Report: Alaska Native contracting program delivers little benefit to communities

Senate oversight panel found ANCs’ share of government contracts has grown six times faster than overall federal spending since 2000

Alaska Native Corporations have become some of the largest federal contractors, but they aren’t helping impoverished communities in that state, according to a congressional report and testimony given today.

The report, from the Senate Homeland Security and Governmental Affairs Committee’s ad hoc Contracting Oversight Subcommittee, states that since 2000, ANCs’ share of government contracts has grown six times faster than overall federal spending.

Four companies owned by Alaska natives were among the top 100 recipients of contract awards, and in 2009, six ANCs made Washington Technology’s list of the 100 largest prime contractors in the federal information technology field, according to the report “New Information About Contracting Preferences for Alaska Native Corporations (Part II).”

The subcommittee’s report is an analysis of detailed information about finances and employees at 19 ANCs, all of which would not be considered small businesses under the Small Business Administration's regulations.

The records show that ANCs are multimillion- or multibillion-dollar corporations that “have taken advantage of their 8(a) contracting preferences,” the report states.

The companies say they provide financial support to their communities, but analysts found that they paid only about $615 a year in money, scholarships and other benefits to each member of the Alaska native community, said Sen. Claire McCaskill (D-Mo.), the subcommittee’s chairwoman.

However, Sarah Lukin, executive director of the Native American Contractors Association, said 11 large ANCs provided more than $530 million to more than 67,000 shareholders in fiscal 2008 and 2009.

The report also states that the ANCs employ relatively small percentages of shareholders and often pass work to non-native subcontractors. Specifically, 95 percent of the 19 ANCs’ employees aren’t shareholders, and in the companies’ offices, ANCs have relied heavily on highly paid, non-native executives, the report states.

A recent report by SBA’s inspector general came to the same conclusions and urged the agency to evaluate how the special ANC status has affected other small, disadvantaged businesses in the 8(a) program.

The ANC designation was established in 1971, and in 1986, such companies were made eligible for an SBA program that allows certain firms to be awarded federal contracts noncompetitively. Furthermore, ANCs are exempt from SBA’s restrictions regarding the value of the sole-source contracts and the size of the companies that can participate.

Between 2000 and 2008, ANCs received $6.6 billion in 8(a) sole-source contracts, which were worth more than $3.5 million each. The largest contract was valued at $1.13 billion. The Defense Department awarded it to a joint venture of Arctic Slope Regional Corp. and Afognak Native Corp. in 2002.

In addition, when they receive set-aside awards, ANCs can subcontract work to companies that don’t qualify for the 8(a) program and enter into joint ventures and partnerships with non-native companies.

Sen. Mark Begich (D-Alaska) said the success of the program shows that all 12 of Alaska’s in-state regional corporations are profitable and generate about $4 billion in revenue for their Alaska native shareholders.

“Contrary to the spin generated off various government reports, I believe Alaska native participation in the 8(a) program overall has been one of considerable success,” he said.

About the Author

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

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