ANCs, Indian tribes and NHOs—i.e., the parent entities of tribal 8(a) firms—can be large, with worldwide operations and revenues in the hundreds of millions of dollars. They can own 8(a) and non-8(a) subsidiaries and sometimes form complicated corporate structures. Figure 1 illustrates a notional corporate structure of an ANC with a holding company—a non-8(a) subsidiary that provides shared administrative services to other subsidiaries for a fee. The figure depicts a mix of 8(a) and non-8(a) subsidiaries that may be only partly owned by the ANC. According to SBA, in fiscal year 2010, there were over 8,400 firms in the 8(a) program, 354 of which were owned by a tribal entity. For any firm (including tribal firms) to be eligible to participate in the 8(a) program, it must qualify as small under a primary industry size standard as measured by the number of employees or average revenues from the previous 3 years. In addition, the firm must be, among other things, majority-owned by one or more socially and economically disadvantaged individuals or a qualified entity, such as a tribal entity. Firms approved as 8(a) participants can receive business development assistance from SBA and are eligible to receive contracts that agencies offer to SBA for the 8(a) program. All 8(a) firms, including tribal 8(a) firms, are subject to a 9-year limit on participation in the 8(a) program. During the last 5 years in the program, known as a transitional period, firms are required to obtain a certain percentage of non-8(a) revenue to demonstrate their progress in developing a viable business that is not solely reliant on the 8(a) program. SBA’s district offices are responsible for tracking this business mix on an annual basis. If a firm does not meet its required business mix during one of the last 5 years, SBA invokes a plan of remedial action for the next year, in which the firm is to report to SBA on its progress. Until the required mix is demonstrated, the firm will generally not be eligible for sole-source 8(a) contracts. Congress has provided tribal 8(a) firms with distinct advantages over other 8(a) businesses, in addition to the ability to receive sole-source 8(a) contracts for any amount. In some cases, there are also differences among the advantages provided to firms owned by ANCs, Indian tribes, and NHOs. Table 1 provides more details. For tribal 8(a) firms, SBA has specific oversight responsibility for accepting the firm into the program, which includes ensuring that the tribal entity owning the firm does not have more than one 8(a) firm in the same primary line of business, defined by a North American Industry Classification System (NAICS) code and annually reviewing 8(a) firms to track their progress in the 8(a) program, including their mix of 8(a) and non-8(a) revenue in the last 5 years in the program and any changes to the firms’ business targets, objectives, and goals. The procuring agency offers, and SBA may accept, a procuring agency’s requirement into the 8(a) program either as a competitive procurement— to be competed among all eligible 8(a) firms—or as a sole-source procurement. The agency’s offer letter must identify the requirement, any procurement history, the estimated dollar amount, and NAICS code, among other things. Before accepting a procurement as an 8(a) sole- source contract, SBA is to verify the proposed firm’s size status to ensure that it qualifies as small under the identified NAICS code. Once accepted into the program, 8(a) firms may pursue contracts in additional lines of work, called secondary NAICS codes. Once a requirement is awarded as an 8(a) contract, it must remain in the 8(a) program unless the procuring agency decides it would like to fulfill the follow-on requirement outside of the program and requests approval from SBA to do so. Procuring agency contracting officers also have responsibilities under the 8(a) program. For all of the agencies in our review, SBA has delegated responsibility for contract administration to the contracting officers through partnership agreements. These responsibilities include, for example, ensuring compliance with the limitations on subcontracting requirements under 8(a) contracts. SBA’s 8(a) program regulations allow for involvement of other businesses and non-disadvantaged individuals as a way of helping the 8(a) business grow and develop. For example, 8(a) firms can hire outside agents to assist them in obtaining 8(a) contracts; however, SBA’s revised regulations now prohibit agreements in which agents receive a percentage of the contract value as compensation for their assistance. In addition, large businesses can create a mentor-protégé joint venture with an 8(a) firm to win 8(a) prime contracts or can act as a subcontractor under an 8(a) contract. percentage of labor costs that 8(a) firms and non-8(a) partners may incur under service and construction contracts. For service contracts with subcontracting activity, the 8(a) firm must incur at least 50 percent of the personnel costs with its own employees (15 percent for construction contracts). Further, a non-disadvantaged individual can own up to a 49 percent interest in an 8(a) firm, retaining his or her percentage of ownership in the profits the firm generates. These arrangements with other businesses or non-disadvantaged individuals can result in a relatively small percentage of contract profits being retained by the tribal entity that owns the 8(a) firm. Figure 2 is an illustrative example of how these arrangements could occur when a tribal 8(a) firm forms a joint venture with a large business under the mentor-protégé program, as allowed by SBA regulations. SBA must approve the mentor/protégé agreement before the two businesses submit an offer as a joint venture to receive exclusion from affiliation. 13 C.F.R. §§ 124.513(b)(3) and 124.520(b) and (d)(1)(i). For 8(a) construction contracts, the prime contractor must incur at least 15 percent of the personnel costs with its own employees. Thus, if our illustrative example above were a construction contract, the tribe that owns a 51 percent interest in the firm would receive $31,000 in profit distribution. In 2006, we reported that ANCs used the 8(a) program as one of many sources of revenue (which could include revenue generated outside of government contracts) to provide benefits to their shareholders.found that there was no explicit link between the revenues ANCs generated from the 8(a) program and the benefits they provided to shareholders, because ANCs only tracked benefits generated from their consolidated revenue sources. The recently revised 8(a) regulations require tribal 8(a) firms to report annually to SBA on the benefits they are providing their members or community from their participation in the 8(a) program. From fiscal year 2005 through 2010, federal dollars obligated to tribal 8(a) firms grew from $2.1 billion to $5.5 billion. Obligations to 8(a) firms owned by ANCs—which represented the majority of these tribal obligations during each fiscal year—rose steadily, from $1.9 billion to $4.7 billion. Obligations to 8(a) firms owned by Indian tribes and NHOs also grew steadily during this time frame, to $690 million and $109 million, respectively, in fiscal year 2010. Total 8(a) obligations (to tribal and non- tribal 8(a) firms) increased from $11.3 billion to $18.8 billion during the six-year period. Obligations to tribal 8(a) firms represented a 160 percent increase over this time, while obligations to non-tribal 8(a) firms increased 45 percent. Figure 3 shows the growth of non-tribal and tribal 8(a) obligations. Tribal firms represented a very small percentage of all 8(a) firms, but accounted for almost 30 percent of 8(a) obligations—about $5.5 billion— in fiscal year 2010, as shown in table 2. The percentage of obligations under competitively awarded tribal 8(a) contracts increased from fiscal year 2005 to 2010. In fiscal year 2010, sole-source obligations to ANC 8(a) firms decreased slightly, for the first time since 2005. Table 3 compares the percentage of obligations under competitively awarded contracts for ANC, Indian tribe, and NHO 8(a) firms in fiscal year 2005 and 2010. Even with this increase in obligations under competitively awarded contracts to tribal 8(a) firms, sole-source contracts still accounted for at least 75 percent of all tribal 8(a) obligations annually. In terms of obligations, in fiscal year 2010, sole-source awards to tribal 8(a) firms accounted for $4.3 billion of the total $5.5 billion in tribal 8(a) obligations. Figure 4 shows the breakdown of sole-source and competitive 8(a) obligations for tribal and non-tribal 8(a) firms from fiscal years 2005 through 2010. As shown in figure 4, the percentage of competitive obligations for non- tribal 8(a) firms—about 45 percent in fiscal year 2010—still far outpaces those of tribal 8(a) firms.