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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: April 13, 2000

FROM: Barry McVay, CPCM

SUBJECT: Defense FAR Supplement (DFARS); Utilization of Indian Organizations and Indian-Owned Economic Enterprises

SOURCE: Federal Register, April 13, 2000, Vol. 65, No. 72, page 19858

AGENCIES: Department of Defense (DOD)

ACTION: Final Rule

SYNOPSIS: DOD is amending Defense Federal Acquisition Regulation Supplement (DFARS) Subpart 226.1, Indian Incentive Program, to implement provisions of the Fiscal Year 1999 DOD Appropriations Act (Public Law 105-262) and Fiscal Year 2000 DOD Appropriations Act (Public Law 106-79) which permit small business concerns to participate in the Indian Incentive Program. The Indian Incentive Program provides incentive payments to government contractors that use Indian organizations and Indian-owned economic enterprises as subcontractors. However, a quirk in prior appropriations acts excluded small businesses from participating in the program.

EFFECTIVE DATE: April 13, 2000.

FOR FURTHER INFORMATION CONTACT: Ms. Susan Schneider, Defense Acquisition Regulations Council, PDUSD (AT&L) DP (DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-3062, 703-602-0262; fax: 703-602-0350.

SUPPLEMENTAL INFORMATION: The Indian Financing Act of 1974 established the Indian Incentive Program to encourage contractors to use Indian organizations and Indian-owned economic enterprises as subcontractors. The act, which is implemented by Federal Acquisition Regulation (FAR) Subpart 26.1, Indian Incentive Program. The act does so by permitting an incentive payment to the contractor "equal to 5% of the amount paid to a subcontractor in performing the contract, if the contract so authorizes and the subcontractor is an Indian organization or Indian-owned economic enterprise."

Prior to FY99, annual appropriations acts restricted DOD payments under the program to those contractors that submitted small business subcontracting plans under FAR Subpart 19.7, The Small Business Subcontracting Program, and to those contractors participating in the test program for comprehensive small business subcontracting plans under DFARS Subpart 219.7, Subcontracting with Small Businesses, Small Disadvantaged Business and Women-Owned Small Business Concerns. However, small businesses are not required to submit subcontracting plans, so small businesses with DOD contracts were not eligible to earn the 5% incentive for subcontracting with Indian organizations or Indian-owned economic enterprises. This inequity was rectified in Section 8024 of the FY99 DOD Appropriations Act when it eliminated the requirement for a DOD contractor to submit a subcontracting plan to participate in the Indian Incentive Program. Section 8024 of the FY00 DOD Appropriations Act duplicated Section 8024 of the FY99 act.

On November 18, 1999, DOD published a proposed rule to modify DFARS 226.104, Contract Clause, to state that the contracting officer must include FAR 52.226-1, Utilization of Indian Organizations and Indian-Owned Economic Enterprises, in solicitations and contracts that do not use the procedures in FAR Part 12, Acquisition of Commercial Items, and are for supplies or services valued at $500,000 or more or for construction valued at $1,000,000 or more. In addition, the proposed rule stated that the contracting officer may use FAR 52.226-1 in any solicitation or contract if the contracting officer believes subcontracting possibilities exist for Indian organizations or Indian-owned economic enterprises.

DOD received comments from 36 commenters on the proposed rule. As a result, the threshold has been reduced to the $100,000 simplified acquisition threshold (except contracts awarded under FAR Part 12) to provide increased opportunity for small businesses to participate in the Indian Incentive Program. Since the threshold is substantially reduced, the language authorizing the contracting officer to use FAR 52.226-1 in any contracts with subcontracting opportunities is also deleted.

FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.

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