Brief of Defendant-Appellee, United States

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

TABLE OF AUTHORITIES

Cases

Acevedo v. United States, 824 F.3d 1365 (Fed. Cir. 2016) See PDF page(s): 239

Alder Terrace, Inc. v. United States, 161 F.3d 1372 (Fed. Cir. 1998) See PDF page(s): 237

Anchorage v. United States, 119 Fed. Cl. 709 (2015) See PDF page(s): 240

Anderson v. United States, 344 F.3d 1343 (Fed. Cir. 2003) See PDF page(s): 244

Arizona v. United States, 575 F.2d 855 (Ct. Cl. 1978) See PDF page(s): 244

Bowen v. Massachusetts, 487 U.S. 879 (1988) See PDF page(s): 238

Fed. Crop Ins. Corp. v. Merrill, 332 U.S. 380 (1947) See PDF page(s): 243, 244

Fisher v. United States, 402 F.3d 1167 (Fed. Cir. 2005) See PDF page(s): 237

Gary v. United States, 67 Fed. Cl. 202 (2005) See PDF page(s): 244, 245

Gen. Dynamics Corp. v. United States, 410 F.2d 404 (Ct. Cl. 1969) See PDF page(s): 236

H. Landau & Co. v. United States, 886 F.2d 322 (Fed. Cir. 1989) See PDF page(s): 244

Harris Cnty., Tex., CBCA No. 6909, 21-1 BCA ¶ 37,754 See PDF page(s): 241, 242

Indiana Mich. Power Co. v. United States, 422 F.3d 1369 (Fed. Cir. 2005) See PDF page(s): 236

Jan’s Helicopter Serv., Inc. v. F.A.A., 525 F.3d 1299 (Fed. Cir. 2008) See PDF page(s): 237

Kellogg Brown & Root Servs., Inc. v. United States, 728 F.3d 1348 (Fed. Cir. 2013) See PDF page(s): 236, 241, 242

Lane v. Pena, 518 U.S. 187 (1996) See PDF page(s): 236

Lisbon Contractors, Inc. v. United States, 828 F.2d 759 (Fed. Cir. 1987) See PDF page(s): 241, 243

Lummi Tribe of the Lummi Rsrv., Wash. v. United States, 870 F.3d 1313 (Fed. Cir. 2017) See PDF page(s): 238, 239

Matrix Bus. Sols. v. Dep’t of Homeland Sec., CBCA No. 3438, 15-1 BCA ¶ 35,844 See PDF page(s): 244

McNutt v. General Motors Acceptance Corp. of Ind., 298 U.S. 178 (1936) See PDF page(s): 237

Metzger, Shadyac & Schwarz v. United States, 12 Cl. Ct. 602 (1987) See PDF page(s): 240

Mission Support All. V. Dep’t of Energy, CBCA No. 4985, 16-1 BCA ¶ 36,540 See PDF page(s): 242, 245

Moden v. United States, 404 F.3d 1335 (Fed. Cir. 2005) See PDF page(s): 237

Pernix Serka Joint Venture. v. Dep’t of State, CBCA No. 5683, 20-1 BCA ¶ 37,589 See PDF page(s): 245, 246

Rick’s Mushroom Serv., Inc. v. United States, 76 Fed. Cl. 250 (2007) See PDF page(s): 237, 240

San Antonio Hous. Auth. v. United States, 143 Fed. Cl. 425 (2019) See PDF page(s): 238

Sports Graphics, Inc. v. United States, 24 F.3d 1390 (Fed. Cir. 1994) See PDF page(s): 242

St. Bernard Parish Gov’t v. United States, 134 Fed. Cl. 730 (2017) See PDF page(s): 237, 240

Suburban Mortg. Assoc., Inc. v. U.S. Dep’t of Hous. & Urban Dev., 480 F.3d 1116 (Fed. Cir. 2007) See PDF page(s): 238

Thermalon Indus., Ltd. v. United States, 34 Fed. Cl. 411 (1995) See PDF page(s): 239, 240

United States v. Mitchell, 463 U.S. 206 (1983) See PDF page(s): 237

United States v. Sherwood, 312 U.S. 584 (1941) See PDF page(s): 237

United States v. Testan, 424 U.S. 392 (1976) See PDF page(s): 237

Yancey v. United States, 915 F.2d 1534 (Fed. Cir. 1990) See PDF page(s): 237, 238

Zoubi v. United States, 25 Cl. Ct. 581 (1992) See PDF page(s): 244

Statutes

28 U.S.C. § 1491 See PDF page(s): 233, 234, 237

31 U.S.C. § 6304 See PDF page(s): 239, 240

31 U.S.C. § 6305 See PDF page(s): 240

5 U.S.C. § 702 See PDF page(s): 236

Pub. L. No. 116-94, 133 Stat. 2892 See PDF page(s): 238

Other Authorities

COVID-19 Partners Call Script, USAID (Mar. 18, 2020), https://www.usaid.gov/sites/default/files/documents/1868 /3.18.2020_COVID-19_Partners_Call_Script.pdf See PDF page(s): 243

Guidance Frequently Asked Questions, USAID (Nov. 3, 2020), http://web.archive.org/web/20210228111642/https://www.usaid.gov/sites/default/files/documents/11.03.2020_COVID-19_Partner_FAQs_0.pdf See PDF page(s): 243

USAID Key Accomplishments, USAID, https://www.usaid.gov/reports-and-data/key-accomplishments (last visited Nov. 8, 2022) See PDF page(s): 234

Regulations

2 C.F.R. § 200.400 See PDF page(s): 241, 242

2 C.F.R. § 200.403 See PDF page(s): 241

2 C.F.R. § 200.404 See PDF page(s): 241, 243

FAR 16.202 See PDF page(s): 246

FAR 16.202-1 See PDF page(s): 245

Agency Guidance

U.S. Agency for Int’l Dev., ADS: Grants and Cooperative Agreements to Non-Governmental Organizations § 303.3.15(d) (2020) See PDF page(s): 244, 245

JURISDICTIONAL STATEMENT

Pursuant to Federal Rule of Appellate Procedure 28(b) and Federal Circuit Rule 28(b), appellee states its disagreement with the jurisdictional statement of the appellant. Specifically, appellee disagrees with appellant’s assertion that the Court of Federal Claims possessed jurisdiction over Democracy Worldwide’s (DW) appeal. DW’s grant award does not identify a money-mandating provision; thus, Tucker Act jurisdiction does not extend to this award.

STATEMENT OF RELATED CASES

Pursuant to Federal Circuit Rule 47.5, appellee’s counsel states that they are unaware of any case pending in this or any other court that may affect or be affected by this Court’s decision in this appeal.

STATEMENT OF THE ISSUES

1. Whether the U.S. Court of Federal Claims (“Court of Federal Claims” or “lower court”) has subject matter jurisdiction over appellant’s claim for a right to cost reimbursement under a United States Agency for International Development (“USAID”) grant award that did not contain a money-mandating provision and consideration.
2. Whether the Court of Federal Claims properly disallowed appellant’s costs related to personal protective equipment (“PPE”), sanitation, and nurses’ fees where the grant award did not provide for these costs and the appellant did not seek approval from the agreements officer.

STATEMENT OF THE CASE

I. NATURE OF THE CASE

This appeal arises from a decision of the Court of Federal Claims that held jurisdiction to review a grant dispute for plaintiff-appellant Democracy Worldwide’s (DW) cost disallowance by USAID. Appx12. The USAID award charged DW with strengthening Cameroonian civil society through trainings, advocacy, and follow-up meetings with activists. Appx1.

Due to the COVID-19 pandemic, DW incurred costs for PPE, sanitation, and nurses’ fees. Appx5. DW, however, did not inform the Agreement Officer (AO) or the Agreement Officer’s Representative (AOR) of the specifics of these costs. Appx12. Subsequently, the AO disallowed DW’s costs because (1) the grant agreement did not include DW’s costs and (2) the AO did not approve these costs. Appx6. DW appealed this decision to the Court of Federal Claims arguing (1) the Court had jurisdiction over grant disputes for monetary claims under the Tucker Act, 28 U.S.C. § 1491(a), and (2) the additional costs incurred were reasonable and approved by the government. The lower court held that it had jurisdiction to hear this dispute under 28 U.S.C. § 1491(a) but disallowed DW’s incurred costs, and this appeal followed. Appx12.

II. STATEMENT OF FACTS

A. The Program Award

USAID promotes U.S. foreign policy by advancing freedom, reducing poverty, and strengthening democratic institutions abroad. USAID Key Accomplishments, USAID https://www.usaid.gov/reports-and-data/key-accomplishments [https://perma.cc/MN2Q-3LWK] (last visited Nov. 8, 2022). Pursuant to this mission, USAID issued a Notice of Funding Opportunity (NOFO) that sought applications for programs to protect human rights activities, conduct civil education, and initiate human-rights based litigation in Central Africa. Appx1. Seven organizations submitted proposals responding to USAID’s NOFO, and USAID selected DW’s proposal, whose program focused on building strong institutions to protect human rights through workshops for civil society actors and follow-on meetings with activists. Appx2.

B. The Terms of the Grant Award

USAID awarded DW $2,000,000 to execute its program; the grant award governs the use of these funds. Appx2. The grant agreement states that DW’s proposal is binding and that DW must submit a budget realignment to the AO for prior approval to amend the grant agreement. Appx2. The grant award included a budget that included two line items for “supplies.” Appx3. The definition of supplies encompassed “assorted office supplies, such as flip charts, pens, folders, handouts, and name tags.” Appx3. The Other Direct Costs category also provided for supplies, including “assorted office supplies for staff, including paper, pens, ink, staplers, and anything necessary to daily operations.” Appx3. The budget, however, did not provide for PPE, sanitation, or fees for medical personnel. Appx11.

C. COVID-19 and DW’s Performance

DW planned its first training for April 2020 in Yaoundé, Cameroon at the Hilton Hotel, where it scheduled experts to speak on good management practices for nongovernmental organizations. Appx2. On March 6, 2020, Cameroon reported its first case of COVID-19 and closed its borders several days later, preventing DW’s experts from attending its first training. Appx3.

At this time, the Program Manager contacted Justin Baird, the AOR, and sought approval to bring in DW’s trainers virtually and informed him it may incur “additional costs” for “masks, sanitation, etc.” Appx3. As an AOR, Mr. Baird did not have authority to approve budget realignments and sought guidance from Ms. Huston, the AO. Appx4. The AO informed the AOR that any PPE purchases needed to comply with guidance on USAID’s website, which stated that purchases must be reasonable and 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.” Appx10. FAQs on USAID’s website further stated that implementing partners must still seek approvals that are normally required pursuant agreements’ existing terms and conditions. Appx129. The AOR communicated the AO’s guidance to DW and asked it to inform him if a budget realignment proved necessary. Appx5.

Without further guidance from the AO, DW incurred thousands of dollars in COVID-19 related costs, including a $5,000 cleaning fee from the hotel and $1,945 for 500 masks, gloves, hand sanitizer, and thermometers. Appx6. DW also procured two nurses for the training, providing them with a per diem and lodging at the Hilton and classified this $3,500 cost as a consultant fee. Appx7. The consultant fee in the budget, however, included only trainers and legal experts. Appx6. DW submitted these costs, totaling more than $10,445, to the AOR who, in agreement with the AO, disallowed all of DW’s additional costs. Appx6. After a petition for review, the AO issued a written decision disallowing the costs, which the Bureau for Management, Office of Management Policy, Budget, and Performance, Compliance Division (M/MPBP/Compliance) affirmed. Appx6. DW appealed this decision to the Court of Federal Claims. Appx6.

SUMMARY OF THE ARGUMENT

The Court of Federal Claims incorrectly found subject matter jurisdiction over DW’s claim for cost disallowance for a grant award. First, DW failed to establish jurisdiction by a preponderance of the evidence. Any waiver of sovereign immunity must be clear and explicit. Although the Tucker Act grants such waiver, it also necessitates a separate, substantive right of action. As such, it does not apply to the grant award here because no money-mandating statute provides a right of action for money damages, nor does the grant award presume money damages. Second, the Court of Federal Claims erroneously analogized the grant award to a traditional procurement contract. Although some instances warrant such analogy, the grant award here effectuates a different purpose than a procurement contract and fails to provide any direct consideration to the federal government. Because of this errant comparison, the lower court’s analysis is flawed, and so, DW’s claim falls outside the narrow grant of jurisdiction at the Court of Federal Claims. Therefore, this court should reverse the lower court’s holding and dismiss DW’s claim in its entirety.

Should this Court find jurisdiction, it should uphold the judgment of the Court of Federal Claims because it did not clearly err by disallowing DW’s costs for PPE, sanitation, and nurses’ fees. For costs to be allowable under a federal grant, such costs must not exceed what a prudent person would incur under the circumstances. The budget to which DW was bound did not include a line item for PPE, and the grant award, and multiple pieces of agency guidance, required AO approval before incurring costs outside the budget. Further, DW bore the burden of seeking approval from the proper government official, and the AOR did not have the requisite authority. Finally, because of the fixed-price nature of the grant, DW assumed the risk of incurring costs not included in its budget.

ARGUMENT

I. STANDARD OF REVIEW

The Federal Circuit reviews a dismissal for lack of jurisdiction de novo. Yancey v. United States, 915 F.2d 1534, 1537 (Fed. Cir. 1990). As such, this Court need not afford any deference to the lower court’s decision. See generally id. In such cases, the plaintiff bears the burden of proving jurisdiction by a preponderance of the evidence. Id. The Federal Circuit only overturns factual determinations when they are “clearly erroneous.” See Kellogg Brown & Root Servs., Inc. v. United States, 728 F.3d 1348, 1350, 1360 (Fed. Cir. 2013). A finding of fact is clearly erroneous when the appellate court has a “definite and firm conviction” that the lower court erred. See Indiana Mich. Power Co. v. United States, 422 F.3d 1369, 1373 (Fed. Cir. 2005). Further, cost reasonableness is a question of fact, and a court may examine many fact- and context-specific factors to determine reasonableness. See Kellogg Brown & Root Servs., 728 F.3d at 1360 (citing Gen. Dynamics Corp. v. United States, 410 F.2d 404, 409 (Ct. Cl. 1969)).

II. THE LOWER COURT INCORRECTLY HELD IT HAD JURISDICTION OVER DW’S GRANT DISPUTE BECAUSE THE TUCKER ACT’S LIMITED WAIVER OF SOVEREIGN IMMUNITY DOES NOT APPLY TO THIS GRANT AGREEMENT.

To bring a private right of action against the federal government, a claimant must identify an express waiver of sovereign immunity. See Lane v. Pena, 518 U.S. 187, 192 (1996) (holding that to hale the federal government into court plaintiffs must show that the former has “unequivocally” waived its immunity). Here, no such waiver exists as DW failed to identify a money-mandating statute and the Award does not presume money damages. Moreover, the Court of Federal Claim’s analysis in which it found jurisdiction is fundamentally flawed because the Award here is wholly dissimilar to a procurement contract. Consequently, the Court of Federal Claims is the improper venue for this suit; DW should err its grievance at a federal district court under the Administrative Procedure Act (“APA”). Administrative Procedure Act, 5 U.S.C. §§ 702–04 (stating that individuals entitled to judicial review of final agency actions shall bring their claims to “a court of competent jurisdiction,” absent statutory provisions instructing otherwise).

A. Any Waiver of Sovereign Immunity Must Be Unequivocally Expressed.

The long-established principle of sovereign immunity shields the federal government from suit, “except as Congress has consented to a cause of action against the United States.” United States v. Testan, 424 U.S. 392, 399 (1976) (citing United States v. Sherwood, 312 U.S. 584, 587–88 (1941)). Thus, “the existence of consent is a prerequisite for jurisdiction.” United States v. Mitchell, 463 U.S. 206, 212 (1983). Through the Tucker Act, Congress granted petitioners the ability to pursue private suits against the United States at the Court of Federal Claims. Id. at 216. However, this limited and express waiver “cannot be implied but must be unequivocally expressed.” Testan, 424 U.S. at 399. Because no waiver exists for grant agreements per se, no right of action exists here for the appellant.

B. The Tucker Act Does Not Extend Jurisdiction to the Award Because No Distinct, Substantive Right of Action for Money Damages Exists.

As the plaintiff bringing the claim, DW bears the burden of establishing jurisdiction. See Alder Terrace, Inc. v. United States, 161 F.3d 1372, 1377 (Fed. Cir. 1998) (citing McNutt v. General Motors Acceptance Corp. of Ind., 298 U.S. 178, 189 (1936)). DW failed to meet this burden because it failed to identify a substantive right of action for this Award under the Tucker Act. Appx1–12; see Testan, 424 U.S. at 400 (“[T]he Tucker Act is merely jurisdictional, and grant of a right of action must be made with specificity.”) (emphasis added). The Tucker Act explicitly provides 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, or upon any express or implied contract with the United States . . . .” 28 U.S.C. § 1491(a)(1). Because the Tucker Act only establishes jurisdiction and does not create a substantive right of action for money damages, claimants must identify a distinct, money-mandating statute. See Mitchell, 463 U.S. at 216; see also Yancey, 915 F.2d at 1537 (finding jurisdiction under the Contract Disputes Act because this statute is a money-mandating source of law). Without a right for money damages, “the court . . . shall dismiss the cause for lack of jurisdiction.” Fisher v. United States, 402 F.3d 1167, 1173 (Fed. Cir. 2005).

First, no relevant provision of the Constitution provides jurisdiction for this Award under the Tucker Act as this is not a taking. See, e.g., Jan’s Helicopter Serv., Inc. v. F.A.A., 525 F.3d 1299, 1309 (Fed. Cir. 2008) (citing Moden v. United States, 404 F.3d 1335, 1341 (Fed. Cir. 2005)) (“It is undisputed that the Takings Clause of the Fifth Amendment is a money-mandating source for purposes of Tucker Act jurisdiction.”). In addition, because grants generally do not presume money damages, the Award does not provide a substantive right as an express or implied contract. See St. Bernard Parish Gov’t v. United States, 134 Fed. Cl. 730, 734 (2017) (citing Rick’s Mushroom Serv., Inc. v. United States, 76 Fed. Cl. 250 (2007), aff’d, 521 F.3d 1338 (Fed. Cir. 2008)) (stating nontraditional government contracts, such as cooperative agreements, differ from traditional procurement contracts as they “are not presumed to provide money damages”).

Second, no statute or regulation provides a basis for jurisdiction because the statute under which the Award was authorized is money-authorizing. Appx9. “Appropriations acts, by their very nature, are generally money-authorizing, not money mandating. Appropriations are a form of [a]uthority provided by federal law to incur obligations and to make payments from the Treasury for specified purposes.” San Antonio Hous. Auth. v. United States, 143 Fed. Cl. 425, 480 (2019) (internal citations omitted). As such, the disbursement of funds does not entitle a grantee to an actual payment of money damages. Cf. Lummi Tribe of the Lummi Rsrv., Wash. v. United States, 870 F.3d 1313, 1318 (Fed. Cir. 2017) (finding no jurisdiction where plaintiffs were deprived of grant funds because the statute under which the grant was allocated was not money-mandating). Specifically, any alleged claim for additional money under a money-authorizing statute seeks a greater allocation in grant funding than was originally disbursed, creating a cause for equitable relief rather than a remedy for “damages.” See id.

The Supreme Court’s decision in Bowen v. Massachusetts is binding and supports the proposition that money due does not mean money damages for the purposes of Tucker Act jurisdiction. Bowen v. Massachusetts, 487 U.S. 879 (1988). In Bowen, Massachusetts challenged the federal government’s disallowance under Medicaid, a complex federal grant, in district court. Id. at 909. When deciding the proper forum for jurisdiction, the Court examined the character of the relief sought. Id. at 901–09. The Bowen Court understood “money damages” to mean “compensation for the damage sustained by the failure of the Federal Government to pay as mandated.” Id. at 900. Because Massachusetts sought money due, which was an equitable relief, versus compensatory damages, the Supreme Court found proper jurisdiction at district court under the APA instead of the Federal Circuit. Id. at 909–10.

As such, the Court of Federal Claim’s reliance on Suburban Mortgage Associates, Inc. is misplaced. There, this Court opined on a similar issue that examined whether proper jurisdiction for a claim was found at either the federal district courts under the APA or the Court of Federal Claims under the Tucker Act. Suburban Mortg. Assoc., Inc. v. U.S. Dep’t of Hous. & Urban Dev., 480 F.3d 1116, 1122–23 (Fed. Cir. 2007). However, the underlying factual basis and relief sought for the claim in Suburban was based on breach of an insurance contract where the contractor sought money damages allegedly owed. Id. at 1117–18. Therefore, this Court should rely on Bowen, and not Suburban, because it is more factually analogous to the facts of this case concerning a grant award.

Here, the Award was authorized by the Further Consolidated Appropriations Act (FCAA) of 2020, Pub. L. No. 116-94, 133 Stat. 2892. Appx9. Because the FCAA is an appropriation, it is not a money-mandating statute. See San Antonio Hous. Auth., 143 Fed. Cl. at 482. DW’s claim for additional money to cover COVID-related costs is best characterized as a claim for additional money under the grant disbursement versus a claim for damages. This renders DW’s claim equitable under a money-authorizing statute. Therefore, this Court should dismiss DW’s claim for lack of subject-matter jurisdiction. Id. at 480–81 (citing GAO Glossary at 20–21) (granting defendant’s motion to dismiss over plaintiff’s statutory claim brought pursuant to the 2012 Appropriations Act for lack of subject matter jurisdiction); see also Acevedo v. United States, 824 F.3d 1365, 1366–70 (Fed. Cir. 2016) (affirming the government’s motion to dismiss on the ground that the Court of Federal Claims lacked Tucker Act jurisdiction because governing regulations were money-authorizing). Finally, the Award’s mere reference to the Code of Federal Regulations does not create a substantive right of action as it is simply adding to the terms of the Award. See generally Cf. Lummi Tribe of the Lummi Rsrv., 870 F.3d at 1318.

In sum, DW failed to meet its burden of establishing jurisdiction under the Tucker Act because it failed to identify a proper money-mandating statute, thus, no distinct, substantive right for an action for money damages exists. Thus, the Court of Federal Claims erred in granting jurisdiction over this claim. Again, should DW continue to seek relief for its claim, it should file in federal district court under the APA.

C. The Court of Federal Claims’ Analysis Is Fundamentally Flawed and Should Be Overturned Because This Is Not a Procurement Contract.

Because the grant award here (1) effectuates a different purpose and (2) lacks consideration, the Court of Federal Claims erroneously analogized the grant agreement to a procurement contract. Appx9. Thus, the Court’s analysis is flawed, its holding regarding jurisdiction is wrong, and its decision should be overturned.

In limited circumstances, a federal grant agreement may constitute a procurement contract as recognized under the Tucker Act, so long as the grant agreement satisfies traditional requirements for a binding contract, namely the inclusion of consideration or a direct benefit to the government. See, e.g., Thermalon Indus., Ltd. v. United States, 34 Fed. Cl. 411, 414 (1995). But to always read a grant agreement as a procurement contract would render the intended purpose of a grant superfluous.

i. Grants are more like cooperative agreements and wholly dissimilar to procurement contracts in purpose and form.

When examining primary contracting vehicles employed by the federal government, statutory definitions and agency guidance illustrate that grants are more analogous to cooperative agreements than traditional procurement contracts. Consequently, the Court of Federal Claim’s analysis that analogized grants to procurement contracts for the purposes of jurisdiction is misplaced.

The federal government uses grants “to transfer a thing of value to the . . . recipient to carry out a public purpose of support or stimulation authorized by a law of the United States instead of acquiring . . . property or services for the direct benefit or use of the United States Government” when substantial involvement between the parties is not expected. Federal Grants and Cooperative Agreements Act of 1977, 31 U.S.C. § 6304. The federal government uses cooperative agreements “to transfer a thing of value to the [recipient] . . . to carry out a public purpose of support or stimulation authorized by a law of the United States instead of acquiring . . . property or services for the direct benefit or use of the United States Government” and “substantial involvement is expected” between the government and recipient. Id. at § 6305. The statutorily defined use between both grants and cooperative agreements is the exact same, with the sole difference turning on the amount of involvement between the parties when carrying out the agreement. Id. §§ 6304–05. Conversely, procurement contracts are used to “acquire . . . property or services for [the federal government’s] direct benefit or use.” Id. § 6303.

Here, the grant agreement was awarded pursuant to an application by USAID to support the overarching public purpose of increasing protection for human rights defenders through various methods in Central Africa. Appx1–3. Although procurement contracts may technically effectuate a public purpose at large by furthering an agency’s mission, the discrete purpose as to when the federal government should use each contracting vehicle illuminates the distinction. The Award illustrates this principle in the NFO by stating, “USAID may award either a cooperative agreement or a grant for this opportunity. The determination will be made during negotiation of award and will be based on the technical application proposed.” Appx16. Thus, this Award was intentionally classified as a grant, not a procurement contract.

However, the classification of these agreements, while important, does not solely determine “whether [the] arrangement constitutes a contract enforceable under the Tucker Act.” See Thermalon Indus., Ltd., 34 Fed. Cl. at 412. Therefore, the jurisdictional inquiry turns to whether the traditional standards of a mutual intent to contract exist, namely consideration, or a direct benefit, to the government. Id.

ii. Grants lack the necessary element of consideration.

Lack of consideration serves as a deciding factor when determining whether a contracting vehicle affords money damages. St. Bernard Parish Gov’t, 134 Fed. Cl. at 736, aff’d on other grounds, 916 F.3d 987 (Fed. Cir. 2019); see also Rick’s Mushroom Serv., Inc., 521 F.3d at 1344; Metzger, Shadyac & Schwarz v. United States, 12 Cl. Ct. 602, 605 (1987) (“[I]n the context of government contracts . . . consideration must render a benefit to the government, and not merely a detriment to the contractor.”). Specifically, consideration establishes an enforceable contract against the government because the direct benefit indicates a right to money damages. Rick’s Mushroom Serv., Inc., 521 F.3d at 1344. The mere fact that the government is paying for some beneficial improvement is not enough to establish consideration; the benefit must be direct, not incidental. Anchorage v. United States, 119 Fed. Cl. 709, 713–14 (2015) (holding the contract in dispute constituted a procurement contract and not a cooperative agreement because the government received direct, tangible benefits, such as a service road).

Here, consideration is incidental. The grant award indicates a direct benefit to the people of Cameroon, not the United States government. Appx26 (“Program Objectives: This program seeks to strengthen Cameroonian institutions to help Cameroon respect its human rights obligations and build the capacity of civil society actors to promote these rights, monitor compliance, and demand accountability.”) (emphasis added). Any benefit conferred to USAID through this grant agreement is generalized at most.

Because the grant agreement here effectuates a different purpose and lacks the principal characteristic of consideration that would imply money damages, the lower court’s conclusion that the grant is analogous to a procurement contract is flawed. Thus, DW failed to meet its burden of establishing jurisdiction at the lower court because it did not, and could not, name a money-mandating statute, as required by the Tucker Act. This Court should reverse the lower court’s holding because its analysis of the grant award here was fundamentally flawed.

III. THE COURT OF FEDERAL CLAIMS PROPERLY DISALLOWED DW’S COSTS FOR PPE, SANITATION, AND NURSES’ FEES BECAUSE THEY WERE NOT REASONABLE, THE AOR DID NOT HAVE AUTHORITY TO APPROVE THE COSTS, AND DW ASSUMED THE RISK BY INCURRING COSTS WITHOUT AO APPROVAL.

Costs allocated to a federal grant award must be reasonable. 2 C.F.R. § 200.403. DW’s costs for PPE, sanitation, and nurses’ fees were not reasonable because it did not comply with the terms of the grant award, and it ignored agency guidance to seek AO approval. Moreover, the AOR lacked authority to approve DW’s costs, and DW assumed the risk of incurring these costs without proper approval.

A. DW’s Costs Were Not Reasonable Because They Deviated from the Terms of the Federal Award and DW Ignored Agency Guidance to Seek Approval.

Despite the COVID-19 upheaval, DW, as the grant applicant, bore the burden of ensuring and proving cost reasonableness. See Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 767–68 (Fed. Cir. 1987). For a cost to be reasonable under a federal grant, the costs must not exceed the amount that “a prudent person” would incur “under the circumstances.” 2 C.F.R. § 200.404. Among the factors determining reasonableness is whether “the terms and conditions of the Federal award” place restrictions on incurring costs. Id.; 2 C.F.R. § 200.400(b) (“The non-Federal entity assumes responsibility for administering Federal funds . . . consistent with . . . the terms and conditions of the Federal award.”). Exigent circumstances alone, however, do not justify incurring unreasonable costs, and courts have disallowed costs incurred without approval of the proper government authority in such circumstances. See Kellogg Brown & Root Servs., Inc., 742 F.3d at 971 (violence in Iraq did not justify the contractor negligently accepting a proposal for construction of a dining facility that was [fifty percent] higher than necessary); see also Harris Co., Tex., CBCA No. 6909, 21-1 BCA ¶ 37,754, at 183,267, 183,270 (finding that “exigent . . . circumstances” from an impending hurricane did not relieve a FEMA grantee from ensuring cost reasonableness for debris removal where the grantee failed to secure explicit AO approval).

i. DW’s costs were not reasonable because they conflict with the terms of the grant award, and DW did not seek AO approval.

DW argues two “supplies” line times in the narrative budget include its costs. Appx3. The terms of the budget, however, describe supplies as “assorted office supplies for staff,” e.g., pens, paper, and ink, not the PPE and sanitation equipment for training participants for which DW seeks reimbursement. Appx3. DW also submitted the nurses’ fees and per diem under the “consultant” category, which, in the budget, includes only trainers and legal experts. Appx6. The grant award further stated that DW was bound to its budget proposal and needed prior approval from the AO to amend the budget. Appx2. Because the grant agreement did not include PPE, sanitation, or nurses’ fees, DW violated the terms of the grant award by incurring costs outside the budget without AO approval. See Cf. Mission Support All. V. Dep’t of Energy, CBCA No. 4985, 16-1 BCA ¶ 36,540, at 178,016 (finding that the contractor’s insurance costs were not reasonable where the contractor did not seek approval for the costs as the contract required). Given that DW’s COVID-19 costs did not appear in the budget and the grant award required prior approval to amend the budget, a reasonably prudent person would have sought approval before incurring these substantial costs. 2 C.F.R. § 200.400(b).

DW argues the Other Direct Costs line item included its PPE and sanitation costs because the general phrase “anything necessary to daily operations” followed the list of office supplies items in the narrative budget; however, the definition of supplies does not include PPE and sanitation fees because the listed items contemplate office supplies. Appx3. The general phrase “anything necessary to daily operations” must contemplate items similar to office supplies because the office supplies items precede the general phrase in the narrative budget. See Sports Graphics, Inc. v. United States, 24 F.3d 1390, 1392 (Fed. Cir. 1994) (“[W]here an enumeration of specific things is followed by a general word or phrase, the general word or phrase is held to refer to things of the same kind as those specified.”).

Thus, the general phrase in the narrative budget is not a catch-all for DW’s claimed costs. See id.

Additionally, DW may assert that COVID-19 upheaval justifies incurring costs without AO approval. The Boards, however, have consistently found that “exigent” circumstances do not absolve the grantee’s responsibility to ensure cost reasonableness. See, e.g., Harris Cnty., Tex., CBCA No. 6909, 21-1 BCA ¶ 37,754, at 183,272 (impending hurricane did not justify grantee’s excessive payments for debris removal). Given that the Boards have found that contractors and grantees are still required to exercise reasonable judgment during major natural disasters and wars, the impact of COVID-19 alone does not justify incurring thousands of dollars in costs because the regulations required DW to use its judgment and contact the AO for approval of costs outside the budget. See Kellogg Brown & Root Servs., 742 F.3d at 971. Further, courts must balance the need to act quickly under difficult conditions against the government’s need to control federal funds and preserve the integrity of the grant system. Allowing DW to claim costs outside the budget because of COVID-19 would render nearly any COVID-19 related cost allowable and USAID would lose its control over grantee spending.

Thus, DW’s costs are not reasonable because they do not comply with the terms of the grant award, and COVID-19 upheaval alone does not justify DW incurring unreasonable costs.

ii. DW did not demonstrate the prudence required for reasonableness because it ignored multiple pieces of agency guidance to seek agency approval for COVID-19 related costs.

DW asserts its costs are reasonable because USAID’s guidance states PPE is generally allowable. Guidance on USAID’s website, however, also 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.” Appx10; Appx129. A USAID executive reiterated the need for approval before incurring COVID-19 related costs, and FAQs available on USAID’s website stated that “approvals that are normally required . . . must still be obtained.” Appx129; see COVID-19 Partners Call Script, USAID (Mar. 18, 2020), https://www.usaid.gov/sites/default/files/documents/1868/3.18.2020_COVID-19_Partners_Call_Script.pdf [https://perma.cc/CU89-5GVG]; COVID-19 Implementing Partner Guidance Frequently Asked Questions, USAID (Nov. 3, 2020), https://www.usaid.gov/sites/default/files/documents/11.03.2020_COVID-19_Partner_FAQs_0.pdf [https://perma.cc/J93A-7ZQ4]. Further, the AOR informed DW that it was required to ensure that its costs were reasonable and to contact him if a budget realignment was necessary. Appx4.

Despite these pieces of guidance, DW never contacted the AO or AOR to apprise them of its specific costs for the sanitation, the PPE, or the consultant fees. Appx4. Rather, DW only told the AOR that it required “masks, sanitation, etc.,” without referencing nurses’ fees or any specific amounts for the masks or sanitation. Appx3. Given that every piece of agency guidance asked implementing partners to seek agency approval before incurring COVID-19 related costs, the costs are not reasonable because a prudent person acting under the agency’s guidance would have sought approval from the agency. See 2 C.F.R. § 200.404.

Because DW’s actions violated the terms of the grant award that required them to seek AO approval to amend the budget, it has not demonstrated that it acted prudently under the circumstances. Therefore, this Court should affirm the judgment of the lower court disallowing DW’s costs. See Lisbon Contractors, Inc., 828 F.2d at 767.

B. The AOR Did Not Have the Actual Authority to Approve DW’s Costs, and the AO Did Not Ratify Any Unauthorized Commitment by the AOR.

The government is not bound by those with apparent authority, and those who enter agreements with the government must ensure that the official who purports to act for the government possesses actual authority. Fed. Crop Ins. Corp. v. Merrill, 332 U.S. 380, 383–84 (1947) (“[A]nyone entering into an arrangement with the Government takes the risk of having accurately ascertained that he who purports to act for the Government stays within the bounds of his authority.”). The government can grant actual authority expressly through a statute or regulation or implicitly if the government employee needs the authority to fulfill their duties. See Anderson v. United States, 344 F.3d 1343, 1353 (Fed. Cir. 2003); H. Landau & Co. v. United States, 886 F.2d 322, 324 (Fed. Cir. 1989). Specifically, implied actual authority exists where the government employee’s management responsibilities require the ability to contract for the government. See, e.g., Zoubi v. United States, 25 Cl. Ct. 581, 588 (1992) (finding that Acting Program Director’s duties of establishing a new Saudi Arabian project implied authority to contract for interpreters); Arizona v. United States, 575 F.2d 855, 861 (Ct. Cl. 1978) (finding that Director of Bureau of Prison’s authority to “manage and control” all U.S. penal institutions implied the power to contract on the government’s behalf).

USAID operational policy states that only an AO has the authority to “commit[] to changes that affect the program, cost, period of performance, or other terms and conditions of the award.” U.S. Agency for Int’l Dev., ADS: Grants and Cooperative Agreements to Non-Governmental Organizations § 303.3.15(d) (2020). The AO may ratify an unauthorized commitment of funds by an AOR, but the AO must submit a memorandum to the Director of the Bureau Office of Acquisition and Assistance (“Director, M/OAA”), who has the sole authority to ratify the unauthorized commitment. Id. § 303.3.19(a).

Here, USAID did not approve the costs because the AOR did not have the actual express or implied authority to approve changes to the program’s budget, and DW cannot rely on apparent authority for approval. Id. § 303.3.15(d). DW only communicated directly with the AOR, and the AOR does not have express actual authority because USAID policy states that an AOR may not amend the program’s budget unilaterally. Id.; Appx5. Further, unlike cases where courts have found that a government employee’s managerial responsibilities granted implied actual authority to bind the government, here, the AOR’s responsibilities mainly include assisting the AO, and the AOR need only contact the AO to obtain approvals when necessary. See, e.g., Zoubi, 25 Cl. Ct. at 588. Thus, the AOR does not need the authority to approve costs to execute his duties. See H. Landau & Co., 886 F.2d at 324. Because the AOR lacks actual authority and apparent authority, the government is not liable for any purported approvals from the AOR. Fed. Crop Ins. Corp., 332 U.S. at 383–84.

DW’s contention that the AO ratified the AOR’s unauthorized commitment also fails because the AO did not “possess full knowledge of the material facts” and did not take the steps required by USAID operational policy to ratify any unauthorized commitment by the AOR. Gary v. United States, 67 Fed. Cl. 202, 215 (2005) (listing “full knowledge of the material facts” as a requirement for individual ratification); see also U.S. Agency for Int’l Dev. at § 303.3.19(a). DW’s email to the AOR only stated that DW may incur costs for “masks, sanitation, etc.,” without elaboration as to specific costs. Appx3. DW did not incur any of its COVID-19 costs until after the Program Manager’s last email to the AOR and did not otherwise communicate these costs to the AOR or the AO. Appx5. Thus, the AO could not have ratified any unauthorized commitment because she did not know any of the specific costs or their amounts. See Cf. Mission Support All., CBCA No. 4985, 16-1 BCA ¶ 36,540, at 178,017 (finding that the contracting officer did not constructively approve the contractor’s insurance costs because the contractor did not apprise her of “the type of insurance, the cost of the premium, or any other details related to the [insurance] premiums submitted in conjunction with a request for approval.”).

Additionally, even if the AO possessed the requisite facts and wished to ratify an unauthorized commitment, the AO did not secure the approval of the Director, M/OAA, as required by agency policy. U.S. Agency for Int’l Dev. at § 303.3.19(a). Thus, the AO did not ratify the AOR’s unauthorized commitment because she did not possess the material facts and did not follow agency ratification procedures. See Gary, 67 Fed. Cl. at 215.

Therefore, the Government did not approve DW’s costs because the AOR did not have actual authority and the AO did not have knowledge of the material facts to ratify an unauthorized commitment.

C. DW Assumed the Risk by Incurring COVID-19 Related Costs Because the Fixed-Price Nature of the Grant Placed the Burden on DW.

Although this grant agreement differs from a procurement contract, the risk allocation resembles that of a firm-fixed price contract. A contractor in a firm-fixed price contract is not entitled to an adjustment for the contractor’s cost experience in performing on the contract, and the contractor bears the risk of costs not attributable to the government. FAR 16.202-1 (“This contract type places upon the contractor maximum risk and full responsibility for all costs . . .”); Matrix Bus. Sols. v. Dep’t of Homeland Sec., CBCA No. 3438, 15-1 BCA ¶ 35,844, at 175,282.

Shifting the cost-risk to contractors incentivizes contractors to “control costs” and “effectively” perform their obligations under the contract. See FAR 16.202-1.

Pernix Serka Joint Venture illustrates how a party assumes the risk when incurring costs without approval from the government. Pernix Serka Joint Venture. v. Dep’t of State, CBCA No. 5683, 20-1 BCA ¶ 37,589, 182,519. In Pernix, PSJV, a contractor operating under a firm-fixed price contract, incurred costs related to protecting its employees during an Ebola outbreak in Sierra Leone. Id. at 182,520. In response to PSJV’s request for guidance, the contracting officer told PSJV that the decision rested solely with PSJV and that there would not be a basis for an equitable adjustment. Id. at 182,521. PSJV subsequently incurred costs related to employee evacuation, but the CBCA found that PSJV assumed the risk in incurring the costs because “PSJV has not identified any clause in the contract that . . . shift[ed] the risk to the Government for any costs incurred due to an unforeseen epidemic.” Id. at 182,523. The CBCA further held that PSJV could not demonstrate a constructive or cardinal change because it had not identified any action by the government which ordered excess costs or the performance of work outside the contract’s scope. Id. at 182,523.

Likewise, in this case, the Court of Federal Claims properly disallowed DW’s COVID-19 costs because the grant agreement allocated the risk to DW. This grant agreement shares features with a fixed-price contract because it contains a ceiling price and disclaims “liab[ility] for reimbursing the recipient for any amount in excess of the obligated amount.” See FAR 16.202. Further, it serves the same policy purpose because shifting the risk to the government in a grant disincentivizes grantees to control costs. See id.

Additionally, like in Pernix, where PSJV incurred costs after the contractor warned them that there would not be a basis for an equitable adjustment, here, DW incurred thousands of dollars in costs without approval despite the AOR’s warning to DW that costs must “compl[y] with the guidance on USAID’s website.” See Pernix, CBCA No. 5683, 20-1 BCA ¶ 37,589, at 182,520; Appx5. Further, DW cannot point to any action by the agency that changed the scope of the grant or ordered DW to perform work outside the grant’s scope, and thus it cannot prevail under constructive or cardinal change theories. See id. at 182,523 (operating during an epidemic did not create a cardinal change). Therefore, given the fixed-price nature of the grant agreement and the burden the AOR placed on DW, DW assumed the risk that USAID would disallow the costs it incurred without approval. See id.

Thus, this Court should affirm the lower court’s judgment because it did not clearly err in determining that DW’s incurred costs were unreasonable because the terms of the budget did not include PPE, sanitation, and nurses’ fees; the agency did not approve DW’s costs as required by the grant award; and DW assumed the risks of incurring these costs.

CONCLUSION

For the foregoing reasons, we ask this Court to dismiss this case for lack of jurisdiction. In the alternative, we ask that this Court affirm the judgment of the Court of Federal Claims disallowing DW’s COVID-19 related costs.

Respectfully submitted,

Madison Plummer

Benjamin R. Whitlow