8(a) nod for native groups

The U.S. government acts in two distinct roles when dealing with citizens. In its sovereign capacity, the government provides for the health and welfare of the public by organizing the national defense, promoting economic initiatives and engaging in other projects for the general benefit of the public.

In its private capacity, the government retains the same rights as may be exercised by any private entity in commerce. This capacity enables it to enter into contracts for acquiring goods and services.

Appreciating this distinction helped motivate recent moves toward more commercial practices in government acquisition. Now agencies commonly emulate businesses as much as possible when contracting. But in one key area—procurement preferences—the government still confuses its two roles.

Through set-asides and other evaluation gimmicks, the government directs billions of dollars into the hands of preferred sources in pursuit of social engineering goals. The most notable of these programs is the Small Business Administration's Section 8(a) for directing work to firms owned by "socially and economically disadvantaged persons."

Members of select minority groups—including blacks, Hispanics and American Indians—are presumed to be socially disadvantaged. In theory, other persons may claim such status, but few meet the test in practice. When a procurement is conducted as an 8(a) set-aside, participation is limited to 8(a) companies. Below certain thresholds—$3 million for service contracts and $5 million for manufacturing contracts—an agency may award a contract to a disadvantaged contractor on a sole-source basis. Above those thresholds, the agency is required to compete the work among eligible 8(a) concerns, but other potential competitors are excluded.

Participating firms must qualify as "small" under applicable regulations. But the regulations let some very large companies qualify.

The preference is even more pronounced when the concern is owned by an American Indian tribe, an Alaska native corporation or a native Hawaiian organization. When an agency selects one of those tribally owned businesses, it can ignore 8(a) rules and award a sole-source contract of any size to the concern.

Moreover, in determining whether such a concern meets the definition of a small business, the agency may disregard the assets of the tribe and of any other business owned by the tribe. In contrast, all of the affiliates of other 8(a) concerns are examined together.

These and other special rules give "native American" companies a huge advantage over other 8(a) concerns—not to mention all non-8(a) companies that would like to compete for a given contract. Currently, the constitutionality of tribal preferences is under challenge in federal court. President Bush's Justice Department is vigorously defending these special preference programs at every turn.

Whether this makes sense from a public policy perspective is left to the reader to decide.

Peckinpaugh is corporate counsel for DynCorp in Reston, Va. This column represents his personal views.