Congressmen probe contracts with Alaska native firms

Two members of the House Government Reform Committee have announced an investigation into contracts awarded to Alaska native corporations without competition.

Rep. Tom Davis, R-Va., committee chairman, and Rep. Henry Waxman, D-Calif., ranking member, wrote letters to the Government Accountability Office and several federal agencies, citing press reports of large security-related contracts worth up to $2.2 billion awarded to companies owned by natives of Alaska.

Contracts awarded to these corporations, which are classified as disadvantaged, bypass the normal competitive process under a Small Business Administration section, known as the 8(a) business development program. To participate, businesses must be a member of an ethnic minority or show they are disadvantaged in another way, and they must also be a small business.

Drew Crockett, a spokesman for Davis, said the letters focus on Alaska native corporations because they do not face a money limit on contracts awarded without competition. Other participants in the 8(a) program can only avoid competition on contracts valued at $5 million for goods and $3 million for services.

The letters suggest that while Alaska native corporations receive the contracts, much of the work is done by large subcontractors, which are not eligible for the 8(a) program. Those large companies, the GAO letter states, "should be capable of obtaining federal contracts through the standard competitive process."

Frank Lalumiere, SBA's deputy administrator for government contracts, said there's a lot of misinformation surrounding the 8(a) program, but the bottom line is that "we're trying to enforce the rules and regulations for the purpose of benefiting Alaskans."

"The sole-source provision is to give them a jump start. It's not to say a lot of these 8(a) companies don't go head to head with [big companies]," he said. Participants in 8(a) can only remain in the program for nine years, he said, and they are terminated early if they no longer need the program or are not complying with regulations.

"Our big worry is that because there's no competition or transparency for these contracts, Alaska native corporations are being abused by major companies," said Danielle Brian, executive director of the Project on Government Oversight, a watchdog group. In other words, big companies that do not qualify for 8(a) programs may be the ones benefiting from the program because they are doing most of the work as subcontractors.

One of the House Government Reform letters, addressed to Defense Secretary Donald Rumsfeld, Homeland Security Secretary Michael Chertoff, and Secretary of State Condoleezza Rice, requests information about subcontracts used in conjunction with contracts awarded to Alaska native corporations. The congressmen also requested information on a contract that the former Customs Service awarded to Chenega Technology Services Corp. in 2003 without competition after originally soliciting offers for a competition.

The Washington Post reported on that contract in November 2004, following a Los Angeles Times story on Alaska native corporations and government contracting.

A woman who answered the phone at Chenega Corp. said no one was available to speak to the press Tuesday.

The letter to GAO asked it to investigate why agencies are using the 8(a) program and, as a result, avoiding competition. Contracts awarded without competition are known as "sole-source" contracts.

"The agencies sometimes claim that these sole-source contracts are awarded because they cannot wait to obtain critical sources. It appears, however, that urgency frequently is not an issue, but that agency officials are primarily concerned about meeting minority contracting goals," the letter stated.

The letter also noted an apparent increase in the number of contracts being awarded to Alaska native corporations. "As more federal contractors and federal contracting officials become aware of this exception to the use of fully competitive procedures, there may be growing use of these contracts," it said.

The congressmen ask GAO to answer the following questions: "How many native Alaskans are employed by those corporations to work at the work site locations?" and "What is the impact of these contracts on employment, income, education and economic development for native Alaskans?"

Allan Burman, president of the consulting firm Jefferson Solutions and former procurement chief of the Office of Federal Procurement Policy, said that if the Alaska native community has benefited from the sole source contracts, then that could justify their use.

"The standard for doing government work is through competition. Every administrator would always be looking for ways to use competition," he said, "but obviously it doesn't make sense all the time."