Small Business Administration 8(a) Program
In the Small Business Act of July 30, 1953, Congress created the Small Business Administration (SBA), whose function was to "aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns." The charter also stipulated that the SBA would ensure small businesses a "fair proportion" of government contracts and sales of surplus property. The SBA’s mission is to maintain and strengthen the nation's economy by aiding, counseling, assisting and protecting the interests of small businesses and by helping families and businesses recover from national disasters.
The SBA 8(a) Business Development Program is named for Section 8(a) of the Small Business Act. This business development program was created to help small disadvantaged businesses compete in the American economy, and more specifically, in the federal contracting arena. To qualify for this program, a firm must be a small business, be unconditionally owned and controlled by one or more socially and economically disadvantaged individuals, and demonstrate a potential for success.
A small disadvantaged business is defined as one that is at least 51% owned by one or more individuals who are both socially and economically disadvantaged. This can include a publicly owned business that has at least 51% of its stock unconditionally owned by one or more socially disadvantaged individuals and whose management and daily business is controlled by one or more such individuals.
Under the SBA’s 8(a) Program, a federal agency can sole source a contract to an 8(a) company if it meets certain criteria. In general, these criteria include that the company can demonstrate that it has the capability to perform the work and that the solicitation has not been published as a competitive procurement.
There is a $5.5 million dollar limit on the size of a manufacturing contract and a $3.5 million dollar limit on the size of all other contracts that may be offered on a sole-source basis to an 8(a) company. A company that is classified as an 8(a) with tribal status is not subject to this threshold. The U.S. government provided this opportunity because unlike regular small businesses in which profits generally go to one individual or one family, the profits from Native enterprises are shared by hundreds – and sometimes even thousands – of Native American tribal members.
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What is the Native 8(a) Program?
Under a provision created by Congress in the 1980’s to the Small Business Act of 1958, tribal corporations certified under Section 8(a) of the Small Business Act may contract with the federal government without a cap on the amount of a sole-source contract. Other individual small businesses certified by Section 8(a) of the Act may also be awarded a sole-source contract, but are limited by the dollar amount of the contract. Additionally, while tribal corporations can obtain 8(a) certification for affiliate enterprises, individual small businesses cannot own more than 20 percent of one additional Section 8(a)-certified affiliate in their lifetime. These provisions were created to acknowledge that Native 8(a) enterprises must provide benefits to entire communities -- hundreds or thousands of disadvantaged people -- whereas individual business owners provide benefits to one or two owners.
Why did Congress create the Native 8(a) Program?
In the 1980’s, the Reagan Commission on Indian Reservation Economies observed that federal procurement policy actually obstructed reservation economic development. A subsequent Congressional inquiry found that very few tribal enterprises participated in the Section 8(a) program. Recognizing the positive impact that the 8(a) program could have on tribal communities living in devastating poverty with little to no economic opportunity, Congress created the exceptions in the law for enterprises owned communally by tribes, Alaska Native Corporations and later, Native Hawaiian Organizations – community based organizations required to provide social, economic and cultural benefits to their Native owners in perpetuity.
What has the Impact of the Native 8(a) Program been for Tribal Communities?
The Native 8(a) Program is a hand up, not a hand out. This non-appropriated opportunity provides a channel from contracting profits to the members of the tribal or Native Hawaiian community it serves. Tribal enterprises receive less than 1.3% of the total U.S. procurement pie. Yet this minuscule market share creates educational opportunities to tribal members, housing for elders and other tribal members, preservation of tribal culture and language, and funding for governmental services such as police officers, court systems, health care facilities, and child welfare programs. This program has had remarkable successes and, in fact, supplements those underfunded federal programs as tribes exercise self-sufficiency and self-determination.
What does the future of the Native 8(a) Program hold?
A few Alaska Native Corporations have experienced great success with the Native 8(a) program and in so doing have become an “easy target” for those who do not fully understand the small scope and big impact of this opportunity. Many more tribal corporations are queued up to work hard and deliver quality services to the Federal government and return benefits to their members, but are finding opportunities more limited. Misunderstanding the program and who it serves, a few Members of Congress have put this program in their sights and tried to halt this successful program. The Small Business Administration is now finalizing new regulations that will address the majority of the concerns raised by these few members of Congress over the years. The Native 8(a) program continues to face many challenges. As tribal communities seek additional ways to diversify their economies, the Native 8(a) program is an avenue many tribes, Alaska Native Corporations and Native Hawaiian Organizations are looking to participate in. However, achieving 8(a) certification can prove time-consuming and costly. Additionally, recent scrutiny on the Native 8(a) program by members of Congress leaves some tribal corporations uneasy about making the investment. Nevertheless, the benefits of the program and opportunities for economic diversification are immense and the Native American Contractors Association and its members will continue to advocate for expansion of the program.