Background:

Based on its unique legal relationship with Indian tribes the Federal Government has taken a number of steps to promote the economic self-sufficiency of Native communities who still remain among the poorest and most under-employed groups in America. One of its most successful initiatives has been making Native American corporations eligible for the Small Business Administration's 8(a) Program. The Federal government buys over $200 billion in goods and services annually, and through the 8(a) Program, has a statutory goal of awarding at least 23 percent of its purchases to small businesses, including Native corporations. 

By statute and regulation, Indian tribes, Alaska Natives and Native Hawaiian organizations (Native Americans) have different 8(a) rights than companies owned by individuals. The primary advantages are: 1) They are exempt from the limits placed on sole source contracts; and 2) They can own multiple companies that can join the 8(a) Program. The profits generated by these Native corporations provide economic benefits to tribal communities, sometimes numbering in the thousands. Profits generated by individually-owned businesses benefit only that individual owner. 

Native American participation in this program is under attack by many different stakeholders. The recent controversy has erupted because these unique Native American corporations have been increasingly successful in getting government contracts. These contracts are not gifts or grants; the corporations must demonstrate capabilities and experience to the government customer. If convinced, the government procuring agency can use the unlimited sole-source capability of Native corporations and tribes to direct larger contracts to the 8(a) Program. 

The award of a few large contracts has prompted a number of news reports most of which have not fully represented the history and benefits of the tribal 8(a) Program. The federal Indian and procurement policy issues raised in these stories and by actions of some members of Congress are complex. They involve many stakeholders, including minority 8(a) trade associations and a host of congressional committees. Several unions and non-profit "watchdog" groups who are concerned about the growing number of sole-source and non-competed contracts in the government generally also have the tribal 8(a) Program on their radar screen. 

What is the Tribal 8(a) Program?

The 8(a) Program recognizes the unique status of Indian tribes, Alaska Natives and Native Hawaiian organizations. It has been extremely difficult for Native corporations to overcome barriers – such as the vast, rural nature of Indian country, the lack of basic infrastructure and the lack of economic development opportunities in Native communities and villages – without assistance. To help them overcome these barriers, Congress provided unique procurement rights to Native Americans under the Small Business Administration's 8(a) Program. These are an important tool in promoting Indian economic development and tribal self-sufficiency.

These rights are based on the legal and political relationship that exists between the United States and tribes and on the duty of the Federal Government to promote a sustainable Native economy. 

Why Native 8(a) firms have the unlimited dollar size sole-source capability?

Native corporations are unique. Each may represent thousands of members and Native owners. The profits and economic benefits of most Native corporations are shared with their tribal shareholders or tribal owners. In order to provide a benefit in the form of a dividend or a community benefit of any consequence, Native corporations must generate much larger revenues and profits than individually owned firms. 

In order to make a proper comparison between individually-owned 8(a) companies and Native corporations, one would have to envision all 4,000 members of a Native-owned corporation forming 4,000 individually owned 8(a)s. Then a significant benefit could result to the owners of each of the 4,000 corporations. Provided each of those individually owned Native American firms had the expertise to run a business successfully. Many facets of the competitive corporate environment are contrary to traditional Native American culture. 

Other than the large sole-source contracts, what are the key differences between individual 8(a)s and Native 8(a)s?

1) Native 8(a)s are eligible for the large sole-source contracts, they can also select whomever they want to manage the 8(a), whereas individual owners must manage the 8(a) on their own. Native corporations must have Boards of Directors, which oversee the 8(a) management team as well as other issues, such as preservation of their culture and distribution of tribal owner benefits.

2) All 8(a)s, including Native corporations, are limited to 9 years in the program.

3) Native corporations can have multiple 8(a)s, but no two subsidiaries can be in the same primary industry code. The reason for this is that Native 8(a)s provide benefits to their tribal owners and community.

Do the Tribal communities really benefit from the 8(a) program? 

Yes. The Alaska Native corporations are currently conducting a survey to assess the breadth and impact of their benefits. Preliminary results show that millions of dollars have flowed back into the tribal communities. For example, in 2004, Alaska Native corporations paid $27,144,119 in dividends to tribal shareholders and donated $4,859,937 for cultural and social programs. Nationwide federal contracting by Native firms has created over 27,822 jobs. Learn more about how the 8(a) Program is changing the lives of Native Americans through testimonials. Other community benefits include:

What is the difference between revenues and profits?  

Revenues represent the total value of the contract and profits represent the amount of money left for the owners after the work has been completed. Profits on federal contracts range from 1 or 2% on equipment sales up to 10-15% on proprietary products. Services such as engineering and information technology are generally in the range of 5-10%. If a Native corporation had $40 million in revenue, one of the bigger 8(a)s, and the profit margin is 5%, the Native-owned corporation with 4,000 tribal shareholders or tribal members would share in $2 million of profit or $500 per individual. An individually owned 8(a) would share the $2 million with no one but itself.

What is at stake?

There is growing concern that Native Americans participation in the 8(a) Program, and indeed the 8(a) Program in general, is in jeopardy. Native Americans only recently began to compete in the federal marketplace and are only now beginning to achieve some measure of success. The 8(a) Program has become an important tool in building a culture of ownership and entrepreneurship in Indian country and in diversifying Native economies. While Native Americans participation in this program is enabling them to compete in the American marketplace and to become self-sufficient, they remain one of the poorest and most under-employed groups in America. The 8(a) Program is changing that and enabling Native Americans – through their hard work and business ingenuity – to improve their lives and to create jobs for all Americans. By jeopardizing Native Americans participation in this program, we are jeopardizing this progress.   

To learn about Native American federal contracting facts, follow this link.

For more information: 

Karen J. Atkinson, Executive Director
Native American Contractors Association  Phone: 202.349.9845