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The legislative history fully demonstrates the intent of the Congress in amending this section. The presumptions established by both agencies in the present regulations further that Congressional intent. They should, therefore, be retained. The opposition expressed by IHS counsel demonstrates once again how far IHS still has to go before fully accepting the goals of this legislation.

The Bureau notes that this section does not state that its provisions govern the renewal of an expiring term contract. We have already pointed out that the Bureau's attempt to eliminate the existing regulatory language which requires the renewal of contracts for the same functions or programs without a further declination review is unjustified in the light of the stated Congressional purposes of the 1988 amendments.

Only when

a contractor proposes to add programs or functions to an expiring contract should the declination procedures apply and then only to the proposed program or function to be added.

Paragraph (c) (p. 25) of this section currently provides that if the agency fails to approve the contract within 90 days without a timely declination, the contract is deemed approved on the 90th day. The IHS would qualify this language with the following proviso: "to the extent the proposal conforms to the law and regulations" (pp. 25-26).

It

We object to this qualifying language. A tribal organization whose contract application has not been declined within 60 days of submittal will begin to prepare to assume operation of an IHS or Bureau program or service. A tribal organization should not be forced to commit personnel and funds to a contract which has not been declined within the statutory time frame and then subsequently learn that its application, perhaps due to a technicality, does not "conform to the law and regulations." is incumbent upon the agencies to make this threshold determination within the first 60 days of the contract review as mandated by $102 of the Act. "The Committee amendment directs both secretaries to approve contract proposals within ninety days unless the Secretary provides a basis, as provided in the Act, for declining a contract." S. Rep. No. 100-274 at 24. This statement needs no elaboration. The IHS proposal lays the groundwork for agency abuse of the statutory time frame. When this was brought to the attention of the agencies at Albuquerque, they agreed to examine this proviso more closely. Nevertheless, the proviso remains in the April 3 draft.

In paragraph (d) (p. 26) of this section, the IHS proposes to delete language which would have allowed a contractor who has not been awarded its approved contract to incur contract costs after the 31st day since the date of contract approval. No reason is given. This provision could provide a meaningful remedy against agency delay after a proposal has been approved.

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In addition, the Albuquerque conference agreed to add a new subsection (f) (p. 26) which provides: "A contract proposal involving divisibility shall not be declined on that basis." We understand that this clause is intended to address, in part, the problem created when some tribes served by a program wish to contract and some do not. As discussed below, we feel that the statutory rights of Indian tribes under the Act require a viable procedure in the regulations for addressing the issue of divisibility.

Amount of funding (p.26) -- IHS suggests revising paragraphs (b)(3) (p. 27) and (b)(3)(ii)(E) (p. 28) of this section

to read:

"Contract support functions are those func-
tions that do not duplicate program services
[and] activities which are funded in paragraph
(b)(1) above and are allowable under the cost
principles contained in
These functions

may be generally classified as:

...

"(ii) Those functions the agency performs on
behalf of the program. Examples may include but
are not limited to:

(E) Executive functions of the governing body that are directly attributable to the direction or management of the contracted program.

In the previous draft, paragraph (E) had read:

"Reasonable functions of the governing body
related to support of the program."

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The revised appeal procedures applicable to situations where the Indian tribe or tribal organization and the Secretary cannot agree on the amount of funds to be provided under a proposed contract make clear that declination requirements apply to a dispute over funding just as much as to other disputes involving the approval of proposals. This language is discussed below. Clause (e) on page 30 cross references the declination appeals section to underscore this point.

Paragraph (g) of this section (p.30) implements $106(g) of the Act requiring the Secretary to add indirect cost funding to the direct cost base. With regard to this section, the IHS asks whether direct and indirect costs lose their identity in subsequent years. We believe the answer to be no. Section 106(g) of the Act clearly states that:

"The Secretary shall add the indirect cost funding amount awarded for a self-determination contract to the amount awarded for direct program funding for the first year and, subject to adjustments in the amount of direct program costs for the contract, for each subsequent year that the program remains continuously under contract."

Congress contemplated keeping these costs separate in subsequent years, noting that:

"Section 106(g) is intended to require the Secre-
tary to provide indirect costs for each contract
year in addition to the program funding which
would have been available to the Secretary to
operate a contracted program and to prohibit the
practice which requires tribal contractors to
absorb all or part of such indirect costs within

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the program level of funding, thus reducing the
amount available to provide services to Indians
as a direct consequence of contracting. The
combined amount of direct and indirect costs
shall then be available for each subsequent year
that the program remains continuously under con-
tract.
It is the Committee's hope that the
Department of the Interior Office of Inspector
General, the Bureau of Indian Affairs and the
Indian Health Service will coordinate their ef-
forts with the tribes to develop the most cost
effective method of distributing indirect cost
funds. The Committee amendment will insure that,
whatever method is used, the tribal contractor
will realize the full amount of direct program
costs and indirect costs to which the contractor
is entitled. Furthermore, the Committee amend-
ment is intended to insure that the funds needed
are continuously available, unless the Congress
reduces such funds by appropriations actions."

S. Rep. No. 100-274 at 33, 34.

It should be noted that the intent of Congress is to prohibit requiring contractors to absorb such indirect costs from program funds. A tribal contractor may utilize funds to which it is entitled as indirect costs for program purposes at its election should they not be needed to reimburse indirect costs. In that sense, the funds do lose their identity once they are collected by the contractor. The identity of the contractor's entitlement to program funds and to indirect costs established in accordance with the procedures provided for by the regulations would nevertheless be preserved.

It should be remembered, however, that tribal contractors negotiate their indirect cost rate with the cognizant agency. This rate will vary from year to year as will the base