What Is a 638 Contract?
The Indian Self-Determination and Education Assistance Act (ISDEAA), Public Law 93-638, signed into law in 1975 and codified primarily at 25 U.S.C. §§ 5301–5423, fundamentally changed the relationship between the federal government and tribal nations. Before ISDEAA, the Indian Health Service (IHS) and Bureau of Indian Affairs (BIA) directly operated programs for tribal communities with little tribal input. ISDEAA recognized that tribal governments — not federal agencies — are best positioned to determine the health and social service needs of their own people.
Under Title I of ISDEAA, federally recognized tribes and tribal organizations can enter into self-determination contracts with the Department of Health and Human Services (through IHS) or the Department of the Interior (through BIA) to assume operation of programs, functions, services, and activities (PFSAs) that the federal government would otherwise provide. These are commonly called “638 contracts” after the public law number.
The legal mechanism is critical to understand: a 638 contract is not a grant. It is a government-to-government agreement through which a tribal nation assumes an inherent federal obligation. The federal government has a trust responsibility to provide healthcare to American Indians and Alaska Natives — rooted in treaties, the Snyder Act of 1921 (25 U.S.C. § 13), and the Indian Health Care Improvement Act (IHCIA, 25 U.S.C. § 1601 et seq.). When a tribe contracts under 638, it is not receiving a discretionary award. It is assuming the federal government's own obligation to deliver specific services.
638 Contracts vs. Competitive Grants
Tribal health programs frequently manage both 638 contract funding and competitive federal grants — sometimes from the same agency. The compliance frameworks for these two funding mechanisms are fundamentally different, and confusing them is one of the most common and costly mistakes tribal administrators make.
| Dimension | 638 Contract | Competitive Grant |
|---|---|---|
| Legal basis | ISDEAA (25 U.S.C. §§ 5301–5423) | Federal Grant and Cooperative Agreement Act; 2 CFR 200 |
| Nature of agreement | Government-to-government contract | Federal financial assistance award |
| Funding basis | Transfer of inherent federal function + CSC | Competitive application; merit review |
| Can the agency decline? | Only for 5 statutory reasons (25 U.S.C. § 5321(a)(2)) | Yes, at agency discretion based on merit |
| Compliance framework | ISDEAA + AFA terms | 2 CFR 200 (Uniform Guidance) |
| Contract Support Costs | Required by law; must be fully funded | Indirect costs via negotiated rate; not guaranteed full |
| Carryover | Significant flexibility; funds remain tribal | Limited; often requires prior approval |
| Sovereign protections | Tribal sovereignty explicitly preserved | Standard federal terms; limited sovereignty protections |
For tribal organizations managing both types of funding, understanding these distinctions is essential. Our 2 CFR 200 compliance guide covers the competitive grant framework in detail. The Tribal Healthcare Funding Guide addresses how these parallel frameworks interact in practice.
The Government-to-Government Relationship
A 638 contract is grounded in the political and legal relationship between tribal nations and the United States. Tribes are not non-profit organizations applying for funding — they are sovereign governments assuming the operation of programs the federal government is obligated to provide. This distinction has practical consequences throughout the contracting lifecycle:
- Right to contract. The tribe's right to assume PFSAs is statutory. IHS cannot decline a proposal except for five specific reasons enumerated in the law (25 U.S.C. § 5321(a)(2)), and the burden of proof falls on IHS to justify any declination.
- Negotiation, not application. 638 proposals trigger a mandatory negotiation process. The tribe and IHS negotiate the terms of the contract, the scope of PFSAs, the budget (including Contract Support Costs), and reporting requirements. This is fundamentally different from submitting a grant application and waiting for a merit-based decision.
- Federal trust obligation. The funds transferred under a 638 contract represent the amount the federal government would have spent to operate the program directly (the “Secretarial amount”). The tribe is entitled to at least this amount plus the additional costs of running the program that the government would not have incurred — Contract Support Costs.
- Tribal sovereignty. ISDEAA explicitly preserves tribal self-governance authority. The tribe determines how to deliver contracted services within the scope of the AFA. IHS does not direct tribal employees, set work schedules, or manage day-to-day operations.
Title I Contracts vs. Title V Compacts
ISDEAA contains two primary mechanisms for tribal assumption of federal programs. Title I (self-determination contracts) is the original 1975 authority. Title V (self-governance compacts), added in 1994, provides greater flexibility for tribes that have demonstrated successful operation under Title I.
| Feature | Title I Contract | Title V Compact |
|---|---|---|
| Eligibility | All federally recognized tribes and tribal organizations | Tribes meeting self-governance eligibility criteria |
| Scope | Individual PFSAs; can be narrow | Broader; can include entire IHS area office programs |
| Flexibility | Moderate; tied to specific PFSA scope | Greater; tribes can redesign programs and reallocate funds |
| IHS oversight | More involvement; contract monitoring | Less; trust responsibility shifts more fully |
| Track record required | None for initial contracts | Must demonstrate 3+ years of successful contracting |
This guide focuses on Title I contracts, which are the starting point for most tribal organizations assuming IHS programs. Many of the compliance, reporting, and budgeting principles apply to Title V compacts as well, though compacts provide additional flexibility in how funds are managed and programs are structured.
Who This Guide Is For
This guide is written for the people who do the work: tribal health directors, grants managers, finance officers, and compliance staff at tribal health programs and tribal organizations that hold or are pursuing 638 contracts with IHS. It assumes you are familiar with the basics of tribal governance and federal Indian law but may be newer to the specific mechanics of 638 contracting, or looking to strengthen your program's compliance and cost recovery practices.
If your organization also manages competitive federal grants — HRSA Section 330 (health centers), SAMHSA behavioral health awards, CDC cooperative agreements — you are in good company. Most tribal health programs navigate multiple funding streams simultaneously. Our HRSA 330 Program Guide and Tribal Healthcare Funding Guide are companion resources designed to work alongside this 638-specific content.