8(A) program benefits Native Corporations: the Small Business Administration's 8(a) program gives Native organizations a push to succeed. (Alaska Native Business News).

In 1993, Chugach Alaska Corp. was bankrupt. Its timber holdings were unprofitable and the 1989 Exxon Valdez oil spill had wiped out its fishing interests. The Anchorage-based Alaska Native regional corporation, with about 2,000 shareholders, was in danger of liquidation.

The corporation needed to follow a new path, one that promised steady payoffs but required little capital investment Entering the government services field through an obscure Small Business Administration program fit the bill.

Under the SBA 8(a) program, Chugach Alaska gained certification for a subsidiary to pursue federal contracts for military base services.

"Chugach in the early '90s, we were upside down with bankruptcy," says President and Chief Operating Officer Barney Uhart, who has a background in the government services industry. "The 8(a) program and the types of businesses--government services--we chose to get into, required little capital investment. It allowed us to build on something without a lot of capital investment. On top of that, it allowed us to build that history and backlog of work that allowed us to be competitive out of the 8(a) program."

In 1994, Chugach Alaska won $1.2 million and $4.5 million annual contracts to service the U.S. Navy housing on Adak and the U.S. Air Force facility in King Salmon, respectively.

While successfully completing those contracts, the corporation aggressively marketed its services to other agencies and more contracts followed. Chugach Alaska branched out into construction, education, clerical services and information technology, and today is successfully gaining contracts in the competitive market.

In 2000, Chugach Alaska earned more than $100 million in revenues, completed its bankruptcy reorganization plan and paid its first dividend to shareholders. By 2001, the corporation had nearly tripled revenues, to $278 million, and is still growing, according to UharL Almost all of its income is from government contracts.

Its success in the field has not gone unnoticed.

Today, 12 of the 13 Alaska Native regional corporations, several village corporations and other tribal entities have subsidiaries under the 8(a) program. The only regional corporation that has opted to go a different direction is the highly successful Anchorage-based Cook Inlet Region Inc.

The regional and village Native corporations were formed under the 1971 Alaska Native Claims Settlement Act, which divided 44 million acres of land and nearly $1 billion among Alaska's Natives to help settle land claims blocking construction of the trans-Alaska oil pipeline. Under ANCSA, 13 regional and nearly 200 village for-profit corporations were formed.

Most of the corporations lost money during the first 25 years after incorporation, but in the 1990s, fueled by a booming economy, and in part because of successful 8(a) government contracting businesses, most are now on their feet.

In Alaska, 166 firms are 8(a) certified, 91 of which are affiliated with ANCSA corporations and six others are owned by tribes, including a tribe based in the Lower 48, according to the Small Business Administration. Another 33 8(a) companies are owned individually by Native Americans.

"It took awhile for the corporations to discover (the program), but now that they have, and now that they have some fairly sizable resources," it's a big success, says Ron Veltkamp, public information director for the Small Business Administration in Alaska.

The 8(a) program was first authorized as Section 8(a) of the 1953 regulation that created the Small Business Administration. It wasn't activated until 1978 when another act established the program and its goals. It is geared toward helping people who are socially and economically disadvantaged build successful businesses. It is not restricted to Alaska Natives, Veltkamp adds.

"This program is one of the most active programs in Alaska," he says. "We used to have a way larger loan portfolio, but now the 8(a) program has really, really grown."

In order to qualify under the SBA 8(a) program, a company has to meet the following criteria, according to the SBA Web site:

* It must be a small business. (Many subsidiaries of Native corporations qualify.)

* It must be unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who are of good character and citizens of the United States.

* It must demonstrate potential for success.

Programs also exist for women-owned businesses, veteran-owned businesses and businesses located in certain disadvantaged neighborhoods, called HUBzones.

Businesses are eligible for the program for nine years, or until they exceed size standards, which vary depending on the type of business. The first four years are considered the developmental stage. During this phase, the businesses are offered development assistance to help overcome their economic disadvantage. The next five years are called the transitional stage, during which further assistance is offered and the business is prepared to graduate from the program and enter competitive markets.

In addition to the advantages for small businesses of being 8(a) certified, there are advantages to the government to work with such companies, says Kay Bills, executive director of the Alaska 8(a) Association in Wasilla, which acts as a chamber of commerce for 8(a) businesses by doing things such as lobbying for favorable legislation and regulations that oversee the program.

"The 8(a) program is a good program," she says. "It's an excellent way for the government to get the things that they need and it's a good way for the government to develop businesses.

"Our federal government is so wide and so deep, it buys everything, things you would never even think about," Bills adds.

In the old days, an agency would have advertised in a newspaper to get bids on contracts. It was taking two years to get a simple procurement, Bills says. The 8(a) businesses are already certified and competitive bids aren't required on many contracts. "You call them up and get their best deals and you can close on it in 48 hours."

Bills started an information technology business in Wasilla in 1987 and struggled through the state's economic doldrums. In 1992, a friend convinced her that she was an ideal candidate for the 8(a) program. Reams of paperwork later, "imagine doing your taxes 12 times a year," she was certified.

"It's a process of knowing who you are, knowing how to do your business and proving to the federal government that you can do the job," she said.

In 2000, Bills sold her business, which had grown to 200 employees, to Chugach Alaska Corp.

"Chugach has always been the leading edge for trying things out," says Bills. "ASRC (Arctic Slope Regional Corp.) is another one that's been right up there at the top. They know how to put a team together and how to get a job done."

In fact, an Arctic Slope subsidiary, Piquniq Management Corp., was the first Native subsidiary to be certified under the 8(a) process.

Piquniq won its first contract in the late 1980s, after completing the same arduous certification process that Bills endured. Since then, Bills says, deadlines have been set on the government end of the paperwork chain and some of the more redundant paperwork has been eliminated. In addition, the program has grown to the point that the SBA has people who specialize in the 8(a) application process who can help prospective businesses.

In the early 1990s, the certification process was trimmed further for Native corporations, helping open the gates for Chugach Alaska and other companies.

A technical amendment to the Alaska Native Claims Settlement Act in 1992 streamlined the process through which a Native corporation could be certified under the 8(a) program, says Karen Forsland, deputy district director of the Small Business Administration Alaska District office.

"They amended part of ANCSA essentially to clarify that Alaska Native corporations and their subsidiary companies are minority and economically disadvantaged businesses for the purposes of qualifying for government contracting," Forsland says. "Because they are determined to be minority-owned and socially and economically disadvantaged, they didn't have to provide voluminous data to support this."

The ANCSA corporations also have another benefit not open to other small businesses: They are exempt from the affiliates rule, which states little businesses can't be 51 percent owned by bigger businesses and still qualify for 8(a), unless that bigger business is Indian-owned.

So Arctic Slope Regional Corp., for example, which has more than $1 billion in annual revenue, can own subsidiaries classified under the small business heading, despite their common ownership with the larger corporation. A small business that is 51 percent owned by another corporation isn't eligible for the program.

Uhart notes another preference given to Native companies.

"Under current law there is no size restriction on the size of the contract," for Native companies, Uhart says. "A typical 8(a) is restricted, where a company owned by a Native corporation, there is no size limit."

If a government agency wants to market a services contract worth $1 million, it can sole-source the bid to any eligible firm, Forsland explains. If the contract is worth $3 million, the agency must open the contract to competition among all eligible 8(a) firms. But if the agency wants to sole-source that $3 million contract through 8(a), it must go to an eligible firm owned by a federally recognized tribe or a Native corporation.

Despite the success of Alaska businesses in the SBA 8(a) program, Bills warns that it isn't a shortcut to success.

"It does no more than help position you in front of the right people, then you have to stand on your own legs at that point," Bills says. "You'll get shown the door out as fast as you were shown the door in, if you aren't ready to do business."

In the past 10 years, Chugach Alaska has shown it is ready to do business and is successfully competing for government contracts outside the 8(a) program.

In 2002, Chugach subsidiary Chugach Development Corp. teamed with Bechtel Corp. and Lockheed Martin Corp. to form Kwajalein Range Services in order to bid on the support services contract for the missile defense-testing site on Kwajalein Atoll in the Marshall Islands. The result was a $626 million, four-year contract with the potential for 15 years valued at $2.5 billion.

"That's a tremendous success story," Forsland says. "We want to see as the firms graduate that they continue to be successful."

RELATED ARTICLE: GOVERNMENT CONTRACTS GO TO 8(A) BUSINESSES

The federal government purchases billions of dollars in goods and services each year that range from paper clips to complex space vehicles. It is the policy of the United States, as stated in the Small Business Act, that all small businesses have the maximum practicable opportunity to participate in providing goods and services to the government. To ensure that small businesses get their fair share, the SBA negotiates annual procurement preference goals with each Federal agency and reviews each agency's results. The SBA is responsible for ensuring that the statutory government-wide goals are met in the aggregate. One of those goals is to ensure that 5 percent of the government's prime and subcontracts go to small disadvantaged businesses, which include 8(a) businesses.

Source: The Small Business Administration Web site.