Alaska Native Firms Capitalize on No-Bid Deals

By Griff Witte
Washington Post Staff Writer
Wednesday, April 12, 2006

Alaska Native Corporations have quadrupled their share of federal small-business contracts in just the past few years, but the government has provided lax oversight that opens the door to potential abuses, according to a new audit by the Government Accountability Office.

The companies, known as ANCs, receive preferences that make it easier for the government to give them no-bid contracts under a program for small and disadvantaged businesses. With federal procurement offices increasingly spread thin with smaller staffs and fewer resources, the firms' business has surged as the government turns to them for help without having to conduct competitions. From 2000 to 2004, the value of contracts received by ANCs under the small- and disadvantaged-business program jumped to $1.1 billion from $265 million, according to a draft copy of a GAO report obtained by The Washington Post.

GAO auditors also found that the government's oversight of ANC contracts has failed to keep pace with their explosive growth. Without greater accountability, the report said, there is the potential for "unintended consequences or abuse," with taxpayers and small businesses on the losing end.

The report quotes an unidentified contracting official as describing ANC firms as "an open checkbook" because the normal limits on no-bid awards do not apply to ANCs. Another official said he would be "laughed out of the office" if he tried to terminate an ANC's contract because it was not complying with the rules.

ANCs were created by Congress in 1971 to settle land disputes between the government and native Alaskans. Since then, they have done such work as training security guards in Iraq and setting up mobile classrooms in Mississippi after Hurricane Katrina.

A detailed GAO review of 16 large contracts found that ANCs, which are not always run by native Alaskans but are supposed to benefit them, have devised a number of tactics to maximize their contracts. They have, for example, created new subsidiaries to inherit contracts when the original subsidiary grows too large to be considered "small." They have also created partnerships in which the ANC firm subcontracts out much of the work to large, non-Alaskan firms. In one case the Energy Department gave an ANC firm an $80 million contract because the firm planned to give the work to a large, incumbent contractor.

Those tactics were decried yesterday by government watchdogs, who say the program is being misused.

"It appears that the usual Beltway bandits have figured out how to exploit this well-intentioned program and turn it into their own personal ATM," said Jennifer Porter Gore, spokeswoman for the Project on Government Oversight.

The Small Business Administration, which runs the program under which ANCs receive most of their contracts, also was criticized for not providing better oversight.

"The reality is that SBA's lack of accountability is not only hurting this nation's small businesses, but most importantly, it is hurting taxpayers," Rep. Nydia M. Velázquez (N.Y.), ranking Democrat on the House Small Business Committee, said in a written statement.

A spokesman for the SBA, Raul E. Cisneros, declined to comment on the GAO's findings. He said agency officials will review the report and respond later this week.

A spokeswoman for the Native American Contractors Association, which represents the ANCs, did not respond to a call seeking comment.

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