Senate panel: Alaska Native firms have unfair advantage

McCaskill seeks level playing field for small businesses, maximize value to taxpayers

Posted: Friday, July 17, 2009

WASHINGTON - Alaska Native corporations are no longer small businesses, yet they still enjoy advantages under Small Business Administration rules that allow them to elbow out smaller firms for no-bid contracts, a Senate oversight panel found.

These companies "provide some benefits to their shareholders," the committee said, but the rules under which they operate create "the potential for waste, fraud and abuse."

The panel released its findings Thursday during a hearing to examine how Alaska Native corporations grew so furiously during the past decade.

Growing business acumen may account for some of the growth, the committee found, but the corporations benefited especially from federal rules introduced into law in 1986 by then-Sen. Ted Stevens, R-Alaska.

Those rules eventually gave Native corporations the ability to land 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. Indian tribes and Hawaiian natives also have similar benefits.

The Senate Subcommittee on Contracting Oversight found that last year, four Alaska Native corporations were among the 100 largest federal contractors in the country: Arctic Slope Regional Corp., Afogniak Native Corp., NANA Regional Corp. and Chugach Alaska Corp. They provide a variety of services, although many of their contracts are through the Defense Department for such services as security and maintenance at military bases.

"Nobody begrudges giving small, disadvantaged businesses a chance to win federal contracts," said the committee's chairman, Sen. Claire McCaskill, D-Mo., a former state auditor who's examining an array of questionable federal contracting practices.

It's a laudable goal to allow small businesses to "get their foot in the door," McCaskill said, "but the Alaska Native Corporations have used their special preferences to bust the door down."

Her goal, McCaskill said, is to level the playing field for all small businesses and provide the greatest value to taxpayers.

McCaskill was confronted with a room full of Alaskans. Lobbyists, business owners and others with ties to Native corporations waited several hours to enter the standing-room-only hearing, and both of Alaska's senators opened overflow rooms in their offices for people to watch the proceedings.

Sarah Lukin, who was until recently an executive with the Afognak Native Corporation, told the committee that it was "disappointing" to see a press release from McCaskill's office describing the 8(a) program for Alaska Native corporations as a "federal loophole."

"The phrase has the connotation that somehow our economic disadvantages are not real," said Lukin, who's the executive director of the Native American Contractors Association. Washington has a history of missteps and failed policies for American Indian and Native Alaskans, Lukin said, but with the Alaska Native contracting rules, Washington "actually got it right."

Both Sen. Lisa Murkowski, a Republican, and Sen. Mark Begich, a Democrat, were allowed to sit on the panel as honorary committee members, and both Alaska senators also were allowed to give opening statements.

Murkowski said she didn't want the oversight committee to forget the goal of the program is "to mitigate the impact of past ill-conceived policies and to help our Native people maintain their unique cultures and identities and survive in the modern world."

Begich, who unseated Stevens last year, said there may be "a few bruised apples that require attention," and he agrees the Small Business Administration needs to clarify its procedures and ensure it is adequately examining potential areas of abuse.

Overall, however, the program "continues to raise the standard of living for thousands of Alaska Native people who live in 200 villages and communities across my state," he said. "There are scores of compelling success stories."

Alaska Republican Rep. Don Young wasn't invited to testify at the hearing. In a statement, Young defended 8(a) contracting, saying it has allowed Alaska Natives "to begin to realize economic and social self-determination, something that has long been the goal of Federal Indian policy."

"I consistently fail to see why our Congress is seeking to punish a successful program that is working exactly as intended," said Young, who's fended off previous efforts to change contracting rules to limit the benefits to Alaska Natives. "Congress' decision to allow Alaska Native participation was the correct one, and we are beginning to see the payoff now."



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