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

Congressional research reportNov 28, 2012

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Contracting Programs for Alaska Native

Corporations: Historical Development and

Legal Authorities

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November 28, 2012

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R40855

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Prepared for Members and Committees of Congress

Contracting Programs for Alaska Native Corporations

Summary

The widely reported increase in federal contract dollars awarded to Alaska Native Corporations

(ANCs) and their subsidiaries in recent years has generated congressional and public interest in

the legal authorities that govern contracting with these entities. Currently, federal agencies may

contract with ANCs or their subsidiaries under several different statutory authorities. These

include (1) the Armed Services Procurement Act (ASPA) and the Federal Property and

Administrative Services Act (FPASA); (2) Section 8(a) of the Small Business Act; and (3) Section

15 of the Small Business Act. The identity of the procuring agency and the size of the ANC or

ANC-owned firm, in part, determine which authority is used in particular circumstances.

ASPA and FPASA, for example, generally give defense and civilian agencies, respectively, broad

authority to contract with any qualified, responsible source, including ANCs and their

subsidiaries. Contractors do not need to be “small” in size, or for-profit entities, as they generally

must be to receive contracts under the Small Business Act. ASPA and FPASA also authorize

agencies to make sole-source awards in certain circumstances (e.g., unusual and compelling

urgency), although such awards must be justified in writing and approved by agency officials.

Two sections of the Small Business Act also permit contracts with certain ANCs or their

subsidiaries. Section 8(a) of the act authorizes agencies to contract with small businesses owned

and controlled by socially and economically disadvantaged individuals or groups participating in

the “8(a) Program.” ANCs are deemed to be socially and economically disadvantaged, and ANCowned firms may participate in the 8(a) Program. Under Section 8(a), agencies may conduct

competitions in which only 8(a) firms may compete (i.e., set-asides), as well as make sole-source

awards in circumstances where such awards would not be permitted under ASPA or FPASA. 8(a)

contracts valued in excess of $4 million ($6.5 million for manufacturing contracts) must generally

be competed among 8(a) firms. However, Section 8(a) authorizes sole-source awards of such

contracts to 8(a) firms if (1) the contracting officer does not reasonably expect that at least two

8(a) firms will submit offers at a fair market price; or (2) the Small Business Administration

accepts the requirement on behalf of an 8(a) firm owned by an ANC or other disadvantaged

group. Sole-source contracts under the authority of Section 8(a) historically did not need to be

justified or approved. However, since 2009, agencies have been required to justify and obtain

approval for sole-source 8(a) contracts valued in excess of $20 million (base plus options).

Section 15 of the Small Business Act also authorizes set-asides (but not sole-source awards) for

various types of small businesses. ANC-owned small businesses not participating in the 8(a)

Program could receive awards under the authority of Section 15.

In addition, several other statutes create incentives for agencies to contract with ANCs or their

subsidiaries by, for example, allowing contracts with “large” ANCs to count toward federal prime

contractors’ goals for subcontracting with small businesses. Similarly, various appropriations

riders permit the Department of Defense to contract out functions performed by government

employees to ANCs without going through the customary competitive sourcing process.

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 limit the circumstances in

which ANC-owned firms could receive 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.

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Contracting Programs for Alaska Native Corporations

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

Credit Toward Prime Contractors’ Subcontracting Goals ................................................. 18

Small Disadvantaged Businesses for Purposes of Transportation Contracts .................... 19

Appropriations Riders Allowing Direct Conversion of DOD Functions................................. 20

Legislative Activity in the 112th Congress ..................................................................................... 21

Regulatory Developments.............................................................................................................. 22

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........................................................................................................... 23

Acknowledgments ......................................................................................................................... 23

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Contracting Programs for Alaska Native Corporations

Introduction

The widely reported increase in federal contract dollars awarded to Alaska Native Corporations

(ANCs) and their subsidiaries in recent 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

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. Also, in 2011, SBA

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/sites/default/files/

oig_reptbydate_july9-15_0.pdf.

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://www.hsgac.senate.gov//imo/media/doc/

SubcommitteMajorityStaffAnalysisofPubliclyAvailableANCData62309.pdf?attempt=2.

Participation in the 8(a) Program, supra note 1, at 4. More recently, the Government Accountability Office (GAO) has

reported that the dollars obligated to “tribal 8(a) firms,” which include ANC-owned 8(a) firms, increased from $2.1

billion in FY2005 to $5.5 billion in FY2010, and that such firms got nearly one-third of all 8(a) obligations, although

they constituted only 6.2% of 8(a) firms. See Gov’t Accountability Office, Federal Contracting: Monitoring and

Oversight of Tribal 8(a) Firms Need Attention, GAO-12-84 (January 2012), available at http://www.gao.gov/products/

GAO-12-84.

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”).

See, e.g., id. at 161 (statement of Representative Henry A. Waxman).

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 (October 2007) (copy on file with the authors) (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).

Id. at 11-12 (discussing the dividends paid and job opportunities provided by ANCs, among other things).

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promulgated regulations that seek to address alleged issues regarding ANCs’ participation in the

8(a) Program (e.g., requiring annual reporting on ANCs’ benefits to Alaska Natives).

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:

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 (name redacted) and (name redacted).

U.S. Small Business Administration, Developing Indian Owned Businesses Through the Assistance of the 8(a)

Program of the Small Business Administration (September 1970).

P.L. 92-203, 85 Stat. 688 (codified, as amended, at 43 U.S.C. §§1601-1629h).

Id. at §2(b); 43 U.S.C. §1601(b).

Robert D. Arnold, with Janet Archibald et al., Alaska Native Land Claims 106, 120, 274-76 (1976).

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 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 FY2013 budget justifications that 59% 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.

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.

U.S. Dep’t of the Interior, Budget Justifications and Performance Information, Fiscal Year 2013, Bureau of Land

Management, at VIII-138 (2012), available at http://www.doi/gov/budget/appropriations/2013/upload/

FY2013_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

P.L. 93-638, §4(e), 88 Stat. 2204 (codified, as amended, at 25 U.S.C. §450b(e)) (January 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.

P.L. 95-507, §231, 92 Stat. 1772 (October 24, 1978); 15 U.S.C. §636(a).

Consolidated Omnibus Budget Reconciliation Act, P.L. 99-272, §18015, 100 Stat. 370-71 (April 7, 1986); 15 U.S.C.

§637(a).

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).

P.L. 100-241, §15, 101 Stat. 1812 (February 3, 1988) (amending Section 29 of ANCSA, codified at 43 U.S.C.

§1626(e)(1)).

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Contracting Programs for Alaska Native Corporations

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 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.

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.

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).

P.L. 102-415, §10, 106 Stat. 2115 (October 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).

Government Accountability Office, Contract Management: Increased Use of Alaska Native Corporations’ Special

8(a) Provisions Calls for Tailored Oversight, GAO-06-399, at 26 (April 2006), available at http://www.gao.gov/

products/GAO-06-399.

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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. 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. 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” 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, and other issues.

During this period, ANCs reportedly had little or no involvement in the SBA’s 8(a) Program.

Recovery

What allowed the ANCs to recover, apparently, was their brief, unique opportunity to sell net

operating losses (NOLs) to other U.S. companies between 1986 and 1988. The ANCs’ sale of

Steve Colt, Financial Performance of Native Regional Corporations, 28 Alaska Rev. of Soc. & Econ. Conditions 9-10

(1991).

Id. at 3.

Steve Colt, Alaska Natives and the “New Harpoon”: Economic Performance of the ANCSA Regional Corporations,

at 3 (February 2, 2001), available at http://www.iser.uaa.alaska.edu/Publications/colt_newharpoon2.pdf.

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)/ebook%20layout/C/C.1/ANCSA%20at%2035%20Delivering%20on%20the%20Promise.pdf.

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.

See Linxwiler, supra note 27.

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.

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.

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NOLs provided an estimated $410 million for regional ANCs and $500 million for village

ANCs.

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. 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.” 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.” 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.

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 awarded in the late 1980s. 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.

By 1992, an Alaska Business article had mentioned two regional ANCs as having 8(a) contracts.

By 1997, two regional ANCs, Aleut Corporation and Chugach Alaska Corporation, got the bulk

Julie Stricker, The Maturing of the 13 Regional Corporations, Alaska Bus. Monthly, March 2001, at 49 (citing Steve

Colt).

P.L. 99-514, §1804(e)(4), 100 Stat. 2801 (October 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.

P.L. 100-647, §5021, 102 Stat. 3666 (November 10, 1988); 26 U.S.C. §1504 note.

Colt, supra note 24, at 13.

Stricker, supra note 32, at 49-50.

Jennifer Forker, 25 Years After ANCSA, Alaska Bus. Monthly, November 1996, at 58 and following.

Linxwiler, supra note 27, at 4.

Stricker, supra note 30, at 63.

Id. at 63-64.

Clifford Gerhart, ANCSA Corporations, Alaska Bus. Monthly, November 1992, at 25-31.

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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. 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 ANCowned 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,

4. international agreements require the agency to award the contract to a particular

entity,

Vivian Hamilton, Building on Experience, Alaska Bus. Monthly, September 1997, at 28 and following.

Contract Management, supra note 23, at 26, Fig. 6.

Id. at 9.

Armed Services Procurement Act, P.L. 80-413, 62 Stat. 21 (February 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. §3301 et seq.).

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.

Congressional Research Service

Contracting Programs for Alaska Native Corporations

5. a statute authorizes non-competitive awards or the agency is acquiring brandname 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 forprofit,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

authorities for contracting with small businesses.54 Under these authorities, agencies may “set

10 U.S.C. §2304(c)(1)-(7) (defense agencies) & 41 U.S.C. §3304(a)(1)-(7) (civilian agencies).

10 U.S.C. §2304(f) (defense agencies) & 41 U.S.C. §3304(e) (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)(1)(B) (defense agencies) & 41 U.S.C. §3304(e)(1)(B) (civilian agencies). The identity of the

approving official is determined by the anticipated value of the contract.

41 U.S.C. §1708.

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”).

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.”).

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.

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

(continued...)

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Contracting Programs for Alaska Native Corporations

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 solesource 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-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

(...continued)

made to small business concerns.”); Competition in Contracting Act, P.L. 98-369, §2711, 98 Stat. 1175-76 (August 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).

Federal law requires that contracts whose anticipated value is between $3,000 and $150,000 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 are similarly required to be set aside for

small businesses if the contracting officer reasonably expects that offers will be obtained from at least two responsible

small businesses offering the products of different small businesses, and the award will be made at a fair market price.

48 C.F.R. §19.502-2(b).

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. §19.5023(a).

See supra note 47 and accompanying text.

See supra notes 48 to 50 and accompanying text.

13 C.F.R. §121.103(a)(1). Control or the power of control need only exist; it need not be exercised.

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.”).

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.”).

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) for either 8(a) BD program

(continued...)

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Contracting Programs for Alaska Native Corporations

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 protest firms’ size,68 self-certifications are not necessarily closely

scrutinized. SBA regulations provide that

A contracting officer may accept a concern’s self-certification as true for the particular

procurement 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

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(...continued)

entry or contract award, the firm’s size shall be determined independently 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)).

13 C.F.R. §124.501(a).

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).

13 C.F.R. §124.109(a)(3).

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.

See 13 C.F.R. §121.108 (including criminal penalties under 15 U.S.C. §645(d)).

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; and the SBA Government Contracting Area Director

with responsibility for the area in which the headquarters of the protested offeror is located). Sole-source awards are

treated differently. See 13 C.F.R. §1001(b)(2)(ii).

13 C.F.R. §121.405(b).

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).

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.

(continued...)

Congressional Research Service

Contracting Programs for Alaska Native Corporations

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

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

(...continued)

See P.L. 95-507, §202, 92 Stat. 1757 (October 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 (August 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

(April 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 (November 15, 1988) (codified at 15 U.S.C.

§637(a)(4)) (making NHO firms eligible for the 8(a) Program).

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. §19.8051(d).

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 (October 28,

2004) (requiring that certain “acquisition” thresholds be periodically adjusted for inflation).

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).

P.L. 111-84, §811(a)(1)-(3), 123 Stat. 2405-06 (October 28, 2009) (prohibiting agencies from awarding sole-source

(continued...)

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Contracting Programs for Alaska Native Corporations

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

(...continued)

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). “Covered procurements” include those described in

10 U.S.C. §2304(f)(2)(D)(ii) and 41 U.S.C. §3304(e)(4)(D), provisions which exempt sole-source contracts awarded

under the authority of Section 8(a) of the Small Business Act from the justifications and approvals required for other

sole-source contracts.

Section 811 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, clarified 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 (March 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.

P.L. 111-84, 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.

See, e.g., AHNTECH, Inc., B-401092, Comp. Gen. December (April 22, 2009) (“The [Small Business] Act affords

the SBA and contracting agencies broad discretion in selecting procurements for the 8(a) program.”).

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 exception

is that tribally and NHO-owned firms are not deemed to be economically disadvantaged in the same way that ANCowned firms are. Compare 13 C.F.R. §124.109(a)(2) (ANC-owned firms) with 13 C.F.R. §124.109(b)(2) (tribally

owned firms) and 13 C.F.R. §124.110(c) (NHO-owned firms).

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

(continued...)

Congressional Research Service

Contracting Programs for Alaska Native Corporations

Table 1. “Special Rules” for Contracting with ANC-owned Firms Under Section 8(a)

of the Small Business Act

“Special Rule” for ANCOwned Firms

Authority for the

“Special Rule”

All affiliations, as defined under

SBA regulations, count when the

SBA makes size determinations.

Affiliations with the parent ANC or

its subsidiaries are excluded when

the SBA makes size determinations

unless the SBA determines that the

ANC-owned firm has obtained, or

is likely to obtain, a “substantial

unfair competitive advantage within

an industry category” if these

affiliations are excluded.

15 U.S.C.

§636(j)(10)(J)(ii); 13

C.F.R.

§124.109(c)(2)(iii)

Management by

nondisadvantaged

individuals (as a

component of

control)

Management and daily business

operations must be conducted by

one or more disadvantaged

individuals.

People who are not Alaska Natives

may manage ANC-owned firms if

the SBA determines that such

management is required to assist

the firm’s development, the firm

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.

13 C.F.R.

§124.109(c)(4)(i)(B)

Social

disadvantage

Individuals are either rebuttably

presumed to be socially

disadvantaged or must prove

individual social disadvantage by a

preponderance of the evidence.

ANC-owned firms are deemed

“minority business enterprises” and

are irrebuttably presumed to be

socially and economically

disadvantaged small business

concerns provided 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);

P.L. 99-272, 101 Stat.

370-71 (Apr. 7,

1986) (codified at 15

U.S.C. §637(a)(4)(A)(B))

Issue

General 8(a) Rule

Exclusion of

certain

affiliations in

size

determinations

(...continued)

regulations, and are not debarred or suspended from government contracting. See 13 C.F.R. §124.108(a). With ANCowned 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, can be granted based on: (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 record of successful performance on contracts from governmental or nongovernmental

sources, and (3) adequate capital to sustain the firm’s operations and carry out its business plan. See 13 C.F.R.

§124.109(c)(6)(ii). 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.

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.

Congressional Research Service

Contracting Programs for Alaska Native Corporations

Issue

General 8(a) Rule

“Special Rule” for ANCOwned Firms

Authority for the

“Special Rule”

Economic

disadvantage

Individuals must show economic

disadvantage upon entry to the

program and annually thereafter.

ANCs are deemed economically

disadvantaged provided that Alaska

Natives and descendants of Alaska

Natives own a majority of the total

equity of the ANC and the total

voting powers to elect directors of

the ANC through their holdings of

settlement common stock.

P.L. 100-241, §15,

101 Stat. 1812-13

(Feb. 3, 1988); P.L.

102-415, §10, 106

Stat. 2115 (Oct. 14,

1992) (codified at 43

U.S.C. §1626(e)); 13

C.F.R. 124.109(a)

Sole-source

awards above

the competitive

threshold

Agencies may make sole-source

awards in excess of $4 million

($6.5 million for manufacturing

contracts) only if the contracting

officer does not reasonably

expect that at least two

responsible firms will submit

offers and the award can be made

at a fair market price.

Agencies may make sole-source

awards to ANC-owned firms at any

time, even when the contracting

officer reasonably expects that at

least two responsible 8(a) firms will

submit offers and the award can be

made at a fair market price.

P.L. 100-656, §602(a),

102 Stat. 3887-88

(Nov. 15, 1988)

(codified at 15 U.S.C.

§637(a)(1)(D)(i)-(ii));

13 C.F.R. §124.506(a)

Inability to

receive

additional

source-source

awards after

obtaining a

certain amount

of 8(a) awards

8(a) firms generally may not

receive additional sole-source

awards once they have received a

combined total of competitive and

sole-source awards in excess of

(1) $100 million, in the case of

firms whose size is based on their

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.

ANCs can continue to receive

additional sole-source awards even

once they have reached $100

million or other applicable

threshold.

13 C.F.R.

§124.519(a)-(d)

Owners’ onetime eligibility

for the 8(a)

Program

Individuals may confer eligibility

for the 8(a) Program upon only

one firm; individuals, along with

their firms, may participate in the

8(a) Program for a maximum of

nine years.

ANCs may confer eligibility upon

multiple firms; while ANC-owned

firms must leave the 8(a) Program

after a maximum of nine years, the

ANC can continue to participate in

the program as a firm owner

perpetually.

P.L. 101-37, §4, 103

Stat. 70-71 (June 15,

1989) (codified at 15

U.S.C.

§636(j)(11)(B)-(C))

Ability to own

majority

interests in

multiple 8(a)

firms

Individuals who have been

determined to be disadvantaged

for purposes of one 8(a) firm,

their immediate family members,

and 8(a) firms themselves

generally may not own more than

20% of any other 8(a) firm.

ANCs are barred from owning

more than 51% of another 8(a) firm

obtaining the majority of its

revenues from the same primary

industry in which another ANCowned firm operates or has

operated within the past two years.

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

industry.

P.L. 101-37, §4, 103

Stat. 70-71 (June 15,

1989) (codified at 15

U.S.C.

§636(j)(11)(B)-(C));

13 C.F.R.

§124.109(c)(3)

Source: Congressional Research Service.

Congressional Research Service

Contracting Programs for Alaska Native Corporations

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. 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 SBA’s resources are adequate for thorough

reviews of 8(a) firms,90 and a January 2012 GAO report opined that SBA “cannot implement” its

new rules (discussed below) intended to strengthen 8(a) firms’ role in any joint ventures using

currently available information.91

13 C.F.R. §124.109(c)(3)(i) (“For corporate entities, a Tribe must unconditionally own at least 51 percent of the

voting stock and at least 51 percent of the aggregate of all classes of stock. For non-corporate entities, a Tribe must

unconditionally own at least a 51 percent interest.”). ANC-owned firms are subject to the same requirements as tribally

owned firms here.

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.”).

13 C.F.R. §124.109(a) & (b).

13 C.F.R. §124.109(b)(7)(ii).

13 C.F.R. §124.109(c)(6).

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 generally 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).

Compare Small Business Administration, 8(a) Business Development (BD) Program Application: Alaska Native

Corporation-Owned Concern, available at http://www.sba.gov/content/8a-business-development-bd-programapplication-alaskan-native-corporation-owned-concern with Small Business Administration, 8(a) Business

Development Program Application, available at http://www.sba.gov/sites/default/files/SBA%20Form%201010_0.pdf.

Small Business Administration, 8(a) Annual Update, available at http://www.sba.gov/sites/default/files/

forms_1450.pdf.

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 (November 2008), available at

http://www.gao.gov/new.items/d0916.pdf (noting a lack of routine surveillance reviews).

Federal Contracting: Monitoring and Oversight of Tribal 8(a) Firms Need Attention, supra note 3, at 39. This report

also suggested that SBA has failed to address certain previously identified issues, such as determining when an ANCowned firm would have an “unfair advantage” over other 8(a) firms due to its affiliation with an ANC or other

subsidiaries of an ANC. Id. at 41.

Congressional Research Service

Contracting Programs for Alaska Native Corporations

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 provisions create incentives for agencies to contract with

ANCs or their subsidiaries by, for example, allowing contracts with “large” ANCs to count

toward federal prime contractors’ goals for subcontracting with small businesses.

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. The amount appropriated remained constant at $8

million per year between FY1989 and FY2006, and was increased to $15 million per year during

the 110th Congress.94 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.95

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.”).

P.L. 100-442, §7, 102 Stat. 1765 (September 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 (October 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.

See P.L. 101-165, §9103, 103 Stat. 1151-52 (November 21, 1989); P.L. 101-511, §8077, 104 Stat. 1892-93

(November 5, 1990); P.L. 102-172, §8112A, 105 Stat. 1202 (November 26, 1991); P.L. 102-396, §9091A, 106 Stat.

1922 (October 6, 1992); P.L. 103-139, §8059A, 107 Stat. 1453 (November 11, 1993); P.L. 103-335, §8025A, 108 Stat.

2623 (September 30, 1994); P.L. 104-61, §8024, 109 Stat. 657 (December 1, 1995); P.L. 104-208, §8024, 110 Stat.

3009-93 (September 30, 1996); P.L. 105-56, §8024, 111 Stat. 1225 (October 8, 1997); P.L. 106-79, §8024, 113 Stat.

1236 (October 25, 1999); P.L. 106-259, §8022, 114 Stat. 679 (August 9, 2000); P.L. 107-117, §8022, 115 Stat. 2252

(January 10, 2002); P.L. 107-248, §8021; P.L. 108-87, §8021; P.L. 108-287, §8021; P.L. 109-148, §8020; P.L. 109289, §8018; P.L. 110-116, §8021; P.L. 110-329, §8021; P.L. 111-118, §8021, 123 Stat. 3432. The amount appropriated

remained at $15 million per year during the first session of the 112th Congress. See P.L. 112-10, §8020, 125 Stat. 61

(April 15, 2011); P.L. 112-74, §8019, 125 Stat. 808-89 (December 31, 2011).

48 C.F.R. §52.226-1(b).

Congressional Research Service

Contracting Programs for Alaska Native Corporations

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.96 Any challenges are referred to the Bureau of Indian Affairs for eligibility

determinations.97

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.98

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.99 These subcontracting plans establish goals for the value of

subcontracts that prime contractors should award to small businesses and small disadvantaged

businesses, among others.100 A contractor’s failure to comply with its subcontracting plan

constitutes a material breach of the contract, potentially allowing the agency to terminate the

contractor for default.101 The contractor could also potentially be required to pay liquidated

damages.102

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).103 Moreover, until October 3, 2008, other firms had to be certified SDBs for

subcontracts with them to count toward contractors’ goals.104 All 8(a) firms were deemed to be

48 C.F.R. §52.226-1(b)(1).

Id.

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 (January 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 (August 2,

2002). The regulations have apparently been promulgated as if the Emergency Supplemental Act still governed. See

Dep’t of Defense, General Servs. Admin., & National Aeronautics & Space Admin., FAR Case 2004-017, Small

Business Credit for Alaska Native Corporations and Indian Tribes, 72 Fed. Reg. 46345 (August 17, 2007).

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.

100

15 U.S.C. §637(d)(6).

101

15 U.S.C. §637(d)(8).

102

48 C.F.R. §19.705-7.

103

15 U.S.C. §637(d)(1) (describing subcontracting with “small businesses”).

104

See Small Business Administration, Small Disadvantaged Business Program, 73 Fed. Reg. 57490 (October 3, 2008)

(announcing that SBA would no longer certify SDBs);13 C.F.R. §124.1001(c) (2009) (“A firm may represent that it

(continued...)

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Contracting Programs for Alaska Native Corporations

SDBs, but other firms at least 51% unconditionally owned and controlled by socially and

economically disadvantaged individuals or groups could also obtain certification.105

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 certain contracts

funded by the Department of Transportation (DOT), provided that they obtain the necessary

certifications.106 The Transportation Equity Act for the 21st Century (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.107

However, later regulations, promulgated in response to court cases challenging the

constitutionality of “quotas” for minority firms,108 construe “10 percent” as an “aspirational goal

at the national level,” 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.”109

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”

ineligible for the DOT program.110 Second, “small disadvantaged businesses” under TEA-21

include women-owned firms,111 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

(...continued)

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.”).

105

13 C.F.R. §124.1002 (2008).

106

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.”).

107

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 (August 10, 2005). More recently, Congress has enacted the

Moving Ahead for Progress in the 21st Century Act (MAP-21), which includes similar language. See P.L. 112-141,

§1101, 126 Stat. 415 (July 6, 2012).

108

See CRS Report RL33284, Minority Contracting and Affirmative Action for Disadvantaged Small Businesses: Legal

Issues, by (name redacted).

109

49 C.F.R. §26.41(b)-(c).

110

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.”).

111

P.L. 105-178, §1101(b)(2)(B).

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Contracting Programs for Alaska Native Corporations

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-76.112

OMB Circular A-76, along with its four attachments,113 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 riders114 and permanent laws115 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.116

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

112

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

(January 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.

113

Attachment 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.

114

See, e.g., P.L. 111-8, §737, 123 Stat. 559 (March 11, 2009) (suspending new A-76 competitions).

115

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 (name redacted), (name redacted)

, and (name redacted), at Appendix A.

116

See P.L. 101-165, §9036, 103 Stat. 1137 (November 21, 1989); P.L. 101-511, §8026, 104 Stat. 1880 (November 5,

1990); P.L. 102-172, §8026, 105 Stat. 1177 (November 26, 1991); P.L. 102-396, §9026, 106 Stat. 1906 (October 6,

1992); P.L. 103-139, §8022, 107 Stat. 1442 (November 11, 1993); P.L. 103-335, §8020, 108 Stat. 2621 (September 30,

1994); P.L. 104-61, §8020, 109 Stat. 656 (December 1, 1995); P.L. 104-208, §8015, 110 Stat. 3009-91 (September 30,

1996); P.L. 105-56, §8014, 111 Stat. 1223 (October 8, 1997); P.L. 106-79, §8014, 113 Stat. 1234 (October 25, 1999);

P.L. 106-259, §8014, 114 Stat. 677 (August 9, 2000); P.L. 107-117, §8014, 115 Stat. 2250 (January 10, 2002); P.L.

107-248, §8014, 116 Stat. 1539 (October 23, 2002); P.L. 108-87, §8014, 117 Stat. 1074 (September 30, 2003); P.L.

108-287, §8014, 118 Stat. 972 (August 5, 2004); P.L. 109-148, §8014, 119 Stat. 2700 (December 30, 2005); P.L. 109289, §8013, 120 Stat. 1275-76 (September 26, 2006); P.L. 110-116, §8015, 121 Stat. 1316-17 (November 13, 2007);

P.L. 110-329, §8016, 122 Stat. 3623-24 (September 30, 2008); P.L. 111-118, §8016, 123 Stat. 3430-31 (December 19,

2009); P.L. 112-10, §8016(b)(1)(C), 125 Stat. 59 (April 15, 2011); P.L. 112-74, §8039, 125 Stat. 814-15 (December 31,

2011).

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Contracting Programs for Alaska Native Corporations

ownership,” among others.117 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).118 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.119 The exemptions for direct conversions

remained unchanged since the 106th Congress.120

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.

Legislative Activity in the 112th Congress

Members of the 112th Congress have introduced legislation (H.R. 598, S. 236) 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.121 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.122 It would also amend the definition of “Indian tribe” contained in Section

117

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.

118

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.”).

119

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.”).

120

See P.L. 112-74, §8039, 125 Stat. 814-15 (December 31, 2011).

121

As introduced, H.R. 598 and S. 236 are identical in their provisions and numbering.

122

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

(continued...)

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Contracting Programs for Alaska Native Corporations

8(a)(13) of the Small Business Act so that ANCs no longer constitute “Indian tribes” for purposes

of the 8(a) Program.123 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 1988.124 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).125

Excluding ANCs from Section 8(a)’s definition of “Indian tribe” would, thus, subject them to the

competitive thresholds, as well as 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.126

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.”127 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.128

Regulatory Developments

On February 11, 2011, SBA amended its rules to change certain eligibility and other requirements

pertaining to the 8(a) Program.129 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;130 (2) must report annually to the SBA on the

(...continued)

to be promulgated by the SBA. H.R. 598, §8(a)-(b); S. 236, §8(a)-(b).

123

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 97 and accompanying text.

124

ANC-owned firms could, however, potentially still receive sole-source awards under other authority, including the

Competition in Contracting Act. See supra note 47 and accompanying text.

125

P.L. 100-656, §602(a), 102 Stat. 3887-77 (November 15, 1988).

126

H.R. 598, §3 & 5; S. 236, §3 & 5.

127

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.

128

H.R. 598, §8; S. 236, §8.

129

Small Bus. Admin., Small Business Size Regulations; 8(a) Business Development/Small Disadvantaged Business

Status Determinations: Final Rule, 76 Fed. Reg. 8222 (February 11, 2011).

130

Id. at 8234 (codified at 13 C.F.R. §124.109(c)(3)(2)). The proposed rule would have gone further and prohibited a

(continued...)

Congressional Research Service

Contracting Programs for Alaska Native Corporations

benefits provided to Alaska Natives from the ANC’s participation in the 8(a) Program;131 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.132 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.133 In addition, the rule indicates that it is the SBA’s policy to have ANC-owned

firms’ applications for the 8(a) Program processed at the San Francisco Division of Program

Certification and Eligibility whenever possible.134 These applications had previously been

processed in the Anchorage District Office.

These changes generally took effect on March 14, 2011, although the SBA has delayed

implementation of the requirement that ANCs report on the benefits provided to Alaska Natives

through their participation in the 8(a) Program.135

Author Contact Information

(name redacted)

Legislative Attorney

[redacted]@crs.loc.gov, 7-....

(name redacted)

Legislative Attorney

[redacted]@crs.loc.gov, 7-....

Acknowledgments

(name redacted), former CRS specialist in American Indian policy, and (name redacted), former CRS

legislative attorney, co-authored this report.

(...continued)

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 Bus. Admin.,

Small Business Size Regulations; 8(a) Business Development/Small Disadvantaged Business Status Determinations:

Proposed Rule, 74 Fed. Reg. 55694, 55702 (October 28, 2009).

131

76 Fed. Reg. at 8264 (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.

132

Id. at 8235 (codified at 13 C.F.R. §124.109(c)(6)(i)-(iii)).

133

Id. at 8241 (codified at 13 C.F.R. §124.506(b)(4)). The non-8(a) firm may serve as a subcontractor only if the SBA’s

Associate Administrator for Business Development determines that other potential subcontractors are not available.

134

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.

135

The regulations promulgated in February provided that this reporting requirement would be effective “as of

September 9, 2011, unless SBA further delays implementation through a Notice in the Federal Register.” Id. at 8222.

However, SBA appears to have delayed reporting, in part, so that it could consult with the Tribes. See, e.g., Small Bus.

Admin., Notice of Tribal Consultations, 76 Fed. Reg. 27859 (May 13, 2011); Small Bus. Admin., Notice of Tribal

Consultations, 76 Fed. Reg. 12273 (March 7, 2011). Most recently, SBA gave notice that it has submitted the reporting

requirements to the Office of Management and Budget for review. See Small Bus. Admin., Notice of Reporting

Requirements for OMB Review, 77 Fed. Reg. 12902 (March 2, 2012).

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