WASHINGTON - Wealthy Alaska Native corporations that benefit from no-bid federal contracts have used their special preference program far beyond its original purpose, said Sen. Claire McCaskill, whose Senate oversight subcommittee will examine today how some of those companies have used federal small-business guidelines to fuel their explosive growth.
McCaskill, a Democratic former state auditor from Missouri who's taking a look at government contracts at all levels, said she planned to go into her subcommittee hearing with an open mind.
However, she also said she was skeptical of the large, no-bid federal contracts that Alaska Native corporations were able to obtain. She said this week that she wanted to determine whether some of the wealthiest Native corporations have "participated in a giant loophole to competitiveness."
"I will certainly admit I have a bias toward competing for contracts that involve public money," she said. "I'm not ashamed to admit that bias; I think it's a healthy bias."
Special rules introduced into law by former Sen. Ted Stevens, R-Alaska, allow Native corporations to be eligible for no-bid federal contracts of any size, unlike other small businesses, which are capped at $5.5 million for federal contracts under the Small Business Administration's 8(a) Business Development Program.
"We want to make sure that people understand this is a great program," said Helvi Sandvik, the president of the Anchorage-based NANA Development Corp. "It is a program that was designed by Congress and intended to benefit economically disadvantaged people, and that is precisely what the program does."
Since 2000, federal awards to Alaska Native corporations have grown 1,386 percent, reaching $3.9 billion last year, according to a report that the Office of the Inspector General of the Small Business Administration issued last week. Half those contracts went to just 11 of the 203 eligible Alaska Native firms, the report found. Those 11 corporations landed 82 percent of their contracts without competitive bidding.
"These are no longer small companies that are trying to find their way and grow in order to help the Alaska Native population," McCaskill said. "I've got no problem existing for the benefit of people in Alaska, and them getting their fair share of the profits. But I'm not sure that it's fair to taxpayers that we have this huge exception where they never have to compete for anything regardless of how big or dominant they get in the marketplace."
The hearing, by McCaskill's Contracting Oversight Subcommittee of the Senate Committee on Homeland Security and Governmental Affairs, will explore potential abuses of the program and focus on her staff's findings as well as those in the SBA inspector general's report last week.
"I got nothing against Alaskans or the wonderful Native populations," McCaskill said.
However, it is worth examining why a certain group of corporations had a different set of rules, she said.
"The reason is you want to give people experience in the government contracting process, and get their foot in the door?" she said. "Or is the reason we want to allow certain classifications of folks the ability to sole-source contract?"
McCaskill's oversight hearing prompted four Alaska Native corporations to join other Native American tribes and businesses to form a coalition to fight what they say is a misrepresentation of their role in government contracting.
Sandvik defended the no-bid contracts many Alaska native corporations depend on, calling them "negotiated contracts" to provide federal services.
"In order to do a 'no bid' contract, you have to negotiate. It's not like somebody just hands you a blank check," she said. "You as a contractor have to lay out the costs associated with delivering that work and to defend those costs and to demonstrate that they're competitive in the marketplace."
She added that they don't think that the way the contracts are negotiated costs taxpayers more.
"These are federal budgets that have already been approved, services that need to be delivered," she said. "There's no additional burden on the taxpayers as a result of the government making a decision to execute the work via an 8(a) company."
Their coalition has the support of the state's congressional delegation. Democratic Sen. Mark Begich and Republican Sen. Lisa Murkowski wrote to McCaskill expressing their concerns about her inquiry.
"I think we want to make sure we're not doing it because someone 'feels' a certain way, but there's some good data that shows the federal government is not spending properly or it's not doing what the mission of what 8(a)'s are about," Begich said this week. "I hope it's not a witch hunt. I hope it's not a specific attack on Alaska Natives in our state. That would be a big mistake."
McCaskill said she was "surprised by the amount of heat and intensity" generated in reaction to the hearing.
"I think we're on to something, because there is a 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," she said. "Which makes me think that people are feeling defensive about this particular program."
The SBA inspector general's report found that federal agencies often prefer noncompetitive, sole-source awards because they're a "quick, easy and legal method of meeting their small business goals. ... However, such awards may not result in the best value for the government."
The report's authors also added, however, that the program has helped the Native corporations "fulfill a mission that is broader than the bottom line of the corporations - namely, to help Alaska Natives achieve economic self-sufficiency."
That's important, the report says, because unlike other small, disadvantaged businesses that are eligible for the program whose profits go to only a few individuals, profits generated by Native Corporations go to all shareholders. They also pay for scholarships, cultural programs, employment assistance, jobs, internships, subsistence activities "and numerous other services to the communities where their shareholders live and work."