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Members of Congress discussed removing special contracting privileges reserved for Alaska Native corporations at a joint committee hearing Wednesday.

Legislators leaned heavily on an April Government Accountability Office report on contracting preferences for Alaska Native corporations, in considering where to lay blame for findings that no-bid contracts awarded through the program have led to inflated costs and may have unintended effects on other disadvantaged business groups. The federal acquisition workforce took criticism at the hearing, conducted by the House Government Reform and Small Business committees, for well-publicized lapses in use of the program.

Rep. Don Young, R.-Alaska, testified on the historical context of the preferences for Alaska Native firms, designed to benefit both individual businesses and Native Alaskan communities. To that end, native groups are exempt from a $3 million limit on the size of no-bid contracts that can be awarded to other types of disadvantaged businesses, can own an unlimited number of subsidiaries and need not be led by a disadvantaged person.

In a sharp exchange, Young defended the program's priorities against questioning by Rep. Donald Manzullo, R.-Ill., chairman of the Small Business Committee, and Rep. Henry Waxman, D-Calif., ranking member of the Government Reform Committee.

Manzullo criticized a program design that he said effectively makes disadvantaged businesses compete for work against potentially better-positioned Alaska Native groups, rather than one another. Waxman suggested that no-bid contracts increase prices agencies pay, to which Young responded that it is agencies themselves that set the terms of the contracts they ultimately award.

"If an agency isn't getting quality, say so," Young challenged. But Manzullo underscored that the concerns being raised were not focused on quality but on the fairness of preferences that benefit disadvantaged groups in Alaska while overlooking unemployment and business disadvantages elsewhere in the country.

In a series of questions set to acquisition officials from the Interior and Defense departments, Rep. Tom Davis, R.-Va., pushed for an admission that competition, rather than no-bid contracts, is the most reliable means to assure best value to agencies.

Manzullo questioned whether agencies are interested in best value in contracts awarded to Alaska Native corporations, quoting a GAO finding that agencies use the no-bid option as a "quick, easy and legal" means of awarding large contracts while at the same time getting credit toward meeting their small business goals. The more than four-fold increase in the value of contracts awarded to Alaska Native corporations between 2000 and 2004 through the Small Business Administration's 8(a) disadvantaged business program -- from $265 million to $1.1 billion -- partially reflects laziness on the part of agency contracting officers, Manzullo said.

David Cooper, director of acquisition and sourcing management at GAO, was quick to disown the charge of laziness but testified that the report's findings point to lack of training and, in some cases, shortages of personnel, in the acquisition workforce.

The April report found that agency contracting personnel and SBA officials, who are jointly charged with oversight of Alaska Native corporation participation in the 8(a) program, were often uncertain of how responsibilities are divided. In almost no cases had there been oversight of limitations on subcontracting designed to ensure that privileged participants did not act as fronts for other businesses, Cooper said.

He described the SBA's response to the report's findings as disappointing, noting, "In several cases, the SBA has been slow to respond to our recommendations."

But in a hearing rife with finger-pointing, Rep. Chris Van Hollen, D.-Md., scored one of the few clear points. After nearly all the witnesses had been scolded for their role in runaway no-bid contracting, Van Hollen invited any of the panelists to take issue with the policy proposition that "Congress should consider treating beneficiaries of all 8(a) programs equally." No one volunteered.

COMMENTS

• Although the original intent of Alaskan Native Corporation (ANC) contracting program was good, it has been abused like most other programs and thereby, leaves non-ANC 8(a) firms that are truly disadvantaged at a major disadvantage. Reasons that the ANC revenue has more than quadrupled over the past 7 years are because: (1) ANC parent corporations have capital--lots of capital, (2) ANCs use their capital to recruit Program Managers, Chief Operating Officers, and other technical project managers from large corporations or federal agencies, (3) these highly paid recruits have established relationships with government agencies because of their prior work experience through large corporations, (4) the recruits know the contracting officers and the technical project managers at the federal agencies extremely well and also market themselves and the ANCs heavily, and (5) the federal agencies are happy to award contracts—sole source—to the recruits that work for ANCs! The federal agency contracting officer and project managers are perhaps assured that in most cases there is continuity in project work because of the personnel who are assigned to the projects. Because of the already-established personal relationships, an unlimited sole source contract is awarded. In these situations, all, except for the non-ANC 8(a), wins: The Federal Agency wins because they have just awarded a large percentage of their contracting dollars to a "Small Disadvantaged Business" and ANC 8(a) falls into this category, and the ANCs win because of their exponential increase in revenue, which allows them to buy, invest, and own several non-ANC 8(a) subsidiaries, and lobby further with Senator Stevens and the Hill. The loser in this unintended and unfair contracting program is the non-ANC 8(a). The non-ANC 8(a)s neither have the capital to recruit professionals for large sums of money from large corporations or federal agencies, nor have the support of Senator Stevens, nor the ability to procure unlimited sole source. This is unfair and the treatment differential of the ANC 8(a)s within the US SBA 8(a) program is simply wrong. Again, the fact that the ANCs have an unfair advantage over the non-ANCs demonstrates that money, power, and blindness prevail in the US. Gita Murthy Posted June 6, 2007 4:21 PM
• Contrary to what Representative Manzullo thinks, contracting officers in my agency do not go to the Alaskan Native Firms because we are "lazy," but because we believe we are supporting a good program, we're negotiating with an excellent firm, we receive a fair and reasonable price, we can generally get an award done quickly, and we have very few problems during the administration of the contract. Major downsizing is going on now in the NAVFAC acquisition community -- we simply do not have the resources that we used to have and if anyone out there really thinks the "computer" has tremendously improved our processes, well, let me tell you - it just "ain't so"!!!! The programs we are mandated to use, the awful lack of speed of the systems, the absolute frustration of entering data into multiple systems, and oh, yes, watching that "hourglass" -- wow -- talk about wanting to toss the computer. We were apprehensive at first, but working with the Alaskan Native Firms has been a pleasure. GovExec.com reader Posted June 27, 2006 1:39 PM