ANC | The Contracting Education Academy

November 14, 2011 By AMK

Do Alaska Native Corporations deserve their special contracting status?

For many people, the government’s set-aside program for Alaska Native Corporations is a blemish on the federal acquisition system. Even people who otherwise support the idea of setting aside contracts for economically disadvantaged groups take a dim view of the program, which allows agencies to award contracts of any size to ANC firms without competition.

Ever since the death of its champion, Alaska Sen. Ted Stevens, opponents have called for the program to end. Here is an overview of the arguments for and against keeping it.

The case for the ANC program:

* It’s a time-saver. Agencies can award sole-source contracts of any size to ANCs at any time. Therefore, the ANC program lets contracting officers move quickly when they’re pressured for time or caught in emergency situations, such as preparing for a hurricane.

The contracting officer doesn’t have to spend time justifying a sole-source award when using an ANC, said Larry Allen, president of Allen Federal Business Partners.

Officials also save time by avoiding the bid protests that are always a risk during full-and-open competitions.

* It stimulates the economy. The program benefits Alaska natives in economically depressed areas in the state and other parts of the country.

A 2009 survey of 11 ANCs by the Native American Contractors Association (NACA) showed that the companies provided more than $530 million in various types of benefits to more than 67,000 shareholders from 2000 to 2008. More than $341 million of that money was in cash dividends.

Alaska natives are given the opportunity to go to college, for instance, with their shares in the ANCs, said Jennine Elias, director of external affairs at NACA.

The program also provides funding for housing and government services, such as law enforcement.

* It’s a promise-keeper. ANCs were created to settle land claims with Alaska natives and foster economic development, and the companies have been allowed to participate in the government’s 8(a) minority-owned small-business program since 1986. Therefore, the ANC program fulfills a promise to the native community, Elias said.

The case against the ANC program:

* It short-circuits the procurement process. Although sole-source provisions can help in emergencies, the process can tempt an official to award a contract when it would be better to hold a competition for the work, Allen said.

There’s no doubt that contracting officers are overworked, and the ANC program can help ease their workload. But, he cautioned, “a program with good intentions can get out of control.”

* It undermines efforts to level the playing field. There was a big push for parity in government several years ago. Companies in Historically Underutilized Business Zones used to have first crack at set-aside contracts, but Congress put all small businesses on an equal footing last year.

“The theme is parity among other guys,” said Rob Burton, former deputy administrator at the Office of Federal Procurement Policy and now a partner at Venable law firm. But because ANCs don’t have to follow the same rules as other small businesses, they have “an incredible deal.”

Other small-business owners and Federal Computer Week readers have voiced their frustrations.

“The ANC advantage is unfair to real 8(a) companies and should be disbanded,” commented one reader from Virginia.

* Its benefits to the native community are questionable. The benefits ANC shareholders receive have come under scrutiny over the years. Sen. Claire McCaskill (D-Mo.), chairwoman of the Homeland Security and Governmental Affairs Committee’s Contracting Oversight Subcommittee, has found some problems with the program.

In 2009, her subcommittee’s analysis revealed that only about $615 a year in money, scholarships and other benefits go to each member of the Alaska native community. The report also says the ANCs employ a relatively small percentage of shareholders and often send work to outside subcontractors. McCaskill has proposed changes to match other small-business rules.

However, Elias said ANCs are already required to report on what they’re doing in their community in the interests of transparency.

And Allen said it’s a good program that would benefit from oversight by every agency, not just the Small Business Administration.

About the Author: Matthew Weigelt is a senior writer covering acquisition and procurement for Washington Technology. Published Nov. 8, 2011 at http://washingtontechnology.com/articles/2011/11/07/home-page-acquisition-pros-cons-anc.aspx?s=wtdaily_091111.

May 27, 2011 By AMK

Former GSA assistant commissioner takes post with Alaska Native company

Former GSA official Ed O’Hare has joined Koniag Development Corp. as senior vice president of its Technology Business Sector, the company announced May 25.

O’Hare moves to Koniag from Dynanet Corp., where he had served as vice president of the 8(a) small business since January.

Before Dynanet, O’Hare was the assistant commissioner of the Federal Acquisition Service’s Integrated Technology Service at the General Services Administration, a key federal IT position that is in charge of $22 billion annually.

At Koniag, O’Hare will lead the corporation’s four subsidiaries in the fields of IT, telecommunications and information security. The companies are Koniag Services Inc., Koniag Technology Solutions, Frontier Systems Integrators and Professional Computing Resources Inc.

Koniag Development is a subsidiary of Koniag, an Alaska Native Corporation, of Kodiak, Alaska.

— About the Author: Matthew Weigelt is acquisition editor for Federal Computer Week – published 5/25/2011 at http://washingtontechnology.com/articles/2011/05/25/ed-o-hare-goes-to-koniag.aspx?s=wtdaily_260511

April 5, 2011 By AMK

Contracting preferences for Alaska native corporations under threat

Sen. Claire McCaskill, D-Mo., once again took aim at contracting preferences for certain corporations owned by native Alaskans, arguing the program is wasteful and rife with abuse.

The senator this week introduced a measure that would put Alaska native corporations on equal procurement footing with other companies operating in the Small Business Administration’s 8(a) Business Development Program, which helps small and disadvantaged firms gain access to federal and private procurement markets.

“The American people have made it clear they want us to cut back federal government spending and at this point it’s really a question of how much,” said McCaskill, chairwoman of the Senate Subcommittee on Contracting Oversight.

“I think the one thing we can all agree on is that we should start with waste and abuse,” she said. “Contracting practices that aren’t providing taxpayers with the best bang for their buck should be first on the chopping block.”

ANCs date back to the 1971 Alaska Native Claims Settlement Act, which created 13 regional corporations and more than 200 village corporations. Eligible citizens from each region were given shares in their corporation’s stock, allowing them to benefit from ANC profits. McCaskill complains of pervasive abuse in the program and said the corporations fail to employ sufficient numbers of Alaska natives and return only minimal benefits to the people the program was intended to help.

ANC advocates argue it is unfair to compare them to other small businesses that operate under a model designed to benefit individual entrepreneurs. The corporations reinvest some of their profits in the native population through their shareholders. ANCs also spend profits on cultural and social programs that benefit the larger Alaskan community, proponents said.

McCaskill’s amendment would eliminate the ANCs’ ability to receive sole-source contracts of unlimited value. All other 8(a) firms have their noncompetitive contracts capped at $4 million, or $6.5 million for manufacturing. A new rule change published last month requires agency contracting officers to provide written justification when awarding sole-source ANC contracts in excess of $20 million. The approval documentation then would be public.

The amendment also would prevent Alaska native firms from automatically being designated as socially and economically disadvantaged. The companies would have to prove that status upon entering the 8(a) program. The corporations also would have to be managed by individuals who qualify as economically and socially disadvantaged. The program currently allows the corporations to be managed by non-natives, often from locations in the Washington metropolitan area.

Under McCaskill’s proposal, an ANC would be allowed to have a majority interest in only one 8(a) subsidiary at a time and that affiliate’s size would be a factor in determining the ANC’s program eligibility. In addition, the firms would be prohibited from operating as pass-through entities to deliver contracts to non-native companies.

The restrictions would apply only to ANCs and not native Hawaiian organizations or corporations owned by native tribes, all of which are provided the same contracting preferences. The provision is likely to face stiff resistance from the Senate’s Alaskan delegation, which is feverishly protective of ANC rights.

McCaskill’s amendment and the bill — the 2011 Small Business Innovation Research/Small Business Technology Transfer Reauthorization Act — are currently being debated by the Senate and could be up for a vote early next week. A longtime critic of the preferences for ANCs, McCaskill has introduced identical legislation as a stand-alone measure before. Rep. Bennie Thompson, D-Miss., introduced a companion measure in the House.

An additional amendment to the SBIR/STTR Reauthorization Act, which seven Republican senators sponsored, would rescind all unspent and unobligated stimulus funds. The provision was offered by Sens. Olympia Snowe of Maine, John Thune of South Dakota, Marco Rubio of Florida, Scott Brown of Massachusetts, Mike Enzi of Wyoming, Jerry Moran of Kansas, and David Vitter of Louisiana.

— by Robert Brodsky – April 1, 2011 – GovExec.com at http://www.govexec.com/story_page_pf.cfm?articleid=47492&printerfriendlyvers=1

February 17, 2011 By AMK

SBA makes first major revision to 8(a) program in a decade

The Small Business Administration has finalized the most comprehensive changes to its 8(a) small and disadvantaged business contacting program in more than a decade, with a sharp focus on reforming and improving the transparency of Alaska native corporations.

The long-awaited final rules, published Friday in the Federal Register, closely mirror — except for minor technical changes — the proposed rules offered by SBA in October 2009.

The lengthy final rule, which takes effect on March 14, attempts to tackle a host of 8(a) concerns, from the threshold to enter and remain in the program to tightening the rules for joint ventures and mentor-protégé relationships.

“SBA has learned through experience that certain of its rules governing the 8(a) [Business Development] program are too restrictive and serve to unduly preclude firms from being admitted to the program,” the rule states. “In other cases, SBA determined that a rule is too expansive or indefinite and sought to restrict or clarify those rules.”

The agency conducted public meetings in 10 cities and consulted with tribes in two others. SBA received more than 230 comment letters.

“Through public meetings held in cities throughout the country, SBA gained valuable input from members of the small business community on ways to strengthen the program to provide the best opportunities for eligible firms, while also stepping up efforts to combat waste, fraud and abuse,” said SBA Administrator Karen Mills.

Arguably the biggest change affects ANCs, controversial 8(a) subentities that can win sole-source contracts of any size. For the first time, firms owned by ANCs or by Indian tribes, Native Hawaiian organizations and community development corporations will be required to report the financial benefits flowing back to their communities. Several recent news reports and congressional investigations have questioned whether the profits from ANCs are reaching disadvantaged Native Alaskans.

Each firm now will be required to submit information relating to their funding of cultural programs, employment assistance, jobs, scholarships, internships and subsistence activities, SBA said. In a change from the proposed rule, only the parent company, rather than the individual businesses or subsidiaries, will be required to report. Also, the agency delayed implementation of this provision for six months to allow further meetings with the tribal and ANC community, said John Klein, SBA’s acting director of government contracting and assistant general counsel for procurement law.

Devon E. Hewitt, a partner in the Washington law firm of Piliero Mazza, said the change recognizes the intense scrutiny ANCs are facing from Congress and watchdogs. “The question is whether they have done enough,” Hewitt said.

But some lawmakers want to go further in reforming the ANC program. On Thursday, Rep. Bennie Thompson, D-Miss., ranking member of the House Homeland Security Committee, introduced a bill that would put ANCs on equal footing with all other small businesses operating in the 8(a) program. The bill is a companion to legislation previously introduced by Sen. Claire McCaskill, D-Mo.

“All too often, small businesses are crowded out of opportunities by Alaska native corporations that receive uncapped, no-bid contracts under a special provision of the 8(a) program,” Thompson said. “This bill will assure that ANCs cannot continue in a privileged status that both protects them from legitimate competition from other businesses and fails to return a fair share of profits to Native Alaskan shareholders.”

The SBA regulations make other attempts to regulate the behavior of ANCs. Firms graduating from the 8(a) program no longer will be allowed to hand off contracts to a new subsidiary owned by the same ANC. “There is a perception that these contracts are being passed from one firm to another,” Klein said.

Several ANCs that have proposed changes to the 8(a) program applauded the rules change. “The rule-making process has been long and difficult for the Alaska native community,” said Rex Rock Sr., president and chief executive officer of Arctic Slope Regional Corporation. “The SBA struck a meaningful balance by protecting government and taxpayer interests while continuing to provide economic opportunities for disadvantaged businesses.”

The final rule also makes several significant changes to the rules guiding joint ventures, which are created when a small business partners with a non-8(a) firm, typically a larger business. These joint ventures are considered small businesses eligible to receive high-value contracts without competition.

The rule attempts to assure that the nondisadvantaged firm does not unduly benefit from the program. The 8(a) partner of the joint venture must now perform at least 40 percent of the work, including those awarded through a mentor-protégé agreement. The previous statutory language required only that the small business perform a “significant portion” of the work, Hewitt said.

Joint ventures awarded to an 8(a) firm also will not be allowed to win more than three contracts during a two-year period, and these entities cannot subcontract work to a non-8(a) joint venture partner. Plus, mentors who do not provide assistance to their protégés could face consequences ranging from stop-work orders to debarment.

Other proposed changes would clarify the size, income and familial determinations needed to be eligible for the 8(a) program, including those:

Excluding the individual retirement accounts from the strict net worth calculations that are used to determine eligibility for the program;
Raising the adjusted gross income to enter into the program from $200,000 to $250,000 (the total value of the participant’s assets needed to enter the program was increased from $3 million to $4 million);
Increasing the adjusted gross income for continued eligibility for the program from $300,000 to $350,000 (the asset level was bumped from $4 million to $6 million);
Allowing immediate family members of a current or former program participant to own an 8(a) firm if they are qualified to run the business and are judged not to be a front for their family member’s company;
Requiring that a firm’s size status remain small for its primary industry code during its participation in the 8(a) program;
Limiting the type and amount of fees an agent or representative can charge for assisting an 8(a) firm (the rule prohibits unreasonable fees as well as arrangements in which the fees are a percentage of the contract award or revenue); and
Allowing owners of 8(a) firms called to active military status to elect to be temporarily suspended rather than lose any of their nine-year term in the program.

– by Robert Brodsky – GovExec.com – February 11, 2011

December 9, 2010 By AMK

Small-business contracts under scrutiny from several federal agencies

A half-dozen federal agencies are looking into alleged abuses of small-business contracts, some involving Alaska native corporations that have received hundreds of millions of dollars in recent years under special set-aside rules.

Contracting specialists and government officials said the flurry of enforcement efforts signals a shift toward more oversight of contracts by the Obama administration in the wake of reports about questionable contracting practices. “This is a warning to everybody,” said Stan Soloway, president and chief executive of the Professional Services Council, a national trade group of government contractors. “Clearly, there is a signal here.”

Daniel Gordon, administrator of the White House Office of Federal Procurement Policy, said the administration supports set-aside contracts for small business and Alaska native corporations, or ANCs, but only with sufficient oversight. “We can only do that if the public . . . are confident that we are protecting those programs from fraud,” Gordon said. “The days of ‘No one is checking’ are over. For too long, there was inadequate oversight.”

The government requires agencies to devote about a quarter of procurement spending to small businesses – almost $100 billion last year. In some cases, though, small firms and ANCs allegedly have operated as fronts to pass on work and revenues to traditional companies, in violation of small-business rules.

In September, President Obama signed legislation that provides billions in new loan guarantees and other support for small businesses, with the aim of helping spur job growth and stimulating the flagging economy.

The surge in enforcement follows an unprecedented action by the Small Business Administration in October to suspend a large contractor, GTSI, from all government business. The SBA said it had evidence that GTSI had used two small firms to illegally get work from a $3 billion contracting program at the Department of Homeland Security.

Those measures came after The Washington Post detailed the relationships between the companies in a series of articles that began in September. The series has focused on abuses in the government’s small-business programs for Alaska native corporations, subsidiaries of which have received more than $29 billion in contracts over the past decade.

Among the recent enforcement and oversight efforts:

l Justice Department civil enforcement authorities are considering how to recover money from firms involved in questioned small-business contracts. The companies under scrutiny include GTSI and the two firms it worked with – EG Solutions and MultimaxArray Firstsource, according to people with knowledge of the inquiry.

In a statement, the U.S. Attorney’s Office in the District said the department is working with the SBA on civil fraud cases, but it declined to identify the companies it is reviewing.

“The U.S. attorney’s office is committed to working with SBA and inspectors general to examine whether the United States may be entitled to monetary damages and penalties from companies that abuse the small business contracting rules,” the statement said.

l Senior procurement officials at the Department of Homeland Security have launched a “comprehensive review” of the agency’s small-business contracting program, known as First Source. Officials plan to examine whether the businesses are doing the proper amount of work themselves and not handing it off to subcontractors, according to a DHS e-mail obtained by The Post.

“In light of the recent SBA’s suspensions and The Washington Post article regarding abuses in the First Source program, DHS intends to undertake a comprehensive review of all 11 First Source contracts to ensure that the program can continue forward without further risk or abuse,” the e-mail said.

In a statement, a DHS spokesman said the agency “takes very seriously the issues that resulted in the recent SBA suspensions of two of the First Source contractors.”

l The Army Criminal Investigation Command and the Defense Criminal Investigative Service have joined with the Interior Department Inspector General’s Office to examine a $250 million Army contract given to an inexperienced Alaska native corporation subsidiary, United Solutions and Services (US2).

That investigation came after The Post reported that the subsidiary received the large contract without competition, even though it could not do the work itself. Army officials said they used the company to avoid a contracting competition. They also said they knew that the firm was not doing at least half the work during much of the contract period, something that is required under SBA rules.

A spokesman for US2 said the firm “is confident that any review of this kind will show that the company and government agencies acted properly and responsibly. US2 will fully cooperate with any such inquiry in this matter.”

The SBA Inspector General’s Office also is investigating First Source contractors that SBA officials said “entered in a relationship with a subcontractor in order to defraud the government.”

The SBA is continuing to examine GTSI, even though the suspension of the company was lifted, officials said. As part of an agreement with the SBA to resume contracting, two senior GTSI executives resigned, and three others were suspended until the probe is complete.

SBA officials later also suspended the two small businesses that worked with GTSI, EG Solutions and MultimaxArray. In suspension letters to the companies, the SBA said it has evidence that the firms worked with a large company to “defraud the Government.”

Eyak Corp., the parent of EG Solutions, said in a statement that the firm is working with the SBA “to demonstrate its compliance with all relevant SBA regulations in an effort to lift the suspension and restore the company’s good standing. We are not aware of the status of any U.S. Attorney’s Office investigation but will certainly fully cooperate with any such inquiry.

“We will also work with DHS to ensure that the First Source program will continue to operate in the highly ethical manner EG Solutions adheres to.”

A spokesman for GTSI declined to comment on recent developments. An executive at MultimaxArray did not respond to inquiries.

Lars Anderson, a contracting attorney who represents a First Source contractor who raised questions about GTSI to Homeland Security officials, said there “appears to be a bellwether shift in enforcement” by the SBA and other agencies.

“I believe that this recent SBA action represents the start of a crackdown on the widespread abuses of programs meant to assist small businesses, and it is long overdue,” Anderson said.

Soloway, the trade group president, said he does not believe the problems are endemic. He said some of them stem from confusion about the government’s complex small-business rules – by contractors and government regulators alike. He said the enforcement efforts present an opportunity to clarify the regulations. “We need to be looking at the laws,” he said. “It becomes a learning moment as well as a legal moment.”

– by Robert O’Harrow Jr. – Washington Post – December 9, 2010

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