Gilded Awards

Alaska Native corporations land no-bid contracts worth up to $700 million as scrutiny over 8(a) status mounts.

Alaska Native corporations, whose competitive edge in getting government business has been under scrutiny lately, received large, no-bid contracts from a procurement shop at the Interior Department in 2003 and 2004. Upcoming congressional hearings will examine the legislation that exempts tribally owned corporations from the dollar limits that apply to other companies, as critics question whether the exemption benefits native communities and how closely the contracts are monitored.

Interior's National Business Center operates 14 contracts awarded to tribally owned corporations, four of which are worth up to $100 million or more, according to contracting documents obtained by Government Executive through the Freedom of Information Act. The agreements were made through the Small Business Administration's 8(a) Business Development program, which allows agencies to make awards without competition to businesses that are considered small and disadvantaged, including Alaska Native corporations. Only tribally owned companies are exempt from the standard limit of $3 million ($5 million for manufacturing) on no-bid contracts awarded through the program.

The center awarded Jacksonville, Fla.-based Chenega Technical Products (now called Chenega Integrated Systems, a subsidiary of Anchorage, Alaska-based Chenega Corp.) a contract worth up to $200 million over five years for information technology and administrative support services in June 2003. The same month, the company won a deal worth up to $100 million over five years for logistics and support services. In 2004, TKC Communications and TKC Integration Services, both of which are subsidiaries of Kotzebue, Alaska-based NANA Regional Corp., signed two agreements worth up to $200 million over five years primarily for telecommunications and computer-related goods and services.

Unlike other companies in the 8(a) program, tribally owned corporations have no restrictions on the size of their workforces or revenues. The 1971 Alaska Native Claims Settlement Act, written by Sen. Ted Stevens, R-Alaska, created the corporations, which are based on 13 regions and more than 200 villages. In theory, profits are distributed among shareholders and the Alaskan community, although neither Congress nor any federal agency tracks those distributions. Alaska Native corporations say they provide shareholders with dividends, scholarships, jobs, training and cultural services.

Harri Kramer, spokeswoman for NANA's business arm, says the corporation pays almost 100 percent of its profits to its shareholders in the form of dividends and services, which added up to $5 million in dividends for 11,400 shareholders in fiscal 2005. "Firms participating in the 8(a) program should not be held up to special scrutiny or criticism because the 8(a) program is working as intended," and helping native shareholders, she says.

Kristina Williams, a spokeswoman for Chenega, directed all questions about the contracts to Interior. She says Chenega invests the majority of its time and profit in native communications, in the form of scholarships, language preservation and other services. "Our shareholders are not wealthy individuals purchasing shares of a large corporation. They paid for their ownership in these corporations by having their land, pride, language, culture and religion taken away from them," Williams says.

David Sutfin, assistant director of GovWorks Federal Acquisition Center, which is part of the National Business Center, says before the center makes awards through the 8(a) program, it first conducts extensive market research and negotiates on price and technical issues. The national center is a fee-for-service organization that sets up contracts for other federal agencies.

"We still determine that we're getting best value," says Debra L. Glass, chief of acquisition and property management at the National Business Center.

Agencies likely pay more to award business without competition to an Alaska Native corporation because it lets them get the contract in place more quickly, says Steven L. Schooner, a George Washington University associate professor specializing in procurement law. "That's what entities like the National Business Center specialize in," he says, referring to fee-for-service organizations that charge agencies for contracting support. He adds that there's no evidence that the procurement shop has the incentives or capability to ensure that its market research generates competitive prices.

Sutfin says he doesn't have data on whether the National Business Center pays more when making awards through the 8(a) program, but federal acquisition regulations require the contracting officer to determine that the price on a no-bid contract is fair and reasonable by comparing it with similar contracts. Sutfin adds that the program benefits the government by enabling contracting officers to make large awards quickly.

"When you have the pressure of time, [no-bid contracting] is going to be your friend," says Tim Vigotsky, former chief of the National Business Center and now president of Centreville, Va.-based consultancy Vigotsky and Associates.

The contracting documents shed light on questions being pursued by Rep. Tom Davis, R-Va., chairman of the House Government Reform Committee. In March 2005, Davis and Rep. Henry Waxman, D-Calif., a ranking member, sent letters to the Government Accountability Office and several federal agencies asking for more information about awards made to Alaska Native corporations. The letters questioned whether work awarded to those corporations is subcontracted to large businesses that are not tribally owned.

SBA requires that 8(a) contractors perform at least 51 percent of the contracts they are awarded. NANA's Kramer says the corporation has established an oversight process in which each of its subsidiaries reports subcontracting and other related activities to its management council on a quarterly basis. Chenega would not comment on how it tracks subcontracting.

Davis expects GAO to release a report on Alaska Native contracts in spring, after which he'll hold hearings.

Large, no-bid awards to tribally owned corporations are not unique to the National Business Center. "It happens all the time," says William K. Walker, a lawyer who represents Alaska Native corporations.

Schooner and other critics say it doesn't make sense for Alaska Native corporations to be in the 8(a) program, because they are neither small nor disadvantaged. Proponents of the program say not only should tribally owned corporations be in the program because they generate revenues for Alaskan communities, but they also deserve to be exempt from the normal limits placed on no-bid contracts that other 8(a) companies face because of their size.

"If I have a little 8(a) company, I'd say that's unfair. If I'm an [Alaska Native corporation] with hundreds or tens of thousands of shareholders, I'd say it's not fair to play by the same rules as the small guys," Walker says.