Post by Okwes on Jan 31, 2006 10:30:52 GMT -5
ANC's 8(a) status under fire
By Melissa Campbell
Alaska Journal of Commerce
An employee with a Chugach Alaska Corp. subsidiary works on Chugach's corporate headquarters building. Alaska Native corporations that have 8(a)-certified subsidiaries are under fire by Congress and the national media. Photo Courtesy of Chugach Alaska Corp.
Chugach Industries Inc. this month was awarded a five-year $25.6 million contract from the National Aeronautics and Space Administration help the agency build a scientific and technical information program. The work will be done in Hanover, Md., and in Hampton, Va.
Last December, the Anchorage-based company received a $35.8 million U.S. Department of Defense contract for the construction of temporary battalion team complex-modularity facilities at Fort Stewart, Ga.
The contracts are a boon for the Anchorage-based, minority-owned company. But the methods used to get the contracts are being questioned by federal officials and the national news media.
Chugach Industries, along with about 200 other companies in Alaska, is certified through the Small Business Administration as small, disadvantaged businesses that are owned by Native Americans, according to the SBA Alaska division. All 8(a)-certified companies can get no-bid, sole-source government contracts. Contracts are limited to $3 million or $5 million, depending on the type of work.
The SBA 8(a) certification is open to all socially and economically disadvantaged individuals, such as minorities or veterans. Its aim is to help these businesses gain experience, earn some money, then move into competitive bidding. The certification last for nine years or until the SBA considers the company is no longer a small business.
The law gives one special provision 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.
That's why Native-owned companies like TKC Communications can receive a $1 billion contract from the U.S. Treasury Department's Bureau of Public Debt, or ASRC Aerospace Corp. can sign a $51 million contract with NASA's Ames Research Center.
These companies are subsidiaries of Alaska Native regional corporations. All of the state's regional corporations, as well as dozens of village corporations, have opened subsidiaries, gotten 8(a) certified and formed missions to get lucrative government contracts.
Many are doing well. Information from the Federal Procurement Data System shows that between 1997 and 2005, Alaska-based Native American companies received contracts totaling $4.4 billion. And that is not a complete picture, as an unknown number of multi-million contracts are given to companies based outside Alaska, and were not included in the figures.
These large-scale contracts have many wondering about the fairness of the system. Congressional leaders are questioning no-bid, sole-sourced contracts in general, but are investigating 8(a) contracts awarded to Alaska Native corporations specifically.
Last March, the House Committee on Government Reform asked the Government Accountability Office to investigate why federal agencies are giving contracts to ANCs and if they are doing it at a reasonable price to the taxpayers.
"Over the past few years, there has been an increase in the number and value of no-bid federal contracts awarded to Alaska Native corporations. This raises serious questions about whether the interests of taxpayers are being protected," Rep. Henry Waxman, the committee's ranking minority leader said in a written statement in response to inquiries by the Journal. "The absence of competition leaves the taxpayer vulnerable to inflated costs and inadequate performance."
Officials with the Alaska Native corporations and with 8(a) trade associations say the nation is getting a good service from their companies. Good performances have been well documented, they say, and government agencies are getting these services at a fair, negotiated price.
"This program is not a government handout," said Sheri Buretta, board chair of Chugach Regional Corp. "Alaska Natives have with the government, with the treaties made, this opportunity. Alaska Natives are a success story. The government should embrace that."
Their success wasn't always so promising.
The Great Experiment
It was dubbed "The Great Experiment." After oil was discovered in Alaska, but before production could begin, a land claims battle between its aboriginal residents, and the state and federal governments had to be settled.
Instead of a traditional - and unsuccessful - reservation system used with American Indian tribes in the Lower 48, the parties signed the Alaska Native Claims Act of 1971, where Natives gave up their aboriginal claims. In return, the act provided $962.5 million and 44 million acres of land. The act established 13 regional corporations and more than 200 village corporations. Those with one-fourth or more Alaska Indian, Eskimo or Aleut blood became shareholders in their area regional and village corporations.
A group of people, most of who had survived on a subsistence lifestyle in roadless areas, was suddenly immersed in the Western-based corporate world, with the mandate of providing their shareholders with a for-profit company.
They were also to provide nonprofit organizations, offering shareholders social and cultural services.
It was sink or swim. If the corporations failed, the government had no further obligations.
In the beginning, most of the regional corporations struggled, barely skirting bankruptcy. A number of village corporations merged or folded into their regional counterparts. There are currently 169 village and four urban corporations. Urban corporations are like village organizations, but operate in more-populated areas, such as Juneau and Kodiak.
In the 35 years since ANCSA, the Alaska Native corporations have found success, in large part because of their 8(a)-certified subsidiaries.
In 2003, the 13 regional corporations showed a combined net income of $100 million on revenues of more than $2.5 billion, according to a study done by the Association of ANCSA Presidents and CEOs.
According to the Native American Contractors Association, 15 Alaska Native corporations with 8(a) businesses provided $27 million in dividends and $5.4 million in cultural and social program donations in 2004. Between 1999 and 2004, they awarded more than $14 million in scholarships to Native descendants.
In 2004, 8(a)-certified companies paid more than $141 million in payroll in Alaska, and had more than 7,700 employees. Nationwide, 8(a)s employed nearly 28,000 people, the association said.
The preference to tribal organizations has also stood up in court. In 2003, the Supreme Court denied a review of a lower court decision, affirming the unique status of ANCs and tribes.
Stealing from the little guy?
With ANCs getting billions of dollars in government contracts, congressional leaders and others wonder if this special provision is taking money from other small, minority-owned disadvantaged businesses.
Absolutely not, said Ron Perry, president of the Alaska 8(a) Association, a trade group that helps minority-owned companies get contracts.
Perry said that the large-scale contracts that ANCs are getting are contracts that would otherwise have gone to the big companies, like Bechtel Corp. or Lockheed Martin Corp.
"If this program didn't exist, the big contracts would go to the big businesses," he said. "Large companies would love to see them disappear."
And there's no reason Alaska Native companies shouldn't take advantage of the program, Chugach Corp.'s Buretta said.
"It's unfair some of the attacks that have been made and the stereotyping in the articles of Alaska Natives in general," she said. "It makes us look like welfare cases, that we create these companies to be run by someone else."
Sarah Lukin, chair of the public relations committee of the Native American Contractors Association, worries that many people have already decided that the ANC preference is unfair. What they don't realize, she said, is the impact the government contracts has on the parent company's shareholders.
ANCs get 0.02 percent of the total government contracts, Lukin said. But proceeds from that money, among the other endeavors from the parent companies and the non-8(a) subsidiaries, allow corporations to invest millions of dollars to help the people in their regions.
Each Alaska-based regional corporation has a nonprofit entity to provide such things as scholarships, job training, health care services and cultural activities.
Subsidiaries with 8(a) certifications have allowed regional and village corporations to diversify, relying less on harvesting the natural resources on their land holdings.
"We realize that the economic opportunities in Alaska are limited," Lukin said. "We're gaining experience Outside and we hope that experience leads to opportunities in the state. But we shouldn't be limited to that."
CIRI enters 8(a) business
Cook Inlet Region Inc. is among the most successful corporations developed under ANCSA. CIRI provides regular dividends to shareholders and offers well-respected social and housing programs to all Alaska Natives and Native Americans.
The corporation has found success in telecommunications, tourism and real estate.
In 2004, it distributed $119 per share to its stockholders, each of who own an average of 100 shares.
CIRI has only recently opened its first subsidiary to gain 8(a) status. ANC Research and Development LLC is an advanced engineering research company headquartered in Colorado Springs, Colo., said Greg Razo, CIRI vice president of government contracting.
Working in the space and missile defense industry, the subsidiary expects to sign its first contract next month, subcontracting with a technology firm based in Huntsville, Ala. Razo wouldn't disclose the contract amount, and said the work is classified.
"It's how we're beginning in showing the government our ability to perform in this line of business," Razo said.
When Margie Brown took over as president of the corporation last year, she and the board directed the company to get into 8(a) contracting as a way to diversify the corporation's holdings.
Razo declined to name who will manage the new subsidiary, but said it is someone who has experience in the space and missile defense industry and who lives in the Colorado Springs area.
"Any company wants to chose someone to run a business that has the qualifications to be successful, regardless of their heritage," he said. "The purpose of this is to take advantage of a government designed to do small business contracting. Tribes do that through 8(a) preference. It makes nothing but good sense to look for lines of business that are less competitive."
Melissa Campbell can be reached at melissa.campbell@alaskajournal.com.
By Melissa Campbell
Alaska Journal of Commerce
An employee with a Chugach Alaska Corp. subsidiary works on Chugach's corporate headquarters building. Alaska Native corporations that have 8(a)-certified subsidiaries are under fire by Congress and the national media. Photo Courtesy of Chugach Alaska Corp.
Chugach Industries Inc. this month was awarded a five-year $25.6 million contract from the National Aeronautics and Space Administration help the agency build a scientific and technical information program. The work will be done in Hanover, Md., and in Hampton, Va.
Last December, the Anchorage-based company received a $35.8 million U.S. Department of Defense contract for the construction of temporary battalion team complex-modularity facilities at Fort Stewart, Ga.
The contracts are a boon for the Anchorage-based, minority-owned company. But the methods used to get the contracts are being questioned by federal officials and the national news media.
Chugach Industries, along with about 200 other companies in Alaska, is certified through the Small Business Administration as small, disadvantaged businesses that are owned by Native Americans, according to the SBA Alaska division. All 8(a)-certified companies can get no-bid, sole-source government contracts. Contracts are limited to $3 million or $5 million, depending on the type of work.
The SBA 8(a) certification is open to all socially and economically disadvantaged individuals, such as minorities or veterans. Its aim is to help these businesses gain experience, earn some money, then move into competitive bidding. The certification last for nine years or until the SBA considers the company is no longer a small business.
The law gives one special provision 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.
That's why Native-owned companies like TKC Communications can receive a $1 billion contract from the U.S. Treasury Department's Bureau of Public Debt, or ASRC Aerospace Corp. can sign a $51 million contract with NASA's Ames Research Center.
These companies are subsidiaries of Alaska Native regional corporations. All of the state's regional corporations, as well as dozens of village corporations, have opened subsidiaries, gotten 8(a) certified and formed missions to get lucrative government contracts.
Many are doing well. Information from the Federal Procurement Data System shows that between 1997 and 2005, Alaska-based Native American companies received contracts totaling $4.4 billion. And that is not a complete picture, as an unknown number of multi-million contracts are given to companies based outside Alaska, and were not included in the figures.
These large-scale contracts have many wondering about the fairness of the system. Congressional leaders are questioning no-bid, sole-sourced contracts in general, but are investigating 8(a) contracts awarded to Alaska Native corporations specifically.
Last March, the House Committee on Government Reform asked the Government Accountability Office to investigate why federal agencies are giving contracts to ANCs and if they are doing it at a reasonable price to the taxpayers.
"Over the past few years, there has been an increase in the number and value of no-bid federal contracts awarded to Alaska Native corporations. This raises serious questions about whether the interests of taxpayers are being protected," Rep. Henry Waxman, the committee's ranking minority leader said in a written statement in response to inquiries by the Journal. "The absence of competition leaves the taxpayer vulnerable to inflated costs and inadequate performance."
Officials with the Alaska Native corporations and with 8(a) trade associations say the nation is getting a good service from their companies. Good performances have been well documented, they say, and government agencies are getting these services at a fair, negotiated price.
"This program is not a government handout," said Sheri Buretta, board chair of Chugach Regional Corp. "Alaska Natives have with the government, with the treaties made, this opportunity. Alaska Natives are a success story. The government should embrace that."
Their success wasn't always so promising.
The Great Experiment
It was dubbed "The Great Experiment." After oil was discovered in Alaska, but before production could begin, a land claims battle between its aboriginal residents, and the state and federal governments had to be settled.
Instead of a traditional - and unsuccessful - reservation system used with American Indian tribes in the Lower 48, the parties signed the Alaska Native Claims Act of 1971, where Natives gave up their aboriginal claims. In return, the act provided $962.5 million and 44 million acres of land. The act established 13 regional corporations and more than 200 village corporations. Those with one-fourth or more Alaska Indian, Eskimo or Aleut blood became shareholders in their area regional and village corporations.
A group of people, most of who had survived on a subsistence lifestyle in roadless areas, was suddenly immersed in the Western-based corporate world, with the mandate of providing their shareholders with a for-profit company.
They were also to provide nonprofit organizations, offering shareholders social and cultural services.
It was sink or swim. If the corporations failed, the government had no further obligations.
In the beginning, most of the regional corporations struggled, barely skirting bankruptcy. A number of village corporations merged or folded into their regional counterparts. There are currently 169 village and four urban corporations. Urban corporations are like village organizations, but operate in more-populated areas, such as Juneau and Kodiak.
In the 35 years since ANCSA, the Alaska Native corporations have found success, in large part because of their 8(a)-certified subsidiaries.
In 2003, the 13 regional corporations showed a combined net income of $100 million on revenues of more than $2.5 billion, according to a study done by the Association of ANCSA Presidents and CEOs.
According to the Native American Contractors Association, 15 Alaska Native corporations with 8(a) businesses provided $27 million in dividends and $5.4 million in cultural and social program donations in 2004. Between 1999 and 2004, they awarded more than $14 million in scholarships to Native descendants.
In 2004, 8(a)-certified companies paid more than $141 million in payroll in Alaska, and had more than 7,700 employees. Nationwide, 8(a)s employed nearly 28,000 people, the association said.
The preference to tribal organizations has also stood up in court. In 2003, the Supreme Court denied a review of a lower court decision, affirming the unique status of ANCs and tribes.
Stealing from the little guy?
With ANCs getting billions of dollars in government contracts, congressional leaders and others wonder if this special provision is taking money from other small, minority-owned disadvantaged businesses.
Absolutely not, said Ron Perry, president of the Alaska 8(a) Association, a trade group that helps minority-owned companies get contracts.
Perry said that the large-scale contracts that ANCs are getting are contracts that would otherwise have gone to the big companies, like Bechtel Corp. or Lockheed Martin Corp.
"If this program didn't exist, the big contracts would go to the big businesses," he said. "Large companies would love to see them disappear."
And there's no reason Alaska Native companies shouldn't take advantage of the program, Chugach Corp.'s Buretta said.
"It's unfair some of the attacks that have been made and the stereotyping in the articles of Alaska Natives in general," she said. "It makes us look like welfare cases, that we create these companies to be run by someone else."
Sarah Lukin, chair of the public relations committee of the Native American Contractors Association, worries that many people have already decided that the ANC preference is unfair. What they don't realize, she said, is the impact the government contracts has on the parent company's shareholders.
ANCs get 0.02 percent of the total government contracts, Lukin said. But proceeds from that money, among the other endeavors from the parent companies and the non-8(a) subsidiaries, allow corporations to invest millions of dollars to help the people in their regions.
Each Alaska-based regional corporation has a nonprofit entity to provide such things as scholarships, job training, health care services and cultural activities.
Subsidiaries with 8(a) certifications have allowed regional and village corporations to diversify, relying less on harvesting the natural resources on their land holdings.
"We realize that the economic opportunities in Alaska are limited," Lukin said. "We're gaining experience Outside and we hope that experience leads to opportunities in the state. But we shouldn't be limited to that."
CIRI enters 8(a) business
Cook Inlet Region Inc. is among the most successful corporations developed under ANCSA. CIRI provides regular dividends to shareholders and offers well-respected social and housing programs to all Alaska Natives and Native Americans.
The corporation has found success in telecommunications, tourism and real estate.
In 2004, it distributed $119 per share to its stockholders, each of who own an average of 100 shares.
CIRI has only recently opened its first subsidiary to gain 8(a) status. ANC Research and Development LLC is an advanced engineering research company headquartered in Colorado Springs, Colo., said Greg Razo, CIRI vice president of government contracting.
Working in the space and missile defense industry, the subsidiary expects to sign its first contract next month, subcontracting with a technology firm based in Huntsville, Ala. Razo wouldn't disclose the contract amount, and said the work is classified.
"It's how we're beginning in showing the government our ability to perform in this line of business," Razo said.
When Margie Brown took over as president of the corporation last year, she and the board directed the company to get into 8(a) contracting as a way to diversify the corporation's holdings.
Razo declined to name who will manage the new subsidiary, but said it is someone who has experience in the space and missile defense industry and who lives in the Colorado Springs area.
"Any company wants to chose someone to run a business that has the qualifications to be successful, regardless of their heritage," he said. "The purpose of this is to take advantage of a government designed to do small business contracting. Tribes do that through 8(a) preference. It makes nothing but good sense to look for lines of business that are less competitive."
Melissa Campbell can be reached at melissa.campbell@alaskajournal.com.