The Federal Government has a program called “Section 8(a)” that is used to favor small businesses. This rule allows the award of sole source contracts to companies meeting certain requirements. The idea is to grow small businesses through this simpler award process and also aid disadvantage groups. The 8(a) rules favor those contractors owned by women, minorities and service disabled veterans. The restriction on the program is that the size of the contract is limited to under $20 million since the goal is jump start small companies into larger ones.
One of the legacies of Senator Ted Stevens (R-AK) was a rule that Alaskan Native American companies could win a contract of any size. He had this change made in the defense bills. This has allowed those corporations to grow and win contracts over not only other 8a companies but also traditional contractors as well. This rule had raised the hackles of other Senators and in the last few years there has been movement to eliminate the rule favoring Alaskan companies.
Not only that but one of the reforms that the Obama Administration is trying to accomplish is the reduction in the number of sole source contracts awarded. The goal with that reform is to gain more competition, better pricing and ultimately save money. The use of sole source contracts makes an award process simpler and easier for the contracting command involved as it shortens the time line since there needs to be no competition. There use is often justified to gain speedy awards. These changes are putting pressure on all Native American owned companies but especially Alaskan ones who may see a significant decline in their work if the government does limit awards and increase competition.
The most recent Defense Authorization Bill included a limit of sole source contracts to $20 million dollars without requiring extended approval and justification. This change will make it harder to award these contracts quickly which may lead to more competitions among non-8(a) companies. The Defense Department is meeting with Native American groups to discuss these changes and their affects.
The government is also facing problems because of a recent court case that ruled that HUBZone companies take precedence over other small businesses. Since few Native American corporations are in Historically Underutilized Business Zones which are normally in large urban areas this ruing will also limit their chances of getting sole source awards. This means that Native American companies may have to compete for these contracts as if a HUBZone company wants the business and it is decided to sole source it they must get it.
The government has in the past justified these contracts as a way to help disadvantaged groups at the cost of a small amount of inefficiency and the chance of slightly higher prices. The current deficit situation and the desire to increase efficiency as well as Steven’s exemption of his home state businesses have led to a reevaluation of these processes. The end result may be a significant decrease in the amount of work these companies now get from the government or increased costs for them as they must bid on contracts. Either result limits the effect of the Federal spending on their communities which was the whole point of the program in the first place.