Alaska News

Our view: No-bid preferences

The Small Business Administration is working on tighter rules for the program that has helped some Alaska Native corporations get billions of dollars in federal contracts. Known as 8a, the program allows government agencies to award the Native firms no-bid contracts of unlimited size. SBA's proposed rules don't require competitive bidding and they don't cap the size of Native no-bid contracts. But they may help forestall Congress from making more dramatic reforms.

Without question, federal 8a contract work has been a boon to some Native corporations. It helped Chugach Alaska Corp. recover from bankruptcy. In 2007, Chugach was able to pay a dividend of $52.51 a share. Ahtna, based in the Copper River area, is another firm that rebounded from serious trouble with help from 8a contracts. Previously small village corporations like Chenega and Afognak have used 8a work to grow into major businesses reaching far outside Alaska.

In 2006, Alaska's 13 Native regional corporations took in $2.4 billion from 8a contract work -- 34 percent of all their revenues. That year, Alaska 8a ventures had more than 24,000 employees outside the state.

But the question has never been "Is 8a a good deal for certain Alaska Native corporations?" Clearly, it is. The question is whether 8a is a good deal for taxpayers.

A 2006 Government Accountability Office report looked at no-bid contracts for security at Army installations, including two held by Native corporations. Comparable private security contracts, awarded through competition, cost 25 percent less, the GAO found.

The GAO also found that the Small Business Administration was failing to monitor no-bid Native contracts closely enough to prevent potential abuse.

Missouri U.S. Sen. Claire McCaskill is the 8a program's most prominent critic in the Senate. "As someone who is highly skeptical of sole-source contracting," she has said, "I think it should be the exception, not the rule. ... Large corporations should compete for government business -- period."

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Other critics have complained that 8a is unfair to genuine small businesses, which may lose their shot at government work when Native corporations vacuum up so much of it.

During the recent AFN convention, Native corporate leaders staunchly defended the 8a program. They essentially said nothing is broken, so there's no need to fix it.

But a hard-line attitude opposing any 8a reforms may well backfire and do their shareholders more harm than good.

Critics have raised legitimate issues that should be considered and, in at least some aspects, addressed. If American taxpayers are not getting the best value for their money, it is in the interest of everyone to remedy that. Otherwise, Native 8a contractors may simply give their critics more ammunition and raise the odds they may eventually lose their contracting advantages altogether.

Because in the end, the 8a program is an artificial opportunity created by government policy. And when the government grants special economic privileges, the government can take them away.

BOTTOM LINE: Valid concerns about generous use of no-bid contracts for Alaska Native corporations need to be addressed.

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