            In the United States Court of Federal Claims
                                  No. 14-187C

                           (Filed December 19, 2014)

 * * * * * * * * * * * * * * * *
 BIO-MEDICAL APPLICATIONS *
 OF AQUADILLA, INC., et al.,   *
                               *
               Plaintiffs,     *           Underpayment Claim; Money-
                               *           Mandating Regulation; 38 C.F.R.
          v.                   *           § 17.56 (2008); RCFC 12(b)(1);
                               *           RCFC 12(b)(6).
 THE UNITED STATES,            *
                               *
               Defendant.      *
 * * * * * * * * * * * * * * * *

      David T. Ralston, Jr., Washington, DC, for plaintiffs. Lisa A. Estrada, Jay
N. Varon, Frank S. Murray, Jennifer M. Forde, Washington, DC, of counsel.

       John S. Groat, United States Department of Justice, with whom were Stuart
F. Delery, Assistant Attorney General, Robert E. Kirschman, Jr., Director, Steven
J. Gillingham, Assistant Director, Phyllis Jo Baunach, Senior Trial Counsel,
Joshua D. Schnell, Trial Attorney, Washington, DC, for defendant. Dennis Foley
and Drew Cornacchio, Department of Veterans Affairs, Washington, DC, of
counsel.
                        ____________________________

                                 OPINION
                       ____________________________

BUSH, Senior Judge.

     The court has before it defendant’s motion to dismiss this suit, which was
brought pursuant to Rules 12(b)(1) and 12(b)(6) of the Rules of the United States
Court of Federal Claims (RCFC). Defendant’s motion was filed May 5, 2014 and
has been fully briefed, including sur-replies and extensive appendices. Oral
argument was neither requested by the parties nor deemed necessary by the court.
For the reasons set forth below, defendant’s motion is denied.

                                      BACKGROUND1

       This suit contends that plaintiffs were underpaid for dialysis and related
services (collectively, dialysis services) provided to veterans. According to the
complaint, plaintiffs are 234 outpatient dialysis treatment centers; the centers share
an affiliation, through various ownership interests, with Fresenius Medical Care
Holdings, Inc. Plaintiffs therefore refer to themselves as the Fresenius Plaintiffs
(hereinafter, Fresenius Plaintiffs or plaintiffs).

       The dialysis services in question were provided to veterans who had
obtained “beneficiary authorizations” from the Department of Veterans Affairs
(VA). Compl. ¶¶ 22-23. According to plaintiffs, the correct payment amounts for
these services should have been derived from a formula provided by 38 C.F.R.
§ 17.56 (2009), not rates provided by the fee schedule used by the Medicare
program.2 The relevant time-period for plaintiffs’ claims is for dialysis services
provided from January 1, 2009 through February 15, 2011 (the Relevant Period).
On February 15, 2011, substantive amendments to section 17.56 took effect; thus,
plaintiffs present no underpayment claims for dialysis services provided after that
date.

      Defendant raises a number of challenges to plaintiffs’ claims in its motion to
dismiss. Many of defendant’s arguments presented here were rejected when


       1
        / The facts recited here are taken from the complaint and other filings and are
undisputed unless otherwise noted. Other than to determine the court’s jurisdiction over this suit,
the court makes no findings of fact in this opinion.
       2
         / The court prefers to rely on the 2008 edition of the Code of Federal Regulations, which
was in effect for many of the landmark events of this controversy. There do not appear to be any
significant differences between relevant provisions of the 2008, 2009 and 2010 editions of the
Code of Federal Regulations that were applicable when the dialysis services at issue in this suit
were provided to veterans. All citations to the Code of Federal Regulations herein are to the
2008 edition, unless otherwise noted.

                                                2
presented to this court in another dialysis services underpayment case founded on
38 C.F.R. § 17.56. DaVita, Inc. v. United States, 110 Fed. Cl. 71 (2013).
Although the government’s position is fundamentally the same in the two suits,
here the government’s motion relies, in part, on authorities and arguments that
were not discussed in detail in DaVita. In any event, the holding in DaVita is not
binding authority in this case. AINS, Inc. v. United States, 365 F.3d 1333, 1336
n.1 (Fed. Cir. 2004), abrogated on other grounds by Slattery v. United States, 635
F.3d 1298 (Fed. Cir. 2011) (en banc).

                                  DISCUSSION

I.    Standards of Review

      A.     RCFC 12(b)(1)

       In considering the issue of subject matter jurisdiction, this court must
presume all undisputed factual allegations in the complaint to be true and construe
all reasonable inferences in favor of the plaintiffs. Scheuer v. Rhodes, 416 U.S.
232, 236 (1974), abrogated on other grounds by Harlow v. Fitzgerald, 457 U.S.
800 (1982); Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 747 (Fed.
Cir. 1988). However, plaintiffs bear the burden of establishing subject matter
jurisdiction, Alder Terrace, Inc. v. United States, 161 F.3d 1372, 1377 (Fed. Cir.
1998) (citing McNutt v. Gen. Motors Acceptance Corp. of Ind., 298 U.S. 178, 189
(1936)), and must do so by a preponderance of the evidence, Reynolds, 846 F.2d at
748 (citations omitted). If jurisdiction is found to be lacking, this court must
dismiss the action. RCFC 12(h)(3).

       The Tucker Act delineates this court’s jurisdiction. 28 U.S.C. § 1491
(2012). That statute “confers jurisdiction upon the Court of Federal Claims over
the specified categories of actions brought against the United States . . . .” Fisher
v. United States, 402 F.3d 1167, 1172 (Fed. Cir. 2005) (en banc) (citations
omitted). These include money damages claims against the federal government
founded upon the Constitution, an act of Congress, a regulation promulgated by an
executive department, an express or implied contract with the United States, or a
claim for liquidated or unliquidated damages in cases not sounding in tort. Id.
(citing 28 U.S.C. § 1491(a)(1)).


                                         3
      The Tucker Act concurrently “waives the Government’s sovereign
immunity for those actions.” Id. The statute does not, however, create a
substantive cause of action or right to recover money damages in the Court of
Federal Claims. Id. “[T]o come within the jurisdictional reach and the waiver of
the Tucker Act, a plaintiff must identify a separate source of substantive law that
creates the right to money damages.” Id.

       In other words, the source underlying the cause of action must be
money-mandating, in that it “‘can fairly be interpreted as mandating compensation
by the Federal Government for the damage sustained.’” United States v. Testan,
424 U.S. 392, 400 (1976) (quoting Eastport S.S. Corp. v. United States, 372 F.2d
1002, 1009 (Ct. Cl. 1967) and citing Mosca v. United States, 417 F.2d 1382, 1386
(Ct. Cl. 1969)). If the provision relied upon is found to be money-mandating, the
plaintiff need not rely upon a waiver of sovereign immunity beyond the Tucker
Act. Huston v. United States, 956 F.2d 259, 261 (Fed. Cir. 1992) (citing United
States v. Mitchell, 463 U.S. 206, 218 (1983)).

       When the government has challenged the truth of jurisdictional facts in the
complaint, the court must resolve the dispute. Reynolds, 846 F.2d at 747 (citations
omitted). The court may inquire into evidence outside the pleadings to establish
jurisdictional facts. Id.; Rogers v. United States, 95 Fed. Cl. 513, 514-15 (2010)
(citations omitted). “Indeed, the court may, and often must, find facts on its own.”
Martinez v. United States, 48 Fed. Cl. 851, 857 (2001) (citing RHI Holdings, Inc.
v. United States, 142 F.3d 1459, 1461-62 (Fed. Cir. 1998); Rocovich v. United
States, 933 F.2d 991, 993 (Fed. Cir. 1991)), aff’d in relevant part, 281 F.3d 1376
(Fed. Cir. 2002).

      B.     RCFC 12(b)(6)

       It is well-settled that a complaint should be dismissed under RCFC 12(b)(6)
“when the facts asserted by the claimant do not entitle him to a legal remedy.”
Lindsay v. United States, 295 F.3d 1252, 1257 (Fed. Cir. 2002). When
considering a motion to dismiss brought under RCFC 12(b)(6), “the allegations of
the complaint should be construed favorably to the pleader.” Scheuer, 416 U.S. at
236. The court must not mistake legal conclusions presented in a complaint,
however, for factual allegations which are entitled to favorable inferences. See,
e.g., Papasan v. Allain, 478 U.S. 265, 286 (1986) (“[W]e are not bound to accept

                                         4
as true a legal conclusion couched as a factual allegation.”) (citations omitted).

       The court must also inquire whether the complaint meets the plausibility
standard described by the United States Supreme Court, i.e., whether it adequately
states a claim and provides a “showing [of] any set of facts consistent with the
allegations in the complaint.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 563
(2007) (Twombly) (citations omitted). “To survive a motion to dismiss, a
complaint must contain sufficient factual matter, accepted as true, to ‘state a claim
to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(Iqbal) (quoting Twombly, 550 U.S. at 570). Plausibility is a context-specific
inquiry. See, e.g., Iqbal, 556 U.S. at 679 (“Determining whether a complaint
states a plausible claim for relief will . . . be a context-specific task that requires
the reviewing court to draw on its judicial experience and common sense.”)
(citation omitted).

II.    Analysis

       A.      Introduction

               1.      Administrative Incoherence

       Unfortunately, the dispute before the court is more complicated and
confusing than would be expected in what plaintiffs describe as a “simple and
fairly straightforward . . . collections case.” Pls.’ Opp. at 6. Part of this confusion
must be attributed to the codified medical regulations of the VA which, despite a
sweeping overhaul in 1996, were littered with errors throughout the Relevant
Period.3 See 61 Fed. Reg. 21,964 (May 13, 1996) (re-codifying the VA’s medical
regulations in Part 17 of Title 38 of the Code of Federal Regulations); see also,
e.g., 38 C.F.R. § 17.120(a)(4) (referencing a non-existent 38 C.F.R. § 17.48(j)); 38
C.F.R. § 17.121 (citing for authority a non-existent 38 U.S.C. § 501(c)(1) (2006));
38 C.F.R. § 17.142 (referencing non-existent regulations 38 C.F.R. §§ 17.99,
17.210). Further confusion is demonstrated by the parties’ acknowledgment that


       3
         / Defendant contributes to this confusion by citing to a regulation which is not to be
found in the 2008, 2009 or 2010 editions of the Code of Federal Regulations, or the current
edition, for that matter. See Def.’s Reply at vii, 24 (citing to non-existent “38 C.F.R. § 7.21” and
“38 C.F.R. § 17.21”).

                                                 5
the applicable VA manual (Manual M-1) during the Relevant Period may not have
reflected the provisions of the VA’s medical regulations or, for that matter, actual
administrative practices at the VA. See Pls.’ Opp. at 24-25 & n.18 (noting
inconsistencies between 38 C.F.R. § 17.56 and Manual M-1 (citing Pls.’ App. at
108-09)); Def.’s Reply at 19 (“We do agree with plaintiffs that . . . there is
evidence that VA officials did not follow the provisions of Manual M-1 governing
payment for dialysis services and did not pay providers of dialysis services in
accordance with the Medicare rates as directed by Manual M-1; our statement in
our opening brief regarding the VA’s practice should have reflected this fact.”).
Thus, part of this controversy arose from the VA’s lack of coherence in its
administration of payment for dialysis services in the years preceding the Relevant
Period and during the Relevant Period.

               2.     Ambiguities in the Government’s Legal Arguments4

      The government raises diverse arguments to attack this court’s jurisdiction
over plaintiffs’ claims and to attack the sufficiency of certain claims presented in
the complaint. It is only with some difficulty, however, that the government’s
opening brief may be deciphered to separate the jurisdictional challenges from the
RCFC 12(b)(6) challenges. Neither the table of contents of the brief, nor the
statement of questions presented, offers a clear demarcation of Rule 12(b)(1) and
Rule 12(b)(6) arguments.

       The primary focus of the government’s reply brief is on this court’s
jurisdiction. See Def.’s Reply at 1 (“Because plaintiffs fail to rebut our showing
that no statute gave the VA authority to issue 38 C.F.R. § 17.56 (2009) as a
money-mandating provision so as to repeal Federal procurement laws, and, for that
reason, plaintiffs’ claims are subject to the Contract Disputes Act (CDA), 41
U.S.C. §§ 7101-7109 [(2012)], this Court lacks jurisdiction over plaintiffs’
complaint.”), 25 (“For the reasons set forth in our moving brief and above, the
Court should dismiss the complaint for lack of jurisdiction.”). However, as the
court reads plaintiffs’ opposition brief (to which defendant’s reply brief was


       4
         / The court does not assign blame to the attorneys who worked on the government’s
briefs. The legal issues are thorny and complex, and the government’s position in this dispute
resists any easy or straightforward explanation. Although ultimately unpersuasive, the
government’s motion raised a number of skillful and well-supported arguments.

                                                6
directed), plaintiffs attempt to rebut the government’s jurisdictional and non-
jurisdictional challenges to the complaint. See, e.g., Pls.’ Opp. at 14 (asserting that
“Plaintiffs more than carry their jurisdictional burden of establishing . . . that
Section 17.56 can be fairly interpreted as mandating compensation for non-VA
providers of authorized dialysis services.”) (citations omitted); id. at 14 n.9
(responding to one of defendant’s arguments that plaintiffs describe as a request
for “dismissal of Plaintiffs’ claims under RCFC 12(b)(6)”); id. at 47 n.43
(responding to one of defendant’s arguments that, according to plaintiffs, does
“not affect jurisdiction”). Given that defendant’s reply brief presents no clearly
identified RCFC 12(b)(6) arguments, it is difficult to discern whether the
government’s non-jurisdictional challenges to the complaint have been conceded
to be infirm or whether these non-jurisdictional arguments are merely de-
emphasized in defendant’s reply and sur-reply briefs.

             3.     Structure of the Court’s Analysis

       Despite the somewhat amorphous structure of defendant’s opening brief and
the ambiguity presented by the omission of any reference to RCFC 12(b)(6)
arguments in defendant’s reply brief, the court has attempted in this opinion to
address all of the government’s substantive arguments. Because much of the
government’s jurisdictional challenge to the complaint rests upon its varied
assaults on the interpretation and validity of 38 C.F.R. § 17.56, the court’s
jurisdictional analysis begins with a discussion of that regulation and the parties’
arguments which focus on the regulation itself. The court then turns to the
government’s other jurisdictional arguments concerning the impact of the Contract
Disputes Act and other procurement statutes and regulations on plaintiffs’ claims.
Finally, the court addresses the non-jurisdictional arguments presented by the
government which appear to rely upon RCFC 12(b)(6).

      B.     Jurisdictional Challenge Focused on the Meaning and Validity of
             38 C.F.R. § 17.56

             1.     Authorized Promulgation of Section 17.56 in 1998

                    a.    Payment Formula Established

      The VA promulgated section 17.56 in 1998. The rule was established

                                          7
through formal notice-and-comment procedures. See Payment for Non-VA
Physician Services Associated with Either Outpatient or Inpatient Care Provided
at Non-VA Facilities, 63 Fed. Reg. 39,514 (July 23, 1998). The rule was, in
relevant part, “intended to establish reimbursement consistency among federal
health benefits programs to ensure that amounts paid to physicians better represent
the relative resource inputs used to furnish a service, and to achieve program cost
reductions.” Id.

      From the outset, the rule provided a formula to calculate the proper payment
for non-VA outpatient physician services. One part of the formula addressed the
VA’s payment for physician services when those services were not listed on
“Medicare’s participating physician fee schedule.” 38 C.F.R. § 17.56(a) (1999).
The formula in those instances provided that:

            Payment under the 75th percentile methodology is
            determined for each VA medical facility by ranking all
            occurrences (with a minimum of eight) under the
            corresponding code during the previous fiscal year with
            charges ranked from the highest rate billed to the lowest
            rate billed and the charge falling at the 75th percentile as
            the maximum amount to be paid.

Id. § 17.56(c). However, when the 75th percentile method could not be calculated
due to the infrequency of a particular type of physician service billed to that
medical facility, the VA would pay “the usual and customary rate if there are
fewer than 8 treatment occurrences for a procedure during the previous fiscal
year.” Id. § 17.56(a).

                   b.    Sufficient Statutory Authority for Section 17.56

       The court notes that 38 U.S.C. § 501 (1994) was cited as authority for the
promulgation of section 17.56. See 38 C.F.R. pt. 17 (1999) (noting that 38 U.S.C.
§ 501 provides authority for the VA’s medical regulations, along with other more
specific statutes); 63 Fed. Reg. 39,514, 39,515 (noting that section 501 provides
authority for section 17.56); see also Pls.’ Opp. at 18-21. Defendant suggests that
section 501 could not have provided sufficient authority for the promulgation of
substantive regulations such as section 17.56, relying especially on Chrysler Corp.

                                         8
v. Brown, 441 U.S. 281 (1979) and Miller v. United States, 294 U.S. 435 (1935).
Def.’s Reply at 8-16. These cases are inapposite, but for different reasons.

       Chrysler does not address the nature and text of 38 U.S.C. § 501 or any of
its predecessor statutes. Instead, Chrysler discusses 5 U.S.C. § 301 (2012). As
plaintiffs point out, 5 U.S.C. § 301 and 38 U.S.C. § 501 are different statutes with
different purposes. Pls.’ Sur-Reply at 8-9. Persuaded by plaintiffs’ arguments in
this regard, the court finds the analogy between 38 U.S.C. § 501 and 5 U.S.C.
§ 301 strained and therefore finds the holding of Chrysler to be of no value in this
dispute.

      Miller, on the other hand, discusses a statute which has significant parallels
with the text of 38 U.S.C. § 501, and according to defendant, the 1918 statute
discussed in Miller was a precursor of § 501. See Def.’s Reply at 14. The relevant
portion of the statutory provision discussed in Miller is set forth as follows:

             That the director, subject to the general direction of the
             Secretary of the Treasury, shall administer, execute, and
             enforce the provisions of this Act [to authorize the
             establishment of a Bureau of War Risk Insurance in the
             Treasury Department], and for that purpose have full
             power and authority to make rules and regulations not
             inconsistent with the provisions of this Act, necessary or
             appropriate to carry out its purposes, and shall decide all
             questions arising under the Act, except as otherwise
             provided . . . . Wherever under any provision or
             provisions of the Act regulations are directed or
             authorized to be made, such regulations, unless the
             context otherwise requires, shall or may be made by the
             director, subject to the general direction of the Secretary
             of the Treasury. The director shall adopt reasonable and
             proper rules to govern the procedure of the divisions and
             to regulate and provide for the nature and extent of the
             proofs and evidence and the method of taking and
             furnishing the same in order to establish the right to
             benefits of allowance, allotment, compensation, or
             insurance provided for in this Act, the forms of

                                          9
             application of those claiming to be entitled to such
             benefits, the methods of making investigations and
             medical examinations, and the manner and form of
             adjudications and awards[.]

Act of May 20, 1918, ch. 77, sec. 1, § 13, 40 Stat. 555, 555. The relevant portions
of the text of section 501 contain similar, but not identical, instructions regarding
the regulatory powers of the Secretary of the Department of Veterans Affairs:

             (a) The Secretary has authority to prescribe all rules and
             regulations which are necessary or appropriate to carry
             out the laws administered by the Department and are
             consistent with those laws, including –

             (1) regulations with respect to the nature and extent of
             proof and evidence and the method of taking and
             furnishing them in order to establish the right to benefits
             under such laws;
             (2) the forms of application by claimants under such
             laws;
             (3) the methods of making investigations and medical
             examinations; and
             (4) the manner and form of adjudications and awards.

             (b) Any rule, regulation, guideline, or other published
             interpretation or order (and any amendment thereto)
             issued pursuant to the authority granted by this section or
             any other provision of this title shall contain citations to
             the particular section or sections of statutory law or other
             legal authority upon which such issuance is based. The
             citation to the authority shall appear immediately
             following each substantive provision of the issuance.

38 U.S.C. § 501(a)-(b). Whatever the parentage connecting the 1918 statute
amending the Bureau of War Risk Insurance’s foundational legislation and section
501 governing the regulatory powers of the VA, the holding in Miller is not
directly applicable to the circumstances of the promulgation of section 17.56 for

                                         10
the reasons discussed below.

       Miller invalidated a regulation of the Bureau which attempted to replace a
factual inquiry into the determination of an individual veteran’s permanent
disability with a formulaic definition of permanent disability. See 294 U.S. at 440
(“The vice of the regulation, therefore, is that it assumes to convert what in the
view of the statute is a question of fact requiring proof into a conclusive
presumption which dispenses with proof and precludes dispute.”). Although a
superficial reading of Miller might suggest that the Bureau lacked the power to
create any substantive war risk insurance regulation based on the grant of
regulatory authority cited above, a closer examination shows that the invalid
regulation was improper because, in the view of the Supreme Court, it
contradicted a specific statutory provision. A specific statutory provision of the
Act of October 6, 1917 permitted claimants of war insurance benefits to bring suit
in a United States district court if their insurance claim was denied. Act of
October 6, 1917, Ch. 105, sec. 405, 40 Stat. 398, 410. When the regulation in
question deprived the claimant of a factual inquiry into disability and replaced that
inquiry with a regulatory definition of disability (in particular by equating the loss
of one eye and one hand with disability), the regulation exceeded its statutory
authorization. Miller, 294 U.S. at 439 (“It is not, in the sense of the statute, a
regulation at all, but legislation.”).

       This closer reading of Miller suggests that the question, in this case, is not
whether section 501(a)-(b), or its direct predecessor 38 U.S.C. § 210(c)(1) (1988),5
gives the VA power to issue substantive regulations, the question is whether such
substantive regulations conflict with statutes that govern the relevant activities of
the VA. One example of this principle is found in Gardner v. Brown, 5 F.3d 1456
(Fed. Cir. 1993), aff’d, 511 U.S. 115 (1994). Citing Miller, the United States
Court of Appeals for the Federal Circuit noted that a regulation limiting relief for
disabilities resulting from VA medical treatment contravened a specific statute and
was therefore invalid. See Gardner, 5 F.3d at 1464 (“The VA’s desire to pay less
compensation than Congress mandated could not authorize the extra-statutory
legislation embodied in 38 C.F.R. § 3.358(c)(3) [(1992)].”). Thus, in Gardner,


       5
         / There are no substantive differences between § 501(a)-(b) and § 210(c)(1) because
§ 501 is merely the re-codification of its predecessor statutes. See Department of Veterans
Affairs Codification Act, Pub. L. No. 102-83, 105 Stat. 378 (1991).

                                              11
regulatory invalidity was based on a conflict with a specific statute, not on the
VA’s lack of authority to issue substantive regulations.

       Although, as discussed infra, the government strives mightily to suggest
that section 17.56 conflicts with certain statutes governing public contracting, the
court has not found any conflict between section 17.56 and those statutes. Thus,
Miller and its progeny do not compel a finding that the promulgation of section
17.56 was infirm in any respect. As to defendant’s contention that section 501 is a
mere housekeeping statute that does not permit the VA to issue substantive
regulations, the court must disagree. Courts have regularly noted the validity of
regulations issued under the authority of section 501 and its direct predecessor 38
U.S.C. § 210(c)(1). Section 210(c)(1), for example, has been referred to by the
Federal Circuit as the VA’s “more general authority to adopt regulations.” Haas v.
Peake, 525 F.3d 1168, 1191 (Fed. Cir. 2008). A substantive regulation based on
this authority, concerning benefits for certain veterans experiencing non-
Hodgkin’s lymphoma, was accepted by the Federal Circuit as valid. Id.

       In another example, the VA’s general regulatory power authorized a
substantive regulation which defined “full-time study” for veterans’ educational
benefits. Wayne State Univ. v. Cleland, 590 F.2d 627, 634 (6th Cir. 1978) (“The
Administrator has the authority to issue regulations, pursuant to § 210(c)(1), which
are consistent with any legislation administered by the V.A.”). Clearly, § 501 and
its predecessor § 210(c)(1) are not mere housekeeping statutes. The VA had the
authority, under § 501, to promulgate section 17.56. Defendant’s attempt to
invalidate its own regulation must fail. Cf. DaVita, 110 Fed. Cl. at 83 (“The
Government’s effort to have the Court invalidate its own regulations is not well
taken.”) (citation omitted).

       Finally, in a related attack on the validity of section 17.56, defendant argues
that the regulation must pass a four-part test established by Hamlet v. United
States, 63 F.3d 1097, 1105 (Fed. Cir. 1995) and Brodowy v. United States, 482
F.3d 1370, 1375 (Fed. Cir. 2007). The court disagrees. Plaintiffs’ burden is to
show that section 17.56 is a money-mandating provision of law. Huston, 956 F.2d
at 261 (citing Mitchell, 463 U.S. at 218). The test in Hamlet and Brodowy
establishes whether agency issuances of less formality than codified regulations
may be money-mandating for purposes of establishing Tucker Act jurisdiction in
this court. The court declines to extend that doctrine, which is inapplicable to the

                                         12
facts of this case, to create an acid test for the validity of regulations published in
the Code of Federal Regulations.6

               2.     Valid Amendment of Section 17.56 in 2005

       The parties agree that provisions of section 17.56 relevant to non-VA
outpatient dialysis services were amended in 2005 and that the agency did not
utilize formal notice-and-comment procedures because the VA viewed this
amendment as a mere technical amendment. See Def.’s Mot. at 16-19; Pls.’ Opp.
at 21-26. The parties disagree, however, as to the significance of the 2005
amendment. Furthermore, if the court adopts plaintiffs’ interpretation of the
amended regulation, defendant insists that the 2005 amendment must have been
procedurally invalid because the changes were substantive and the VA would have
been required to issue the amendment through notice-and-comment rule-making.
The court, for the reasons discussed infra, agrees with plaintiffs as to the meaning
of the amended section 17.56 and as to the validity of the 2005 amendment.7

                      a.      Explaining the Applicability of the Payment Formula

      As part of a revision of section 17.56 focused largely on non-VA health care
professional services delivered in Alaska, a topic which was the subject of formal


       6
         / Defendant also briefly argues that section 17.56, as interpreted by plaintiffs, violates
the Appropriations Clause of the United States Constitution. See Def.’s Mot. at 9 (citing U.S.
Const. art. I, § 9, cl. 7); Def.’s Reply at 21-22. The government acknowledges that “Congress
appropriated funds for the VA to acquire medical services for veterans, [but contends that]
Congress did not authorize the VA to acquire medical services in a manner not subject to
procurement laws.” Def.’s Reply at 21. The court agrees with plaintiffs, as discussed below, that
payments to plaintiffs pursuant to section 17.56 do not violate procurement laws. Defendant has
failed to show how payments of funds pursuant to the formula established by section 17.56
offend the Appropriations Clause of the United States Constitution. See Pls.’ Opp. at 32-33
(demonstrating that such payments for non-VA medical services have been part of the VA’s
budget authority for decades).
       7
         / The court notes that the VA, during the years prior to the Relevant Period and through
much of the Relevant Period, appears to have shared plaintiffs’ view of the 2005 amendment and
its procedural validity. It is only as the VA prepared to amend section 17.56 in 2010-11 and
responded to litigation that its position on the 2005 amendment of section 17.56 appears to have
changed.

                                                13
notice-and-comment rule-making, Def.’s Mot. at 16, the agency also revised the
term in the regulation describing the services addressed by the payment provisions
of section 17.56. Payment for Non-VA Physician and Other Health Care
Professional Services Associated With Either Outpatient or Inpatient Care
Provided at Non-VA Facilities, 70 Fed. Reg. 5926, 5926 (Feb. 4, 2005). This
change was described as one of a “number of technical changes of a non-
substantive nature”:

            A number of technical changes of a non-substantive
            nature have been made in this final rule. The proposed
            rule described the title of this rule as Payment for
            Non-VA Physician Services Associated with Either
            Outpatient or Inpatient Care Provided at Non-VA
            Facilities. The use of the phrase “non-VA physician,”
            both in the title of 38 CFR 17.56 and throughout the
            regulation, is imprecise, as the rule applies to all non-VA
            physician and other health care professional services
            associated with outpatient or inpatient care provided at
            non-VA facilities. In order to reconcile the terminology
            used in this rule with common practice in VA, the phrase
            “non-VA physician” will be replaced with “non-VA
            health care professional services.” Additionally, the
            language was clarified to state the rates payable are
            based on the geographic location of where the services
            were rendered.

Id. The change to section 17.56 relevant to this dispute is clear; the term “non-VA
physician services” is replaced by “non-VA health care professional services”
throughout the regulation. Id. at 5927.

       Plaintiffs argue, aided by evidence of VA payment practices from October
1, 2002 through June 2005, Pls.’ Opp. App. at 107, as well as the VA’s
pronouncements in the Federal Register, 70 Fed. Reg. 5926, that the 2005 change
was merely technical in nature because it reflected existing administrative
practices at the VA. Defendant, on the other hand, argues that the 2005 change
was a “scrivener’s error” that mistakenly eliminated important controls on the
costs of non-VA health care professional services. See Def.’s Mot. at 14

                                        14
(“Plaintiffs’ overly literal reading of the 2005 change represents a scrivener’s error
and is directly contrary to policy makers’ and drafters’ clearly expressed intent.”),
18 (arguing that by altering one provision in the regulation to include non-
physician services, but failing to alter a payment formula provision relying on the
Medicare “participating physician fee schedule” and not on a number of Medicare
fee schedules, the VA lost the advantages of an important cost-containment
mechanism).

       Defendant’s argument regarding a costly scrivener’s error would be more
persuasive if it were supported by any evidence of a dramatic change in payment
practices at the VA after February 2005, or of VA recognition of such an error
between February 2005, when the alleged error took effect, and the time when
plaintiffs reminded the VA that the payment formula for dialysis services in
section 17.56 was not governed by Medicare rates, in 2009. The government,
however, has cited none. Based on this record, the court agrees with plaintiffs,
and the VA pronouncement at the time of the amendment, that section 17.56 was
amended in only a technical fashion to reflect payment practices for non-VA
health care professional services. Rather than interpreting section 17.56 to
contradict its plain language, as the government appears to urge, the court
interprets the amended regulation as commanding the use of the 75th percentile
method of payment, or the usual and customary rate method, whenever the
Medicare participating physician fee schedule did not apply to non-VA health care
professional services provided during the Relevant Period.

                   b.     No Substantive Change to the Agency’s Application
                          of the Payment Formula

       Defendant argues that if plaintiffs’ interpretation of the text is adopted, the
2005 amendment of section 17.56 “actually would change the VA’s longstanding
policy regarding compensation significantly.” Def.’s Mot. at 17. The government
appears to imply that such a significant change would have been substantive rule-
making, not interpretive rule-making, and that the 2005 amendment was invalid
for making substantive changes to payments for non-VA health care professional
services in the absence of notice-and-comment rule-making. See id. at 12 (noting
that a valid regulation “‘must have certain substantive characteristics and be the
product of certain procedural requisites’” (quoting Chrysler, 441 U.S. at 301)); see
also Def.’s Reply at 9 (“Substantive rules promulgated in the absence of

                                         15
compliance with the procedures proscribed by Congress are void.” (citing Tunik v.
Merit Sys. Prot. Bd., 407 F.3d 1326 (Fed. Cir. 2005))). The court cannot agree
that the 2005 technical change in section 17.56 was substantive rule-making.

       Plaintiffs assert that the “VA’s own records establish that the scope of
Section 17.56 was not changed in 2005, for years prior to the February 2005
terminology change, the VA already had been paying non-VA dialysis providers
in accordance with Section 17.56’s “‘75th Percentile” payment methodology.’”
Pls.’ Opp. at 22 (citation omitted). Plaintiffs’ assertion is supported by the
evidence before the court, as noted supra. For this reason, the court agrees with
plaintiffs’ statement that “Defendant’s argument that the February 2005 change in
Section l7.56’s terminology represented a decisive and substantive change in VA
payment policy that could only be accomplished via notice-and-comment
rulemaking is untenable.” Id. at 26.

       The court also agrees with plaintiffs that the VA’s actions in 2005 and 2009
show that the VA rightly considered the 2005 technical change in section 17.56 to
be merely interpretative, not substantive. Id. at 27-29 & nn.22-23. For all of the
above reasons, the VA was not required to follow notice-and-comment procedures
to replace the term “non-VA physician services” with “non-VA health care
professional services” in section 17.56. Because the promulgation of 38 C.F.R.
§ 17.56 (2008) has not been shown to have been procedurally invalid, defendant’s
attempt to discredit section 17.56 as a source of law upon which plaintiffs may
rely must be rejected.

            3.     Section 17.56 is Money-Mandating

       There is little dispute that section 17.56 mandates payment for non-VA
health care professional services pursuant to the payment formula contained
therein. See Pls.’ Opp. at 16 (“Defendant appropriately does not attempt to claim
that the language of Section 17.56 is anything but mandatory in terms of
establishing the payment methodology by which Plaintiffs were to be paid.”).
Defendant’s attacks on the validity of section 17.56 are unsound, as discussed
supra, and defendant’s arguments that public contracting statutes conflict with
section 17.56 are also unsound, as discussed infra. The government cannot refute
the fact that the text of section 17.56 introduces its payment formula provisions
with the phrase “payment for non-VA health care professional services . . . shall

                                        16
be.” 38 C.F.R. § 17.56(a) (emphasis added). This is mandatory language and
therefore section 17.56 is money-mandating. DaVita, 110 Fed. Cl. at 82. Reliance
by plaintiffs on a money-mandating source of law such as section 17.56 is
sufficient to confer jurisdiction on this court. E.g., Testan, 424 U.S. at 401-02
(citation omitted).

      C.     Defendant’s Jurisdictional Challenge Asserting that 38 C.F.R.
             § 17.56 Contravenes Procurement Statutes, or that Plaintiffs
             Have Failed to Satisfy Jurisdictional Prerequisites of the Contract
             Disputes Act

       The government attempts to convince the court that the VA’s payments for
non-VA dialysis services during the Relevant Period were contractual in nature,
and that statutes governing federal contracting and procurement practices prevent
plaintiffs from recovering on their claims. One focus of this jurisdictional
challenge suggests that section 17.56 is in conflict with contracting statutes and
thus, this regulation cannot be a valid, money-mandating source of law for
plaintiffs’ claims. Another focus of the government’s arguments is that each of
the beneficiary authorizations issued by the VA was a unilateral contract accepted
by performance. A final focus of the government’s arguments asserts that because
the Contract Disputes Act (CDA) applies to the VA’s arrangements for dialysis
services identified in the complaint, plaintiffs, having failed to file claims with a
contracting officer at the VA before filing suit in this court, have not fulfilled the
jurisdictional prerequisite for a CDA suit in this court. The court in DaVita
rejected arguments of this nature, and the court must do so again here. 110 Fed.
Cl. at 79-81.

             1.    Section 17.56 Does Not Conflict with Applicable Federal
                   Contracting Statutes

                   a.     Section 501 Provides Authority for a Non-
                          Contractual Payment Scheme

       The first proposition that undergirds the government’s contract-focused
arguments is that the VA had no authority to pay for non-VA dialysis services
other than its contractual authority:


                                         17
              Consistent with the governing statutes, no VA official
              had any authority to obligate the United States as the
              result of any VA “non-contractual” acquisition of
              dialysis services. The inability of plaintiffs to meet their
              burden to establish that 38 C.F.R. § 17.56 (2009)
              constitutes a money mandating provision independent of
              the VA’s contractual authority mandates dismissal of the
              complaint for lack of jurisdiction.

Def.’s Mot. at 11. This proposition is plainly wrong. First, as discussed supra, 38
U.S.C. § 501 provides sufficient authority for the money-mandating regulation 38
C.F.R. § 17.56. Second, nothing in the contracting statutes cited by the
government forbids the VA from paying for non-VA health care professional
services through a non-contractual mechanism.

       Defendant cites, for example, 38 U.S.C. § 1703(a) (2012) and 38 U.S.C.
§ 8153 (2012) as the VA’s express authority for the acquisition of non-VA
medical services. Def.’s Mot. at 14. As plaintiffs point out, however, there is no
indication in the evidence before the court that these statutes provide the authority
for section 17.56(a)-(c), which sets forth the payment formula for obtaining non-
VA dialysis services on a “fee-basis” for an authorized individual veteran, as
opposed to the authority for entering into a contract for procuring non-VA dialysis
services for any number of veterans referred to the provider, which is addressed in
section 17.56(f). See Pls.’ Opp. at 18-21 & n.15, 37-38. Further, plaintiffs note
that the VA’s medical regulations and other evidence show a “clear dichotomy”
between the VA’s contract mechanism for obtaining dialysis services and the
VA’s fee-basis mechanism.8 Id. at 1-2, 19-20, 31-32, 42-44. Based on the record,


       8
        / Indeed, the history of section 17.56 and its amendments shows that the VA’s payment
formula was amended in 2000 to include a provision seeking to lower costs through negotiated
contracts. VA Payment for Non-VA Public or Private Hospital Care and Non-VA Physician
Services That Are Associated With Either Outpatient or Inpatient Care, 65 Fed. Reg. 66,636,
66,636 (Nov. 7, 2000) (“Sometimes VA can negotiate contracts with hospitals or physicians or
with their agents to reduce the payment amounts.”); Def.’s Mot. at 16 (“In 2000, the VA
amended 38 C.F.R. § 17.56 (1999) to provide for lower payments based on negotiated
contracts.”) (citation omitted); Pls.’ Opp. at 19 (“The VA’s modification of Section 17.56 in
2000 to add the provision on contract pricing would have been necessary only if the VA
recognized that Section 17.56, as adopted in 1998, already authorized the VA to obtain medical

                                              18
the court does not agree with defendant that fee-basis payments for plaintiffs’ non-
VA health care professional services were contractual in nature or were authorized
by 38 U.S.C. § 1703(a) or 38 U.S.C. § 8153.

      Defendant also relies on 41 U.S.C. § 3101-4712 (2012) generally, and
section 3101 in particular, to state that the VA cannot procure non-VA medical
services through contracts unless it abides by procurement laws and regulations:

              The provisions of 41 U.S.C. §§ 3101-4712 mandate that
              the VA comply with the applicable Federal procurement
              statutes and regulations in purchasing and contracting for
              acquisition of medical services for veterans. Section
              3101 provides that “[a]n executive agency shall make
              purchases and contracts for . . . services in accordance
              with” the Federal acquisition statutes, 41 U.S.C. §§
              3101-4712, and implementing regulations. Consistent
              with the mandate of section 310[1], sections 3101-4712
              thus apply generally to all purchases and contracts by
              executive agencies in the absence of a specific statutory
              exclusion.

Def.’s Mot. at 8 (citations omitted). The court has found, however, that the VA’s
payments during the Relevant Period, made pursuant to section 17.56(a)-(c) for
fee-basis dialysis services, were not contractual in nature, thus rendering the
procurement laws and regulations cited by defendant irrelevant to plaintiffs’
claims. In addition, the court does not read the general language of 41 U.S.C.
§ 3101, directing that agencies “shall make purchases and contracts for property
and services” in accordance with procurement laws and regulations, to foreclose
the VA from issuing beneficiary authorizations pursuant to 38 U.S.C. § 501 and 38
C.F.R. § 17.56.

                      b.     Even if Section 501 Did Not Authorize Non-
                             Contractual Payments for Non-VA Health Care


services for VA beneficiaries on a non-contract basis . . . .”). This regulatory context supports
plaintiffs’ view that payments for non-VA health care professional services occurred through two
channels contractual and non-contractual. DaVita, 110 Fed. Cl. at 80-81.

                                               19
                          Professional Services, Acquiescence by Congress
                          Apparently Validated Section 17.56 and Its Non-
                          Contractual Payment Formula

       Should the court have erred as to the validity of section 17.56, relied upon
by plaintiffs as a money-mandating regulation authorized by 38 U.S.C. § 501, the
court finds, in the alternative, that the payment formula in 17.56 was apparently
acquiesced to by Congress. As a preliminary matter, defendant argues that the
standard for congressional ratification of agency practices has not been met here.
Def.’s Reply at 23; Def.’s Sur-Reply at 2-3 & nn.1-2. Plaintiffs counter that

             when Congress expressly appropriated funds to the VA
             for fee basis medical services, it knowingly authorized
             the VA to use non-contractual means to deliver non-VA
             medical care to veterans during the Relevant Period . . . .
             Therefore, to the extent Defendant continues – in the
             face of the objective evidence to the contrary – to
             contend that the VA’s use of non-contract,
             money-mandating procedures to facilitate the delivery of
             non-VA medical services to veterans was “unauthorized”
             by Congress, the record establishes the predicates
             necessary for “ratification by appropriation” even under
             the authorities cited by Defendant in its Reply. . . . Thus,
             even were Defendant correct that the use of non-contract
             means to pay for fee basis medical services was
             somehow “unauthorized” under prior statutory authority,
             there is abundant evidence that Congress ratified that
             practice.

Pls.’ Sur-Reply at 7-8.

       The standard to establish congressional ratification of unauthorized agency
action is not easy to meet. See Schism v. United States, 316 F.3d 1259, 1293 (Fed.
Cir. 2002) (en banc) (“[T]o demonstrate congressional ratification though
appropriation statutes, the statute ‘must plainly show a purpose to bestow the
precise authority which is claimed.’” (quoting Ex parte Endo, 323 U.S. 283, 304
n.24 (1944))). Schism holds that “in order for ratification to occur the

                                         20
appropriation act itself must show a purpose to bestow the precise authority
claimed and previously lacking.” Id. at 1290 (citing Endo). Although there is
substantial evidence in the record that Congress was aware of fee-basis, non-
contractual payments to health care providers pursuant to the mechanism set forth
in section 17.56(a)-(c), plaintiffs have not cited to any appropriations act which
directly addresses the authority of the VA to make such payments. The court
agrees with defendant that Congressional ratification of section 17.56(a)-(c) has
not been demonstrated by plaintiffs.

       Congressional acquiescence to an agency’s long-standing interpretation of a
codified regulation appears to be another matter. As the Federal Circuit has
explained, “[t]he doctrine of acquiescence is premised upon Congress’ failure to
act in response to an action it might view as previously unauthorized, unlike the
ratification context where Congress affirmatively acted to demonstrate its approval
of an agency action.” Schism, 316 F.3d at 1294-95 (citations omitted). Although
mere legislative silence is not enough, evidence of extensive congressional
awareness of administrative practices and evidence of consideration of legislation
addressing the agency’s regulatory practices may be enough to show acquiescence.
See id. at 1295-96 (citing authorities). The congressional acquiescence doctrine
has supported a number of decisions of the Supreme Court and the Federal Circuit.
See Disabled Am. Veterans v. Sec’y of Veterans Affairs, 419 F.3d 1317, 1322-23
(2005) (citing cases). But see Schism, 316 F.3d at 1295 (“Nevertheless, the
Supreme Court has repeatedly cautioned against using congressional silence alone
to infer approval of an administrative interpretation.”) (citing cases).

        Having considered a number of these precedential cases, the court believes
that if Congress did not provide authority for section 17.56 through 38 U.S.C.
§ 501, it apparently acquiesced to non-contractual payments for non-VA health
care professional services for veterans before and during the Relevant Period.
Plaintiffs have presented a number of documents showing congressional
awareness, during the Relevant Period, of the VA making non-contractual
payments to providers of medical services to veterans. See Pls.’ Sur-Reply App.
Tabs 1-3 (including a Government Accountability Office (GAO) Report to the
Subcommittee on Oversight and Investigations, Committee on Veterans’ Affairs,
House of Representatives; a hearing report produced by that Subcommittee; and,
another hearing report produced by the House Committee on Veterans’ Affairs).
The VA’s Office of Inspector General (OIG) circulated a report to the House and

                                        21
Senate Committees on Veterans’ Affairs which also made Congress aware of the
non-contractual payments being made by the VA around the time of the 2005
amendment to section 17.56. Pls.’ Opp. App. at 101, 104, 106, 108, 117. A
similar OIG report in 2009 again informed both the House and Senate Committees
of non-contractual payments made by the VA for non-VA health care professional
services. Id. at 145, 155-56, 169, 171-72, 191, 194.

       Not only was Congress extensively aware of the VA’s interpretation of
section 17.56 and its non-contractual payments for non-VA health care
professional services, Congress actively considered non-VA health care services
to be one of the important aspects of health care for veterans it addressed by
legislation in the years immediately following the promulgation of section 17.56.
In 1999, for example, in the Veterans Millennium Health Care and Benefits Act,
Pub. L. No. 106-117, Title I, § 111, 113 Stat. 1545, 1553-56 (1999), now codified
at 38 U.S.C. § 1725 (2012), the VA was instructed to reimburse non-VA hospitals
for the emergency care of veterans, under certain conditions. In the Veterans
Health Care, Capital Asset, and Business Improvement Act of 2003, Pub. L. No.
108-170, Title I, § 105, 117 Stat. 2042, 2045, now codified at 38 U.S.C.
§ 1720(c)(1) (2012), Congress lessened reporting requirements for providers of
non-VA nursing home care. In the Veterans Health Programs Improvement Act of
2004, Pub. L. No. 108-422, Title VI, § 601, 118 Stat. 2379, 2396, now codified at
38 U.S.C. § 1703(d)(1)-(4), the VA was instructed to conduct audits of contracting
for non-VA health care services.

        Given the bipartisan support for veterans’ health care in general, it would be
of little use to recount all of the legislative attention paid to this aspect of the VA’s
mission from 1998, when section 17.56 was promulgated, to 2011, when an
amendment to that regulation changed the payment formula for non-VA health
care professional services. In just six months in 2003, for example, at least four
bills were introduced in the Senate that proposed substantive changes to health
care services for veterans. Def.’s Mot. App. at 46-47. It is clear that Congress
continued to address non-VA health care services after the 2005 amendment of
section 17.56 and during the Relevant Period. In the Veterans’ Mental Health and
Other Care Improvements Act of 2008, Pub. L. No. 110-387, Title IV, § 402, 122
Stat. 4110, 4123-24, now codified in various subsections of 38 U.S.C. §§ 1725,
1728 (2012), longer periods of emergency care treatment were covered for
veterans in non-VA facilities. In the Act of February 1, 2010, Pub. L. No.

                                           22
111-137, § 1, 123 Stat. 3495, 3495-96 (2010), now codified in various subsections
of 38 U.S.C. § 1725, Congress removed certain barriers to VA reimbursement for
emergency care in non-VA facilities for veterans who had other health insurance.
All of this legislative activity shows that Congress continually addressed non-VA
health care for veterans, and the VA’s payments for such care, without disturbing
the VA’s interpretation and application of the payment formula in section 17.56.
In these circumstances, the court finds that Congress appears to have acquiesced to
section 17.56 even if 38 U.S.C. § 501 did not provide sufficient authority for the
VA to issue and amend that regulation. See Disabled American Veterans, 419
F.3d at 1322 (holding that “congressional inaction in the face of long-standing
agency practice can rise to the level of implied adoption”).

             2.    Payments to Plaintiffs Were Not Contractual in Nature

       Defendant strives to convince the court that the authorizations issued by the
VA pursuant to section 17.56 were contractual in nature. Defendant relies first on
certain contracting regulations that should, in its view, apply to the VA’s
reimbursement of non-VA health care professional services provided to veterans.
Next the government relies on general principles of contract law to argue that the
beneficiary authorizations for these services were in fact unilateral contracts
accepted upon performance. Both of these contractual analyses are infirm.

                   a.     Regulations Specifically Pertaining to Contracting by
                          the VA

      The parties do not dispute that the Federal Acquisition Regulation (FAR)
and the VA’s supplemental acquisition regulations (VAAR) apply to VA
procurements. According to plaintiffs, however, these regulations have no
applicability to the fee-basis beneficiary authorizations issued under sections
17.52 and 17.56 during the Relevant Period:

             Defendant . . . never establishes that the individual
             authorizations at issue in the Complaint were actually
             issued and administered as procurement contracts in
             accordance with the FAR and VAAR procurement
             regulations. Defendant fails to do so because it cannot.
             Put simply, the VA did not issue or administer the

                                         23
              authorizations in controversy here as FAR- and
              VAAR-based procurement contracts, and Plaintiffs’
              claims do not rely on procurement law in any way.
              Certainly, that a series of procurement regulations
              governs federal agency procurement contracts does not,
              ipso facto, render the authorizations at issue in this
              Complaint procurement contracts themselves. For
              Defendant’s invocation of FAR and VAAR to succeed
              here, Defendant must demonstrate how those
              procurement regulations apply here. Defendant cannot
              make that showing because the prelitigation record is
              clear that the authorizations are not “procurement
              contracts” – and they cannot be self-servingly recast as
              such by Defendant now.

Pls.’ Opp. at 34.

       The court agrees with plaintiffs that nothing in the record shows that the
dialysis services at issue in this suit were obtained through contracting pursuant to
the FAR or the VAAR. Defendant argues that it does not matter what the VA used
for procedures – its own procurement regulations could nonetheless apply. See
Def.’s Reply at 19-20 (“As we demonstrate, the VA’s apparent assumption sub
silentio that procurement laws did not apply to its acquisitions of non-VA medical
services and its practices have no bearing upon the legality of those practices,
which are therefore not entitled to . . . deference.”). As discussed below, the court
finds that the regulations cited by defendant have not been demonstrated to have
applied to the dialysis services provided by plaintiffs during the Relevant Period.

        Three VAAR regulations are cited by defendant in its opening brief as
evidence that the beneficiary authorizations at issue here were contractual.9 The
first is 48 C.F.R. § 801.670-3, Def.’s Mot. at 19, 38, which states in relevant part
that:

              When medical, dental, and ancillary services under


       9
       / All citations here to the VAAR are to the 2008 version of Chapter 8 of Title 48 of the
Code of Federal Regulations.

                                              24
            $10,000 per authorization are not available from an
            existing contract or agreement, the following VA
            officials at VA medical facilities may authorize these
            services[.]

VAAR 801.670-3(a). The second regulation is 48 C.F.R. § 813.307(c), Def.’s
Mot. at 34, which states in relevant part that:

            The contracting officer or other properly delegated
            official (see 801.670-3) may use the following order
            forms when ordering the indicated medical, dental, and
            ancillary services totaling up to $10,000 per
            authorization when such services are not available under
            existing contracts:
            ....
            (2) VA Form 10-7079

VAAR 813.307(c) (“Forms”). It is undisputed that VA Form 10-7079 was the
form used to order dialysis services from plaintiffs during the Relevant Period.
The third regulation cited by defendant is 48 C.F.R. § 853.213, Def.’s Mot. at 19,
which states in relevant part that VA Form 10-7079 is “for obtaining indicated
medical and dental services within the limitations prescribed in 813.307.” VAAR
853.213. This third regulation has for a title “Simplified Acquisition Procedures,”
in VAAR Subpart 853.2, “Prescription of Forms.”

       Although these regulations, taken together, show that the VA may use VA
Form 10-7079 when acquiring medical services for veterans in some type of
simplified acquisition permitted by its contracting procedures, the court must
agree with plaintiffs that no such contracting procedure was followed here. See
Pls.’ Opp. at 33-41. In the government’s reply brief, further reference to the
regulatory framework specific to VA contracting is provided:

            As a matter of law, VA’s publication of . . . 48 C.F.R.
            § 801.601(c) placed plaintiffs on notice that VA
            individual authorizations were issued pursuant to the
            VA’s contractual authority and were subject to
            procurement laws and a limitation of $10,000 for each

                                        25
            authorization. . . . While, for the purposes of this
            motion, we do not dispute that VA officials appear to
            have acted in a manner inconsistent with procurement
            laws, plaintiffs had notice of restrictions on VA officials
            to obligate the United States as a matter of law.

Def.’s Reply at 24 (citations omitted). This VAAR section fails to advance the
government’s argument because it merely states a general limitation on VA
employees’ authority to obligate contract funds:

            An individual may not commit the Government for
            purchases of supplies, equipment, or services unless the
            individual has received delegated contracting authority
            as a contracting officer or purchase card holder or as
            provided in 801.670. Individuals making such
            commitments or acting beyond the scope of their
            authority may be held financially liable.

VAAR 801.601(c). Having considered both the regulatory provisions relied upon
by defendant in the VAAR, as well as the extensive documentation of the VA’s
practice of issuing non-contractual authorizations under sections 17.52 and 17.56,
the court concludes that nothing in the VAAR citations provided by defendant
applied to the beneficiary authorizations at issue in this suit.

                   b.    Unilateral Contract Theory

       The government buttresses its contract-formation theory by construing VA
Form 10-7079 beneficiary authorizations as invitations to enter into contracts with
the VA. In essence, defendant’s theory asserts that each authorization issued to
each individual veteran receiving the dialysis services identified in the complaint
was a unilateral contract that was accepted upon the provision of the dialysis
services. Def.’s Mot. at 29-31. Defendant relies on FAR provisions, caselaw and
the Restatement (Second) of Contracts to support this theory. Id. at 5, 29-31. The
court does not find these authorities applicable to this case, where the payment
relationship between the VA and plaintiffs was governed by section 17.56 and
lacked any indicia of the VA’s intent to contract or of VA procurement activity.



                                        26
                              i.      FAR Provisions

      First, the court examines the FAR provisions relied upon by defendant.10
The two regulations primarily cited by the government are FAR 2.101 and FAR
13.004. FAR 2.101, in relevant part, defines “contract” to mean

               a mutually binding legal relationship obligating the seller
               to furnish the supplies or services (including
               construction) and the buyer to pay for them. It includes
               all types of commitments that obligate the Government
               to an expenditure of appropriated funds and that, except
               as otherwise authorized, are in writing. In addition to
               bilateral instruments, contracts include (but are not
               limited to) awards and notices of awards; job orders or
               task letters issued under basic ordering agreements; letter
               contracts; orders, such as purchase orders, under which
               the contract becomes effective by written acceptance or
               performance . . . .

48 C.F.R. § 2.101. This definition of contract is provided for the purposes of the
FAR and federal acquisitions: “A word or a term, defined in this section, has the
same meaning throughout this regulation ([FAR] chapter 1) . . . . Id. § 2.101(a).

        Although the court must agree with defendant that, pursuant to FAR 2.101,
a purchase order might present a unilateral contract accepted upon performance,
and that, in another context, the general type of authorization form used by the VA
might be construed as a purchase order, these concepts do not apply in this case.
First, as plaintiffs argue, the VA gave no indication that it considered its Form
10-7079 authorizations to be purchase orders within the meaning of FAR 2.101.
See Pls.’ Opp. at 34 (stating that “the VA did not issue or administer the
authorizations in controversy here as FAR- and VAAR-based procurement
contracts”). Second, the VAAR does not include VA Form 10-7079 among the
forms specifically identified as purchase orders. Compare VAAR 813.307(a),
with VAAR 813.307(c). Third, as noted above and discussed more fully below,


       10
         / All citations here to the FAR are to the 2008 version of Title 48 of the Code of
Federal Regulations.

                                                27
the VA’s payments for the dialysis services identified in the complaint in this case
were not contractual in nature and were not subject to the FAR. See DaVita, 110
Fed. Cl. at 84 (“VA authorizations issued to individual veterans for dialysis
treatment are not contracts . . . .”).

      The other regulation relied upon by defendant is FAR 13.004, “Legal effect
of quotations,” which states in relevant part that:

              A quotation is not an offer and, consequently, cannot be
              accepted by the Government to form a binding contract.
              Therefore, issuance by the Government of an order in
              response to a supplier’s quotation does not establish a
              contract. The order is an offer by the Government to the
              supplier to buy certain supplies or services upon
              specified terms and conditions. A contract is established
              when the supplier accepts the offer.

48 C.F.R. § 13.004(a). It is difficult to understand how the government wishes the
court to apply this regulation to the beneficiary authorizations and payments for
dialysis services at issue in this case, because the government has identified no
“quotations” that triggered the VA Form 10-7079 authorizations for dialysis
services.11 It is also difficult to comprehend how Part 13 of the FAR, which
governs “Simplified Acquisition Procedures,” could be applicable to this dispute,
when so many other applicable FAR provisions, in Part 13 and elsewhere in the
FAR, were ignored by the government if the beneficiary authorizations were
indeed to be construed as simplified acquisitions under the FAR. See Pls.’ Opp. at
36-41.

       In sum, the court finds the FAR provisions cited by defendant to be
unavailing in the government’s attempt to convert the VA’s authorizations for
dialysis services into contracts.



       11
         / Indeed, the Armed Services Board of Contract Appeals decision relied upon by the
government to illustrate FAR 13.004, Def.’s Mot. at 29, clearly involves an actual purchase order
issued in response to a price quotation from a supplier. See Friedman Enters., ASBCA No.
54886, 05-2 BCA ¶ 32991 (June 3, 2005).

                                               28
                          ii.   Caselaw

      The government relies, primarily, on two cases for its contention that the
VA’s beneficiary authorizations for dialysis services presented unilateral contracts
accepted by plaintiffs. The first is Bel Pre Health Care Ctr., Inc. v. United States,
24 Cl. Ct. 495 (1991), aff’d, 980 F.2d 745 (Fed. Cir. 1992) (table). The quoted
excerpts from Bel Pre are, at first glance, helpful to defendant’s position in this
case: “‘VA Form 10-7078 [essentially the equivalent, for inpatient services, of
VA Form 10-7079, which is for outpatient services] – Authorization and Invoice
for Medical and Hospital Services is essentially a purchase order for procurement’
which ‘when issued, obligate[s] the Government to pay only for the amount of
services requested and performed.’” Def.’s Mot. at 30 (quoting Bel Pre, 24 Cl. Ct.
at 497).

        As plaintiffs point out, however, an underlying, formal contract purchasing
nursing home services for thirty veterans was at issue in Bel Pre. 24 Cl. Ct. at
496. The beneficiary authorizations in that case were examined by the court to see
if the authorizations, also issued by the VA, provided an additional “enforceable
obligation” not found in the formal contract’s terms. Id. at 497. In the end, the
formal contract’s express terms dictated the resolution of the parties’ dispute,
despite any “definiteness” of those express terms that may have been provided by
the additional VA authorization forms. Id. at 497-98.

       Here, there is no allegation that the beneficiary authorization forms issued
by the VA to plaintiffs defined the terms of an underlying contract for services;
indeed, the opposite is the case. See Compl. ¶¶ 2-3; Pls.’ Opp. at 35 n.31 (“In
contrast to the scenario in Bel Pre, Defendant does not assert that the
authorizations at issue in the Complaint were ordering instruments under
established procurement contracts between the VA and the Plaintiffs.”). For that
reason, Bel Pre is readily distinguishable from this case and the contract analysis
in Bel Pre is of no value in this dispute. The court concludes that the contract
analysis in Bel Pre cannot convert the VA beneficiary forms at issue here into
purchase orders.

       Defendant also relies on the Federal Circuit’s contract analysis in Wesleyan
Co. v. Harvey, 454 F.3d 1375 (Fed. Cir. 2006). The court notes, first, the
following facts that distinguish Wesleyan from this case. There was no regulation

                                         29
in Wesleyan that provided the payment rate for the Army’s purchase orders, as is
the case for the VA’s beneficiary authorizations in this case. In addition, the six
purchase orders at issue in Wesleyan were issued by the Army to one specific
company for multiple prototypes of the same water filtration systems; here,
authorizations were provided to numerous individual veterans to obtain dialysis
services from 234 providers.

      In Wesleyan, the appeals court offered this analysis of the Army’s purchase
orders:

             The purchase orders . . . involve the exchange of
             property for money, and thus involve “procurement.”. . .
             The purchase orders specify the parties involved,
             delivery instructions, price, payment terms, and
             transportation instructions. No essential term is missing.
             Although Wesleyan did not sign the purchase orders, it
             performed, which clearly signals acceptance. Taken
             together, the purchase orders and Wesleyan’s
             performance contain all essential contract terms and
             demonstrate mutual assent to a procurement contract.

454 F.3d at 1378-79 (footnote omitted). The Federal Circuit noted that there had
been more communications between the company and the Army than just the bare
language of the six purchase orders: “The complete exchange between the parties
is no doubt even more robust than the information contained in the record. For
example, oral discussions are referenced on the purchase orders, and the record
does not include the content of those discussions.” Id. at 1379 n.4. In this case,
there is no allegation in the complaint of oral discussions referenced in the text of
beneficiary authorizations issued by the VA.

       Wesleyan thus stands for the proposition that where the government is the
buyer and a company is the seller, a purchase order met with performance is
adequate to form a procurement contract. See 454 F.3d at 1379 (“This purchasing
activity was sufficient to transform the Army’s relationship with Wesleyan from
that of evaluator and bidder to that of buyer and seller.”). In the court’s view,
however, it would be wrong to extend this holding to situations where a document
that superficially resembles a purchase order is used by the government to

                                         30
authorize benefits for individual veterans. Although Wesleyan supports the
government’s view that certain types of documents, met with performance, are
sufficient to form a procurement contract, there are too many factual dissimilarities
between Wesleyan and this case to infer that a procurement contract was formed
when plaintiffs provided dialysis services to veterans equipped with beneficiary
authorizations.

       In sum, the court does not find that the government’s cited cases compel a
finding that the VA’s beneficiary authorizations were unilateral procurement
contracts accepted upon performance. Accord DaVita, 110 Fed. Cl. at 80 (“The
statutory and regulatory framework governing the provision of medical services to
veterans establishes that the authorizations at issue are not contracts. Rather,
authorizations are separate instruments to be used when a particular medical
service is not available under an existing contract.”).

                          iii.   Restatement (Second) of Contracts

      Finally, the government seeks support from a section of the Restatement
(Second) of Contracts titled “Option Contract Created by Part Performance or
Tender.” Restatement (Second) of Contracts § 45(1) (1981). The text cited by
defendant, Def.’s Mot. at 30, explains that

             [w]here an offer invites an offeree to accept by rendering
             a performance and does not invite a promissory
             acceptance, an option contract is created when the
             offeree tenders or begins the invited performance or
             tenders a beginning of it.

Restatement (Second) of Contracts § 45(1). Defendant does not explain how such
a general principle of contract formation applies to federal procurement contracts,
or to VA beneficiary authorizations specifically. Instead, defendant cites generally
to a number of cases and decisions which are not binding on this court, Def.’s
Mot. at 31, with little analysis as to the import or persuasiveness of these
decisions. Having studied the illustrations provided with the Restatement
(Second) of Contracts § 45 (none of which resemble the facts of this case), and the
citations provided by government, the court is not persuaded that the VA’s
beneficiary authorizations constituted unilateral contracts accepted upon

                                         31
performance.

       The court notes, too, that nothing in the VA’s conduct when issuing the
beneficiary authorizations indicated an intent to enter into numerous individual
unilateral contracts acceptable upon performance. Pls.’ Opp. at 36-41. More
formal contracting mechanisms were available for obtaining dialysis services from
plaintiffs via contract; indeed, according to the complaint, formal contracts of this
nature were already in place between at least some of the plaintiffs and the VA.
Compl. ¶ 3. Later, when the underpayment dispute arose, the VA’s conduct again
indicated that plaintiffs and the VA were not bound by contract with respect to
dialysis services obtained through the beneficiary authorizations identified in the
complaint. See Pls.’ Opp. at 45 (“The VA’s specified remedial process [for the
alleged underpayments] bore no relation to a contract adjustment or to a CDA
disputes and appeal process.”). Based on the foregoing analysis, the conditions of
unilateral contract formation have not been shown to have been present here.

             3.    The VA Did Not Procure Services under the Contract
                   Disputes Act by Issuing Beneficiary Authorizations

       Despite the clear dichotomy between authorizations and contracts presented
in section 17.56, and notwithstanding the total absence of any indicia of
contractual procedures when the VA administered the beneficiary authorizations
for dialysis services, the government contends that plaintiffs’ suit is barred
because no claim was filed with a VA contracting officer before plaintiffs filed
their suit in this court. See Def.’s Mot. at 35 (“Because the dialysis
centers’ acceptance of VA purchase orders by performance resulted in contracts,
in the absence of plaintiffs’ submission of proper claims and a contracting
officer’s final decision on such claims, this Court now lacks jurisdiction to
entertain plaintiffs’ claims.”). The court disagrees with defendant’s contention
because even if the elements of contract formation could be viewed as having been
met here, such contracts, in this instance, were not procurement contracts subject
to the Contract Disputes Act and its jurisdictional prerequisites.

      As plaintiffs note, defendant has failed to demonstrate how the “unilateral
contracts” alleged to have been formed by the VA’s beneficiary authorizations are
procurement contracts:


                                         32
            Defendant . . . never establishes that the individual
            authorizations at issue in the Complaint were actually
            issued and administered as procurement contracts . . . .
            Certainly, that a series of procurement regulations
            governs federal agency procurement contracts does not,
            ipso facto, render the authorizations at issue in this
            Complaint procurement contracts themselves.

Pls.’ Opp. at 34. The inquiry, then, is whether any putative contracts based upon
the beneficiary authorizations issued by the VA to individual veterans would be
procurement contracts to which the CDA applies. In the court’s view, defendant’s
assumption that any such unilateral contracts for dialysis services would be
procurement contracts is flawed.

       Not all contracts to which the United States is a party are procurement
contracts. See, e.g., G.E. Boggs & Assocs., Inc. v. Roskens, 969 F.2d 1023, 1026
(Fed. Cir. 1992) (“Not all government contracts, however, fall within the Contract
Disputes Act.” (citing Coastal Corp. v. United States, 713 F.2d 728, 730 (Fed. Cir.
1983))). Contracts “within the purview of the Contract Disputes Act . . . must be
for the direct procurement of goods or services by an executive agency of the
government.” Id. at 1027-28 (citing New Era Constr. v. United States, 890 F.2d
1152, 1157-58 (Fed. Cir. 1989); Tatelbaum v. United States, 749 F.2d 729, 730
(Fed. Cir. 1984)). The term “procurement,” for purposes of defining a contract
subject to the CDA, has recently been discussed by the Federal Circuit:

            Congress defined “procurement” when it established the
            Office of Federal Procurement Policy, which oversees
            the direction of federal procurement policies,
            regulations, and procedures. Distributed Solutions Inc.
            v. United States, 539 F.3d 1340, 1345 (Fed. Cir. 2008)
            (citing 41 U.S.C. §§ 401-20). Specifically, 41 U.S.C.
            § 403(2) states that “‘procurement’ includes all stages of
            the process of acquiring property or services, beginning
            with the process of determining a need for property or
            services and ending with contract completion and
            closeout.” 41 U.S.C. § 403(2). This court has relied on
            this definition for procurement on multiple occasions.

                                        33
                See Res. Conservation Grp. LLC v. United States, 597
                F.3d 1238, 1244 (Fed. Cir. 2010); Distributed Solutions,
                539 F.3d at 1345. While those cases involved defining
                the term, “procurement,” in the context of the Court of
                Federal Claims’ jurisdictional statute, the Tucker Act, we
                discern no reason that undermines the applicability of the
                definition to the portion of the Contract Disputes Act
                that defines the [Civilian Board of Contract Appeals’]
                jurisdiction.

Rockies Express Pipeline LLC v. Salazar, 730 F.3d 1330, 1336 (Fed. Cir. 2013).

       This court has noted that a FAR provision adds further clarity to the
definition of “procurement” provided by 41 U.S.C. § 403(2):12

                [The FAR] equat[es] “procurement” with “acquisition,”
                which “begins at the point when agency needs are
                established and includes the description of requirements
                to satisfy agency needs, solicitation and selection of
                sources, award of contract, contract financing, contract
                performance, contract administration, and those technical
                and management functions directly related to the process
                of fulfilling agency needs by contract[.]”

ViroMed Labs., Inc. v. United States, 87 Fed. Cl. 493, 501 n.11 (2009) (quoting 48
C.F.R. § 2.101(b)(2) (2013)). The remaining portion of FAR 2.101, which also
defines acquisitions and procurements in text that has not changed since the 2008
version of the FAR, states in relevant part:

                Acquisition means the acquiring by contract with
                appropriated funds of supplies or services (including
                construction) by and for the use of the Federal
                Government through purchase or lease . . . .

48 C.F.R. § 2.101 (2008) (emphasis added); see New Era, 890 F.2d at 1157

      12
           / 41 U.S.C. § 403(2) has been recodified at 41 U.S.C. § 111 (2012).

                                                34
(stating that “the acquisition by purchase, lease or barter, of property or services
for the direct benefit or use of the Federal Government . . . characterizes a Federal
procurement.”) (citation and internal quotation omitted).

       To trigger the jurisdictional prerequisites of the CDA, the alleged “unilateral
contract” dispute in this court must have arisen from procurement contracts, rather
than non-procurement contracts. See 41 U.S.C. §§ 7102(a)(2), 7104(b)(1);
Rockies Express, 730 F.3d at 1336; G.E. Boggs, 969 F.2d at 1026-28. Because the
CDA does not define “procurement,” Rockies Express, 730 F.3d at 1336, the court
relies on 41 U.S.C. § 111 and FAR 2.101 to define a procurement, id.; ViroMed,
87 Fed. Cl. at 501 n.11, as well as relevant caselaw. Pursuant to these authorities,
a procurement contract is an acquisition for property or services for the direct
benefit or use of the federal government. See supra. Here, the dialysis services
authorized by the VA with the VA Form 10-7079’s were for the direct benefit and
use of individual veterans, not the VA. In the court’s view, therefore, these
authorizations, should they be construed to be unilateral contracts, could not have
been procurement contracts to which the CDA applied.13

       To further discern whether a contract is a procurement contract or some
other kind of contract, it is helpful to examine cases which have distinguished this
court’s general contract jurisdiction, 28 U.S.C. § 1491(a)(1), from its CDA
jurisdiction over procurement contract disputes, id. § 1491(a)(2).14 One such case
is Arbitraje Casa de Cambio, S.A. de CV. v. United States, 79 Fed. Cl. 235 (2007),
which is somewhat analogous to this case.

       The facts as alleged in Arbitraje were as follows. The plaintiffs in Arbitraje
were Exchange Houses in Mexico which, in the past, lost money due to the
purchase of fraudulent United States Postal Service (USPS) money orders. The
plaintiffs then met with the USPS four times in order to craft an agreement
regarding the continued redemption of USPS money orders by the plaintiffs.

       13
          / The court does not doubt that formal contracts between plaintiffs and the VA for the
provision of dialysis services to veterans referred by the VA would be subject to an entirely
different analysis.
       14
         / Some of these cases are concerned, instead, with the jurisdiction of boards of contract
appeals to hear CDA disputes, rather than this court’s CDA jurisdiction. 41 U.S.C. §§ 7104(a),
7105 (2012).

                                               35
Later, the plaintiffs sued in this court alleging a breach of that agreement by the
USPS. The government moved to dismiss the case on the basis that the plaintiffs
had failed to submit a claim to a contracting officer before filing suit, as required
by the CDA.

      The court described the contractual allegations of the plaintiffs as follows:

             Here, assuming the alleged facts are true, the
             Government and the Exchange Houses entered into a
             contract whereby the Exchange Houses would resume
             cashing money orders in exchange for the Government’s
             promise to repay the reclaimed money. The Exchange
             Houses cash the money orders on behalf of payees, and
             the USPS is not directly involved in the transaction.
             When a payee receives a USPS money order, it presents
             that document to an Exchange House, which purchases it
             for a fee. The payee endorses the money order over to
             the Exchange House, and the payee leaves with cash.
             The Exchange House then forwards the money order to
             its partner bank in the United States. The partner bank
             presents the money order to the Federal Reserve Bank
             for credit, and then credits the Exchange House’s
             account for the value of the money order.

Arbitraje, 79 Fed. Cl. at 240.

      The government characterized the alleged contract in Arbitraje as “an
agreement by Plaintiffs to continue accepting and processing USPS money orders
in exchange for reimbursements for reclamations already made.” 79 Fed. Cl. at
239. As such, the government argued that “the alleged contract was for the
procurement of services and, therefore, bound by the CDA.” Id. The court
disagreed, because although the USPS received a benefit from the alleged
contract, the contract was not for the direct benefit or use of the government. Id.
at 240 (citing United States v. Winstar Corp., 518 U.S. 839 (1996)). The court
described the payments and services addressed by the alleged contract in this
manner:



                                          36
             It is clear that the USPS receives a benefit from the
             Exchange Houses’ roles in the postal money order
             system. The standard for CDA procurement contracts,
             however, states that the procurement of services must be
             “for the direct benefit or use of the Federal
             Government.” The Exchange Houses’ role in the USPS
             money order system directly benefits the payees; the
             Exchange Houses, for a fee, convert the money order
             into cash for the payee. The role of the Exchange
             Houses as it relates to the Government is indirect. It
             takes one more step, the forwarding of the money order
             to the U.S. partner bank, for the Federal Government to
             again be engaged in the USPS money order process.

Id. (citing New Era, 890 F.2d at 1157).

       Although the facts of the money order reclamation dispute in Arbitraje are
different than the beneficiary authorization payment dispute in this case, there is
one similarity worth noting. In each case, there was a direct beneficiary of the
alleged contractual arrangement, but that direct beneficiary was not the
government. In Arbitraje, it was the payee of a money order; here, it was the
veteran receiving dialysis treatment. As in Arbitraje, any contracts for dialysis
services in this case are not procurement contracts subject to the CDA. DaVita,
110 Fed. Cl. at 80-81.

       In G.E. Boggs, to provide another example of government contracts that are
not procurement contracts, a contractor attempted to litigate a dispute over
contracts performed in and for Syria before the Armed Services Board of Contract
Appeals (ASBCA). 969 F.2d at 1024-26. Although the United States Agency for
International Development (AID) eventually adopted the contracts to close them
out, the essential nature of the contracts with Syria showed another example in
which the claimant had not entered into a procurement contract subject to the
CDA:

             Boggs’s contracts also do not fall within the purview of
             the Contract Disputes Act because such contracts must
             be for the direct procurement of goods or services by an

                                          37
             executive agency of the government. . . . Boggs directly
             contracted with Syria to build the waterworks. The AID
             administrator never contracted to receive such a water
             system; AID’s mandate was to terminate the contracts
             after Congress cancelled monetary assistance to Syria.

Id. at 1027-28 (citations omitted). The Federal Circuit specifically noted that
“[t]he AID administrator did not enter into the adoption agreements with Boggs
for the purpose of procuring any goods or services for an executive agency of the
federal government.” Id. at 1027. Because the ASBCA lacked CDA jurisdiction
over the dispute, the case was transferred to this court, presumably to resolve the
dispute under this court’s general contract jurisdiction, not its CDA jurisdiction.
Id. at 1028. G.E. Boggs, therefore, must again be read to require that a
procurement contract have the purpose of directly obtaining property or services
for an executive agency to fall with the jurisdictional ambit of the CDA.

       The court has considered the parties’ arguments regarding the applicability
of the CDA to this suit. The court has also considered the VA’s administration of
the beneficiary authorizations and payments for dialysis services under section
17.56. Finally, the court has examined the definition of “procurement contract”
provided by 41 U.S.C. § 111, FAR 2.101, Rockies Express, G.E. Boggs, New Era,
and Arbitraje. Based on the evidence of record and relevant law, the court
concludes that even if unilateral contracts were formed between plaintiffs and the
VA, as defendant alleges, these contracts were not procurement contracts to which
the CDA applies. Defendant’s arguments based on procurement statutes and the
CDA fail to invalidate this court’s jurisdiction over plaintiffs’ claims.

      D.     The Government’s Non-Jurisdictional Challenges to the
             Complaint

       The government raises two non-jurisdictional challenges to plaintiffs’
claims, one more fully developed than the other. First, defendant asserts that
VAAR 801.601(c) and VAAR 801.670-3 invalidate any of plaintiffs’ claims that
are based on beneficiary authorizations that obligated the United States to pay
more than $10,000. Def.’s Mot. at 5, 37-38; Def.’s Reply at 24-25. Second,
defendant argues that some of the veterans who obtained the dialysis services
identified in the complaint were not eligible for such services under 38 U.S.C.

                                         38
§ 1703 and 38 C.F.R. § 17.52; thus, any claims for underpayment of dialysis
services for those veterans are invalid. Def.’s Mot. at 23. These arguments which
were brought, presumably, under RCFC 12(b)(6), have no merit.

                    1.     Authorizations for More than $10,000 in Dialysis Services

      VAAR 801.670-3 describes when non-VA “medical . . . services under
$10,000 per authorization” may be authorized by the VA, and by whom. 48
C.F.R. § 801.670-3(a). VAAR 801.601(c) largely focuses on contracting authority
within the VA. As the court has discussed supra, however, the VAAR contracting
regulations cited by defendant, VAAR 801.601(c) and VAAR 801.670-3, have not
been shown to be applicable to the beneficiary authorizations at issue in plaintiffs’
claims. Thus, any cap on contracting authority in these regulations has not been
shown to also limit the amount the VA could authorize with VA Form 10-7079’s
which specify payment under section 17.56.

       Because defendant’s arguments in this regard are somewhat cursory, the
court has also considered the other VAAR regulations cited by defendant for its
jurisdictional arguments, VAAR 813.307(c) and VAAR 853.213. These
regulations may be read to contain limits on contractual authority, including limits
on the use of VA Form 10-7079’s. These regulations, however, have also not been
shown to apply to the beneficiary authorizations issued by the VA to plaintiffs.
See supra. Having considered all of the VAAR regulations alluded to by the
government, the court does not find that plaintiffs’ claims which are based on
authorizations for more than $10,000 in dialysis services lack plausibility so as to
merit dismissal under RCFC 12(b)(6).15 Iqbal, 556 U.S. at 678.

                    2.     Dialysis Services for Veterans Not Eligible for Services
                           under 38 U.S.C. § 1703

      Defendant also contends that its “very preliminary inquiry [shows that] a
substantial portion of the payments to plaintiffs during the relevant period . . . are
based on dialysis services provided to veterans not eligible for services in
accordance with the provisions of 38 U.S.C. § 1703 and 38 C.F.R. § 17.52.”

         15
              / The court did not rely on materials outside of the pleadings for this ruling. See RCFC
12(d).

                                                    39
Def.’s Mot. at 23. In other words, if certain veterans were not eligible for services
under 38 U.S.C. § 1703 and section 17.52, defendant reads section 17.56 as not
providing any authorization for payment to plaintiffs for dialysis services for those
veterans during the Relevant Period. In the government’s view, “[t]he Court
should dismiss plaintiffs’ claims . . . to the extent that they seek compensation on
the basis of services they provided to veterans not eligible for services under 38
U.S.C. § 1703 and 38 C.F.R. § 17.52 (2009).” Id. at 23-24.

        Plaintiffs do not meet this argument head-on, but state that the parties are
bound, at this stage of the litigation, by favorable inferences that must be accorded
to the factual allegations of the complaint. Pls.’ Opp. at 14 n.9. Among the
citations to the complaint provided by plaintiffs in this footnote to their opposition
brief, the most pertinent factual allegation is as follows:

             During the Relevant Period, Fresenius Plaintiffs
             provided such non-contracted Dialysis Services to VA
             beneficiaries predicated upon (a) the VA’s payment
             obligation under 38 C.F.R. § 17.56; and (b) the VA’s
             representations, as evidenced by the VA beneficiary
             authorizations, that the respective veteran met the
             requirements of 38 C.F.R. § 17.52(a) and was eligible for
             such non-contracted care under and in accordance with
             38 C.F.R. § 17.56.

Compl. ¶ 23 (emphasis added). This statement falls far short of a factual
allegation that all of the veterans served by plaintiffs during the Relevant Period
were eligible for services under 38 U.S.C. § 1703 and 38 C.F.R. § 17.52. Thus,
the court cannot conclude, after reviewing all of the paragraphs of the complaint
cited by plaintiffs, see Pls.’ Opp. at 14 n.9 (citing Compl. ¶¶ 2, 3, 23, 27), that the
complaint alleges that all of plaintiffs’ claims are for dialysis services provided to
veterans eligible for services under 38 U.S.C. § 1703 and 38 C.F.R. § 17.52.

       Although plaintiffs suggest that “[t]he Complaint alleges Plaintiffs provided
dialysis services to veterans eligible for non-VA service[s] under Section 17.52,”
Pls.’ Opp. at 14 n.9 (citing Compl. ¶¶ 2, 3, 23, 27), it would be more accurate to
state that the complaint is silent as to veteran eligibility under 38 U.S.C. § 1703
and 38 C.F.R. § 17.52 for the dialysis services performed by plaintiffs during the

                                          40
Relevant Period. Thus, it is not correct to state that there is any allegation in this
regard that “must be taken as true at this stage of the case.” Pls.’ Opp. at 14 n.9.
Instead, plaintiffs have alleged only that the VA’s beneficiary authorizations
stated that the veterans in question met eligibility requirements under sections
17.52 and 17.56. Compl. ¶ 23.

       This analysis, however, does not compel dismissal of any of plaintiffs’
claims under RCFC 12(b)(6). There is nothing set forth currently within the
pleadings which would support defendant’s dismissal request, only a reference in
the government’s motion to dismiss reporting the results of the government’s
“very preliminary inquiry.” Def.’s Mot. at 23. For the government to obtain
dismissal of any of plaintiffs’ claims based on veteran ineligibility under 38 U.S.C.
§ 1703 and 38 C.F.R. §§ 17.52, 17.56, a more robust argument would be required.
In that regard, defendant would be obliged to rely upon evidence outside of the
pleadings to establish veteran ineligibility for services under section 17.56 and
could no longer rely upon RCFC 12(b)(6). See RCFC 12(d). In the court’s view,
defendant’s request for RCFC 12(b)(6) dismissal of some of plaintiffs’ claims, on
the ground that certain veterans were ineligible for plaintiffs’ dialysis services
under 38 U.S.C. § 1703 and 38 C.F.R. §§ 17.52, 17.56, is inadequately supported
and premature.

       For the foregoing reasons, none of plaintiffs’ claims have been shown to
lack the requisite plausibility under RCFC 12(b)(6). Iqbal, 556 U.S. at 678.

                                   CONCLUSION

      Accordingly, it is hereby ORDERED that:

      (1)    Defendant’s Motion to Dismiss, filed May 5, 2014, is DENIED; and

      (2)    On or before January 30, 2015, the government shall FILE its
             Answer to the complaint.


                                               /s/Lynn J. Bush
                                               LYNN J. BUSH
                                               Senior Judge

                                          41
