Native American firms climb small biz ladder
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By Nick Wakeman
"We do everything it takes to run a facility, and a lot of IT services are included." -- Barney Uhart, Chugach Alaska Corp.
Chugach Alaska Corp.
When Barney Uhart came to work for Chugach Alaska Corp. in 1993, the company was emerging from bankruptcy.
The corporation and its Alaskan Native members in the coastal area of Prince William Sound had been devastated by the Exxon Valdez oil spill, which severely damaged the fisheries they depended on as major source of revenue.
"I came on board to find another line of business for the corporation," said Uhart, president and chief executive officer.
Chugach decided to pursue government support services, particularly base operations and maintenance work. The company won its first contract for $5 million in 1994 to operate and maintain the King Salmon Airport in Alaska, an Air Force facility.
From that humble start, the corporation has built a $500 million annual business with operations in 24 states and six foreign countries. The majority of the work is base operations and maintenance.
"We do everything that it takes to run a facility, and a lot of IT services are included," Uhart said.
The IT portion of its work was enough to land Chugach the No. 6 spot on this year's Washington Technology Top 25 8(a) list, which ranks the largest 8(a) firms doing business with the federal government. The company had about $38.8 million in overall IT during fiscal 2002, with about $2.4 million from 8(a) contracts.
Chugach is one of eight Native American-owned firms on this year's list. Six of the eight are tribally owned or Alaskan Native Settlement Act corporations: Arctic Slope Regional Corp., Bowhead Support Services Inc., Choctaw Management Services Enterprise, Chugach, S&K Technologies Inc. and TKC Communications LLC.
Individuals of Native American ancestry own two of the eight companies: Arrowhead Global Solutions Inc. and Cherokee Information Services.
The top ranked Native American company is Choctaw of Durant, Okla., which was ranked No. 3 with $47.7 million in overall IT revenue and $40.8 million in 8(a) contracts. The Choctaw Nation of Oklahoma owns the company.
The prominence of the Native American companies on this year's list stands in contrast to last year, when only four Native American companies -- Choctaw, Arctic Slope, Datatrac Information Services Inc. and Wyandotte Net Tel -- made the list. Arctic Slope of Barrow, Alaska, is ranked No. 8 this year with $36.2 million in overall IT revenue and $35.6 million in 8(a) revenue.
Other 8(a) companies that provide a range of services join these companies.
At No. 1 is Force3 Inc. of Crofton, Md., which had $105.8 million in overall IT revenue and $38.6 million in 8(a) revenue. The companies on the list are ranked by overall IT revenue, not 8(a) revenue.
Force3 provides IT services, particularly in networking. Ranked No. 3 last year, Force3 is one of 11 companies on the list making a repeat appearance. In fact, the top four companies are veteran Top 25 companies: Force3, Artel Inc., Choctaw and Computer & Hi-tech Management Inc.
Several notable companies from last year's list have graduated from the 8(a) program, including 2002 top company Datatrac of Richardson, Texas, and the No. 2 company RS Information Systems Inc. of McLean, Va.
The rise of the Native American companies isn't attributable to any single factor, industry and government officials said. There are 513 Native American-owned 8(a) companies, according to the Small Business Administration. Tribes own some, and individuals of Native American ancestry own some.
"There were two or three things that helped us," said Greg Dumontier, president of S&K Technologies of St. Ignatius, Mont., the No. 7 company with about $38 million in overall IT dollars and $2.4 million from 8(a) contracts.
The Confederated Salish and Kootenai Tribes on the Flathead Indian Reservation own the company in western Montana. S&K Technologies got a fast start, Dumontier said, because it used the business infrastructure of S&K Electronics, a former 8(a) company that the tribes owned. Under the 8(a) laws, tribal governments and Alaskan Native corporations are allowed to own multiple 8(a) companies.
S&K Technologies started as a three-person unit of S&K Electronics in 1997, Dumontier said. It became its own company in 1999, and today has 250 employees, he said.
"The tribe has a reputation of being one of the more progressive ones," he said.
Companies owned by tribal governments and Alaskan Native corporations have benefits not available to other 8(a) companies, such as no ceiling on sole-source awards. In addition, prime contractors can apply for a 5 percent fee if they use a Native American company as a subcontractor on Defense Department work.
The tribal-owned and Alaskan Native corporations get these benefits because the profits from their businesses go back to the tribe or corporation shareholders to be used for training, education and other government services.
"The villages are historically poor and lack many resources," said Katharine Boyce, a partner at the Washington law firm Patton Boggs LLP, who specializes in Native American issues. "And federal funds have never met the requirements under the treaty obligations."
But many of the 8(a) benefits for Native American companies have been in place for more than 20 years, and likely are not the reason for the recent growth of the Native American contractors, said Darryl Harriston, SBA deputy associate deputy administrator for government contracting and business development.
SBA has been trying to increase awareness of these programs, but "what you are seeing is Native American companies being more aggressive and understanding the procurement process better," he said. "Over the last few years, the tribes have become much more entrepreneurial."
The Army, Air Force and Navy have been particularly good at creating opportunities for Native American-owned companies, Boyce said.
"It used to be weird to see a Native American company on someone's team," said James Kane, president of Federal Sources Inc., McLean, Va. "Now it isn't." *
The Small Business Administration's 8(a) business development program was created to help small, disadvantaged companies compete in the U.S. economy and provide access to the federal marketplace.
To participate in the nine-year 8(a) program, companies must meet the following criteria:
- Be a small business.
- Be unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who are U.S. citizens of good character. Native American tribes and Alaskan native corporations also can own an 8(a) company.
- Demonstrate potential for success.
A small business is independently owned and operated, organized for profit and not dominant in its field. Program eligibility is based on the average number of employees for the preceding 12 months or average sales volume over three years. Specifics vary depending on the products or services offered.
Socially disadvantaged individuals are those who have been subject to racial or ethnic prejudice or cultural bias because of their identity as members of a group. These groups include:
- African Americans
- Hispanic Americans
- Native Americans
- Asian Pacific Americans.
Economically disadvantaged individuals are socially disadvantaged and hindered by diminished capital and credit opportunities. An applicant's net worth, excluding equity in the firm and primary residence, may not exceed $250,000.
In determining potential for success, SBA evaluates:
- Managerial experience
- Ability to access credit and capital
- Previous performance
- Professional licensing.
Participants graduate after nine years, sooner if they exceed the 8(a) size standards.Source: SBA
The Top 25 (a) list is complied using data from the Federal Procurement Data Center. The market research firms Federal Sources Inc., McLean, Va., and Eagle Eye Publishers Inc., Fairfax, Va., analyzed the data using 117 product services codes that Washington Technology editors picked as best representing information technology, systems integration and telecommunications work.
Agencies report contract obligations worth more than $25,000 to prime contractors. FSI and Eagle Eye used the product service codes to analyze this data and rank the companies.
The companies were ranked according to their total IT prime contracting dollars in fiscal 2002 and not just 8(a) dollars. Washington Technology believes this is the best way to judge the progress and success of 8(a) companies, because the program's goal is to help create companies that remain viable after graduating.
The list does not include companies that had less than $1 million in 8(a) revenue in 2002.
The procurement center only collects reports on spending with prime contractors, so the list does not reflect subcontracting revenue. Also, spending by intelligence agencies, the U.S. Postal Service, congressional agencies and judicial branches are not reported to the center, so the list does not reflect those expenditures.