In a noteworthy decision this February, the Small Business Administration’s (SBA) Office of Hearings and Appeals (OHA) upheld SBA’s determination denying GTEC Industries, Inc. (GTECI) entry into the 8(a) Business Development Program as a tribally owned entity.[1] For businesses seeking 8(a) program certification, this decision highlights the importance of demonstrating eligibility by a preponderance of the evidence.
GTECI’s 8(a) application has a lengthy history. GTECI first applied to the 8(a) program in May 2017 and was denied in May 2018 for failing to establish economic disadvantage and potential for success – both key requirements for program admission. GTECI requested reconsideration of this decision and actually filed a lawsuit in federal district court concerning SBA’s final agency decision in November 2018 following a request for reconsideration from GTECI. While SBA rescinded its decline decision and reopened GTECI’s application, SBA’s focus was on GTECI’s status as a recognized Indian tribe.
As relevant background, there are special rules for entities owned by Indian tribes (and Alaska Native Corporations, Native Hawaiian Organizations, and Community Development Corporations) for applying to and remaining in the 8(a) program.[2] Among other program requirements, all applicants must be deemed economically disadvantaged and establish the potential to succeed in the program. The standards for establishing economic disadvantage and potential for success for tribally-owned entities differ from the standards applicable to individual-owned companies.
However, before you can establish economic disadvantage and potential for success as a tribally-owned applicant, you must first establish that you qualify as a company owned and controlled by an Indian tribe (or a wholly owned entity of a tribe). The key factor in GTECI’s application and ultimate denial as affirmed on appeal was that SBA could not determine that GTECI was owned and controlled by a recognized tribe.
SBA’s regulations define an Indian tribe as “any Indian tribe, band, nation, or other organized group or community of Indians, including any ANC, which is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians, or is recognized as such by the State in which the tribe, band, nation, group, or community resides.”[3] In so many words, the Tribe must be either federally or state recognized.
In GTECI’s case, GTECI claimed that it was owned and controlled by the Georgia Tribe of Eastern Cherokee, Inc., a corporation wholly owned by the Georgia Tribe of Eastern Cherokee, a tribe recognized by the State of Georgia. As the applicant, GTECI carried the burden of establishing such status.
During its processing of the application, SBA obtained a letter from the Georgia Council on American Indian Concerns finding that the Georgia Tribe of Eastern Cherokee was not a tribe as contemplated by the requirements under Georgia statute, but rather that it was a non-profit Indian heritage organization engaging in the recruitment of Indians in the State of Georgia who are of Cherokee heritage. SBA also obtained a proposed findings letter from the Office of Federal Acknowledgement, finding that the Georgia Tribe of Eastern Cherokee did not meet three of the seven requirements for federal acknowledgement as a tribe. In response, GTECI provided financial statements and a merger agreement. SBA again denied the application, finding that GTECI failed to establish that it was owned and controlled by a state-recognized Indian tribe.
On appeal, OHA found no basis to conclude that SBA’s determination that the Georgia Tribe of Eastern Cherokee was not an Indian tribe was arbitrary, capricious, or contrary to law. OHA explained that SBA’s reliance on the letters from the Georgia Council on American Indian Concerns and the Office of Federal Acknowledgement was reasonable and that GTECI did not demonstrate that its owner was the same tribal entity recognized by the State of Georgia. In fact, a number of individuals claimed to be associated with the Georgia Tribe of Eastern Cherokee. There was insufficient documentation presented for SBA to find that GTECI met the ownership requirements to be eligible as a tribally-owned applicant. Accordingly, OHA affirmed SBA’s denial of GTECI’s application.
This decision highlights the importance of demonstrating eligibility for the 8(a) program by a preponderance of the evidence. The onus is on the applicant to produce sufficient documentation and evidence, and SBA has the sole discretion to request clarification on information presented or learned as part of the application.
[1] See GTEC Indus., Inc., SBA No. BDPE-589 (2021).
[2] See 13 C.F.R. § 124.109.
[3] 13 C.F.R. § 124.3.
