Senators probe Alaska set-aside program

Critics charge program invites fraud

Senators are raising questions about abuses of current contracting preferences given to companies owned by Alaska natives.

Critics have long charged that the Alaska Native Corporation set-aside program invites fraud, enabling large companies to gain access to lucrative sole-source contracts by becoming partners of qualified Alaskan companies. A Senate subcommittee has now validated that accusation.

“Nobody begrudges giving small, disadvantaged businesses a chance to win federal contracts," said Sen. Claire McCaskill (D-Mo.), chairwoman of the Homeland Security and Governmental Affairs Committee's Contracting Oversight Subcommittee. "But the Alaska Native Corporations have used their special preferences to bust the door down."

The subcommittee held a hearing July 16 to examine the program. Debra Witt, assistant inspector general for auditing with the Small Business Administration's IG office, referred in her testimony to prior IG and Government Accountability Office audits that "have shown that non-competitive contracts have been misused, resulting in wasted taxpayer resources, poor contractor performance and inadequate accountability for results."

From 2000 to 2008, the spending on ANC contracts increased 915 percent, from $600 million to $5.2 billion, an average annual increase of 33.6 percent, according to a statement from members of the subcommittee. By comparison, overall contract spending increased only 149 percent during that time.

Since 1986, Congress has extended special procurement advantages to ANCs in the Small Business Administration's 8(a) program. They can receive sole-source contracts for any dollar amount, unlike businesses in other categories that face a cap.

Last week, in advance of the hearing, a coalition of American Indian tribes and organizations called Native8(a)works launched an effort to tell Congress their side of the story: that for them, the program works as intended, bringing much-needed revenue into small, isolated communities in Alaska. 

“The original congressional mandate was ‘Go forth and prosper,’ and some of us have done exactly that,” said Helvi Sandvik, president of NANA Development, an ANC. “For many native-owned companies, this is the one program that finally is beginning to make a difference.”

NANA Regional, the parent company of NANA Development, ranked No. 47 on Washington Technology’s 2009 Top 100 List. Its federal business nearly doubled from 2007 to 2008.

Meanwhile, senators are raising and investigating questions about the value of the program.

"If we take a hard look at the numbers, only about $615 a year in money, scholarships and other benefits goes back to each member of the Alaska Native community," McCaskill said.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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Reader comments

Thu, Feb 4, 2010 KT

This is another example of the federal government gone wild with tax payer money. All Small Businesses need a break with the current economy. Open the playing field and allow all us small businesses to compete. No more set asides, no more 8A, this is nothing more than wasting tax dollars on sometimes less than capable companies. KT

Fri, Jul 17, 2009 CH99516 Anchorage, Alaska

Sen. Mark Begich (D-Alaska) initiated a study by the Institute for Social and Economic Research at the University of Alaska earlier this month. The study found that 70% of all Native corp. dividends went to their shareholders. In rural Alaska, where a gallon of milk costs $11 and jobs are scarce, these dividends are vital to survival. What is "fraudulent" about the program? It was created by the U.S. Congress, and despite the Native share of federal contracts "skyrocketing," Native corps. receive only about 1% of all federal contracts. The program is working exactly as it was intended. That's the bottom line.

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