New Restrictions Planned for 8(a) Joint Ventures SBA is proposing new restrictions on joint ventures between 8(a) firms and large mentors. The proposed rule would limit the amount of work that could be done by the larger non-8(a) partner in a joint venture. This rule applies to all 8(a) firms, but SBA indicated it was a response to suspicions that Alaska Native corporations were serving as fronts for large businesses. Over the past five years SBA said 62 ANC joint ventures have been awarded sole-source contracts worth about $2.5 billion. By 2008 ANCs received 26% of the dollars awarded through the 8(a) program, although they account for only 2% of 8(a) firms. According to a Senate staff report, four ANCs ranked among the top 100 federal contractors in 2008, but they are considered small businesses under the law, no matter what their size. Tribally-owned firms, including ANCs, are allowed to receive sole-source contracts above limit for other 8(a) companies ($3.5 million or $5.5 million for manufacturing). The proposed rule would require a joint venture on sole-source contracts to perform at least 50% of the work and the 8(a) partner must perform at least 40% of that. In other words, the 8(a) firm would have to perform at least 20% of the total contract. In addition, the larger JV partner would not be allowed to take a second bite of the apple by serving as a subcontractor. SBA acknowledged a “perception of impropriety” when the larger partner did the vast majority of the work and collected the vast majority of the revenue. SBA said the purpose of the rule is to ensure that more money from joint ventures flows to the 8(a) partner instead of the large business. In the proposed rule published in the Oct. 28 Federal Register, SBA asked for comments on alternative ways to ensure that result, including whether joint ventures between 8(a) firms and large corporations should be banned. Comments are due Dec. 28. ANC and tribal groups complained that they are being unfairly criticized. The National 8(a) Association, which represents many Alaska businesses, did not respond to a request for comment. The chair of the Senate Subcommittee on Contracting Oversight, Sen. Claire McCaskill, D-MO, has suggested eliminating large sole-source awards and putting them up for competition among tribally-owned firms. (SAA, 7/24) Other proposed changes: •Native Hawaiian-owned companies would be allowed to receive sole-source awards in unlimited amounts, just as ANCs and other tribally-owned businesses do. •SBA proposes to require tribally-owned businesses—including Alaska Native and Native Hawaiian firms and those owned by community development corporations—to file an annual report explaining how 8(a) participation has benefited tribal or native members and the community. Senate investigators have estimated the largest Alaska Native corporations’ contributions to their communities amounted to only $615 per Alaska Native per year, although those corporations were awarded hundreds of millions of dollars worth of 8(a) contracts. •Currently Indian tribes must show that they are economically disadvantaged in order to participate in the 8(a) program, but Alaska Native corporations are automatically classified as economically disadvantaged. SBA asked for comments on whether it should set an absolute limit on an economically disadvantaged tribe’s assets or net worth. •SBA now prohibits a tribally-owned firm from owning an 8(a) business in the same NAICS code as another 8(a) company owned by the same tribe in the past two years. The proposed rule expands that prohibition so that a new tribally-owned company could not receive an 8(a) contract in a secondary NAICS code that was the primary NAICS code previously used by the same tribe. SBA says the purpose is to encourage tribes to diversify their businesses. •The proposed rule would allow any tribal member to participate in the management of a tribally-owned 8(a) firm regardless of whether the individual is economically disadvantaged. Tribal representatives asked for the change so that their best-qualified members could help run the companies. SBA also asked for comment on whether members of a different tribe should be allowed to participate in the management of a tribally-owned 8(a) business. •The proposed rule would recognize that a tribally-owned business has “the potential for success” if the tribe promises financial support for the business and has the resources to provide that support. SBA said it understands that some tribal businesses are intended to provide jobs and community development, not to make a profit. SBA plans to put reviews of ANC applications in the hands of its San Francisco or Philadelphia offices instead of the Anchorage, AK, district office. Auditors have criticized the Anchorage office’s supervision of Alaska Native firms. .