Increase in Native corporation contracts brings Senate scrutiny

CONTRACTS: Analysis reveals only a fifth were done in Alaska.

June 23, 2009 

WASHINGTON -- An investigation into how Alaska Native corporations are landing billions in federal contracts found the companies have seen dramatic growth over the past eight years and said the contracting has totaled nearly $24 billion during that period.

The Senate Subcommittee on Contracting Oversight, headed by Sen. Claire McCaskill, D-Mo., released some of its early findings Tuesday, in advance of a July 16 hearing she plans to hold on Native contracting. From 2000 to 2008, only one-fifth of all contracts awarded to Alaska Native corporations were performed in Alaska, McCaskill's committee found.

The total amount of Alaska Native contracting has grown from $508 million in 2000 to $5.2 billion last year, the committee said.

It also found that last year Alaska Native corporations received 19 percent of all federal contracts awarded to small businesses.

Special contracting rules for Native corporations have allowed them to "qualify for large contracts while circumventing the normal competition process," McCaskill's office wrote in its report. About 70 percent of those contracts were awarded through the Department of Defense, which gave Native corporations contracts for security and maintenance at military bases, among other services.

McCaskill's subcommittee asked for and now is studying eight years' worth of internal records covering how much executives are paid, how many employees are Native and other business matters. However, the figures released Tuesday came from public records on contracts.

McCaskill at the July hearing is likely to zero in on rules inserted into federal law years ago by then-Sen. Ted Stevens. Those rules allow Native corporations to be eligible for no-bid federal contracts of any size, unlike other small businesses, which are capped at $5.5 million for contracts under the program. One of the Native corporations under scrutiny, Cook Inlet Region Inc. in Anchorage, said it has never received money from no-bid contracts.

Jana Turvey, vice president of corporate affairs for Afognak Native Corp. in Anchorage, defended the federal program.

"Collectively, ANCs (Alaska Native corporations) serve 130,000 disadvantaged individuals and are responsible for providing entire Native communities economic, social and cultural benefits in perpetuity," she said. "All other 8(a) companies received, combined, 81 percent of prime contract awards and serve their owners -- approximately 10,000 disadvantaged individuals. In addition, data collected by the Native American Contractors Association in 2007 clearly showed that tribes, Alaska Native corporations, and Native Hawaiian organizations combined garner only 1.2 percent of federal contract dollars, disproportionately smaller than our population.

"It is also noteworthy that the subcommittee repeatedly references where ANCs are doing business, with a particular focus on Virginia. We are unaware of any geographic restrictions on Alaska Native corporations, or any other 8(a) companies, where business can be conducted," she said. "In fact, other large companies who are awarded federal contracts outside of the 8(a) program are not restricted to where they can conduct business or perform contracts. It should come as no surprise that ANCs do business in Virginia, as that is where a great deal of federal spending takes place."

Alaska's congressional delegation on Tuesday jumped to the defense of the Native corporations, created by Congress in the 1971 Alaska Native Claims Settlement Act to settle Native claims to ownership of most Alaska land.

"We look forward to telling the entire story during the full hearing," said Sen. Mark Begich, D-Alaska. "It is really inappropriate to release and comment on partial information when all of the facts have not been gathered."

But Alaska's Native corporations have their critics too. A 2006 investigation by the Government Accountability Office recommended the U.S. Small Business Administration tighten its oversight of the contracting, although that report did not suggest changes in federal law or find abuses by Native companies. The SBA's inspector general is auditing the companies' contracting practices, including how much of the revenue reaches Natives as shareholder dividends.

The special rules have allowed big defense contractors to use Native corporations as subcontractors, making it look as though smaller companies are benefiting, said Lloyd Chapman of the California-based American Small Business League, which lobbies Congress for small-business owners seeking fairer contracting rules.

"The Pentagon gets to give contracts to the top defense contractors and report it as a small business," Chapman said.

Sen. Lisa Murkowski, R-Alaska, countered that the criticism is "largely economically motivated" by competitors who've come to believe that "a dollar to an Indian business is a dollar lost to them."

The program has brought "economic opportunity to some of the most poverty-stricken regions of our nation, and provides solid value for our government," said Rep. Don Young, R-Alaska. "I will continue working to ensure that this hearing does not turn into a political witch hunt."

Find Erika Bolstad online at adn.com/contact/ebolstad or call her in Washington, D.C., at 202-383-6104.

Federal contracts

Alaska Native corporation federal contracts: Federal contract awards grew from $508.4 million to $5.2 billion a year from 2000 to 2008.During the same years, 21 percent of all federal contracts awarded to Alaska Native corporations went toward work completed in Alaska. Virginia and Maryland received another 25 percent, followed by roughly 10 percent split between Florida and California.About 70 percent of contracts awarded to Native corporations from 2000 to 2008 were from the Defense Department. Source: U.S. Senate Subcommittee on Contracting Oversight

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