WT Business Beat

By Nick Wakeman

Blog archive

Time to reform ANCs

It is one of those odd coincidences that last week as we were finishing up our annual Small Business Special Report that another scandal involving an Alaska Native Corporation hits the news.

This time the issue is a sole source contract that FDA gave to Alaska Newspapers Inc., a company owned by Calista Corp., an ANC. The contract - awarded without competition - was given to Alaska Newspapers because the company had agreed to hire Qorvis Communications to do the work.

Questions have been raised over whether FDA skirted procurements laws. Even if it was all technically legal, that sure isn't the right way to run an acquisition. It lacks transparency and there are few safeguards in place to make sure the government is getting a fair price and the best work.

In our small business special report, you'll find a list ranking the top ANCs and tribally owned companies that are participating in the 8(a) program. The top company, ASRC Federal Holding Co., had $621.8 million in prime IT contracts. The top traditional 8(a) had $95.4 million.

Not only do ANCs have the same advantages as traditional 8(a)s they also have the added perks such as being able to own multiple 8(a) companies and no ceiling on the size of contract the government can direct to them without competition. For a traditional 8(a), the limit is $3 million for services and $5 million for manufacturing.

I know that ANCs and tribally owned companies do a lot of good for their communities. The profits are paid as dividends to their members. Profits also go to building schools and health clinics and providing scholarships. Money also is spent on other economic development efforts.

These are all worthy endeavors and deserve continued support by the government.

But as ANCs and tribally owned companies have grown and have increased their capabilities, the competitive advantages that they hold are no longer needed. Over the last 10 years, many of these companies have developed the technical and business skills to compete in a more full and open environment.

The programs also lend themselves to corruption or at least perversion, such as the case a few months back where two ANC-owned construction companies were passing work to subcontractors owned by their senior executives.

They are doing themselves a disservice by hanging onto these super-sized set-aside programs.

The solution seems simple to me - have them follow the same procurement regulations as other 8(a) companies or at least lower the threshold for the non-compete contracts.

It is not a perfect fix but this will level the playing field somewhat and perhaps make these companies a less attractive vehicle for those looking to skirt procurement rules.

Posted by Nick Wakeman on Oct 06, 2008 at 9:54 AM

Reader Comments

Tue, Oct 7, 2008 JERRY HERRERA CA

The ANC and Tribal-owned 8(a) advantage extends deep into the continental United States as well. Take a look at several recent Air Force contracts awarded using competitive 8(a) procedures for Base Telecommunication projects. These were not sole source yet 8(a) and Tribal-owned participates were awarded over 75% of these contracts. Whether sole source or competitive 8(a), ANC and Tribal-owned companies hold a substantial competitive advantage over all other 8(a)'s and its time that someone looked into it.

Mon, Oct 6, 2008 Lawrence Thuotte VA

After the discovery of oil in Prudhoe Bay, Alaska, the United States needed to find a mechanism to transport the newly extracted crude from the Northern Slope to an ice free port in the southern part of Alaska; what is now known as the Alaskan Pipeline. However, due to litigations over Aboriginal Land Right claims by numerous Alaskan Natives, Secretary of Udall had instituted a land freeze in 1966 that precluded the transfer of the lands necessary to lay the Alaskan Pipeline, which would allow this transport of Oil across the State.In an attempt to settle these numerous disputes over land ownership rights in Alaska, the Federal Government passed the Alaskan Native Lands Claim Settlement Act (ANLCSA) of 1971.Part of this settlement mandated the establishment of 13 Regional and roughly 200 Village corporations to manage the assets provided to the Alaskan Natives as part of this land settlement. In return, the Alaskan Natives gave up the right to their ancestral lands.Through a series of legislative acts and policy implementations, these Alaskan Native Corporations (ANCs) were brought into the Small Business Administration¡¦s 8(a) program. Typical 8(a) companies have one to only a handful of owners. A $3 million contract provides a reasonably good return that helps raise the socio-economic of a company with just a few owners. However, for a company with owners that number in the tens of thousands, a $3 million dollar contract provides little help¡K Hence the $3M/$5M cap was removed for the ANCs to allow the ability to help raise the socio-economic status of this large group of people.There are at least two solid reasons that ANCs should maintain the special considerations that they current have under the SBA 8(a) program. First, the number of owners are significantly larger than the typical 8(a) company and hence require larger contracts in order to improve their socio-economic status and secondly, the Federal Government has a moral responsibility to the Alaskan Native based on the ANLCSA of 1971.For those who believe that this program has been abused, consider the following statistics, based on the most current complete statistics available (FY 2005)¡K?ÏOf the $377 billion in federal contracts, ANCs received $3.197 billion?ÏApproximately 38% of all Federal Contracts were award non-competitively, ANCs received 1.3% of these contracts?ÏANCs received approximately 2.9% of the 2005 small business contracts?ÏANCs received approximately 17% of 8(a) awards.While 17% of all 8(a) awards may initially seem high, it is important to note that in FY 2005 there were approximately 9,000 non-ANC small businesses in the 8(a) program, with each representing one to several owners each, whereas ANCs consist of approximately 140,000 Alaskan Native Owners. Alaskan Native Owners far exceed the number of non-ANC owners in the 8(a) program, yet received far less than even 20% of the program benefits.As for the contention that ANCs no longer require the help or that their time has past, one need to only look at the current state of the Alaskan Natives as they compare to other minority socio-economic groups. While great strides have been made in increasing the socio-economic status of the Alaskan Native due to programs such as the special provisions of the 8(a) program, much remains to be done. The medium income of the Alaskan Natives in the aggregate remains much lower (approximately 81%) than the U.S. average.No, I¡¦d say that the ANCs are not taking advantage of the provisions that are rightfully their based on ANLCSA of 1971 and subsequently legislation and policy implementation, but rather using a very important program for the exact reasons that it was put into place.

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above.

WT Daily

Sign up for our newsletter.

Terms and Privacy Policy consent

I agree to this site's Privacy Policy.