Missouri Sen. McCaskill proposes a crackdown on Alaska native corporation program

By Robert O'Harrow
Washington Post Staff Writer
Wednesday, November 17, 2010; 9:53 PM

Sen. Claire McCaskill proposed a legislative crackdown Wednesday on the government's multibillion-dollar Alaska native corporation program, saying that contracting "loopholes" intended to help the state's indigenous people have led to waste and abuses.

The legislation is the most direct attack yet on a program promoted by the late Sen. Ted Stevens (R-Alaska), who pushed an extraordinary set of rules through Congress giving the corporations' subsidiaries the right to receive federal contracts of any size without competition, as well as other benefits.

More than 200 of the corporations, known as ANCs, were created by Congress in 1971 to settle land claims and help improve life for tens of thousands of impoverished native people. Almost 300 more subsidiaries have been created to win federal contracts.

The Pentagon and other agencies have spent more than $29 billion over the past decade on deals with those subsidiaries, some of which had virtually no experience. Annual spending on ANC contracts soared from $506 million in 2000 to $5.5 billion last year.

Relatively little of the money from the contracting boom has gone into shareholder pockets, according to a Washington Post investigation. But the subcontractors and non-native executives of the subsidiaries, most of them based in the Washington region and across the lower 48 states, sometimes made millions. Some ANCs have been used to pass on work to established companies, according to audits and reports.

"We've seen that a very small portion of these companies' profits are reaching native Alaskans, so it's time to acknowledge the fact that this program is not effective for either native Alaskans or taxpayers," McCaskill (D-Mo.) said in a statement.

Under the legislation, which does not have a co-sponsor, the native corporations would no longer be able to receive contracts of any size without competition. Instead, they would face the same caps as other small and disadvantaged businesses, topping out at $5.5 million per deal.

The ANCs would also no longer automatically be considered small and disadvantaged under federal rules. Some top ANCs have joined the ranks of the government's top contractors, making hundreds of millions each year in federal revenue.

The firms also would have to be managed by native executives, eliminating an exemption that has led to the vast majority of the subsidiaries being almost entirely run by non-natives, some of them former executives of traditional government contractors.

McCaskill's proposals will not surprise Alaska native executives, who have been bracing themselves for reform efforts since Stevens left Congress early last year. In July 2009, McCaskill held a sharply critical hearing about the program.

She announced her intention to introduce legislation last month, after The Post's investigation, which showed huge disparities between the money that some native shareholders received and millions that went to non-native consultants, executives and subcontractors.

The Post articles also found that the federal government has long known about problems - including pass-through arrangements - but largely ignored them because ANCs were a convenient way to do business.

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