Tribal companies' edge stirring a backlash?

Procurement regs favoring tribal 8(a) companies

Tribally owned 8(a)s may receive sole-source contracts regardless of dollar amount, while 8(a)s in other categories are limited to $3 million on contracts for services. This also means they can receive contracts not available to other 8(a) companies and without competing against larger companies.


A sole-source contract awarded to any 8(a) cannot be protested for lack of competition. But that protection only goes up to the $3 million or $5 million ceiling for most 8(a) companies; for ANC or tribally owned vendors, the lack of a contract ceiling means no protest can be filed regardless of the size of a contract.


If a prime contractor to a Defense Department agency signs an ANC 8(a) as a subcontractor, the contractor will get a 5 percent rebate on the value of the subcontract.

Sen. Ted Stevens (R-Alaska) penned the provisions that give small businesses run by Alaska Natives added advantages in federal procurements.

Courtesy of Sam Kittner/ZUMA Press

Federal procurement regulations give advantages to companies run by Alaska Natives, a policy that some agencies use to bypass the costly, time-consuming process of competitive bidding.

The practice can be seen clearly in federal IT contracting'the top four small-business government contractors are all run by Alaska Natives.

But many in industry are beginning to complain that agencies are using the regulations to steer business to contractors they want to work with. And some observers have said the policy undercuts competition and, in the long run, could hamper federal acquisitions.

Exploiting the edge

For more than 30 years, Alaska Native corporations, or ANCs, have enjoyed regulatory advantages intended to aid impoverished tribal communities. In the last several years, however, ANCs have seen a veritable explosion of business as a powerful Alaska senator rewrote the rules and the companies learned to exploit the almost unbeatable advantages they have in pursuing government contracts.

In fiscal 2003, seven of the 25 largest companies that met federal guidelines as small, disadvantaged businesses, known as 8(a) companies, were ANCs; in 2002, there were four ANCs on the 8(a) list. But there was only one in 2001 and 2000.

In 2003, the four 8(a) vendors with the highest revenue from federal IT work were all ANCs.
Thanks to the special rules governing tribal firms, a federal agency can award a contract to an Alaskan tribal 8(a) without conducting a competitive procurement. Many in industry believe this is a ploy that lets an agency then designate a large company as the subcontractor to handle the bulk of the work.

'I think there's a good amount of that going on,' picking a contractor and making them a subcontractor to an ANC, said Angela Styles, former administrator of the Office of Federal Procurement Policy.

'There seems to be more of it happening these days. I'm getting more calls from companies' about ANCs, said Styles, who nows practices procurement law with the Washington firm of Miller & Chevalier.

The largest 8(a) vendor, Chenega Corp. of Anchorage, Alaska, last year won a 10-year, $500 million contract from the Homeland Security Department for maintenance and technical support. Science Applications International Corp. of San Diego, a major federal IT vendor, is a subcontractor for Chenega.

Less competition

Steven Schooner, co-director of the Government Procurement Law Program at George Washington University, said the rules could hamper competition among vendors.

'If we were talking about work that ANCs truly could perform by themselves, like [other] 8(a)s, this doesn't look as bad,' Schooner said. 'But where the program encourages 8(a)s to serve as fronts for businesses that otherwise would compete for the same work, we've not only reduced competition, which is bad unto itself, but we've also inflated the price by adding a layer of overhead.'

But there may be signs of a backlash developing.

The Transportation Security Administration withdrew plans for a competition for a multiyear, multimillion-dollar contract to maintain airport baggage screening equipment shortly after meeting with representatives from an ANC that holds a similar contract with the Customs and Border Protection directorate within the Homeland Security Department.

Less than a week after an article outlining the meeting appeared on the U.S. News & World Report Web site, TSA announced it had decided to reopen the buy to competitive bids.

Any changes to the regulatory advantages enjoyed by ANCs will take place on Capitol Hill.

Prime mover

Sen. Ted Stevens (R-Alaska) was for years chairman of the Senate Appropriations Committee and the prime mover in creating the ANCs' competitive advantage.

Courtney Boone, Stevens' spokeswoman, defended the provisions, saying that ANCs are a special case because the federal government works with tribes on a 'government-to-government' basis.
'It sets native-owned businesses separate from others,' Boone said.

'I'm not aware that we have any plans to review [the regulations] at this point,' said Craig Orfield, a spokesman for the Senate Small Business Committee. 'However, we are chronically concerned about the performance of the small-business contracting programs we deal with and whether the methods the agencies pursue to execute small-business goals are as effective as Congress originally intended. If there's a group of businesses and contractors out there who feel the program is not being carried out fairly, I can guarantee you the committee staff will look at it one way or another.'

Rep. Tom Davis (R-Va.), chairman of the House Government Reform Committee, has been a fierce advocate of competitive practices in government contracting. He is considering revisions to the ANC rules.

'We'll be looking at this issue,' said David Marin, Davis' spokesman. 'Davis wants to shine a light on this issue, given his purist stance on acquisition policy in general. Special interest set-asides like this are, in effect, a scam on the taxpayer.'

Allan Burman, president of the government consulting arm of Jefferson Consulting Group LLC, and a former OFPP administrator, said no one is looking at whether the regulations are meeting their original intent of assisting tribal communities in Alaska, or whether this represents good procurement policy for agencies.

'Are agencies getting good deals or not? Who's looking at the outcome? If I were going to put a study together, those are questions I would ask,' Burman said.

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