Alaska Natives and a Small Business Administration official defended federal contracting preferences for Indian and Native firms Thursday, telling the Senate Indian Affairs Committee that the program is working and regulatory changes will eliminate the potential for fraud and abuse.
A small number of participants abused the preferences under the SBA's 8(a) program, but those have been overshadowed by benefits to Native shareholders and tribal members in the form of dividends, jobs, scholarships, community pride, and more, said Joseph Jordan, associate administrator for SBA's government contracting office.
The 8(a) preferences have been under attack in recent years, fueled by reports of Alaska Native corporations landing federal contracts worth tens of millions of dollars without having to compete for them.
Other businesses in the program, such as Hispanic companies, are limited to sole-source contracts limited to $6.5 million.
The preferences apply to firms owned by Natives, American Indians and Native Hawaiians, but Alaska Native corporations have been singled out for criticism by some lawmakers and in media reports.
The program lacks oversight, does little to help Alaska villages, has enriched non-Native contractors and gives unfair advantages to huge Native corporations while truly small firms struggle to survive, they've said.
The hearing, titled "Promise Fulfilled: The Role of the SBA 8(a) Program in Enhancing Economic Development in Indian Country," gave Natives and American Indian representatives the chance to explain the program's benefits and describe the unique role of tribal and Native corporations.
All Native-owned corporations should be considered permanently disadvantaged until significant disparities in major areas are closed, said Julie Kitka, president of the Alaska Federation of Natives.
Life for Natives has improved in recent years, with elders living longer, while poverty and infant mortality rates have fallen. The 8a preferences are playing a big role in that, boosting the profits at Native corporations and returning benefits to shareholders, she said.
The 8(a) preferences need more support because they're making life better in communities that have struggled for generations, she said.
"There is no doubt in my mind this is one of most successful programs we've ever seen," she said.
Other supporters explained that tribes and Native corporations aren't like other corporations because they must look after whole communities. Some of the benefits are intangible, such as cultural and language preservation.
Sen. Mark Begich, who called for the hearing with fellow Democrat Sen. Daniel Inouye of Hawaii, said despite decades of improvement, dozens of rural Alaska communities still haul their drinking water, gas reaches $10 a gallon in some villages and large numbers of Natives live in poverty.
The program is "not a handout," he said. "It's a step to self-sufficiency. ... It's an opportunity for people to create their own success."
The regulatory overhaul of the program is the "first of its kind" in more than 10 years, and comes only after extensive discussions with Native and tribal leaders, said Jordan, with the SBA.
It will tighten accountability and oversight, and includes a new requirement that firms annually demonstrate how the 8a program benefits shareholders and tribal members.
Peter McClintock, a deputy inspector general, cited problems with the program, saying his office found that non-Native managers raked in millions of dollars, benefits provided to shareholders could not be tracked back to 8a contracts, and the percentage of contracts awarded to Natives in the 8a program had nearly tripled in five years, reaching $3.9 billion in 2009.
Sen. Lisa Murkowksi, an Indian Affairs member, used the meeting to attack a bill proposed by Sen. Claire McCakill, D-Missouri, to eliminate the preferences for Alaska Native corporations.
McCaskill is not a member of the committee and because of that could not participate, McCaskill's press secretary said in an email. But she and her staff planned to follow the hearing closely.
Murkowski asked McClintock if he saw any justification for singling out Native corporations.
No, he replied.
"Our office has never taken the position that ANC's should not participate," McClintock said.
As for the effectiveness of the SBA's changes, it's too soon to assess, he said.
Committee member Sen. John McCain, R-Ariz., attended the program briefly. He attacked it as irresponsible to U.S. taxpayers and said benefits merely trickled back to Natives, while non-Native contractors, lobbyists and others pocketed huge sums.
"This is fundamentally unfair to the people who are supposed to be the recipients, the Native Alaskans," he said.
Alaska Newspapers Inc., which operates this web site and publishes several weekly newspapers, is registered as an 8(a) and is owned by Calista, a Native regoinal corporation serving shareholders with roots in the Bethel region.
This story is posted with permission from Alaska Newspapers Inc., which publishes six weekly community newspapers, a statewide shopper, a statewide magazine and slate of special publications that supplement its products year-round.