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No ‘loophole’ in Native business success

For the past several years there has been considerable congressional and public attention paid to government contracts. Democratic congressional committees investigated possible abuses of sole-source contracting largely because they considered that many large corporations were benefiting from special arrangements in government and, in particular, defense contracts. At the same time, sole-source contracting from tribal contractors also came under fire, and continues to draw attention.

Sen. Claire McCaskill, D-Mo., is known for cleaning up government contract issues. She campaigned on these issues when seeking office while working for the Missouri State government. McCaskill chairs the Ad Hoc Committee on Contracting Oversight to assess issues of government contract abuse and waste. The senator has revived attention to the sole-source contracting by tribal corporations and businesses, in particular the rapid increase in sole source contracting by Alaska Native Corporations.

ANCs were created by the Alaska Native Claims Settlement Act of 1971 and were designed to manage assets and build Native economies as for-profit, state-chartered businesses. In 1988, Congress authorized the Small Business Administration to qualify ANCs and tribally-owned businesses for section 8(a) sole-source contracting.

The program enabled businesses to secure government contracts without a competitive bid process and as long as government monitors and contractors found good performance and value for the government and taxpayers. A qualifying business can participate in the program for a specific number of years. Thereafter, having gained market experience and access, the small businesses are more capable of participation and success on the national market.

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The 1988 amendments were designed to encourage tribal businesses to participate in government contracting. Before, few Indian or ANCs were winning significant government contracts. Because of the general absence of Indian market participation and the economic disadvantage of tribal communities, tribal businesses were not restricted to contract limits. Most small businesses are owned and operated by single business persons, and they are working to increase private wealth, so the 8(a) program provides access to minority, female and economically disadvantaged business people, but SBA restrictions limit contracts to less than $5.3 million. Tribally-owned business are owned and operated for the benefit of tribal members or tribal shareholders, and those can number into the hundreds or thousands.

One of the complaints of a recent Government Administration Office report was that ANCs are using a “loophole” to gain access to federal sole-source contracts. Since 2000 contracts by ANCs have increased from $265 million to $1.1 billion in 2004. The GAO report uses a strongly negative term to describe a process of inviting American Indian tribal businesses into the marketplace through limited time access to government contracting.

Other reports by the Washington Post also use the expression “loophole” when reporting the activities of McCaskill’s committee work. The discussion is compounded by the GAO report, which often does not show conclusive results, and only suggests that ANCs may have competitive advantages over privately-owned small businesses. The report suggests that many small business organizations have complained about the surge in ANC government contracting in recent years, and suggest, but do not show evidence, that ANCs have strong competitive advantages over small private enterprise.

There is some discussion that tribally-owned business may not belong in the SBA programs. Tribal enterprises owned and operated by tribal communities for their collective economic goals do not fit the mainstream definition of typical small businesses. Tribal businesses serve the needs of the most economically disadvantaged people in the United States, but they also serve the economic policy needs of sovereign Indian communities that want to engage in market enterprise in ways that conform to their history and culture.

The GAO report notes some of the unique organizational differences between tribally-owned businesses, ANCs in particular, but then do not take into account the long term economic and political commitments the United States has to enable tribal communities to develop economically according to their own values and community needs. Indian policy in this discussion is replaced by discussions of loopholes. While effective regulation of sole-source contracting is welcome, the broader goal should be to promote successful Indian tribal business enterprise.