Piliero Mazza & Pargament, PLLC   Vol. 6, Issue 9,  October 2004

Addressing Tribal and Alaska Native Corporation Legal and Business Issues

The articles shown here are excerpts.  If you would like to subscribe to Tribal Advocate, please contact Susan Brock at (202) 857-1000 or at  .

  A R T I C L E S

COURT WATCH -U.S. District Court Upholds Consitutionality of Small Disadvantaged Business Policies
REGULATIONS - DOD Issues Final Rule Clarifying Indian Incentive Program Criteria
SMALL BUSINESS - The SBA's New Regulation on Contract Novations: What Will It Cost Your Business?
SPECIAL REPORT - S&K Technologies Defends Native American Preference Programs



U.S. District Court Upholds Constitutionality of Small Disadvantaged Business Policies

Recently, the U.S. District Court for the Western District of Texas upheld the constitutionality of small and disadvantaged business (SDB) policies against charges of racial discrimination. The decision in Rothe Development Corp. v. U.S. Department of Defense, W.D. Tex. July 2, 2004 , (Rothe) challenged the Supreme Court’s Adarand decisions on preference programs for SDBs. (See TA, May 2001 for a history of Adarand and January 2002 for a previous challenge.) While future appeals are bound to test such preference programs again, Rothe signals, in one court’s opinion, that the constitution provides the government with ample latitude to consider the present impact of past racial discrimination.

This case arose when Rothe Development Corporation submitted the lowest bid on a computer service contract but was not selected because of a 10 percent price evaluation adjustment (PEA) applied to its proposal. The PEA, implemented by the Federal Acquisition Regulations, is intended to help SDBs succeed in the government contracting arena. The company appealed the decision, arguing that the PEA, as well as the government-wide five percent goal to direct procurement dollars to SDBs, amounts to government-sponsored racial discrimination.




DOD Issues Final Rule clarifying Indian Incentive Program Criteria

On September 17, 2004, the Department of Defense (DOD) issued its final rule implementing criteria for application of the Indian Incentive Program (Program). By way of background, the Program allows for DOD contractors that subcontract to Native American owned businesses to receive a five percent refund of the monies paid by way of subcontracts to Native firms.

Public Law 107-248

In Section 8021 of the DOD Appropriations Act for Fiscal Year 2003 (P.L. 107-248), Congress established a $500,000 threshold for contracts and subcontracts under which incentives payment may be made, authorized incentive payments for subcontracts awarded to Native Hawaiian small businesses, and added contracts and subcontracts for commercial items to the Program. On October 1, 2003, DOD issued an interim rule to implement Section 8021. See Tribal Advocate Vol. V, Issue 10 (Nov/Dec 2003). In issuing its final rule, DOD considered the fourteen comments received in response to its interim rule. The final rule became effective September 17, 2004.

The Term "Indian" Defined

The final rule made minor changes to the interim rule. One significant change is that the final rule amended the definition of "Indian" to include any "Native" as defined in the Alaska Native Claims Settlement Act. This amendment clarifies much confusion over the issue of whether Alaska Native Corporations were eligible participants under the Program. In amending the definition of "Indian," it is now clear that Alaska Native Corporations are in fact eligible to participate in the Program.




The SBA’s New Regulation on Contract Novations: What Will It Cost Your Business?

One of the primary motivating factors to grow a business is the possibility of selling it at a premium. Many owners of small businesses, including Tribes, Alaska Native Corporations (ANC) and Native Americans, spend years working extremely hard to win as many contracts as possible with the goal of selling the business, or its assets, when the time is right. For Tribes and ANCs, the transfer of these assets to other entities within their organizations or to third parties is often part of a business or economic development strategy critical to their growth. There is a new regulation that could significantly impact the ability of small business owners, like Tribes and ANCs, to sell or transfer their contracts or their company itself, making difficult, if not impossible, to profit from their hard work.

The Small Business Administration (SBA) has amended its size regulations by, among other things, adding a section which provides that when a novation (or change-of-name agreement) has been executed, the new entity must submit a written self-certification that it is small so that the procuring agency may take the appropriate small business credit. See 13 CFR § 121.404(i). Under this new regulation, if a small business is sold and a novation is required, the buyer must submit certification of small business size status along with the novation documentation. The new regulations do not require that the transferred contracts be terminated if the buyer is unable to certify as a small business. Instead, the procuring agency would not be able to take credit towards its small business goals. The SBA will begin applying this new rule to any novation documentation executed on, or after, December 21, 2004.




S&K Technologies Defends Native American Preference Program

On September 13, 2004, NBC’s "Nightly News" aired a story entitled, "Questions Mount over Iraq Rebuilding Contracts," that attempted to answer why so few of the billions of dollars appropriated for Iraq are actually being spent.

NBC senior investigative correspondent, Lisa Myers, reported on "following the paper trail of U.S. government contracts in Iraq" that led her to the Flathead Indian Reservation in Montana and "a tiny information technology company. . . called S&K Technologies."

The following is an excerpt from a letter written by S&K Technologies' president & CEO, Greg DuMontier to NBC:

NBC Nightly News’ story entitled "Questions mount over Iraq rebuilding contracts", which was broadcast on September 13, 2004 and posted on the MSNBC website, is inaccurate, misleading, and grossly mischaracterizes our involvement in the Iraq reconstruction effort. Our company was featured in this story apparently as an example of problems in government procurement. We would like to set the record straight.

S & K Technologies, Inc. is a Tribally-owned corporation that has been certified by the Small Business Administration (SBA) as qualifying for government contract set-asides under Section 8(a) of the Small Business Act. This provision of the Act was established to aid small minority owned disadvantaged businesses in achieving viability so that they can continue to be successful after they graduate from the 8(a) program. This program has been strongly supported by Congress over several administrations because of its success. It has helped thousands of small businesses owned by many minority or disadvantaged groups (not just Indians) to survive and prosper and, thus, contribute to U.S. economic growth. It is not, as one of your experts is quoted as saying, a "subterfuge to avoid open competition."



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