NIMA, Alaskan Firms to Sign Controversial Deal

NIMA, Alaskan Firms to Sign Controversial Deal

Bob Bowe

The National Imagery and Mapping Agency this month is expected to sign a controversial 15-year, $2 billion outsourcing deal designed to help Alaskan Native companies.

The project, which will outsource some 600 jobs to the private sector, has aroused opposition in the information technology industry and among government employee unions. They question whether the government or Alaskan Natives themselves are benefiting from a special program that allows the Defense Department to bypass normal acquisition procedures in order to award contracts to designated Alaskan Native Regional or Village Corporations.

Despite the criticism, NIMA is moving to award the contract to NJVC Corp., a McLean, Va., consortium comprised of two Alaskan Native corporations, Chenega Corp. and Arctic Slope Regional Development Corp.

NIMA, a Defense Department agency that handles the government's photographic intelligence needs, contends the project will improve IT operations and save the agency money.

"Most savings will come from reduced civilian pay," said agency spokesman John Iler. "The vendor will also receive incentives to reduce costs and implement efficiencies and commercial best practices. ... The consolidation of numerous existing contracts under this single vehicle will also result in lower contract administration costs for NIMA."

Alaskan Native corporations are regional and village corporations owned by the indigenous people of Alaska. The corporations were formed under a 1971 federal law giving them preferred procurement status in exchange for federal rights to traditional Native land.

A clause in the Defense Department's 2001 appropriations act gave them exemptions from most competition provisions in the Federal Acquisition Regulations, a NIMA spokesman said. Both Chenega and Arctic Slope Regional also are in the Small Business Administration's 8(a) program, which helps small, minority-owned businesses through preferential contracting opportunities.

After going through an Office of Management and Budget A-76 assessment of its employees' work, NIMA was allowed to directly award the contract to NJVC without going through a competition that would have allowed federal employees to bid against NJVC for the work. The agency selected NJVC in November 2000.

Many in the government IT industry are unhappy with the blanket exception giving Alaskan Native companies an advantage in securing government work. But opponents are reluctant to speak against it publicly, whether for fear of appearing prejudiced or of arousing the enmity of Sen. Ted Stevens, R-Alaska, who pushed the measure when he held the chairmanship of the Senate Appropriations Committee.

"It's [giving] preference to an entire class of people in the aggregate, instead of the individuals," said one industry analyst who spoke on background, voicing common sentiments. "I'm sure the intentions are good, [but] I wonder how the government is able to determine what a fair proposal is when there's no competition."

Under the terms of the contract, NJVC will provide call centers, centralized systems and servers, distributed desktop computing, enterprise telecommunications, mainframe computers and networking services, among other functions. NIMA officials said elements of other IT contracts will over time be included in this program.

The 600 government employees affected by the outsourcing, most located in the St. Louis and Washington metropolitan areas, will be encouraged to transfer their employment to NJVC, with both NIMA and the company offering transition incentives.

The contract is not set up to create jobs in Alaska nor to create work opportunities for Natives to move to the lower 48 states, said Bob Bowe, chief executive officer of Chenega Technical Services Corp., the McLean, Va., subsidiary participating directly in the joint venture. And the federal employees who transition to NJVC will not be required to relocate to Alaska.

Bowe said both Alaskan Natives and NIMA will benefit from the contract. Profits in the venture will go to the Alaskan Natives who make up the shareholders of the two companies and who live in isolated, desolate communities, he said. Chenega, for instance, has just 119 shareholders, all of whom live in the Prince William Sound region of the state.

NIMA and its affected employees will benefit because, unlike regular A-76 competitions that frequently drag out for two to three years and cost several million dollars to complete, the agency was able to move quickly on the outsourcing project.

At the same time, under normal rules, a winning contractor would be required to make the transition within six months, which usually leads to downsizing as the vendor tries to realize cost savings as quickly as possible, Bowe said. The cost to NIMA would be incredible in terms of lost capability if employees decide not to make the transition.

Under the guidelines that apply to Alaskan Native companies, however, NJVC will have as long as seven years to make the transition, minimizing the risk and uncertainty for employees and cutting down on the loss of highly skilled workers.

The group most vocally opposed to this type of contract is the 200,000-member American Federation of Government Employees.

"We support preferential procurement programs, but we don't see any social good achieved [in this]. We don't see any benefit from this," said Wiley Pearson, a defense policy analyst with the employees union. "Our belief is that through competition, you find out who's best to do the work. The only beneficiaries [in these cases] are bureaucrats who don't have to go through a tedious but necessary process."

NIMA does reap an intangible benefit. The federal government requires agencies to give at least 23 percent of their contracts to small businesses, and 5 percent of all their business to small, disadvantaged businesses, said Steve Charles, executive vice president and co-founder of the immixGroup, a McLean, Va., consulting company that helps companies get on General Services Administration purchasing schedules.

"The government will use its power to grow small and disadvantaged businesses, women-owned and veteran-owned businesses [and] use minority preferences to achieve this socioeconomic goal," Charles said.

But he also pointed out that government programs to encourage small businesses, such as the 8(a) program, have both size and time limitations, while the law giving Alaskan Native firms competitive exemptions sets no such limits.

Brendan Danaher, a policy analyst and government procurement specialist with the government employees union, said it's hard to tell whether the program actually benefits individuals in the Alaskan communities.

"These are privately held corporations. They're not traded, they're not subject to SEC rules, so there's no transparency," Danaher said. "It's hard to find if they actually are providing any benefits. [It's] pretty positive we're not getting the benefits of competition, it's pretty clear employees' salaries and benefits are dropping, and it's unclear whether [the Alaskan Natives] are reaping any benefits."

Bowe disputed those conclusions. The Alaskan Native shareholders have been investing profits in establishing more broad-based enterprises, he said. For example, Chenega purchased McLean Research Corp. and turned it into the Chenega Technical Services Corp. a subsidiary now involved in the NIMA project. Similar business moves by the parent company mean significant profits haven't started accumulating yet.

The shareholders are not treating these contracts as solutions to their short-term woes. They also remain poor, Bowe said, "because they've taken the money that is coming in and put it in a trust fund for their children's children's children's children."

"This is so different [from most corporations]. It's corny, but we actually have a social mission," Bowe said. "By Bureau of Labor Standards [measures], these are the poorest communities in the United States. ... There are no roads, [and] half the homes don't even have running water. Individually, they need the money."

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