Tribal companies dominate Top 25 8(a)s

<@VM>What is an 8(a) company?<@VM>How we got the 8(a) numbers<@VM>What makes them so special?<@VM>Making the list<@VM>Keep your eyes on these

J. Adam Fenster "It's a loophole gone wild ... I have seen little evidence that [this special status] produces jobs in Alaska as opposed to profits for those entrepreneurs skillful enough to exploit it." ? Charles Tiefer, professor at the University of Baltimore School of Law

J. Adam Fenster

The No. 1 company on Washington Technology's list of Top 25 8(a) firms wasn't even on the list last year.

Chenega Corp., an Alaska Native Corporation, makes its debut at the top in part because its IT subsidiary, Chenega Technology Services Corp. of Anchorage, Alaska, received a $500 million, 10-year contract from the Homeland Security Department. The technology company is now providing maintenance and technical support for more than 6,500 inspection devices located at land, air and sea border points throughout the United States.

Chenega is not alone in making an impressive debut; two other Alaska Native Corporations also cracked the top 25 for the first time. Eyak Technology LLC, owned by Eyak Corp. Anchorage, earned the No. 17 spot, while Koniag Inc.'s IT company, Frontier Systems Integrators LLC, also of Anchorage, entered the list at No. 19.

The Top 25 is dominated by tribally owned corporations this year: The top four companies are tribal businesses, and eight of the Top 25 are Alaska Native Corporations or Native American tribally owned.

Joining Chenega, Eyak and Frontier are:

    S&K Technologies Inc., No. 2, owned by the Confederated Salish & Kootenai Tribes of St. Ignatius, Mont.
  • TKC Communications Inc., No. 3, owned by Nana Regional Corp. of Kotzebue, Alaska

  • ASRC Federal Holding Co., No. 4, owned by Arctic Slope Regional Corp. of Barrow, Alaska

  • Chugach Alaska Corp., No. 7, owned by Ukpeagvik Inupiat Corp. of Barrow

  • Bowhead Support Services Inc., No. 12, owned by Ukpeagvik Inupiat Corp.

Washington Technology's annual Top 25 8(a) list is compiled by Federal Sources Inc. of McLean, Va., which analyzed General Services Administration procurement data to create the rankings. Federal Sources is owned by the Washington Management Group, which is owned by Koniag.

Fifteen companies from last year's list appear again in 2004. Paradigm Solutions Corp. of Rockville, Md., hit the No. 5 spot, up from No. 9 last year. Eagle Group International Inc. also rose four positions, from No. 10 to No. 6. Last year's No. 1 and No. 2 companies, Force3 Inc. of Crofton, Md., and Artel Inc. of Reston, Va., both graduated from the 8(a) program.

The dominance of tribal companies this year -- nearly one-third of the list -- can be attributed in large part to the regulations that give these firms a significant advantage over other 8(a) companies in competing for federal contracts.

"There are no limits on sole-source contracts [to] any tribally owned corporation," said Al Stubblefield, acting associate administrator for business development at the Small Business Administration. Sole-source contracts to other 8(a) companies are capped at $3 million, or $5 million for a manufacturing contract, he said.

Eyak, for instance, didn't form its IT subsidiary, Eyak Technologies, until January 2002, but garnered more than $24.1 million in federal contracts by the end of fiscal 2003.

"We've been awarded many contracts to date of various scope and size in support of a broad range of federal agencies," said James Dunn, chief operating officer of Eyak Technology in Anchorage.

The company has won awards to provide call-center staffing, satellite communications services projects, operations center design and build-out projects, and cellular network design and implementation projects, among other services, Dunn said.

By itself, the no-cap provision on sole-source contracts does not explain all of the success enjoyed by tribal corporations. The regulations also extend benefits to large companies that subcontract to tribal firms or enter mentor-protégé relationships with them.

For example, the Defense Department has the Indian Incentive Subcontractor Initiatives Program, which pays contractors a 5 percent bonus on subcontracting work given to Alaska Native or other tribally owned companies.

An executive with a large IT integrator said the regulations make it possible for his company, through partnering with a tribal firm, to gain access to contracts it otherwise might not win.

The government's effort to push more work to small businesses also has helped Alaska Native companies.

"ANCs and 8(a)s can satisfy that," said Scott Hommer, a partner in the government contracts group with Venable LLP, a Washington law firm.

"Also, more and more agencies are using utilization of 8(a)s and small businesses as evaluation criteria," said Hommer, whose firm has seen growth in its business helping prime contractors comply with federal small-business goals.

Federal regulations are generous to tribal companies -- Hawaiian and Native American companies were included with ANCs in 1998 -- because tribal reservations and Alaskan native villages have suffered from unemployment rates in excess of 60 percent, and economic opportunities are almost nonexistent. In exchange for these generous procurement regulations, federal law requires these companies to promote economic development for their groups.

The program has been successful in many ways. For example, since Arctic Slope was created in 1972, it has grown to $1.03 billion in 2003 revenue. It employs 829 shareholders and spouses. The tribal corporation has numerous subsidiaries, including several that participate in the federal 8(a) program.

But there are critics of the regulations' generosity to tribal corporations.

"It's a loophole gone wild," said Charles Tiefer, former solicitor of the House of Representatives, former assistant legal counsel to the Senate and now a professor at the University of Baltimore School of Law.

If the purpose of the tribal corporations' special status is to give an economic boost to indigenous peoples, Tiefer doesn't know if that goal is being met.

"I have seen little evidence that this produces jobs in Alaska as opposed to profits for those entrepreneurs skillful enough to exploit it," he said. Tiefer compared it to offshore islands that offer tax loopholes with their lax banking laws.

"One does not see a lot of jobs for workers in these places," he said.

Others who are critical of the regulations -- those employed by large corporations, other 8(a) firms and federal agencies -- declined to discuss the special status of tribal corporations, because they do not want to disagree publicly with the policies of one of the most powerful officials in Washington, Sen. Ted Stevens, R-Alaska.

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

1) Be a small business.
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.

2) 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 Alaska Native Corporations also can own an 8(a) company.

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.

3) Demonstrate potential for success 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: SBAThe Top 25 8(a) list is complied using data from the Federal Procurement Data Center. The market research firm Federal Sources Inc. of McLean, Va., analyzed the data using 117 product services codes that Washington Technology editors chose as best representing information technology, systems integration and telecommunications work.

Agencies report contract obligations worth more than $25,000 to prime contractors. FSI 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 2003 and not just their 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. However, the list does not include companies that had less than $1 million in 8(a) revenue in 2003.

The procurement center only reports agency 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.
Alaska Native Corporations and tribally owned companies enjoy advantages that 8(a) companies owned by individuals do not.

Among the advantages:

  • They are exempt from the limits placed on sole source contracts.

  • They can own multiple companies that can join the 8(a) program.

  • They can start new 8(a) companies as their older ones graduate from the program.

  • The Defense Department pays a 5 percent bonus to prime contractors that use Alaska Native or tribally owned companies as subcontractors. The bonus is based on the amount of work that goes to the subcontractor.
    Alaska Native Corporations or tribally owned companies on this year's list:

    No. 1 Chenega Technology Services Inc.

    No. 2 S&K Technologies Inc.

    No. 3 TKC Communications Inc.

    No. 4 ASRC Federal Holding Co.

    No. 7 Chugach Alaska Corp.

    No. 12 Bowhead Support Services Inc.

    No. 17 Eyak Technology LLC

    No. 19 Frontier Systems Integrators LLC

    FOR 8(A)S:

    Energy Department

    Value: $35 million over five years

    Status: An award is imminent. Energy is using the General Services Administration schedule to pick a contractor.

    Purpose: Energy's Office of Radioactive Waste Management at Yucca Mountain needs IT support in its operations management division. RS Information Services Inc. holds the incumbent contract, which expires in September.

    Patent and Trademark Office

    Value: $20 million

    Status: The RFP is expected at the end of September.

    Purpose: The Patent and Trademark Office wants a contractor to help it manage and improve its call center. Systems Integration Inc. holds the incumbent contract. 

    NASA

    Value: $8 million over five years

    Status: The RFP is expected Sept. 17; a pre-proposal conference is scheduled for Oct. 7.

    Purpose: NASA's Johnson Space Center needs support services in its human resources department.

    FOR NATIVE AMERICAN OR TRIBALLY OWNED:

    Bureau of Indian Affairs

    Value: $15 million over three years

    Status: An RFP is expected at the end of September.

    Purpose: A number of Bureau of Indian Affairs' offices need architecture and engineering services, including pre-design and design support as well as management of construction projects. 

    FOR SERVICE-DISABLED VETERANS:

    Naval Space And Warfare Systems Command

    Value: $100 million over five years

    Status: A request for information was issued, and responses are being evaluated.

    Purpose: Spawar is looking for a contractor to provide services, including management, administrative, logistics and training support. 

    FOR ALL SMALL BUSINESSES:

    Environmental Protection Agency

    Value: $300 million over 10 years

    Status: A pre-solicitation notice was released July 30. The RFP was expected Sept. 3, with proposals due by Oct. 1.

    Purpose: EPA is issuing two $300 million contracts: one for Region 6 and one for Region 8. The contracts will supply professional architect/engineer, technical and management services. 

    Energy Department

    IT Services

    Value: $125 million over five years

    Status: The RFP is under review; a release date has not been set.

    Purpose: Energy wants services including end-user support, server management, applications and database management, systems software, help desk and data center operations. 

    Environmental Protection Agency

    Business Information Strategic Support

    Value: $70 million over five years

    Status: The RFP is expected Sept. 15.

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