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No-Bid Contracts to Alaska Native Corporations Raise Eyebrows

By Ed O'Keefe

Alaska Native Corporations have scored billions of dollars in no-bid government contracts in the last decade, leading lawmakers to suggest Thursday that the firms, created to provide economic benefits to Alaska's native populations, have exploited a loophole at the expense of taxpayers nationwide.

At issue is an ANC's ability to receive contracts of any size from a federal agency as part of a Small Business Administration program for minority and disadvantaged small businesses.

Government investigations and news reports have exposed how companies take advantage of the unique benefit, often winning large contracts with the departments of Defense or Homeland Security, and sometimes creating complex business partnerships with firms that have no ties to the SBA program or Alaska.

“Nobody begrudges giving small, disadvantaged businesses a chance to win federal contracts,” said Sen. Claire McCaskill (D-Mo.), the chairwoman of a Senate subcommittee on contracting oversight. She noted that several government-backed economic development programs provide assistance to minority groups, women-owned businesses and veterans.

“But the Alaska Native Corporations have used their special preference to bust the door down.”

No-bid contracts awarded to ANCs ballooned from $508.4 million in 2000 to $5.2 billion in 2008, according to an analysis of the 19 largest ANCs prepared by McCaskill's staff. Despite the earnings, ANCs pay only roughly $615 each per year in benefits to the 130,000 Alaska Natives who are company shareholders. The report also suggests that Alaska Natives have not enjoyed enough of the revenues, since approximately 5 percent of ANC employees are Alaska Natives and most executive compensation is earned by managers who are not Alaska Natives.

The latest findings mirror a SBA inspector general report released last week and similar investigations conducted by the Government Accountability Office, including a 2006 report that called the ANC loophole an “open checkbook” for the companies.

Defenders note, however, that the firms have donated millions of dollars to scholarships, internship programs and other civic organizations, providing economic assistance the native Alaskan populations might otherwise not receive.

“Here's a federal program that the government actually got right for native people. The program is making a difference,” said Sarah Lukin, executive director Native American Contractors Association.

“To cut the program that got us this far is absolutely wrong.”

Alaska's two senators, Lisa Murkowski (R) and Mark Begich (D) also attended the standing-room only hearing as guests of the subcommittee. Murkowski warned colleagues that changes to the ANC program would have an adverse effect on other business operated by Indian tribes or Hawaiian natives.

“The sad truth is that there are very few business models that have provided any modicum of success for tribes and Alaska Native Corporations,” she said.

“Our Native leaders have entered into contracts, hired people, created systems, and focused all of their energies on learning this business. Now that same federal government threatens to pull the rug out from under them.”

By Ed O'Keefe  | July 16, 2009; 4:38 PM ET
Categories:  Contracting, Oversight  
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Comments

stevens? and i cant remember the congressman .

Posted by: donaldtucker | July 16, 2009 9:01 PM | Report abuse

young

Posted by: SofaKingCool2009 | July 16, 2009 10:43 PM | Report abuse

And Senator McCaskill, dedicated as she is at rooting out corruption, hasn't even gotten to the part about the malfeasance and malpractice at the DOJ, yet.

The DOJ routinely abets the graft carried out by the most rapacious big defense and intelligence community contractors, many of them the same thieves behind the ANC corruption, by looking the other way at whistleblower complaints, and helping the contractors destroy evidence and obstruct justice during investigations.

Senator McCaskill:

Please keep your eye on the DOJ and DOD IG Offices of Professional Responsibility over the next couple of months, and be particularly attuned to filings about DOJ malfeasance that has been worked in conjunction with Government COTRs, in order to let the really blatant fraudulent contractors escape out the back door, on a "Government Knowledge" defense. It didn't work for Darleen Druyan and it shouldn't work either for these Government employees with their hands out for kickbacks.

Please hold hearings about this, and I guarantee, we can fill your day with examples and evidence.

Posted by: Morganto | July 17, 2009 12:12 AM | Report abuse

Any effort to enhance federal ethics and fair contracting should be supported. As taxpayers, we need to keep our eye on the ball and be patient as well. It took eight years for the Bush/Cheney kleptocracy to foul things up. If the new administration can clean it up and reintroduce ethical management in half that time, I'll be satisfied.

TGIF

Posted by: free-donny | July 17, 2009 7:28 AM | Report abuse

One truth of the Alaskan Native Corporations is that they have little to do with Alaska natives. They are a scam set up by Ted Stevens to sidestep the Competition in Contracting Act in bringing federal dollars to benefit Alaksa-related corporations.

One of these companies, once called me to ask if they could do business with my company. I said, "sure - send over any native Alaskan you have and we'll talk about it." Of course, they didn't have any native Alaskans.

All of the executives in these companies are local and making very good salaries. This is a scam, nothing more, and it only exists because Ted Stevens was so powerful in the Senate for so long. It's time to dump this rotten garbage.

Posted by: hill_marty | July 17, 2009 7:59 AM | Report abuse

If these firms falls into the 8(a) category, the Federal Acqusition Regulations (FAR) clearly give guidance for sole source awards to those firms. The FAR states:

19.805-1 General.
(a) Except as provided in paragraph (b) of this subsection, an acquisition offered to the SBA under the 8(a) Program shall be awarded on the basis of competition limited to eligible 8(a) firms if—

(1) There is a reasonable expectation that at least two eligible and responsible 8(a) firms will submit offers and that award can be made at a fair market price; and

(2) The anticipated total value of the contract, including options, will exceed $5.5 million for acquisitions assigned manufacturing North American Industry Classification System (NAICS) codes and $3.5 million for all other acquisitions.

(b) Where an acquisition exceeds the competitive threshold, the SBA may accept the requirement for a sole source 8(a) award if—

(1) There is not a reasonable expectation that at least two eligible and responsible 8(a) firms will submit offers at a fair market price; or

(2) SBA accepts the requirement on behalf of a concern owned by an Indian tribe or an Alaska Native Corporation.

Posted by: mintchocolatechip | July 17, 2009 8:43 AM | Report abuse

This information shouldn't surprise anyone, the Bush/Cheney Administration did no bid contracts for years with Cheney's old organization HALLIBURTON. It would be interesting to see how much growth Cheney managed to capture in his Blind Trust from all the Halliburton no-bid contracts.

Posted by: rbsher | July 17, 2009 10:17 AM | Report abuse

Make no mistake. This is an anti-Indian crusade. Alaska Natives lost their tribal lands and hunting and fishing rights to become shareholders in these corporations.
The focus should be on shareholder rights and benefits, not on turning these corporations into even poorer substitutes- unless you want to rewrite the treaty between Alaska Natives and the Congress.(Or
give Alaska Natives the Pipeline built on tribal lands.)

Posted by: steveconn1 | July 17, 2009 12:26 PM | Report abuse

This the Bush legacy:
Corruption, nepotism, conflict of interest, zero integrity, zero ethics, trashing laws and open fraud.

Posted by: Virginian_Ace | July 17, 2009 12:30 PM | Report abuse

If they're any good at all, they should be ready to compete for business. With $5B in 2008, if they haven't learned how by now, we might as well just call it welfare.

Posted by: st50taw | July 17, 2009 1:33 PM | Report abuse

SBA "set-asides" are the same shell game now as they were when I worked in Federal Government sales 10 years ago.

Here's how it works. A large contractor, say Boeing for example, approaches an 8a or small business contractor to be the "prime contractor" on a bid. That's about all the value the SB contract adds: "consulting and management". The big firm (positioned as a "sub-contractor") is really bidding and undercuts the other small guys knowing they will make up for their losses on the original bid by "upscoping" or adding a ridiculous amount of profits through contract modifications and "overruns" after the contract award.

Why is this allowed?

Because big shot government agency officers go to work for the big contractors after their retirement with a "wink, wink, nod, nod" for past "favors"

Posted by: coloradodog | July 17, 2009 4:07 PM | Report abuse

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