Native firms face changes to contracting

SBA: Tribal corporations could still obtain no-bid contracts without set limits.

October 28, 2009 

A federal agency is proposing big changes to the controversial contracting program for minorities that spurred massive growth among Alaska Native corporations over the past decade.

The agency, the federal Small Business Administration, on Wednesday published a 31-page proposed rule comprising many changes to its contracting program for minority-owned, disadvantaged businesses, including Alaska Native firms.

Among the changes that could resonate in Alaska:

• The agency could early-terminate Alaska Native firms from the contracting program if they grow over a certain size. Right now, the firms' size matters only when they join the program.

• Alaska Native and tribal firms would be unable to continue their contracting privileges in a certain line of business — after those privileges expire — simply by creating a new company.

• Alaska Native and tribal firms would not be allowed to subcontract work to their large, non-Native partners. Also, the Native firms would have to do at least 40 percent of the work in those partnerships.

• Alaska Native firms would have to start reporting to the SBA annually how their contracting is benefiting their shareholders.

But the SBA isn't proposing to dismantle the biggest magnet for criticism in its contracting program: The provision that allows Alaska Native and tribal firms to obtain federal contracts without limit on the dollar amount and without competition.

That provision -- inserted in federal law by former Sen. Ted Stevens, R-Alaska -- has generated criticism by Lower 48 politicians and other minority business owners, who say it is unfair to taxpayers and other minorities.

Undoing that provision would require Congress to amend federal law, and Sen. Claire McCaskill, D-Mo., a critic of sole-source contracting, has signaled her intent to pursue such legislation.

The deadline for public comments on the SBA's proposed rule is Dec. 28. The new rules can become final sometime after that.

The SBA said Wednesday it specifically is seeking public input on "how best to limit sole-source awards to ensure that program benefits flow to the intended beneficiaries."

ALASKA REACTION

Executives from some of the state's largest Native corporations said their staffs were poring over the proposed changes.

The impact on individual Native corporations will probably vary greatly because they all run their businesses differently, said Barney Uhart, president of Anchorage-based Chugach Alaska Corp., one of the state's biggest Native firms.

He said he hasn't noticed any proposed changes that would severely harm Chugach.

"At least the process has started, and I'm glad for that. This is the way that (rule changes) need to occur," he said.

One of the seemingly significant rule changes -- the one preventing Native firms from subcontracting work to their non-Native partners -- may not be all that far-reaching because many federal agencies are already disallowing it.

"There has been a push back from agencies not to (allow) that," said Clara Pratte, director of the SBA's office of Native American Affairs.

"These regulations formalize it," she said.

OUTSIDE REACTION

Pratte said some of SBA's proposed changes could address concerns raised by McCaskill's government oversight committee in recent months. The committee has been investigating Alaska Native firms' federal contracting.

In a report published this year, the committee said that the companies had landed nearly $24 billion in work over the past eight years, and it questioned whether the benefits to Native shareholders were "in proportion to the potential for waste, fraud and abuse" created by sole-source contracting.

McCaskill issued a statement Wednesday saying she was encouraged that SBA has "finally taken some steps forward to improve oversight of the 8(a) program," especially the proposed change requiring the firms to report the benefits they are passing along to shareholders.

But, she said, "Unfortunately, I don't think these actions go far enough. As someone who is highly skeptical of sole-source contracting, I think it should be the exception, not the rule. In this instance, it remains the rule. Large corporations should compete for government business -- period."

The Native American Contractors Association, based in Washington, D.C., said that it hopes Congress will allow the SBA to implement the new rules before seeking legislative reform.

"At the end of the day, NACA and the Native community may not agree with all of the draft regulations, but we do appreciate the SBA's positive efforts to engage the Native community in this process," said Sarah Lukin, NACA executive director.


Find Elizabeth Bluemink online at adn.com/contact/ebluemink or call 257-4317. Daily News reporter Erika Bolstad contributed to this story.

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