiguity, and (b) . . . a
government agency that claims a right to do this is under an implied
obligation to assist its contractor, by timely and candid information
to take the measures that the latter may deem best to diminish and
mitigate its loss.

Id.

The situation presented on this appeal is quite distinguishable from the

egregious conduct in Healy. Healy was not informed that it might be underpaid

until well after the contract was executed and performance had begun. Indeed,

the contracting officer approved the contractor’s budget even though the President

had already requested less than 40% of that sum from Congress, and the officer

did not notify the contractor of that request for another five months. Here, in

contrast, Plaintiffs do not dispute the government’s contention that “the tribes

have participated in annual budget consultations with BIA.” Aplee. Br. at 48

n.16; see 25 U.S.C. § 450j-1(i) (requiring the Secretary to solicit tribes’

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participation in formulating the BIA’s budget requests). And, as I have already

explained, the statutory context and the historical course of dealing made it clear

to tribal organizations that annual shortfalls were likely and that contract-support

costs would be underpaid.

III. CONCLUSION

For the foregoing reasons, I respectfully dissent.

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