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Saturday, April 24, 2010

Native Alaska contracting preference under scrutiny

Alaska Native corps. fight to keep favoritism in federal contracting
Only Native-owned businesses have the ability to land sole-source, no-bid, unlimited-value contracts with the federal government -- a fact that raises some ire among those who oppose the preferential structure.

Critics claim Native corporations too easily secure big money contracts without doing enough to improve life in their shareholders' hometowns -- a founding ethic of the Alaska Native Claims Settlement Act. Plus, they say, unscrupulous outside interests can use the Native corporations as "front companies" to gain access to big contracts from which they might otherwise be excluded, and further direct work to subcontractors in which they have a financial stake. The worst case scenario? Money and jobs are passed on to entities with no Native ties at all.

Supporters counter that the potential for waste or abuse is not a legitimate excuse to thwart opportunity for Natives. Yet changes are already under way in response to demands for increased public accountability. The SBA has proposed requiring Alaska Native corporations to demonstrate how their contracts benefit their communities, and the Department of Defense -- the main source of contracting opportunities -- is requiring its officers to justify sole-source awards in excess of $20 million, which are available only to Native-owned corporations. No-bid awards for all other 8(a) businesses are restricted to $5.5 million or less.

Alaskans are resisting the change on both fronts. U.S. Senator Lisa Murkowski intends to try to repeal the new DOD reporting requirement. Murkowski says more paperwork will cause a chilling effect on awards.

A proposed rule to report yearly on how benefits from 8(a) participation is reaching Native people prompted terms like "onerous" and "burdensome and unreasonable." Many are also critical of government value judgments about whether the corporations are fulfilling their missions.

Native corporations welcome including Native Hawaiians among the Native-owned businesses with access to sole source contracts of unlimited value.

Native corporations argue that they can weed out bad managers and corruption on their own, and question why they should be subject to more stringent performance guidelines than other American companies.

2006 GAO Report: Increased Use of Alaska Native Corporations’ Special 8(a) Provisions Calls for Tailored Oversight

Alaska Native Corporations: IGs and Issues
In July 2009, Alaska Native Claims Settlement Act Corporation Chugach World Services Inc in Anchorage, Alaska received a $55 million Indefinite Quantity firm-fixed-price contract to revitalize Buildings 2266 and 2264 at Fort Sam Houston, TX.

If an Alaska corporation seems like an odd single-solicitation choice for work in Texas, you’re not alone. Chugach has a long history of federal contracts for similar work all over the USA, however, which makes them an experienced partner. They’re not alone, either. ANCs’ share of federal contracting has grown from $1.1 billion in FY 2004 to $3.9 billion in 2008, including some key front-line contracts. That’s 26% of 8(a) dollars, going to 2% of registered 8(a) firms. Meanwhile, the US Small Business Administration’s Inspector General has released a pair of reports in the past 2 years, documenting issues with ANCs…

The July 2009 Small Business Administration’s Inspector General (SBA IG) report says that unique federal contracting privileges for Alaska Native Corporations (ANCs) damage the prospects of small, disadvantaged firms seeking federal business under the 8(a) small business contracting program.

Federal agencies are supposed to award 5% of their contracting dollars to small, disadvantaged businesses, of which 8(a) firms are a subset.

ANCs can also participate in the 8(a) program, but they have a number of additional advantages. Exemptions from competition requirements for larger contracts above $5.5 million. No $100 million cap on the total sum of money a single firm can receive under the 8(a) program. Not to mention relaxed restrictions on the number of firms that can be owned by an ANC 8(a) firm, creating a set of “small” firms that are really a large firm with operating divisions – and pre-existing relationships that have encouraged federal agencies to meet quotas by awarding large, sole-source contracts to ANCs.

Even within ANCs, the SBA IG says that no limits on sole-source awards concentrate the benefits. In FY 2007, 50% of ANC awards went to just 11 ANC firms, or 6% of the total. Furthermore, those top 11 firms received 82% of their 8(a) awards without competition.

Additional Readings [from linked article]

  • US GAO (July 9/09, #B-401057.2) – Small Business Administration-Reconsideration. “The Small Business Administration (SBA) asks that we reconsider our decision in Mission Critical Solutions, B-401057, May 4, 2009, 2009 CPD para. 93, in which we concluded that, prior to the award of a contract to an Alaska Native Corporation on a sole-source basis…”

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