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Alaska Native Corporations to defend controversial contracting program

Apr. 6, 2011 - 06:00AM   |  
By SARAH CHACKO   |   Comments
Sen. Claire McCaskill, D-Mo., wants to rein in the federal contracting program that benefits Alaska Native Corporations.
Sen. Claire McCaskill, D-Mo., wants to rein in the federal contracting program that benefits Alaska Native Corporations. (Staff file photo)

Native American business groups and leaders will seek to defend a federal contracting program that benefits Alaska Native Corporations during a Senate hearing on Thursday.

Some Alaska Native Corporations (ANC) have reaped billions of dollars worth of federal contracts in recent years under special rules designed to help small and disadvantaged businesses. At a Senate Indian Affairs Committee hearing, ANC executives intend to argue that most Native-owned companies remain in need of economic development opportunities.

In its prepared testimony for the hearing, the National Congress of American Indians, which represents American Indian and Alaska Native tribal governments, points to the extreme poverty in which many Native communities still live, "comparable to those in developing nations around the world."

The hearing comes as some lawmakers, led by Sen. Claire McCaskill, D-Mo., are trying to rein in the program. McCaskill has said ANCs have won an outsized portion of the billions of dollars in contracts that agencies reserve for small and disadvantaged companies under the Small Business Administration's 8(a) program.

ANCs, unlike other 8(a) companies, are presumed to be disadvantaged and can receive an unlimited amount of contracts through the program. McCaskill, who chairs a contract oversight subcommittee, introduced legislation to remove ANC preferences under the program.

Contract awards to Alaska Native Corporations increased 916 percent in less than a decade, from $508.4 million in 2000 to $5.2 billion in 2008, according to McCaskill's subcommittee staff.">McCaskill investigated ANCs in 2009 and found that contract recipients failed to employ Alaska Natives and returned only minimal benefits from the businesses to Alaska Natives.

SBA Deputy Inspector General Peter McClintock said in an email he will show that a large percentage of 8(a) contracts were obtained by a relatively small number of ANC-owned firms.

A 2009 IG report also recommended that SBA provide greater oversight of ANC participation in the 8(a) program and study the effects of the ANC program on other 8(a) participants.

SBA made changes to the 8(a) program in March, including setting a percentage of work that 8(a) companies in joint ventures have to perform. It also required that ANCs report on the benefits they return to their communities.

"Although the agency recently strengthened its regulations to increase its oversight capabilities, it remains to be seen whether SBA will effectively exercise these responsibilities," McClintock said in an email.

ANCs and tribal organizations said they are supportive of efforts to increase transparency and accountability. Many were consulted as the SBA created the new 8(a) rules and they also agreed with changes in federal acquisition rules, such as a requirement that federal agencies justify and approve all 8(a) contract awards over $20 million.

The National Congress of American Indians says in its written testimony that the problem is not with competition among small businesses but the government's willingness to open its work to small businesses, increase agency contracting goals and size standards, and stop practices that shut out small businesses, such as bundling contracts.

SBA officials have not commented on Sen. McCaskill's bill but seem to agree with her call for more accountability. However, they stop short of doing away with ANC preferences altogether.

SBA Associate Administrator Joseph Jordan told McCaskill's subcommittee in 2009 that it is "a misnomer to say there is no competition when it comes to 8(a) ANCs."

Jordan, who is also being called before the committee Thursday, then said that more than $650 million of the contract work ANCs received in 2008 was awarded competitively and that contracting officers must certify that the government is getting a fair and reasonable price for all contracts.

"To say that the government did not get the best value because it was sole sourced is, or should be, inaccurate," Jordan said.

SBA Administrator Karen Mills assured hundreds of tribal officials during the Reservation Economic Summit last February in Las Vegas that her agency would support their efforts to grow business. But that support will come with more accountability, Mills told">Indian Country Today after her speech to the summit.

"The important focus is that we cannot have fraud, waste and abuse in any of our programs. [Sen. McCaskill's] concern is really our concern. We have to make sure that we are delivering programs that don't have the image of being inappropriate," Mills said.

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