DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: Virgin Islands Commission on Aging
Docket No. 87-34
Decision No. 890
DATE: August 14, 1987
DECISION
The Virgin Islands Commission on Aging (appellant) appealed
the
determination of the Administration on Aging, Office of
Human
Development Services (respondent) disallowing $399,211 charged to
a
grant awarded under title III-C of the Older Americans Act for
the
provision of nutrition services. Payments were made by the
appellant to
a contractor, Duvergee, Inc. (Duvergee), for meals provided to
qualified
persons on St. Thomas from February 11, 1986 through February 10,
1987
and on St. Croix from March 14, 1986 through March 13, 1987.
Duvergee
was awarded the contracts pursuant to a judgment of the
Territorial
Court of the Virgin Islands which also required the appellant
to
terminate contracts awarded to other bidders pursuant to
competitive
bids. The court found that Duvergee was a responsible
bidder entitled
to status as a preferred bidder under Virgin Islands
law. The court
further found that federal procurement standards
permitted application
of the preferred bidding statute in this case.
The appellant appealed
this decision to the Appellate Division of the
Territorial Court. Its
appeal is still pending. 1/
The disallowance was taken on the ground that Duvergee was not
a
responsible bidder and did not submit the bid which was lowest in
price,
as required by 45 CFR Part 74, Appendix G, section 11.b. The
appellant
agreed that these were the applicable procurement standards, that
the
preferred bidders statute should not have been applied, and
that
Duvergee should not have been awarded the contracts. However,
the
appellant argued that the payments should not be disallowed since it
had
originally awarded the contracts in accordance with the
applicable
procurement regulations but was compelled to follow the decision
of the
Territorial Court. The appellant further argued that since
the
respondent could have intervened in Duvergee's action against
appellant
but failed to do so, the respondent should be precluded from
disallowing
the payments to Duvergee.
For the reasons discussed below, we uphold the disallowance.
The appellant did not dispute that, but for the court order, all
payments
made to Duvergee were unallowable because the contracts were
awarded to
Duvergee in violation of the applicable procurement
standards. Thus,
the question presented here is simply whether
otherwise unallowable costs
incurred by a grantee pursuant to court
order should be paid by the federal
government.
We conclude that the order of the Territorial Court does not provide
any
basis for reversing the disallowance. Although the order required
the
appellant to award the contracts to Duvergee, it did not order
the
respondent to reimburse the appellant for payments under the
contracts.
Thus, not only does the order not run against the respondent as
a
procedural matter, but the order in substance clearly does not
require
federal reimbursement. Appellant has cited no provision authorizing
or
requiring respondent to participate in unallowable payments
simply
because a court ordered appellant to make the payments.
Moreover, the appellant's suggestion that the respondent had a duty
to
intervene in the action by Duvergee stands things on their head. To
the
contrary, as the defendant in the action, the appellant should
have
taken the initiative by requesting the respondent to intervene.
(This
assumes that, as a matter of sovereign immunity, the respondent
could
not be sued without its consent, as the respondent argued.) There
is no
allegation that the appellant made such a request, however. 2/
Accordingly, while we appreciate the predicament in which the
appellant
finds itself, we cannot find that the appellant was entitled by
virtue
of the court order to be reimbursed for payments to Duvergee which
it
conceded are otherwise unallowable.
We note, however, that while the appellant repeatedly conceded that
the
contract should not have been awarded to Duvergee since it was not
the
lowest bidder and the preferred bidding statute was not applicable,
it
is not as clear that the appellant conceded that Duvergee was not
a
responsible bidder. Instead, the appellant stated that its position
at
the court hearing was that Duvergee "was not the most
responsible
bidder," and did not have "the best sanitary conditions of the
bidders."
(Appellant's brief, p. 3) We see no requirement in the
applicable
regulations that the award be made to the most responsible bidder,
or to
the bidder with the best sanitary conditions. The appellant
created
further confusion regarding its position by stating that it was "in
full
agreement with the position taken by the Federal Government . .
.
[which] the Virgin Islands Government adopted . . . at trial." (Id.,
p.
9)
If Duvergee had been a responsible bidder although not the
lowest
responsible bidder, the respondent apparently would have had
discretion
to disallow only those payments under the contract which were in
excess
of the lowest bid. See South Carolina Department of Social
Services,
Decision No. 256, February 16, 1982.
We can not find Duvergee to be a responsible bidder on the record
before
us, however. Although the Territorial Court found that Duvergee
was
responsible, the respondent here made independent findings on this
issue
which appellant did not dispute. See disallowance letter, pp.
2-3. 3/
Conclusion
For the reasons stated above, the disallowance in the amount of
$399,211
is sustained.
_____________________________ Judith
A.
Ballard
_____________________________ Norval
D.
(John) Settle
_____________________________ Alexander
G.
Teitz Presiding Board Member
1. The Presiding Board Member in this case denied the
appellant's
request for a stay of proceedings until the issuance of a
decision by
the Appellate Division, stating that the Board would not keep
this case
on its docket indefinitely. The appellant had provided no
firm basis
for its belief that a decision would be issued by the end of the
year;
indeed, it stated that no briefing schedule had yet been set.
(Letter
to parties dated July 30, 1987)
2. A question concerning the effect of a court order
on federal
funding was presented to the Board in Joint
Consideration--Abortion
Funding, Decision No. 260, February 26, 1982.
The Board there reviewed
the claims by several states for federal financial
participation under
Medicaid for the costs of abortions for which the Hyde
Amendment
prohibited funding. The states argued that Medicaid funding
should be
available to them as they were compelled by federal court orders
to
provide the abortions. The Board denied the appeals, finding
that
although the court orders required the states to reimburse health
care
providers for abortion costs, the court orders did not require
the
federal government to reimburse the states. The Board's decision
was
upheld on appeal. State of Illinois v. U.S. Department of Health
and
Human Services, 594 F. Supp. 147 (D. Ill. 1984), aff'd 772 F.2d
329
(7th Cir. 1985).
However, we do not specifically rely on that decision here since
the
factual context and applicable provisions were different.
3. Appellant also did not raise the possibility that
while Duvergee
was not a responsible bidder at the time the contract was
awarded, it
could have become responsible during the term of the contract by
having
satisfactory sanitary conditions. If this did in fact occur,
respondent
may consider whether appellant should be allowed to set off
against the
disallowance the low bid price per meal, multiplied by the number
of
meals served in the particular time period, or possibly even the
fair
value of the