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Senator suggests limits on Alaska 8(a) contracts.

A Senate subcommittee turned up the heat on Alaska Native Corporations as dozens of Alaskans and their supporters overflowed a hearing room to defend their federal contracting preferences.

The Alaskans argued that the contract revenue has provided large sums to support educational and social programs in Native communities. But the Senate Homeland Security and Governmental Affairs Committee's Subcommittee on Contracting Oversight estimated the largest ANCs' contributions amount to $615 per Alaska Native per year.

The July 16 hearing examined the impact of the Alaska firms' contract preferences in the 8(a) program: they can receive sole-source awards in unlimited amounts, while other 8(a) firms have limits; they are considered small businesses no matter what their size; and they can create an unlimited number of 8(a) subsidiaries, while individual entrepreneurs can own only one 8(a) business.

The subcommittee chairwoman, Sen. Claire McCaskill, D-MO, released a staff report based on the financial records of 19 of the largest ANCs. It found:

* ANC contract awards increased 916% from 2000 to 2008, approximately six times faster than overall federal contract spending. The vast majority of the contracts were sole-source.

* Four ANCs rank among the top 100 federal contractors: Arctic Slope Regional Corp., Afognak Native Corp., NANA Regional Corp. and Chugach Alaska Corp. All 19 companies surveyed were larger than the applicable SBA size standards for a small business.

* Only 5% of the companies' employees are Native shareholders.

The report concluded, "The Subcommittee's investigation shows that the Alaska Native Corporations are multimillion or billion dollar corporations that are now among the largest federal contractors.

Although ANCs provide some benefits to their shareholders, ANCs' contracting preferences also create the potential for waste, fraud, and abuse."

"We have programs for 8(a), HUBZone and service-disabled veteran-owned businesses because we want these small businesses to be able to get their foot in the door," McCaskill said. "But the Alaska Native Corporations have used their special preferences to bust the door down."

A separate audit by the SBA inspector general says Alaska firms received 26% of the contract dollars going to 8(a) companies in 2008, although they account for only 2% of all 8(a) companies. The IG said the ANCs' dominance "may have resulted in diminished opportunities for other 8(a) participants."

With their two home-state senators running interference, representatives of the Alaska corporations emphasized their vital role in helping to lift Native people out of poverty. "By most social and economic indicators, Native Americans are at the lowest rung, struggling with the legacy of rural isolation and stagnant local economies," said Sarah Lukin, executive director of the Native American Contractors Association.

She said it was "disturbing" to see a press release from McCaskill's office describing the ANC contracting program as a "loophole." "The phrase has the connotation that somehow our economic disadvantages are not real," she said.

Sen. Mark Begich, D-AK, called the ANC contracting program "one of the most successful programs this government has done."

Sen. McCaskill said she is not questioning the need for aid to Alaska Native communities, but whether the 8(a) contracting program is the right way to deliver that aid.

She said her target is the excessive use of sole-source contracts, a practice that goes far beyond ANCs, "From the taxpayers' perspective, it's hard to see why Alaska Native Corporations should receive enormous contracts with no competition," she said.

She suggested one possible solution might be for the Alaska firms and other tribally owned businesses to compete among themselves for contracts. "That would seem to me a starting point for discussion," she said.

The Defense Department is looking at competing some of its ANC contracts, said Shay Assad, director of defense procurement and acquisition policy. The majority of ANCs' sole-source work comes from Defense.

But Sen. Lisa Murkowski, R-AK, replied, "The message from Alaskans is, we have a success story here."

A delegation of Alaskans visited other congressional offices to press their case. A group of Alaskan and tribal companies has formed a coalition, Native 8(a) Works, that sponsored ads on some politically oriented websites.

The organization's website warns, "Congress is threatening to curtail a Federal economic development policy that is actually successful."
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Publication:Set-Aside Alert
Date:Jul 24, 2009
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