Brief of Contractor-Appellant, Democracy Worldwide

UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT

DEMOCRACY WORLDWIDE,

Plaintiff-Appellant,

v.

UNITED STATES,

Defendant-Appellee.

Appeal from the United States Court of Federal Claims in 20-782C, Judge Jedidiah Blake II

This brief was prepared as part of the Procurement Law Moot Court Competition at The George Washington University Law School. The opinions represented in this brief are those of the authors. They do not necessarily represent the views of the Department of the Navy, Department of Defense, or the U.S. Government; nor do they necessarily represent the views of Fox Rothschild LLC.

Table of Authorities

Cases

• Anchorage v. United States, 119 Fed. Cl. 709 (2015) See PDF page(s): 205, 208
• Anderson v. United States, 344 F.3d 1343 (Fed. Cir. 2003) See PDF page(s): 203, 209, 210
• Baley v. United States, 942 F.3d 1312 (Fed. Cir. 2019) See PDF page(s): 204
• Blueport Co. v. United States, 533 F.3d 1374 (Fed. Cir. 2008) See PDF page(s): 204
• Bowen v. Massachusetts, 487 U.S. 879 (1988) See PDF page(s): 202, 212, 213
• Buder v. Sartore,774 P.2d 1383 (1989) See PDF page(s): 215, 216
• City of El Centro v. United States, 922 F.2d 816 (Fed. Cir. 1990) See PDF page(s): 210
• Emery Worldwide Airlines, Inc. v. United States, 264 F.3d 1071 (Fed. Cir. 2001) See PDF page(s): 204
• Fed. Crops Ins. Corp. v. Merill, 332 U.S. 380 (1947) See PDF page(s): 223
• Fisher v. United States, 402 F.3d 1167 (Fed. Cir. 2005) See PDF page(s): 205
• Gary v. United States, 67 Fed. Cl. 202 (2005) See PDF page(s): 223
• Holmes v. United States, 657 F.3d 1303 (Fed. Cir. 2011) See PDF page(s): 210, 211, 212
• House v. United States, 99 Fed. Cl. 342 (2011) See PDF page(s): 206
• Ind. Mich. Power Co. v. United States, 422 F.3d 1369 (Fed. Cir. 2005) See PDF page(s): 204
• Jan’s Helicopter Serv., Inc. v. Fed. Aviation Admin., 525 F.3d 1299 (Fed. Cir. 2008) See PDF page(s): 205, 206
• John R. Sand & Gravel Co. v. United States, 457 F.3d 1345 (Fed. Cir. 2006) See PDF page(s): 204
• Leonardo v. United States, 63 Fed. Cl. 552 (2005) See PDF page(s): 223, 224
• Loveladies Harbor, Inc. v. United States, 27 F.3d 1545 (Fed. Cir. 1994) See PDF page(s): 205, 208
• Pernix Serka Joint Venture v. Dep’t of State, CBCA 5683, 20-1 BCA ¶ 37589 See PDF page(s): 202, 211, 226, 227
• Rick’s Mushroom Serv., Inc., v. United States, 521 F.3d 1338 (Fed. Cir. 2008) See PDF page(s): 202, 204, 208, 209
• Silver Buckle Mines v. United States, 117 Fed. Cl. 786 (2014) See PDF page(s): 206, 207
• Sonoma Apt. Assocs. v. United States, 939 F.4d 1293 (Fed. Cir. 2019) See PDF page(s): 204
• St. Bernard Parish Gov’t v. United States, 134 Fed. Cl. 730 (2017) See PDF page(s): 211
• Suburban Mortg. Assocs. v. United States, 480 F.3d 1116 (Fed. Cir. 2007) See PDF page(s): passim
• Texas v. United States, 537 F.2d 466 (Ct. Cl. 1976). See PDF page(s): 205
• Todd v. United States, 386 F.3d 1091 (Fed. Cir. 2004) See PDF page(s): 205
• United States v. Connolly, 716 F.2d 882 (Fed. Cir. 1983) See PDF page(s): 205
• United States v. Mitchell, 445 U.S. 535 (1980) See PDF page(s): 204
• United States v. Mitchell, 463 U.S. 206 (1983) See PDF page(s): 206
• United States v. Testan, 424 U.S. 392 (1976) See PDF page(s): 204, 205, 206, 212
• United States v. White Mountain Apache Tribe, 537 U.S. 465 (2003) See PDF page(s): 206, 207, 212
• United States v. Winstar Corp., 518 U.S. 839 (1996) See PDF page(s): 209, 210
• Winstar Corp. v. United States, 64 F.3d 1531 (Fed. Cir. 1995) See PDF page(s): 210
• Wolfing v. United States, 144 Fed. Cl. 516 (2019) See PDF page(s): 206

Statutes

• 5 U.S.C. §§ 701–706 See PDF page(s): 212
• 5 U.S.C. § 702 See PDF page(s): 212, 213
• 5 U.S.C. § 704 See PDF page(s): 212, 213
• 28 U.S.C. § 1491 See PDF page(s): passim
• 30 U.S.C. § 28f See PDF page(s): 206
• 31 U.S.C. §§ 6301–6308 See PDF page(s): 208
• 31 U.S.C. § 6305 See PDF page(s): 211
• 37 U.S.C. § 204 See PDF page(s): 206
• 37 U.S.C. § 403 See PDF page(s): 206
• 41 U.S.C. §§ 7101–7109 See PDF page(s): 208

Regulations

• 2 C.F.R. pt. 200 See PDF page(s): 207
• 2 C.F.R. § 200.100 See PDF page(s): 206
• 2 C.F.R. § 200.101 See PDF page(s): 207
• 2 C.F.R. § 200.305 See PDF page(s): 207, 221
• 2 C.F.R. § 200.344 See PDF page(s): 207
• 2 C.F.R. § 200.403 See PDF page(s): passim
• 2 C.F.R. § 200.404 See PDF page(s): passim
• 2 C.F.R. § 200.405 See PDF page(s): 214, 219, 220
• 2 C.F.R. § 200.407 See PDF page(s): 214, 221, 222
• 43 C.F.R. § 3834.11 See PDF page(s): 206
• 48 C.F.R. § 1552.211-73 See PDF page(s): 225
• FAR 16.104 See PDF page(s): 225
• FAR 16.202-1 See PDF page(s): 225, 226
• FAR 16.301-1 See PDF page(s): 203, 225, 226
• FAR 16.306 See PDF page(s): 225, 227

Treatises

• Restatement (Second) of Contracts §§ 18, 22, 24 (1981) See PDF page(s): 209
• Restatement (Second) of Contracts § 71 (1981) See PDF page(s): 210
• Agency Guidance
• USAID, Grants and Cooperative Agreements to Non-Governmental Organizations (2020) See PDF page(s): 223
• Memorandum from Russell T. Vought, Dir., Off. of Mgmt. and Budget, to the Heads of Exec. Dep’ts and Agencies (Jan. 05, 2021), https://www.whitehouse.gov/wp-content/uploads/2021/01 /M-21-11.pdf See PDF page(s): 226
• Novel Coronavirus (COVID-19), USAID (Mar. 21, 2020), https:/ www.usaid.gov/coronavirus [http://web.archive.org /web/20200321032153] See PDF page(s): 217
• U.S. Gov’t Accountability Off., GAO-12-331G, Government Auditing Standards (2018) See PDF page(s): 218

Other Authorities

• Advice on the Use of Masks in the Community, During Home Care, and in Health Care Settings in the Context of COVID-19, WHO (Mar. 19, 2020), https://apps.who.int/iris/bitstream/handle/10665/331493 /WHO-2019-nCoV-IPC_Masks-2020.2-eng.pdf?sequence= 14&isAllowed=y See PDF page(s): 218
• Amindeh Blaise Atabong, In Cameroon, Face Masks Are Compulsory—But Unaffordable for Many, Mail & Guardian (Apr. 18, 2020), https:// mg.co.za/article/2020-04-18-in-cameroon-face-masks-are -compulsory-but-unaffordable-for-many See PDF page(s): 217, 218
• Cost of Living in Yaounde,Numbeo, https://www.numbeo.com/cost -of-living/in/Yaounde-Cameroon (last visited Mar. 5, 2021) See PDF page(s): 218
• Fadela Chaib, Shortage of Personal Protective Equipment Endangering Health Workers Worldwide, WHO (Mar. 02, 2020), https://www .who.int/news/item/03-03-2020-shortage-of-personal-protective -equipment-endangering-health-workers-worldwide See PDF page(s): 217
• How COVID-19 Spreads, CDC (last updated Oct. 28, 2020), https:// www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/how -COVID-spreads.html. See PDF page(s): 216
• How Much Water Do You Use at Home?, U.S. Geological Surv. (last visited Mar. 5, 2021), https://water.usgs.gov/edu/activity -percapita.php See PDF page(s): 218
• Scott S. Sheffler, A Reasoned Case for a “Grant Disputes Act,” 47 Pub. Cont. L.J. 209 (2018) See PDF page(s): 207

STATEMENT OF RELATED CASES

Pursuant to Rule 47.5 of the Federal Circuit Rules of Practice, Democracy Worldwide is unaware of another appeal in or from the same civil action or proceeding in the lower court or body that was previously before this Court or another appellate court. Counsel are unaware of any related cases pending in this Court or another court that will directly affect or be directly affected by the Court’s decision in this appeal.

JURISDICTIONAL STATEMENT

On June 30, 2020, Democracy Worldwide submitted its quarterly report, which included $10,445 in reimbursable costs for the purchase of personal protective equipment, nurses, and cleaning services, and which the government Agreement Officer (AO) disallowed. Appx6. Democracy Worldwide appealed the AO decision to USAID’s Bureau for Management, Office of Management Policy, Budget, and Performance, Compliance Division Assistant Administrator (“Assistant Administrator”), who denied the appeal. Id. On September 30, 2020, Democracy Worldwide filed a suit for money damages arising from the government’s breach of contract under 28 U.S.C. § 1491(a)(1) and the money-mandating provisions of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, (Uniform Guidance). Appx1,6–7. The Court of Federal Claims subsequently found that it had jurisdiction over the dispute and affirmed the disallowance of the costs. Appx9,12. Democracy Worldwide timely filed an appeal to this Court.

STATEMENT OF ISSUES

1. I. Whether the Court of Federal Claims properly found it had jurisdiction under the Tucker Act over this claim for money damages arising from a grant agreement, because the regulations governing the grant and the grant itself, as a contract, are both money-mandating sources of law.
2. II. Whether the Court of Federal Claims clearly erred in affirming the disallowance of Democracy Worldwide’s COVID-19-related costs when these costs were reasonable, no AO approval was required, and in any case the AO ratified the purchase.

STATEMENT OF THE CASE SETTING OUT RELEVANT FACTS

Democracy Worldwide is a Human Rights Organization. Appx1. For many years, Democracy Worldwide has advocated for human rights across the globe. Appx1. Specifically, Democracy Worldwide has experience supporting human rights defenders in Central and West Africa. Appx1.

In November 2019, the Center of Excellence on Democracy, Human Rights, and Governance, which is part of the United States Agency for International Development (USAID), published a Notice of Funding Opportunity (NOFO), announcing that USAID had $8,000,000 for human rights programming awards to increase protection for human rights defenders in Central Africa. Appx1,13. The NOFO stated that the solicitation was designed to further USAID’s 2013 Democracy, Human Rights, and Governance Strategy. Appx14. The NOFO also provided that USAID would award grants or cooperative agreements based on the technical nature of the application proposal. Appx16. USAID received seven applications, including Democracy Worldwide’s proposal to support human rights defenders in Cameroon, which received a near perfect score from USAID. Appx1.

Democracy Worldwide proposed a program to support human rights defenders in Cameroon by strengthening the normative frameworks and institutional architecture that would help Cameroon respect its human rights obligations and by building the capacity of civil society actors to promote those rights, monitor compliance, and demand accountability. Appx1–2. Democracy Worldwide proposed to advance this goal by training civil society actors to mobilize communities. Appx2. Democracy Worldwide would host quarterly training sessions and follow up throughout the year with individual meetings. Appx2.

Along with its proposal, Democracy Worldwide submitted a comprehensive budget for its proposed project. Appx3. The budget for each training session contained a “supplies” line item for the training, which, according to the narrative budget, included “assorted office supplies, such as flip charts, pens, folders, handouts, and name tags.” Appx3. The budget also included a line item for “supplies” in the “Other Direct Costs” category, which, according to the narrative budget, included “assorted office supplies for staff, including paper, pens, ink, staplers, and anything necessary to daily operations.” Appx3.

In January 2020, USAID awarded Democracy Worldwide $2,000,000 for its proposal. Appx2. The resulting grant agreement contained Democracy Worldwide’s project proposal and budget as an appendix. Appx2. The agreement stated that parties were bound by the submitted proposal and required Democracy Worldwide to submit proposed changes to the Agreement Officer (AO) for approval prior to any amendment. Appx2.

Upon award, Democracy Worldwide started to carry out its proposal. Appx2. Democracy Worldwide planned to have its first training for civil society groups on April 15–17, 2020. Appx2. Democracy Worldwide’s field staff in Cameroon invited civil society actors in country to the training program, and Democracy Worldwide’s headquarters invited international experts. Appx2. Democracy Worldwide designed the program to equip local civil society actors to receive foreign aid funding by teaching U.S. rules and regulations, best accounting practices, and management practices. Appx2.

Democracy Worldwide planned to conduct the training at the Hilton Hotel in Yaoundé, Cameroon, where all participants and experts would stay. Appx2. To help build rapport, Democracy Worldwide also organized a welcome dinner for all participants and trainers. Appx2.

Twelve days after the country’s first confirmed case of COVID-19, Prime Minister Joseph Dion Ngute closed Cameroon’s borders on March 18, 2020. Appx3. With the borders closed, Democracy Worldwide concluded it was no longer possible for the proposed international experts to attend the first training session in person. Appx3.

On March 23, 2020, Amanda McDowell, Democracy Worldwide’s Program Manager, contacted Justin Baird, the Agreement Officer Representative (AOR) at USAID, to alert him that Democracy Worldwide would have to make adjustments to the program. Appx3. In her email, Ms. McDowell wrote that Democracy Worldwide planned to rent a projector and screen so the experts could give their presentations virtually. Appx3. Democracy Worldwide planned for local staff to give presentations related to institution-building in person. Appx3. Ms. McDowell also noted that “[w]e also may have some additional costs depending on Cameroon’s rules re: covid (e.g., for masks, sanitation, etc.).” Appx3.

That same day, Mr. Baird responded to Ms. McDowell, telling her that he would follow up with Morgan Huston, the AO at USAID. Appx4. Mr. Baird forwarded the email from Ms. McDowell, opining that the remote training would still meet the program targets and asking, “Also, looks like they may want to purchase some masks/PPE for their field staff/trainings. Is this approved?” Appx4.

On March 25, 2020, Ms. Huston responded to Mr. Baird that she agreed that the remote presentations would meet the program targets and asked him:

Please inform [Democracy Worldwide] that any PPE purchase needs to comply with the guidance on the USAID website. The FAQs are also helpful. If they have any other questions/expenses, we can hop on a call to figure out if a budget/program realignment is necessary.

Appx4. Mr. Baird responded to Ms. McDowell, telling her that she could purchase PPE, so long as it complied with the guidance on the USAID website, and directing her to the FAQs on that website. Appx5. According to the USAID Frequently Asked Questions issued in March 2020, USAID directed program partners to contact the CO/AO or COR/AOR for changes incurred as a result of COVID-19 that would have a significant impact on the budget. Appx129. The USAID FAQs also emphasized that reasonable costs in relation to safety measures were generally allowable and that USAID would consider any additional proposed costs on a case-by-case basis, provided that such costs are “allowable, allocable, and reasonable.” Appx130.

On April 10, just five days before the training date, the Cameroonian government issued new COVID-19 restrictions, requiring everyone to wear a mask in public spaces, effective April 13, 2020. Appx5. In addition, Hilton required Democracy Worldwide to provide hand washing stations at the entrances and exits of the meeting room and charged $5,000 for the conference space. Appx5.

Accordingly, Democracy Worldwide purchased masks, latex gloves, hand sanitizer, and thermometers for the participants and staff to use during the training. Appx5. Before purchasing the masks, Democracy Worldwide solicited quotes from several manufacturers and retailers and chose the option with the lowest per mask price, which was a manufacturer that required a minimum purchase of 500 masks. Appx5. Because the pandemic was forecast to last beyond the first training, Democracy Worldwide purchased the masks in bulk for $1,500. Appx5–6. To construct hand washing stations, Democracy Worldwide purchased large water jerry cans, hand soap, and plastic barrels at $350. Appx5–6. Democracy Worldwide charged $3,400 for nurses’ consultant fees and attendant expenses, $95 for thermometers, and $5,000 for additional sanitation for the conference space. Appx6.

Masks: $1500

Jerry cans, hand soap, and plastic barrels: $350

Nurses’ consultant fees and expenses: $3,400

Thermometers: $95

Additional sanitation: $5,000

Democracy Worldwide provided this information in the quarterly financial reports included in the program reports. Appx6. Democracy Worldwide listed the PPE and thermometers purchased for staff under the “other direct costs” budget category and listed the PPE for participants, the cost of the COVID-19 tests, and the hand washing stations in the budget line items for the first training. Appx6.

The AO excluded COVID-19 PPE from allowable costs because those expenses were not included in the grant agreement. Appx6. Two weeks later, as required by USAID regulation, Democracy Worldwide appealed to USAID’s Bureau for Management. Appx6. The Bureau denied the appeal. Appx6.

Democracy Worldwide appealed the decision to the Court of Federal Claims. Appx6. The Court of Federal Claims found that it had jurisdiction over the dispute and affirmed USAID’s disallowance of the costs of the PPE. Appx12. Addressing USAID’s argument that it lacked Tucker Act jurisdiction after this Court’s decision in Rick’s Mushroom Services v. United States, 521 F.3d 1338 (Fed. Cir. 2008) and Bowen v. Massachusetts, 487 U.S. 879 (1988), the court below found that it had jurisdiction because grants were analogous to procurement contracts rather than cooperative agreements, where grantees and contractors alike enjoy significant autonomy and bear significant performance risk. Appx7–9.

In affirming USAID’s disallowance of the costs, the court below found that Democracy Worldwide was required to get express written approval for the additional costs. Appx10. The court also found that, like contractors in a fixed-price contract, grantees bear the risk and thus the responsibility to obtain approval for required amendments. Appx11. The court below relied on the Civilian Board of Contract Appeals opinion in Pernix Serka Joint Venture v. Department of State, CBCA 5683, 20-1 BCA ¶ 37,589, which found that a fixed-price contractor bore the cost risk associated with an Ebola outbreak. Appx10–11. Finally, the court rejected Democracy Worldwide’s argument that the AOR had approved the modification to the grant agreement because the AOR lacked the responsibility to do so, and it likewise rejected the argument that the AO had ratified the modification because the evidence did not show that the AO was fully aware of the material facts, namely the cost, and could therefore not fully confirm, adopt, or acquiesce in the purchase. Appx12.

Democracy Worldwide now appeals to the U.S. Court of Appeals for the Federal Circuit.

SUMMARY OF THE ARGUMENTS

The Court of Federal Claims properly exercised Tucker Act Jurisdiction over the dispute between Democracy Worldwide and USAID. The Court of Federal Claims may exercise Tucker Act jurisdiction over claims against the government for money, provided that some separate source of authority—Constitution, law, regulation, or contract—provides the substantive right to money damages. See 28 U.S.C. § 1491(a)(1). The dispute need not arise from a procurement contract, as Courts have long accepted Tucker Act jurisdiction over other classes of agreement. See id.

Turning to the case at hand, the Court of Federal Claims properly found that it had jurisdiction under the Tucker Act. First, the regulations governing the grant, the Uniform Guidance, are money-mandating. See 2 C.F.R. §§ 200.1–200.521. The fact that this agreement is a grant agreement does not alter the accuracy of this conclusion. See 28 U.S.C. § 1491(a)(1). Further, the agreement in question is a contract. See Anderson v. United States, 344 F.3d 1343, 1353 (Fed. Cir. 2003). Finally, Democracy Worldwide seeks money damages, a form of remedy that the Court of Federal Claims could provide. See Suburban Mortg. Assocs. v. United States, 480 F.3d 1116, 1121 (Fed. Cir. 2007). Because the dispute between Democracy Worldwide and USAID met the long-standing test for Tucker Act Jurisdiction, the Court of Federal Claims correctly found that it had jurisdiction and provided Democracy Worldwide the appropriate forum to dispute the disallowance of the reasonable costs it incurred furthering USAID’s mission under the threat of a pandemic.

The Court of Federal Claims clearly erred when it denied the cost reimbursement for masks, hand washing stations, nurses’ consultant fees and attendant expenses, thermometers, and additional sanitation for the conference space. The cost is allowable if it is reasonable, allowable, and allocable. 2 C.F.R. §§ 200.403–07. The prior approval by the AO is required only if Democracy Worldwide is amending the grant agreement, or when the cost would have a significant impact on the budget. Appx2,129.

In the case at bar, the Court of Federal Claims clearly erred when it decided that Democracy Worldwide did not follow a proper procedure. First, Democracy Worldwide purchased COVID-19 PPE in accordance with the USAID guidance because the PPE satisfied “allowable,” “allocable,” and “reasonable” standards under the regulations. See Appx130. Prior approval by the AO was not required when PPE cost did not have a significant impact on the entire budget. See Appx129. Moreover, Democracy Worldwide did not amend the grant agreement when it purchased the PPE according to the budget agreement, which included “anything necessary to daily operations.” See Appx2. Second, even if the costs required prior approval, the AOR approved, and the AO ratified the purchase when she ratified the spending with knowledge of material facts surrounding the AOR’s actions. See Appx3–5. Finally, the government bore the risk of increased cost because the grant agreement was more like a cost-reimbursement contract than a fixed-price contract. See FAR 16.301-1.

Based on the foregoing reasons, we respectfully ask this Court to affirm the part of the Court of Federal Claims’ decision finding it had jurisdiction and reverse the part of the decision disallowing the costs of the COVID-19 related purchases in the amount of $10,445.

Argument

I. STandards of review

A. Jurisdictional Issue

Subject matter jurisdiction is a question of law, which this Court reviews de novo. Rick’s Mushroom Serv., 521 F.3d at 1342–43; Emery Worldwide Airlines v. United States, 264 F.3d 1071, 1078 (Fed. Cir. 2001). Findings of fact relating to jurisdictional issues, however, are reviewed for clear error. Blueport Co. v. United States, 533 F.3d 1374, 1378 (Fed. Cir. 2008); John R. Sand & Gravel Co. v. United States, 457 F.3d 1345, 1353 (Fed. Cir. 2006), aff’d, 552 U.S. 130 (2008).

B. Disallowance Issue (Factual Dispute)

This Court reviews a decision of the Court of Federal Claims de novo for errors of law and for clear error in findings of fact. See Baley v. United States, 942 F.3d 1312, 1330 (Fed. Cir. 2019) (quotations omitted). A factual finding is clearly erroneous when the reviewing court is “left with a definite and firm conviction that a mistake has been committed.” Sonoma Apt. Assocs. v. United States, 939 F.3d 1293, 1297–98 (Fed. Cir. 2019) (quoting Ind. Mich. Power v. United States, 422 F.3d 1369, 1373 (Fed. Cir. 2005) (cleaned up)).

II. THE COURT OF FEDERAL CLAIMS HAD TUCKER ACT JURISDICTION OVER THIS DISPUTE.

A. The Court of Federal Claims May Exercise Tucker Act Jurisdiction over Claims for Money Damages in Disputes That Have a Separate “Money-Mandating” Authority.

The Court of Federal Claims may exercise Tucker Act jurisdiction over a claim for money damages arising from agreements other than procurement contracts, so long as a separate source of law mandates money damages. The Tucker Act gives the Court of Federal Claims jurisdiction over “any claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort.” 28 U.S.C. § 1491(a)(1). These claims must be for “presently due money damages from the United States.” United States v. Testan, 424 U.S. 392, 398 (1976) (quoting United States v. King, 395 U.S. 1, 3 (1969)). This grant of jurisdiction includes a waiver of sovereign immunity. See 28 U.S.C. § 1491(a)(1); Suburban Mortg. Assocs. v. United States, 480 F.3d 1116, 1121 (Fed. Cir. 2007). The Tucker Act does not, however, establish a substantive, enforceable right for monetary damages. United States v. Mitchell, 445 U.S. 535, 538 (1980) (“The Tucker Act is ‘only a jurisdictional statute; it does not create any substantive right enforceable against the United States for money damages.’”) (quoting Testan, 424 U.S. at 398).

As a result, “because the Tucker Act itself does not create a substantive cause of action, ‘in order to come within the jurisdictional reach and the waiver of the Tucker Act, a plaintiff must identify a separate source of substantive law that creates the right to money damages.’” Jan’s Helicopter Serv. v. FAA, 525 F.3d 1299, 1306 (Fed. Cir. 2008) (quoting Fisher v. United States, 402 F.3d 1167, 1172 (Fed. Cir. 2005) (en banc in relevant part)). Therefore, the plaintiff must provide a separate source of law, which may come from either a “money-mandating constitutional provision, statute, or regulation that has been violated, or an express or implied contract with the United States.” Loveladies Harbor v. United States, 27 F.3d 1545, 1554 (Fed. Cir. 1994) (citing United States v. Connolly, 716 F.2d 882, 885 (Fed. Cir. 1983) (en banc), cert. denied, 465 U.S. 1065 (1984)). “In the parlance of Tucker Act cases, that source must be ‘money-mandating.’” Fisher, 402 F.3d at 1172 (citations omitted). The party seeking to establish Tucker Act jurisdiction has the burden of persuasion. Todd v. United States, 386 F.3d 1091, 1094 (Fed. Cir. 2004) (citing Testan, 424 U.S. at 398)).

The U.S. Supreme Court, this Court, and the Court of Federal Claims have long accepted that the Tucker Act grants jurisdiction over claims against the government arising from agreements that are not traditional procurement contracts, including grant agreements. As early as 1976, the Court of Claims found that it had Tucker Act jurisdiction over some grant disputes. Texas v. United States, 537 F.2d 466, 467–68 (Ct. Cl. 1976). This Court in Suburban Mortgage held that the Tucker Act provided jurisdiction over a claim for money damages under an insurance agreement issued to the appellant by the Department of Housing and Urban Development. Suburban Mortg. Assocs., 480 F.3dat 1126. More recently, the Court of Federal Claims found it had Tucker Act jurisdiction over a putative “cooperative agreement” between a city and the federal government. Anchorage v. United States, 119 Fed. Cl. 709, 713 (2015).

The disagreements have lain in whether the Tucker Act allowed jurisdiction over a particular agreement. And the disagreements have focused on the nature of the agreement in question, generally, as is the case here, whether there was a separate money-mandating authority. Because of this, in the decision on appeal the Court of Federal Claims correctly applied the ordinary principles of Tucker Act jurisdiction to this particular grant to find that it could exercise jurisdiction. See Appx7–9.

B. The Court of Federal Claims Had Jurisdiction over the Dispute at Hand Because the Uniform Guidance Is a Money-Mandating Regulation and the Grant Agreement Is a Money-Mandating Contract.

The Court of Federal Claims had Tucker Act jurisdiction over Democracy Worldwide’s claim against USAID. First, the regulations governing the administration of the grant agreement are a money-mandating source of law. See infra Section II.B.1. That the agreement is not a procurement contract and this Court’s decision in Rick’s Mushroom are irrelevant. See infra Section II.B.2. Finally, the agreement, by virtue of its status as an enforceable contract, also serves as a money-mandating source of law. See infra Section II.B.3.

1. The Regulations Governing This Grant Agreement, the Uniform Guidance, Are a Money-Mandating Authority.

The regulations governing Democracy Worldwide’s grant agreement are money-mandating. These regulations spell out USAID’s obligations to pay agreed-upon and allowable costs of performance with specific and mandatory language that implies a right to recover damages for government failure to satisfy the obligations. This satisfies the requirements for a “money-mandating” source of law. See Jan’s Helicopter Serv., 525 F.3d at 1306(“[T]o come within the jurisdictional reach and the waiver of the Tucker Act, a plaintiff must identify a separate source of substantive law that creates the right to money damages.”) (quotation omitted).

A source of law is money-mandating if it “can fairly be interpreted as mandating compensation by the Federal Government for the damages sustained.” United States v. Mitchell, 463 U.S. 206, 216–17 (1983) (quoting Testan, 424 U.S. at 400). Moreover, a statute can be interpreted as money-mandating if it grants the claimant a right to recover damages either “expressly or by implication.” Id. at 217 n.16 (quotation omitted). “It is enough, then, that a statute creating a Tucker Act right be reasonably amenable to the reading that it mandates a right of recovery in damages.” United States v. White Mt. Apache Tribe, 537 U.S. 465, 473 (2003). “While the premise to a Tucker Act claim will not be lightly inferred, a fair inference will do.” Id. (quotation omitted). The case at hand involves money-mandating regulations rather than a statute, but the Tucker Act itself makes no distinction. See 28 U.S.C. § 1491(a)(1) (granting this Court jurisdiction over “any claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department . . . .”).

Examples of money-mandating statutes and regulations include: 37 U.S.C. § 204 (2018), a military pay statute, House v. United States, 99 Fed. Cl. 342, 347 (2011), aff’d, 473 F. App’x 901 (Fed. Cir. 2012); 30 U.S.C. § 28f(a)(1) (2018) and 43 C.F.R. § 3834.11 (2022), a statute and regulation requiring the holders of mine patents to pay a fee to the Bureau of Land Management (BLM), Silver Buckle Mines v. United States, 117 Fed. Cl. 786, 791–92 (2014); and 37 U.S.C. § 403 (2018), a military housing allowance statute, Wolfing v. United States, 144 Fed. Cl. 516, 520–21 (2019).

The grant agreement between Democracy Worldwide and USAID was administered under regulations that can be fairly read as mandating a right by Democracy Worldwide to recover damages for improperly disallowed expenses. This grant was administered under the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”), Title 2, Code of Federal Regulations, Subtitle A, Chapter II, Part 200. See 2 C.F.R. § 200.100(a)(1) (establishing “uniform administrative requirements, cost principles, and audit requirements”); see also 2 C.F.R. § 200.101(a)(1) (applying Part 200 to “Federal agencies that make Federal awards to non-Federal entities” and “all costs related to Federal awards.”). The Uniform Guidance establishes the government’s obligation to pay. See 2 C.F.R. § 200.305(b)(6) (“payments for allowable costs by non-Federal entities must not be withheld at any time during the period of performance”). Likewise, the Uniform Guidance mandates payment for allowable costs at the closeout of the grant. 2 C.F.R. § 200.344(c) (“The Federal awarding agency or pass-through entity must make prompt payments to the non-Federal entity for costs meeting the requirements in Subpart E [relating to cost principles] of this part under the Federal award being closed out.”). Further, upon closeout, the agency “must make a settlement for any upward or downward adjustments to the Federal share of costs.” 2 C.F.R. § 200.344(e). Finally, the Uniform Guidance provides definitions of reasonable costs and allocable costs. 2 C.F.R. §§ 200.404–05. Lest there remains any doubt, “[t]hroughout [Part 200] when the word ‘must’ is used it indicates a requirement.” 2 C.F.R. § 200.101(b)(1).

The Uniform Guidance lays out in sufficient detail the government’s payment obligations that it creates an implied right of a grantee to damages for improper disallowance—it is certainly “reasonably amenable” to that interpretation. See White Mt. Apache Tribe, 537 U.S. at473; see also Silver Buckle Mines, 117 Fed. Cl. at 791 (finding that a statute and regulation requiring holders of mining patents to pay a fee to BLM served as a money-mandating authority implying the patent-holders’ right to sue BLM for money damages under the Tucker Act);Scott S. Sheffler, A Reasoned Case for a “Grant Disputes Act,” 47 Pub. Cont. L.J. 209, 241–42, 242 n. 284 (2018) (noting that most grants meet the “relatively low standard” for Tucker Act jurisdiction because “all grants arise under statutorily authorized programs involving a cost-reimbursement system set forth in regulations,” and citing as examples 2 C.F.R. pt. 200, Subpart E, and 2 C.F.R. § 200.305). As the Court of Federal Claims identified, “this grant arose under a statutorily authorized program involving a cost reimbursement system pursuant to regulations.” Appx9. That suffices for the Uniform Guidance to serve as a money-mandating source of law. This Court should find that there is a money-mandating authority and affirm the jurisdictional decision by the Court of Federal Claims.

2. The Fact That This Agreement Is a Grant Is No Bar to Tucker Act Jurisdiction, Even After Rick’s Mushroom.

The fact that the dispute arose from a grant agreement does not defeat Court of Federal Claims jurisdiction. As noted above, this Court has properly found that Tucker Act jurisdiction can attach to agreements other than procurement contracts. Indeed, the Court of Federal Claims has long accepted that it can, in fact, exercise jurisdiction over grant disputes. This Court’s decision in Rick’s Mushroom has not altered that legal landscape.

In the brief before the Court of Federal Claims, the government argued, because of the fundamentally different purposes of contracts and grants, the Tucker Act does not provide jurisdiction over the grants. Appx7. The government’s brief cited the Federal Grants and Cooperative Agreement Act of 1977 (FGCAA), 31 U.S.C. §§ 6301–6308 (2018), and its explanation of the different purposes served by contracts and grants to support this argument. Appx7. This argument fails to grapple with the fact that Tucker Act jurisdiction does not require the existence of a contract. Anchorage v. United States, 119 Fed. Cl. 709, 713 (2015) (requiring “either a money-mandating constitutional provision, statute, or regulation, or an express or implied contract with the United States”) (emphasis added). In its absence, a money-mandating constitutional provision, statute, or regulation will suffice. See Loveladies Harbor, 27 F.3d at 1554 (recognizing a claim under the Fifth Amendment as supporting Tucker Act jurisdiction).

Similarly, the government’s brief also argued that cooperative agreements do not presume money damages and thus do not fall under Tucker Act jurisdiction. Appx7–8. That argument relied on the assertion that the grant agreement in this case resembled a cooperative agreement more than a contract. That assertion, in turn, was based on this Court’s decision in Rick’s Mushroom, in which this Court found that Tucker Act jurisdiction did not exist over the cooperative agreement in question. See Rick’s Mushroom Services v. United States, 521 F.3d 1338, 1344 (Fed. Cir. 2008). That reliance, however, was misplaced.

This Court’s opinion in Rick’s Mushroom distinguishes contracts and cooperative agreements, but that distinction does not control here. First, that distinction related to Rick’s attempt to rely on the Contract Disputes Act (CDA), 41 U.S.C. §§ 7101–09 (2018), as a source of the substantive right to recover money necessary to establish Tucker Act jurisdiction under 28 U.S.C. § 1491(a)(2). Rick’s Mushroom Serv.,521 F.3d at 1344 (“Rick’s attempts to rely on the CDA as the source of its substantive right to recover money damages and to establish jurisdiction under 28 U.S.C. § 1491(a)(2)”); see also 28 U.S.C. § 1491(a)(2) (“The Court of Federal Claims shall have jurisdiction to render judgment upon any claim by or against, or dispute with, a contractor arising under section 10(a)(1) of the Contract Disputes Act of 1978 . . . .”).

Moreover, this Court rejected the argument that the CDA provided the right to money damages for reasons inherent in the CDA, not the Tucker Act. Rick’s Mushroom Serv., 521 F.3d at 1343–44 (“The CDA, however, applies only to express or implied government contracts for procurement of goods or services.” (citing 41 U.S.C. § 602(a)). When this Court did address § 1491(a)(1), it found only that § 1491(a)(1) did not provide jurisdiction because Rick’s could not “point to a money-mandating provision that establishes jurisdiction for an implied-in-fact contract.” Id. at 1344. Notably, that conclusion made no reference to the fact that the agreement in question was a cooperative agreement.

Thus, Rick’s Mushroom does not control this case. Unlike Rick’s Mushroom Service, Democracy Worldwide can point to money-mandating regulations. See supra Part II.B.1. As a result, the agreement here is readily distinguishable from the agreement in Rick’s Mushroom as regards § 1491(a)(1). Further, Democracy Worldwide has never sought relief under the CDA, so this Court’s application of § 1491(a)(2) in Rick’s Mushroom is beside the point. Rick’s Mushroom also provides no guidance on identifying whether a regulation is money-mandating, and other decisions by this Court provide clearer and more comprehensive explanations of what makes an agreement a contract than Rick’s Mushroom. See infra Part II.B.3. Thus, the cooperative-agreement-versus-contract discussion in Rick’s Mushroom does not bear on the outcome of this case.

3. The Agreement Is a Contract Because It Has All the Elements Required for a Contract with the Federal Government, and It Mandated Claims for Money Damages.

Democracy Worldwide’s grant agreement with USAID was also a contract. It contains all the elements required for a contract with the federal government—unambiguous offer and acceptance, mutual intent, consideration, and actual authority in the government’s agent. Further, that the agreement is a grant agreement does not prevent it from being a contract. As a contract, it is presumed to mandate money damages and thus establish Tucker Act jurisdiction.

To recover against the government for an alleged breach of contract, there must be a binding agreement in the first place. An agreement binding upon the government requires four elements: “(1) mutuality of intent to contract; (2) lack of ambiguity in offer and acceptance; (3) consideration; and (4) a government representative having actual authority to bind the United States in contract.” Anderson, 344 F.3d at 1353(citations omitted). This Court has relied on the formulation of the Second Restatement of Contracts to define the necessary mutuality of intent. See id. (citing Restatement (Second) of Contracts §§ 18, 22, 24 (1981)).

A contract with the Government need not be a procurement contract. See id. (identifying the elements of a contract with the government without reference to procurement, the Federal Acquisition Regulation, or the CDA). The Supreme Court has accepted this Court’s determination that the series of agreements between the Federal Home Loan Bank Board (Bank Board) and investors that the Bank Board encouraged to invest in failing savings and loans in exchange for various kinds of favorable treatment in oversight constituted an enforceable contract. See United States v. Winstar Corp., 518 U.S. 839, 861–66 (1996) (declining to address directly the question whether a contract existed between the government and respondent-investors, but accepting “the Court of Appeals’ conclusion that ‘it was the intention of the parties to be bound by the accounting treatment for goodwill arising in the merger.’”) (quoting Winstar Corp. v. United States, 64 F.3d 1531, 1544 (Fed. Cir. 1995)). The party seeking enforcement bears the burden of establishing the existence of an enforceable contract. City of El Centro v. United States, 922 F.2d 816, 820–21 (Fed. Cir. 1990) (citation omitted).

As noted above, the Tucker Act gives the Court of Federal Claims jurisdiction over “any claim against the United States founded . . . upon any express or implied contract with the United States.” 28 U.S.C. § 1491(a)(1). But because the Tucker Act does not provide the cause of action, the contract must provide it—a matter that is presumed, but not assumed. See Holmes v. United States, 657 F.3d 1303, 1314 (Fed. Cir. 2011) (“[W]hen a breach of contract claim is brought in the Court of Federal Claims under the Tucker Act, the plaintiff comes armed with the presumption that money damages are available, so that normally no further inquiry is required.”). Whether a contract mandates money damages is analyzed under the same framework as any other potentially money-mandating source of law. Id. at 1309 (asking whether the other source of law “can fairly be interpreted as mandating compensation by the Federal Government” (quoting United States v. Navajo Nation, 556 U.S. 287, 290 (2009) (internal quotations omitted)).

The agreement in this case was a contract between Democracy Worldwide and the government. The succession of (1) request for proposals (NOFO) by USAID, (2) proposal by Democracy Worldwide with program information and proposed budget, and (3) award by USAID incorporating Democracy Worldwide’s proposal and budget demonstrates a mutuality of intent to enter a binding agreement and a lack of ambiguity in offer and acceptance. See Appx1–3; see also Anderson, 344 F.3d at 1353, 1355 (requiring, for a binding agreement with the government, mutuality of intent to contract and lack of ambiguity in offer and acceptance). There is no question or suggestion that the AO lacked the authority to enter the agreement. See Appx1–3.

Though it requires more explanation, the agreement in this case also contains the consideration for both parties required for a contract. See Anderson, 344 F.3d at 1353 (requiring consideration for a binding agreement). Consideration is, generally, a promise bargained for with a return performance or promise of performance. Restatement (Second) of Contracts § 71 (1981). Democracy Worldwide received a promise of $2,000,000 to support its programming. See Appx1–2. For USAID’s part, the agency received Democracy Worldwide’s agreement to perform programming that Democracy Worldwide created in response to USAID’s request for proposals to further USAID’s 2013 Democracy, Human Rights and Governance Strategy. See Appx1–2; see also Appx14. Therefore, each party had the consideration required for the existence of a contract, and the agreement was thus a contract.

The Court of Federal Claims has expressed the principle that the consideration provided to the government must be more than merely incidental; but even considering that concept, the agreement at hand was based on consideration. In St. Bernard Parish Government v. United States, 134 Fed. Cl. 730 (2017), that court found that a cooperative agreement, under which the federal government would reimburse the parish government for costs associated with dredging after Hurricane Katrina, was not a contract in part because the benefit to the federal government—the existence of unobstructed waterways in St. Bernard Parish—did not go beyond a “mere incidental benefit.” Id. at 735–736 (quoting Anchorage, 119 Fed. Cl. at 713). That benefit was too indirect, and the agreement really had as its purpose the “transfer of a thing of value to the local government from the executive agency.” Id. (citing 31 U.S.C. § 6305).

While the rule is sound, given the definition of “consideration,” the rule leads to a different outcome in the case at hand. In St. Bernard, the waterways and the need to dredge them existed before federal involvement, and the parish would have needed no incentive or encouragement to dredge them—even if it needed the money. See id. at 736. Here, by contrast, Democracy Worldwide’s programming did not exist and would have not existed but for USAID’s solicitation for proposals and agreement to fund it. See Appx1–2. Further, USAID did not solicit the programming or agree to fund it to benefit the party to whom the money was given, as in St. Bernard, but rather to further its own programs. Compare Appx1–2, with St. Bernard, 134 Fed. Cl. at 732–33 (noting that the Cooperative Agreement required St. Bernard Parish to contract for the dredging and the agency to provide 100% of the actual costs).

Any argument that, because the direct benefit went to Cameroon, it could not also adhere to the United States is a misunderstanding of the principles applied in St. Bernard. In St. Bernard, the federal government promised money to the parish for projects of which the parish was a direct beneficiary. See St. Bernard, 134 Fed. Cl. at 736. In this case, the federal government transferred money to Democracy Worldwide, which cannot plausibly be said to be the direct beneficiaries of its own work. If Cameroon is considered the direct beneficiary, it received no money, making a comparison to St. Bernard inapt. It makes no sense to take Cameroon’s benefit into account when determining whether there is mutual consideration between USAID and Democracy Worldwide.

Given that a contract exists, Democracy Worldwide enjoys a presumption that it is entitled to money damages for improper disallowance. See Holmes, 657 F.3d at 1314 (noting in a breach of contract claim, “the presumption that money damages are available, so that normally no further inquiry is required”). Here, USAID awarded Democracy Worldwide money under a grant agreement that contained as terms the project proposal and the budget. Appx2. The fact that USAID agreed to pay Democracy Worldwide according to the budget for the performance of agreed-upon tasks allows Democracy Worldwide to rest on this presumption. See Holmes, 657 F.3d at 1314 (“[W]hen a breach of contract claim is brought in the Court of Federal Claims under the Tucker Act, the plaintiff comes armed with the presumption that money damages are available, so that normally no further inquiry is required.”); see also White Mt. Apache Tribe, 537 U.S. at473 (“While the premise to a Tucker Act claim will not be lightly inferred, a fair inference will do.”). Thus, the grant agreement provides an adequate basis for Tucker Act jurisdiction.

C. Democracy Worldwide Seeks Money Damages the Court of Federal Claims Could Provide.

Finally, Democracy Worldwide seeks money damages, relief the Court of Federal Claims can adequately provide. “The Tucker Act both waives sovereign immunity for, and grants the Court of Federal Claims exclusive jurisdiction over, actions for money damages . . . .” Suburban Mortg. Assocs., 480 F.3d at 1121 (citing 28 U.S.C. § 1491(a)(1)); see also Testan, 424 U.S. at 400 (noting that Tucker Act jurisdiction was limited to a claim for money damages, whether based on statute or contract). The Supreme Court’s decision in Bowen v. Massachusetts, 487 U.S. 879, 909–10 (1988), which held that not all claims for money were claims for money damages of the kind barred by the Administrative Procedures Act (APA), does not control in this case brought under the Tucker Act.

In Bowen, the Supreme Court faced the question of whether “a federal district court has jurisdiction to review a final order of the Secretary of Health and Human Services refusing to reimburse a State for a category of expenditures under its Medicaid program.” Bowen, 487 U.S. at 882. The Court held that the federal district court, under the APA, properly had jurisdiction over a suit by the State of Massachusetts against the Secretary of Health and Human Services over the latter’s disallowance of certain costs for reimbursement under Medicaid. Id. at 886–88, 909.

The Supreme Court based this conclusion, in part, on the observation that the relief granted by the district court was not in the form of a “money judgment” as it was a simple reversal of the HHS Secretary’s decision disallowing costs, and that even if the suit were for money owed under the Medicaid grant program, it was a claim for specific relief rather than for compensatory damages, where the APA, 5 U.S.C. § 702, does not permit jurisdiction over claims for money damages. Id. at 909–10. Declaratory and injunctive relief are not money damages, even if payment results, and in this case the money at issue was either an “overpayment,” “underpayment,” or “restitution,” not damages. Id. at 893. The Supreme Court also reasoned that the Court of Federal Claims was not adequately situated to provide relief because (1) the suit concerned an issue impacting the state and federal governments’ complex and ongoing relationship in the Medicaid grant program, and (2) the Court of Federal Claims could not provide full relief because it lacked “the general equitable powers of a district court to grant prospective relief.” Id. at 904–05.

This Court in Suburban Mortgage then tackled the challenge of mapping Tucker Act jurisdiction onto the variety of characterizations of suits for money identified in Bowen. This Court’s solution lay in the APA’s provision of overlapping exclusions to APA jurisdiction, including both claims for money damages and claims for which adequate remedy is available elsewhere. Suburban Mortg. Assocs., 480 F.3d at 1122 (citing 5 U.S.C. §§ 702, 704). Because, as this Court noted, the fact the Court of Federal Claims could provide adequate relief under the Tucker Act sufficed to bar APA jurisdiction, disputes could be resolved simply by asking whether the Court of Federal Claims could provide adequate remedy. Id. at 1128.

This approach also avoided the problem of distinguishing the various kinds of money claim. In Suburban Mortgage, this Court declined to analyze the claim in question to distinguish between a claim for damages and a claim for money owed for the purposes of Tucker Act jurisdiction. Id. at 1126. Instead, it adopted a more straightforward test: “if a money judgment will give the plaintiff essentially the remedy he seeks—then the proper forum for resolution of the dispute is not a district court under the APA but the Court of Federal Claims under the Tucker Act.” Id. Nothing more is required. Id.

This is consistent with Bowen too. As this Court noted, quoting Bowen, “[t]he jurisdiction of the Claims Court, however, is not expressly limited to actions for ‘money damages,’ . . . whereas that term does define the limits of the exception to § 702.” Id. at 1125 n.13 (quoting Bowen, 487 U.S. at 900 n.31) (alterations in original). Further, Bowen was based on the complicated, ongoing relationship between state and federal government in the Medicaid program. Id. at 1127. In sum, this Court laid out boundaries for Tucker Act jurisdiction that are consistent with Bowen but unaffected by the Supreme Court’s identification of different types of money claims.

Under the guiding precedent of Suburban Mortgage, Democracy Worldwide seeks money damages. It seeks a “monetary award,” and a money judgment will give Democracy Worldwide the remedy sought. See id. at 1126 (“[W]hen the plaintiff’s claims, regardless of the form in which the complaint is drafted, are understood to be seeking a monetary reward from the Government, then, for the reasons explained, a straightforward analysis calls for determining whether the case falls within the jurisdiction of the Court of Federal Claims.”). Democracy Worldwide’s claim meets the test for Tucker Act jurisdiction.

D. Conclusion: The Court of Federal Claims Had Tucker Act Jurisdiction

For these reasons, the Court of Federal Claims correctly found that it had jurisdiction over this dispute. Both the Uniform Guidance and the grant agreement itself are “money-mandating” authorities, and Democracy Worldwide seeks monetary relief the Court of Federal Claims could provide. Because this dispute falls under the lower court’s Tucker Act jurisdiction, this Court should affirm that part of its decision.

III. THE COURT OF FEDERAL CLAIMS CLEARLY ERRED BECAUSE DEMOCRACY WORLDWIDE’S PURCHASE OF PPE WAS ALLOWABLE, ALLOCABLE, AND REASONABLE, AND THE AO APPROVED THE PURCHASE.

This Court should reverse the decision of the Court of Federal Claims affirming USAID’s denial of the costs Democracy Worldwide incurred purchasing masks, hand washing stations, nurses’ consultant fees and attendant expenses, thermometers, and additional sanitation for the conference space because these costs were plainly allowable, reasonable, and allocable. See infra Part III.A. When a cost is allowable, reasonable, and allocable, the grant agreement does not require approval by the AO as a condition for its allowance. See 2 C.F.R. § 200.407 (2020). Even if approval was required for allowance of the costs, the AOR did approve the purchase, and the AO ratified it when she confirmed the spending with knowledge of the material facts surrounding the AOR’s actions. See infra Part III.B. Finally, the USAID bore the risk of a cost increase because this grant agreement was a cost-reimbursement contract. See infra Part III.C. The Court below clearly erred when it failed to recognize that the costs were allowable, allocable, and reasonable, and that the purchases were approved by the AOR and ratified by the AO.

A. The COVID-19-Related Purchases Were Allowable, Allocable, and Reasonable Because Democracy Worldwide Acted Prudently When It Took Necessary Measures to Protect Participants from the Pandemic.

The Court of Federal Claims committed clear error when it found that the purchase of masks, hand washing stations, nurses’ consultant fees and attendant expenses, thermometers, and additional sanitation for the conference space was unreasonable. Under the relevant regulations, grantees may be reimbursed for costs that are allowable, allocable, and reasonable. See Appx9; see also 2 C.F.R. §§ 200.403-05 (2022). The purchases were reasonable because Democracy Worldwide acted prudently following the USAID guidelines, and the COVID-19-related purchases were necessary to protect the lives of humanitarian grants participants and to comply with the mandate of the Cameroonian government. There is no question that Democracy Worldwide’s COVID-19-related expenses were allocable under the standard provided in 2 C.F.R. § 200.405. And a cost that is both reasonable and allocable is allowable. 2 C.F.R. § 200.403. Finally, the Court of Federal Claims committed clear error by finding that the costs were unreasonable because Democracy Worldwide failed to get AO approval, when that was not required and did, in fact, occur. See Appx3–5.

1. The Cost Is Reasonable Because Democracy Worldwide Acted Prudently Under the Circumstances.

Democracy Worldwide acted prudently to purchase COVID-19 PPE, sanitation, and nursing services when it consulted with the AOR and complied with the USAID guidelines. A cost is reasonable if it does not exceed the cost that “would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.” 2 C.F.R. § 200.404. The U.S. Government Accountability Office Government Auditing Standards state that “abuse is behavior that is deficient or improper when compared with behavior that a prudent person would consider reasonable and necessary business practice given the facts and circumstances, but excludes fraud and noncompliance with provisions of laws, regulations, contracts, and grant agreements.” Gov’t Accountability Off., GAO-18-568G, United States Government Auditing Standards § 6.23 (2018). In Buder v. Sartore,774 P.2d 1383 (Colo. 1989) (en banc), the Supreme Court of Colorado provided an informative insight in explaining the application of the prudent-person standard.

In Buder, the court noted that under section 15-1-304, 6 C.R.S. (1973), the general prudent person rule governing fiduciaries applies when

[i]n acquiring . . . property for the benefit of others, fiduciaries shall . . . exercise the judgment and care under the circumstances then prevailing, which men of prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of their capital.

Buder, 774 P.2d at 1385. The court held that Buder abused his discretion when he invested substantial amounts of entrusted money without careful calculation. Id. at 1386–87.

In the case at hand, Ms. McDowell, Manager at Democracy Worldwide, acted as a prudent person. When the COVID-19 numbers spiked in Cameroon, Ms. McDowell promptly asked Mr. Baird, the AOR, for guidance on changing the training program to match the changing circumstances. Appx4. This was consistent with the instructions in USAID’s Frequently Asked Questions issued in March 2020. Appx129. The guide said, “[f]or those additional costs incurred as a result of COVID-19 that would have a significant impact on the budget, the partner must contact the CO/AO or COR/AOR.” Appx129. When the AOR replied to Ms. McDowell saying, “[y]ou can purchase PPE just make sure it complies with the guidance on the USAID website, e.g., is reasonable, etc.,” Ms. McDowell complied with the USAID guidance by following the “prudent person” standard under 2 C.F.R. § 200.404. Appx4–6. Ms. McDowell prudently followed what USAID directed program managers to do, and she did not abuse her power as a program manager when she consulted with appropriate authority from USAID. Appx4–6; see also GAO-18-568G, supra, § 6.23 (“[A]buse is behavior that is deficient or improper when compared with behavior that a prudent person would consider reasonable and necessary business practice.”).

Moreover, Democracy Worldwide conducted careful calculation prior to the purchase of COVID-19 PPE. See Appx5. Democracy Worldwide solicited price quotes from several manufactures and elected to purchase the cheapest option. Appx5; see also Buder, 774 P.2d at 1385 (requiring fiduciaries to “exercise the judgment and care under the circumstances then prevailing”). Therefore, Democracy Worldwide acted prudently under the circumstances and the COVID-19 PPE purchase was reasonable.

2. The Cost of COVID-19-Related Purchases Was Reasonable Because the Purchases Were Necessary to Protect Participants from the Pandemic.

A cost is reasonable if it does not exceed the cost that “would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.” 2 C.F.R. § 200.404. The reasonableness of a given cost depends on a number of factors:

(a) whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award;

(b) The restraints or requirements imposed by such factors as: sound business practices; arm’s-length bargaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of Federal award;

(c) Market prices for comparable goods or services for the geographic area;

(d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal Government;

(e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award’s cost.

Id.

Here, it is clear that the cost of masks, hand washing stations, nurses’ consultant fees and attendant expenses, thermometers, and additional sanitation fees were reasonable under the terms of 2 C.F.R. § 200.404. First, the use of masks and sanitations was recognized as necessary for the operation of the non-Federal entity, as Democracy Worldwide was obliged under the terms of the grant agreement to avoid causing harm to the attendees. See Appx9 (recognizing the grant agreement contains a “Do No Harm” provision). COVID-19 is highly contagious and most commonly spreads through respiratory droplets during close contact. How COVID-19 Spreads, CDC (Aug. 11, 2022), https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/how-COVID-spreads.html [https://perma.cc/GPG2-ADQ4]. The Center for Disease Control and Prevention warns that “[t]he best way to prevent illness is to avoid being exposed to this virus. You can take steps to slow the spread . . . . Cover your mouth and nose with a mask when around others. Wash your hands often with soap and water. Routinely clean and disinfect frequently touched surfaces.” Id. Democracy Worldwide purchased masks, hand washing stations, nurse-consultants, and additional sanitation for the conference space to protect participants and to prevent the spread of the virus. See Appx5–6.

Moreover, as soon as the pandemic began, USAID announced its new assistance program to provide PPE—including masks—to affected countries. Novel Coronavirus (COVID-19), USAID, https:/www.usaid.gov/coronavirus (last visited Nov. 30, 2022) [https://perma.cc/N869-BCRA]. The newly announced assistance regarding the PPE implies that USAID recognized masks and sanitation related supplies as necessary. See id. Thus, Democracy Worldwide acted reasonably because “the cost [was] of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award.” See 2 C.F.R. § 200.404(a).

Second, Democracy Worldwide purchased PPE because the Cameroonian government required everyone to wear a mask in public spaces. Appx5. It would have been illegal for participants to appear in public space without masks. Appx5.Moreover, the Hilton mandated the hand sanitizing stations at the entrances and exits of their meeting rooms and charged additional cleaning fees for sanitizations. Appx5. Therefore, Democracy Worldwide acted reasonably by following “restraints or requirements imposed by such factors as: sound business practices; arm’s-length bargaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of Federal award.” See 2 C.F.R. § 200.404(b).

Third, the prices Democracy Worldwide paid were reasonable in light of market prices for comparable goods or services for the geographic area. Democracy Worldwide solicited price quotes from retailers to purchase masks in bulk because the pandemic forecasted to last beyond the first training. Appx5. When it found the cheapest option per mask, Democracy Worldwide decided to order the minimum required. Appx5.

When the COVID-19 pandemic began, the entire globe experienced mask shortages. Shortage of Personal Protective Equipment Endangering Health Workers Worldwide, WHO (Mar. 3, 2020), https://www.who.int/news/item/03-03-2020-shortage-of-personal-protective-equipment-endangering-health-workers-worldwide [https://perma.cc/SL73-E83C]. When the Cameroonian government mandated wearing masks in public spaces, people in Cameroon also suffered from mask shortages. Amindeh Blaise Atabong, In Cameroon, Face Masks are Compulsory – But Unaffordable for Many, Mail & Guardian (Apr. 18, 2020), https://mg.co.za/article/2020-04-18-in-cameroon-face-masks-are-compulsory-but-unaffordable-for-many/ [ https://perma.cc/YB8A-N9BN]. If masks were available in Cameroon, the prices were up to around $1.80 per mask. Id. Therefore, purchase of 500 masks for $1,500 was reasonable because the Cameroonian government gave short notice in midst of the global mask shortages and the pandemic forecasted to last for more than a short-term period. See Appx5; see also 2 C.F.R. § 200.404(c).

Moreover, the price of hand washing stations was reasonable compared to goods sold in Cameroon. On average, people use one gallon (3.78L) of water to wash their hands. How Much Water Do You Use at Home?, U.S. Geological Surv.,https://water.usgs.gov/edu/activity-percapita.php(last visited Nov. 30, 2022) [https://perma.cc/T8H6-CP3C]. Considering the circumstances, around 200L of water would have been required. 1.5L of water costs around $0.6 in Yaoundé, Cameroon. Cost of Living in Yaounde, Numbeo, https://www.numbeo.com/cost-of-living/in/Yaounde-Cameroon (last visited Nov. 30, 2022) [https://perma.cc/2RSP-QLM4]. Democracy Worldwide spent $350 in total including large water jerry cans, hand soap, and plastic barrels. Appx5–6. Therefore, the cost of hand sanitizing stations was reasonable for the market price in Cameroon. See 2 C.F.R. § 200.404(c).

While nurses’ consultant fees and attendant expenses, thermometer and other additional sanitation costs might not have been comparable at the current market price, the price for COVID-19-related products spiked during Democracy Worldwide’s first training. Amindeh Blaise Atabong, supra. Also, with additional precautions and risks imposed to nurses during the pandemic, taking extra precautions was a reasonable practice. Advice on the Use of Masks in the Community, During Home Care, and in Health Care Settings in the Context of COVID-19, WHO (Mar. 19, 2020), https://apps.who.int/iris/bitstream/handle/10665/331493/WHO-2019-nCoV-IPC_Masks-2020.2-eng.pdf?sequence=14&isAllowed=y [https://perma.cc/4H3J-U8NP]. Therefore, given the circumstances, the cost for nurses’ consultant fees and attendant expenses, thermometers, and additional sanitation was reasonable. See 2 C.F.R. § 200.404(c).

Fourth, Democracy Worldwide acted with prudence in the circumstances considering its responsibilities to the non-Federal entity, its employees, the public at large, and the Federal Government. It was prudent for Democracy Worldwide to purchase masks in addition to setting up sanitation stations and paying for additional cleaning and nursing services during the COVID-19 outbreak, as recommended by public health authorities. Advice on the Use of Masks in the Community, During Home Care, and in Health Care Settings in the Context of COVID-19, supra. The World Health Organization advised that wearing a medical mask is “one of the prevention measures that can limit the spread of certain respiratory diseases, including COVID-19. However, the use of mask alone is insufficient to provide an adequate level of protection, and other measures should also be adopted.” Id. It was Democracy Worldwide’s responsibility to protect the health and safety of staff and participants. See Appx9 (recognizing the grant agreement contains a “Do No Harm” provision). Therefore, Democracy Worldwide acted prudently when it took these preventative measures. See 2 C.F.R. § 200.404(d); see also Appx5–6.

Democracy Worldwide’s spending also did not unjustifiably increase the cost of the award spending. When the Cameroonian government closed the border, Democracy Worldwide transformed the program to a hybrid-training plan. Appx4–5. Some participants came on site, while others participated virtually. Appx4–5. From the modification, Democracy Worldwide saved the cost for food, travel, and stays. Appx2,5. Therefore, the PPE cost did not significantly increase the overall cost of the original budget. See 2 C.F.R. § 200.404.

3. The Costs Were Allocable to the Grant in Question Because the COVID-19-Related Purchases Were Assignable to the Federal Award.

Finally, the costs were allocable to the federal award because the COVID-19-related expenses were necessarily incurred for the performance of the award. “A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received.” 2 C.F.R. § 200.405(a).

Th[e] standard [of allocability] is met if the cost: (1) is incurred specifically for the Federal award; (2) benefits both the federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with principles in this subpart.

2 C.F.R. § 200.405(a)(1)–(3). Democracy Worldwide incurred COVID-19-related cost specifically for executing the federal award. On March 13, 2020, when Prime Minister Ngute closed Cameroon’s border, Democracy Worldwide could no longer invite experts to the country. Appx5. Instead of having everyone at the training site, Democracy Worldwide decided to modify the program by conducting a hybrid-mode training. Appx3–5. Both the AO and AOR approved the modified hybrid-training. Appx4–5. For those who attended in-person, Cameroon’s government and Hilton required participants to wear masks and use additional sanitization. Appx5. Through careful safety measures Democracy Worldwide implemented, the first training ended highly successfully. Appx5. Therefore, Democracy Worldwide incurred the purchase of COVID-19 PPE specifically to execute a Federal contract. See 2 C.F.R. § 200.405(a)(1) (the standard of allocability is met “if the cost is incurred specifically for the Federal award.”).

Because Democracy Worldwide has not used these COVID-19-related purchases for any grant or work other than the grant in question, these costs are allocable. The expenses related to sanitation stations, cleaning, and nursing services were entirely related to the first training. See Appx5–6. Democracy Worldwide purchased more masks than were needed strictly for the first training, but that was done to save money per unit, and Democracy Worldwide reasonably and correctly predicted that it would need the masks for the remaining trainings under this grant. See Appx5. This satisfies the remaining requirements for the allocability of these costs. See 2 C.F.R. § 200.405. Therefore, the COVID-19-related purchases were allocable.

4. If a Cost Is Reasonable and Allocable, It Is Allowable.

A cost is allowable when it is reasonable and allocable, and otherwise complies with regulations and accounting standards not at issue in this case. The decision from the Court of Federal Claims does not dispute accounting standards, terms of the contract, or other limitations. See Appx9–11. Therefore, because the cost was reasonable and allocable, the cost was allowable.

The Uniform Guidance lists factors affecting allowability of costs. 2 C.F.R. § 200.403. Costs must meet the following general criteria to be allowable under federal grant awards:

(a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.

(b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost item.

(c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity.

(d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect It.

(e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part.

(f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. See also § 200.306(b).

(g) Be adequately documented. See also §§ 200.300 through 200.309 of this part.

(h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3).

Id.

The only question is whether the costs were reasonable. See 2 C.F.R. § 200.403(a) (“Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.”). As explained above, the costs were allocable, see Part III.A.3, supra. Neither the government in its brief to the Court of Federal Claims nor the court challenged this contention. See Appx9–10. None of the other matters are in dispute. See Appx9–11. There is no question that the costs did not conform with the limitation or exclusions of cost items, 2 C.F.R. § 200.403(b), that the costs were inconsistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity, 2 C.F.R. § 200.403(c), that the costs were not accorded consistent treatment within the budget, 2 C.F.R. § 200.403(d), that they were not determined under appropriate accounting principles, 2 C.F.R. § 200.403(e), that they were included as a cost-sharing or requirement 2 C.F.R. § 200.403 (f), or that they were inadequately documented, 2 C.F.R. § 200.403(g), or that they were not incurred during the approved budget period, 2 C.F.R. § 200.403(h). See Appx9–11. Here, Democracy Worldwide’s spending on COVID-19-related purchases was reasonable and allocable. See supra Part III.A.1–2; see also supra Part III.A.3. Therefore, the cost was allowable.

5. Because the Cost Was Allowable, Reasonable, and Allocable, Democracy Worldwide Was Entitled to Payment Without Additional Approval by the AO.

Additional approval by the AO was not necessary when Democracy Worldwide purchased masks, hand washing stations, nurses’ consultant services, thermometers, and additional sanitation for the conference space. First, the Uniform Guidance required only that the costs be allowable, reasonable, and allocable for payment. Appx9; see also, 2 C.F.R. § 200.305 (“[P]ayments for allowable costs by non-Federal entities must not be withheld at any time during the period of performance.”). Prior written approval is not required. 2 C.F.R. § 200.407 (“The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability.”).

Prior approval was not specifically required for allowability. The approval by the AO was unnecessary because USAID COVID-19 guidelines require approval when the cost of COVID-19 PPE has a significant impact on the budget. Appx129. The USAID FAQ provided that “reasonable costs in relation to safety measures are generally allowable.” Appx132. In addition, the FAQ stated that “[b]efore incurring any additional costs relating to COVID-19, partners must contact their AOR(s)/COR(s)/ and AO(s)/CO(s) for approval when required.” Appx129. USAID specifically clarified that “when required” applies if “those additional costs incurred as a result of COVID-19 . . . would have a significant impact on the budget.” Appx129.Thus, when there is insignificant impact on the budget, the grantee does not necessarily need approval by the AO for purchasing COVID-19-related purchases.

It is clear that the COVID-19 PPE costs did not have a significant impact on the budget. USAID awarded Democracy Worldwide $2,000,000 to implement its proposed training program. Appx2. The COVID-19 PPE costs totaled $10,445. Appx6. The cost only portioned 0.5% of the entire award budget. See Appx2,6. Therefore, considering the scale of the program and its budget, the PPE costs were insignificant. See Appx129. Because the cost of COVID-19 PPE purchase was minimal compared to the entire budget amount, prior approval by the AO was not necessary.

Furthermore, Democracy Worldwide did not need approval from the AO because Democracy Worldwide did not amend the agreement when it purchased the COVID-19 PPE. According to the grant agreement, “[t]o amend the grant agreement, [Democracy Worldwide] would need to submit a budget or program realignment to the AO for prior approval.” Appx2. The budget provides that the costs include “anything necessary to daily operation.” Appx3. During the COVID-19 pandemic, masks, handwashing stations, nurses, and other sanitary supplies were “necessary to daily operation.” See id. This is not an amendment because Democracy Worldwide was authorized to make such purchases under the agreement as originally written. See id. Therefore, because COVID-19 PPE was necessary for daily operation and because Democracy Worldwide did not amend the agreement, approval by the AO was not required.

In conclusion, the Court of Federal Claims clearly erred when it disallowed the reimbursement costs for the COVID-19 PPE. The PPE cost should be allowable because the COVID-19 PPE costs were reasonable, allocable, and allowable. The PPE protected the safety of program participants from the pandemic, and the overall cost was insignificant compared to the entire award amount. See Appx2, 5–6. Democracy Worldwide took reasonable steps to purchase the PPE to execute the grants award and the PPE, sanitation, and nursing services helped the training proceed successfully. See Appx2, 5–6.For all the reasons stated above, the PPE costs were allowable.

6. The Court of Federal Claims Committed Clear Error Because It Relied on the Wrong Test for the Reasonableness of the Costs and the Costs Were Plainly Reasonable.

The Court of Federal Claims committed clear error when it found the COVID-19-related costs unreasonable because it relied on the wrong test to determine whether the costs were reasonable, and the application of the correct test shows that they were. In the decision on appeal, the Court of Federal Claims found that these costs were not reasonable—and thus not allowable—because USAID’s COVID-19 guidance stated that “[b]efore incurring any additional costs relating to COVID-19, partners must contact their AOR(s)/COR(s)/CO(s) for approval, when required,” and generally referred grantees with questions to the AO for guidance. See Appx10.

This reasoning is fatally flawed. The Court appears to have reasoned that a prudent person would have gotten written approval by the AO before incurring costs, based on USAID’s COVID-19 guidance. See Appx10. But the specific provision cited by the Court below requires the grantee to get AO approval “when required.” Appx129. Moreover, that provision plainly does not purport to change the regulatory regime. See Appx129. And the relevant regulations deny any general requirement to obtain approval for a cost as a condition of its reasonableness. (A) See 2 C.F.R. §§ 200.403–405; (B) see also 2 C.F.R. § 200.407 (“The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required for allowability.”). No reasonable person would interpret this FAQ guidance as requiring prior AO approval—it only instructs grantees to get the written approval they are otherwise required to get.

The same is true for the other authority the Court cited to support its conclusion that Democracy Worldwide’s purported failure to get prior approval meant these costs were unreasonable. This other authority was the general instruction in the FAQs advising grantees to communicate with the AO about the allowability of a specific cost. Appx10. It would be clearly erroneous to interpret the FAQs as requiring AO approval generally. See Appx12930.

The Court below clearly erred by failing to inquire whether the costs were allowable, reasonable, and allocable under the terms of the Uniform Guidance themselves. Communication with the agency may of course play a role in prudent behavior. See 2 C.F.R. § 200.404 (defining reasonable cost as one that “would be incurred by a prudent person under the circumstances prevailing at the time the decision was made”). But Democracy Worldwide did communicate with USAID. Appx3–4. Because the costs were reasonable, see supra Part II.A.2,it would clearly not have been reasonable for Democracy Worldwide to get prior written approval by the AO as such approval is not required as a matter of law and as a matter of fact. See Appx2–3. The fact that now Democracy Worldwide might regret its reliance on the Uniform Guidance does not matter. See 2 C.F.R. § 200.404. The reasoning that a prudent person would take the specific step of obtaining prior written approval by the AO when the Uniform Guidance does not require prior written approval is clearly erroneous. See Appx129–30. Because the Court of Federal Claims based its decision on that reasoning, its affirmance of the disallowance of costs was also clearly erroneous.

B. The Agreement Officer Ratified the COVID-19-Related Expenses Because She Had Full Knowledge of the Circumstances Surrounding the Action of the AOR.

The AO ratified the purchase of COVID-19 PPE when she confirmed the spending to the AOR after reading the entire conversation between the AOR and Democracy Worldwide. USAID, 303_070122, ADS Chapter 303: Grants and Cooperative Agreements to Non-Governmental Organizations § 303.3.15(d) (2020) states that the AOR does not have actual authority to enter into or modify grants agreement. See Appx12. The government cannot be bound by the actions of those with apparent authority. Fed. Crops Ins. v. Merill, 332 U.S. 380, 384 (1947).

However, when a government employee enters into an unauthorized agreement, the agreement can become binding upon ratification by an individual with actual authority. Gary v. United States, 67 Fed. Cl. 202, 215–16 (2005). For ratification to be effective, “a superior must not only (1) have possessed authority to contract, but also (2) have fully known the material facts surrounding the unauthorized action of her subordinate, and (3) have knowingly confirmed, adopted, or acquiesced to the unauthorized action of her subordinate.” Leonardo v. United States,63 Fed. Cl. 552, 560 (2005). A party seeking to enforce a contract against the United States bears the burden of proving by preponderance of the evidence that the officer had authority to contract and ratified the agreement. See id. at 555.

In Leonardo, the artist claimed to have entered into an agreement with the government when she had conversations regarding contractual matters with a cultural affairs specialist who functioned as assistant to the cultural affairs officer at American Cultural Center. See id. at 554–55. The specialist did not have actual authority to bind the government. See id. at 557. The court found that the specialist lacked implied authority to contract because contracting authority was not an integral part of the duties assigned to the specialist. See id. at 558.The court also held that the cultural affairs officer who had authority to contract did not ratify the contract because the artist failed to show that the officer possessed the full knowledge of all the facts regarding the representative’s unauthorized actions. See id. at 569.

Unlike in Leonardo, the AO, who had authority to contract, did have full knowledge of all the facts regarding the AOR’s unauthorized actions. See Appx12 (“Ms. Huston, as the Agreements Officer, is the only individual with actual authority to modify grant agreements.”) (citation omitted). When the AOR forwarded Ms. McDowell’s email to the AO, the AOR stated “[p]lease see below exchange from Amanda at Democracy Worldwide.” Appx4. It is clear from this context that the AO fully received the material facts surrounding the action of her subordinate: that, in response to COVID-19, Democracy Worldwide proposed purchasing masks and sanitation. Appx4; see also Leonardo,63 Fed. Cl. at 560 (requiring for an effective ratification, that the superior “have fully known the material facts surrounding the unauthorized action of her subordinate.”). The AO confirmed the action of her subordinate when she replied back to AOR, “[a]greed” and further stated, “[p]lease inform [Democracy Worldwide] that any PPE purchase needs to comply with the guidance on the USAID website . . . .” Appx4. Because the AO read the entire email conversation between the AOR and Ms. McDowell, the AO knowingly confirmed Democracy Worldwide’s request. See Leonardo,63 Fed. Cl. at 560 (requiring for an effective ratification, that the superior “have knowingly confirmed, adopted, or acquiesced to the unauthorized action of her subordinate”). As there is no question that the AO had authority to contract, by her actions she ratified the AOR approval of these purchases.

The government may argue that the AO was not fully aware of the material facts because she did not know of the costs of the PPE and so could not ratify the purchases, but the specifics of the cost are not among the “material facts” required for ratification. The “material facts” required for ratification relate to the unauthorized action of her subordinate, rather than the details of cost. See id. at 560–70 (requiring for ratification the superior to confirm the unauthorized action of her subordinate). The AO was fully aware of the material facts when she read the entire conversation between the AOR and Ms. McDowell and advised that the COVID-19-related purchases must comply with the USAID guidance. See Appx3–5. In other words, the AO knew about the material facts because the AO directed Democracy Worldwide to USAID FAQs instead of requiring Democracy Worldwide to submit costs for additional ratification. Therefore, the AO ratified the COVID-19-related purchases when, with knowledge of the material facts surrounding the conversation between the AOR and Democracy Worldwide, she knowingly confirmed the AOR’s grant of permission to proceed.

C. The Court of Federal Claims’ Reliance on Pernix Was Misplaced Because the Grant Was More Like a Cost-Reimbursement Contract Than a Fixed-Price Contract.

The court below clearly erred in relying on Pernix Serka Joint Venture v. Dep’t of State, CBCA 5683, 20-1 BCA ¶ 37589 to find that Democracy Worldwide bore the cost risk under the grant agreement because the cost risk allocation in this grant agreement was not analogous to that in a fixed-price contract. The agreement in this case plainly bore no relationship to a fixed price contract in its risk profile, so that the obviously correct comparison was a cost-reimbursement contract. The Court of Federal Claims committed a clear error.

In analyzing which party bore the cost risk in this case, the Court of Federal Claims erroneously applied Pernix. The court drew an analogy between the contractor’s responsibility to bear additional costs under a fixed-price contract during an Ebola outbreak in Pernix and the case at hand. Appx10–11 (citing Pernix,20-1 BCA ¶ 37,589). The reliance is misplaced because, while Pernix reflected risk allocation in a fixed-price contract, the grant here had none of the fixed-price risk distribution.

A firm-fixed-price contract “places upon the contractor maximum risk and full responsibility for all costs and resulting profit or loss” and “provides maximum incentive for the contractor to control costs and perform effectively.” FAR 16.202-1. By contrast, a cost-plus-fixed fee contract “permits contracting for efforts that might otherwise present too great a risk to contractors, but it provides the contractor only a minimum incentive to control costs.” FAR 16.306(a). Complex requirements, “particularly those unique to the Government, usually result in greater risk assumption by the Government.” FAR 16.104. This is especially true for complex research and development contracts, “when performance uncertainties or the likelihood of changes makes it difficult to estimate performance costs in advance.” Id. In such situation, “the cost risk should shift to the contractor, and a fixed-price contract should be considered.” Id. In a cost-reimbursement contract, the contractor is required to provide the best estimate level of effort to fulfill the purpose of the contract. See, e.g., EPAAR 1552.211-73.

In the case at bar, Democracy Worldwide did not assume the risk of increased cost of performance. The grant awards had more than one characteristic of cost-reimbursement agreements as defined under FAR 16.301-1, which states that “[c]ost-reimbursement types of contracts provide for payment of allowable incurred costs, to the extent prescribed in the contract. These contracts establish an estimate of total cost for the purpose of obligating funds and establishing a ceiling that the contractor may not exceed (except at its own risk) without the approval of the contracting officer.” FAR 16.301-1. First, Democracy Worldwide established a budget of $2,000,000 based on the actual costs of the project, and the agreement contained the project proposal with the budget attached. Appx2; see also FAR 16.301-1 (“[Cost-reimbursement types of contracts] establish an estimate of total cost for the purpose of obligating funds and establishing a ceiling that the contractor may not exceed . . . .”). Second, the grant did not include profits for Democracy Worldwide. See Appx15 (“Applications should be from qualified U.S. or non-U.S. entities, such as private, non-profit organizations (or for-profit companies willing to forego profits)”). Third, the agreement stated that Democracy Worldwide was bound to the proposal and to amend the grant agreement, Democracy Worldwide needed to give notice to the AO for prior approval. Appx2; see also FAR 16.301-1. All of these characteristics of the contract show that the grant award was more like a cost-reimbursement contract. Therefore, USAID assumed the risk of the increase in cost arising from performance of the training program in Cameroon because the grants award was more like a cost-reimbursement contract than a fixed-price contract. See Memorandum from Russell T. Vought, Dir., Off. of Mgmt. and Budget, to the Heads of Exec. Dep’ts and Agencies (Jan. 05, 2021), https://www.whitehouse .gov/wp-content/uploads/2021/01/M-21-11.pdf [https://perma.cc/X2WA-BXLA] (explaining that the government bears more risk in cost-reimbursement contract).

Furthermore, it does not make sense to analyze which party bore the “cost risk” in this not-for-profit grant contract by analogy to a for-profit, procurement contract. See Appx15. The court below sought to determine which party bore the downside of cost risk in this case. Appx10–11. It did so by comparing the agreement in question to a commercial, fixed-price contract. Id. This was patently unreasonable because while the issue of the risk of higher costs was debatable, there is no debate that Democracy Worldwide does not enjoy the same upside cost risk as the contractor in Pernix did. Under a fixed-price contract, the contractor benefits from the positive cost risk, i.e., that a project comes in under cost. See FAR 16.202-1 (noting that a fixed-price contract places on the contractor “maximum risk and full responsibility for all costs and resulting profit or loss” and providing “maximum incentive for the contractor to control costs and perform effectively”). Democracy Worldwide, by contrast, cannot benefit from the cost risk because there is no provision for profits under the agreement. See Appx15. When deciding which party bore the risk when costs were high, it was unreasonable for the Court of Federal Claims to rely on a comparison to an agreement that would allocate the risk when costs are low in a manner the exact opposite of the agreement at hand. Analysis of risk allocation under this agreement by comparison to a fixed-price contract is patently unreasonable.

Finally, the court’s reliance on Pernix is misplaced because the circumstances differ materially. In Pernix, U.S. Department of State (DoS) entered a fixed-price contract with Pernix “to construct a rainwater capture and storage system in Freetown, Sierra Leone.” Pernix, 20-1 BCA ¶ 37,589. During the operation, Ebola broke out and DoS gave no guidance other than to say that Pernix would need to make its own decisions to complete the project under such circumstances. See id. at 3. Without further guidance, Pernix decided to demobilize the workforce and returned later. Id. Pernix sought an equitable adjustment for costs for additional medical services it had to provide the employees on site, arguing that there was a constructive change. Id. The Civilian Board of Contract Appeals rejected this argument for the allocation of risk reasons cited above, as well as the fact that the contract specifically allocated the risk of “acts of God, epidemics, and quarantine restrictions” to the contractor. See id. at 8.

Democracy Worldwide’s case is distinguishable from Pernix. As mentioned above, Democracy Worldwide entered into a grant contract resembling a FAR cost-reimbursement contract with USAID, and so USAID assumed the risks of unexpected costs when the government allowed the change in scope of the project. See FAR 16.306(a). And this grant agreement makes no reference to risk of quarantine restrictions. See Appx1–3. Therefore, the Court of Federal Claims clearly erred when it wrongly applied the Pernix standard to the case at hand.

CONCLUSION

For these reasons, the Court of Federal Claims properly exercised jurisdiction over Democracy Worldwide’s claim against USAID. The regulations governing the administration of the grant and the grant itself, by virtue of its contractual nature, provide the money-mandating source of law needed for Tucker Act jurisdiction over the claim against the government for money damages.

The Court of Federal Claims, however, clearly erred in finding that Democracy Worldwide’s COVID-19-related expenses were not reasonable. Because the expenses were reasonable and not significant, no approval by the AO was required, though the AO did effectively ratify the purchase. Therefore, we respectfully request this Court affirm the part of the Court of Federal Claims’s decision finding it had jurisdiction and reverse the part of the decision disallowing the $10,455 that Democracy Worldwide spent on masks, hand washing stations, nurses’ consultant and attendance, and additional sanitation for the conference space, so they might carry out their civil society training under COVID-19 conditions.

Respectfully submitted,

Stuart J. Anderson

Jung Hyoun Han