Late last year, the Indian Health Service (IHS) of the Department of Health and Human Services (HHS) issued proposed regulations that would, if made final, govern IHS’s use of set-asides under the Buy Indian Act (Act). IHS’s current regulations give little guidance on how set-asides under the Act should be made. If the proposed regulations go into effect, officials at IHS will have a better roadmap for setting aside procurements under the Act. Below are key eligibility and procedural updates that may impact Native American businesses competing for IHS procurements.

The proposed regulations provide that IHS must give preference to Indians, Federally Recognized Tribes, or Alaska Native Corporations (ANCs) whenever practicable. IHS’s authority to set aside procurements under the Act, however, is limited. IHS may use the Act to set aside procurements for Indian Economic Enterprises (IEE) and Indian Small Business Economic Enterprises (ISBEE) when acquiring supplies, general services, architectural and engineering services, and “covered construction”—the planning, design, construction, and renovation, including associated architecture and engineering services, of IHS facilities and construction of safe water and sanitary waste disposal facilities for Indians.

IEE Eligibility Requirements

The proposed regulations set eligibility requirements for IEEs. Specifically, they define an IEE as any business activity owned by one or more Indians, Federally Recognized Indian Tribes, or ANCs provided that:

  1. the combined Indian, Federally Recognized Indian Tribe, or ANC ownership of the enterprise constitutes not less than 51 percent;
  2. the Indians, Federally Recognized Indian Tribes, or ANCs together receive at least 51 percent of the earnings from the contract; and
  3. the management and daily business operations of an enterprise are controlled by one or more individuals who are Indians possessing requisite management or technical capabilities directly related to the primary industry in which the enterprise conducts business.

In addition, the proposed regulations require that an IEE satisfy the above-referenced eligibility requirements during the following periods:

  1. at the time the offer was made;
  2. at the time of award; and
  3. during the life of the contract.

If a contractor loses IEE eligibility during any of these times, IHS may terminate the contract for default. Finally, an IEE must meet applicable limitations on subcontracting requirements set forth in the Federal Acquisition Regulation.

ISBEE Eligibility Requirements

Eligibility requirements for ISBEEs under the proposed regulations are the same as those for IEEs, but the concern must be small under applicable Small Business Administration size standards.

Set-Aside Procedures

The proposed regulations lay out procedures for how set-asides under the Act should be made. Specifically, if the regulations are adopted, IHS will give priority to ISBEEs for all purchases by utilizing ISBEE set-asides to the maximum extent possible. If, after market research is conducted, IHS finds that there is no reasonable expectation of receiving offers from two or more ISBEEs for a particular procurement that will be competitive in terms of market price, product quality, and delivery capability, IHS will conduct further market research to determine whether there is a reasonable expectation of receiving offers from two or more IEEs that will be competitive in terms of market price, product quality, and delivery capability. If no such expectation exists, then normally IHS will make a formal “deviation determination” to make an award to non-IEEs.

Even though the proposed regulations are more detailed than current regulations for IEE and ISBEE set-asides, the procedures they set forth are still vague about how such set-asides should be applied. And, shortly after these proposed regulations were released, the Indian Community Economic Enhancement Act of 2020 was enacted to expand the ability of HHS to set aside contracts for IEEs under the Act. IHS may make changes to the proposed regulations to account for this recently enacted law.

PilieroMazza’s Native American Law & Tribal Advocacy attorneys have earned a national reputation for their experience helping Indian tribes, tribally owned business entities, ANCs, Native Hawaiian Organizations (NHOs), and concerns owned by Native Americans meet the challenges created by the unique legal structures that affect tribes, ANCs, and NHOs. Please visit this link to learn more. PilieroMazza’s coverage of the Indian Community Economic Enhancement Act of 2020 is available here.

Peter Ford is a Partner in PilieroMazza’s Government Contracts Group and Native American Law & Tribal Advocacy Team.