Native preference program criticized

Posted: Friday, June 23, 2006

ANCHORAGE - A federal program that allows Alaska Native corporations to obtain expensive no-bid government contracts came under fire by members of Congress.

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Critics said Wednesday the program gouges taxpayers, inspires laziness in government contracting officers and squeezes other minority-owned businesses out of the marketplace.

"I want to see competition, and I want to see costs held down," said Rep. Henry Waxman, D-Calif., at a hearing of the House Government Reform Committee in Washington, D.C.

Rep. Don Young, R-Alaska, said the criticism was "a thinly disguised attack on the Native Alaskan people and the corporations precisely because a few of them have enjoyed some measure of success."

A recent report of the U.S. Government Accountability Office found no evidence of wrongdoing by an Alaska Native corporation participating in the program, Young said.

Nonetheless, the GAO found that there is not enough scrutiny of Native contracting, which totaled $1.1 billion in 2004 and was carried out in places as far away as Brazil and Iraq.

Waxman said he read something else in the report.

"The State Department awarded a no-bid contract to an ANC, even though its initial proposed price was double the government's cost estimate," he said. "When an ANC was used to provide emergency classrooms after Hurricane Katrina, prices again doubled."

The preference program, created by Sen. Ted Stevens in 1986, lets Alaska Native corporations get sole-source contracts above the usual $5 million limit that other minority-owned businesses face.

The Native companies dredge ports in Iraq, provide security for diplomats overseas, operate search-and-rescue boats in the South Pacific, and fix broken windows and potholes on military bases in Alaska.

Some Native-owned firms have used the contracts to become among the largest companies in Alaska, based on annual revenue. Chenega Corp., the Native corporation for a tiny village on a Prince William Sound island, doubled its revenue in 2004 to $481 million, ranking it the third-largest Alaska-based, Alaskan-owned business.

Critics say some contracts merely allow large defense contractors and other big businesses to get federal work without having to bid for it by partnering with a Native corporation.

Young, a witness at the hearing, said Congress should not roll back this element of national Indian policy. The measure fulfills the promise of the Alaska Native Claims Settlement Act, the 1971 legislation that created the Native corporations, he said.

Charles Totemoff, chief executive of Chenega, said businesses like his do not just benefit a family or a partnership but are supposed to be engines of economic growth for an entire community.

"We are doing exactly what the federal government told us to do, and we are doing it well," he said.

Waxman questioned Totemoff about a 2004 contract Chenega unsuccessfully sought, to maintain airport screening equipment for the Transportation Security Administration.

Alaska's delegation to Congress - Stevens, Young and Sen. Lisa Murkowski - pushed for Chenega to get the contract, Waxman said, citing documents and copies of e-mails he obtained.

Waxman asked if Chenega sought help from the delegation and whether Totemoff remembered Chenega proposing to team up with Siemens, with the multinational conglomerate doing all the technical work.

Totemoff said he was not aware of any request for the delegation's help.

"I don't recall that far back," he said, an answer he repeated several times.

Waxman asked Totemoff whether he believed it made sense to award a contract based on connections to members of Congress.

Totemoff said he did not think so.

"I think our corporation is ethically far better than that," he said.

Waxman called the case disturbing. He cited a 2004 e-mail from Jon DeVore, then a member of Murkowski's staff, saying he thought TSA had agreed not to bid the contract until Chenega could make its case for why it should get a job without bidding. The no-bid option would be cheaper and faster, DeVore said in the e-mail to the TSA congressional liaison.

DeVore, who attended the hearing, said during a break that what he and Murkowski's staff did for Chenega did not amount to political pressure, as Waxman contends.

"It's senators and delegations doing what they all do on a regular basis," he said.

DeVore now works in Washington as an attorney and a lobbyist. Chenega is among his lobbying clients.

DeVore said there's nothing unusual in that. A year passed, as required, between the time that he left the senator's office and he began working as a lobbyist.

Totemoff said that Native corporations are being blamed for their success. Nobody complained when the contracts were small, he said.

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