McCaskill introduces bill to curb preferences for Alaska native corporations

Sen. Claire McCaskill introduced a bill Wednesday to restrict the contracting privileges afforded to Alaska native corporations.

The sweeping legislation would put the Alaskan firms on equal footing with other small disadvantaged businesses operating in the Small Business Administration's 8(a) Business Development Program.

The bill, which McCaskill first announced in October, would eliminate the ANCs' ability to receive sole-source contracts of unlimited value. All other 8(a) firms have their noncompetitive contracts capped at $3.5 million, or $5.5 million for manufacturing.

A longtime critic of ANCs, McCaskill argued the program is rife with abuse, the corporations fail to employ sufficient numbers of Alaska natives and return only minimal benefits to the people the program was intended to help.

"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," said McCaskill, who chairs the Senate Subcommittee on Contracting Oversight.

ANC supporters argue it is unfair to compare them to other small businesses that operate under a model designed to benefit individual entrepreneurs. The corporations reinvest some of their profits in the native population through their shareholders. ANCs also spend profits on cultural and social programs that benefit the larger Alaskan community, proponents said.

Jana Turvey, vice president of corporate affairs for Afognak Native Corp., said McCaskill's claims of widespread abuse in the ANC program are false.

"It is clear Sen. McCaskill has turned a blind eye to the progressive policies of her predecessors allowing native people a chance at economic self-sufficiency," Turvey said. "The senator's crusade, despite countless success stories, shows a clear lack of understanding of federal Indian policies and deliberate ignorance of the benefits Alaska native shareholders, their descendants and families receive because of the program."

Data provided by Native 8(a) Works, an advocacy group for ANCs, shows that more than 35,000 jobs worldwide were created through the program. In 2008, the 12 Alaska native regional corporations distributed $171 million in dividends to shareholders, which represented two-thirds of their net profits, the group said.

McCaskill's proposal contains a number of other provisions that could affect the viability of ANCs.

Alaska native firms no longer would be automatically designated as socially and economically disadvantaged and would have to prove that status upon entering the 8(a) program. The corporations also would have to be managed by individuals who qualify as economically and socially disadvantaged. A loophole in the program allows the corporations to be managed by non-natives, often from locations in the Washington metropolitan area.

Under McCaskill's proposal, an ANC would be allowed to have a majority interest in only one 8(a) subsidiary at a time and that affiliate's size would be a factor in determining the ANC's program eligibility. In addition, the firms would be prohibited from operating as pass-through entities to deliver contracts to non-native companies.

The restrictions would apply only to ANCs and not native Hawaiian organizations or corporations owned by native tribes, all of which are provided the same contracting preferences.

The bill, which has been referred to the Senate Small Business and Entrepreneurship Committee, does not have a co-sponsor yet and could face stiff resistance from the Senate's Alaskan delegation.

"This bill is misguided, misinformed and shows a clear lack of understanding for how important the program is for the people of Alaska," Sen. Mark Begich, D-Alaska, told Government Executive last month.

This is not the first time McCaskill has called for major reforms of the ANC program.

Last year, she proposed an amendment to the fiscal 2010 Defense authorization bill that would have stopped ANCs from winning Defense Department contracts of unlimited value without any competition. The amendment also would have lifted a provision that allows Alaska native corporations to earn a bonus when they subcontract with their own subsidiary. But McCaskill dropped the provision after a debate with Begich on the Senate floor.

Begich, who concedes the ANC program could use some "tweaking," said he is planning a "full-court press" to stop the new legislation.