The Indian Incentive Program: How Primes Earn a 5% Incentive
The Indian Incentive Program pays a prime contractor an extra 5% of the amount paid to an eligible Indian-owned subcontractor. Here is which contracts qualify, how a prime applies, and what to expect on timing.
Key points
- The incentive equals 5% of the amount paid to an eligible Indian-owned subcontractor, paid by the government on top of the contract price.
- DoD contracts use DFARS 252.226-7001; civilian agency contracts use FAR 52.226-1.
- The prime applies through its contracting officer and can file while the contract is open, but not after closeout.
- Valor Tactical Innovation is an Indian-Owned Economic Enterprise and a Small Disadvantaged Business.
What is the Indian Incentive Program?
The Indian Incentive Program (IIP) pays a prime contractor an incentive equal to 5% of the amount paid to an eligible Indian-owned subcontractor. It is set out in FAR subpart 26.1 and was created to encourage subcontracting with Indian organizations and Indian-Owned Economic Enterprises.
The incentive is paid by the government, on top of the contract price. It does not reduce what the prime pays the subcontractor.
Which contracts qualify?
The contract must include the incentive clause:
- DoD contracts: DFARS 252.226-7001. The Department of Defense says a prime can ask for the clause to be added and can file at any time while the contract is being performed.
- Civilian agency contracts: FAR 52.226-1, which a contracting officer may include when subcontracting opportunities exist and funds are available.
Who is an eligible subcontractor?
The subcontractor must be an eligible Indian organization or Indian-Owned Economic Enterprise, at least 51% owned by eligible owners. A prime cannot claim the incentive on work subcontracted to its own parent, subsidiary or affiliate.
How does a prime apply?
- Confirm the clause. Check that the contract includes DFARS 252.226-7001 or FAR 52.226-1, or ask the contracting officer to add it.
- Collect the documents. Typically the subcontract or purchase order, invoices or proof of payment, and the start and end month of the work. Valor provides its ownership documentation on request.
- Submit through the contracting officer. For DoD, complete requests go to the Office of Small Business Programs and are handled first come, first served.
- File before closeout. Claims can be made while the contract is open; once it closes, a claim can no longer be filed.
What to expect on timing and funding
Payments depend on the funds appropriated each fiscal year and on how many requests are ahead in the queue. The DoD Office of Small Business Programs notes that complete, eligible requests not funded in one year roll over to the next, so they do not need to be resubmitted, but the wait can be long. The incentive is subject to contracting officer approval and the availability of funds.
Working with Valor Tactical
Valor Tactical Innovation is an Indian-Owned Economic Enterprise and a Small Disadvantaged Business. Primes that place qualifying purchase orders with Valor may be eligible to apply for the 5% incentive. Ask our team for the documents your contracting officer will need through our contact page.
Valor manufactures energetic components such as impulse cartridges, CAD/PAD and initiators, squibs and EEDs.
This article is general information, not legal advice. Confirm eligibility and procedures with your contracting officer.
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