.
Contracting Programs for Alaska Native
Corporations: Historical Development and
Legal Authorities
Kate M. Manuel
Legislative Attorney
John R. Luckey
Legislative Attorney
Jane M. Smith
Legislative Attorney
March 25, 2011
Congressional Research Service
7-5700
www.crs.gov
R40855
CRS Report for Congress
P
repared for Members and Committees of Congress
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Contracting Programs for Alaska Native Corporations
Summary
According to some reports, federal contract dollars awarded to Alaska Native Corporations
(ANCs) and their subsidiaries increased by 916% between FY2000 and FY2008, going from
$508.4 million to $5.2 billion. The dollars awarded to ANC-owned firms through the Small
Business Administration’s (SBA’s) 8(a) Program, in particular, reportedly tripled between
FY2004 ($1.1 billion) and FY2008 ($3.9 billion). This widely reported increase has generated
congressional and public interest in the legal authorities governing contracting with these entities.
Federal agencies can presently contract with ANCs or ANC-owned firms under various
authorities. The identity of the procuring agency and the small business status of the ANC or
ANC-owned firm determine, in part, which authority governs in particular circumstances. First,
the Armed Services Procurement Act (ASPA) of 1947 and the Federal Property and
Administrative Services Act (FPASA) of 1949, as amended, generally give defense and civilian
agencies, respectively, broad authority to contract with any qualified, responsible source,
including ANCs and ANC-owned firms. These acts also authorize agencies to make sole-source
awards to ANCs or ANC-owned firms in certain circumstances (e.g., single source, unusual or
compelling circumstances), although such sole-source awards must be justified in writing and
approved by agency officials. Second, Section 15 of the Small Business Act of 1958 authorizes
agencies to “set aside” contracts for small businesses by conducting competitions in which only
they can compete. Section 15 does not, however, authorize sole-source awards. Third, Section
8(a) of the Small Business Act authorizes set-asides and sole-source awards to small businesses
owned and controlled by socially and economically disadvantaged individuals or groups. Under
Section 8(a), contracts valued in excess of $4 million ($6.5 million for manufacturing contracts)
must be set aside for 8(a) firms and cannot be awarded noncompetitively unless (1) there is not a
reasonable expectation that at least two eligible and responsible 8(a) firms will submit offers at a
fair market price or (2) the SBA accepts the requirement on behalf of an 8(a) firm owned by an
ANC, Indian tribe, or, in the case of Department of Defense (DOD) contracts, a Native Hawaiian
Organization. Until 2009, such sole-source awards were not subject to justifications or approvals,
unlike those under ASPA and FPASA. Fourth, Native American statutes provide for the payment
of a 5% bonus to federal contractors that subcontract with ANCs; allow contracts with “large”
ANCs to count toward federal prime contractors’ goals for subcontracting with small businesses;
and provide that any size ANC counts as a disadvantaged business enterprise for certain
transportation contracts. Fifth, various appropriations riders allow DOD to contract out functions
performed by government employees to ANCs without going through the competitive sourcing
process normally required.
The 111th Congress enacted legislation (P.L. 111-84) requiring justifications and approvals for
sole-source contracts in excess of $20 million awarded to ANC- or other group-owned firms
through the 8(a) Program. Members of the 112th Congress have introduced legislation (H.R. 598,
S. 236) that would generally subject ANC-owned firms participating in the 8(a) Program to the
same treatment as individually owned firms. Among other things, this legislation would preclude
ANC-owned firms from receiving sole-source awards valued in excess of $4 million ($6.5 million
for manufacturing contracts) under the authority of Section 8(a) of the Small Business Act. SBA
also promulgated a final rule on February 11, 2011, prohibiting ANC-owned firms from receiving
a sole-source 8(a) contract that is a follow-on contract to an 8(a) contract that was performed
immediately previously by another firm owned by the same ANC, as well as requiring ANC-
owned firms to report annually on the benefits provided to Alaska Natives through the ANC’s
participation in the 8(a) Program. This rule would also make other changes affecting ANCs.
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Contents
Introduction ................................................................................................................................ 1
The History of Contracting Programs for ANCs .......................................................................... 2
Alaska Native Claims Settlement Act and ANCs ................................................................... 2
Creation of Alaska Native Corporations .......................................................................... 2
Definition of ANCs as Tribes ................................................................................................ 4
The Indian Self-Determination and Education Assistance Act of 1975 ............................. 4
8(a) Definition of Tribes.................................................................................................. 4
ANCs Deemed Economically Disadvantaged ........................................................................ 4
ANCs’ Economic Performance........................................................................................ 5
Loss ................................................................................................................................ 6
Recovery ........................................................................................................................ 6
Expansion ....................................................................................................................... 7
Legal Authorities Governing Contracting with ANCs .................................................................. 8
General Contracting Authorities ............................................................................................ 8
General Small Business Authorities....................................................................................... 9
Section 8(a) of the Small Business Act ................................................................................ 11
Authorities in Native American Laws .................................................................................. 17
5% “Subcontracting Bonus” .......................................................................................... 17
Set-Asides Under the Buy Indian Act ............................................................................ 18
Credit Toward Prime Contractors’ Subcontracting Goals ............................................... 19
Small Disadvantaged Businesses for Purposes of Transportation Contracts.................... 20
Appropriations Riders Allowing Direct Conversion of DOD Functions ............................... 21
Legislative Activity................................................................................................................... 22
111th Congress..................................................................................................................... 22
112th Congress .................................................................................................................... 23
Regulatory Developments ......................................................................................................... 24
Figures
Figure 1. Competition Requirements for the 8(a) Program ......................................................... 12
Tables
Table 1. “Special Rules” for Contracting with ANC-owned Firms Under Section 8(a) of
the Small Business Act ........................................................................................................... 14
Contacts
Author Contact Information ...................................................................................................... 25
Acknowledgments .................................................................................................................... 25
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Introduction
The widely reported increase in federal contract dollars awarded to Alaska Native Corporations
(ANCs) and their subsidiaries over the past eight years has generated congressional and public
interest in the legal authorities governing contracting with these entities. Of particular interest are
the authorities creating the alleged “special procurement advantages” that ANC subsidiaries enjoy
in contracting under the Small Business Administration’s Minority Small Business and Capital
Ownership Development Program (commonly known as the 8(a) Program).1
According to some reports, federal contract dollars awarded to ANCs and their subsidiaries
increased by 916% between FY2000 and FY2008, going from $508.4 million to $5.2 billion.2
The dollars awarded to ANC-owned firms through the 8(a) Program, in particular, reportedly
tripled between FY2004 ($1.1 billion) and FY2008 ($3.9 billion).3 Critics are concerned about the
impact of these increases on other minority-owned businesses participating in the 8(a) Program,4
as well as the potential for fraud, waste, and abuse when agencies make sole-source awards to
ANCs or their subsidiaries.5 However, supporters of contracting programs for ANCs point out
that, even with the recent increases, contracting with ANCs and their subsidiaries represents a
small percentage of federal contract dollars.6 They also note that profits from federal contracts are
vital to improving the economic well-being of Alaska Natives.7
The 111th Congress enacted legislation (P.L. 111-84) requiring justifications and approvals for
sole-source contracts whose value exceeds $20 million (base plus all options) that are awarded to
ANC- or other group-owned firms through the 8(a) Program. Members of the 112th Congress
have introduced legislation (H.R. 598, S. 236) that would generally subject ANC-owned firms
participating in the 8(a) Program to the same treatment as individually owned firms. Among other
things, this legislation would preclude ANC-owned firms from receiving sole-source awards
valued in excess of $4 million ($6.5 million for manufacturing contracts) under the authority of
Section 8(a) of the Small Business Act. SBA also promulgated a final rule on February 11, 2011,
prohibiting ANC-owned firms from receiving a sole-source 8(a) contract that is a follow-on
contract to an 8(a) contract that was performed immediately previously by another firm owned by
1 Office of the Inspector General, U.S. Small Business Administration, Participation in the 8(a) Program by Firms
Owned by Alaska Native Corporations, at 2 (July 10, 2009), available at http://www.sba.gov/idc/groups/public/
documents/sba_homepage/oig_reptbydate_july9-15.pdf.
2 U.S. Senate, Committee on Homeland Security & Governmental Affairs, Subcommittee on Contracting Oversight,
Majority Staff, New Information about Contracting Preferences for Alaska Native Corporations (Part I), at 1 (2009),
available at http://mccaskill.senate.gov/pdf/ANCdataAnalysis.pdf.
3 Participation in the 8(a) Program, supra note 1, at 4.
4 See, e.g., Northern Lights and Procurement Plights: The Effect of the ANC Program on Federal Procurement and
Alaska Native Corporations: Joint Hearing Before the Committee on Government Reform and the Committee on Small
Business, House of Representatives, 109th Cong., 2d Sess., at 173-74 (2006) (statement of Harry Alford, President and
CEO, National Black Chamber of Commerce) (characterizing ANCs as “predators on the minority business
community”).
5 See, e.g., id. at 161 (statement of Representative Henry A. Waxman).
6 See, e.g., Native American Contractors Association, Native American Contracting under Section 8(a) of the Small
Business Act: Economic, Social, and Cultural Implications, at 3 (Oct. 2007), available at
http://www.nativecontractors.org/media/pdf/TAYLOR-REPORT.pdf (noting that, in FY2005, contracts with ANCs
represented less than 1% of all federal contracts, less than 2% of all sole-source contracts, less than 3% of all small
business contracts, and less than 20% of all 8(a) contracts).
7 Id. at 11-12 (discussing the dividends paid and job opportunities provided by ANCs, among other things).
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the same ANC, as well as requiring ANC-owned firms to report annually on the benefits provided
to Alaska Natives through the ANC’s participation in the 8(a) Program. This rule would also
make other changes affecting ANCs.
The History of Contracting Programs for ANCs
Alaska Native Claims Settlement Act and ANCs
The Small Business Administration’s (SBA’s) 8(a) minority contracting program slightly predates
the creation of Alaska Native Corporations. The 8(a) minority contracting program dates from the
late 1960s, when it was created administratively.8 The SBA considered Indian tribes eligible for
the 8(a) minority contracting program, as indicated by a September 1970 SBA pamphlet
encouraging Indian tribes and individuals to participate in the 8(a) Program.9
Creation of Alaska Native Corporations
ANCs were created under the authority of the Alaska Native Claims Settlement Act (ANCSA),10
enacted in 1971 to settle Alaska Natives’ aboriginal land claims to most of Alaska. Congress’s
stated intent in passing ANCSA—shared by Alaska Native organizations and the state of
Alaska—was to settle the claims
without establishing any permanent racially defined institutions ... without creating a
reservation system or lengthy wardship or trusteeship, and without adding to the categories
of property and institutions enjoying special tax privileges.11
To carry out this intention, Congress authorized Native corporations, not tribes, to receive the
lands and monies awarded in the settlement. Unlike Indian trust lands, the corporations’ lands
would be held in fee simple and could be developed without federal approval.12
Congress intended ANCs to be vehicles for the economic development of Alaska Natives. The
conference report on ANCSA stated that
the Regional Corporations shall be organized as business for profit corporations…. [T]he
investment functions to be carried out by the [state-wide] Alaska Native Investment
Corporation [under the Senate version] have been assigned ... to the Regional Corporations.13
The intended functions of this state-wide Investment Corporation, according to the earlier Senate
committee report on its bill, were to
8 See CRS Report R40744, The “8(a) Program” for Small Businesses Owned and Controlled by the Socially and
Economically Disadvantaged: Legal Requirements and Issues, by John R. Luckey and Kate M. Manuel.
9 U.S. Small Business Administration, Developing Indian Owned Businesses Through the Assistance of the 8(a)
Program of the Small Business Administration (Sept. 1970).
10 P.L. 92-203, 85 Stat. 688 (codified, as amended, at 43 U.S.C. §§ 1601-1629h).
11 Id. at § 2(b); 43 U.S.C. § 1601(b).
12 Robert D. Arnold, with Janet Archibald et al., Alaska Native Land Claims 106, 120, 274-76 (1976).
13 U.S. Congress, House Conference Committee, Alaska Native Claims Settlement Act: Conference Report to
Accompany H.R. 10367, 92nd Cong., 1st Sess., at 41-42 (1971).
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conduct business for profit activities and to provide a long-range return through dividends to
its Native stockholders. The Investment Corporation thus is intended to act as a prudent
businessman would, and to administer the Natives’ funds with the object of maximizing the
value of their stock and their future unrestricted income.14
ANCSA created four types of ANCs, all to be incorporated under state law:
• 12 regional corporations, based on the regions of 12 specified Alaska Native
associations, covering the entire state (plus a 13th regional corporation for Alaska
Natives permanently residing outside Alaska);
• village corporations, for Alaska Native communities with populations of 25 or
more Natives;
• group corporations, for Alaska Native communities with populations of fewer
than 25 Natives in which Natives constituted a majority; and
• urban corporations, for urban Alaska Native communities.
An Alaska Native could become a voting shareholder in both the local regional corporation and
the local village, group, or urban corporation.
As compensation for settling the land claims, ANCSA provided for the conveyance of some 40
million acres (including subsurface rights) and $962.5 million to the ANCs, chiefly to the 12
regional corporations and the village corporations. The settlement lands were to be divided
among the 12 regional corporations (excluding the 13th corporation) based on the acreage of their
regions and among the village corporations based chiefly on their populations. Group and urban
corporations were to receive a set number of acres apiece. (Conveyance of title to the ANCs is the
responsibility of the Bureau of Land Management, which reported in its FY2010 budget
justifications that 54% of the lands to be conveyed had been surveyed and patented to the
ANCs.)15 The settlement funds were to be paid out over a number of years and divided among the
regional corporations (including the 13th corporation) based on their population. Each regional
corporation was to distribute at least half of its share of these funds to the village corporations in
its region.
As noted above, the ANCs were to hold their ANCSA lands in private fee title, not in the trust
title usual for Indian lands, and subject to federal, state, and local taxation in specified
circumstances. The regional corporations were to operate as for-profit entities, and the village
corporations as either for-profit or non-profit entities. Their revenues from investment of their
settlement funds were to be subject to taxation.
14 U.S. Congress, Senate Interior and Insular Affairs Committee, Alaska Native Claims Settlement Act of 1971: Report
to Accompany S. 35, 92nd Cong., 1st Sess., at 105 (1971). See also Arnold et al., supra note 12, at 281.
15 U.S. Department of the Interior, Budget Justifications and Performance Information, Fiscal Year 2010, Bureau of
Land Management, at III-143 (2009), available at http://www.doi.gov/budget/2010/data/greenbook/
FY2010_BLM_Greenbook.pdf.
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Definition of ANCs as Tribes
The Indian Self-Determination and Education Assistance Act of 1975
Congress has taken several steps to assist ANCs. An important step in relation to the 8(a) Program
came in 1975, when Congress included regional and village ANCs in the definition of “Indian
tribe” in a major Indian law, the Indian Self-Determination and Education Assistance Act of 1975:
“Indian tribe” means any Indian tribe, band, nation, or other organized group or community,
including any Alaska Native village or regional or village corporation as defined in or
established pursuant to the Alaska Native Claims Settlement Act (85 Stat. 688) which is
recognized as eligible for the special programs and services provided by the United States to
Indians because of their status as Indians.16
8(a) Definition of Tribes
This 1975 definition of “Indian tribe” was used in two later amendments to the Small Business
Act. First, in 1978, the definition was incorporated by reference in an amendment specifying that
small businesses wholly owned by Indian tribes were eligible for the loan program implemented
under the authority of Section 7(a) of the act.17 Second, 1986 amendments to the Small Business
Act used the language of the 1975 definition when making “economically disadvantaged” Indian
tribes and ANCs eligible for the 8(a) Program.18 These 1978 and 1986 amendments to the Small
Business Act were each added after Indian tribes complained about SBA officials’ varying
opinions as to whether Indian tribes were eligible for the 7(a) and 8(a) Programs.19
ANCs Deemed Economically Disadvantaged
The 1986 amendments meant that tribes and ANCs still had to prove they were economically
disadvantaged to be eligible for the 8(a) Program. In 1988, ANCSA was amended to specify that
“Native Corporations” (ANCs) were to be considered “minority business enterprises” for all
purposes of federal law.20 Designation as minority business enterprises did not, however, lead the
SBA to deem ANCs to be economically as well as socially disadvantaged. According to 1991
testimony of the Alaska Federation of Natives,
[w]hen the ANCSA amendments of 1987 [P.L. 100-241] were being legislated, the parties
involved agreed to include an amendment that would make it clear that Alaska Native
16 P.L. 93-638, § 4(e), 88 Stat. 2204 (codified, as amended, at 25 U.S.C. § 450b(e)) (Jan. 4, 1975). Inclusion as Indian
tribes made ANCs eligible for contracts and grants to operate Bureau of Indian Affairs and the Indian Health Service
programs under this act.
17 P.L. 95-507, § 231, 92 Stat. 1772 (Oct. 24, 1978); 15 U.S.C. § 636(a).
18 Consolidated Omnibus Budget Reconciliation Act, P.L. 99-272, § 18015, 100 Stat. 370-71 (Apr. 7, 1986); 15 U.S.C.
§ 637(a).
19 See, e.g., U.S. Congress, Senate Small Business Committee, S. 1022, A Bill to Make Small Businesses Owned by
American Indian Tribes Eligible for the SBA 8(a) Program: Hearings, 98th Cong., 1st Sess., at 28 (1983) (discussing the
Section 7(a) loan program); U.S. Congress, Senate Small Business Committee, Amending Section 8(a) of the Small
Business Act: Report to Accompany S. 1022, 98th Cong., 1st Sess., at 4-5 (1983) (discussing the 8(a) Program).
20 P.L. 100-241, § 15, 101 Stat. 1812 (Feb. 3, 1988) (amending Section 29 of ANCSA, codified at 43 U.S.C. §
1626(e)(1)).
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corporations were eligible for SBA minority programs. At that time, congressional staff
relied on the fact that “disadvantaged business enterprises” (called DBE’s), were a subset of
“minority business enterprises” (called MBE’s), and would thus be covered by the explicit
inclusion of Native corporations and specified affiliates as MBE’s.... Since then, we have
found that SBA is distinguishing disadvantaged business enterprises from minority business
enterprises, saying that a statutory definition as an MBE does not qualify Native corporations
as DBE’s for purposes of SBA programs.21
In 1992, Congress further amended ANCSA to clarify that Native Corporations were to be
considered “economically disadvantaged” for all purposes of federal law.22 Since 1988, according
to Government Accountability Office (GAO) figures, ANCs have consistently increased their
involvement in the 8(a) Program, as measured by the number of ANCs owning subsidiaries that
participate in the 8(a) Program.23
ANCs’ Economic Performance
ANCs were to be ANCSA’s vehicles—the “engines,” as it were—for the economic development
of Alaska Natives. However, the variation among regions and villages in acreage and population
meant that ANCs differed widely in their shares of the $962.5 million settlement fund and the 40
million acres to be conveyed. The 12 land-based regional corporations, which together cover the
entire state of Alaska, also varied not only in the size of their regions but in their regions’
economic resources and activities. Likewise, the village, group, and urban corporations, which
are scattered unevenly across the 12 regions, varied widely in their degree of isolation and the
economic activity of their surroundings. Hence, ANCs differed widely in their initial ANCSA
funding, the land-based resources they received, and their opportunities for economic
development.
21 U.S. Congress, Senate Energy and Natural Resources Committee, Subcommittee on Public Lands, National Parks, &
Forests, Alaska Land Status Technical Corrections Act of 1991: Hearing on S. 1625, 102nd Cong., 1st Sess., at 25 (1992)
(prepared statement of Julie Kitka, President, Alaska Federation of Natives).
22 P.L. 102-415, § 10, 106 Stat. 2115 (Oct. 14, 1992); 43 U.S.C. § 1626(e)(1). The House committee report on the bill
stated that it was amending Section 29 of ANCSA
to clarify that Alaska Native corporations are minority and economically disadvantaged business
enterprises for the purposes of implementing the SBA programs. Section 15(e) of the 1987
Amendments to ANCSA (P.L. 100-241) provided that Alaska Native corporations shall be defined
as minority business enterprises for as long as a majority of both the total equity and total voting
power of the corporation is held by holders of Settlement Common Stock and by Natives and
descendants of Natives. This section would further clarify that Alaska Native corporations and their
subsidiary companies are minority and economically disadvantaged business enterprises for the
purposes of qualifying for participation in Federal contracting and subcontracting programs, the
largest of which include the SBA 8(a) program and the Department of Defense Small and
Disadvantaged Business Program.... While this section eliminates the need for Alaska Native
Corporations or their subsidiaries to prove their ‘economic’ disadvantage the corporations would
still be required to meet size requirements as small businesses.
U.S. Congress, House Interior and Insular Affairs Committee, Settlement of Certain Claims Under the Alaska Native
Claims Settlement Act: Report to Accompany H.R. 3157, 102nd Cong., 2nd Sess., at 19 (1992).
23 Government Accountability Office, Contract Management: Increased Use of Alaska Native Corporations’ Special
8(a) Provisions Calls for Tailored Oversight, GAO-06-399, at 26 (Apr. 2006), available at http://www.gao.gov/
products/GAO-06-399.
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Since 1971, the ANCs have also differed widely in their business success, growth, income, and
losses, but an overall pattern of loss, recovery, and gradual expansion has been suggested by
several observers.
Loss
In the 1970s, ANCs organized themselves, made their land selections, and received their ANCSA
payments. The last major ANCSA payments to regional ANCs were made in 1980.24 In the 1970s
and 1980s, the ANCs invested in a wide variety of business operations, such as hotels, seafood
processing, shipping, oilfield services, and construction, as well as in natural resources. Their
businesses and investments were chiefly in Alaska. However, as a group, regional ANCs lost
substantial amounts of money in the period of 1971-1985, especially in non-resource business
operations. “The [regional] corporations altogether lost money on business operations every year
except 1974 and 1985,” according to economist Steve Colt.25 The same analyst later stated,
the consolidated financial performance of the Alaska Native corporations over their first two
decades was surprisingly poor. The twelve regional corporations lost about $380 million—
more than three quarters of their original cash endowment—in business operations between
1973 and 1993.26
At the same time, the ANCs struggled with the significant financial costs of litigation to
determine how ANCSA was to be applied and interpreted. There was “heavy litigation”27 over
land selections, Native village and group eligibility, individual Natives’ enrollment, ANC
elections and corporate governance, revenue-sharing among regional ANCs and with village
ANCs,28 and other issues.29
During this period, ANCs apparently had little or no involvement in the SBA’s 8(a) Program.30
Recovery
What allowed the ANCs to recover, apparently, was their brief, unique opportunity to sell net
operating losses (NOLs)31 to other U.S. companies between 1986 and 1988. The ANCs’ sale of
24 Steve Colt, Financial Performance of Native Regional Corporations, 28 Alaska Rev. of Soc. & Econ. Conditions 9-10
(1991).
25 Id. at 3.
26 Steve Colt, Alaska Natives and the “New Harpoon”: Economic Performance of the ANCSA Regional Corporations,
at 3 (Feb. 2, 2001), available at http://www.iser.uaa.alaska.edu/Publications/colt_newharpoon2.pdf.
27 James D. Linxwiler, The Alaska Native Claims Settlement Act at 35: Delivering on the Promise, Proceedings of the
53rd Annual Rocky Mountain Mineral Law Institute, at 4 (2007), available at http://www.iser.uaa.alaska.edu/
Publications/8(a)/e-book%20layout/C/C.1/ANCSA%20at%2035%20Delivering%20on%20the%20Promise.pdf.
28 Section 7(i) of ANCSA, codified at 43 U.S.C. § 1606(i), provides for the distribution of 70% of a land-based regional
ANC’s net revenues from its timber and subsurface resources among the other land-based regional ANCs, with some
limitations. Section 7(j), codified at 43 U.S.C. § 1606(j), provides for the further distribution of some of the timber and
subsurface income from regional ANCs to village ANCs and certain shareholders.
29 See Linxwiler, supra note 27.
30 According to an Alaska Business article, a subsidiary of the Arctic Slope Regional Corporation, called Piqunik
Management Corporation, was the first ANC subsidiary to be 8(a) certified, and it won its first contract in the late
1980s. See Julie Stricker, 8(a) Program Benefits Native Corporations, Alaska Bus. Monthly, June 2003, at 63.
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NOLs provided an estimated $410 million for regional ANCs and $500 million for village
ANCs.32
Congress created the ANCs’ window of opportunity for NOL sales in 1986 when it added a
provision to the Internal Revenue Code that disallowed sales of NOLs by any corporation except
ANCs.33 Two years later Congress repealed the ANC exception.34
“For the regional corporations as a group, NOL sales proceeds provided a cash infusion equal (in
real dollars) to two thirds of the original ANCSA payments.”35 ANC income from NOL sales
“essentially recapitalized many of the struggling regional corporations, and put them in position
to benefit from the economic boom that began in the early 1990s.”36
Expansion
Given the opportunity to start over, ANCs apparently selected investments more wisely and
emphasized diversification, especially in businesses outside Alaska, although they also continued
“to do what they do well.”37 ANCs became active and made profitable investments in tourism
(including hotels), oilfield services, communications, catering, real estate, construction, and other
businesses, as well as in natural resources (timber and mining). In addition, by about 1992,
litigation costs were diminishing.38
Some ANCs also became active in federal contracting, especially through the SBA’s 8(a)
Program. As noted above, the first ANC 8(a) contract was in the late 1980s.39 However, the 8(a)
certification process was considered by many ANCs “arduous” until the 1992 amendment to
ANCSA, discussed above, that deemed ANCs economically disadvantaged for purposes of the
SBA’s 8(a) Program and other federal programs.40
(...continued)
31 Internal Revenue Code § 172. NOLs may be deducted from gross income in certain past or future years, thereby
reducing tax liability in those years. During the early 1980s, any U.S. corporation with NOLs could sell its NOLs to
another corporation. See Colt, supra note 26, at 13.
32 Julie Stricker, The Maturing of the 13 Regional Corporations, Alaska Bus. Monthly, Mar. 2001, at 49 (citing Steve
Colt).
33 P.L. 99-514, § 1804(e)(4), 100 Stat. 2801 (Oct. 22, 1986); 26 U.S.C. § 1504 note. Linxwiler explains:
while it was seeking reorganization pursuant to the bankruptcy laws, [regional ANC] Bering Straits Native
Corporation (BSNC), along with its advisors, initiated an effort to engage in the sharing of the tax benefits of its
NOLs through transactions with profitable companies with large tax liabilities—in essence, the ANCSA
corporation “sold” its losses to the profitable company, which used them as deductions to decrease its tax liability.
Senator Ted Stevens (R-AK) was instrumental in obtaining the enactment of a series of statutes that clarified the
authority of all Native corporations to enter into such transactions and they eventually became widespread among
ANCSA corporations until the authority for them was repealed in 1988.
Linxwiler, supra note 27, at 23.
34 P.L. 100-647, § 5021, 102 Stat. 3666 (Nov. 10, 1988); 26 U.S.C. § 1504 note.
35 Colt, supra note 24, at 13.
36 Stricker, supra note 32, at 49-50.
37 Jennifer Forker, 25 Years After ANCSA, Alaska Bus. Monthly, Nov. 1996, at 58 and following.
38 Linxwiler, supra note 27, at 4.
39 Stricker, supra note 30, at 63.
40 Id. at 63-64.
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By 1992, an Alaska Business article had mentioned two regional ANCs as having 8(a) contracts.41
By 1997, two regional ANCs, Aleut Corporation and Chugach Alaska Corporation, got the bulk
of their revenues and profits from 8(a) contracts.42 A chart in a 2006 GAO report on contracting
with ANCs shows a gradual but consistent increase in the number of ANCs (of all types) with
8(a) subsidiaries and the total number of such subsidiaries in the 8(a) Program, from very low
numbers in 1988 to a total of 49 ANCs and 154 subsidiaries in December 2005.43 According to
GAO, as of 2005, 12 of the 13 regional ANCs had 8(a) subsidiaries, as did 33 village ANCs and 4
urban ANCs (out of a total of 182 village, urban, and group ANCs).44
Legal Authorities Governing Contracting with
ANCs
Various authorities presently govern contracting between federal agencies and ANCs or ANC-
owned firms. These include (1) the general contracting authorities, (2) the general small business
authorities, (3) Section 8(a) of the Small Business Act, (4) authorities pertaining to Native
Americans, and (5) various appropriations riders. These authorities address the award of
contracts, as well as related issues.
General Contracting Authorities
The Armed Services Procurement Act of 1947 and the Federal Property and Administrative
Services Act of 1949, as amended, give defense and civilian agencies, respectively, broad
authority to contract for goods and services.45 So long as they comply with statutory and
regulatory requirements governing solicitation of bids or offers, competition in contracting, and
similar matters, agencies may generally make awards to any entity that happens to be the lowest
qualified responsible bidder or offeror.46 This includes ANCs and their subsidiaries.
Moreover, agencies may make sole-source awards to ANCs or ANC-owned firms under the
general contracting authorities in the same circumstances in which they can make sole-source
awards to other entities. Such circumstances exist when
1. only one source can supply the goods or services,
2. there are unusual and compelling circumstances,
3. the agency seeks to maintain the industrial base,
41 Clifford Gerhart, ANCSA Corporations, Alaska Bus. Monthly, Nov. 1992, at 25-31.
42 Vivian Hamilton, Building on Experience, Alaska Bus. Monthly, Sept. 1997, at 28 and following.
43 Contract Management, supra note 23, at 26, Fig. 6.
44 Id. at 9.
45 Armed Services Procurement Act, P.L. 80-413, 62 Stat. 21 (Feb. 19, 1948) (codified at 10 U.S.C. § 2302 et seq.);
Federal Property and Administrative Services Act, P.L. 81-152, 63 Stat. 377 (June 30, 1949) (codified at 40 U.S.C. §
471 et seq. and 41 U.S.C. § 251 et seq.).
46 There are some exceptions to this general rule, such as the prohibition upon contracting with government employees
or entities owned or substantially owned and controlled by government employees. See 48 C.F.R. §§ 3.601-3.602. The
exceptions are few and narrow, however.
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4. international agreements require the agency to award the contract to a particular
entity,
5. a statute authorizes non-competitive awards or the agency is acquiring brand-
name commercial items for resale,
6. considerations of national security keep the agency from advertising its
requirements, or
7. a particular award is necessary in the public interest.47
Contracting officers must generally justify such sole-source awards in writing48 and obtain
approval of these justifications from their superiors.49 They must also generally issue a notice of
their intent to make a sole-source award prior to awarding the contract.50
The general contracting authorities may, in fact, be necessary to make awards to ANCs
themselves, as opposed to their subsidiaries or ANC-owned firms, given that some ANCs may not
qualify as “small” under the size standards applicable to contracts awarded under the authority of
the Small Business Act.51 The general contracting authorities also do not require that entities be
for-profit to receive an award, unlike the small business authorities.52 Not all ANCs are for-
profit,53 and small non-profit ANCs could receive awards under the general contracting
authorities when they could not receive awards under the small business authorities.
General Small Business Authorities
Contracts could also be awarded to small ANCs or ANC-owned firms under the general small
business authorities. Section 15 of the Small Business Act of 1958, in conjunction with Sections
2711 and 2723 of the Competition in Contracting Act of 1984, provides agencies with special
47 10 U.S.C. § 2304(c)(1)-(7) (defense agencies) & 41 U.S.C. § 253(c)(1)-(7) (civilian agencies).
48 10 U.S.C. § 2304(f)(2) (defense agencies) & 41 U.S.C. § 253(f)(2) (civilian agencies). The justification must include
(1) a description of agency needs; (2) the statutory exception upon which the agency relied and a demonstration of the
reasons for using the exception that is based upon the proposed contractor’s qualifications or the nature of the
procurement; (3) a determination that the anticipated cost will be fair and reasonable; (4) a description of any market
survey conducted, or a statement of the reasons for not conducting a market survey; (5) a listing of any sources that
expressed, in writing, interest in the procurement; and (6) a statement of any actions that the agency may take to
remove or overcome barriers to competition before subsequent procurements. 10 U.S.C. § 2304(f)(3)(A)-(F) (defense
agencies) & 41 U.S.C. § 253(f)(3)(A)-(F) (civilian agencies).
49 10 U.S.C. § 2304(f)(1)(B) (defense agencies) & 41 U.S.C. § 253(f)(1)(B) (civilian agencies). The identity of the
approving official is determined by the anticipated value of the contract.
50 10 U.S.C. § 2304(f)(1)(C) (defense agencies) & 41 U.S.C. § 253(f)(1)(C) (civilian agencies). See also 41 U.S.C. §
416(b)(5) (notice requirements). Notices identify the intended recipient of the sole-source contract and state the
agencies’ reason(s) for awarding a sole-source contract. Id.
51 15 U.S.C. § 632(a)(1)-(2)(A) (statutory definition of “small” for purposes of the Small Business Act); 13 C.F.R. §§
121.101-121.108 (defining size in terms of the number of employees or gross income); Participation in the 8(a)
Program, supra note 1, at 12 (characterizing ANCs as “large”).
52 See 13 C.F.R. § 121.105(a)(1) (“Except for small agricultural cooperatives, a business concern eligible for assistance
from SBA as a small business is a business entity organized for profit, with a place of business located in the United
States, and which operates primarily within the United States or which makes a significant contribution to the U.S.
economy through payment of taxes or use of American products, materials or labor.”).
53 See, e.g., Contract Management, supra note 23, at 1 (noting that Alaskan village, urban, and group corporations may
be either for-profit or nonprofit). Regional corporations, in contrast, must be for-profit. Id.
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authorities for contracting with small businesses.54 Under these authorities, agencies may “set
aside” contracts for small businesses—by conducting competitions in which only they can
compete—when certain conditions are met.55 These set-asides can be total or partial,
encompassing the entire acquisition or a severable segment of it.56 Agencies may also make sole-
source awards to small businesses when one of the seven circumstances authorizing
noncompetitive awards under the general contracting authorities exist, although such awards are
made under the general contracting authorities and not the general small business authorities.57
They are thus subject to the notice, justification, and approval requirements discussed
previously.58
One of the alleged “special provisions” governing contracting with ANCs, discussed below,
arguably assists ANC-owned firms in qualifying as “small” for purposes of contracting under the
general small business authorities. While all affiliations between businesses, or relationships
allowing one party control or the power of control over another,59 count when the SBA makes
size determinations,60 certain affiliations with the parent ANC or its subsidiaries are generally
excluded when the SBA determines the size of an ANC-owned firm.61 Although the SBA is
authorized to consider these affiliations when not doing so results or is likely to result in an ANC-
54 Small Business Act of 1958, P.L. 85-536, § 15, 72 Stat. 395 (July 18, 1958) (codified at 15 U.S.C. § 644(a)) (“To
effectuate the purposes of this Act, small-business concerns within the meaning of this Act shall receive any award or
contract or any part thereof, and be awarded any contract for the sale of Government property, as to which it is
determined by the [Small Business] Administration and the contracting procurement or disposal agency (1) to be in the
interest of maintaining or mobilizing the Nation’s full productive capacity, (2) to be in the interest of war or national
defense programs, (3) to be in the interest of assuring that a fair proportion of the total sales of Government property be
made to small business concerns.”); Competition in Contracting Act, P.L. 98-369, § 2711, 98 Stat. 1175-76 (Aug. 18,
1984) (“In fulfilling the statutory requirements relating to small business concerns and socially and economically
disadvantaged small business concerns, an executive agency shall use competitive procedures but may restrict a
solicitation to allow only such business concerns to compete.”) (procurements of civilian agencies); CICA, § 2723, 98
Stat. 1187-88 (same) (procurements of defense agencies).
55 Contracts whose anticipated value is between $3,000 and $150,000 must be set aside for small businesses unless the
contracting officer is unable to obtain offers from two or more small businesses that are competitive with market prices
and in terms of the quality and delivery of goods or services. 15 U.S.C. § 644(j)(1); 48 C.F.R. § 19.502-2(a). Contracts
whose anticipated value exceeds $150,000 must also be set aside for small businesses if the contracting officer
reasonably expects that (1) offers will be obtained from at least two responsible small businesses offering the products
of different small businesses and (2) the award will be made at a fair market price. 48 C.F.R. § 19.502-2(b).
56 When a total set-aside is not appropriate, an acquisition can generally be partially set aside for small businesses if (1)
the requirement is severable into two or more economic production runs or reasonable lots, (2) one or more small
businesses are expected to have the technical competence and productive capacity to satisfy the set-aside portion of the
requirement at a fair market price, and (3) the acquisition is not subject to simplified acquisition procedures. 48 C.F.R.
§ 19.502-3(a)(1)-(4). Partial set-asides cannot be made when procuring construction work, however. 48 C.F.R. §
19.502-3(a).
57 See supra note 47 and accompanying text.
58 See supra notes 48 to 50 and accompanying text.
59 13 C.F.R. § 121.103(a)(1). Control or the power of control need only exist; it need not be exercised.
60 13 C.F.R. § 121.103(a)(6) (“In determining the concern’s size, SBA counts the receipts, employees, or other measure
of size of the concern whose size is at issue and all of its domestic and foreign affiliates, regardless of whether the
affiliates are organized for profit.”).
61 15 U.S.C. § 636(j)(10)(J)(ii)(II); 13 C.F.R. § 121.103(b)(2)(i) (“Business concerns owned and controlled by Indian
Tribes, Alaska Native Corporations (ANCs) organized pursuant to the Alaska Native Claims Settlement Act (43 U.S.C.
§ 1601 et seq.), Native Hawaiian Organizations (NHOs), Community Development Corporations (CDCs) authorized by
42 U.S.C. § 9805, or wholly-owned entities of Indian Tribes, ANCs, NHOs, or CDCs are not considered affiliates of
such entities.”).
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owned firm obtaining a “substantial unfair competitive advantage within an industry category,”62
the SBA and agencies exercising delegated authority on its behalf63 reportedly seldom exercise
this authority.64
In contrast, ANC-owned firms are not exempt from the requirement that they be “businesses” for
purposes of the Small Business Act, which means that they must be for-profit to be awarded
contracts under the general small business authorities.65 They also must self-certify that they are
“small,” as measured by the size standards for the goods or services to be procured, when
submitting bids or offers for contracts to be awarded under the general small business
authorities.66 However, while there are potentially severe penalties for misrepresentation of size67
and other entities may generally challenge firms’ size status,68 most self-certifications are not
closely scrutinized:
A contracting officer may accept a concern’s self-certification as true for the particular
purpose involved in the absence of a written protest by other offerors or other credible
information which causes the contracting officer or SBA to question the size of the
concern.69
Section 8(a) of the Small Business Act
Agencies can also contract with ANC-owned firms, although not necessarily ANCs themselves,70
under the authority of Section 8(a) of the Small Business Act of 1958, as amended. Section 8(a)
generally authorizes set-asides and sole-source awards to “socially and economically
disadvantaged small business concerns,” which include firms at least 51% owned and
62 13 C.F.R. § 124.109(c)(2)(iii). (“In determining the size of a small business concern owned by a socially and
economically disadvantaged Indian tribe (or a wholly owned business entity of such tribe), each firm’s size shall be
independently determined without regard to its affiliation with the tribe, any entity of the tribal government, or any
other business enterprise owned by the tribe, unless the Administrator determines that one or more such tribally owned
business concerns have obtained, or are likely to obtain, a substantial unfair competitive advantage within an industry
category.”). ANCs are included within the definition of “Indian tribe” used here. See Omnibus Consolidated Budget
Reconciliation Act of 1985, P.L. 99-272, § 18015, 100 Stat. 370 (1986) (codified at 15 U.S.C. § 637(a)(13)).
63 13 C.F.R. § 124.501(a).
64 See, e.g., Contract Management, supra note 23, at 37 (reporting that some contracting officers claimed not to know
how to determine what constitutes a “substantial unfair competitive advantage” when making size determinations for
ANC-owned firms).
65 13 C.F.R. § 124.109(a)(3).
66 See Small Business Administration, Guide to SBA’s Definitions of Small Business, “Use of Size Standards for
Government Procurement,” at 13-14, available at http://www.sba.gov/idc/groups/public/documents/sba_homepage/
guide_to_size_standards.pdf.
67 See 13 C.F.R. § 121.108 (including criminal penalties under 15 U.S.C. § 645(d)).
68 13 C.F.R. § 121.1001(a)(2) (authorizing protests of competitive awards by offerors whom the contracting officer has
not eliminated for reasons related to size; the contracting officer; the SBA Government Contracting Area Director with
responsibility for the area in which the headquarters of the protested offeror is located; and other “interested parties”).
Sole-source awards are treated differently. See 13 C.F.R. § 1001(b)(2)(ii).
69 13 C.F.R. § 121.405(b).
70 The statutes and regulations consistently refer to agencies’ contracting with ANC-owned firms, and individual ANCs
could have difficulty qualifying as small under the size standards. Additionally, non-profit ANCs would not qualify as
businesses for purposes of the Small Business Act. See 13 C.F.R. § 124.109(a) (speaking of participation in the 8(a)
Program by “ANC-owned concerns”); 13 C.F.R. §§ 121.101-121.108 (size standards used in determining whether a
firm is small); 13 C.F.R. § 121.105(a)(1) (defining “businesses” as for-profit entities).
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unconditionally controlled by ANCs, Indian tribes, Native Hawaiian Organizations (NHOs) or
Community Development Corporations (CDCs).71 Contracts whose value is at or below the so-
called “competitive threshold” ($4 million, $6.5 million for manufacturing contracts) may
generally be awarded on a sole-source basis, without the competition among 8(a) firms that
would result if the contract were set aside.72 Contracts whose value exceeds the competitive
threshold, in contrast, generally must be set-aside for competitions in which all 8(a) firms may
compete unless there is not a reasonable expectation that at least two eligible and responsible 8(a)
firms will submit offers at a fair market price.73 See Figure 1.
Figure 1. Competition Requirements for the 8(a) Program
Source: Congressional Research Service.
However, agencies also have special authority to make sole-source awards to ANC- or other
group-owned firms under Section 8(a) in circumstances when they could not make awards to
individually owned 8(a) firms (e.g., when the contract exceeds the “competitive threshold,” and
there is a reasonable expectation that at least two eligible and responsible 8(a) firms will submit
offers at a fair market price).74 Because this authority does not derive from the Competition in
Contracting Act (CICA), such awards were not subject to the same requirements regarding
71 15 U.S.C. § 637(a)(1)(A)-(B). While “socially and economically disadvantaged small business concerns” were
originally defined as those owned by one or more socially and economically disadvantaged individuals, Congress later
included firms that are at least 51% owned and unconditionally controlled by ANCs, Indian tribes, NHOs, or CDCs.
See P.L. 95-507, § 202, 92 Stat. 1757 (Oct. 24, 1978) (codified at 15 U.S.C. § 637(a)(4)(A)-(B)) (creating statutory
authority for the 8(a) Program for minority-owned businesses); Community Development Act of 1981, P.L. 97-35, Ch.
8, Subch. A, 95 Stat. 489 (Aug. 13, 1981) (codified at 42 U.S.C. §§ 9801 et seq.) (making CDC-owned firms eligible
for the 8(a) Program); Omnibus Consolidated Budget Reconciliation Act of 1985, P.L. 99-272, § 18015, 100 Stat. 370
(Apr. 7, 1986) (making tribally and ANC-owned firms eligible for the 8(a) Program); Business Opportunity
Development Reform Act of 1988, P.L. 100-656, § 207, 102 Stat. 3861 (Nov. 15, 1988) (codified at 15 U.S.C. §
637(a)(4)) (making NHO firms eligible for the 8(a) Program).
72 15 U.S.C. § 637(a)(16)(A). A noncompetitive award may be made under this authority so long as (1) the firm is
determined to be a responsible contractor for performance of the contract, (2) award of the contract would be consistent
with the firm’s business plan, and (3) award of the contract would not result in the firm exceeding the percentage of
revenue from 8(a) sources forecast in its annual business plan. 15 U.S.C. § 637(a)(16)(A)(i)-(iii). For contracts whose
value is below the competitive threshold to be awarded competitively, the SBA’s Associate Administrator for 8(a)
Business Development must approve the agency’s request to do so. 15 U.S.C. § 637(a)(1)(D)(ii); 48 C.F.R. § 19.805-
1(d).
73 15 U.S.C. § 637(a)(1)(D)(i)(II); 48 C.F.R. § 19.805-1(a)(1)-(2). The text of the Small Business Act, as codified at
Section 637(a) of Title 15, currently gives the “competitive threshold” as $3 million ($5 million for manufacturing
contracts). However, this amount has twice been adjusted for inflation pursuant to Section 807 of the Ronald W.
Reagan National Defense Authorization Act for FY2005. See P.L. 108-375, § 807, 118 Stat. 2010-11 (Oct. 28, 2004)
(requiring that certain “acquisition” thresholds be periodically adjusted for inflation).
74 15 U.S.C. § 637(a)(1)(D)(i)(I)-(II); 48 C.F.R. § 19.805-1(b)(1)-(2) (sole-source awards to tribally or ANC-owned
firms); 48 C.F.R. § 219.805-1(b)(2)(A)-(B) (sole-source awards to NHO-owned firms).
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justifications, approvals, and notices as other sole-source awards prior to enactment of the
National Defense Authorization Act (NDAA) for FY2010.75 The NDAA for FY2010 changed this
by requiring justifications, approvals, and notices for sole-source contracts in excess of $20
million (base plus all options)76 awarded under the authority of Section 8(a) similar to those
required for sole-source contracts awarded under the general contracting authorities.77 However,
justifications, approvals, and notices are still not required for sole-source contracts valued at
between $4 million ($6.5 million for manufacturing contracts) and $20 million awarded under the
authority of Section 8(a).
While agency discretion in determining whether to procure particular goods or services under the
authority of Section 8 (a) is fairly broad,78 detailed statutory and regulatory requirements govern
firms’ eligibility for and participation in the 8(a) Program. The places where the statutory or
regulatory requirements pertaining to contracting with ANC-owned firms differ from the general
8(a) requirements have attracted the most scrutiny from those concerned about the alleged
“special procurement advantages” of ANC-owned firms.79 These places are briefly summarized in
Table 1,80 while a separate report explains the general 8(a) requirements in more detail.81
75 P.L. 111-84, § 811(a)(1)-(3), 123 Stat. 2405-06 (Oct. 28, 2009) (prohibiting agencies from awarding sole-source
contracts in excess of $20 million in “covered procurements” unless “(1) the contracting officer for the contract
justifies the use of a sole-source contract in writing; (2) the justification is approved by the appropriate official
designated to approve contract awards for dollar amounts that are comparable to the amount of the sole-source contract;
and (3) the justification and related information are made public as provided in sections 2304(f)(1)(C) and 2304(l) of
title 10, United States Code, or sections 303(f)(1)(C) and 303(j) of the Federal Property and Administrative Services
Act of 1949 (41 U.S.C. 253(f)(1)(C) and 253(j)), as applicable.”). “Covered procurements” include those described in
10 U.S.C. § 2304(f)(2)(D)(ii) and 41 U.S.C. § 253(f)(2)(D)(ii), provisions which exempt sole-source contracts awarded
under the authority of Section 8(a) of the Small Business Act from the justifications, approvals, and notices required for
other sole-source contracts.
76 Section 811 of the NDAA for FY2010 did not itself specify whether these justifications, approvals, and notices are
required only when the base value of the contract exceeds $20 million, or when the base value of the contract plus all
options exceeds $20 million. However, regulations promulgated by the Federal Acquisition Regulatory Council on
March 16, 2011, clarify that justifications, approvals, and notices are required when the base value of the contract plus
all options exceeds $20 million. See Dep’t of Defense, Gen. Servs. Admin., Nat’l Aeronautics & Space Admin.,
Federal Acquisition Regulation; Justification and Approval of Sole-Source 8(a) Contracts: Interim Rule, 76 Fed. Reg.
14559 (Mar. 16, 2011). This regulation also clarified that agency heads may generally delegate the authority to approve
contracting officers’ justifications to other agency personnel and are not required to approve all justifications
themselves. Id.
77 See id. at § 811(b)(1)-(5). The NDAA for FY2010 requires that justifications for sole-source awards include: (1) a
description of the agency’s needs; (2) the specific statutory provision authorizing the agency to use other than
competitive procedures; (3) a determination that use of a sole-source contract is in the best interest of the agency; (4) a
determination that the anticipated cost of the contract will be fair and reasonable; and (5) any other matters that the
head of the contracting agency might require. The contents of such justifications thus differ slightly from those required
for other sole-source awards under CICA. Under CICA, justifications must include: (1) a description of the agency’s
needs; (2) the specific statutory provision authorizing the agency to use other than competitive procedures; (3) a
determination that the anticipated cost will be fair and reasonable; (4) a description of the market survey conducted or a
statement of the reasons for not conducting a market survey; (5) a listing of any sources that expressed an interest in the
procurement in writing; and (6) a statement of any actions the agency may take to remove or overcome barriers to
competition before future procurements of similar goods or services. See supra note 48.
78 See, e.g., AHNTECH, Inc., B-401092, Comp. Gen. Dec. (Apr. 22, 2009) (“The [Small Business] Act affords the
SBA and contracting agencies broad discretion in selecting procurements for the 8(a) program.”).
79 See, e.g., Northern Lights and Procurement Plights, supra note 4, at 178 (statement of Ann Sullivan, President,
Madison Services Group, Inc., on behalf of Women Impacting Public Policy) (suggesting that all 8(a) firms should be
subject to the same requirements). Firms owned by Indian tribes, NHOs, and CDCs enjoy many, but not all, of the
alleged “special procurement advantages” enjoyed by ANC-owned firms. See 13 C.F.R. § 124.109(b)-(c) (tribally
owned firms); 13 C.F.R. § 124.110 (NHO-owned firms); 13 C.F.R. § 124.111 (CDC-owned firms). A notable
(continued...)
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Table 1. “Special Rules” for Contracting with ANC-owned Firms Under Section 8(a)
of the Small Business Act
“Special Rule” for ANC-
Authority for the
Issue General
8(a)
Rule
Owned Firms
“Special Rule”
Exclusion of
All affiliations, as defined under
Affiliations with the parent ANC or
15 U.S.C. §
certain
SBA regulations, count when the
its subsidiaries are excluded when
636(j)(10)(J)(i ); 13
affiliations in
SBA makes size determinations.
the SBA makes size determinations
C.F.R. §
size
unless the SBA determines that the
124.109(c)(2)(iii)
determinations
ANC-owned firm has obtained, or
is likely to obtain, a “substantial
unfair competitive advantage within
an industry category” if these
affiliations are excluded.
Management by
Management and daily business
People who are not Alaska Natives
13 C.F.R. §
non-
operations must be conducted by
may manage ANC-owned firms if
124.109(c)(4)(i)(B)
disadvantaged
one or more disadvantaged
the SBA determines that such
individuals (as a
individuals.
management is required to assist
component of
the firm’s development, the firm
control)
will retain control of all
management decisions, and a
written management plan shows
how Alaska Natives will develop
managerial skills sufficient to
manage the concern or similar
concerns in the future.
Social
Individuals are either rebuttably
ANC-owned firms are deemed
43 U.S.C. § 1626(e);
disadvantage
presumed to be social y
“minority business enterprises” and
P.L. 99-272, 101 Stat.
disadvantaged or must prove
are irrebuttably presumed to be
370-71 (Apr. 7,
individual social disadvantage by a
socially and economically
1986) (codified at 15
preponderance of the evidence.
disadvantaged smal business
U.S.C. §
concerns provided they are at least
637(a)(4)(A)-(B))
(...continued)
exception is that tribally and NHO-owned firms are not deemed to be economically disadvantaged in the same way that
ANC-owned firms are. Compare 13 C.F.R. § 124.109(a)(2) (ANC-owned firms) with 13 C.F.R. § 124.109(b) (tribally
owned firms) and 13 C.F.R. § 124.110 (NHO-owned firms).
80 There are also variations in the regulations regarding “good character” and “potential for success.” With 8(a) firms
generally, SBA checks that the firm and its owner(s) have not engaged in criminal conduct, have not violated SBA
regulations, and are not debarred or suspended from government contracting. See 13 C.F.R. § 124.108(a). With ANC-
owned firms, the SBA applies these requirements only to officers, directors, and shareholders owning more than a 20%
interest in the firm, not to all ANC shareholders. See 13 C.F.R. § 124.109(c)(7)(B)(ii). Similarly, with potential for
success, SBA generally considers the following five criteria when granting waivers: (1) the management experience of
the disadvantaged individual(s) upon whom eligibility is based; (2) the firm’s technical experience; (3) the firm’s
capital; (4) the firm’s performance record on prior federal or other contracts in its primary field; and (5) whether the
firm has or can timely obtain the personnel, facilities, equipment, and other resources necessary to perform contracts
under Section 8(a). See 13 C.F.R. § 124.107. Waivers for ANC-owned firms, in contrast, are based on three criteria: (1)
the technical and managerial experience and competency of the individuals who will manage and control the firm’s
daily operations, (2) the firm’s financial capacity, and (3) the firm’s performance record on prior federal or other
contracts in the its primary industry. See 13 C.F.R. § 124.110(e). However, commentators generally do not attribute the
reportedly increasing number of contracts with ANC-owned firms to these factors, and they are thus excluded from
Table 1. In fact, the difference in the number and wording of the waiver criteria probably would not result in ANC-
owned firms receiving waivers when other 8(a) firms would not.
81 See CRS Report R40744, The “8(a) Program” for Small Businesses Owned and Controlled by the Socially and
Economically Disadvantaged: Legal Requirements and Issues, supra note 8.
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“Special Rule” for ANC-
Authority for the
Issue General
8(a)
Rule
Owned Firms
“Special Rule”
51% owned by an ANC and their
management and daily business
operations are controlled by one or
more Alaska Natives.
Economic
Individuals must show economic
ANCs are deemed economically
P.L. 100-241, § 15,
disadvantage
disadvantage upon entry to the
disadvantaged provided that Alaska
101 Stat. 1812-13
program and annual y thereafter.
Natives and descendants of Alaska
(Feb. 3, 1988); P.L.
Natives own a majority of the total
102-415, § 10, 106
equity of the ANC and the total
Stat. 2115 (Oct. 14,
voting powers to elect directors of
1992) (codified at 43
the ANC through their holdings of
U.S.C. § 1626(e)); 13
settlement common stock.
C.F.R. 124.109(a)
Sole-source
Agencies may make sole-source
Agencies may make sole-source
P.L. 100-656, §
awards above
awards in excess of $4 million
awards to ANC-owned firms at any 602(a), 102 Stat.
the competitive
($6.5 million for manufacturing
time, even when the contracting
3887-88 (Nov. 15,
threshold
contracts) only if the contracting
officer reasonably expects that at
1988) (codified at 15
officer does not reasonably
least two responsible 8(a) firms will
U.S.C. §
expect that at least two
submit offers and the award can be
637(a)(1)(D)(i)-(ii));
responsible firms will submit
made at a fair market price.
13 C.F.R. §
offers and the award can be made
124.506(a)
at a fair market price.
Inability to
8(a) firms general y may not
ANCs can continue to receive
13 C.F.R. §
receive
receive additional sole-source
additional sole-source awards even
124.519(a)-(d)
additional
awards once they have received a
once they have reached $100
source-source
combined total of competitive and million or other applicable
awards after
sole-source awards in excess of
threshold.
obtaining a
(1) $100 million, in the case of
certain amount
firms whose size is based on their
of 8(a) awards
number of employees, or (2) the
lesser of (A) $100 million or (B)
five times the size standard for
the industry, in the case of firms
whose size is based on their
revenues.
Owners’ one-
Individuals may confer eligibility
ANCs may confer eligibility upon
P.L. 101-37, § 4, 103
time eligibility
for the 8(a) Program upon only
multiple firms; while ANC-owned
Stat. 70-71 (June 15,
for the 8(a)
one firm; individuals, along with
firms must leave the 8(a) Program
1989) (codified at 15
Program
their firms, may participate in the
after a maximum of nine years, the
U.S.C. §
8(a) Program for a maximum of
ANC can continue to participate in
636(j)(11)(B)-(C))
nine years.
the program as a firm owner
perpetually.
Ability to own
Individuals who have been
ANCs are barred from owning
P.L. 101-37, § 4, 103
majority
determined to be disadvantaged
more than 51% of another 8(a) firm Stat. 70-71 (June 15,
interests in
for purposes of one 8(a) firm,
obtaining the majority of its
1989) (codified at 15
multiple 8(a)
their immediate family members,
revenues from the same primary
U.S.C. §
firms
and 8(a) firms themselves
industry in which another ANC-
636(j)(11)(B)-(C)); 13
general y may not own more than
owned firm operates or has
C.F.R. §
20% of any other 8(a) firm.
operated within the past two years.
124.109(c)(3)
They may own majority interests in
multiple firms obtaining the
majority of their revenues in
different primary industries, or
obtaining less than 50% of their
revenues in the same secondary
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“Special Rule” for ANC-
Authority for the
Issue General
8(a)
Rule
Owned Firms
“Special Rule”
industry.
Source: Congressional Research Service.
ANC-owned firms are, however, subject to other requirements governing eligibility for and
participation in the 8(a) Program, including requirements that they (1) be small under the SBA’s
size standards,82 (2) be businesses under the SBA’s definition,83 (3) be unconditionally owned and
substantially controlled by their owner (i.e., the ANC),84 (4) possess good character,85 (5)
demonstrate potential for success,86 and (6) obtain increasing percentages of their income from
non-8(a) sources in their final five years of participation in the 8(a) Program.87 ANC-owned firms
must also apply to participate in the 8(a) Program like other firms. This application form is
somewhat different from that used by individually owned firms, but requires similarly extensive
supporting documentation concerning company personnel, corporate organization, financial
status, and company operations.88 ANC-owned firms must also submit an “8(a) Annual Update”
like other 8(a) firms.89 This update requires additional documentation much like that submitted
with applications to the 8(a) Program.90 Careful review of this documentation could potentially
disclose some of the alleged problems with ANC-owned 8(a) firms, such as joint ventures to
which the ANC-owned firm contributes nothing beyond its eligibility for 8(a) contracts. However,
a November 2008 GAO report questioned whether the SBA presently has the resources to
conduct thorough reviews of 8(a) firms.91
82 13 C.F.R. § 124.109(c)(3)(i) (“A tribally-owned applicant concern must qualify as a small business concern as
defined for purposes of Federal Government procurement in part 121 of this title.”). ANC-owned firms are subject to
the same requirements as tribally owned firms here.
83 13 C.F.R. § 124.109(a) & (b) (requiring ANC-owned firms to comply with the general eligibility requirements when
they are not contrary to or inconsistent with the special requirements for these entities); 13 C.F.R. § 121.105(a)(1)
(“Except for small agricultural cooperatives, a business concern eligible for assistance from SBA as a small business is
a business entity organized for profit, with a place of business located in the United States, and which operates
primarily within the United States or which makes a significant contribution to the U.S. economy through payment of
taxes or use of American products, materials or labor.”).
84 13 C.F.R. § 124.109(a) & (b).
85 13 C.F.R. § 124.109(b)(7)(ii).
86 13 C.F.R. § 124.109(c)(6).
87 13 C.F.R. § 124.509(b)(2). The final five years of a firm’s participation in the 8(a) Program are known as the
“transitional stage,” and firms in the transitional stage must achieve annual targets for the amount of income they
receive from non-8(a) sources. 15 U.S.C. § 636(j)(10)(I)(i)-(iii); 13 C.F.R. § 124.509(b)(1). These targets increase over
time, with firms required to attain 15% of their revenue from non-8(a) sources in the fifth year, 25% in the sixth year,
35% in the seventh year, 45% in the eighth year, and 55% in the ninth year. 13 C.F.R. § 124.509(b)(2). Firms that do
not obtain the required percentage of revenue from non-8(a) sources are generally ineligible for sole-source 8(a)
contracts “unless and until” they remedy the situation. 13 C.F.R. § 124.509(d)(1).
88 Compare Small Business Administration, 8(a) Business Development (BD) Program Application: Alaska Native
Corporation-Owned Concern, available at http://www.sba.gov/idc/groups/public/documents/sba_homepage/
forms_trng1010banc.pdf with Small Business Administration, Application for 8(a) Business Development (8(a) BD)
and Small Disadvantaged Business (SDB) Certification, available at http://www.sba.gov/idc/groups/public/documents/
sba_homepage/forms_trng1010banc.pdf.
89 Small Business Administration, 8(a) Annual Update, available at http://www.sba.gov/idc/groups/public/documents/
sba_homepage/forms_1450.pdf.
90 Id.
91 Government Accountability Office, Small Business Administration: Agency Should Assess Resources Devoted to
Contracting and Improve Several Processes in the 8(a) Program, GAO-09-16, at 1 (Nov. 2008), available at
(continued...)
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Authorities in Native American Laws
Several authorities governing contracting with ANCs and their subsidiaries are located in statutes
and U.S. Code sections pertaining to Native Americans, rather than those pertaining to
contracting or small business. These include provisions (1) authorizing payment of a 5%
“subcontracting bonus” to federal prime contractors that subcontract with certain “Indian
organizations” or “Indian-owned economic enterprises,” (2) authorizing set-asides under the Buy
Indian Act, (3) allowing contracts with ANCs or ANC-owned firms of any size or without
certification to count toward federal contractors’ goals for subcontracting with small businesses or
“small disadvantaged businesses,” and (4) allowing certified ANCs or ANC-owned firms to
qualify as “small disadvantaged businesses” for purposes of Department of Transportation
contracts.
5% “Subcontracting Bonus”
Federal prime contractors are eligible for so-called “bonuses” equal to “5 percent of the amount
paid, or to be paid, to a subcontractor” when they subcontract with ANCs or ANC-owned firms,
among others.92 Congress authorized such bonuses in 1988, in part, because of concerns that
federal prime contractors had less incentive to use Indian-owned subcontractors than other
minority-owned subcontractors because of the geographical “remoteness of [Indian]
reservation[s].”93 Congress also appropriated funds for the Department of Defense (DOD), in
particular, to pay subcontracting bonuses.94 The amount appropriated remained constant at $8
million per year between FY1989 and FY2006,95 and was increased to $15 million per year
(...continued)
http://www.gao.gov/highlights/d0916high.pdf (noting a lack of routine surveillance reviews).
92 25 U.S.C. § 1544 (“Notwithstanding any other provision of law, a contractor of a Federal agency under any Act of
Congress may be allowed an additional amount of compensation equal to 5 percent of the amount paid, or to be paid, to
a subcontractor or supplier, in carrying out the contract if such subcontractor or supplier is an Indian organization or
Indian-owned economic enterprise as defined in this chapter.”).
93 P.L. 100-442, § 7, 102 Stat. 1765 (Sept. 22, 1988) (codified at 25 U.S.C. § 1544); H.Rept. 100-838, at 6 (1988),
reprinted in 1988 U.S.C.C.A.N. 2344, 2347 (“Currently, contracting agencies are authorized to encourage contractors
to use minority subcontractors, however, there is no incentive for the contractors to use Indian contractors located on
Indian reservations due to the remoteness of such reservation.”). The statute and its implementing regulations (in
Subpart 26.1 of the Federal Acquisition Regulation) only mention Indians, Indian organizations, Indian-owned
economic enterprises, and Indian tribes, which include ANCs. However, Congress included Native Hawaiians among
those entities that prime contractors may receive bonuses for subcontracting with in 2002. See P.L. 107-248, § 8021,
116 Stat. 1541 (Oct. 23, 2002) (including “small business[es] owned and controlled by an individual defined under 25
U.S.C. 4221(9)” among those whom contractors receive bonuses for contracting with); 25 U.S.C. § 4221(9) (defining
“Native Hawaiians”); 48 C.F.R. Subpart 226.1 and § 252.226-7001 (DOD regulations on subcontracting bonuses).
Native Hawaiians were included in subsequent appropriations. See P.L. 108-87, § 8021, 117 Stat. 1076 (Sept. 30,
2003); P.L. 108-287, § 8021, 118 Stat. 974 (Aug. 5, 2004); P.L. 109-148, § 8020, 119 Stat. 2702 (Dec. 30, 2005); P.L.
109-289, § 8018, 120 Stat. 1276-77 (Sept. 29, 2006); P.L. 110-116, § 8021, 121 Stat. 1319 (Nov. 13, 2007); P.L. 110-
329, § 8021, 122 Stat. 3625 (Sept. 30, 2008).
94 See P.L. 101-165, § 9103, 103 Stat. 1151-52 (Nov. 21, 1989); P.L. 101-511, § 8077, 104 Stat. 1892-93 (Nov. 5,
1990); P.L. 102-172, § 8112A, 105 Stat. 1202 (Nov. 26, 1991); P.L. 102-396, § 9091A, 106 Stat. 1922 (Oct. 6, 1992);
P.L. 103-139, § 8059A, 107 Stat. 1453 (Nov. 11, 1993); P.L. 103-335, § 8025A, 108 Stat. 2623 (Sept. 30, 1994); P.L.
104-61, § 8024, 109 Stat. 657 (Dec. 1, 1995); P.L. 104-208, § 8024, 110 Stat. 3009-93 (Sept. 30, 1996); P.L. 105-56, §
8024, 111 Stat. 1225 (Oct. 8, 1997); P.L. 106-79, § 8024, 113 Stat. 1236 (Oct. 25, 1999); P.L. 106-259, § 8022, 114
Stat. 679 (Aug. 9, 2000); P.L. 107-117, § 8022, 115 Stat. 2252 (Jan. 10, 2002); P.L. 107-248, § 8021; P.L. 108-87, §
8021; P.L. 108-287, § 8021; P.L. 109-148, § 8020; P.L. 109-289, § 8018; P.L. 110-116, § 8021; P.L. 110-329, § 8021.
95 Id.
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during the 110th Congress.96 Other agencies have not received similar appropriations to pay
subcontracting bonuses, but have the same statutory authority to pay them that DOD has.
To be eligible for a bonus, the prime contractor must
use its best efforts to give Indian organizations and Indian-owned economic enterprises …
the maximum practicable opportunity to participate in the subcontracts it awards to the
fullest extent consistent with efficient performance of its contract.97
Contracting officers and contractors may generally rely on subcontractors’ representations
regarding their eligibility as Indian organizations or Indian-owned economic enterprises unless an
interested party challenges their eligibility or the contracting officer has independent reason to
question it.98 Any challenges are referred to the Bureau of Indian Affairs for eligibility
determinations.99
Set-Asides Under the Buy Indian Act
ANC-owned firms are eligible for contracts set aside for “Indian organizations” and “Indian-
owned economic enterprises” under the authority of the Buy Indian Act, as Section 23 of a 1910
act “[t]o provide for determining the heirs of deceased Indians” is commonly known.100 The Buy
Indian Act provides that,
so far as may be practicable Indian labor shall be employed, and purchases of the products of
Indian industry may be made in [the] open market in the discretion of the Secretary of the
Interior.101
The Indian Health Service (IHS) retained this authority to give preference to the “products of
Indian industry” when it moved from the Department of the Interior (DOI) to the Department of
Health and Human Services.102
Both DOI and IHS thus have similar authority to prefer Indian products, but the regulations under
which they do so differ slightly.103 The IHS regulations specify that this authority is to be used in
96 P.L. 110-116, § 8021; P.L. 110-329, § 8021. The amount appropriated remained at $15 million per year during the
first session of the 111th Congress. See P.L. 111-118, § 8021, 123 Stat. 3432 (Dec. 19, 2009). At least one version of
the proposed Department of Defense Appropriations Act, 2011, would also appropriate $15 million per year for this
purpose. See S. 3800, § 8021.
97 48 C.F.R. § 52.226-1(b).
98 48 C.F.R. § 52.226-1(b)(1).
99 Id.
100 See, e.g., Native American Industrial Distributors, Inc., B-310737.2; B-310737.4; B-310737.5 (Comp. Gen. Dec.
Apr. 15, 2008) (upholding an award to a wholly owned subsidiary of an ANC under the Buy Indian Act).
101 P.L. 61-313, § 23, 36 Stat. 861 (June 25, 1910) (codified, as amended, at 25 U.S.C. § 47). The Buy Indian Act also
exempts ANCs, along with other Indian organizations and Indian-owned economic enterprises, from certain bonding
requirements imposed on federal contractors by the Miller Act. See 25 U.S.C. § 47a (“[T]he Secretary [of the Interior],
in his discretion, may require security other than bonds required by the Miller Act when entering into a contract with an
Indian-owned economic enterprise pursuant to the provisions of the Act of June 25, 1910, for the construction,
alteration, or repair of any public work of the United States: Provided, That, the alternative form of security provides
the United States with adequate security for performance and pay.”).
102 See 48 C.F.R. § 370.501(b).
103 Compare 48 C.F.R. §§ 370.500-370.505 (IHS procurements) with 48 C.F.R. §§ 1426.7002-1426.7005 (DOI
(continued...)
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connection with the “maintenance and operation of hospital and health facilities for Indians and
for the conservation of Indian health.”104 They also provide that no more than 50% of a
subcontract on a set-aside contract may be performed by non-Indian firms and require
competitive award of contracts to the “maximum extent ... practicable,” with justifications and
approvals issued for noncompetitive awards.105 In contrast, the DOI regulations apply chiefly to
contracts “performed on reservations,” although other agencies can rely on this authority when
contracting for work that is “specifically for the benefit of Indians.”106 The DOI regulations also
provide a “preference” for subcontracting with Indians,107 but are less explicit as to what this
means than the IHS regulations.
Credit Toward Prime Contractors’ Subcontracting Goals
Subcontracts awarded by federal prime contractors to ANCs or their subsidiaries count toward
contractors’ goals for subcontracting with small businesses and “small disadvantaged businesses”
even if the ANC or ANC subsidiary is large or not certified as “disadvantaged”:
Subcontracts awarded to an ANC or an Indian tribe shall be counted towards the
subcontracting goals for small business and small disadvantaged business (SDB) concerns
regardless of the size or Small Business Administration certification status of the ANC or
Indian tribe.108
Section 8(d) of the Small Business Act, as amended, requires federal agencies to negotiate
subcontracting plans with the apparently successful bidder or offeror on eligible prime contracts
prior to awarding the contract.109 These subcontracting plans establish goals for the value of
subcontracts that prime contractors should award to small businesses and small disadvantaged
businesses, among others.110 A contractor’s failure to comply with its subcontracting plan
constitutes a material breach of the contract, potentially allowing the agency to terminate the
(...continued)
procurements).
104 48 C.F.R. § 370.501(b).
105 48 C.F.R. § 370.503(e) (limitations on subcontracting); 48 C.F.R. § 370.504(a) (competitive awards preferred).
106 48 C.F.R. § 1426.7002(a) (work performed on reservations); 48 C.F.R. § 1452.226-71 (same); 48 C.F.R. §
1452.226-70 (allowing other agencies to contract under this authority in certain circumstances).
107 48 C.F.R. § 1426.7002(b).
108 48 C.F.R. § 19.703(c)(1)(i). The statutory authority for this regulation is presently unclear. Section 702 of the
Emergency Supplemental Act of 2002 initially amended 43 U.S.C. § 1626(e)(4)(B) to allow subcontracts with large or
uncertified ANCs or ANC subsidiaries to count toward subcontracting goals under Section 8(d) of the Small Business
Act. See P.L. 107-117, § 702, 115 Stat. 2312 (Jan. 10, 2002). However, a later statute amended 43 U.S.C. §
1626(e)(4)(B) again, so that it now addresses government contracting and subcontracting goals under Section 15 of the
Small Business Act, not subcontracting goals under 8(d). See Supplemental Appropriations Act for Further Recovery
from and Responses to Terrorist Attacks on the United States, P.L. 107-206, § 3003, 116 Stat. 924 (Aug. 2, 2002). The
regulations have apparently been promulgated as if the Emergency Supplemental Act still governed, though. See
Department of Defense, General Services Administration, & National Aeronautics & Space Administration, FAR Case
2004-017, Small Business Credit for Alaska Native Corporations and Indian Tribes, 72 Fed. Reg. 46345 (Aug. 17,
2007).
109 15 U.S.C. § 637(d)(4) & (5). Eligible contracts are generally those exceeding $650,000 ($1.5 million for contracts to
construct public facilities) and offering subcontracting possibilities. Id.
110 15 U.S.C. § 637(d)(6).
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contractor for default.111 The contractor could also potentially be required to pay liquidated
damages.112
Other firms must qualify as “small” under the SBA regulations for subcontracts with them to
count toward contractors’ goals for subcontracting with small businesses or small disadvantaged
businesses (SDBs).113 Moreover, until October 3, 2008, other firms had to be certified SDBs for
subcontracts with them to count toward contractors’ goals.114 All 8(a) firms were deemed to be
SDBs, but other firms at least 51% unconditionally owned and controlled by socially and
economically disadvantaged individuals or groups could also obtain certification.115
Small Disadvantaged Businesses for Purposes of Transportation Contracts
The same statute that allows subcontracts with large or uncertified ANCs or ANC affiliates to
count for purposes of contractors’ subcontracting goals for small businesses also enables large
ANCs or ANC affiliates to qualify as “small disadvantaged businesses” for contracts funded by
the Department of Transportation (DOT) under the Transportation Equity Act for the 21st Century
(TEA-21) provided they obtain the necessary certifications.116 TEA-21 originally required that
not less than 10 percent of the amounts made available for the program under titles I, III, and
V of this Act shall be expended with small business concerns owned and controlled by
socially and economically disadvantaged individuals.117
However, later regulations, promulgated in response to court cases challenging the
constitutionality of “quotas” for minority firms,118 construe “10 percent” as an “aspirational
goal,” which “does not authorize or require recipients to set overall or contract goals at the 10
percent level, or any other particular level, or to take any special administrative steps if their goals
are above or below 10 percent.”119
Allowing large ANCs and their affiliates to qualify as small disadvantaged businesses for
purposes of DOT contracting goals is potentially significant for two reasons. First, “small
business” arguably has a narrower meaning under TEA-21 than it does under the Small Business
Act, which could render some non-ANC-owned firms that might otherwise qualify as “small”
111 15 U.S.C. § 637(d)(8).
112 48 C.F.R. § 19.705-7.
113 15 U.S.C. § 637(d)(1) (describing subcontracting with “small businesses”).
114 See Small Business Administration, Small Disadvantaged Business Program, 73 Fed. Reg. 57490 (Oct. 3, 2008)
(announcing that SBA would no longer certify SDBs);13 C.F.R. § 124.1001(c) (2009) (“A firm may represent that it
qualifies as an SDB for any Federal subcontracting program if it believes in good faith that it is owned and controlled
by one or more socially and economically disadvantaged individuals.”).
115 13 C.F.R. § 124.1002.
116 P.L. 107-117, § 702; P.L. 107-206, § 3003 (codified at 43 U.S.C. § 1626(e)(4)(C) (“Any entity that satisfies
subsection (e)(1) or (e)(2) of this section that has been certified under section 637 of title 15 is a Disadvantaged
Business Enterprise for the purposes of P.L. 105-178.”).
117 P.L. 105-178, § 1101(b), 112 Stat. 113 (June 9, 1998). TEA-21 lapsed on May 31, 2005, but was extended through
FY2009 by the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU).
See SAFETEA-LU, P.L. 109-59, § 1101(b), 119 Stat. 1144 (Aug. 10, 2005).
118 See CRS Report RL33284, Minority Contracting and Affirmative Action for Disadvantaged Small Businesses: Legal
Issues, by Jody Feder.
119 49 C.F.R. § 26.41(b)-(c).
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ineligible for the DOT program.120 Second, “small disadvantaged businesses” under TEA-21
include women-owned firms,121 which could place the collective interests of women-owned small
businesses more directly at odds with those of ANC-owned firms than is the case when individual
women-owned firms participate in the 8(a) Program or are designated as small disadvantaged
businesses for SBA programs. Women are not among the groups presumed to be socially
disadvantaged for purposes of SBA programs, and small businesses owned and controlled by
women are eligible for such programs only when individual women owners prove by a
preponderance of the evidence that they are socially disadvantaged.
Appropriations Riders Allowing Direct Conversion of DOD
Functions
The Department of Defense (DOD) can contract out functions performed by government
employees to ANCs or ANC-owned firms without going through the competitive sourcing
process normally required under Office of Management and Budget (OMB) Circular A-76.122
OMB Circular A-76, along with its four attachments,123 generally sets forth guidelines and
procedures for determining whether an activity should be performed in-house by the agency with
government personnel or contracted-out to the private sector. Beginning in the early 1980s, a
series of appropriations riders124 and permanent laws125 affected DOD’s use of the A-76 process.
While most of these enactments in some way limited DOD’s ability to contract out functions
using the A-76 process, one rider attached to every DOD appropriations act since 1989 has
permitted DOD to avoid the A-76 process and its restrictions on outsourcing by contracting
functions out to firms owned by ANCs, Indian tribes, or NHOs.126
120 P.L. 105-178, § 1101(b)(2)(A) (“The term ‘small business concern’ has the meaning such term has under section 3
of the Small Business Act (15 U.S.C. 632); except that such term shall not include any concern or group of concerns
controlled by the same socially and economically disadvantaged individual or individuals which has average annual
gross receipts over the preceding 3 fiscal years in excess of $16,600,000, as adjusted by the Secretary for inflation.”).
121 P.L. 105-178, § 1101(b)(2)(B).
122 Since the 1950s, the federal government has had a stated policy of not competing with the private sector. This policy
was first officially stated by the Bureau of the Budget (BOB) in a directive issued in 1955. See BOB Bulletin 55-4 (Jan.
15, 1955). Since 1966, this policy has been expressed in OMB Circular A-76. This circular was substantially revised in
1967, 1979, 1983, 1991, 1999, and, most recently and most extensively, in May 2003. The 1999 amendment was issued
to bring the circular into conformance with and assist implementation of the Federal Activities Inventory Reform
(FAIR) Act of 1998 (P.L. 105-270), which generally requires each executive agency to annually inventory its activities
that are not inherently governmental and submit this inventory to OMB. In the early 1990s, much of OMB Circular A-
76 was incorporated into the Federal Acquisition Regulation. See 48 C.F.R. § 7.3.
123Attachment A contains the inventory process for categorizing all activities as commercial or inherently
governmental. Attachment B sets out the process to be used for public-private competitions. Attachment C gives the
rules for calculating the cost of these competitions. Attachment D supplies the definitions for the circular.
124 See, e.g., P.L. 111-8, § 737, 123 Stat. 559 (Mar. 11, 2009) (suspending new A-76 competitions).
125 See, e.g., 10 U.S.C. §§ 2460-2476 (“Contracting for Performance of Civilian or Industrial Type Functions”). For
more examples of this type of legislation, see CRS Report R40641, Inherently Governmental Functions and
Department of Defense Operations: Background, Issues, and Options for Congress, by John R. Luckey, Valerie Bailey
Grasso, and Kate M. Manuel, at Appendix A.
126 See P.L. 101-165, § 9036, 103 Stat. 1137 (Nov. 21, 1989); P.L. 101-511, § 8026, 104 Stat. 1880 (Nov. 5, 1990); P.L.
102-172, § 8026, 105 Stat. 1177 (Nov. 26, 1991); P.L. 102-396, § 9026, 106 Stat. 1906 (Oct. 6, 1992); P.L. 103-139, §
8022, 107 Stat. 1442 (Nov. 11, 1993); P.L. 103-335, § 8020, 108 Stat. 2621 (Sept. 30, 1994); P.L. 104-61, § 8020, 109
Stat. 656 (Dec. 1, 1995); P.L. 104-208, § 8015, 110 Stat. 3009-91 (Sept. 30, 1996); P.L. 105-56, § 8014, 111 Stat. 1223
(Oct. 8, 1997); P.L. 106-79, § 8014, 113 Stat. 1234 (Oct. 25, 1999); P.L. 106-259, § 8014, 114 Stat. 677 (Aug. 9,
2000); P.L. 107-117, § 8014, 115 Stat. 2250 (Jan. 10, 2002); P.L. 107-248, § 8014, 116 Stat. 1539 (Oct. 23, 2002); P.L.
(continued...)
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The original version of this rider generally restricted outsourcing using the A-76 process, but
exempted so-called “direct conversions” to “qualified firm[s] under 51 percent Native American
ownership,” among others.127 Such firms included those owned by ANCs, Indian tribes, or
individual Native Americans. The 106th Congress later made two modifications to this provision.
First, it exempted direct conversions to “qualified firms” from requirements concerning federal
employee comments and congressional notification codified in 10 U.S.C. § 2461(b)-(c), as well
as from the A-76 process codified in 10 U.S.C. § 2461(a).128 Second, while it maintained the
exemption for direct conversion to firms owned by ANCs and Indian tribes, it removed the
exemption for direct conversions to firms owned by Native American individuals and replaced it
with one for direct conversions to NHO-owned firms.129 The exemptions for direct conversions
remained unchanged from the 106th Congress through the 111th Congress.130
However, while these appropriations riders allowed DOD to avoid the A-76 process when
contracting out functions to ANCs or ANC-owned firms, they did not authorize DOD to make
noncompetitive awards to such entities. For this reason, DOD has used the authority to make
sole-source awards above the competitive threshold to ANC-owned firms codified in Section 8(a)
of the Small Business Act in conjunction with its authority under the appropriations riders.131
Legislative Activity
111th Congress
The 111th Congress enacted legislation subjecting sole-source awards valued in excess of $20
million (base plus all options) made to ANC- and other group-owned firms under Section 8(a) of
the Small Business Act to justification and approval requirements like those to which sole-source
(...continued)
108-87, § 8014, 117 Stat. 1074 (Sept. 30, 2003); P.L. 108-287, § 8014, 118 Stat. 972 (Aug. 5, 2004); P.L. 109-148, §
8014, 119 Stat. 2700 (Dec. 30, 2005); P.L. 109-289, § 8013, 120 Stat. 1275-76 (Sept. 26, 2006); P.L. 110-116, § 8015,
121 Stat. 1316-17 (Nov. 13, 2007); P.L. 110-329, § 8016, 122 Stat. 3623-24 (Sept. 30, 2008).
127 P.L. 101-165, § 9036 (“None of the funds appropriated by this Act shall be available to convert to contractor
performance an activity or function of the Department of Defense that, on or after the date of enactment of this Act, is
performed by more than ten Department of Defense civilian employees until a most efficient and cost-effective
organization analysis is completed on such activity or function and certification of the analysis is made to the
Committees on Appropriations of the House of Representatives and the Senate: Provided, That this section shall not
apply to a commercial or industrial type function of the Department of Defense that ... is planned to be converted to
performance by a qualified firm under 51 percent Native American ownership.”). Identical provisions were included in
later statutes. See P.L. 101-511, § 8026; P.L. 102-172, § 8026; P.L. 102-396, § 9026; P.L. 103-139, § 8022; P.L. 103-
335, § 8020; P.L. 104-61, § 8020; P.L. 104-208, § 8015; P.L. 105-56, § 8014; P.L. 106-79, § 8014.
128 P.L. 106-79, § 8014 (“[T]his section and subsections (a), (b), and (c) of 10 U.S.C. 2461 shall not apply to a
commercial or industrial type function of the Department of Defense that … is planned to be converted to performance
by a qualified firm under 51 percent Native American ownership.”).
129 P.L. 106-259, § 8014 (“[T]his section and subsections (a), (b), and (c) of 10 U.S.C. 2461 shall not apply to a
commercial or industrial type function of the Department of Defense that … is planned to be converted to performance
by a qualified firm under 51 percent ownership by an Indian tribe, as defined in section 450b(e) of title 25, United
States Code, or a Native Hawaiian organization, as defined in section 637(a)(15) of title 15, United States Code.”).
130 See P.L. 111-118, § 8016, 123 Stat. 3430-31 (Dec. 19, 2009). At least one version of the Department of Defense
Appropriations Act, 2011, includes a similar provision. See S. 3800, § 8016.
131 See supra notes 74 to 77 and accompanying text.
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awards under the general contracting authorities are subject.132 The 111th Congress also
considered, but did not enact, legislation that would have subjected ANC-owned firms
participating in the 8(a) Program to eligibility requirements like those to which individually
owned 8(a) firms are subject (H.R. 6447, S. 3959); limited DOD’s authority to make sole-source
awards in excess of $3.5 million ($5.5 million for manufacturing contracts) to ANC-owned firms
(S.Amdt. 1762 to S. 1390);133 and restricted agencies’ authority to pay subcontracting bonuses
under the Indian Financing Act (S.Amdt. 1762 to S. 1390). In addition, the Ad Hoc Subcommittee
on Contracting Oversight of the Senate Committee on Homeland Security and Governmental
Affairs held hearings on “Contracting Preferences for Alaska Native Corporations” on July 16,
2009, and the majority staff of that committee issued a two-part report on New Information about
Contracting Preferences for Alaska Native Corporations.134
112th Congress
Members of the 112th Congress have introduced legislation (H.R. 598, S. 236), identical to that
introduced in the 111th Congress,135 that would remove all the “special rules” for contracting with
ANC-owned 8(a) firms described in Table 1 and subject ANC-owned firms to eligibility and
other requirements like those to which individually owned 8(a) firms are subject.136 The proposed
legislation would accomplish this, in part, by amending the Alaska Native Claims Settlement Act
(ANCSA) so that ANCs are no longer deemed to be socially or economically disadvantaged for
purposes of Sections 7(j) and 8(a) of the Small Business Act.137 It would also amend the
definition of “Indian tribe” contained in Section 8(a)(13) of the Small Business Act so that ANCs
no longer constitute “Indian tribes” for purposes of the 8(a) Program.138 By doing so, H.R. 598
and S. 236 would preclude ANCs from receiving sole source awards in excess of $4 million ($6.5
million for manufacturing contracts) under the authority of the Business Opportunity
Development Reform Act (BODRA) of 1988.139 Section 602(a) of BODRA currently provides
that the “competitive thresholds” contained in Section 8(a) of the Small Business Act do not
apply to entities defined as “Indian tribes” in Section 8(a).140 Excluding ANCs from Section 8(a)’s
definition of “Indian tribe” would, thus, subject them to the competitive thresholds, as well as
132 See id.
133 This amendment was withdrawn before the Senate passed its version of the National Defense Authorization Act for
FY2010, and similar provisions were not included in the enacted legislation.
134 These reports are available online at http://hsgac.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&
Hearing_ID=b181d787-3563-4050-b1dd-1503adf47733.
135 See H.R. 6447, 111th Cong.; S. 3959, 111th Cong.
136 As introduced, H.R. 598 and S. 236 are identical in their provisions and numbering.
137 H.R. 598, § 3; S. 236, § 3. Currently, under ANCSA, ANCs are deemed “minority business enterprises” and,
therefore, are irrebutably presumed to be socially disadvantaged for purposes of the 8(a) Program if they are at least
51% owned by an ANC, and their management and daily business operations are controlled by one or more Alaska
Natives. 43 U.S.C. § 1626(e); 15 U.S.C. § 637(a)(4)(A)-(B). ANCs are similarly deemed to be “economically
disadvantaged” if Alaska Natives or descendants of Alaska Natives own a majority of the ANC’s total equity and
voting powers through their holdings of settlement common stock. Id. H.R. 598 and S. 236 would remove these
presumptions and force ANCs to qualify as “socially disadvantaged” and “economically disadvantaged” under criteria
to be promulgated by the SBA. H.R. 598, § 8(a)-(b); S. 236, § 8(a)-(b).
138 H.R. 598, § 1; S. 236, § 1. ANCs would, however, remain “Indian tribes” under other provisions of federal law,
including the Indian Financing Act. See supra notes 92 to 99 and accompanying text.
139 ANC-owned firms could, however, potentially still receive sole-source awards under other authority, including the
Competition in Contracting Act. See supra note 48 and accompanying text.
140 P.L. 100-656, § 602(a), 102 Stat. 3887-77 (Nov. 15, 1988).
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require that all affiliations of ANC-owned firms count when the firms’ size is determined and that
an ANC may participate in the 8(a) Program only one time.141
The proposed legislation would also amend Section 8(a) to (1) prevent ANC-owned firms from
receiving additional sole-source awards when the total amount of competitive and sole-source
awards they have received in any year exceeds the total amount of competitive and sole-source
awards that individually owned firms may receive (currently, $100 million); (2) prohibit the SBA
from exempting ANC-owned firms from any time limitations on participation in the 8(a) Program
to which individually owned 8(a) firms are subject; and (3) require ANCs to report annually to the
SBA on their total revenue, the amount of this revenue attributable to the 8(a) Program, and the
“total amount of benefits paid to shareholders.”142 H.R. 598 and S. 236 would also require the
SBA to amend the regulations for the 8(a) Program so as to preclude SBA from waiving the
requirement that the management and daily business operations of ANC-owned firms be
controlled by one or more socially and economically disadvantaged individuals; prohibit ANCs
from conferring eligibility to participate in the 8(a) Program on more than one firm at a time; and
preclude ANC-owned 8(a) firms from acquiring ownership interests in other 8(a) firms that
exceed the ownership interests that individually owned 8(a) firms may acquire.143
Regulatory Developments
On February 11, 2011, SBA amended its rules to change certain eligibility and other requirements
pertaining to the 8(a) Program.144 Several of these changes apply specifically to ANC-owned
firms. Under the new rules, ANC-owned 8(a) firms (1) may not receive a sole-source 8(a)
contract that is a follow-on contract to an 8(a) contract that was performed immediately
previously by a firm owned by the same ANC;145 (2) must report annually to the SBA on the
benefits provided to Alaska Natives from the ANC’s participation in the 8(a) Program;146 and (3)
may be found to have potential for success if the ANC pledges to use its resources to support the
firm and to not allow the firm to cease operations.147 The rule also generally prohibits non-8(a)
firms that form joint ventures with 8(a) firms to perform sole-source contracts in excess of $4
million ($6.5 million for manufacturing contracts) from serving as subcontractors (at any tier) on
the contract.148 In addition, the rule indicates that it is the SBA’s policy to have ANC-owned
141 H.R. 598, § 3 & 5; S. 236, § 3 & 5.
142 H.R. 598, § 4(b), 6 & 7; S. 236, § 4(b), 6 & 7. It should be noted that “benefits” is not defined in H.R. 598 or S. 236,
and the term could potentially be construed to include more than just dividends paid to shareholders. ANCs often assert
that they provide other benefits to Alaska Natives than dividend payments. See supra note 7.
143 H.R. 598, § 8; S. 236, § 8.
144 Small Business Admin., Small Business Size Regulations; 8(a) Business Development/Small Disadvantaged
Business Status Determinations: Final Rule, 76 Fed. Reg. 8222 (Feb. 11, 2011).
145 Id. at 8234 (to be codified at 13 C.F.R. § 124.109(c)(3)(2)). The proposed rule would have gone further and
prohibited a newly certified 8(a) firm from receiving an 8(a) contract in a secondary NAICS code that is or was the
primary NAICS code of another firm owned by the same ANC for two years after its admission to the program. See
Small Business Admin., Small Business Size Regulations; 8(a) Business Development/Small Disadvantaged Business
Status Determinations: Proposed Rule, 74 Fed. Reg. 55694, 55702 (Oct. 28, 2009).
146 76 Fed. Reg. at 8264 (to be codified at 13 C.F.R. § 124.604). The SBA did, however, clarify that this is purely a
reporting requirement, not an eligibility requirement. Id. at 8236.
147 Id. at 8235 (to be codified at 13 C.F.R. § 124.109(c)(6)(i)-(iii)).
148 Id. at 8241 (to be codified at 13 C.F.R. § 124.506(b)(4)). The non-8(a) firm may serve as a subcontractor only if the
(continued...)
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firms’ applications for the 8(a) Program processed at the San Francisco Division of Program
Certification and Eligibility whenever possible.149 These applications had previously been
processed in the Anchorage District Office.
These changes will generally take effect on March 11, 2011, although ANCs will not be required
to report on the benefits provided to Alaska Natives through their participation in the 8(a)
Program until at least September 2011.150
Author Contact Information
Kate M. Manuel
Jane M. Smith
Legislative Attorney
Legislative Attorney
kmanuel@crs.loc.gov, 7-4477
jsmith@crs.loc.gov, 7-7202
John R. Luckey
Legislative Attorney
jluckey@crs.loc.gov, 7-7897
Acknowledgments
Roger Walke, former CRS specialist in American Indian policy, co-authored this report.
(...continued)
SBA’s Associate Administrator for Business Development determines that other potential subcontractors are not
available.
149 Id. at 8238. The rule also notes that, when the San Francisco office has a backlog, applications may be processed by
the Philadelphia Division of Program Certification and Eligibility. Id.
150 Id. at 8236 (noting that SBA will delay implementation of this requirement for at least six months, and may delay it
longer if necessary).
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