PACRIM PIZZA COMPANY, Appellant, v. Robert PIRIE, Secretary of the Navy, Appellee, 304 F.3d 1291

MAYER, Chief Judge. Paerim Pizza Company appeals the decision of the Armed Services Board of Contract Appeals sustaining the contracting officer’s default termination of its contract for noncompliance with the accounting and discrimination provisions. Pacrim Pizza Co., 2000 WL 655951, ASBCA No. 51608, 00-2 BCA ¶ 30,928 (May 16, 2000). Because the nonappropriated funds doctrine bars our jurisdiction, we dismiss.

Background In June of 1993, Paerim Pizza Company (“Paerim”) entered into a contract with the Morale, Welfare, and Recreation activity, a local, base level nonappropriated fund instrumentality, located at the Marine Corps Air Station in Iwakuni, Japan. Under the contract, Paerim was to provide fast food services at the air station for a period of ten years.

On March 31, 1998, the contracting officer terminated the contract for default based on Pacrim’s violations of paragraph 7 requiring that Paerim maintain daily accounting records of all transactions, and paragraph 27, the Equal Employment Opportunities clause, prohibiting discrimination in the form of sexual harassment. Paerim appealed the termination to the Armed Services Board of Contract Appeals, which concluded that Paerim was not in compliance with these provisions and sustained the termination. This appeal followed.

Discussion We have jurisdiction over appeals from final decisions of agency boards of contract appeals under 28 U.S.C. § 1295(a)(10), which requires that the contracts at issue be made pursuant to the Contract Disputes Act of 1978. See G.E. Boggs & Assoc. v. Roskens, 969 F.2d 1023, 1026 (Fed.Cir.1992) (“If the Contract Disputes Act does not apply to the Boggs contract ... this Court lacks jurisdiction over this appeal....”).

The Contract Disputes Act, in relevant part, applies to “any express or implied contract (including those of the nonappropriated fund activities described in sections 1346 and 1491 of Title 28) entered into by an executive agency for-(2) the procurement of services.” 41 U.S.C. § 602(a)(2) (2000).

Sections 1346 and 1491 limit the covered nonappropriated fund instrumentality (“NAFI”) contracts to express or implied contracts with “the Army and Air Force Exchange Service, Navy Exchanges, Marine Corps Exchanges, Coast Guard Exchanges, or Exchange Councils of the National Aeronautics and Space Administration.” 28 U.S.C. §§ 1346(a)(2), 1491(a)(1) (2000). Contracts with NAFIs outside these enumerated exchanges are not covered by the Contract Disputes Act. Furash & Co. v.

United States, 252 F.3d 1336, 1343 (Fed.Cir.2001) (“The parenthetical language [in 41 U.S.C. § 602(a)(2)] describes the military exchanges as ‘the nonappropriated fund activities described in [the Tucker Act],’ which implies that other non-appropriated fund activities are not included.”). Pacrim argues that we have jurisdiction under the Contract Disputes Act because its contract with the Morale, Welfare, and Recreation activity is included in the enumerated exceptions in that the contract encompasses services that are routinely performed by Marine Corps Exchanges.

Besides, it says, the contract stated that it was subject to the Contract Disputes Act. The question of whether contracts with Morale, Welfare, and Recreation entities fall within the enumerated exceptions for exchanges is a matter of first impression. The plain language of the statutes suggests that an entity which is not denominated a major exchange, is not covered under the Contract Disputes Act. McDonald’s Corp. v.

United States, however, holds that there are exceptions to this narrow construction. 926 F.2d 1126, 1133 (Fed.Cir.1991) (the Navy Resale and Service Support Office, which is responsible for and negotiates contracts on behalf of Navy exchanges, is included in the statutory exception for armed service exchanges).

A NAFI may be a covered contracting entity under the Contract Disputes Act if it is closely affiliated with a post exchange and meets a three-part test: it must have sufficient assets to reimburse the United States the cost of a judgment, be clearly defined as within the resale system, and provide financial data sufficient to predict the government’s potential liability. Id. at 1132-33. McDonald’s suggests that under this inquiry, “organization[s] serving the recreational needs of servicemen might not” “be considered within the enumerated category.” Id. at 1132.

Because Pacrim’s contract was with a local Morale, Welfare, and Recreation entity with supervision and contracting structures separate and distinct from an exchange, the contract does not meet the McDonald’s threshold requirement that the NAFI be closely affiliated with a post exchange. Therefore, the three-part test does not come into play. In view of McDonald’s and the requirement that statutory waivers of sovereign immunity be construed narrowly, United States v.

Nordic Village, Inc., 503 U.S. 30, 34, 112 S.Ct. 1011, 117 L.Ed.2d 181 (1992), we conclude that the Morale, Welfare, and Recreation activity is not a covered entity, and that Pacrim’s contract is not subject to the Contract Disputes Act. We are not bound by board decisions, of course, but it is notable that the board has repeatedly interpreted McDonald’s as holding that Morale, Welfare, and Recreation contracts are not so closely affiliated with exchanges as to be within the scope of the Contract Disputes Act. See Atlantis Constr.

Corp., 1995 WL 706997, ASBCA No. 44044, 96-1 BCA ¶ 28,045 (Nov. 21, 1995) (citing McDonald’s for the proposition that a contract entered on behalf of the Morale, Welfare, and Recreation, and other entities with nonappropriated funds does not fall under the exceptions set forth in

section 1346 or 1491(a)(1) of title 28); Computer Valley Int’l, Ltd., 1993 WL 325120, ASBCA No. 39658, 94-1 BCA ¶ 26,297 (Aug. 13, 1993) (citing McDonald’s to conclude that the Wiesbaden Community Morale, Welfare, and Recreation Fund does not fall within the enumerated exchange exceptions); see also Okinawa Sunset Recording Studio & Prods., 2000 WL 246622, ASBCA No. 52343, 00-1 BCA ¶ 30,804 (Feb. 28, 2000); Recreational Enters., 1987 WL 40727, ASBCA No. 32176, 87-1 BCA ¶ 19,675 (Feb. 20, 1987).

Pacrim’s argument that the Morale, Welfare, and Recreation activity is a covered entity because in this case the service for which it contracted fulfills functions similar to those of an exchange is also unpersuasive. The fact that the two types of entities may offer duplicative services does not affect our jurisdictional ruling in light of the structural distinctions between them. Pacrim asserts that because the contract states that it is subject to the Contract Disputes Act, the government should be estopped from asserting a lack of jurisdiction.

The contract contains two provisions relevant to our jurisdiction. First, paragraph 6, “Legal Status,” in part states that “MWR contracts are United States contracts; however, they do not obligate appropriated funds of the United States except for a judgment or compromise settlement in suits brought under provisions of the Contract Disputes Act....” This language does not render the contract subject to the Contract Disputes Act, but instead states that if the Act does apply, appropriated funds may be used to pay judgments. Because the Act does not apply here, this clause is not operative.

Second, paragraph 21(c), “Disputes,” reads in relevant part that “[t]he decision of the ASBCA is final and conclusive except:

(1) The contractor may appeal such a decision to the United States Court of Appeals for the Federal Circuit within one-hundred-twenty (120) days of receipt of a copy of the decision of the ASBCA.” The government acknowledges this clause, but asserts it was included in error. It further explains that the language for future contracts of this type has been revised to omit such language. We recognize the awkwardness of the government’s position, but only Congress can grant waivers of sovereign immunity; parties may not by contract bestow jurisdiction on a court. See Insurance Corp. of Ireland, Ltd. v.

Compagnie des Bauxites de Guinee, 456 U.S. 694, 701-02, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982) (Federal court jurisdiction is “limited to those subjects encompassed within a statutory grant of jurisdiction .... [N]o action of the parties can confer subject matter jurisdiction upon a federal court.”); RHI Holdings, Inc. v. United States, 142 F.3d 1459, 1461 (Fed. Cir.1998). Conclusion Accordingly, the appeal is dismissed for want of jurisdiction. DISMISSED