Congress mulls changes for Alaskan Native contracting

One plan would apply restrictions on contract sizes

Congress could soon change small-business regulations that currently give Alaskan Native corporations a significant edge in pursuing government contracts.

The prospect of modifying the Small Business Administration's 8(a) program, which provides contracting opportunities to disadvantaged small companies as a way to foster their growth, lay at the heart of a June 21 joint hearing by the House Government Reform and Small Business committees. Every witness had suggestions, from requiring federal agencies and companies to more closely follow existing regulations to removing ANCs from the 8(a) program.

David Marin, staff director for the Government Reform Committee, said committee chairman Tom Davis (R-Va.) was considering the options. 'One very real possibility under consideration is applying the current $3 million to $5 million thresholds for sole-source awards that apply to all other firms in the 8(a) program to ANCs, American Indians and Native Hawaiians,' he said.

The interest in changing 8(a) requirements followed the emergence of ANCs as dominant members of the program and an April Government Accountability Office report that found federal agencies are using ANCs to short-cut competitive acquisitions.

Alaskan Native corporations were established under the Alaska Native Claims Settlement Act in 1971, as a vehicle for distributing land and financial benefits in place of establishing a reservation system. In 1986, Sen. Ted Stevens (R-Alaska) spearheaded legislative changes to the 8(a) program to include ANCs and give them several advantages in pursuing government contracts. The intention was to foster economic development for Alaskan tribes, which historically had exceptionally high poverty rates.

In the 8(a) program as it exists today, member companies must be small, with net worth not to exceed $750,000 during their tenure in the nine-year program, including all subsidiaries and related businesses. But ANCs are exempt from the size limitation and can have as many subsidiaries as they choose, including multiple subsidiaries enrolled in the 8(a) program at the same time, provided they are in different primary industries.

Companies in the program can receive sole-source contracts worth up to $3 million for services and up to $5 million for manufacturing, and the contracts cannot be protested once awarded. But ANCs are exempt from the limitation on sole-source contract size'and have received sole-source awards worth more than $1 billion'and also cannot have their awards protested.

As a result of these advantages, the GAO found, contracts awarded to ANCs through the 8(a) program grew from $265 million in fiscal 2000 to $1.1 billion in 2004, or about 13 percent of the program's total revenue.

Compounding the ANCs' competitive advantages, the GAO reported that SBA has done a very poor job of tracking ANC contracts to ensure they are not abused.

Harry Alford, president and CEO of the National Black Chamber of Commerce, wants Congress to keep ANCs from squeezing the other disadvantaged small businesses out of federal contracting. He recommended the tribal companies be removed from the 8(a) program altogether and have a new program set up for them, to foster community economic development.

'I think Congress is starting to understand this travesty,' Alford said in an interview. 'They don't deserve to be in there'they're a different animal. They have resources, lawyers and consultants that General Motors would wish to have.'

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