Summary: Recent amendments to the Federal Acquisition Regulation (“FAR”) permit subcontracts awarded to Alaskan Native Corporations (“ANCs”) and Indian tribes to be counted towards a contractor’s goals for subcontracting with small business (“SB”) and small disadvantaged business (“SDB”) concerns, regardless of the size or Small Business Administration (“SBA”) certification status of the ANC or Indian tribe. These changes to the FAR are effective September 17, 2007.

Background: ANCs and Indian tribes are already eligible for a number of special preferences in government contracting. The Alaska Native Claim Settlement Act (43 US.C. §1601 et seq.) provided a number of government contracting opportunities and special benefits for ANCs as part of the settlement of land claims. By statute, ANCs are considered minority and economically disadvantaged business enterprises if holders of Settlement Common Stock, Natives, and descendants of Natives control a majority of the total equity of the corporation and the total voting power of the corporation for the purposes of electing directors. 43 U.S.C. § 1601(e)(1). Businesses owned and controlled by an ANC are not considered affiliates of the parent ANC or of another entity owned by the ANC solely due to the common ownership. 8(a) procurements can be sole-sourced to ANCs, even if the value of the procurement would normally require competition. Joint ventures and partnerships in which an ANC has 51% ownership and voting power also benefit from the Native Corporation status. 43 U.S.C. § 1601(e)(2).

The FAR provides that Indian organizations and Indian-owned economic enterprises shall have the maximum practicable opportunity to participate in performing contracts awarded by Federal agencies. FAR 26.102. Like ANC’s, companies with at least 50% of their equity owned by an Indian tribe may be eligible for certification by the SBA as an 8(a). These entities can receive 8(a) contracts on a sole-source basis, even if the value of the procurement would normally require competition. The normal SBA affiliation rules do not apply to tribal 8(a) enterprises; Tribes may form and operate multiple 8(a) companies without regard to affiliation if the NAICS codes are unique to each company. Tribally-owned concerns certifying that at least 35% of employees engaged in performing the contract will reside in an Indian reservation or adjoining HUBZone are eligible for HUBZone certification.

Legislative Change: Section 702 of the Emergency Supplemental Act 2002 (P.L. 107-117), as amended by section 3003 of the 2002 Supplemental Appropriation Act for Further Recovery From and Response to Terrorist Attacks on the United States (P.L. 107-206, 43 U.S.C. §1626), provides that subcontracts awarded to ANCs that are considered a minority and economically disadvantaged concern under the criteria at 43 U.S.C. §1626(e)(1), and any of their direct and indirect subsidiary corporations, joint ventures and partnerships that meet the requirements of 43 U.S.C. §1626(e)(2) shall be counted towards the satisfaction of a contractor’s goal for subcontracting with SB and SDB concerns. The law also allows subcontracts awarded to Indian tribes that are recognized by the Bureau of Indian Affairs in accordance with 25 U.S.C. §1452(c) and Indian-owned economic enterprises that meet the requirements of 25 U.S.C. §1452(e) to be counted towards the satisfaction of a contractor’s goal for subcontracting with SB and SDB concerns. Such credit may be taken even when the ANC or Indian tribe may be “other than small” under SBA regulations. The law does not require the ANC or Indian tribe to be eligible for SDB or 8(a) certification

Practitioner Tips: The new FAR changes provide Contractors with additional opportunities to meet their SB and SDB subcontracting goals. In pursing these additional opportunities, however, Contractors should be aware of the following:

  • The legislation addressed only ANCs and Indian tribes and did not extend the same benefit to Native Hawaiian Organizations.
  • Contractors should ensure the subcontractor meets the requirements of 43 U.S.C. §§1626(e)(1) or 1626(e)(2) or 25 U.S.C. §§1452(c) or 1452(e) before awarding the subcontract as the subcontractor’s status at time of award will control for all reporting periods.
  • As Indian tribes continue to enjoy sovereign immunity, Contractors considering entering into subcontracts with tribal business activities should ensure the Agreement includes a waiver of sovereign immunity.
  • Contractors should be able to find ANCs and/or Indian tribes for subcontracting opportunities through market research. Department of Interior statistics indicate that there are approximately 550 Indian tribes and ANCs, and the Central Contractor Registration (“CCR”) database allows vendors to register as ANC Owned Firms, American Indian Owned, Indian Tribe (Federal Recognized), Tribally Owned Firms, etc.
  • Where one or more subcontractors are in the subcontract tier between the prime contractor and the ANC or Indian tribe, the ANC or Indian tribe shall designate the appropriate contractor(s) to count the subcontract towards its SB and SDB subcontracting goals. In most cases, the appropriate contractor is the contractor that awarded the subcontract to the ANC or Indian tribe. To avoid double-counting, the ANC or Indian tribe must provide a copy of its written designation to the contracting officer, the prime contractor, and any subcontractors between the prime contractor and the ANC or Indian tribe within 30 days of the subcontract award.
  • The ANC or Indian tribe may designate more than one contractor to count the subcontract towards its SB and SDB goals; however, only a portion of the subcontract can be designated to each contractor. The sum of the various designations may not exceed the total value of the subcontract.