Common 638 Contract Mistakes & How to Avoid Them

After working with tribal health programs navigating the 638 contracting landscape, the same mistakes appear repeatedly. These are not failures of competence — they are the predictable result of a system that applies different rules to different funding streams, provides inconsistent guidance across IHS Area Offices, and often leaves tribal administrators to figure out the mechanics on their own. This guide names the most common and costly mistakes and provides concrete steps to avoid them.

Mistake #1: CSC Underclaiming

This is the single most expensive mistake tribal 638 contractors make. Contract Support Costs are legally required to be fully funded under Salazar v. Ramah Navajo Chapter (567 U.S. 182, 2012) and 25 U.S.C. § 5325(a). Yet many tribal organizations receive less CSC than they are entitled to — not because IHS refuses to pay, but because the tribe's own calculation understates the actual costs.

How It Happens

• Incomplete direct CSC identification. Tribes fail to identify all eligible direct CSC line items. Workers' compensation, liability insurance, audit costs, property insurance, and state unemployment taxes are commonly missed. If IHS would not have incurred the cost as a federal agency but you incur it as a tribal contractor, it is likely eligible as direct CSC.
• Stale indirect cost rates. The tribe has not submitted an indirect cost proposal to IBC in years, so IHS applies an outdated rate that understates current indirect costs. Every year without a current rate is a year of underfunding.
• Accepting IHS's CSC calculation without review. IHS provides a CSC estimate as part of the negotiation process. Some tribes accept this estimate without independently calculating their costs. IHS estimates are often conservative.
• Not recalculating when the Secretarial amount changes. When the base funding increases (new PFSAs, cost-of-living adjustments, congressional increases), CSC should be recalculated. The indirect CSC amount is a function of the direct cost base — when the base grows, CSC grows with it.

What to Do Instead

Conduct an annual CSC review. Catalog every cost you incur to support contracted programs that IHS would not incur as a federal agency. Submit indirect cost proposals to IBC every year without exception. Compare your independently calculated CSC against what IHS is paying — if there is a gap, raise it in AFA negotiations. For retroactive underpayments, consult with an ISDEAA attorney about contract claims. The Budget & CSC guide provides detailed calculation methodologies.

Mistake #2: Confusing Grant Rules with 638 Contract Rules

This mistake runs in both directions and is particularly common at tribal organizations that manage both 638 contracts and competitive federal grants. The compliance frameworks are fundamentally different, and cross-contamination creates problems regardless of which direction it goes.

Applying Grant Rules to 638 Contracts

When tribal staff apply 2 CFR 200 rules to 638 contract expenditures, the result is unnecessarily restrictive operations:

• Procurement staff require competitive bidding for all 638 purchases over $10,000, when tribal procurement policies may allow more flexible approaches
• Finance staff seek IHS prior approval for budget transfers within the 638 contract, when no such approval is required under ISDEAA
• Equipment purchased with 638 funds is tracked using federal property disposition rules rather than tribal property policies

Applying 638 Flexibility to Competitive Grants

The reverse is more dangerous from a compliance standpoint:

• Staff carry over competitive grant funds assuming the same flexibility as 638 contracts, resulting in audit findings
• Procurement for HRSA or SAMHSA grant purchases follows tribal policies instead of 2 CFR 200 procurement standards
• Budget modifications exceed the 10% threshold without prior approval from the awarding agency

What to Do Instead

Create a compliance matrix that maps each funding source to its governing framework. Train all finance, procurement, and program staff on the differences. In your accounting system, tag every transaction with its funding source so that compliance review can verify the correct rules were applied. The compliance guide includes a detailed comparison table for reference.

Mistake #3: Declination Response Failures

When IHS declines a 638 contract proposal, the tribe has strong legal tools to challenge the decision. But those tools are time-sensitive, and too many tribes either miss the deadlines or fail to use the available remedies effectively.

Common Failures

• Missing the 30-day window. The tribe has 30 days from receipt of the declination to request an informal conference or appeal to IBIA. Once this window closes, administrative remedies become more complex (though the option to file in federal court generally remains available).
• Accepting the declination without challenge. Some tribes treat an IHS declination as a final rejection and simply move on. Under ISDEAA, the burden of proof falls on IHS to justify the declination. Many declinations are successfully overturned through the informal conference process without needing to escalate to IBIA or court.
• Not demanding technical assistance. ISDEAA requires IHS to provide technical assistance to help tribes address any deficiencies identified in a declination (25 U.S.C. § 5321(b)). If IHS declined your proposal citing capacity concerns, demand the technical assistance the statute requires — and document that you requested it.
• Not tracking the 90-day deemed approval. If IHS fails to respond to a contract proposal within 90 days, the proposal is deemed approved by operation of law (25 U.S.C. § 5321(a)(2)). Some tribes do not track this deadline and miss the opportunity to assert deemed approval when IHS delays its response.

What to Do Instead

Treat the 638 proposal process like litigation: document everything, track every deadline, and respond to declinations immediately. Send proposals by certified mail or with electronic delivery confirmation so you have a documented date of receipt. Start the 90-day clock on the date IHS acknowledges receipt. If a declination is issued, have legal counsel review it within 5 business days so you have time to plan your response within the 30-day window. The eligibility guide covers the five declination criteria and appeal process in detail.

Mistake #4: Reporting Gaps That Affect Contract Renewal

638 contracts renew automatically under ISDEAA, but reporting compliance plays a significant role in the tribe's relationship with IHS and its path to mature contractor status. Persistent reporting gaps — even when they don't trigger formal consequences — erode the trust that underlies the government-to-government relationship.

How It Happens

• Staff turnover. The person who knew the reporting deadlines and IHS portal credentials leaves, and no one else has the knowledge or access. Reports stop getting submitted until someone notices months later.
• Multi-stream confusion. The organization manages so many reporting streams — 638 contract, HRSA 330, SAMHSA, state contracts, Medicaid — that deadlines blur together and some fall through the cracks.
• Data quality issues. The GPRA data extraction fails because of EHR configuration issues, and rather than submitting incomplete data or requesting a deadline extension, the tribe simply does not submit.
• Assumption that 638 reporting is optional. Some tribal administrators believe that because 638 contracts respect tribal sovereignty, reporting is discretionary. While reporting is negotiated (not imposed), once the AFA specifies reporting requirements, they are contractual obligations.

Consequences

Reporting gaps may not trigger immediate formal action, but they have real consequences:

• Loss of progress toward mature contractor status — IHS evaluates reporting consistency as a key factor
• Weakened position in AFA negotiations — reporting gaps give IHS leverage to impose more (not fewer) reporting requirements
• Potential triggering of monitoring activities or corrective action notices
• Single Audit findings for non-compliance with award terms

What to Do Instead

Build a consolidated reporting calendar covering all funding streams with automated reminders at 30, 14, and 7 days before each deadline. Cross-train at least two staff members on every reporting system. Maintain documented procedures for each report type, including portal credentials, data sources, and step-by-step submission instructions. If you are going to miss a deadline, notify the IHS Area Office proactively and propose a revised timeline. The reporting guide provides a sample annual reporting calendar.

Mistake #5: Governance Documentation Lapses

Governance is the foundation of a 638 contract. The tribal resolution authorizing the contract, the organizational charter, the health board bylaws, and the delegation of authority structure are all essential documents that IHS relies on as evidence that the tribal government has authorized and is overseeing the contracted programs. When these documents lapse or become outdated, problems follow.

Common Lapses

• Expired tribal resolutions. The resolution authorizing the 638 contract was adopted 5 years ago and has never been renewed. While IHS may not immediately challenge an expired resolution for an ongoing contract, it weakens the tribe's position in negotiations and can become an issue if any dispute arises.
• Outdated signatory authority. The person authorized to sign the AFA is no longer in office, but the tribal resolution naming them as signatory was never updated. This can delay contract renewals and amendments.
• Missing health board documentation. The tribal health board or advisory committee that provides oversight of the 638 programs has not met regularly, has not maintained minutes, or has vacancies that prevent a quorum.
• Organizational policy gaps. The tribe's financial management policies, personnel policies, or procurement policies have not been updated to reflect current operations. Outdated policies can become audit issues if actual practice diverges from documented policy.

What to Do Instead

Establish an annual governance review process. Before each AFA renewal cycle, verify that: the tribal resolution is current and correctly names the authorized signatories; the health board is constituted and meeting regularly; organizational policies have been reviewed within the past two years; and the organizational chart reflects current reality. Treat governance documentation as a compliance requirement with its own calendar of renewal dates.

Mistake #6: Not Exercising Tribal Sovereignty Protections

ISDEAA contains strong protections for tribal sovereignty — but they only work if the tribe asserts them. Too often, tribal health administrators accept IHS requirements or actions that exceed the agency's authority under ISDEAA, either because they are unaware of the legal boundaries or because they want to maintain a cooperative relationship and avoid conflict.

Sovereignty Protections Tribes Commonly Fail to Assert

• Reporting beyond the AFA. IHS staff request reports, data, or documentation not specified in the AFA. The tribe complies to be cooperative, but this sets a precedent that can expand over time. If a report is not in the AFA, the tribe has no obligation to provide it — and IHS has no authority to require it.
• Federal personnel policies. IHS suggests that the tribe follow federal hiring practices, procurement procedures, or administrative policies. Unless the tribe has voluntarily adopted these policies, they do not apply to 638 contract operations. Tribal policies govern.
• Unannounced site visits. IHS staff arrive for a monitoring visit without proper advance notice. While maintaining a cooperative relationship is valuable, the AFA should specify monitoring procedures, including notice requirements. Unscheduled visits should be politely redirected through proper channels.
• Sovereign immunity waiver. Contract language proposed by IHS (or by third parties in subcontracts) includes provisions that could be interpreted as a waiver of tribal sovereign immunity. This is the single most important sovereignty protection to guard — the model agreement (25 U.S.C. § 5329) explicitly states that the contract does not constitute a waiver.
• Program design authority. IHS instructs the tribe to deliver services in a specific way or maintain IHS's pre-existing program structure. ISDEAA gives tribes the authority to redesign programs within the contracted scope to better serve their communities. Tribal self-determination means the tribe decides how to deliver services, not just whether to deliver them.
• Data sovereignty. IHS claims ownership of or unrestricted access to data collected by the tribal program. While GPRA data must be reported per the AFA, the tribe's broader patient data and program records are tribal property. Data sovereignty is an increasingly important dimension of tribal self-determination. The tribal data sovereignty guide explores this topic in depth.

What to Do Instead

Know your rights under ISDEAA. Train health directors, program managers, and compliance staff on the boundaries of IHS authority under the statute. When IHS requests something outside the scope of the AFA, respond in writing: acknowledge the request, cite the AFA's terms, and offer to discuss the matter through the proper government-to-government consultation process. Asserting sovereignty is not being adversarial — it is exercising the rights that ISDEAA was specifically designed to protect. The compliance guide details the boundaries between IHS authority and tribal self-determination.

Mistake #7: Underestimating the Secretarial Amount

The Secretarial amount — the base funding transferred from IHS to the tribe — should represent the full cost of operating the contracted PFSAs. But IHS calculations sometimes understate this amount by excluding costs that IHS incurs but does not attribute to the specific service unit or PFSA.

Commonly Excluded Costs

• Area Office support. The IHS Area Office provides management support, technical assistance, and administrative services to service units. A proportional share of these costs should be included in the Secretarial amount.
• Headquarters support. IHS Headquarters provides policy development, IT systems, training, and other centralized functions. These costs support field operations and should be allocated to contracted PFSAs.
• Vacant position funding. If IHS has unfilled positions at the service unit, the salary and benefit funding for those positions should still be included in the Secretarial amount. The tribe is assuming the program as it should be operated, not as it is currently understaffed.
• Non-recurring costs. Equipment replacement, facility maintenance, and other costs that IHS funds on an irregular basis should be annualized and included in the Secretarial amount.

What to Do Instead

Request the complete IHS budget for the PFSAs you are assuming, including allocated Area Office and Headquarters costs. Independently calculate what IHS would spend to operate the programs at full staffing with all supporting infrastructure. If IHS's proposed Secretarial amount is lower than your calculation, document the discrepancy and raise it during negotiations. Under ISDEAA, the tribe is entitled to “not less than the applicable level of funding” (25 U.S.C. § 5325(a)(1)).

Mistake #8: Failing to Register and Maintain SAM.gov

All entities receiving federal awards — including 638 contracts — must maintain an active registration in the System for Award Management (SAM.gov). SAM.gov registration expires annually and must be renewed. A lapsed registration can delay contract funding, prevent AFA execution, and create complications for competitive grant applications submitted simultaneously.

Set a calendar reminder 60 days before your SAM.gov expiration date. Designate a specific staff person as the SAM.gov administrator with backup personnel. Do not wait until contract renewal time to discover your registration has lapsed.

Building a Culture of Compliance and Self-Determination

Avoiding these mistakes is not just about checking boxes. It is about building the organizational capacity to fully exercise the tribal self-determination that ISDEAA was designed to enable. When a tribe underclaims CSC, it subsidizes the federal government from tribal resources. When it fails to assert sovereignty protections, it allows the government-to-government relationship to erode into a grantor-grantee dynamic. When governance lapses occur, the foundation of self-determination weakens.

The most successful tribal 638 programs approach compliance as an expression of sovereignty: we manage these programs because our people deserve better, and we demonstrate excellence in compliance because it strengthens our position to do more. Every clean audit, every on-time report, every properly calculated CSC claim is an assertion that tribal nations can and do operate federal programs at least as effectively as the federal government — which was the premise of ISDEAA from the beginning.

For more guidance on building strong compliance practices, explore the compliance and monitoring guide, the budget and CSC guide, and the tribal readiness checklist.