Delegation wants repeal of regs aimed at Native contracts

  • From left, the Alaska congressional delegation of Sen. Dan Sullivan, Rep. Don Young and Senate Energy and Natural Resources Chair Lisa Murkowski. The senators are supportive of Young’s effort in the House to repeal regulations they say are chilling the ability of Alaska Native corporations to qualify for sole source contracts worth more than $20 million under the Small Business Administration 8(a) program. AP Photo/Tom Williams/CQ Roll Call

Rep. Don Young is trying again to make a small change to federal code that he says will have a big impact on many Alaska Native corporations doing business with the federal government.

The changes Young is seeking would repeal special criteria the federal agencies are required to consider when justifying sole-source government contracts totaling more than $20 million to Alaska Native corporations and other small businesses.

That language would be replaced by existing and widely used criteria found in the 1984 Competition in Contracting Act, which Young contends is better understood and easier to apply.

Young’s proposal was included as an amendment to the 2017 National Defense Authorization Act, which moved out of the House Armed Services Committee April 28.

The current five-step justification process requires federal agencies to cite their authority and need to go outside the standard competitive bidding process was added to the 2010 Defense spending authorization as Section 811 of that bill.

Young said in an April 29 release from his office that Section 811 has led to “major inequities” for Native contractors.

“What was sold as a good governance measure in the Senate has led to the discrimination and mistreatment of Native community-owned businesses. The heightened level of scrutiny required by Section 811 is found nowhere else in the federal government, and has resulted in the net loss of jobs, more than 60 percent decline in revenue from these contracts and a frightening layer of bureaucratic red tape,” Young said.

Among the regional corporations, 28.5 percent of their total revenue was from 8(a) contracting in 2014 compared to 42.9 percent in 2010.

Subsidiaries of Alaska Native regional corporations and Native village corporations are often first in line for government contracts under the Small Business Administration’s 8(a) Business Development Program. The program aims to help “socially and economically disadvantaged” small business owners by allowing them to receive sole-source government contracts generally capped at $6.5 million, according to the SBA.

However, agencies are allowed to award sole-source contracts of any size to Native-owned corporations.

It is Young’s third attempt to clarify or repeal Section 811 since 2013. His amendments to the 2014 and 2016 Defense spending bills were pulled during negotiations with the Senate.

Alaska Native Village Corporation Association Director Keja Whiteman said in a formal statement that the group supports Young’s effort to repeal Section 811.

“The passage of Section 811 has been detrimental to the already heavily regulated and highly scrutinized Alaska Native corporations and Native 8(a) businesses,” Whiteman said.

Sens. Lisa Murkowski and Dan Sullivan echoed Young’s sentiment in statements from their offices.

“Section 811 was ‘air dropped’ in the dark of night into a non-amendable conference report to accompany the 2010 National Defense Authorization Act,” Murkowski spokeswoman Jenna Mason wrote in an email. “The full Senate was never given an opportunity to debate, amend or cast an up or down vote on the provision. This is the worst sort of process and was undertaken deliberately to silence the voice and vote of Indian Country supporters in the House and Senate.”

Sullivan’s spokesman Mike Anderson noted the sole-source justification provision was implemented before he was in the Senate and said he supports language to mitigate the “harmful effects” Section 811 has had on Native 8(a) contracting opportunities.

“Sen. Sullivan is committed to using his position on the Senate Armed Services Committee to attempt to correct this problem,” he wrote.

Missouri Democrat Sen. Claire McCaskill has led a push in Congress in recent years to get increased oversight of Alaska Native regional corporations, particularly in regards to the companies’ business with the federal government. She argues that much of the money awarded to the corporations through the 8(a) program does not reach the corporate shareholders as intended.

The 12 Alaska Native regional and smaller village corporations were established as part of the 1971 Alaska Native Claims Settlement Act. Many corporation subsidiaries have been established as small businesses to specialize in government contracting for construction, IT and operations management services among others.

A comparison of Section 811 sole-source justification requirements and those in the Competition in Contracting Act by a 2012 Government Accountability Office report found the criteria to be rather similar; the biggest difference was that Section 811 requires “a determination that the use of a sole-source contract is in the best interest of the agency concerned.”

The same December 2012 GAO report concluded the number of $20 million-plus 8(a) contracts issued declined after the justification requirement change because apparent confusion among agencies as to exactly when the Section 811 criteria applied.

According to the report, the number of sole-source contracts to 8(a) businesses fell from an average of about 50 per year from 2008-2010 to about 20 per year after enactment of Section 811 in 2011.

Another GAO report requested by McCaskill and released March 21 — titled “Alaska Native Corportions: Oversight Weaknesses Continue to Limit SBA’s Ability to Monitor Compliance with 8(a) Program Requirements” — found that 344 Alaska Native corporations and subsidiaries were still awarded roughly $4 billion in 8(a) federal contracts during the 2014 fiscal year, or nearly a quarter of the $17 billion in total government spending that went to almost 5,600 businesses in the program nationally.

Of that $4 billion, about $3.1 billion went to six Alaska Native corporations and their subsidiaries according to Bloomberg’s annual list of the 200 leading federal contractors in fiscal year 2014.

The six Alaska Native regional and village corporations in the top 200 were: Arctic Slope Regional Corp., No. 75 at $793 million; NANA Regional Corp., No. 85 at $707 million; Afognak Native Corp., No. 107 at $491 million; Chenega Corp., No. 119 at $441 million; Chugach Alaska Corp., No. 138 at $384 million; and Bristol Bay Native Corp., No. 142 at $363 million.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

 

Updated: 
05/04/2016 - 8:07pm