By Robert O'Harrow Jr.
Washington Post Staff Writer
Thursday, September 30, 2010; 9:06 PM
ANCHORAGE - They gathered in an office building behind closed doors, a dozen executives of Alaska native corporations pondering how to proceed in the face of threats to a government program that had given them a shortcut to billions in revenue from federal contracts.
For years, the leaders of Alaska native corporations had maintained a united front of support for the ANC program, despite news accounts and audits that turned up allegations of abuses.
In August 2009, just weeks after an especially critical congressional hearing, officials from three of the ANCs proposed a major break in the long-held habit of keeping native problems to themselves.
They wanted the group to acknowledge the problems and adopt radical reforms. The room went silent when the officials announced their key proposal: a cap on contracts that would end their ability to get deals of any size without competition.
"The reaction was surprisingly muted," said a person who was there that day who spoke on the condition of anonymity because of the nature of the meeting. "It was obvious there was discomfort, but no one raised their voices or pounded the table."
One of the reformers, Tara Sweeney, a vice president at Arctic Slope based in Barrow, told The Washington Post in a recent interview that advocating a position with implied criticism of Alaska natives was "not an easy path to take." But she said that she and others could not stand by and do nothing. "We need to do the right thing," she said.
Executives at Doyon Limited and Cook Inlet Region Inc. joined those at Arctic Slope in calling for fundamental changes in the program, which has opened the way for $29 billion to Alaska native corporations over the past decade, most of it through set-aside deals or contracts awarded without competition.
In a proposal handed over to the SBA last month, the three companies called for better tracking and reporting of benefits to Alaska native shareholders and their communities. They reiterated their call for limits on the size of contracts awarded without competition, requiring additional justification for contracts of more than $100 million. They called for new limits on how ANC subsidiaries could operate and for better enforcement "of program rules to ensure the integrity" of small-business contracting.
"Our proposed reforms will improve the program by increasing accountability, decreasing the potential for abuse while continuing to encourage the growth of sustainable businesses that raise the standard of living for Alaska native people," the three reformers said in a Sept. 13 letter to the Small Business Administration.
In the Alaska native community, the proposals are a source of intense debate.
Sarah Lukin, executive director of the Native American Contractors Association, said the ANC program as it currently is benefits Alaska natives and taxpayers. She said the three reformers, who are not members of her association, "can afford to do business" without the set-aside program because of their natural resources and real estate holdings.
Lukin said critics have taken ANC problems out of context, ignoring the fact that the same issues, such as the use of contracts without competition, are widespread across the government. "The scrutiny on ANCs is disproportionate," she said.
In an interview, another reformer, Margie Brown, president and chief executive of Cook Inlet Region, said that federal contracting is a great tool but that the ability to get unlimited contracts without competition has unintended consequences. Brown and the other reformers said in an op-ed piece that ran in the Anchorage Daily News: "We understand that not everyone in our community will agree with our proposal, but improving [the program] is the right thing to do."
The proposals go beyond a measure approved as part of the National Defense Authorization Act for fiscal 2010 - the Pentagon's budget - which requires a written justification from agencies that awarded no-bid deals worth more than $20 million.
For its part, the SBA, which oversees Alaska native corporations, is formulating rules that will require the companies to be more open about how federal contracts benefit native shareholders and will limit the work performed by joint-venture partners. Those rules are expected to take effect early next year.
An unlikely set of allies has joined the reformers.
In an interview, Sen. Lisa Murkowski (R-Alaska), one of the most adamant ANC boosters, applauded the idea of more transparency and accountability.
"In order to continue the good for which this program was intended, we have to pursue the reforms that allow for appropriate oversight," she said. "I have defended this program, but I do not defend the program unconditionally."
Shay Assad, the top procurement official at the Pentagon, which has awarded more contracts to ANCs without competition than any other government agency, said, "What I want to do is take a totally different approach to this contracting methodology."
Assad said that ANCs and government officials need to be more open about the deals they strike and scale back the number of contracts awarded without competition. The government also ought to find ways to award more contracts that create jobs in Alaska for native shareholders, he said.
"I know that the taxpayers get a better deal when we compete," he said. "We need to make a huge course correction."
Sen. Claire McCaskill (D-Mo.), chairman of a contracting oversight subcommittee that held the ANC hearing last year, said the contracting privileges ought to be rescinded altogether.
"If you really understand what is going on with Alaska native corporations, your heart breaks for the many poor natives who are suffering still. They're being used," she said. "Two groups of people are getting screwed by the program. Many Alaska natives who are not getting their fair share, and the American taxpayers."
She suggested that the government make direct payments to the native shareholders. "I would much prefer that the American government help Alaska natives directly than through ridiculously over-priced, noncompete government contracts," she said.
Sheri Buretta, chairman of the board of the Chugach Corp., said that the government needs to keep giving ANCs room to improve and grow.
"There's no doubt in my mind there are abuses," she said. Until now, native executives have been afraid to speak up because of fears "it will be used against us."
"We're trying as hard as we can," she said. "It's an evolutionary process."