ANCs: Obama pledge on Iraq contracts won't affect us
(Alaska Journal of Commerce (Anchorage) Via Acquire Media NewsEdge) Mar. 6--It was a brief sentence toward the end of President Barack Obama's speech to a joint session of Congress Feb. 24.
"We'll eliminate the no-bid contracts that have wasted billions (of dollars) in Iraq," Obama said.
Then, on March 4, Obama ordered an overhaul of the way the government hands out contracts, promising to curtail no-bid awards that have led to waste, abuse and corruption investigations.
"The days of giving defense contractors a blank check are over," said Obama, who added that such changes could save up to $40 billion a year.
The president's message targeted in particular no-bid contracts, to allow for more competition for government-paid work.
Four spokespersons for Alaska Native firms that have been involved in lucrative federal no-bid contracting said they were aware of Obama's comments in his address Feb. 24 to the nation, but said they were sure the president wasn't talking about them.
"I don't think President Obama was speaking to Alaska Native corporations or small businesses in general when he made that statement," said Sarah Lukin, vice president of external relations for Alutiig LLC and the Afognak Native Corp. "We don't expect it to have an impact on our business."
It's unclear how many Alaska Native firms are currently working directly in, or in support of, the Iraq war efforts. It is clear, however, that the success of dozens of Alaska Native corporations and their subsidiaries have come through their heavy involvement in government work that has been awarded through sole-source, no-bid contracts. Some contracts have totaled in the billions of dollars.
Some 38 percent of federal contracting dollars are awarded through no-bid contracts, and Alaska Native corporations and American Indian tribes nationwide collectively take less than 1 percent of federal procurement dollars, Lukin said.
Alaska Native corporations and their subsidiaries are among some 200 Alaska firms certified through the U.S. Small Business Administration as small, disadvantaged businesses that are owned by Native Americans, according to the SBA Alaska division.
All 8(a)-certified companies are eligible to participate in no-bid, sole-source government contracts. The majority of contracts are limited to $3 million or $5 million, depending on the type of work.
The SBA 8(a) certification is open to socially and economically disadvantaged individuals, such as minorities or veterans. Its aim is to help these businesses gain experience, earn some money, then move to competitive bidding.
But federal law gives one special provision -- a move driven by former Alaska Sen. Ted Stevens -- to companies where Alaska Natives, Native Hawaiians or American Indians own at least a 51 percent majority: Native-owned companies have no limits on contract amounts.
Those reached for comment on Obama's message on no-bid Iraq contracts said they did not believe they currently had contracts relating to the war efforts.
"There are very, very few contractors working in Iraq or Afghanistan under 8(a) contracts," said Barney Uhart, executive director of Chugach Native Corp. "We didn't want to put any of our folks in a war zone."
Arctic Slope Regional Corp., which in the past has had 8(a) contracts related to operations in Iraq, did not respond to initial inquiries made just after Obama's speech. Reached March 3, spokeswoman Mary Gasperlin said the person in her company who had that information was busy and it would take several days to comment.
The government doesn't seem to know either. The SBA, which oversees the certification program, could not provide any information regarding any contracts that Alaska Native 8(a) firms may currently or formerly have had in Iraq or Afghanistan. The Federal Procurement Data System, which tracks contracts, doesn't track data according to where companies are based.
The U.S. Government Accountability Office has investigated 8(a) contracting by Alaska Native corporations. The GAO in April 2006 released a report on contract management of the Alaska Native corporations' special 8(a) provisions.
The GAO found that while representing a small amount of total federal procurement spending, 8(a) obligations to firms owned by ANCs increased from $265 million in fiscal 2000 to $1.1 billion in 2004. In fiscal year 2004, obligations to ANC firms represented 13 percent of total 8(a) dollars, the GAO report said.
The reported specifically noted two ANCs under contract in support of the Iraq effort.
ASRC Airfield and Range Services Inc. had a $50 million Department of Defense contract to work in Iraq training and equipping security guards.
Bowhead Manufacturing Co. LLC had a $33 million contract with the Department of Defense for the distribution of water and fuel tanks to U.S. storages sites in support of the Iraq war. Phone numbers for Bowhead are no longer in service.
Leaders in Alaska Native corporations say they don't believe sole-source contracts with their companies is wasteful. Helvi Sandvik, executive director of NANA Development Corp., she doesn't view the president's statement as a threat to the 8(a) programs. "There seems to be a misconception that 8(a)s are the only sole source contracts," she said.
Gail Schubert, an executive with Bering Straits Native Corp. agreed. "I think when you look at the no-bid or sole source contracts that the Alaska Natives and we in particular have received, you will find there is not the kind of waste that the president appears to think there is," Schubert said. "The contracts are useful to the (federal) agencies. They don't have the time to do a competitive bid and review it.
"The Alaska Native corporations comprise such a small percentage of the sole source work, that we are a blip on the radar screen," she added.
Rep. Don Young, R-Alaska, meanwhile said in a release that he had won a victory for Alaska small businesses in the federal economic stimulus bill.
Young said the Senate version of the bill included a provision that appeared to prohibit use of programs administered by the SBA designed for procurement through minority-owned business enterprises, women-owned businesses, veteran and service disabled veteran programs and the SBA's 8(a) programs.
Young said he worked with Democrats in Congress to make a case for these programs, and was able to get the provision pulled from the bill.
"I was approached by members of the Alaska Federation of Natives with concerns about this provision," Young said in a statement issued in mid-February. "I told them that no matter if I supported this bill or not, I would make sure they were not hurt by it.
"These programs are a success and are working just as Congress intended," he said. "Through these programs, community-based projects function as an economic driver for Alaska Natives and Alaska small businesses, and empower organizations to provide benefits to entire communities and regions throughout our state."
The limitations on subcontracting require that an 8(a) contractor doing a service contract for the federal government must perform 51 percent of the contract with their own people, and many of the big companies have no desire to do 49 percent and work for a small business, Uhart said.
As for tightening up on the no-bid contracts, that has been a focus of the government for a long time, he said. Under the Obama administration, Uhart said he thinks where will be more of a focus on transparency and accountability.
"An 8(a) contract is unlike a competitive contract in a lot of ways," Uhart said. "In an open competition, the support documentation for pricing is not provided as part of the proposal to the government. In 8(a), those are negotiated contracts. The government gets to see all the numbers up front. Every element of the cost proposal is exposed to the government negotiators, and the government has the ability to pick it apart and choose what they want."
Uhart also argued that reporting requirements for the SBA 8(a) contracts are more onerous than reporting in a competitive environment.
"There's no doubt that there has been a lot of attention paid to the fact that Alaska Natives have been very successful; that they have positioned themselves with companies that are able to take advantage of or utilize the program as it was intended by Congress," Sandvik said. "It's unfair to paint a broad brush and assume that anybody who has been successful in business has done so by violating the rules. We have worked hard to learn the business and we deliver great value with our companies.
"We will fight to keep the 8(a) program," Sandvik said. "There is a need to make sure it is understood and the impact it has had on Alaska Natives and other economically disadvantaged peoples. It is doing some good. It would be inappropriate to single out economically disadvantaged people."
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