SBA to Alaska Native Corporations: Show us the money

Alaska Native Corporations soon will have to report to the Small Business Administration on how they have used their special set-aside government contract funds to help their communities back home.

Alaska Native Corporations soon will have to tell Small Business Administration officials how they have used the money from special set-aside government contracts to help their communities back home.

Each company's annual review to SBA will have to include information about how they’re bettering their community through funding cultural programs, helping to develop jobs, sponsoring scholarships and helping to improve tribal members’ lives, said Joe Jordan, SBA’s associate administrator for government contracting and business development, according to new regulations that SBA released today.

“We’re not doing this to judge how they use the money,” Jordan said. But SBA has no mechanism to tell whether the 8(a) business development program is working in the tribal communities.

ANCs have been at the center of controversy in the small business and federal contracting world. Under the current rules, agencies can limit competition for a contract to only ANCs, and even award a sole-source contract to an ANC no matter the size.

An investigation in 2010 by a Senate contracting oversight subcommittee found each member of a Native Alaskan community received roughly $615 per year from 2000 to 2008 as a result of federal contracts received by 19 ANCs. Those same ANCs employ more than 4,500 people. Of these employees, rough 5.2 percent are shareholders of the corporation.

The regulation comes after audits of the 8(a) program by the Government Accountability Office and SBA’s inspector general. In recent years, GAO has confirmed the perception that large businesses can exploit ANCs to reap the benefits of the special designation.

In response to the proposed rule in 2009, most of the 60 people who commented on the reporting rule opposed it. They said it wasn’t specific enough and would be difficult for each company to determine how it affected their community. Commentors also said that the information SBA wants does not exist and the benefits vary so widely among groups that it can’t be uniformly quantified.

So over the next six months SBA will work with the ANCs and other tribes with the small business set-aside status in the 8(a) Business Development program. Officials allowed the new regulation to go into effect in late summer so they could work with tribal leaders to find ways to make the reporting easier.

“The development benefits issue really needed to be addressed,” Jordan said.

Meanwhile, members of the House and Senate have introduced legislation to end the special set-aside for ANCs. Last month, Sen. Claire McCaskill (D-Mo.), chairwoman of the Homeland Security and Governmental Affairs Committee’s Contract Oversight Subcommittee, introduced a bill and Rep. Bennie Thompson (D-Miss.) introduced a companion bill in the House Feb. 10.

“All too often, small businesses are crowded out of opportunities by Alaska Native Corporations that receive uncapped, no-bid contracts under a special provision of the 8(a) program,” Thompson said.

“This bill will assure that ANCs cannot continue in a privileged status that both protects them from legitimate competition from other businesses and fails to return a fair share of profits to Native Alaskan shareholders,” he said.