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Tuesday, October 5, 2010

Social preference or corporate welfare?

In response to the WaPo attacks on ANC social preference in US Federal procurement, the moneyed interests behind the ANC are striking back. To me, it is cynicism writ large.

The context here is a group of small business interests who have been given a 23% piece of the multi-billion dollar US Federal procurement budget. This is to be divvied up between small business HUBZone interests and small business socially stigmatized status businesses.

The effect, if not the intent, of this social preference policy is to set the various small business groups against each other, thereby distracting one and all from the larger issues of social policy. Not to mention the tension that any form of sole source contracting generates.

We have already seen how the HUBZone interests have recently gained a leg up on the other socially stigmatized groups. This just heightens the tension between the beneficiaries of the preferential policy. And it has to be asked if there are other, more direct and cost-effective means, of achieving at least equal if not more effective social outcomes?

The ANC matter is a cynical tactic, designed by people who have had agendas other than social welfare, to buy off the mineral rich lands of the Alaskan Native peoples with the preferential pieces of the US procurement pie. Who are the real intended beneficiaries of this type policy?

It is cynical because the plan would have no effective means of implementation without the interjection of non-Native players in the game, who take the prize and leave the crumbs to fall off the table where they may. It is cynical because these players are given a preferential grab at the portion of the pie set aside for the small business group as a whole.

It is classic divide and conquer political tactic, with only a micron-wide veneer of social welfare. It is, in fact, corporate welfare for the non-stigmatized majority who provide the "responsibility" and expertise and networking to skim the cream from the procurement pot of gold with the benefit of social preference monopoly.

But I editorialize too much. This is what the apologists for the ANC social preference say on the subject, and you can decide the merits as you will, with fair and balanced reporting:

First, this Press Release: Native American Contractors Association Responds to the Washington Post Series on Alaska Native Corporations
Last week’s Washington Post series by Robert O’Harrow contained a number of inaccurate and misleading characterizations about the important work of Alaska Native Corporations (ANC). In response, the Native American Contractors Association (NACA) has dedicated a page on its website challenging the accuracy and objectivity of these articles. The information sets the record straight regarding the critical mission and strong value of ANCs to the U.S. government and Alaska Native people.

On August 26, 2010, NACA Executive Director Sarah Lukin sent Mr. O’Harrow an eight-page document spelling out the facts regarding the history, role and significance of ANC participation in the SBA 8(a) program. The majority of these facts and viewpoints were dismissed altogether in the Washington Post’s print articles.

A glaring omission from the entire Washington Post entire series was a balanced, thoughtful examination of the enormous sacrifice Alaska Native people made in exchange for promised business development opportunities to ensure long-term economic success. This includes the U.S. government’s commitment to honor and economically support the Alaska Native people after it seized millions of acres of oil-rich Native land worth hundreds of billions of dollars in exchange for the formation of ANCs and the promise to provide access to important economic initiatives such as the SBA 8(a) program. 8(a) embodies this promise; ANC participation in this program is core to Federal Indian Policy and honors the government’s promise to bring economic self-sufficiency to the Alaska Native people.

In the Washington Post’s second round of news coverage on October 1, 2010, reporter Robert O’Harrow continued his unprecedented attack on ANCs and the indigenous people they serve by misleading readers on industry efforts to bring greater transparency and accountability to ANC 8(a) contracting. The story, entitled “Breaking With Tradition, Native Executives Propose Reforms to ANCs,” irresponsibly led readers to believe the broad ANC community opposes efforts to strengthen ANC accountability. Just the opposite is true. In fact, NACA has joined other Native American organizations, such as the National Congress of American Indians and the National Center for American Indian Enterprise Development, in calling for increased compliance, transparency and education of Native Boards to closely monitor 8(a) company activities for years. (Read NACA’s joint recommendations.)

Mr. O’Harrow glossed over the fact that new regulations and legislative provisions already in motion will substantially improve oversight of ANC 8(a) participation. Specifically, new SBA proposed rule changes will establish a system to report benefits provided to the Native community from 8(a) participation. Additionally, these rules will impose new annual financial reporting for ANC 8(a) firms, create additional oversight by the SBA and agencies, and place new restrictions on ANC participation in the 8(a) program. In addition, the National Defense Authorization Act of FY2010 includes a provision (Section 811) which requires agencies to go through a formal Justification and Approval process for any sole-source award to a Native 8(a) over $20 million.

The ANCs that drafted the alternative policy proposal cited by Mr. O’Harrow have unique and significant access to natural resources and other investments, which provide them a reliable revenue stream outside of the 8(a) program. In essence, they can afford to compete outside of 8(a), unlike the vast majority of ANCs that do not have such resources and require participation in programs like 8(a) to build business capacity.

The Washington Post’s article series also misrepresented the fiduciary obligations required by all ANCs in reporting their financial statements. This, too, was pointed out in Ms. Lukin’s August 2010 letter to O’Harrow. Ms. Lukin wrote that “the overwhelming majority” of ANCs do file their annual reports with the state of Alaska – and “are completely open with the federal government regarding their respective financial pictures.” Ms. Lukin added that “every ANC 8(a) firm must submit an annual report to the SBA outlining and updating their business plan,” and that “new SBA regulations will require ANC, Tribal, and NHO 8(a)s to submit financial reports to the SBA annually.” Native Enterprises will continue to engage in full and open disclosure of their financial reports to their shareholders. None of these facts were included in Mr. O’Harrow’s articles.

Ms. Lukin also addressed statements by Senator Claire McCaskill: “Senator McCaskill’s position that Alaska Native people are being ‘used’ is offensive,” she stated. “ANCs are working hard to provide for Native communities, and the facts show 8(a) is helping Alaska Native communities. Since the formation of ANCs, the Alaska Native high school graduation rate has tripled, inflation-adjusted household income has risen by 50 percent and the proportion of Alaska Native people living below the poverty line decreased by roughly 50 percent. These facts prove ANCs and 8(a) are making a difference.”

Ms. Lukin continued: “Senator McCaskill’s assertion that Alaska Native people should be paid directly by the government and excluded from participating in the federal procurement marketplace suggests a return to the welfare system which has provably failed America’s indigenous people. Native people don’t need a hand out; we need the opportunity to contribute to our nation’s economy and experience our share of the American Dream.”

The Washington Post also failed to challenge Senator McCaskill’s questionable, and arguably hypocritical, characterization that ANCs are awarded “ridiculously, over-priced, noncompete government contracts.” Ironically, on September 30th, the day the first Washington Post story published, Missouri-based Boeing announced it had received a single sole-source contract totaling $11.9 Billion – more than twice what ANCs collectively received last year.

NACA’s website includes rebuttals to specific articles from the Washington Post series. Ms. Lukin stated the articles were “weak on substance and short on the facts.” She added: “Native communities are in need, and that need is undeniable. 8(a) is one of the only programs in history that has produced a positive impact for Native people across the United States. Congress must demonstrate, through action, that it stands with Indian Country and supports programs like 8(a) that promote economic self-sustainability for America’s indigenous people.”

The Native American Contractors Association (NACA) is a national Native advocacy organization based in Washington, DC. NACA represents and serves almost 40 Tribal, Alaska Native Corporations (ANCs), and Native Hawaiian Organizations (NHOs) across the nation on issues relating to the economic self-sufficiency of America’s indigenous people, focusing on our members’ participation in government contracting and the Small Business Administration’s 8(a) Business Development Program. NACA’s members represent over 475,000 Tribal Members, Alaska Native Shareholders, and Native Hawaiians.

In the same vein, this Huffington Post piece, Appropriating Native Economies: When Is Enough, Enough?
When is enough, enough? Native Americans have been asking this question for centuries. The answer is clear, at least as it relates to the systematic and unrelenting quest to strip Native communities of their lands, sovereignty and access to economic recovery: It's never enough.

The latest salvo in this unyielding attack is highlighted in, and furthered by, a recent series of Washington Post articles by Robert O'Harrow. In his skewed and context-deficient articles, Mr. O'Harrow targets Alaska Native Corporations, entities created by the U.S. government to help settle historic land and other claims by Alaska Natives. ANCs were sold to Alaska Natives as a way to build their economic futures. Overnight, their indigenous rights and claims were transformed into shares of corporations. The quid pro quo was giving up tremendously valuable resources, as the U.S. sought to acquire hundreds of millions of acres of oil-rich land to meet its burgeoning energy needs. Implicit in this exchange was a responsibility of the U.S. government to assist the ANCs in building their economies, so that their shareholders, Alaska Natives, might be able to escape the grinding poverty crippling many of their communities. This responsibility is similar to the U.S.'s relationship with Indian Nations, and its fundamental obligation to honor treaties guaranteeing crucial rights.

Mr. O'Harrow, both explicitly and implicitly, complains about the ability of ANCs to participate in a level-setting federal contracting initiative administered by the Small Business Administration. Under this initiative, known as the "8(a) program," companies owned by economically-disadvantaged minority individuals can access procurement channels in an effort to help level the playing field in the often relationship-driven world of federal contracting. ANCs, Indian Nations and Native Hawaiian Organizations also have this ability as the faces of Native community groups and sovereign nations. The 8(a) program is one of the few real opportunities available to ANCs, Indian Nations and NHOs to help better their poverty-challenged communities, arguably the most disadvantaged people in the U.S. Because the 8(a) program views Indian Nations and Native Hawaiian Organizations as essentially the same as ANCs, Mr. O'Harrow's attacks against ANCs are leveled against all Native communities.

As an enrolled citizen of the Seneca Nation of Indians, who works every day to help try to bring economic sustainability to our people, it saddens me to witness yet another assault on our efforts to rise above the effects of generational poverty created by years of governmental oppression. Our lands were stripped away. Our people were killed in a systematic removal process sponsored by governments offering cash for dead Indians. We were corralled onto tiny "reservations," where we were expected to adapt almost overnight to foreign systems and values. In the face of all this, we've persevered. We're still here, fighting to be self-sufficient and retain our priceless sovereignty as a people. However, outside forces often conspire to turn this uphill battle into a sheer cliff. We constantly face attempts to strip us of our remaining resources and opportunities, as state and federal governments consistently remind us that enough is never enough.

The Seneca Nation has experienced this onslaught in spades. We retained tiny pieces of our original lands as the U.S. steamrolled over our communities. In the 1960s, despite our reliance on sacred treaty promises that it would never take more land, the U.S. built the Kinzua Dam, which put much of our territory literally underwater and resulted in the forcible relocation of many of our people. Just this year, the U.S. passed the PACT Act, which was purposefully designed to eviscerate the Seneca Nation's successful tobacco industry, an industry that employed and supported thousands of people. It's no secret that big tobacco corporations maneuvered and manipulated legislative backrooms to guarantee the passage of the PACT Act, as they quickly reacted to Indians taking slivers of their precious market share. And now, as we begin to enter the federal contracting space in an effort to build a sustainable and diversified economy, we're hit by broadside attacks like Mr. O'Harrow's.

Mr. O'Harrow focuses on exceptions to prove the rule. Potential for abuse is inherent in any governmental system. To focus on a small number of isolated cases, however, just isn't fair. His facts are selective. Many of his statements are opinion-laden and conveniently ignore important counterpoints. For example, Mr. O'Harrow attempts to characterize the contracts that ANCs receive as outsized. However, he doesn't point out that ANCs, Indian Nations and Native Hawaiian Organizations combined receive less than 1.3 percent of all contracting dollars. He also tries to paint ANCs as cornering the market on sole-source government contracts. Again, he fails to put this into context. Just this year, Boeing received a single-source contract totaling $11.9 billion -- more than twice what ANCs earned last year on a collective basis.

Mr. O'Harrow also takes issue with the fact that Native companies hire some Non-Natives to help build operations. I am the first person to advocate for more Natives in leadership positions. We're getting there, but it takes time. After years of forced boarding schools, substandard educational systems and efforts to marginalize our communities, we're making great strides to build our business acumen while staying true to our traditions, culture and ways. As a Native educated in the "outside" world, it's a privilege and honor for me to have the opportunity to come back to my nation to help further its economy. There are many others like me, and many more who work day-to-day to build the skills necessary to advance our nations within an environment with different systems and values. It's a challenge to walk in two worlds, and it's foolhardy to expect these important skills to be developed overnight on a broad scale. Our Native companies generate the funds necessary to continue to send our children to school and prepare for our collective future. It takes time to do this in a systematic way.

Many new rules previously proposed by the SBA are designed to deal with the potential for abuse that Mr. O'Harrow highlights, rules that many ANCs, Indian Nations and other Native groups support. However, Mr. O'Harrow uses a broad brush as he attempts to paint all ANCs (and by association, Indian Nations and Native Hawaiian Organizations) with the color of a few self-selected, and non-representative, examples. To not put these isolated examples in the overall context of a necessary program that has demonstrably helped struggling Native communities is both inappropriate and irresponsible. Enough is enough.

David Kimelberg is an enrolled citizen (Bear clan) of the Seneca Nation of Indians. He is the CEO of Seneca Holdings LLC, the investment arm of the Seneca Nation, and the founder of nativeinvestment.com, an online forum and blog about economic development in Indian Country. His views are his own and not necessarily those of the Seneca Nation of Indians or Seneca Holdings.

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