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TSA Reconsiders Technology Contract

Alaska Native Corporation Must Compete With Other Bidders

By Robert O'Harrow Jr.
Washington Post Staff Writer
Tuesday, November 30, 2004; Page A04

The Transportation Security Administration yesterday said it would resume plans to seek bids for a large technology maintenance contract, ending consideration of a proposal to give the work to an Alaska Native Corporation without competition.

The TSA had been considering whether it might speed up the maintenance work by awarding the contract to Chenega Technology Services Corp., one of more than 200 privately held Alaska Native Corporations permitted by Congress to sidestep normal procurement rules because of their status as disadvantaged small businesses.

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Chenega Technology had earlier secured a $500 million sole-source deal with U.S. Customs and Border Protection to maintain that agency's screening machinery. In a meeting last month, attended by Chenega executives and by staff members from the offices of Sens. Lisa Murkowski (R-Alaska) and Ted Stevens (R-Alaska), TSA officials were urged to piggyback on the Customs contract.

The proposed contract covers maintenance work for the metal detectors, X-ray machines and Explosive Trace Detectors at the nation's 450 commercial airports. The contractor is to take over for Boeing Co., which was paid $1.2 billion under a competitive contract that was criticized by the Department of Homeland Security's inspector general for more than doubling in size.

The TSA suspended plans for a competition after meeting with Chenega Technology officials in October. In a letter to contractors on Nov. 15, the agency said it "has been made aware of an alternative approach" to award the contract and needed to "exercise due diligence" to determine whether the approach had merit.

Yesterday, TSA officials dropped that idea.

"After carefully reviewing the options and weighing the opinions of the experts, the TSA concluded that the competitive bidding process provides the right avenue to a contractor that will provide the government the best value," said Rear Adm. David M. Stone, the assistant secretary of homeland security for the TSA. "As good stewards of the taxpayers' dollars, we can do no less."

The chief operating officer of Chenega Corp., Chenega Technology's parent company, declined to comment.

Chenega Technology, its Anchorage-based parent company and other subsidiaries have grown rapidly as a result of preferential legislation for Alaska Native Corporations introduced by members of Congress, most prominently Stevens.

Alaska Native Corporations -- established three decades ago as part of land settlement claims between natives and the federal government -- can operate as small businesses, even if parent companies have millions of dollars in revenue and thousands of employees.

They are exempt from the $3 million federal cap on no-bid contracts in place for other minority-owned small businesses, and they don't have to be run by Native Alaskans.

Chenega Corp. and its subsidiaries have 2,300 employees, only 33 of whom are Native Alaskans. Revenue increased from about $43 million in 2001 to an estimated $480 million this year.

Stevens and other supporters of the companies said they receive preferential treatment to improve the lives of Native Alaskans.

But some procurement specialists and government watchdog groups said the rules have given the Alaska Native Corporations an unfair advantage. They complain that the companies often secure contracts and then subcontract much of the work.

Steven L. Schooner, co-director of the Government Procurement Law Program at the George Washington University Law School, applauded the TSA's decision yesterday, saying, "As a taxpayer, as an academic, as a public policy procurement specialist, I favor competition."

"It's clearly in the public's interest to have an open and transparent competition, as opposed to selecting a contractor behind closed doors," he said.

A TSA official said the agency will send requests for proposals to the eight most qualified of 13 companies that originally expressed interest in the contract. The agency plans to award the contract in February.

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