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Alaska Native Corporations Cash In on Contracting Edge

By Robert O'Harrow Jr. and Scott Higham
Washington Post Staff Writers
Thursday, November 25, 2004; Page A01

In July 2002, U.S. Customs Service officials announced they were preparing to award a half-billion-dollar contract for maintenance of thousands of gamma-ray, X-ray and other scanning machines at the nation's ports and borders. Some of the nation's biggest defense contractors, including Lockheed Martin Corp. and DynCorp, were asked to consider bidding for the work.

But a year later, Customs officials issued a statement saying there would not be competition for the work, after all. Instead, they decided to give a no-bid contract to a little-known company owned by Native Alaskans.

Officials at the big companies were surprised to learn they had been bested by Chenega Technology Services Corp., which only recently had been receiving big contracts for the federal government. "I didn't even know how to spell their name," said Raymond Mintz, who had been hired by DynCorp to prepare its bid for the Customs contract.

Chenega had little experience maintaining high-tech scanning machines. So it ended up subcontracting much of the work to some of the big companies that had originally expressed interest in the contract, including San Diego-based Science Applications International Corp. and Massachusetts-based American Science and Engineering Inc., according to interviews and documents.

Chenega did offer Customs officials a unique opportunity. By hiring Chenega, Customs could avoid the slow and costly competitive bidding process for government contracts that is designed to ensure that taxpayers get the most for their money.

Chenega Technology Services Corp. is one of more than 200 privately held Alaska Native Corporations permitted to operate as disadvantaged small businesses as part of government efforts to encourage Native American participation in federal contracting. The corporations have benefited from legislation introduced by members of Congress, most prominently Sen. Ted Stevens (R-Alaska), the powerful chairman of the Senate Appropriations Committee.

Alaska Native Corporations can maintain their small-business status, even if their parent companies have millions of dollars in revenue and thousands of employees. They are exempt from the $3 million federal cap on no-bid service contracts that are in place for other minority small businesses. The corporations do not have to be run by Native Alaskans. And they can subcontract much of their work to other firms, but their employees must do at least 50 percent of the work.

Only 33 Alaska natives are among the 2,300 employees who work for Chenega Technology Services, its Anchorage-based parent company and other subsidiaries. The parent company, Chenega Corp., was begun 30 years ago in a remote Alaska village on Chenega Bay in Prince William Sound.

Chenega Technology is headquartered in a glass office building in Alexandria. Its revenue has increased since fiscal 2001, from about $43 million to an estimated $480 million today. This year, Chenega ranks No. 1 on a list in Washington Technology magazine, a Washington Post Co. subsidiary, of the top 25 small businesses getting government information technology contracts, joining seven other Alaska Native Corporations. Last year, Chenega did not make the list.

The trend has prompted some procurement specialists and government watchdog groups to question whether the corporations are really benefiting taxpayers and large numbers of Native Alaskans.

"We've made an affirmative decision that there is a reason to promote these companies, even though the contracts may cost more," said Angela B. Styles, President Bush's point person for federal procurement at the Office of Management and Budget from 2001 to 2003. "I firmly believe in promoting small businesses, but this is different.

"I don't think people realize the extent of what has happened," said Styles, who now represents corporations trying to secure federal contracts. "The problem is that it appears you have a couple of companies that are fronts, and that's not benefiting the native population."

In response to written questions submitted by The Post, Chenega Chief Operating Officer Jeff Hueners called the company an "American success story" that benefits from preferential laws "based upon the trust relationship the United States Government has with its indigenous, aboriginal people." Hueners said about $1 million a year is distributed to the 142 Native Alaskans who hold shares in Chenega Corp. and to educational and cultural preservation programs.

William Bickelman, a procurement analyst and small-business specialist at U.S. Customs and Border Protection, said Chenega is doing an excellent job, with a 94 percent favorable assessment from the agency for its first six months of work. Bickelman praised the no-bid contract for allowing officials to move quickly on a project vital to national security.

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