Alaska Native Corporations Thrive

Alaska Native Corporations continue to rack up contracts, despite a deepening recession that is battering other small, minority-owned business.

How? Special set asides that permit ANC's to receive no-bid contracts of any size from federal agencies.

Here's a report from Government Executive's Robert Brodsky, who writes that in "fiscal 2008, companies owned by Alaskan regional and tribal corporations earned a record $5 billion in federal contracts, nearly 10 times the $506 million they earned in fiscal 2000, according to new data analyzed by Government Executive. The data, compiled by Eagle Eye Publishers of Fairfax, Va., makes clear the extent of ANC prominence.

"The corporations have won jobs in virtually every state and major sector, from reconstruction contracts in Iraq to information technology agreements in Washington. Individual corporations have thrived. Five ANC parent corporations have brought in $2 billion or more in contracts since 2000, with Anchorage-based Chugach Alaska Corp., leading the way at $4.5 billion."

Here's a bit more from his story:

"Federal acquisition specialists said the data shows that the program, which was designed to help small and disadvantaged companies, has been undermined by a system that rewards companies that earn hundreds of millions in annual revenue.

"'The ANC program, as currently implemented, is a blunt instrument that distorts the procurement system, injects well-founded cynicism into the process, and reinforces the belief that government procurement is more about allocating political spoils than ensuring that the government receives value for taxpayer money,' said Steven Schooner, who teaches contracting law at The George Washington University.

"Alaskan firms argue that it is unfair to compare them to other small businesses that operate under a model designed to benefit individual entrepreneurs. ANCs reinvest much of their revenue in the native population through their shareholders. They also note that they spend millions of dollars on cultural and social programs that benefit the larger Alaskan community.

"'If an individual has a $5 million contract, all of the benefit goes to that person,' said Chris E. McNeil Jr., chief executive officer of Sealaska, a regional corporation in southeast Alaska with 17,600 shareholders. 'That is simply not the case with Alaska native corporations and tribes because that benefit is diluted down to the tribe or the native corporation.'"

Government Inc. believes this is a fascinating, important matter. ANC's have been used in the past as pass-throughs to other federal contractors, raising the question about just what value they add.

We believe Congress will eventually take a closer look at the ANC set asides -- which happen to be a legacy of Sen. Ted Stevens of Alaska, who lost his seat last year after becoming the Senate's longest-serving Republican ever.

In October, Stevens was convicted on seven corruption charges relating to allegations that he lied about accepting gifts and home renovations, without paying, from a wealthy oil contractor

By Robert O'Harrow |  March 9, 2009; 12:58 PM ET
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The basic problem with ANC contracts is they are not competed but negotiated. An ANC simply tells you what they will do for the money you have to spend. Thus, work done for $25M by a previous contractor comes in at $45M when it is initially discussed with an ANC. Since the budget only has $25M, you take out $20M worth of services you were previously getting but can no longer afford and award the contract to the ANC. The result: you pay more for less. Now, couple that with multiple five year option periods, and you’ve just proven that you can continue to pay more for less --- forever. ANC’s have been given a free ride for years. It is time to level the playing field and required them, along with other large companies, to compete for the work. Other businesses make profits for their shareholders in the competitive world. ANC’s have had at least ten years to learn how to bid in the real world. If they are real businesses, they will continue to win work. If their entire existence is based on no bid contracts, they should cease to exist.

Posted by: dlk2161 | March 9, 2009 11:23 PM

I was worried that you missed the point -
until I saw that you understood the crux of the ANC 8(a) sole source problem.
It is a vehicle for Ted Stevens to steer even more payola to Alaska. Pure and simple.

The ANC exec who tries to rationalize taking money out of small business programs and giving it in no bid contracts to huge Alaska companies cries that, "but, we help all those poor Inuits who are incapable of helping themselves."
Note that less than 5% of the execs of ANC's are Inuits.

Isn't that socialism or communism ?
What's wrong with free enterprise, initiative and hard work ?

Posted by: BrianX9 | March 10, 2009 12:07 PM

If the Obama Administration is serious about reducing or ending what they call "no bid contracts" they need look no further than ANC contracting. The public hears about these huge deals that KBR and Chaney's old company get in Iraq or Afghanistan and but the real story is how these companies use ANCs to obtain multi-million dollar contracts without competition. Ordinary small businesses and 8(a) firms have no ability to receive these huge awards.

Typical 8(a) companies graduate from the small business program when they exceed the size standard for small business in the industry they are focused upon. ANCs simply "spin off" a new wholly owned company with a different name and continue to march even though they may be 100 times larger than the NAICS code size standard for small business that a lower 48 states 8(a) company must abide by.

We all know about the abuses they foster yet none of our politicians or executive leaders will take this issue on because of the huge dollars ANCs spend on lobbyists.

In times where unemployment is rampant and businesses are failing across the country it is shameful that we allow this practice to continue. We elected a new President who promised to end abusive no bid contracts. I hope he understands that small business preference programs have a valid use and that the typical preference program contracts are limited to $3.5 million or $5.5 million. These are not the problem. The problem is the ANC no bid contracts that run into billions of dollars and are generally a conduit for passing the business through to billion dollars giant companies using ANCs as a front.

Posted by: williams810 | March 11, 2009 10:11 AM

I lived and worked with Alaska Indians and Eskimos for many years. Capitalism has destroyed their native subsistence economy and dragged them into a capitalist world with no capital, no way to get any, and no cultural heritage or experience for managing capital even if they had any. If the Eskimos of North Slope Borough killed all of the fur seals and foxes in the borough, they couldn’t raise enough capital to buy an upscale house in San Francisco or make significant investments in Wall Street or anything like that.

So, the preferential contract deals are an attempt to mitigate that situation. Next to exploiting resources such as oil, fish and etc., exploiting the natives is the next major industry in Alaska. My question is to what degree are those ANC contractors really native corporations and to what degree are the native corporations being used as fronts to gain competitive advantages for non-native contraaactors who may be friends of Ted Stevens?

Will Moore
Valley Springs, California

Posted by: willmoore | March 11, 2009 11:16 AM

More power to the native corporations of Alaska. In my opinion they need to acquire whatever they can from the government and the outside interests raking the cream from Alaska. Alaska natives were perfectly suited to their way of life before outsiders, starting with the Russians and ending with the United States, changed their entire way of living without providing any real support in learning how to live within the system forced upon them. What do you think will be left in that beautiful and wild country after the oil companies and mining interests are finished up there? There will be a lot of the First People scattered over Alaska trying to make do with whatever is left up there, and a few others of outsider blood in Anchorage and the Valley. Native people owe it to their own ultimate survival to acquire every dime, and every benefit they are able to glean from the system that has forcibly changed their entire way of existance.

Posted by: otiswaynehale | March 11, 2009 12:08 PM

The days of the free money that was directed to the native Alaskans will be ending. Did the native Alaskans truely benefit from all the money that was funnelled to AK by Ex-Sen. Stevens? As it was probably a scam, I doubt that these individuals will probably notice that the money received for their supposed benefit has stopped! can be used to see how much money was sent to them via Stevens and then try and see the benefit - good luck!

Posted by: axf56730 | March 16, 2009 10:29 AM

As a Native, educated and one who has spent many years within the federal Aquisition space, and one currently working for an ANC I would tend to agree with Mr. Moore's comments...My experience has been that while many of the larger ANCs are profitable and statisically look good on paper...ther fact is that very little of the huge profits go to the actual shareholders(Natives). There are a great many people in the middle who get there share first before it ever gets back to the villages. Perhaps it is time to rethink this? But I submit to you the ones that will cry the loudest are not going to be the shareholders themselves...they really don't have a voice in this...Its really all about the preference and how to use the Indians (again) for the self-serving purposes and not to sustain the villages.

Posted by: andeli | March 18, 2009 12:08 PM

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