While an eleventh hour agreement avoided the “fiscal cliff,” it did not fully resolve potential spending cuts. The agreement delayed the sequester, but its impacts are still being felt by contractors, particularly by small businesses. These entities are at the end of the planning process, and delaying a resolution only prolongs uncertainty.
For Native contractors, there is little to be happy about, and much that raises significant concerns. The consequences of the uncertainty in the federal contracting environment caused by the still looming possibility of sequestration, coupled with the enormously harmful effects of Section 811 of the National Defense Authorization Act for FY2010 (“NDAA”), are painting a potentially very dreary picture for these companies and the communities they serve.
Section 811 requires a justification and approval process for direct awards greater than $20 million that are awarded to Native contractors. Apparently it was designed as an additional process to ensure value in these contracts. The Government Accountability Office (“GAO”) recently released its report titled, “Slow Start to Implementation of Justifications for 8(a) Sole Source Contracts.” The findings in this report are extremely important to Native communities, because their involvement in the Small Business Administration’s 8(a) Business Development Program, through community-owned businesses, provides critically important financial resources that fund the distribution of needed benefits and services. More specifically, the benefits received from government contracting net profits include, but are not limited to jobs, scholarships, subsistence, health services, cultural camps, and dividends.
So why is the recent GAO report so disturbing to Indian Country? The report clearly shows that the implementation of Section 811 is shattering Native communities. Because of the inherent inequitableness of the provision, coupled with the confusion and inconsistency of its implementation, indispensably needed benefits and services for some of the poorest communities in this nation face the real possibility of inadequate funding. The report indicates that between FY2010-FY2011, 8(a) contracting dollars valued greater than $20 million decreased 60% in a single year.
As mentioned, and just as troubling, was the discovery that certain agencies were employing Section 811 incorrectly and/or inconsistently. As an example, the report mentioned that an Army Corps contracting official understood Section 811 as a “cap” on the size of 8(a) awards. Consistently throughout the rule making process it was explained that Section 811 was NOT a cap, but simply a threshold that triggers a process to further ensure value. Right from the beginning was worried that despite the explicit acknowledgment that Section 811 is not a cap it would be interpreted as such, and the report validates this concern. In addition, the report identified instances whereby agencies had established their own threshold limits, in a nonsensical manner, and without any consideration to the entities and the communities served by such entities, not to mention that such policies are inconsistent with federal law.
The 8(a) program for many Native Americans instills pride in communities that aspire to gain the business acumen essential to compete in the federal marketplace. Disadvantaged small businesses such as those owned by Tribes, Alaska Native Corporations, and Native Hawaiian Organizations would never be able to compete with large government contractors without the business development tools provided by the 8(a) Program. Section 811 is obstructing the growth of Native community owned small businesses, which unlike “individually” owned entities, have more than one family to provide needed benefits and resources. The result of Section 811 is that millions of dollars have vanished from significantly needed services, benefits and programs for the national Native community with numbers exceeding over 4.5 million individuals. Up to this point in time, the 8(a) program has achieved success in boosting Native economies across the country where other programs have failed. Although Indian gaming may have some success in a few populated areas, federal contracting, through the SBA 8(a) Program, has consistently fueled rural and very poor Native communities. Section 811 threatens this success, and has now become a new highlight on the 200+ year history of unfair burdens cast upon Native Americans.
Kevin J. Allis is an enrolled member of the Forest County Potawatomi Community. He is the Executive Director of the Native American Contractors Association (NACA), a trade association that enhances self-determination through preservation and enhancement of government contracting participation based on the unique relationship between Native Americans and the federal government. Mr. Allis may be reached at kevin@nativecontractors.org.
This post is part of SmallGovCon’s Guest Perspectives series featuring viewpoints from thought leaders throughout the government contracting community. The opinions expressed in Guest Perspectives are solely those of their authors and do not necessarily represent the opinions of Steven Koprince or Petefish, Immel, Heeb & Hird, LLP.