Contracting preferences for Alaska native corporations under threat

Sen. Claire McCaskill, D-Mo., once again took aim at contracting preferences for certain corporations owned by native Alaskans, arguing the program is wasteful and rife with abuse.

The senator this week introduced a measure that would put Alaska native corporations on equal procurement footing with other companies operating in the Small Business Administration's 8(a) Business Development Program, which helps small and disadvantaged firms gain access to federal and private procurement markets.

"The American people have made it clear they want us to cut back federal government spending and at this point it's really a question of how much," said McCaskill, chairwoman of the Senate Subcommittee on Contracting Oversight.

"I think the one thing we can all agree on is that we should start with waste and abuse," she said. "Contracting practices that aren't providing taxpayers with the best bang for their buck should be first on the chopping block."

ANCs date back to the 1971 Alaska Native Claims Settlement Act, which created 13 regional corporations and more than 200 village corporations. Eligible citizens from each region were given shares in their corporation's stock, allowing them to benefit from ANC profits. McCaskill complains of pervasive abuse in the program and said the corporations fail to employ sufficient numbers of Alaska natives and return only minimal benefits to the people the program was intended to help.

ANC advocates 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.

McCaskill's amendment would eliminate the ANCs' ability to receive sole-source contracts of unlimited value. All other 8(a) firms have their noncompetitive contracts capped at $4 million, or $6.5 million for manufacturing. A new rule change published last month requires agency contracting officers to provide written justification when awarding sole-source ANC contracts in excess of $20 million. The approval documentation then would be public.

The amendment also would prevent Alaska native firms from automatically being designated as socially and economically disadvantaged. The companies 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. The program currently 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 provision is likely to face stiff resistance from the Senate's Alaskan delegation, which is feverishly protective of ANC rights.

McCaskill's amendment and the bill -- the 2011 Small Business Innovation Research/Small Business Technology Transfer Reauthorization Act -- are currently being debated by the Senate and could be up for a vote early next week. A longtime critic of the preferences for ANCs, McCaskill has introduced identical legislation as a stand-alone measure before. Rep. Bennie Thompson, D-Miss., introduced a companion measure in the House.

An additional amendment to the SBIR/STTR Reauthorization Act, which seven Republican senators sponsored, would rescind all unspent and unobligated stimulus funds. The provision was offered by Sens. Olympia Snowe of Maine, John Thune of South Dakota, Marco Rubio of Florida, Scott Brown of Massachusetts, Mike Enzi of Wyoming, Jerry Moran of Kansas, and David Vitter of Louisiana.

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