WASHINGTON – Alaska Native Corporations (ANCs) are gearing up for a new round of attacks, as the U.S. Government Accountability Office has released a report raising some serious concerns about their oversight.
The GAO report, “Monitoring and Oversight of Tribal 8(a) Firms Need Attention,” released February 7, found that $5.5 billion in 2010 was awarded under the Small Business Administration (SBA) 8(a) program to tribal, Alaska Native and Native Hawaiian businesses, with ANCs receiving the bulk of the money. There was a much larger percentage increase from 2005 to 2010 in awards to tribal interests over non-tribal 8(a) ones (160 percent versus 45 percent).
The GAO noted that the 8(a) program is supposed to limit the amount of work that can be passed on to subcontractors, but the government watchdog group found that federal agencies weren’t doing enough to ensure this goal.
“Of the 87 contracts in GAO’s review, 71 had subcontractors,” according to the report. “GAO found that required monitoring of limitations on subcontracting by procuring agencies was not routinely occurring. Similar to what GAO reported in 2006, some contracting officers do not understand that ensuring compliance is their responsibility under partnership agreements with SBA, and the regulations do not make this clear.
“Further, agency officials did not know how to monitor subcontracting limitations, particularly for indefinite-quantity contracts, as the data are not readily available. Not monitoring the limits on subcontracting can pose a major risk that an improper amount of work is being done by large firms.”
The GAO said that recent clarifications in March 2011 by the SBA to the 8(a) program are unlikely to correct the problems: “Although a positive step, SBA will have difficulty enforcing new regulations pertaining to tribal 8(a) follow-on contracts and joint ventures given the information currently available….
“Further, the new regulations do not address some issues GAO has previously raised, such as ANC 8(a) firms under the same parent corporation generating a majority of revenue in the same line of business. SBA regulations do not allow a tribal organization to have more than one 8(a) subsidiary perform most of its work under the same primary business line.”
The GAO also highlighted how some tribal 8(a) firms operate, in effect, as large businesses because of their parent corporation’s backing and interconnectedness with sister subsidiaries. The SBA does not have ways to monitor this reality, the report said.
According to the report, SBA officials told the GAO that they are currently in the process of developing the requirements for a new 8(a) tracking database.
Legislators quickly took note of the GAO report, with Rep. Ed Markey, D-Mass., calling on the House Natural Resources Committee to hold a hearing on ANCs.
Markey is widely considered a friend to Indian country, but he believes the ANC contracting situation needs review, especially given a recent criminal indictment involving the Eyak Corporation, the village corporation for Native shareholders in Cordova, Alaska. That scheme allegedly involved Army Corps of Engineers officers working with the Eyak executives to steal $20 million from a federal contract.
“Alaska Native Corporations are provided advantages in federal contracting because of the unique history of native peoples and the U.S. government’s obligations to them,” Markey said in a press release. “However, we must ensure that these advantages are not wrongly exploited and that taxpayers are receiving fair value for contracted work. GAO’s report finds that federal agencies are currently unable to provide the necessary protections. The House Natural Resources Committee should immediately hold a hearing to make sure this problem is fixed.”
In response to the report and to the call from Markey, the Native American Contractors Association quickly offered a press release, saying that the report does not require changes to the 8(a) program by Congress.
“The GAO report contains no ‘smoking gun’ to justify further legislative reform of the Native 8(a) program,” said Sarah Lukin, interim executive director of NACA. “The GAO correctly points out what NACA has long supported; that contracting officers need training to better understand rules and regulations, and that there must be greater coordination between agencies regarding monitoring and oversight of the entire 8(a) program.
“More Native businesses are participating in the 8(a) program to expand their business acumen and, leveraging the experience gained, are competing for government contracts. Clearly the 8(a) program is working as Congress intended,” Lukin added. “Collectively, Native 8(a) contracts represent a small fraction – approximately one percent – of all federal contract dollars. Our small sliver of the federal pie is making a dramatic impact on the lives of hundreds of thousands of Native people nationwide through scholarships, jobs, elder care assistance and other critical programs.”
NACA represents more than 200 tribal, Alaska Native Corporation, and Native Hawaiian Organization government contracting firms across the nation.
The GAO report renews investigations of ANCs started by Sen. Claire McCaskill in 2009. As chairperson of the Subcommittee on Contracting Oversight, she released two reports that found that ANC contractors failed to employ Alaska Natives to work on some contracts and returned minimal benefits from the businesses to Alaska Natives.
“We’ve seen that a very small portion of these companies’ profits are reaching Native Alaskans, so it’s time to acknowledge the fact that this program is not effective for either Native Alaskans or taxpayers,” McCaskill said, adding that her aim was to “return ANCs to equal footing with other small, disadvantaged businesses seeking government contracts.”
In the fall of 2010, McCaskill introduced legislation that would remove a benefit that allows ANCs and tribal businesses to secure non-competitive contracts of unlimited size.
McCaskill’s bill, which stalled, would have required ANCs, like most other 8(a) minority participants, to be limited to sole-source contracts valued at no more than $3.5 million for services, or $5.5 million for goods.
Maria Speiser, a spokeswoman for McCaskill, told Indian Country Today in 2010 that the senator thinks the federal government has a role to play in helping Native Americans economically, but she believes that the government should find a way that is more effective in reaching that goal.
McCaskill’s legislation came after the Washington Post published a lengthy investigative series into alleged mismanagement and shady dealings involving contracts to ANCs. It found some questionable practices, including lacking Native representation in some of the organizations’ business dealings. The articles also reported that the ANCs passed work on to traditional, large defense contractors while non-Native ANC executives earned millions of taxpayer dollars.
Alaska legislators, including Sens. Lisa Murkowski and Mark Begich, and Rep. Don Young, have fought recent attempts by Congress to change the 8(a) program. All three have said that the new GAO report does not require new congressional action.
ANCs were created by a 1971 law that aimed to encourage economic development in Alaska, and in 1986, Congress made ANCs eligible to participate in the SBA’s 8(a) program.