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Congress Set to Focus More on Alaska Firms

By Ed O'Keefe

The number of government contracts awarded to Alaska Native Corporations skyrocketed 1,386 percent between 2000 and 2008, according to a new federal audit, even though they account for only a small portion of companies participating in a Small Business Administration program designed for small, minority-owned businesses.

Claire McCaskill
Sen. Claire McCaskill (D-Mo.) chairs a Senate subcommittee on contracting oversight. (AP)

The latest audit mirrors similar investigations by the Senate panel, other inspectors general and the Government Accountability Office, which in 2006 called the provisions enjoyed by Alaska-based firms an “open checkbook."

A Senate subcommittee on government contracting will hold a hearing on the issue tomorrow, following last week's release of the audit by the SBA's inspector general, part of an ongoing investigation of ANCs.

“I think we’re on to something, because there is teeth-gnashing and screeching going on that I think is potentially out of proportion to what we’ve announced, in terms of the topic of the hearing," said Sen. Claire McCaskill (D-Mo.), who chairs the subcommittee on contracting oversight.

“It’s the right time to look at anything that potentially can save significant money," McCaskill said. "I think competitiveness for contracting can definitely save money."

At issue is an ANC's ability to receive sole-source contracts of any size from federal agencies as part of a SBA program for minority and disadvantaged small businesses.

As The Eye's colleague Robert O'Harrow has previously reported, ANCs have won more than $2 billion in Homeland Security and Defense Department contracts and a deal to do public relations work for the Food and Drug Administration. ANCs have also signed agreements allowing other companies to take advantage of the set-aside programs without the SBA's approval.

Though Alaska natives have reaped economic benefits from the ANCs, there is widespread concern that the loopholes they enjoy have come at the expense of other companies.

"The 8(a) program was designed to let small businesses get their foot in the door," McCaskill said. "Based on the growth of the ANC contracting issue, they’ve busted the door down. It’s no longer a crack in the door, it’s large, multi-hundred-million-dollar contracts utilizing a lot of subcontracting."

Indeed, the latest audit highlighted the disproportionate number of contracts awarded to ANCs. The total amount going to ANCs tripled in recent years, from $1.1 billion in fiscal year 2004 to $3.9 billion in fiscal year 2008. That accounts for 26 percent of all contracts awarded under the SBA program, even though ANCs account for only 2 percent of participating companies.

ANCs have reaped so much government work partly because some federal agencies have an admitted preference to awarding no-bid work to the corporations to save time and money. The audit noted that most agencies do not have staffs big enough to oversee a competitive contracting process.

"It's almost like a seduction," McCaskill said of agencies' preference toward ANCs.

"The government is kind of inclined to use whatever mechanism they can not to go through the competitive bid process. Frankly, that's wrongdoing," she said.

The report urges Congress to reconsider ANC exceptions or at least require the companies to demonstrate to SBA how 8(a) revenues are benefiting Alaskan natives. McCaskill said she expects to work with colleagues to draft legislation addressing some of their findings.

“I think there’s always room for a program that allows small businesses the opportunity to get their foot in the door of federal contracting. But we’ve got to be very careful that it is a foot-in-door exercise. That’s why I think this subject matter deserves the kind of scrutiny we’re going to give it," she said.

By Ed O'Keefe  | July 15, 2009; 3:17 PM ET
Categories:  Congress, Contracting  
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Posted by: angie12106 | July 15, 2009 7:43 PM | Report abuse

It is certainly a good time for Palin to get out of Dodge.

Posted by: mzhuff | July 16, 2009 1:11 PM | Report abuse

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