2007 Small Business Report | Favored to win

New rule broadens ANC subcontracting appeal

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A new final rule allows companies to count all their subcontracts to Alaska Native Corporations toward their small-business and small disadvantaged business goals, no matter what size the ANC is.

The rule has angered some small-business advocates, who say it will add to the difficulty small companies have getting subcontracts. If companies can hire larger ANCs and still get the small-business credit, they have less incentive to seek out truly small businesses, some advocates say.

But some of the worries may be overblown, said Stan Soloway, president of the Professional Services Council. The rule, which also applies to companies owned by American Indian tribes, carries out legislation passed five years ago and follows an interim rule that had much the same effect.

"The rule does not raise any new issues," he said. "Congress long ago determined that ANC and Native American tribal companies are disadvantaged and represent disadvantaged communities."

The time may be right to consider placing new parameters on the programs that give advantages to such businesses, Soloway said, "But there is no new ground being plowed here."

The rule was published in the Aug. 17 Federal Register and took effect Sept. 17. It amends the Federal Acquisition Regulation and applies to designated ANC and American Indian tribes and specifies that prime contractors can count subcontracts to such firms as small-business and small disadvantaged business awards "even where the ANC or Indian tribe may be 'other than small' under the Small Business Administration (SBA) regulations."

The law that the rule implements is Section 702 of the Emergency Supplemental Act of 2002 as amended by Section 3003 of the 2002 Supplemental Appropriations Act for Further Recovery From and Response to Terrorist Attacks on the United States.
The Civilian Agency Acquisition Council and Defense Acquisition Regulations Council developed the rule to implement the law.

ANCs, by law, must be majority-owned by Alaskan tribes. The ANC program already allows such companies to be certified as 8(a) companies and get sole-source contracts without the limits that apply to other 8(a) firms ? $3 million for services and $5 million for manufacturing.

Larry Allen, president of the Coalition for Government Procurement, said the key issue is not the size of the company.

"Some small-business owners are incredibly well off, regardless of the size of their business," he said. "Many Alaska natives, however, live at or below poverty level. The legislation is less about size standards and more about using socioeconomic classifications in government contracting to help those who are economically disadvantaged."

Nevertheless, some small-business advocates were worried about the change.
"Since some of the ANC companies rival some of the largest prime contractors in size, this makes competition completely unfair and basically eliminates the need for a prime to look to a true small business," said Guy Timberlake, chief executive officer and chief visionary officer at the American Small Business Coalition.

The rule also lets the ANC or American Indian tribes designate which company should get the small business credit when there are one or more other companies in the chain between the prime contractor and the ANC or tribal firm.

In response to objections to the rule, and one comment that urged the councils to impose limits "to prevent a wholesale takeover of the SDB subcontracting program by ANCs," the councils said the rule is necessary to implement the statute, which contained no provision for limitations. A list of public comments and responses to them is part of the text of the published rule.

Associate Editor Michael Hardy can be reached at mhardy@1105govinfo.com.

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