In early January 2022, the Government Accountability Office (GAO) published a report on the Small Business Administration’s (SBA) 8(a) Business Development Program’s procedures for verifying whether tribes identified by program applicants were federally or state-recognized Indian tribes.
As is well known, the ability of a small business to participate in the 8(a) Program can be very beneficial. For example, per GAO’s report:
- In fiscal year (FY) 2020, 3,364 8(a) participants were awarded federal 8(a) contracts with federal 8(a) contract obligations for the overall program totaling about $19.7 billion; and
- Each year, the federal government awards about 10 percent of all federal contract dollars, or roughly $50 billion, to 8(a) participants.
GAO’s report was in response to a request that it evaluate the effectiveness of the SBA in verifying tribal recognition of Indian tribes associated with applicants to the 8(a) Program.
While GAO reported that SBA has no formal procedures for verifying whether the tribes listed on 8(a) applications are recognized, it nonetheless described the manner in which SBA collects the necessary documentation to support tribal recognition. As described in GAO’s report:
- Individually owned businesses are not required to provide proof of their tribe’s recognition status but must submit a copy of the owner’s tribal membership card, which is used to verify whether the owner’s tribe has been federally or state-recognized.
- A tribally owned business must submit evidence of federal or state-recognition of the tribe that owns the business.
In either case, SBA must verify that the Indian tribe is federally or state-recognized. SBA’s Business Opportunity Specialists (BOS) handle the initial screening of 8(a) applications and, during this review, are the ones to verify that the tribe associated with the 8(a) application is a recognized one, doing so as follows:
- For federally recognized Indian tribes, SBA’s Standard Operating Procedure (SOP) directs BOS to the list of federally-recognized tribes maintained by the Bureau of Indian Affairs (BIA). Per the SBA, BOS are expected to cross reference an applicant’s claim regarding tribal recognition against the BIA’s most recent published list in the Federal Register.
- For state-recognized Indian tribes, the SOP refers BOS to state websites. Although, depending on the state, BOS may have to review legislation, resolutions, and decisions from state executive bodies responsible for overseeing tribal recognition or affairs, or other sources that may reflect state-recognition. BOS may rely on a statement from a state official with “proper authority” on state-recognition.
GAO also analyzed 8(a) application data for FY 2018 through 2020. SBA reported to GAO that this time period, a total of 1,392 businesses were admitted to the 8(a) program. Of these new businesses admitted to the program, 122—about 9%—were either tribally owned or owned by an enrolled member of a federally or state-recognized Indian tribe (with this total not including Alaska Native Corporations or their subsidiaries). This was out of 133 applications claiming ownership by individual members of tribes or tribally owned businesses. GAO found that of the approved applications, only one applicant’s associated tribe was not federally recognized as claimed. While SBA provided the evidence it relied upon to reach that conclusion, in response to materials presented by GAO’s investigation, SBA indicated that it would terminate the entity’s participation in the 8(a) Program.
These findings are in line with the SBA’s Office of Inspector General (OIG), which had similarly, recently focused on the SBA procedures for verifying federally and state-recognized tribes. The SBA OIG reported in March 2021 that of 108 of the 110 applications from FY 2015 through FY 2018 it reviewed where the application claimed social disadvantage through membership in federally or state-recognized tribes, SBA adequately verified the federal or state-recognition of the Indian tribe.
(In addition to this analysis, GAO also deployed criminal investigators in FY 2021 to covertly test SBA’s controls to verify federal or state-recognition by submitting applications for four purported individually owned business that claimed to be enrolled in a fictitious Indian tribe. GAO submitted contrived documentation that should have made apparent that these applicants should be disqualified based on tribal recognition status. Ultimately, SBA BOS either asked for additional evidence of social disadvantage status or determined based on the submitted information, that the tribe was neither federally nor state-recognized.)
GAO did not make its own independent recommendations to SBA. Instead, GAO noted that the SBA OIG had recommended that SBA document its verification procedures as the lack of documented verification procedures could result in varied recognition decisions depending on which SBA employee reviews an applicant’s supporting information. SBA concurred with the recommendation and have indicated that they are finalizing this effort and plan to complete implementation.