WASHINGTON -- Alaska Native corporations "provide some benefits to their shareholders," a Senate oversight committee found, but it also determined that the advantages the companies enjoy under U.S. Small Business Administration contracting rules create "the potential for waste, fraud and abuse."
And the companies are no longer small businesses, concluded the committee, which released its findings Thursday during a hearing to examine how some Alaska Native corporations grew so spectacularly over the past decade. Their findings also expressed some concern that Alaska Native corporations are elbowing out smaller businesses trying to access federal small-business programs.
Growing business acumen may account for some of the growth, the committee found, but the corporations benefited especially from federal rules introduced into law in 1986 by then-Sen. Ted Stevens, R-Alaska.
Those rules eventually gave Native corporations the ability to land no-bid federal contracts of any size, unlike other small businesses, which are capped at $5.5 million for federal contracts under the Small Business Administration's 8(a) Business Development Program. Indian tribes and Hawaiian natives also have similar benefits.
The Senate Subcommittee on Contracting Oversight found that last year, four Alaska Native corporations were among the 100 largest federal contractors in the country: Arctic Slope Regional Corp. of Barrow and Anchorage, Afognak Native Corp. of Kodiak and Anchorage, NANA Regional Corp. of Kotzebue and Anchorage, and Chugach Alaska Corp. of Anchorage. They provide a variety of services to the government, although many of their contracts are through the Department of Defense for such services as security and maintenance at military bases.
According to federal auditors, 83 percent of Alaska Native corporations' contracts are awarded without competing bids. And a government report found that the amount of contracting to Native companies has totaled nearly $24 billion this decade.
"Nobody begrudges giving small, disadvantaged businesses a chance to win federal contracts," said the committee chairwoman, Sen. Claire McCaskill, D-Mo., a former state auditor who is examining an array of federal contracting practices.
It's a laudable goal to allow small businesses to "get their foot in the door," McCaskill said, "but the Alaska Native corporations have used their special preferences to bust the door down."
Her goal, McCaskill said, is to level the playing field for all small businesses and provide the greatest value to taxpayers.
McCaskill was confronted by a room full of Alaskans.
Lobbyists, business owners and others with ties to Native corporations waited several hours to enter the standing-room-only hearing, and both of Alaska's senators opened overflow rooms in their offices for people to watch the proceedings.
Sarah Lukin, who was until recently an executive with Afognak, told the committee that it was "disappointing" to see a press release from McCaskill's office describing the 8(a) program for Alaska Native corporations as a "federal loophole."
"The phrase has the connotation that somehow our economic disadvantages are not real," said Lukin, who now serves as the executive director of the Native American Contractors Association. Washington has a history of missteps and failed policies for American Indians and Native Alaskans, Lukin said, but with the Alaska Native contracting rules, Washington "actually got it right."
Both Sen. Lisa Murkowski, a Republican, and Sen. Mark Begich, a Democrat, were allowed to sit on the panel as honorary committee members, and both Alaska senators also were allowed to give opening statements.
Alaska Rep. Don Young, however, was not invited to testify -- a sore point that the Republican congressman complained about in a statement issued during the hearing. Young defended 8(a) contracting, saying it has allowed Alaska Natives "to begin to realize economic and social self-determination, something that has long been the goal of Federal Indian policy."
"I consistently fail to see why our Congress is seeking to punish a successful program that is working exactly as intended," said Young, who has fended off previous efforts to change contracting rules to limit the benefits to Alaska Natives. "Congress' decision to allow Alaska Native participation was the correct one, and we are beginning to see the pay-off now."
Murkowski said she didn't want the oversight committee to forget that the goal of the program is "to mitigate the impact of past ill-conceived policies and to help our Native people maintain their unique cultures and identities and survive in the modern world."
"While the dollar value of some individual contracts may be substantial, taken together all of the contracting under this preference accounts something on the order of 1 percent of the total federal contract pie," Murkowski said. "And I am deeply concerned by the suggestion that a victory for the Indians is a defeat for businesses enjoying preferences through other socioeconomic classifications. Surely, there must be a way to win for all."
That point is a major concern for the SBA's inspector general's office, said Debra Ritt, the assistant inspector general for auditing within the Small Business Administration. Smaller Native businesses have been able to affiliate with larger Native corporations with access to capital and credit.
One small-business owner testified that his Alabama-based company, Cirrus Technology Inc., no longer seeks some federal contracts if they know there's a history of involvement by Alaska Native firms.
That's because many federal agencies hoping to meet small- and disadvantaged-business goals for participation go directly to the Alaska Native corporations because they have no limits on the size of the no-bid contracts, Lumer said.
"I cannot provide you with any concrete evidence," said owner Mark Lumer, who himself served as a Defense Department contracting official before starting his own firm. "But anecdotally, I firmly believe that many small businesses will routinely bypass procurements where ANCs are involved because the chances of winning are so small, even if they are allowed to compete in the first place."
Begich said that there may be "a few bruised apples that require attention," and that he agrees the SBA needs to clarify its procedures and ensure that it is adequately examining potential areas of abuse.
But overall, Begich said, the program "continues to raise the standard of living for thousands of Alaska Native people who live in 200 villages and communities across my state. There are scores of compelling success stories."
Find Erika Bolstad online at adn.com/contact/ebolstad or call her in Washington, D.C., at 202-383-6104. The Associated Press contributed to this report.
By ERIKA BOLSTAD