More scrutiny in store for ANC sole-source contracts

Alaska Native Corporations will begin seeing close inspections of their sole-source defense contracts, in light of lawmakers’ concerns about fraud and abuses of the special exceptions for ANCs.

Defense agencies and the military services have been told to conduct top-down reviews of all active sole-source contracts that were awarded to the native-owned corporations before March 16, Richard Ginman, director of defense procurement and acquisition policy at the Defense Department, wrote in a memo on Nov. 7.

In March, the government amended the Federal Acquisition Regulation to require stricter justifications and official approvals before awarding sole-source contracts. The changes were based on a provision in the fiscal 2010 National Defense Authorization Act, which was signed into law in October 2009.

In these reviews, Ginman wants to know how many sole-source contracts worth more than $20 million each agency has awarded to small businesses, including ANCs, since 2006. He has asked for details on the contracts, such as the cost, what was purchased, and the approvals before awarding the sole-source contracts.

Digging deeper, Ginman is inquiring about the subcontracting aspect as well. He’s interested in how much of the work the prime contractor shipped to subcontractors and, more broadly, how much of the work was done by companies other than the prime contractor. He also wants answers about the money paid to the subcontractors under these contracts.

He’s also interested in protection and has asked agencies about the ways they are protecting their source selection boards from being manipulated by a bidder. Responses are due Nov. 30.

Ginman’s requests for information come directly from a letter that two senators sent on October 12 to Frank Kendall, acting undersecretary of defense for acquisition, technology and logistics.

Sens. Claire McCaskill (D-Mo.) and John McCain (R-Ariz.), both members of the Armed Services Committee, raised concerns about the ANCs' unique set-aside privileges. The senators wrote the letter after reading a Washington Post story about alleged abuse of those privileges since 2007 by EyakTek, an ANC, and contracting officers at the Army Corps of Engineers.

McCaskill and McCain in the letter asked for the top-down review.

For several years now, McCaskill has watched ANCs.

In an investigation of the overall ANC program in 2009, the chairwoman of the Homeland Security and Governmental Affairs Committee’s Contracting Oversight Subcommittee and her staff found the same abuses that agencies’ inspectors general and the Government Accountability Office have uncovered though the years.

McCaskill has introduced legislation to make ANCs abide by the same rules as other small-business programs, but it has not been passed.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

Reader Comments

Wed, Nov 16, 2011

I have no problem that these set asides were designed to benefit thousands of people and therefore are worthwhile. But when companies are passing through the work they are not creating shareholder long term value. When an ANC is allowing other contractors to do most or all of the work, and not following solid Federal Procurement practices on the behalf of the Federal Government it is costing the taxpayers more in the long run through overinflated prices in order to make the award of a contract easier. ANC's and 8(A)'s have long served as a means for the Government to get to their preferred source of award, and this practice has to stop in order to make the business community a fair place for competition.

Mon, Nov 14, 2011

The reason that ANC's were provided different rules form typical SBs is that SBs firms are typically owned by one or two individuals, and all profist are returned to those individuals. In the case of ANCs, profits are shared among thousands of shareholders, as a result, the government provided different standards to support these disadvantaged individuals and communities. I understand that a few bad apples have spoiled the reputation of many ANCs who operate under strong values and expect their management to operate with ethics and character. The success of many ANCs have resulted in investments in education and increased graduation rates, afforded scholarships to students for college, supported improved medical care, and enabled families to afford to heat their homes. While punishing the "bad apples" and instituting increased review for sole-source justifications seems appropriate, revamping the whole ANC program and eliminating their privileges will be a tragedy for some very hard-working and deserving people.

Mon, Nov 14, 2011 Frank Matt Tucson, AZ

This type of scrutiny and inquiry is long overdue! Wonder why it took a Washington Post report to raise concerns about the ANCs' unique set-aside privileges...pssst hey Senators it has been going on for YEARS! Now do something about it!

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