Skinner: Coding error to blame for DHS award to Chenega

An agency of the Homeland Security Department improperly awarded a 10-year, $475 million sole-source contract in 2003 to the Alaskan Native firm Chenega Technology Services Corp., according to a new report from the department's inspector general.

The Customs and Border Protection contract with Chenega is for maintenance, repair and operation of metal detectors, X-ray screening devices and other inspection and screening equipment at border checkpoints, airports and seaports, IG Richard L. Skinner explained. As of February 2007, the department had spent $141 million on the contract.

CBP classified Chenega under the industry classification code for wired telecommunications carrier, the IG wrote in the 30-page report. However, the provision of wired telecommunications was not included in the statement of objectives for the contract, he added.

"CBP did not comply with federal regulations when it awarded Chenega the contract under an incorrect industry classification code," the IG wrote. "Had CBP used the correct classification, Chenega would have been ineligible for the sole-source award."

According to the report, a CBP contracting officer and project officer agreed with the IG that the classification was "inappropriate." CBP officials also noted that the Small Business Administration had signed off on the classification used for Chenega. However, agency officials agreed with Skinner's recommendations to further evaluate the contract and the agency's contracting practices.

DHS had sought to consolidate about 20 existing contracts into a single maintenance contract and to put it up for competitive bidding. However, CBP officials were persuaded by Chenega's "self-marketing" to make it a sole source 8(a) Business Development Program, Alaska Native Corporation contract, the report said.

CBP bent the rules because it was under a tight deadline and because it wanted to meet its small business objectives for 2003, Skinner said.

SBA must approve participation in the 8(a) program. Alaska Native Corporations receive additional benefits, including subsidies and exemptions from various federal contract limits. The favored status for Alaskan Native corporations has been controversial but has been promoted by Sen. Ted Stevens (R-Alaska), former chairman of the Senate Appropriations Committee.

Under the incorrect designation used by CBP, Chenega qualified for the sole-source contract, Skinner wrote. But the company would not have been eligible if it had been properly classified because the firm's revenues would have exceeded the limits, the report stated.

Also, the agency did not monitor Chenega effectively with respect to the company's compliance with subcontracting regulations, the IG said. Chenega did not respond to a request for comment in time for this story.

Chenega Technology Services of Alexandria, Va., is a unit of Chenega Corp. of Anchorage, Alaska. Chenega Corp. ranks No. 2 on Washington Technology's 2007 Top 25 8(a) firms list.