IHS (Finally) Proposes Stronger Rules for Buy Indian Act

The Indian Health Service has released a proposed rule that will strengthen requirements for IHS to set aside contracts for businesses owned by tribal companies. The new rule should result in increased opportunities for native-owned businesses by bringing Buy Indian Act purchasing preferences in line with other purchasing policies such as the small business Rule of Two, and it’s about time, as this purchasing preference has been law for 110 years with little clarity on how agencies would enforce it.

The Indian Health Service (IHS) is an agency of the United States Department of Health and Human Services (HHS) whose principal mission is to provide health care to American Indians and Alaska Natives. The Buy Indian Act was originally passed in 1910, and it states that “[s]o far as may be practicable Indian labor shall be employed, and purchases of the products (including, but not limited to printing, notwithstanding any other law) of Indian industry may be made” by the government.

The goal of the proposed rule changes is to “encourage procurement relationships with Indian labor and industry in the execution of the Buy Indian Act.” Aside from that, there is very little commentary on why IHS decided to implement this rule change, but a GAO report from 2015 noted that “BIA [Bureau of Indian Affairs] and IHS have policies and procedures in place to implement the Buy Indian Act” but “both agencies’ headquarters have limited insight into implementation of the Act at regional offices.”

GAO also noted that at “IHS, use of the Buy Indian Act versus other set-aside programs is unclear and also not sufficiently documented” and that IHS “prioritizes awarding contracts to vendors that help the agency meet its federally mandated small business goals, and that awarding contracts under the Buy Indian Act is secondary to those goals.” But there were inconsistent or nonexistent written policies on these practices.

The proposed regulation clarifies when Indian-owned businesses get priority over other businesses in IHS contracting. In order to do that, the regulation has to provide definitions and a framework for the updated policy, summarized below.

For instance, an “Indian Economic Enterprise (IEE) means any business activity owned by one or more Indians, Federally Recognized Indian Tribes, or Alaska Native Corporations” that is majority owned and controlled by a native person. An “Indian Small Business Economic Enterprise (ISBEE) means an IEE that is also a small business concern established in accordance with the criteria and size standards of 13 CFR part 121.” In addition, the rule applies to “all acquisitions, including simplified acquisitions, made by IHS” and HHS purchases on behalf of IHS.

The new rule provides for tiered priority for set-aside purchases by IHS, with ISBEEs getting top priority, and then IEEs, before following other set-aside requirements. The rule for awarding to ISBEEs or IEEs is similar to the small business Rule of Two or VA Rule of Two.

First, “[t]he CO will give priority to ISBEEs for all purchases, regardless of dollar value, by utilizing ISBEE set-aside to the maximum extent possible.”


If the CO determines after market research that there is no reasonable expectation of obtaining offers from two or more ISBEEs that will be competitive in terms of market price, product quality, and delivery capability, the CO shall expand the market research to all IEEs to determine if the requirement can be set aside for IEEs.

IHS can only move on to other types of federal contractors if there is no reasonable expectation of getting two or more offers “that will be competitive in terms of market price, product quality, and delivery capability, from ISBEEs and/or IEEs.”

In addition, there will now be subcontracting limitations for ISBEE and IEE set-asides by incorporating FAR 52.219-14, Limitations on Subcontracting.

The new rules will also include required clauses in solicitations to implement these procurement priorities. ISBEEs and IEEs will have to certify that they meet the definition of these types of companies at time of offer, contract award, and for the full term of the contract. A CO must investigate allegations that the ISBEE or IEE is not compliant with the eligibility requirements and can ask the offeror for additional information.

The IHS proposed rule will strengthen and clarify the requirements to award contracts to both ISBEEs and IEEs by aligning the acquisition priorities with similar rules under the Small Business Act.

The new rule will also require the CO to review and investigate representations about ISBEE and IEE status. This will lay a lot of additional responsibility at the feet of the COs, rather than having some of the investigative duties conducted by SBA, as is common for most of the set-aside procurement world. We’ll have to see if IHS makes any changes to the proposed rule and, if not, how IHS COs cope with these additional responsibilities to implement this new regulation.

Companies who are looking to go after these types of awards should pay close attention to the new rules and consider providing comments by the January 11, 2021 deadline.

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