McCaskill leads hearing focusing on Alaska Native contracts

Thursday, July 16, 2009 | 8:55 p.m. CDT

ANCHORAGE, Alaska — A program that grants preferences to Alaska Native corporations when they compete for billions of dollars in government contracts was scrutinized Thursday by a U.S. Senate panel.

Missouri Sen. Claire McCaskill, a Democrat who chaired the Senate Subcommittee on Contracting Oversight hearing, said she sought to make sure the federal government is getting the best value for its money.

McCaskill said it's time to question the fairness of preferences given to Alaska Native companies, especially when other businesses willing to do the work for less are getting squeezed out.

Sen. Mark Begich, D-Alaska, said the Small Business Administration program was "one of unprecedented success" that had helped many Alaska Natives get a decent education and pull themselves out of poverty. Sen. Lisa Murkowski, R-Alaska, also testified in favor of the program.

But McCaskill said the hearing had "absolutely nothing" to do with whether Alaska Natives have struggled to improve their lives.

"Our responsibility is to look out for the taxpayer," said McCaskill, a former state auditor.

McCaskill said the preferences need to be examined, especially given the astronomical increase in the contracts awarded to Alaska Native corporations and their hundreds of subsidiaries.

According to federal auditors, 83 percent of Alaska Native corporations contracts are awarded without competing bids. Those corporations also enjoy other benefits: They have no cap on contract amounts; they do not need to prove they are disadvantaged; subsidiaries can participate without being considered affiliates; and they can get more than one contract at a time.

Unlike other corporations and companies in the program, Alaska Native corporations are considered permanently disadvantaged regardless of how big they get, McCaskill said.

"That is a huge difference," she said.

According to a government report, the preferences were intended to provide economic opportunities to impoverished Alaskans. However, critics say they now are being used to give Alaska Native corporations an unfair advantage and the work is frequently done by large, non-Native contractors.

The report found that contracts awarded to Alaska Native corporations increased by 916 percent, from $508.4 million in 2000 to $5.2 billion in 2008. It said last year about 80 percent of the contract dollars awarded to Alaska Native corporations was performed outside Alaska.

The Department of Defense is the largest user of such contracts. From 2000-2008, the agency spent $16.9 billion on Alaska Native corporation contracts. The Department of the Interior and the Department of Homeland Security also are big users.

Sen. Susan Collins, R-Maine, questioned why it is that Alaska Native corporations are paid a 5 percent bonus for contracting with their own subsidiaries. She also noted that Alaska Native corporations can add subsidiaries, thereby remaining in the program indefinitely; others are subject to a time limit.

Alaska's 12 regional corporations were formed after the signing of the 1971 Alaska Native Claims Settlement Act to compensate Alaska Natives for the loss of lands historically used or occupied. It appropriated more than $962 million and allowed the regional and village corporations to select 44 million acres of land.

Sarah Lukin, executive director for the Native American Contractors Association, said the program is critical for the future of Alaska Native communities. She said Native people have been decimated by centuries of failed federal policies.

"Here is a federal program the government actually got right for the Native people," she said.

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