Conflict in the Courts, Tribal Contracts in the Balance

Last month the Supreme Court heard oral arguments in a case testing whether federal contracts with Tribes are really contracts at all. The case involves contracts that the Bureau of Indian Affairs awards tribal governments under the Indian Self-Determination Act, but it also has direct implications for tribal contracts with the Indian Health Service. If the government is right, these contracts are not contracts at all. Instead, the government can pay whatever it wants, whenever it wants, even after the Tribes have fully performed their end of the bargain. That outcome would tear down the foundation of the Indian Self-Determination Act, under which Tribes operate one-half of all BIA and IHS operations, and it would relegate Indian Tribes to being second-class contractors.

It wasn’t supposed to be this way.

The Indian Self-Determination Act was rewritten in the 1980s and 1990s precisely to compel the government to award true, binding contracts to Tribes that chose to take over federal operations on their reservations. The agencies were told to calculate the full amount due under each contract, to pay each tribal contractor that amount, and to request supplemental appropriations from Congress if agency funds ran out. After all, that’s what the government does with every other government contractor, and in 1987, Senator Daniel Inouye declared that the past discriminatory treatment suffered by tribal contractors would end with the new statutory language.

But within a few years’ time the agencies were back at it, requesting too few funds to pay all the contracts, never telling contractors how much they would be paid until the contract year was over, yet all the while happily accepting the services that the Tribes were providing. The tribal contractors began to fight back, and in 2005 the Supreme Court ruled for the tribes in the Cherokee case. Then last year in the Ramah case, the Tenth Circuit Court of Appeals in Denver applied that ruling and agreed that all Tribes were entitled to be paid in full, just like any government contractor, and it restored a class action lawsuit against the BIA. But in the meantime, another appellate court in Washington, D.C. disagreed and ruled that the government could not be held responsible, so long as the agency had spent all that it had received from Congress – even though the agency had deliberately refused to ask Congress for sufficient funds to pay the contracts.

In a few weeks the Supreme Court will resolve the conflict between these two appellate decisions. But the case has already forced the government to defend the seemingly indefensible. The government defends agency practices under which the amounts to be paid BIA and IHS contractors are simply set at will by the agencies, then are changed from one day to the next. The government even defends a system that is so poorly managed that on a regular basis, scores of contractors are accidentally overpaid even while other tribes are paid only a fraction of what they are due, and sometimes nothing at all. In essence, the government is asking the Court to bless its incompetence and convert these contracts into discretionary grants that have no payment guarantees at all. It’s also asking the Court to bless a system under which tribes essentially provide the government with extra free services beyond what they are paid for.

The government would never get away with treating Boeing that way, and the Boeings of the world are watching. In a rare alliance with Tribes, the U.S. Chamber of Commerce and the National Defense Industrial Association have stepped in to the case to urge that the Court uphold the Tribes’ contract rights. They point out that well-settled rules are essential to cost-effective government contracting. If the Court upsets those rules, it could undermine the entire government contracting regime, forcing out some contractors who cannot afford to run the risk not getting paid, while increasing the cost of services from those contractors who continue doing business.

A decision in the case is expected before the Court’s current term ends in June.

Lloyd Miller is a tribal rights attorney with the Sonosky Chambers firm. He argued the Cherokee case in 2005, and is on the legal teams handling the Ramah and Arctic cases.

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Conflict in the Courts, Tribal Contracts in the Balance

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