Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division
In the Case of:
Bristol Bay Area Health
Corporation,
Appellant,
- v. -
Indian Health Service,
Appellee.
DATE: March 27, 1992
Docket No. C-423
DECISION
This case is before me on a request for hearing filed by Appellant, Bristol
Bay Area Health Corporation
(BBAHC), challenging a decision dated June 28, 1991 by Appellee, Indian Health
Service (IHS), declining
Appellant's request for modification of Contract No. 243-88-0008.
IHS's stated ground for this declination was that under the Indian Self-Determination
and Education
Assistance Act (Act), Pub. L. 93-638, as amended, 25 U.S.C. 450 et seq., "the
proposed project or
function to be contracted for cannot be properly completed or maintained by
the proposed contract." Id at
450f(a)(2)(C). On July 26, 1991, BBAHC appealed the declination pursuant to
section 450f(b)(3) of the
Act.
This case was originally assigned to Administrative Law Judge (ALJ) Joseph
K. Riotto for hearing and
decision. Judge Riotto held a prehearing telephone conference in this case on
August 9, 1991. During this
conference, the parties agreed that 1) the issues involved were solely legal
and 2) the case could be decided
based on written submissions without the need for an in-person evidentiary hearing.
Both parties
submitted briefs and responses. On December 2, 1991, BBAHC requested that the
ALJ hear in-person oral
argument in Alaska. On December 13, 1991, this case was reassigned to me. Oral
argument was heard on
February 6, 1992 in Anchorage, Alaska.
Based on the record, and on applicable law, I find in favor of Appellee, IHS.
ISSUE
The issue in this case is whether IHS's refusal to modify the subject contract
was in compliance with
applicable statutory and regulatory criteria.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Findings and Conclusions 1 - 25 are undisputed. See J. S. Facts 1 - 10. 1/
1. IHS is an agency within the Public Health Service of the U.S. Department
of Health and Human
Services (DHHS). IHS provides health services for American Indian and Alaska
Native people living on
or near federal Indian reservations. IHS administers its program directly or
through contracts with Indian
tribal organizations under the Act, or with other Indian contractors under the
Buy-Indian Act, 25 U.S.C.
47.
2. The Alaska Area Native Health Service (AANHS) is one of 12 IHS Area Offices.
AANHS is
responsible for health services provided through various IHS programs to IHS
beneficiaries living in the
State of Alaska. BBAHC and its member native villages are served by AANHS.
3. BBAHC is a non-profit corporation incorporated under Alaska law to provide
health services in the
Bristol Bay region of Alaska.
4. BBAHC is a "tribal organization" within the meaning of section 4(l) of the Act, 25 U.S.C. 450b(l).
5. BBAHC's service area consists of 32 Alaska Native villages, which are "Indian
tribes" within the
meaning of section 4(e) of the Act, 25 U.S.C. 450b(e). There are approximately
4,380 Alaska Natives in
this service area, which covers approximately 46,573 square miles -- an area
approximately the size of the
State of Ohio.
6. Under the Act, upon the request of an Indian tribe, the Secretary of the
DHHS is directed to contract
with a tribal organization designated by the requesting tribe(s), to plan, conduct
and administer programs
or portions thereof enumerated in subsection 102(a)(1)(A) - (E) of the Act,
25 U.S.C. 450f(a)(1)(A) - (E).
7. Under section 102(a)(2) of the Act, the Secretary of DHHS may decline to
enter a contract, or decline a
requested modification to a contract, only for one of the following reasons:
(A) the service to be rendered
to the Indian beneficiaries of the particular program or function to be contracted
will not be satisfactory;
(B) adequate protection of trust resources is not assured; or (C) the proposed
project or function to be
contracted for cannot be properly completed or maintained by the proposed contract.
25 U.S.C.
450f(a)(2)(A) - (C).
8. Under authorization from villages in the Bristol Bay service area, BBAHC
has negotiated and
performed a series of self-determination contracts with AANHS for many years.
9. Since 1980, BBAHC and IHS have contracted for BBAHC to occupy and operate
the hospital, living
quarters and health services program for IHS beneficiaries, and for non-Natives
on a fee-for-service basis,
at the federal hospital compound at Kanakanak, Alaska. The Kanakanak service
unit is a tribal-operated
service unit.
10. The Kanakanak Hospital compound is connected by road with the village of
Dillingham, Alaska,
approximately 5.5 miles away, and with the village of Aleknagik, Alaska, approximately
25 miles away.
The Kanakanak compound is inaccessible by road from any other location, including
Anchorage, 325 air-
miles away.
11. All of the quarters on the Kanakanak compound are federally-owned real
property as defined at 41
C.F.R. 101-47.103-12.
12. BBAHC, by letter dated June 21, 1989, proposed to AANHS that Contract No.
243-88-0008 be
modified. The requested modification would have provided more specificity regarding
the administrative,
operational, and maintenance functions to be performed by BBAHC with regard
to the federal quarters
located on the Kanakanak Hospital compound. Specifically with regard to this
appeal, the modification
would also have authorized BBAHC to perform the rent-setting function for these
quarters using
Dillingham as the nearest "established community" on which to base
the rental and utility rates for the
Kanakanak compound.
13. Substantial agreement was eventually reached on each of BBAHC's objectives
in its proposed contract
modification, with the exception of the issue of whether BBAHC could perform
the rent-setting function
for the federal quarters at the Kanakanak compound using Dillingham, rather
than Anchorage, as the
nearest "established community".
14. The only quarters-related function that BBAHC does not presently perform
is rent-setting. The parties
agree that this function is contractible, under appropriate conditions.
15. At 5 U.S.C. 5911, Congress authorized the President of the United States
to prescribe regulations
governing the provision, occupancy and availability of federal quarters and
facilities, and to determine their
rates and charges.
16. The authority of the President under 5 U.S.C. 5911(f) to prescribe regulations
was delegated to the
Director of the Office of Management and Budget (OMB) by section 9(1) of Executive
Order 11609, 36
Fed. Reg. 13747 (July 22, 1971).
17. Pursuant to this rulemaking authority, OMB published Circular A-45, "Policy
Governing Charges for
Rental Quarters and Related Facilities" in final form at 49 Fed. Reg. 13777
(April 6, 1984).
18. Circular A-45, pursuant to 5 U.S.C. 5911 and 5 U.S.C. 5536 (which statute
provides that federal
employees whose pay and allowances are fixed by statute or regulation may not
receive additional pay and
allowances for any service or duty unless specifically authorized by law) sets
forth the following
principles: 1) rental rates and charges for Government quarters and other facilities
will be based upon their
reasonable value to the employee; 2) reasonable value is determined by the rule
of equivalence, that
charges for rent and related facilities should be set at levels equal to those
for comparable private housing
located in the same area (i.e. rents are to be comparable with those in the
nearest "established community");
3) an established community is ordinarily the nearest population center having
a year-round population of
1,500 or more (5,000 in Alaska, given that State's "unique characteristics"
49 Fed. Reg. 13778)), provided
that it has minimum essential medical services; and 4) rents and other charges
may not be set so as to
provide a housing subsidy, serve as an inducement in the recruitment or retention
of employees, or
encourage occupancy of existing government housing.
19. As of the 1980 decennial census, Anchorage was the nearest established
community to Kanakanak
having a year-round population of 5,000 or more.
20. Pursuant to section 7(e)(5) of Circular A-45, exceptions to its requirements
will be permitted, "only
upon written request in those very unusual circumstances when it is demonstrated
to the Office of
Management and Budget that the application of the provisions of this Circular
will not result in a rental rate
equivalent to the reasonable value of the quarters to the occupant [emphasis
added]".
21. On August 17, 1989, BBAHC petitioned IHS to request an exception from OMB
from the "established
community" provision of Circular A-45 to permit BBAHC to use Dillingham,
rather than Anchorage, as
the nearest "established community" for the purpose of calculating
equivalent rental and utility rates,
amenities and isolation adjustments for the Kanakanak quarters.
22. On November 16, 1989, IHS submitted a request for this exception to OMB.
23. On June 11, 1991, OMB responded, concluding that an exception was not warranted.
OMB stated, "it
has not been conclusively demonstrated that application of the Circular will
result in rental rates that are
not equivalent to the value of the quarters."
24. By letter dated June 28, 1991, AANHS declined the BBAHC proposed contract
modification, on the
statutory ground that the "proposed project or function cannot be properly
maintained by the proposed
contract." 25 U.S.C. 450f(a)(2)(C).
25. By letter dated July 26, 1991, BBAHC appealed this declination decision.
26. IHS has the burden of proof to show cause for declination. 42 C.F.R. 36.208(a)(3).
27. The contracting authority and declination provisions of section 102 of
the Indian Self-Determination
Act, 25 U.S.C. 450f, do not supersede 5 U.S.C. 5911 or OMB Circular A-45.
28. While the Secretary is directed to enter into self-determination contracts
with tribal organizations, no
authority exists to support the proposition that the Secretary can enter into
contracts which he has no
authority to administer.
29. The parties agree that OMB Circular A-45 is a substantive rule, issued
pursuant to a specific delegation
of rulemaking authority, and it implements that authority through procedures
which determine how rents
are to be set for federal quarters. BBAHC R. Br. 1.
30. Dillingham, having a year-round population of 2,017 as of the unofficial
1990 census, is not an
"established community" as defined in Circular A-45.
31. Pursuant to section 7(e)(5) of Circular A-45, OMB expressly reserved to
itself the right to grant
exceptions to the Circular's requirements.
32. 25 U.S.C. 450j(f) does not provide independent authority for IHS to waive
Circular A-45's
established community requirement.
33. IHS is bound by OMB's decision declining to grant an exception from the
established community
requirement.
34. IHS cannot contract out to others a power, role, or function that it does
not possess, nor can IHS
authorize anyone to disregard the law.
35. Application or waiver of circular A-45 is solely within OMB's jurisdiction.
36. The Secretary of DHHS has no discretion to ignore OMB's rent-setting comparability
rules, and he
does not have the option, through the exercise of his contracting authority,
of empowering BBAHC to act
in violation of such rules.
37. IHS has no authority to review or look behind the OMB determination not
to grant a waiver or assess
its validity. Further, an ALJ in a hearing held pursuant to section 450f(a)(3)
of the Act has no authority to
pass judgment on the adequacy of OMB's fact finding or interpretation of the
law.
38. IHS's declination decision was in accordance with applicable statutes and
regulations. BBAHC's
contract modification was in conflict with OMB's determination not to grant
a waiver of the "established
community" standard provision of Circular A-45. IHS was bound by that determination
and had no
authority to review or question the underlying factual or legal conclusions
of OMB. IHS, therefore, had no
choice but to decline this contract modification. FFCL 1 - 37.
RATIONALE
The only issue in this case is whether IHS's refusal to modify the contract
to allow BBAHC to set rental
rates for federal quarters at the Kanakanak compound using Dillingham, rather
than Anchorage, as the
nearest "established community," is lawful.
BBAHC argues generally that: 1) IHS has broad legal authority under the Act
to review and make an
independent analysis of the facts underlying OMB's denial that Dillingham can
be used as the "established
community" for purposes of setting rental rates at the Kanakanak hospital
compound; and 2) such authority
can be exercised despite BBAHC's acknowledgment that it has no greater contractual
rights under the Act
than the IHS whom otherwise would exercise such authority.
Specifically, BBAHC argued in its briefs and at oral argument: 1) IHS's decision
refusing BBAHC's
proposal to modify the contract did not comport with the statutory criteria
for declining contracts; 2) rents
for privately owned residential real property in Anchorage are low because of
a glut of housing and a
downturn in the local economy and are not comparable to the cost of housing
in Dillingham; 3) Kanakanak
health care personnel who occupy government housing are paying artificially
low rents because the rents
are keyed to Anchorage and as a result such individuals are being subsidized;
4) OMB's ruling that there
was no reason to waive the rent setting rules in Circular A-45 (because it had
not been proven that they
resulted in rents being at variance with actual values), was without factual
support and also violated 5
U.S.C. 5536 in that it resulted in a de facto subsidy; 5) Circular A-45 only
provides that, "An established
community is ordinarily the nearest population center having a year-round population
of 1,500 or more
(5,000 in Alaska)"; 6) BBAHC believes that this is not an ordinary case,
that Congress did not mean to
direct IHS to enter into illegal contracts and that under section 102 of the
Act, Congress did not mean to
direct IHS to enter into contracts which, by some other provision of law, would
be illegal. Tr. 26; 7) OMB
has not produced an interpretation, but has simply denied the exception request,
and that a reading of the
Act and the Circular together, permits the Secretary to interpret the law to
determine whether the use of
Dillingham to establish rents on the Kanakanak compound is lawful and whether
it would, in fact,
eliminate existing violations of the Act (Tr. 33); and 8) while BBAHC is not
asking me to review the
validity of any statute or the legality of the Circular, it states that to permit
IHS to "hide behind" OMB's
ruling and to not allow BBAHC to "...challenge the specific conclusions
reached by OMB...," renders
meaningless IHS's obligation to make a reasoned decision applying the relevant
statutes and the declination
criteria listed in the Act, and likewise nullifies the hearing and appeal rights
guaranteed by law.
In response, IHS states that: 1) OMB Circular A-45 is a substantive government-wide
regulation having
the force and effect of law; 2) such regulation governs the rental rates of
federal quarters, including those at
the Kanakanak hospital compound; 3) IHS is bound by OMB's determination of such
rates; and 4) nothing
exists in the Act which gives authority to IHS to waive the application of Circular
A-45 to BBAHC.
Having considered the arguments of the parties, I am persuaded by the applicable
law that the principles of
self determination set forth in the Act do not clothe me with authority to review,
much less overrule, a
lawful determination by OMB relating to rental rates on federal property. OMB,
by statute and
implementing regulation, has exclusive jurisdiction over such rates and its
decisions are binding, without
the right of appeal, on all government agencies. Nor can BBAHC have greater
contractual rights than IHS,
which is subject to the exclusive jurisdiction of OMB in relation to the establishment
of rental rates on
federal property.
The Secretary of DHHS is obliged by the Act, with the limited exceptions set
forth in subsection
102(a)(2)(A) - (C) of the Act, 25 U.S.C. 450f(a)(2)(A) - (C), to contract with
Indian tribes, Alaska
natives, and tribal organizations, upon their request, in order that such entities
be permitted to take over the
functions previously performed by the Secretary to benefit Indian tribes and
Alaska natives. The Secretary
cannot, however, contract out to others a power, role, or function that he himself
does not possess, nor can
he authorize anyone to disregard the law.
Pursuant to 5 U.S.C. 5911, the President is authorized to prescribe regulations
governing rates and
charges regarding the provision of federal living quarters and related facilities.
The statute's language and
legislative history indicate that it applies not only to quarters furnished
to federal employees, but also to
those provided to persons such as government contractors - a category which
encompasses BBAHC. S.
Rep. No. 829, 88th Cong., 2d Sess. 6; 5 U.S.C. 5911(d). The President delegated
this power to OMB.
OMB then promulgated Circular A-45, which set forth rules applicable to the
entire executive branch of
government. BBAHC agrees that Circular A-45 constitutes valid substantive law.
OMB has explicit statutory authority to formulate policy regarding the rent
setting function. With regard
to the rent-setting function, OMB has retained for itself the jurisdiction concerning
applications for waivers
of the established community requirement. This authority was upheld in the case
of Yosemite Tenants
Association v. Clark, 582 F. Supp 1342 (E.D. Calif. 1984), where the Court held
that rent setting
procedures are not matters of agency discretion and that regulatory guidelines
must be followed. Thus, the
application or waiver of Circular A-45 is a matter solely within OMB's jurisdiction.
While under the Act the Secretary of DHHS has been directed to enter into self-determination
contracts
with Indian tribes and Alaska natives, this authority is only to enter into
contracts for programs which the
Secretary himself is authorized to administer. Here, since the Secretary (and
through the Secretary, IHS) is
without authority to waive the provisions of Circular A-45, IHS could not accept
a contract modification
from BBHAC that was not in compliance with the "established community"
provision of Circular A-45.
Thus, regardless of whether there is merit to BBAHC's contention that OMB's
ruling on rental rates was
made without reference to the facts and has the effect of subsidizing certain
Kanakanak personnel, BBAHC
has not shown that IHS has authority to look behind OMB's decision or to assess
its validity. In essence,
BBAHC proposed a contract modification (utilization of Dillingham instead of
Anchorage as the
"established community" under Circular A-45 for purposes of establishing
rental rates at the Kanakanak
hospital compound) which contravened a lawful determination by OMB that Anchorage
was the proper
"established community". BBAHC's insistence on using Dillingham to
establish rental rates, despite a
refusal by OMB to grant a waiver for use of such community, made such contract
modification unlawful.
Thus, the IHS properly relied on applicable statutes and regulations when it
declined to accept BBAHC's
modification. BBAHC has failed to raise any valid objection to IHS's declination
determination. 2/
CONCLUSION
Based on the undisputed facts and the law, I conclude that IHS properly concluded
that BBAHC was
prohibited by law from using Dillingham as the "established community"
for purposes of setting rental
rates at the Kanakanak hospital compound. BBAHC and IHS were bound by OMB's
refusal to waive the
"established community" standard in Circular A-45 to permit use of
Dillingham instead of Anchorage.
OMB, by law, has exclusive authority to set rental rates for federal property,
including BBAHC's facility in
Dillingham, Alaska. Therefore, I fin
that IHS's declination of BBAHC's contract modification request pursuant to
section 450f(2)(C) of the Act
was valid and in conformity with applicable regulatory criteria.
Edward D. Steinman
Administrative Law Judge
1. Citations to the record in this decision are as follows:
Joint Statement of Facts J.S. Facts
IHS Brief IHS Br. (page)
IHS Response Brief IHS R. Br. (page)
BBAHC Brief BBAHC Br. (page)
BBAHC Exhibits BBAHC Ex. (number)/(page)
BBAHC Response Brief BBAHC R. Br. (page)
Oral Argument Transcript Tr. (page)
Findings of Fact and FFCL (number)
Conclusions of Law
2. BBAHC, through this appeal of IHS's declination of its contract modification,
is attempting to obtain a
change or exception to the "established community" definition as it
relates to the rental rates at the
Kanakanak hospital compound. This is not the proper forum to achieve such a
result. OMB has recently
sought comment on proposed revisions to Circular A-45. See, the proposed revision
to OMB Circular A-
45, issued by OMB on November 22, 1991, at 56 Fed. Reg. 58935. This revision
did not change the 5,000
population requirement for an established community in Alaska. BBAHC is commenting
on this during
the Notice and Comment period, and this would appear to be the appropriate means
for OMB to consider
BBAHC's concerns.