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Tuesday, January 25, 2011

Contracting Programs for Alaska Native Corporations: Historical Development and Legal Authorities

Todd Garvey
Legislative Attorney

John R. Luckey
Legislative Attorney

Kate M. Manuel
Legislative Attorney

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. Of particular interest are the authorities creating the alleged “special procurement advantages” that ANC subsidiaries enjoy in contracting under the 8(a) Program.

Various authorities presently govern contracting between federal agencies and ANCs or ANCowned firms. 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 solesource 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 solesource 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 111
th 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. It 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; limited DOD’s authority to make solesource awards in excess of $3.5 million ($5.5 million for manufacturing contracts) to ANCowned firms; and restricted agencies’ authority to pay subcontracting bonuses under the Indian Financing Act. Similar legislation may be considered in the 112th Congress if concerns persist about agency contracts with ANC-owned firms. There may also be opportunities to review agency implementation of existing contracting programs, or changes to the regulations governing contracting with ANCs under the 8(a) Program that the SBA proposed in October 2009.

Date of Report: January 4, 2011
Number of Pages: 27
Order Number: R40855
Price: $29.95

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