Buy Indian Act: Bureau of Indian Affairs and Indian Health Service Need Greater Insight into Implementation at Regional Offices
Released: 2015-07-09T00:00:00

Letter

Background

The Buy Indian Act of 1910 authorizes the Secretary of the Interior to employ Indian labor and to purchase the products of Indian-owned firms without using the normal competitive process. As implemented, Interior’s BIA may use the Buy Indian Act procurement authority. In addition, effective in 1955, Congress transferred authority over functions relating to the maintenance and operation of hospitals and health facilities for Indians, and the conservation of the health of Indians from Interior to HHS—formerly the Department of Health, Education, and Welfare. As a result, HHS’ IHS may use the Buy Indian Act procurement authority for acquisitions in connection with those functions. BIA and IHS may use the Buy Indian Act to give preference to Indian-owned businesses when acquiring supplies and services to meet agency needs and requirements. The Buy Indian Act itself is brief and contains little detail. The key to implementing the Act is in both agencies’ regulations. The two agencies have broad discretion over whether and how to utilize the Buy Indian Act and have issued agency regulations governing their use of the authority.

BIA provides services to approximately 1.9 million American Indians and Alaska Natives to enhance quality of life, promote economic opportunity, and carry out the responsibility to protect and improve the trust assets of American Indians and Alaska Natives. IHS is responsible for providing health care for American Indians and Alaska Natives. To provide for these services, both agencies contract for a variety of items and services such as administrative and custodial services, maintenance projects, and office supplies.

BIA and IHS are divided into twelve largely similar geographic areas across the United States, which they refer to as regional offices and area offices respectively.director. BIA and IHS headquarters set policies and oversee the regional offices. Each regional office employs contracting officers responsible for awarding contracts, including Buy Indian Act contracts. Each agency also awards some contracts through their headquarters offices. See figures 1 and 2 below for information on the regional structure of each of the agencies.

Both BIA and IHS Have Buy Indian Act Policies in Place, but Insight into Implementation by Regional Offices is Limited

BIA and IHS have policies and procedures in place to implement the Buy Indian Act and to help ensure contractors’ compliance with key requirements. However, both agencies’ headquarters have limited insight into implementation of the Act at regional offices. BIA and IHS both implement the Buy Indian Act authority through a combination of regulations, agency policy, and guidance. BIA officials told us they prioritize the use of the Buy Indian Act over other set-aside authorities. Conversely, IHS officials reported prioritizing awards through other set- asides over the use of the Act so as to meet federally mandated small business goals. However, these priorities are not documented in regulations or policies. Both agencies have regulations to help ensure contractors comply with key requirements, such as maintaining the minimum proportion of Indian ownership, not subcontracting more than half of the contracted work to other than Indian firms, and providing a preference to Indians in employment, training, and subcontracting. Although these regulations are in place, headquarters officials at both agencies reported limited insight into implementation of these regulations at their regional offices because they do not collect data concerning the Buy Indian Act from regional offices, nor does either agency have a specific review of Buy Indian Act contracts included in its regular procurement review process.

BIA and IHS Have Regulations and Policy in Place, But Prioritization of the Act is Not Sufficiently Documented

Both Agencies Have Regulations and Policies in Place to Implement the Buy Indian Act

Both agencies have regulations and policies in place to implement the Buy Indian Act, codified in formal rules and agency guidance.

In 2013, Interior finalized regulations implementing the Buy Indian Act in the Department of the Interior Acquisition Regulation, over 30 years after they had been initially promulgated. The rule solidified the processes to be used for implementation and provided a consistent policy to be used throughout BIA. BIA began promulgation of the regulations back in October 1982 with proposed rules published in the Federal Register. BIA made additional efforts to establish regulations over the next 30 years until the final regulation took effect in 2013. BIA officials could not identify a specific reason as to why finalization of the regulations took so long. Prior to issuing a rule, BIA issued an internal policy manual to govern the program and provided guidance to its employees through a series of policy memoranda. BIA cited creating a more uniform process and applying it more consistently as the main reasons for pursuing a formal regulation.

HHS, which at the time was the Department of Health, Education, and Welfare, enacted Buy Indian Act regulations in 1975. A modified version of these regulations was later incorporated into the Department of Health and Human Services Acquisition Regulation. IHS also issued the Indian Health Manual to provide additional guidance to its employees regarding the IHS procurement process, including specific policies regarding the Buy Indian Act. The chapter of the Indian Health Manual that contains requirements related to the Buy Indian Act is currently under revision.

BIA and IHS define the term “Indian” in their regulations somewhat differently. BIA regulations define “Indian” as a person who is a member of an Indian Tribe, or “Native” as defined in the Alaska Native Claims Settlement Act. IHS, however, defines “Indian” as a member of any tribe, pueblo, band, group, village, or community that is recognized by the Secretary of the Interior as being Indian or any individual or group of individuals recognized by the Secretary of the Interior or the Secretary of HHS.

Both agencies’ implementing regulations impose key requirements on contractors. First, both agencies require eligible firms to be 51 percent Indian-owned. Second, firms awarded a contract under the Buy Indian Act must give preference to Indians in employment and training opportunities under the contract, and to Indian firms in the award of any subcontracts. Third, firms awarded a contract under the Buy Indian Act must not subcontract more than 50 percent of the work to other than Indian firms.

BIA and IHS Priorities Are Not Sufficiently Documented in Agency Policy

BIA officials stated contracting officers must consider the Buy Indian Act first when awarding every contract, and if they are unable to award a contract using the Buy Indian Act, they must provide justification as to why not. However, this policy is not currently documented. According to BIA officials, policy documentation was recently rescinded because it was confusing and not fully in-line with the intent to award Buy Indian first. BIA is working on revising its policy on the use of the Buy Indian Act. Officials were uncertain exactly when the new guidance would be issued.

At IHS, use of the Buy Indian Act versus other set-aside programs is unclear and also not sufficiently documented. IHS officials told us that, because of difficulties meeting small business goals, the agency prioritizes awarding contracts to vendors that help the agency meet its federally mandated small business goals, and that awarding contracts under the Buy Indian Act is secondary to those goals. They also stated that since June 2005, there has been an effort within the agency to encourage Indian-owned firms to seek status under set-asides other than the Buy Indian Act, such as women-owned or veteran-owned small businesses. IHS was unable to provide documentation related to this practice, and was only able to produce a 1995 policy that, contrary to what we were told, indicated that the Buy Indian Act takes precedence over other set-asides.

The lack of documented policy at BIA and IHS is not consistent with federal internal control standards, which provide that formally documented policies and procedures help to ensure that staff performs Without documented policies in activities consistently across an agency.place BIA and IHS are at risk for inconsistent application of the Buy Indian Act across the agency.

BIA and IHS Regulations Include Mechanisms to Help Ensure Contractor Compliance with Key Requirements

Both agencies’ regulations provide for mechanisms to help enforce key requirements of the Buy Indian Act as implemented. Specifically, both agencies’ regulations require that firms awarded a contract under the Buy Indian Act be at least 51 percent Indian owned, provide a preference to Indians in employment, training, and subcontracting, and not subcontract more than 50 percent of the work to other than Indian firms. These key requirements are implemented through mechanisms such as self- certification procedures and, in some cases, specific contract clauses.

Both BIA and IHS Rely on Self- Certification of Indian-Owned Status

Both agencies rely on firms to self-certify their status as Indian-owned. BIA requires firms to represent their Indian-owned status by checking a box when submitting a proposal for a contract that indicates that they meet the relevant regulatory definitions. are included in all BIA Buy Indian Act contracts that require firms to report any change in Indian-owned status. According to IHS officials, bidders on IHS Buy Indian Act contracts must submit a certificate of degree of Indian blood or other form of tribal membership documentation as part of an application packet in order to be considered eligible for a Buy Indian contract. According to agency officials at both BIA and IHS, under self- certification, contracting officers may request more information from a bidding firm to confirm its Indian-owned status, though officials report this is rarely done. At BIA, the contracting officer may ask an attorney in the appropriate regional office to review a firm’s representation. In addition, after receipt of offers, the contracting officer may question the representation of any bidder by filing a formal objection with the chief of the contracting office.

See 48 C.F.R. § 1452.280-4 for the Indian economic enterprise representation provision included in Buy Indian solicitations. the Buy Indian Act specific challenge process at BIA. IHS handles challenges according to the protest procedures set out in the Federal Acquisition Regulation. To deter intentional misrepresentations of Indian- owned status, both agencies rely on the suspension and debarment process, and prosecution under the federal false statement statute.

Indian Preference Requirement and Subcontracting Limitations Are Implemented Through Contract Clauses

Both agencies’ regulations require firms that are awarded a contract under the Buy Indian Act to give preference to Indians in employment, training, and subcontracting. Contracts awarded under the Buy Indian Act, and all resulting subcontracts, are required to contain the Indian Preference Clause, which specifically requires the contractor to provide a preference to Indians in employment, training, and subcontracting opportunities under the contract. The clause further requires the contractor to maintain sufficient records indicating compliance.

Agency officials at both BIA and IHS told us they have regulations limiting subcontracting with other than Indian-owned firms to no more than 50 percent of the work, although only BIA implements this requirement through the inclusion of a contract clause. Violations of contract clauses can have serious consequences such as contract termination. This approach is similar to how limitations on subcontracting might be handled for some small business contracts. For example, when awarding an 8(a) contract, the Federal Acquisition Regulation directs contracting officers to include the Limitations on Subcontracting clause, under which the contractor agrees that the 8(a) firm will perform a certain percentage of the work.

According to BIA and IHS officials, neither agency employs systematic monitoring or compliance protocols—such as systematic reporting on specific Buy Indian requirements—to ensure that contractors comply with key requirements and contract clauses beyond regular contracting officer oversight. The Buy Indian Act is not necessarily unique in this regard. The Small Business Administration’s women-owned small business and economically disadvantaged women-owned small business programs generally rely on self-certification and oversight by the contracting officer as well.

Certain contracts or types of work involve more stringent, and more specific, monitoring requirements. For example, for contracts over $50,000, BIA requires contractors to appoint a liaison officer in charge of keeping records for its Indian preference program and to issue semi- annual reports. IHS monitors compliance in a similar fashion, requiring a liaison officer for non-construction contracts equal to or over $50,000 and construction contracts equal to or over $100,000.

BIA and IHS Headquarters Officials have Limited Insight into Implementation of the Act at the Regional Offices

Federal internal control standards state that, for an entity to run and control its operations, it must have relevant, reliable, and timely communications, and that information is needed throughout the agency to achieve all of its objectives. The standards further state that operating information is needed to determine whether an agency is complying with various laws and regulations. We found that BIA and IHS headquarters officials have limited insight into the Buy Indian Act implementation in the regional offices. Specifically, both BIA’s and IHS’s headquarters-level procurement managers stated that they had little knowledge about challenges to a firm’s self-certification of Indian-owned status that might have occurred in the regional offices. When asked about how frequently challenges occurred or how they were resolved, BIA and IHS officials told us they would have to consult with regional offices to provide this information. Also, officials at both agencies told us they do not aggregate data relating to challenges. More broadly, these officials reported they do not require regional offices to collect, retain, or aggregate data about compliance with Buy Indian requirements in a systematic fashion.

Given this lack of insight, it is difficult for BIA and IHS officials to know whether the Buy Indian Act is being consistently applied among the regions, or for the agencies to determine the extent to which mechanisms to implement key requirements are working as intended.

Both agencies also identified a specific process in place for reviewing procurements awarded at their regional offices, but these reviews have not historically included an examination of contracts awarded using the Buy Indian Act. For example, Interior requires BIA to conduct bi-annual acquisition reviews at each of its regional offices, but officials told us these reviews have not previously examined the use of the Buy Indian Act in particular. Following a series of informal, region-by-region reviews starting in mid-2015, BIA plans to include Buy Indian Act requirements in future formal acquisition reviews. Similarly, IHS officials reported that they recently completed a periodic procurement management review of contracts awarded at its regional offices, but officials stated they were not aware of any reviews, past or planned, specifically focused on the use of the Buy Indian Act. By not reviewing Buy Indian Act contracts as part of the procurement review process, both agencies are missing opportunities to ensure effective oversight of these contract awards.

A Small Percentage of BIA and IHS Obligations Go Towards Acquiring Various Goods and Services through the Act

Use of the Buy Indian Act comprises a small percentage of BIA and IHS contract obligations. However, both agencies also award contracts to Indian-owned firms using other authorities, thus increasing the percentage of obligations awarded to Indian-owned firms. During the period covered by our review, both agencies awarded contracts using the Buy Indian Act authority to more than 300 different Indian-owned firms. The types of goods and services purchased under the Act varied, and included maintenance, medical, custodial, administrative support, and office supplies.

Use of Buy Indian Act Represents a Small Percentage of Both Agencies’ Contract Obligations

Use of the Buy Indian Act represents a small percentage of both BIA’s and IHS’s annual contract obligations. However, both agencies can and do use other procurement authorities to award contracts to Indian-owned firms, thus increasing the overall percentage of contracts awarded to such firms. Officials from both agencies noted that it would be difficult to have all contract obligations be set aside for award under the Buy Indian Act, noting that some requirements, such as those for utilities, may not be suitable for award using the Act. Figures 3 and 4 show the annual percentage of obligations under the Buy Indian Act, Indian-owned obligations awarded through other procurement authorities, and non Indian-owned obligations for BIA and IHS respectively.

We also found that BIA and IHS were awarding contracts using the Buy Indian Act authority to a number of different Indian-owned firms. Specifically, in fiscal years 2010 through 2014, BIA awarded 732 contracts to 269 vendors and IHS awarded 131 contracts to 84 vendors.

Use of the Buy Indian Act at both agencies’ offices varies. Based on data from FPDS-NG from fiscal years 2010 through 2014, most of the agencies’ offices awarded contracts under the Buy Indian Act, although some used it more than others. For example at BIA, while almost half of the total Buy Indian Act obligations across this time frame were awarded by the agency’s central office, a headquarters office, these obligations decreased from about two-thirds of the agency’s Buy Indian Act obligations in 2010 to about one-third in 2014. Other offices with relatively high percentages of use included the Navajo and Western regional offices. At IHS the majority of the Buy Indian Act obligations were awarded through its Albuquerque, Phoenix, and California area offices.

See figures 5 and 6 for more details about the offices’ contract obligations using the Act.

Types of Goods and Services Purchased Under the Buy Indian Act Vary

BIA and IHS have used the Buy Indian Act to purchase a variety of goods and services in areas such as maintenance, medical, custodial, administrative support, and office supplies.and services purchased are more varied, with architecture and At BIA, the types of goods engineering related goods and services being the most common (see figure 7). Based on our analysis, IHS primarily uses the Buy Indian Act to purchase goods and services in three areas: professional and administrative support services, medically related goods and services, and custodial or housekeeping goods and services (see figure 8).

Conclusions

The use of the Buy Indian Act is intended to promote growth and development of Indian industries and, like any set-aside program, is important in helping these businesses in the marketplace. Interior and HHS issued regulations and other guidance to guide implementation of the Act, but reported differing priorities in terms of use of the Act. While it is within each agency’s discretion to establish these priorities, it is important that these priorities be clearly documented. Both agencies lack current documentation of these stated priorities. Without clear and documented guidance on their priorities, BIA and IHS are at risk of inconsistent implementation. We also found that BIA and IHS have limited insight into how key requirements, such as self certification and potential challenges to those certifications, are being implemented at their regional offices where the contracts are being awarded. Both agencies would benefit from collecting data on use of the Buy Indian Act from regional offices as well as including a review of contracts awarded using the Act in their oversight reviews. Without knowledge of how the regions are implementing requirements related to the Act, both agencies may be missing opportunities to improve use of the Act. Information about the number of challenges, for instance, or detailed reporting on how contractors are meeting their Indian preference requirements, could point to issues in need of attention. Conversely, such information might also highlight regional innovations that, if implemented more broadly, could improve the use of the Buy Indian Act across each agency. Such information could help ensure that both agencies are maximizing the benefits intended in terms of the growth and development of Indian industries.

Recommendations for Executive Action

To ensure consistent implementation of the Buy Indian Act procurement authority across the agencies and to enhance oversight of implementation of the Act at regional offices, we recommend that the Secretaries of the Interior and Health and Human Services direct the Bureau of Indian Affairs and Indian Health Service respectively, to take the following three actions: (1) clarify and codify their policies related to the priority for use of the Buy Indian Act, including whether the Buy Indian Act should be used before other set-aside programs; (2) collect data on regional offices’ implementation of key requirements, such as challenges to self-certification; and (3) include Buy Indian Act contracts as a part of their regular procurement review process.

Agency Comments and Our Evaluation

We provided a draft of this report to Interior and HHS for review and comment. Both agencies concurred with our recommendations and identified actions they are taking or plan to take to address the recommendations. HHS also provided technical comments which we incorporated as appropriate.

Interior indicated it is in the process of updating policy that will more clearly define the priority of the use of the Buy Indian Act authority. Interior also indicated it would develop policy and procedure requirements for collecting data bureau-wide—including from all Indian Affairs offices that initiate procurement actions–on the Act’s key requirements, including self-certification, verification, and validation. Additionally, Interior indicated it plans to incorporate information related to Buy Indian Act contracts into its checklist for its annual reviews.

HHS plans to clarify and codify policies related to the priority for use of the Buy Indian Act in the Indian Health Manual. HHS also plans to conduct a review of contracts awarded under the Buy Indian Act as part of its internal procurement oversight reviews and to require all acquisition offices to conduct regular Buy Indian Act procurement reviews. Additionally, HHS stated it plans to continue oversight to ensure that contractors comply with key requirements and that the agency will collect data on contracts defined in FPDS-NG as American Indian/Alaska Native owned, but did not specify the extent to which data would be collected on the regional offices’ implementation of key requirements. As HHS implements our recommendations, we continue to emphasize the importance of oversight and data collection at the regional office level and encourage HHS to take the necessary steps in collecting data from these offices. Interior and HHS’s written comments are reprinted in appendix I and appendix II, respectively.

We are sending copies of this report to interested congressional committees; the Secretary of the Interior; and the Secretary of Health and Human Services. In addition, this report is available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have questions about this report, please call me at (202) 512-4841. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made major contributions to this report are listed in appendix III.

Appendix I: Comments from the Department of the Interior

Appendix II: Comments from the Department of Health and Human Services

Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact:

Staff Acknowledgments:

In addition to the contact named above, Janet McKelvey, Assistant Director; Julie C. Hadley, Analyst-in-Charge; Matthew J. Ambrose, Danielle R. Greene, Kristine R. Hassinger, Julia M. Kennon, Jeffery D. Malcolm, and Roxanna T. Sun made key contributions to this report.