Alaska firms could lose special status in new legislation

Alaska Native Corporations face losing their unique status in a federal small-business contracting program with a new bill introduced Nov. 17.

Sen. Claire McCaskill (D-Mo.), a former state auditor and self-described prosecutor of acquisition issues, introduced S. 3959 that would remove exclusive provisions in the Small Business Administration’s 8(a) program for the companies owned by ANCs.

“The law would require Alaska Native Corporations to play by the same rules as other 8(a) companies,” McCaskill said in a speech Nov. 2 at the Coalition for Government Procurement’s 2010 Fall Conference.

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McCaskill, chairwoman of the Senate Homeland Security and Governmental Affairs contracting oversight subcommittee, said ANCs are exempt from the 8(a) program's normal rules, while most small companies have to meet certain requirements to qualify for SBA’s program. In addition, ANCs can receive contracts of any size without competition, unlike restrictions for other types of small businesses.

McCaskill's bill would force ANCs to meet the same requirements as other companies in the program. They would not be allowed to be automatically designated as both socially and economically disadvantaged businesses. ANCs would have to justify their status as such.

ANCs also have more access to contracts under their unique status. An investigation by McCaskill’s subcommittee found that ANCs received many sole-source contracts and often passed work on to traditional, large defense contractors. Between 2000 and 2008, ANCs received $6.6 billion in 8(a) sole-source contracts. Many of these contracts were far above the $3.5 million maximum for sole-source contracts that other 8(a) companies can receive, according to the subcommittee’s investigation.

McCaskill’s bill would eliminate the ability of ANCs to receive sole-source contracts exceeding the caps applicable for other 8(a) companies, and her bill would prohibit them from being pass-through companies for other businesses.

The issue raises the ire of both supporters and opponents of the special status ANC companies enjoy. Other 8(a) small businesses often say they are at a disadvantage because of the ANCs. ANC advocates say their special status helps large tribal communities.

Native American leaders reacted to McCaskill’s new legislation, calling it misguided and wrong.

“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,” said Jana Turvey, vice president of corporate affairs for Afognak Native Corp.

Citing an annual report on ANCs, the Native 8(a) Works organization said that in 2008, 12 Alaska Native Regional Corporations distributed $171 million in dividends to shareholders, representing 66 percent of net profits.

The bill was sent to the Senate Small Business Committee for further consideration.