“I can’t get no, I can’t get no, I can’t get no satisfaction, no satisfaction” 

– The Rolling Stones

On March 17, 2022, a district court judge in the Western District of Texas granted the U.S. Department of Labor (“DOL”) Motion to Dismiss on jurisdictional grounds in a case regarding the applicability of the Service Contract Act (“SCA”) to alternative contracting instruments, more specifically cooperative agreements. To make a long story short, the judge ruled that it lacked jurisdiction in this matter and proceeded to granted DOL’s Motion to Dismiss.  

BCFS Health and Human Services (“BCFS”) entered into a series of cooperative agreements with the Department of Health and Human Services (“HHS”) to provide temporary housing and related social services to unaccompanied minors who had entered the United States by crossing our southern border with Mexico.  These agreements did not include all the traditional full Service Contract Act clauses or any Wage Determinations(“WDS”). After an investigation, DOL’s Wage and Hour Division (“WHD”) determined that these cooperative agreements were nonetheless  covered by the SCA and ordered HHS to modify the contracts to incorporate the SCA clauses and WDs. 

After HHS attempted to modify its cooperative agreements with BCFS to include the standard SCA clauses and applicable WDs, BCFS pushed back arguing that the SCA does not apply to cooperative agreements. After agreeing to comply with the SCA temporarily, and receiving a what it understood to be a final decision from the WHD investigator that the SCA does indeed apply to these cooperative agreements, and a demand to calculate the back wages due, BCFS verbally appealed to the national office of the WHD. A conference call ensued in which the Acting Administrator of the WHD affirmed SCA coverage. BCFS then filed an Administrative Procedure Act (“APA”) suit at the U.S. District Court in the Western District of Texas challenging the coverage of cooperative agreements. 

There, the judge held that the District Court lacked jurisdiction in this matter because the Plaintiff did not appeal a final agency action. The APA only authorizes judicial review of a final agency action and here only actions by HHS constituted final agency action. No final written ruling had emerged in writing from the Administrator, and no appeal had been taken to the Administrative Review Board. Because the authority to interpret and rule on the SCA is vested in DOL, HHS’s final agency action was immaterial. Even though BCFS initiated DOL’s review process by appealing the coverage determination to the WHD Administrator, BCFS did not receive a response which is necessary to move to the next step in the administrative process. As such, the court did not consider the initial final decisions issued by DOL to be a final agency action.

BCFS also argued that three opinion letters from DOL to HHS and a teleconference with Acting Administrator of the WHD Jessica Looman, confirming DOL’s view that the SCA applies marked the end of the decision-making process. But the court found that the regulations were clear on the procedure of seeking review of decisions determining SCA coverage and therefore these communications were also not final agency action. 

Finally, BCFS argued that final agency action was unnecessary because the determination that the SCA applies to cooperative agreements is contrary to the plain language of the SCA which can prompt the use of the court’s injunctive powers. But the court stated that use of these injunctive powers is only appropriate upon a finding that the agency’s interpretation is “infused with error…” and which the error is “egregious”. Ultimately, the court disagreed that the determination was infused with egregious error and declined to hold that the lack of agency action was unnecessary. 

Because the court held that it did not have jurisdiction, it mooted Plaintiff’s Motion for Preliminary Injunction and Defendant’s Alternative Cross-Motion for Summary Judgement. As such the judge did not rule on the merits of any of BCFS’s claims so the ambiguity as to whether the SCA applies to cooperative agreements has not been settled. The court, however, in ruling implied that perhaps the cooperative agreements are covered by the SCA. 

The take-away here is that even though many initial disputes between contractors and DOL end with a “Final Decision” from either the contracting officer or an investigator, this does not necessarily conclude DOL’s decision making process and does not ordinarily constitute “final agency action” as necessary to file an APA suit. This has two effects:  (1) it increases the amount that contractors have to spend to appeal SCA coverage determinations before getting in front of a district court judge; and (2) it allows the DOL to exercise its authority over the SCA with some manner of consistency. While consistency is important, in a case like this, and for BCFS in particular, a contractor can see the writing on the wall. HHS, the DOL investigator, and the Administrator seemed to be lined up and in agreement that the SCA applies to the cooperative agreement. So, what is the point of any further administrative appeal? It can be frustrating to spend the money on an appeal when it feels like you already know the outcome and appealing to the Administrator feels like checking the jurisdictional box.  But that is what must be done according to the court. 

For more information or to review the case yourself, it can be found on legal research websites such as Lexis or Westlaw under the citation BCFS HHS v. United States Dep't of Labor, No. SA-21-CV-0776-JKP, 2022 U.S. Dist. LEXIS 48302 (W.D. Tex. Mar. 17, 2022).