Tribal firms capitalize on advantages

ANCs hone their edge while a rumble of protest by competitors grows<@VM>What makes an Alaska Native Corp. or tribally owned 8(a) different than other 8(a)s?

From the calls she is getting at her law practice, Angela Styles, former administrator of the Office of Federal Procurement Policy, said she sees complaints rising about the advantages Alaska Native and tribally owned companies are given over other 8(a)s.

J. Adam Fenster

In 2005, Catapult Technology Ltd. will see its work with the Transportation Department plummet from $4.8 million to practically zero.

The loss is not because the Bethesda, Md., company did a poor job providing network operations and help-desk support, nor did another contractor underbid Catapult.

Catapult lost the work to Bowhead Information Technology Services, an 8(a) firm that is a subsidiary of Ukpeagvik Inupiat Corp., an Alaska Native corporation. Catapult never had a chance to compete against Bowhead to keep its work.

Catapult filed a protest over the award with the Government Accountability Office, but that move fell on deaf ears. GAO upheld the Bowhead award, saying that the lost $4.8 million did not represent an economic hardship for Catapult, which had 2003 revenue of $25 million.

"Under the current plans for consolidation by the CIO at the department, there are a number of companies that are going to be in the same boat," said a Catapult representative who asked not to be identified. "The word is that all the small business work is going to be moved to Bowhead on that contract."

Bowhead officials did not return phone calls seeking comment for this story.

For more than 30 years, Alaska Native Corporations and tribally owned companies have received regulatory advantages intended to aid historically impoverished tribal communities.

In the last several years, however, these companies have seen an explosion of business as new procurement rules came into play, and the companies learned to exploit the advantages they have over other small businesses in pursuing government contracts.

Each year, Washington Technology ranks the top 25 8(a) companies according to their prime contracting IT revenue. In 2000, only two ANC or tribally owned companies were on the list. In 2004, there were eight, including four of the top five companies. Only one of the eight was a tribally owned company. The rest were ANCs, which have been the target of the bulk of complaints from other small businesses and industry officials.

Thanks to the special rules, a federal agency can avoid the costly, time-consuming process of competitive bidding. And many in the private sector mutter darkly that agencies can use these companies to steer business to the contractors they want to work with, by signing them as subcontractors to do the bulk of the work.

"I think there's a good amount of that going on," said Angela Styles, former administrator of the Office of Federal Procurement Policy in the Office of Management and Budget. She now is a procurement attorney with law firm Miller & Chevalier in Washington. "There seems to be more of it happening these days ... I'm getting more calls."

A visit to the Web sites of many ANCs and tribally owned 8(a)s demonstrates the extent of their advantages. All eight companies named in Washington Technology's annual report on the top 8(a)s include at least one Web page describing their non-competitive benefits to federal agencies.

This outrages Steven Schooner, co-director of the Government Procurement Law Program at George Washington University.

"If we were talking about work that ANCs truly could perform by themselves like [other] 8(a)s, this doesn't look as bad," Schooner said. "But where the program encourages 8(a)s to serve as fronts for businesses that otherwise would compete for the same work, we've not only reduced competition, which is bad unto itself, but we've also inflated the price by adding a layer of overhead. ... [There] is no reason to believe that non-competitive reliance on ANCs will result in the government receiving best value for its money."

But there are signs of a backlash developing.

The Transportation Security Administration withdrew plans to compete a multiyear, multimillion-dollar contract to main- tain airport baggage screening equipment shortly after meeting with representatives from an ANC that holds a similar contract with Customs and Border Protection.

Less than a week after an article appeared in The Washington Post outlining the meeting, TSA hastily announced it had decided to reinstate the competitive bid process.

At Fort Drum, N.Y., Army officers were considering a sole-source award to one of two ANCs for maintenance, repair and rehabilitation work. The two ANCs then contacted one of the local contractors holding the contract about subcontracting to them. The contractor complained to his congressman, Rep. John McHugh (R-N.Y.), who met with officials from the Army Contracting Agency.

The agency promised to review the qualifications of local companies. A final decision has not yet been announced on the procurement.

If there are going to be any changes in the regulatory advantages enjoyed by ANCs and tribally owned companies, the action likely will have to take place on Capitol Hill.

For years, Sen. Ted Stevens (R-Alaska) was Appropriations Committee chairman and the prime mover in creating the competitive advantages for these companies.

Courtney Boone, Stevens' spokeswoman, defended the provisions, arguing that the ANCs are a special case because the federal government works with the tribes on a "government-to-government" basis.

"It sets native-owned businesses separate from others," Boone said.

"I'm not aware that we have any plans to review [the regulations] at this point," said Craig Orfield, a spokesman for the Senate Small Business Committee, chaired by Sen. Olympia Snowe (R-Maine). "However, we are chronically concerned about the performance of the small-business contracting programs we deal with and whether the methods the agencies pursue to execute small-business goals are as effective as Congress originally intended.

"If there's a group of business and contractors out there that feel the program is not being carried out fairly, I can guarantee you the committee staff will look at it one way or another," Orfield said.

On the House side, Rep. Tom Davis (R-Va.), chairman of the Government Reform Committee, has been a fierce advocate for competitive practices in government contracting. He is interested in considering revisions to the ANC rules.

"We'll be looking at this issue along with our minority [members]," said David Marin, Davis' spokesman. "Davis wants to shine a light on this issue, given his purist stance on acquisition policy in general. Special interest set asides like this are, in effect, a scam on the taxpayer."

Allan Burman, president of the government consulting arm of Jefferson Consulting Group LLC, and Office of Federal Procurement Policy administrator under three presidents, said no one is looking at whether the regulations are meeting their original intent of assisting tribal communities in Alaska, or whether this represents good procurement policy for agencies.

"Are agencies getting good deals or not? Who's looking at the outcome?" Burman asked. "If I were going to put a study together, those are questions I would ask."

Patience Wait is senior writer with Government Computer News. She can be reached at pwait@postnewsweektech.com.

  • ANC and tribally owned 8(a)s may receive sole-source contracts regardless of the dollar amount. Other 8(a)s have a $3 million limit, including options, on contracts for services; $5 million, including options, for manufacturing contracts.

  • A sole-source contract awarded to any 8(a) cannot be protested for lack of competition, but no ceiling on awards to ANC or tribally owned 8(a)s means that protests cannot be lodged no matter what the contract's size. Some sole-source awards to ANC or tribally owned companies have been as high as $500 million. Other 8(a)s have this protection only up to their $3 million and $5 million ceilings.

  • ANC and tribally owned 8(a)s can own several 8(a) companies, provided each one is in a different primary North American Industry Classification System code. Each subsidiary is considered separate for size determination, regardless of how large the parent corporation may be.

  • If a prime contractor to a defense agency signs on an ANC or tribally owned 8(a) as a subcontractor, the defense contractor will receive a 5 percent rebate on the value of the subcontract.

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