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Fresh Scrutiny on Tribal Federal Contracting

A cornerstone of tribal federal contracting, touted as the second-largest economic driver in Indian Country, is presently facing renewed scrutiny in Washington, D.C. Senator Joni Ernst (R-Iowa), currently chairing the Senate Committee on Small Business and Entrepreneurship, has advocated for a pause in 8(a) set-asides. She has pointed to multiple tribal and Alaska Native enterprises in correspondence directed at various federal agencies. In response, these companies claim that her assertions are based on incomplete or incorrect information, thus igniting a significant controversy over the portrayal of the program.

Concerns Over Program Oversight

During a recent committee hearing, Ernst urged federal agencies to refrain from issuing new 8(a) sole-source awards until an audit of the program could take place, primarily citing allegations of abuse and fraud. The implications of this pause are considerable: last year alone, the 8(a) program stimulated over $25 billion in federal contract awards, of which Native-owned enterprises claimed approximately $16.1 billion, as reported by HigherGov, a firm specializing in federal contracting intelligence.

Ernst emphasized that the non-adequate oversight has permitted companies under investigation to receipt substantial federal contracts, with some allegedly subcontracting work in violation of Small Business Administration (SBA) rules. “Unfortunately, the SBA 8(a) program has become a magnet for fraudsters since its inception,” Ernst lamented during the hearing, suggesting that the historical lack of oversight did not reflect such programs as a beneficial investment for taxpayers.

Opposition from Committee Members

However, Senator Edward Markey (D-Mass.), the committee’s ranking member, countered Ernst’s points by stating that the program has provided essential opportunities for disadvantaged businesses for over four decades. He insisted that isolated cases of misconduct should not warrant an attack on an initiative that has produced good-paying jobs, opened pathways to success, and fostered economic growth nationwide.

As the Senate hearing unfolded, the SBA concurrently initiated a comprehensive review of the 8(a) program. Order dated December 5 directed approximately 4,300 participants to submit three years’ worth of financial documents by January 5, encompassing general ledgers, bank statements, payroll registers, and subcontracting agreements—a mandate that extends an ongoing audit commenced in June, aimed at establishing whether certain firms misused their 8(a) status to acquire sole-source awards while shifting much of the work to other contractors.

Tribal Enterprises Respond

As allegations of misuse were spotlighted during the Senate hearing, tribally-owned federal contracting enterprises disputed the claims made by Senator Ernst in her pre-hearing correspondence. Various named companies—including tribal, Alaska Native, and Native Hawaiian enterprises—maintained that the assertions were grounded in flawed data and misinterpretations of the applicable SBA rules. Disturbingly, many noted that they had not been contacted prior to being named in the letters submitted to federal agencies.

On December 8, Ernst reached out to 22 federal agencies—including the Departments of Defense, Interior, Energy, and the General Services Administration—advising them to suspend 8(a) sole-source contracting and to undertake a review of awards dating to fiscal year 2020. The letters suggested several Native-owned federal contracting companies as examples of purported systemic issues within the program.

The highlighted companies consisted of Dawson MCG, LLC (a subsidiary of Hawaiian Native Corporation); Chenega Corporation (an Alaska Native Corporation); Cherokee Nation Strategic Programs, LLC; and NANA Regional Corporation. Ernst claimed that these enterprises showcased substantial oversight concerns related to subcontracting practices, ongoing investigations, and the operation of multiple 8(a) subsidiaries.

Inaccuracies Highlighted by Tribal Leaders

However, tribal representatives took issue with Ernst’s assertions, contending that the claims mischaracterized vital facts and erroneously applied SBA rules. Cherokee Federal remarked that the information featured in Ernst’s letters was “incomplete and inaccurate.” They asserted, “Our companies were and remain in full compliance with all Small Business Administration and Federal Acquisition Regulation requirements, including subcontracting limitations.” They also informed the committee about these discrepancies while reiterating their commitment to transparency.

The Hawaiian Native Corporation defended its Dawson MCG, LLC subsidiary, clarifying that they are not under investigation as accused. Their leadership articulated, “While it is true that the Department of Justice is investigating certain former employees, HNC and its companies have fully cooperated with both the DOJ and SBA to address issues identified by either agency in their investigations.”

Calista Corporation, another Alaska Native Corporation, also refuted Ernst’s claims, explaining that the senator misinterpreted rules concerning NAICS codes and their application to tribally and ANC-owned firms. According to Thom Leonard, vice president of corporate affairs for Calista, two subsidiaries—Brice Engineering, LLC and Brice Integrated, LLC—operate under the distinct size standards permissible under SBA regulations and have received agency approval.

Seeking Clarity and Support

Meanwhile, the Poarch Band of Creek Indians contested Ernst’s claims, stating that the senator miscalculated figures which led to the assertion that their PCI Federal contracting entity fell out of compliance with 8(a) rules. They communicated the error to Ernst and the committee, expecting that the public record will be corrected accordingly. “We remain committed to transparency and working with federal partners to ensure the facts are clear,” they stated.

As affirmed by Quinton Carroll, executive director of the Native American Contractors Association, Ernst’s letters appear to be based on faulty assumptions regarding the operational mechanics of the 8(a) program as it pertains to tribally owned, Alaska Native, and Native Hawaiian enterprises. He pointed out to Tribal Business News that the committee did not engage with the companies prior to publication, disregarding available “legal and compliant explanations” that could have rectified the record.

Carroll highlighted that Native-owned 8(a) participants function under “stringent compliance, reporting, and oversight standards.” He emphasized that every award is reviewed for fair pricing and adherence to federal regulations, underscoring the significant economic and national-security roles these firms play: Native federal contracting supports an estimated 125,000 American jobs, which in turn fund education, health care, public safety, and infrastructure in Native communities. “It would be very unfortunate if these businesses that support tribal and Native communities face material damages due to these allegations,” Carroll added.

Prepared to advocate for the 8(a) program’s integrity, NACA is ready to collaborate with the administration and Congress, aiming to prevent decisions that may unintentionally hinder Native-owned enterprises.

Senator Lisa Murkowski (R-Alaska) also weighed in on the discourse, asserting that Ernst’s call to halt 8(a) contracts arises from a misunderstanding of how the program operates for Alaska Native Corporations and other Native enterprises. She warned that such a proposal could have dire economic repercussions and appears more rooted in a lack of information than substantiated evidence of systemic abuse. “Much of this is about education,” Murkowski noted, adding that she has discussed this matter with Ernst before and that a continued dialogue is crucial. She expressed uncertainty regarding how responsive Ernst and her team have been to explanations provided by Alaska Native Corporations regarding the program’s functioning.

The Economic Impact of 8(a) Contracting

Per HigherGov’s analysis, the SBA’s 8(a) program accounted for over $25 billion in federal contract awards in fiscal 2024. Of that total, Native-owned entities obtained approximately $16.1 billion, including $14.9 billion in sole-source awards. When accounting for all federal programs—not just 8(a)—tribes and Native enterprises collectively secured $26.2 billion in contract awards for the same fiscal year.

As these discussions unfold, it may be helpful for affected parties to consider using the AI legalese decoder, a tool designed to clarify complex legal documents and help individuals understand regulatory frameworks. By employing such resources, companies can gain a better grasp of their rights, obligations, and the rules governing their participation in federal contracting. This can ultimately support their efforts in compliance and advocacy, ensuring that their contributions to the economy and their communities are accurately recognized.

Tribal Business News attempted to contact both Ernst’s office and the SBA for comments on this matter but had not received responses from either when this report was published.

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