638 Contract Proposal & Application Guide

Contract Proposal vs. Grant Application

If your organization has experience writing competitive grant applications — for HRSA 330, SAMHSA, CDC, or other federal programs — it is essential to understand that a 638 contract proposal is a fundamentally different document serving a fundamentally different purpose.

The most important shift is in mindset. You are not asking for funding; you are notifying IHS that your tribe intends to exercise its right under P.L. 93-638 to assume specific programs. The proposal demonstrates your capacity to do so safely and effectively.

Pre-Proposal Planning

Before developing a formal proposal, tribal health administrators should complete several planning steps that will strengthen the proposal and streamline the negotiation process:

1. Identify the PFSAs You Want to Assume

Work with your IHS Area Office to identify exactly which programs, functions, services, and activities (PFSAs) you want to contract. IHS maintains a catalog of PFSAs at each service unit. Request a detailed breakdown of:

• All PFSAs currently operated by IHS at your service unit
• The budget for each PFSA (this becomes the Secretarial amount basis)
• Staffing levels and position descriptions for each PFSA
• Any equipment, supplies, or facilities currently used to deliver each PFSA

You do not need to assume everything at once. Many tribes start with a single PFSA (such as the Community Health Representative program or public health nursing) and expand contracting scope in subsequent years as organizational capacity grows.

2. Assess Organizational Capacity

Conduct an honest internal assessment of your organization's readiness to operate the contracted programs. Key areas to evaluate:

• Financial management systems. Can your accounting system track expenditures by program, generate required financial reports, and maintain an audit trail? If you will manage multiple funding streams, can you properly allocate shared costs?
• Human resources. Do you have the staff to operate the programs, or will you need to hire? Can you offer competitive compensation? For clinical programs, can you recruit and credential providers?
• Governance structure. Does your tribal governing body or health board have the capacity to provide oversight? Are there clear lines of authority and accountability?
• Facilities and equipment. If the contracted programs operate from IHS facilities, what are the terms for tribal use? If you need your own facilities, are they adequate?

3. Secure Tribal Resolution

Before developing the formal proposal, obtain a tribal resolution from your governing body authorizing the 638 contract pursuit. The resolution should identify the specific PFSAs and authorize named officials to negotiate and execute the contract. See the eligibility guide for resolution requirements.

4. Engage the IHS Area Office Early

ISDEAA requires IHS to provide technical assistance to tribes considering 638 contracting. Contact your Area Office's Office of Tribal Self-Determination before submitting a formal proposal. They can provide:

• Detailed PFSA descriptions and current budget data
• Guidance on proposal format and required elements
• An estimate of Contract Support Costs based on your organizational structure
• Information about equipment, facilities, and staff that will transfer or become available when the tribe assumes the PFSAs

Required Proposal Elements

Under 25 U.S.C. § 5321(a), a 638 contract proposal must include the following elements. While specific formatting requirements vary by IHS Area Office, every proposal should address each of these substantively.

Program Narrative

The program narrative describes how the tribe will operate each contracted PFSA. Unlike a competitive grant narrative — which argues why your approach is innovative or superior — the 638 narrative demonstrates that you can deliver the services safely, effectively, and in accordance with applicable standards. Include:

• Description of services. What services will be provided, to whom, and where. Be specific about service delivery sites, hours of operation, and the geographic area served.
• Service delivery approach. How the tribe will deliver services, including any modifications or enhancements to the current IHS delivery model. Tribes are not required to replicate the IHS model exactly — ISDEAA preserves tribal authority to design programs that reflect community values and needs.
• Quality assurance. How the tribe will ensure clinical quality, patient safety, and program effectiveness. Include credentialing processes for clinical staff, quality improvement activities, and patient grievance procedures.
• Community engagement. How the program will incorporate community input and maintain accountability to the tribal community served.

Staffing Plan

The staffing plan identifies all positions needed to operate the contracted PFSAs. For each position, include:

• Position title and full-time equivalent (FTE) allocation
• Minimum qualifications and any licensure or certification requirements
• Whether the position is currently filled or to be recruited
• Salary range (this feeds into the budget)
• Supervisory relationships and organizational chart showing how contracted program staff fit within the tribal organization

An important provision of ISDEAA: federal employees displaced when a tribe assumes PFSAs have the right to be given preference in tribal hiring for positions related to the contracted programs (25 U.S.C. § 5325(e)). This does not override Indian preference in hiring, but tribes should be aware of and address this requirement in their staffing plans.

Budget

The budget is structured differently from a competitive grant budget. The starting point is the Secretarial amount — the funds IHS currently spends (or would spend) to operate the PFSAs directly. The tribe then adds Contract Support Costs. See the Budget & CSC Guide for detailed guidance on budget development, CSC calculation, and negotiation.

Tribal Resolution

As described in the eligibility section, a current tribal resolution from each tribe to be served must accompany the proposal. For new proposals, ensure the resolution is dated within the current fiscal year and explicitly references the specific PFSAs being contracted.

The Annual Funding Agreement (AFA)

The Annual Funding Agreement is the operational core of a 638 contract. While the overarching contract document establishes the government-to-government relationship and general terms, the AFA specifies the details for each contract period:

• Scope of work. Detailed description of each PFSA being contracted, including measurable objectives and service delivery expectations
• Funding amount. The total contract amount, broken down into Secretarial amount (by PFSA) and Contract Support Costs (direct and indirect)
• Reporting requirements. Specific reports the tribe must submit, including frequency, format, and due dates. Reporting requirements are negotiable — do not simply accept IHS's first proposal without discussion.
• Performance standards. Measurable indicators that the tribe will report on, often aligned with GPRA Government Performance and Results Act measures
• Payment schedule. How and when funds will be disbursed. Most AFAs provide for advance payments (typically quarterly) rather than reimbursement
• Contract period. The AFA period, typically one year aligned with the federal fiscal year (October 1 – September 30), though multi-year terms can be negotiated

The AFA is renegotiated annually (or at whatever interval the contract specifies), giving both parties the opportunity to adjust scope, funding, and terms based on program experience and changing needs. This annual renegotiation is a key feature that differentiates 638 contracting from one-time competitive grant awards.

Model Contract Provisions

ISDEAA includes a “model agreement” (25 U.S.C. § 5329) that serves as the baseline for all Title I contracts. The model agreement provisions are significant because they contain protections that the tribe can rely on even if IHS proposes different terms. Key model agreement provisions include:

• Section 1 — Authority and purpose. Establishes the government-to-government relationship and cites ISDEAA as the legal authority.
• Section 4 — Funding amount. Specifies that the tribe is entitled to the Secretarial amount plus Contract Support Costs, and that CSC must be fully funded.
• Section 5 — Term and renewal. Contracts are for a definite term and renew automatically unless either party provides adequate notice. The tribe has the right to renewal — IHS cannot simply decide not to renew.
• Section 6 — Reports and data. Reporting requirements must be reasonable and negotiated in good faith. IHS cannot unilaterally impose reporting burdens not reflected in the AFA.
• Section 8 — Property. The tribe's right to use federal personal property and equipment necessary for the contracted programs, and the terms under which such property may be transferred to the tribe.
• Section 10 — Sovereign immunity. The contract cannot be construed as a waiver of tribal sovereign immunity. This is a critical protection that tribes should never agree to modify.

When reviewing IHS's proposed contract language, compare each provision against the model agreement. Any deviation from the model should be scrutinized carefully. The model agreement represents the statutory floor — the tribe's minimum entitlement — and IHS cannot require terms less favorable than the model without the tribe's consent.

The Negotiation Process

Once the tribe submits a formal contract proposal, ISDEAA establishes a structured timeline for IHS's response and the subsequent negotiation:

Proposal Submission and IHS Review

Negotiation Best Practices

Experienced tribal administrators approach 638 negotiations strategically. Key recommendations:

• Know your Secretarial amount. Request detailed budget data from IHS before negotiations begin. Understand exactly how much IHS spends on each PFSA you are assuming, including all direct costs, allocated Area Office costs, and headquarters support costs.
• Negotiate CSC aggressively. CSC is the area where tribes most commonly leave money on the table. Ensure your CSC calculation includes all eligible direct and indirect costs. The Budget & CSC Guide covers calculation methodologies in detail.
• Push back on excessive reporting. IHS sometimes proposes reporting requirements that go beyond what the statute requires or what is reasonable for the scope of the contract. Reporting is negotiable — insist on requirements that are proportional to the contract scope and useful for both parties.
• Protect sovereignty provisions. Review all proposed contract language for anything that could be interpreted as a waiver of sovereign immunity, a submission to state law, or an expansion of federal oversight beyond what ISDEAA authorizes.
• Involve legal counsel. Ideally, engage an attorney experienced in federal Indian law and ISDEAA contracting for proposal development and negotiation. The National Indian Health Board (NIHB) and National Congress of American Indians (NCAI) maintain referral lists.

After Contract Execution

Once the contract and AFA are executed, the tribe assumes responsibility for operating the contracted PFSAs. Key immediate priorities:

• Staff transition. If IHS employees are transitioning, coordinate the handover. Tribal hire processes should be well underway before the contract effective date.
• Financial setup. Ensure your accounting system is configured to track 638 contract funds separately from other funding streams. Establish cost allocation procedures if you manage multiple programs.
• Reporting calendar. Build a compliance calendar with all reporting due dates from the AFA. The reporting guide details all common reporting obligations.
• Data systems. If the contracted PFSAs involve clinical services, coordinate access to the Resource and Patient Management System (RPMS) or transition to a tribal health information system. RPMS access is typically maintained under a separate agreement with IHS.
• Third-party billing. Set up Medicaid, Medicare, and private insurance billing for contracted clinical programs. The 100% FMAP for tribal facilities makes Medicaid collections particularly important for program sustainability.

The compliance guide covers ongoing monitoring, audit requirements, and the reassumption process, while the SAM.gov registration guide ensures your entity registration is current — a requirement for receiving federal funds.

Contract Renewal and Expansion

638 contracts renew automatically unless either party provides notice of intent to modify or terminate. The annual AFA renegotiation is the primary mechanism for adjusting scope and funding. Common actions during renewal:

• Adding PFSAs. Submit an amendment proposal to add new programs to the existing contract. The same proposal and negotiation process applies.
• Budget adjustments. Negotiate increases to the Secretarial amount based on program growth, cost-of-living increases, or new services. CSC should be recalculated whenever the Secretarial amount changes.
• Reporting modifications. As the tribe demonstrates capacity (moving toward mature contractor status), negotiate reductions in reporting frequency and scope.
• Title V transition. If the tribe has operated successfully for three or more years and is interested in greater flexibility, begin the self-governance planning process for a Title V compact.