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11.) We noted in our General Memorandum No. 88-70 of October 18, 1988, that while the term "pass through" was not defined, the 1987 House Committee Report accompanying the House version of the Act made clear that the term "pass through" referred to monies appropriated to another Federal agency which are then passed through to the Bureau or the IHS for use in Indian programs. Congress clearly meant by "pass through" what the agencies proposed to define as "flow through." Clarification

needs to be achieved by a technical amendment to the Act rather than adding to the confusion through the use of terms in the regulations different from the way they are used in the Act.

In regard to paragraph (b) (6) (p. 35), while the Act sets forth only five reasons to justify a reduction in funding, the IHS wishes to add a sixth "changed circumstances" reason which is reflective of $105(c)(2) of the Act which provides:

"The amounts of such contracts may be renegotiated annually to reflect changed circumstances and factors, including, but not limited to, cost increases beyond the control of the tribal organization."

This clause is out of place. This language has already been included on page 33 in the section covering contract increases. Its inclusion in the regulation implementing the statutory ban on decreases is inappropriate.

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We should note that this section allows the exclusion

of funds from a contract amount to compensate Federal employees assigned to the contractor but requires the consent of the contractor to the amount of any such deduction (with unexpended funds being returned to the contractor).

Appeals process (p. 36) In paragraph (a)(1) the renewal of contracts and the determination of the amounts of contracts (either new awards or renewals) under $106 of the Act are subject to the same appeal procedures as declination appeals. However, on appeal the amount of an award is reviewed against the requirements of $106 of the Act, not against the declination criteria of $102. Regulatory language in contract renewals should carefully reflect two principles: (1) to the extent that a renewal is requested for the same functions or programs already under contract and there is no dispute as to funding level, then the agency (as under the existing regulations, see 25 C.F.R. $271.20, BIA Procedural Guidelines (April 1977) and 42 C.F.R. $36.207) does not review the renewal proposal against the declination criteria; and (2) if there is a funding dispute, the contractor has the same appeal rights as it would have if the request were rejected on any other ground. These provisions, which were cleared by the Bureau and IHS in Albuquerque, should resolve the long dispute with IHS over funding as a "threshold issue" which is not subject to the appeals

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Under paragraph (b) (p. 39) an informal conference may

be held within 30 days from the filing date at the contract site when feasible.

Under paragraph (c) (p. 39), appeals from an Area Director's decision or the decision of the informal conference may be made to the Interior Board of Indian Appeals, whether the appeal is from the Bureau or from IHS. If the Board concludes that the appeal concerns declination or non-emergency reassumption issues, it will refer the case to the Hearings Division of the Office of Hearings and Appeals (Interior) where the hearing will be conducted by an Administrative Law Judge within 30 days of the referral or as otherwise agreed upon. The Secretary's answer must be filed at least 15 days before the hearing. The hearing must also proceed in accordance with 5 U.S.C. $554 which governs on the record" adjudications.

Paragraph (e)(4) (p. 41) provides that the burden of proof is on the Secretary in a declination appeal (as provided in the existing BIA and IHS regulations).

We question whether having all declination appeals go to by the Department of the Interior will prove effective. long as appeals are heard in accordance with the Administrative Procedure Act, we do not object to appeals from IHS going to the

As

HHS.

Appeals involving health issues may require a special expertise which justifies this approach.

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Contents of award document (p. 42) We note in paragraph (b) (p. 43) that this section provides that the regulations and the tribal contractor's approved proposal are incorporated by reference into the "award." Furthermore, this paragraph implements S110(b) of the Act by adding the final sentence which provides that: "The Federal Government may not impose additional terms and conditions without approval of the Indian tribe or tribal organization."

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Status of contracts in effect on effective date of regulations (p. 43) This clause is unchanged from Nashville, but IHS recommends further study on conversion of "mature" contracts to the new contract format. We suggest that the phrase "existing contracts considered as mature" in paragraph (b)(1) (p. 44) should be clarified to make clear that this reference is to contractors which have requested "mature" status and have been determined by the Federal agency to be qualified for that status. Indian tribes may wish to consider whether a dispute over compliance with the new requirements should be treated as a "contract dispute" or a "declination appeal."

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Designation as a mature contract (p. 44) An additional sentence was added to this section which provides: "Subsequent funding of such contracts shall not be subject to declination." Our records do not indicate that this addition was approved by the Albuquerque Workshop. Subsequent annual funding of contracts is and must be subject to the declination

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appeal procedure when there is a dispute over the funding level of the contract. The added sentence suggests otherwise. A contractor is certainly not intended to forfeit the right to appeal a funding decision because it has achieved status as a "mature contractor." As explained above under "Appeals Process," the amount of annual funding for mature contracts is determined under the provisions of $106 of the Act, subject to the tribal right to an appeal.

All participants at the conference were uncertain as to the process by which a tribal organization could request mature contract status. This will depend upon the pre-contract authority evidenced in the tribal resolution(s). We would also note here that the definition of 'mature contract' contained in the Act is silent as to whether mature contract status may be extended to grants in lieu of contracts and cooperative agreements under the Act.

Commencement of services (p. 45)

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We agree that where the Secretary has failed to comply with the applicable deadlines set forth in these regulations a tribe or tribal organization shall be able to incur preaward costs during the period prior to commencement date. The addition by IHS to this section allows for such authorized preaward costs, but only when authorized by the Secretary. At page 26 the April 3 draft regulations would provide automatic reimbursement after a 30 day delay.