Proving community benefits: A new era for Native-owned 8(a) corporations

Jill Burke
Aaron Jansen illustration

This fall, Alaska Native-owned small businesses enrolled in a federal small business development program known as 8(a) must, for the first time, place into writing how it is the money they make improves the lives of people. And not just any people. The new requirements look specifically at how a corporation benefits its shareholders and the Alaska Native residents living in that corporations' home village or region.

Despite criticism that 8(a) firms aren't putting enough Alaska Natives to work, Native corporations in Alaska want to get the word out that the 8(a) program is not a jobs program. They also want it known that while they may be required to provide social and cultural benefits, it is not their responsibility to provide health care or social services. Efforts are being taken to ensure this line isn't crossed so that the expectations of what "community benefits" do or should mean within the Alaska Native corporation framework -- established by Congress -- aren't confused with government's obligations to Alaska communities, like building water and sewage infrastructure.

It's been known for months that stricter oversight was coming from the U.S. Small Business Administration, which oversees the 8(a) program. But how cataloguing community benefits will occur remains a work in progress. What information should be passed on? What will the consequences be for lying on the forms or inadequately filling them out?

For many entities faced with documenting how their money flows back into the community, fear remains that their foes -- rival contractors or some members of Congress -- will somehow use the new details against them. Those fears came out during a tribal consultation between the SBA and the Alaska Native business community in Anchorage earlier this month.

"There is a big concern about pitting us against each other," Maver Carey, CEO of The Kuskokwim Corp., testified during the June 24 hearing.

Of particular concern: What is perceived as a community benefit by one corporation may not be the way a different corporation chooses to steer its money. Some may provide cash payments -- shareholder dividends. Others may provide college scholarships. Still others might support language preservation.

One formula does not fit all.

Size matters, too, Carey said. Small corporations may not be able to command the profit margin larger firms can wield, and new business ventures need time to grow.  To illustrate this point, Carey used the corporation she oversees -- TKC -- as an example. In 2003 TKC, leveraging only a stock and bond portfolio and passive real estate investments, generated $9 million in revenue. Seven years later, in 2010, it generated $150 million in revenue, largely from branching out into the 8(a) federal contracting arena, Carey said.

"If we were to report on our benefits seven years ago it would be a lot different than where we are at today," she said.

Carey then rattled off the ways in which TKC helps Alaska Natives: it has paid out $11 million in dividends to shareholders, provided scholarships, and sends books in the mail to toddlers every month; other benefits include providing for the long-term financial health of the corporation and creating jobs -- some of which may be local and others, including a contract a TKC subsidiary is currently performing in California, going to Outsiders.

Carey was one among several speakers who used the forum as an opportunity to have their say in hopes of steering the SBA to develop a reporting method that seems fair.

"We don't want folks to put their own judgments on our self-determined rights," Dennis Worden, legislative director for the Native American Contractors Association, told the crowd. "How do you quantify and put a value to preserving a language?"

'We've done this for years'

"This isn't a new concept for Alaska Native people," said Trudy Sobocienski, CEO of Deloycheet Corp., of the village of Holy Cross, on the concept of looking out for one’s community. "It is important to make clear we did not start these programs to keep access to 8(a) or to respond to criticism or the media. This is something that has been embedded in our value system for thousands of years. Our culture's foundation is based on the doctrine of benefitting all. It’s not something we just orchestrated. It is who we are."

One point that critics like U.S. Sen. Claire McCaskill, D-Mo., have of ANCs special privileges -- and keep returning to -- is the perception that the staggering profits of some companies are glaringly out of balance with the poverty that shareholders of those very same corporations endure. The new SBA rules were developed, in part, to both appease these concerns and give ANCs a vehicle by which to defend the attacks and prove they're meeting their obligations.

Sobocienski’s "benefitting all" speech was the first of two moments that afternoon in which the room erupted in energetic applause. The next would come later, in response to a speaker who would underscore the jobs issue raised by Worden.

In enumerating the trickledown effect corporations offer in terms of opportunity for a better life, Sobocienski recounted her personal story. Home schooled and raised on a remote gold mining camp near McGrath, she is the first member of her family to get a college degree, in part because Native leaders before her inspired her to reach beyond her home village. Scholarships helped. Now, she’s risen to become the chief executive of a village corporation.

Clyde Gooden, vice president of business development at NANA Development Corp., an entity created to oversee the business arm of the regional corporation by the same name and which serves 12,400 people in Northwest Alaska, pulled the second large round of applause when he reiterated that "job creation was never intended to be a part of the 8(a) program."

"We are increasing employment opportunities and we fully expect that to continue," he said, but "it is inappropriate to label us as being unsuccessful regarding jobs and benefits."

Gooden said that in 2010, NANA paid out more than $48 million in wages to 1,300 shareholders who are also employed with the NANA family of companies -- companies that are variously engaged in mining, government contracting, providing support to the oil and gas industry, hospitality, and architecture and engineering.

But the reality is that most Native people aren't willing to relocate outside of Alaska to get the jobs the organization has to offer, and the majority of federal contracting work takes place Outside, he added.

Other Native corporations, like Tyonek, advocated for the SBA to aggregate the data it receives. It would be best for the SBA to not identify in any public reports specific details offered by individual companies, said Michaelene Stephan, board president for Tyonek.

There are concerns about giving away too much information about profits, which could give a potential competitors an edge.

What's the so what?

For its part, the SBA has said the forms used to report community benefits will not be subject to a formal auditing process. Yet if discrepancies or deficiencies are discovered, there could be repercussions, some more extreme than others. Firms risk getting suspended not only from the 8(a) program but could also face getting blocked from any government contract work altogether, said John Klein, an SBA procurement lawyer.

Klein and LeAnn Delaney, deputy director for the SBA 8(a) program, helped moderate the tribal consultation.

How discrepancies or inaccuracies in the reporting of community benefits will get detected wasn't entirely clear, but both Klein and Delaney were adamant that because some information would be similar to data provided in other forms, comparisons could be made that would help a reviewer get a sense of how sincerely a particular submitted its answers. For example: A profit from one form that didn't match up with information on the community benefits form could signal something was amiss, they said.

But they also cautioned that it's premature to gauge how the Feds might evaluate the quality of a corporation's responses, since the form is in development and not yet finalized. Which gets to the heart of what the corporations themselves want to guard against -- that a government agency is positioned to make value judgments about what kind of benefits are allowable; and taken a step further, potentially deemed as valid or invalid ways that corporations decide to support their communities.

Klein and Delaney said this is not the goal. The requirement, they said, is only that corporations track for the SBA how profits are funneled -- in whatever form -- to the communities of Alaska Natives that the corporations serve. 

This is why Alaska's Native corporations with a stake in how the SBA implements its new 8(a) rules collaborated on shaping how the form might look, submitted those recommendations and spoke up. Better to chime in now than to find themselves confronted with a mandatory reporting framework they find onerous or off the mark.

Contact Jill Burke at jill(at)alaskadispatch.com