1. Preparing an IDC Proposal and Impact on Contract Support Costs
Steve Osborne, Hobbs Straus
Rebecca Patterson, Sonosky Chambers
April 2, 2019

2. CSC Background What are CSC?
“Reasonable costs for activities which must be carried on by a tribal organization as a contractor to ensure compliance with terms of the contract and prudent management, but which—
normally are not carried on by the respective Secretary in his direct operation of the program, or
are provided by the Secretary… from resources other than those under contract.”

3. CSC Background For decades, both IHS and BIA underfunded CSC
IHS argued that ISDEAA contracts were different and they did not need to honor the statutory provision requiring full payment of CSC
Later IHS argued it did not need to pay full CSC because there was a cap on the CSC appropriation
Two Supreme Court cases: (1) Cherokee Nation and (2) Ramah holding the agencies must pay full CSC

4. CSC Background Since Ramah Congress decided to pay in full
Both IHS and BIA convened CSC workgroups and developed new policies
Differences between BIA and IHS policies

5. CSC Background Starting in 2014, Congress fully funded CSC
Part of the general IHS appropriation
IHS had to reprogram funds to pay the full CSC need
Since 2016, Congress made CSC a separate and indefinite appropriation
No more shortfalls (“such sums as may be necessary”)
Continuous reconciliations and agency closeout

6. CSC Major Issues and Litigation Update: CITC Case
Main issue: duplication of facilities costs
IHS position: if IHS paid any funds for a certain category of costs, no matter how insufficient, IHS owes no more
Tribe position: duplication is a dollar-for-dollar offset
November 2018: Court agrees with the Tribe
IHS will appeal
Second case (besides Sage) where IHS had lost on its duplication position

7. CSC Major Issues and Litigation Update: Norton Sound Health Corp
Main Issue: What is the “full” amount of CSC owed and how does that factor into the duplication question?
NSHC invokes 97/3 option for service unit duplication
IHS revokes 97/3 option, rejects final offer
IHS conducts consultation on 97/3 option
IHS and NSHC settle case
But fate of 97/3 option still officially unresolved

8. CSC Major Issues and Litigation Update: Sage
Two major issues:
1) Whether a Tribe can recover CSC on the third-party revenue funded portion of its health program
2) Duplication: whether the statute refers to duplicating amounts or duplicating categories of funding
District court found in favor of the Tribe
IHS dropped appeal to 10th Circuit
Both issues raised again in other cases (Swinomish, CITC)

9. CSC Major Issues and Litigation Update: Seminole Tribe
Main issue: reallocation authority and salary cap
Tribe proposes to allocate 98.93% of program funding to salaries, wages, and fringe
IHS imposes 80% cap on allocation of appropriated dollars to salaries/fringe (IHS expends 71% on salaries/fringe in direct service)
IHS argues Tribe’s reallocation authority under ISDEAA, for purpose of CSC calculation, is limited by “reasonableness” requirement
Decision last week: both parties’ motions for summary judgment denied

10. CSC Major Issues and Litigation Update
IHS reconciliation process
Wants to closeout each year’s CSC calculations
Requests Tribes sign bilateral amendments
WARNING: do not sign any amendment including a waiver due to potential for claims on third-party revenue-funded portion of program

11. Issues to Consider When Preparing Your IDC Proposal: Exclusions
IHS looks to Tribe’s indirect cost rate proposal when determining exclusions for purpose of calculating indirect CSC owed
Rate = IDC pool/(TDC – exclusions)
Higher exclusions in proposal lower denominator, raise rate
But exclusions will also lower direct cost base when IHS applies “rate-times-base” for purpose of determining ICSC
Effect of rate on BIA award? Other grants?
Consider direct cost base of salaries rather than total direct costs?

12. Issues to Consider When Preparing Your IDC Proposal
Multiple rates
May be a passthrough rate
May be a special ISDEAA or IHS-only rate
Why do it?
Health program has additional administrative costs that other departments do not have
Keep rate lower for other programs, since they may be funding indirect costs using program funds

13. Issues to Consider When Preparing Your IDC Proposal
Closeout and reconciliation
IHS wants to use final rates
IHS wants to reconcile to final passthroughs and exclusions
May trigger a duplication review
If the indirect cost pool expands by over 5% due to the addition of new types of costs
Review is supposed to be limited to new types of costs