Nadler: Reforming set-asides

Contracting advantages do not prepare Alaska firms for future competition

Transportation Security Administration officials recently decided not to award a sole-source contract to an Alaska Native Corp. (ANC) and put the contract out for bid instead. The decision highlights concerns about the Small Business Administration's ANC program and the need to reform it.

ANCs enjoy special contracting preferences based on the unique government-to-government relationship tribes have with federal agencies. The program's goal is to promote the economic development of Alaska tribes and their villages, where unemployment is rampant.

Unlike other minority contractors in SBA's 8(a) program, ANCs can receive sole-source contracts regardless of the dollar amount. Moreover, parent companies and subsidiaries of ANCs are not considered affiliates, so the revenues and employee counts of related companies are not included in an ANC's size determination.

These and other advantages are unparalleled in government contracting and have raised questions about whether the program truly benefits tribes and is in taxpayers' best interests.

The ability to receive unlimited sole-source contracts has resulted in dramatic growth for many ANCs. However, it can also reduce the incentive to develop the skills, infrastructure and core competencies that are necessary to become a viable business in a competitive market.

Viewed in this light, those contracting advantages do a disservice to ANCs because the companies' next generation will not be prepared for the day when ANCs no longer receive special treatment or must compete with hungrier firms. That is why the government encourages other minority-led businesses to become less reliant on set-aside contracts as they progress toward graduation from the 8(a) program. There is no graduation from the ANC program.

Serious questions exist about whether the program's underlying policy is being circumvented and to what extent the money ANCs make is benefiting the tribes. In almost all instances, ANCs are run by people who are not Alaska natives and whose goal is to maximize revenues rather than help the tribes develop economically.

The ANC program is important, but it must be reformed. The ANCs' boards of directors must be integrated into the companies' day-to-day management to ensure that the tribes' interests are paramount. A mentoring program should be established to train native shareholders so they can participate in managing and operating their companies, and ANCs should require that a certain percentage of work be targeted to competitive contracts.

Finally, an economic development fund should be created with contributions tied to concrete metrics, such as return on sales, to increase the amount of money that is returned to tribes.

Such reforms would go a long way toward ensuring that the tribes receive the economic benefits the program's creators envisioned and that taxpayers' interests are protected.

Nadler is a partner in the law firm of Dickstein Shapiro Morin & Oshinsky, where he specializes in government contract matters. He can be reached at (202) 828-2281 or

FCW in Print

In the latest issue: Looking back on three decades of big stories in federal IT.


  • Anne Rung -- Commerce Department Photo

    Exit interview with Anne Rung

    The government's departing top acquisition official said she leaves behind a solid foundation on which to build more effective and efficient federal IT.

  • Charles Phalen

    Administration appoints first head of NBIB

    The National Background Investigations Bureau announced the appointment of its first director as the agency prepares to take over processing government background checks.

  • Sen. James Lankford (R-Okla.)

    Senator: Rigid hiring process pushes millennials from federal work

    Sen. James Lankford (R-Okla.) said agencies are missing out on younger workers because of the government's rigidity, particularly its protracted hiring process.

  • FCW @ 30 GPS

    FCW @ 30

    Since 1987, FCW has covered it all -- the major contracts, the disruptive technologies, the picayune scandals and the many, many people who make federal IT function. Here's a look back at six of the most significant stories.

  • Shutterstock image.

    A 'minibus' appropriations package could be in the cards

    A short-term funding bill is expected by Sept. 30 to keep the federal government operating through early December, but after that the options get more complicated.

  • Defense Secretary Ash Carter speaks at the TechCrunch Disrupt conference in San Francisco

    DOD launches new tech hub in Austin

    The DOD is opening a new Defense Innovation Unit Experimental office in Austin, Texas, while Congress debates legislation that could defund DIUx.

Reader comments

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above

More from 1105 Public Sector Media Group