Indian Nations Law Update - April 2012

Tribes Take Advantage of (Embattled) Section 8(a) Small Business Development Program

The federal government obligates hundreds of billions of dollars in contracts for goods and services each year. Many tribes and Alaska Native Corporations (ANCs) have formed small business concerns (SBCs) to take advantage of contracting preferences under Section 8(a) of the Small Business Act for "socially and economically disadvantaged small business concern[s]," including economically disadvantaged members of tribes and economically disadvantaged tribes. In fiscal year 2010, the federal government awarded $18.5 billion to 8(a) entities, including $5.5 billion to tribal 8(a)s.

"Socially disadvantaged" individuals are those who have been subjected to racial or ethnic prejudice or cultural "bias because of their identity as a member of a group without regard to their individual qualities." A tribally owned 8(a) must be a distinct legal, for-profit entity chartered under tribal, state or federal law. Its articles of incorporation or articles of organization must include a waiver of immunity. The 8(a) program includes special provisions for ANCs, corporations owned by federally-recognized tribes and Native Hawaiian Organizations. Unlike other 8(a)s, Tribal 8(a)s:

May own multiple 8(a)s, as long as each has a different primary industry designation; May qualify as "small" without regard to their affiliates unless the SBA determines that a Tribal 8(a) has a substantial unfair competitive advantage within an industry, something the Small Business Administration (SBa), which administers the act, has so far never done; May receive sole source, non-competitive contracts without regard to the $6.5 million (for manufacturing) and $4 million (for everything else) limits otherwise applicable to 8(a) firms; Tribes automatically qualify as "socially disadvantaged," and there is a rebuttable presumption that individual Indians fall into this category. The same presumption does not apply, however, to "economically disadvantaged" status, which the regulations define as "those socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged." In determining the degree of diminished credit and capital opportunities, The SBA considers assets and net worth and, for tribes, per capita income of members...