Native 8(a) Works

Proposed Rule Changes for ANCs, Tribes & NHOs

The Small Business Association (SBA) accepted comments through January 28, 2010 on its Proposed Rule governing the 8(a) Business Development/Small Disadvantaged Business Status Determinations. The SBA is currently reviewing those comments and considering them as it prepares the final rule. While an exact timetable is unknown, SBA officials have stated their intention to publish the Final Rule in the Federal Register by the end of calendar year 2010. Date(s) for implementation the new regulations will be indicated at that time.

Information courtesy of Pam Mazza, PilieroMazza PLLC, Attorneys at Law. 2009

Size for Primary NAICS Code

Rule Citation Current Rule Proposed Changes
13 C.F.R. § 124.102, 124.302 13 C.F.R. § 124.102 provides that a firm must qualify as small under its primary NAICS code when it applies for the 8(a) Program. Historically, SBA has permitted firms to remain in the 8(a) Program and receive 8(a) contracts in their secondary NAICS codes as long as they remained small for such secondary codes, even if they no longer qualified as small under their primary NAICS code.

In determining whether to graduate an 8(a) firm early, SBA considers a number of factors under section 124.302, including sales trends, degree of sustained profitability and current ability to obtain bonding

 SBA proposes to amend section 124.102(a) to require that a firm remain small for its primary NAICS code during its term of participation in the 8(a) Program. Additionally, in determining whether to early graduate an 8(a) firm, this rule proposes to revise section 124.302 to permit SBA to consider, among other factors, whether the firm exceeds the size standard corresponding to its primary NAICS code for two successive program

SBA’s Determination of Whether a Tribe is Economically Disadvantaged

Rule Citation Current Rule Proposed Changes
13 C.F.R. §124.109(b)(2) This regulation currently requires Indian Tribes to demonstrate their economic disadvantage through the submission of “available data showing the Tribe’s economic condition.” SBA considers such factors as:

1.The number of Tribal members

2.The recent Tribal unemployment rate

3.The per capita income of Tribal members

4.The percentage of the local Indian population below the poverty level

5.The Tribe’s access to capital

6.The Tribal assets as disclosed in a current financial statement

7.A list of wholly or partially owned Tribal enterprises or affiliates and the primary industry classification of each.

Tribes need only demonstrate their economic disadvantage one time. 		SBA is proposing to change the way it determines whether a Tribe is economically disadvantaged. Some options include a bright line assets or net worth test.

SBA requests comments on whether a Tribe should be required to determine its economic disadvantage more than one time.

Limits on the Type of Work a Tribally-Owned Entity May Perform

Rule Citation Current Rule Proposed Changes
13 C.F.R. §124.109(c)(3)(ii)

Currently, an ANC or Tribally-owned 8(a) applicant cannot have the same primary NAICS code as another Tribal entity that has already been admitted into the 8(a) Program, or that has left the Program within the last two years.

However, the regulation allows the applicant to perform secondary work in the same NAICS code as another ANC/Tribal firm.

The proposed rule provides that a newly certified ANC or Tribally-owned 8(a) firm may not receive an 8(a) contract in a secondary NAICS code that is the primary NAICS code of another ANC or Tribal entity (or ANC/Tribal entity that has graduated within two years) for two years from the date of admission to the program.

As an alternative, SBA is also considering allowing the applicant to perform such secondary work on a limited basis

Management of a Tribally-Owned Firm: Economic Disadvantage Requirements for Tribal Members

Rule Citation Current Rule Proposed Changes
13 C.F.R. §124.109(c)(4)

Under the current rules, a Tribal member must qualify as economically disadvantaged to manage the daily business operations of a Tribally-owned concern.

(In practice, the SBA has not required that Tribal members demonstrate that they qualify as “economically disadvantaged,” as these terms are defined only to SBA to manage the 8(a) firm/applicant.)

 The proposed rule provides that any Tribal member may participate in the management of a Tribally-owned firm and need not qualify as economically disadvantaged. Therefore, directors and officers would no longer need to submit copies of their individual tax returns to establish their economic disadvantage.

Management of a Tribally-Owned Firm: Membership in the Tribe

Rule Citation Current Rule Proposed Changes
13 C.F.R. §124.109(c)(4) Tribal 8(a) firms must generally be managed by individuals who are members of the Tribe that owns the concern. SBA requests comments on whether this rule is too restrictive and whether membership in any Tribe should suffice.

Potential for Success Requirement

Rule Citation Current Rule Proposed Changes
13 C.F.R. §124.109(c)(6) In order for an ANC or Tribally-owned entity that has been in business less than 2 years to be eligible for the 8(a) Program, the ANC/Tribe must demonstrate that it has the potential for success. The proposed rule permits SBA to find that an ANC/Tribally-owned firm has the potential for success where an ANC/Tribe has made a firm written commitment to support the operations of the applicant concern and the ANC/Tribe has the financial ability to do so.

Annual Reviews; Reporting Benefits

Rule Citation Current Rule Proposed Changes
13 C.F.R. § 124.112(b) ANCs must certify as to certain eligibility requirements as part of the annual review process. Annual ANC reviews will require information on the extent to which benefits are reaching individual Alaska natives or the native community. The same reporting requirements may also be applied to 8(a) Participants owned by tribes, NHOs and CDCs.

ANC Application Review

Rule Citation Current Rule Proposed Changes
ANC Application Review

13 C.F.R. §124.204(a)		 SBA’s Anchorage, Alaska District Office initially reviews all applications from ANC-owned firms ANC 8(a) applicants will be reviewed out of San Francisco, not Anchorage, and SBA may send some cases to Philadelphia

Upcoming Events

The National 8(a) Association will hold its 2012 Winter Conference Feb. 7-8 at Walt Disney World Resort in Florida.
February 27 - March 1, 2012 More >>
26th Annual Reservation Economic Summit (RES 2012)
Las Vegas, NV