ANCs, sole-source contracts cause alarm on Capitol Hill

Lawmakers seemed leery of the unique Alaska native corporation (ANC) designation June 21 because abuses and fraud have crept into the federal program. Meanwhile, other companies cannot compete for work that they could sometimes perform at lower costs.

At a joint congressional hearing, members voiced their concerns about sole-source and no-bid contracts allowed under the special ANC provision.

Rep. Tom Davis (R-Va.), chairman of the House Government Reform Committee, said a Government Accountability Office report released in April found contracts awarded to ANCs jumped from $265 million in 2000 to $1.1 billion in 2004.

“I worry about the impact of this program on our already overburdened competitive acquisition system,” Davis said.

The government designed the acquisition system so that all segments of the market can contend for government contracts, giving the government the best value in goods and services. However, Congress has restricted some sectors to boost others’ advantages, he said.

“While these various restrictions often have laudable social goals, they all come at a price,” Davis said.

Rep. Don Manzullo (R-Ill.), chairman of the Small Business Committee, said his manufacturing-based congressional district has felt the impact of designations like ANCs. Often such designations diminish the number of jobs available for his constituents.

“These folks are doing right by the federal government; they’re doing right by the American taxpayer; and most importantly they’re doing right by their impoverished communities back in Alaska,” said Rep. Don Young (R-Alaska), who represents the state at large in the House. He was a witness at the June 21 hearing.

In 1971, Congress enacted the Alaska Native Claims Settlement Act, which created ANCs, to resolve land claims and aid the economic development of Alaska natives. The provision came instead of a reservation system. Initially, ANCs could receive contracts only worth as much as $5 million. In 1986, that limit was eliminated.

Finding fault in the system and criticizing ANCs because of some corporations’ success are disguised attacks on the Alaska native population, Young told the committee.

Six federal agencies — NASA and the Defense, Energy, Interior, State and Transportation departments — accounted for 85 percent of ANC-awarded contracts, GAO found.

The committee members still raised concerns about awarding contracts without competition.

Rep. Henry Waxman (Calif.), ranking Democrat on the Government Reform Committee, said the ANC provision has been costly to the taxpayer. He cited a State Department no-bid contract awarded to an ANC that the GAO found was double the price of the government’s cost estimate.

David Cooper, GAO’s director for acquisition and sourcing management, said contracting officers do not always comply with certain requirements, such as notifying the Small Business Administration of contract modifications. They also fail to monitor how much of the contracting work is subcontracted.

Contracting officers need more guidance from Congress, and SBA needs to step up its oversight to avoid abuses, Cooper said.

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