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Under rule change, Alaska Native corporations could once again get high-dollar government contracts

WASHINGTON — After lobbying from Alaska Sen. Dan Sullivan, three military branches have agreed to reinterpret a law that limited Alaska Native corporations' access to high-dollar no-bid contracts, according to a series of internal memos Sullivan's office shared late last week.

The move could bring billions of dollars in contracts back to the Native corporations, which receive preferential treatment for minority-owned businesses under federal law but were limited when that law changed in 2011.

A defense authorization bill that year required that certain "sole source" federal contracts for more than $20 million get the sign-off of the secretary of the Army, Navy or Air Force — a logistic hurdle that resulted in scuttling billions of dollars in contracts for Native corporations and their many subsidiaries.

The memos are a major win for members of Alaska's congressional delegation, who have been attempting to reverse the provision in a variety of ways for years. In the end, it was Sullivan's position on the Senate Armed Services Committee that provided the muscle to reverse course.

Sullivan said he put pressure on the branches by holding up nominations for Trump administration leaders in the Army, Navy and the Air force. He suggested that they tell staff that the contract justifications do not require such high-level approval.

Ultimately, the secretaries agreed with Sullivan's new reading of the law. Contract officers are now free to grant those big-money contracts to Native corporations without going through an approval process that was effectively prohibitive.

Native corporations are a major player in the government contracting business, a legacy of Alaska Sen. Ted Stevens' historical control over the federal appropriations process, and his keen ability to wedge long-term advantages into the law for Alaska.

The Small Business Administration's "8(a)" program is designed to help companies owned by minorities and disadvantaged groups gain a foothold into the federal contracting business, worth hundreds of billions of dollars every year. Congress expanded the law in 1986 to include Alaska Native corporations and Indian tribes. Alaska Native Corps. own hundreds of subsidiaries that operate nationwide in a wide variety of fields, from information technology to construction to janitorial services.

But the awarding of high-dollar defense contracts to Native organizations came under fire as soon as Stevens lost his Senate seat, with Missouri Democrat Claire McCaskill in particular taking aim at the Native corporations' ability to get multi-million dollar no-bid contracts.

In a fiscal year 2010 defense authorization bill, much of that evaporated overnight. Federal procurement officers suddenly had to justify no-bid contracts in excess of $20 million (a figure that later rose to $22 million). They interpreted the law to say that the secretaries of the Army, Navy and Air Force had to personally sign off on those contracts.

"And of course the contracting officer is kind of like, 'Look I'm not going to the Secretary of the Army to get my contract approved.' So they just stopped doing them," Sullivan said. "So there's a huge chilling effect which obviously had a really big impact on Alaska Native corporations and a lot of employment."

The no-bid contracts ground to a halt, dropping from roughly $2 billion to $221 million in 2013, according to the Government Accountability Office.

Sullivan and the rest of the Alaska delegation spent years trying to undo the law with amendments or legislative language, only to be thwarted at every attempt.

"What was a really really powerful engine of economic growth for our regional Native corporations and village corporations essentially went from literally billions to almost zero, because the sole source contracting above that level completely dried up due to that law," Sullivan said in an interview.

On Friday, the Senate Committee on Small Business and Entrepreneurship will hold a hearing in Anchorage at the Z.J. Loussac Public Library to discuss how the new approach could impact Alaska's minority and veteran-owned businesses who contract with the federal government.

It remains to be seen whether removing the barrier to the costly contracts will bring them back to the Native corporations.

But the organizations are generally grateful for the effort, they said.

"This will most certainly be helpful to the program and will increase access to federal contracting opportunities for Alaska Native corporations," said Hallie Bissett, executive director of the Alaska Native Village Corporation Association.

The inclusion of Native corporations in the 8a program is not without controversy. Some feel that the program is wrongly used on chains of subsidiaries that employ largely non-Native people living outside of Alaska.

The Government Accountability Office has released a string of reports in recent years on its own troubles with reviewing the billions of dollars of contracts that flow through Alaska Native corporations and their hundreds of subsidiaries.

But overall, use of those sole source contracts for more than $20 million has declined steeply, according to the GAO.

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