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Technical Excellence in Government Contracts
and Construction Matters Since 1893.
Smith Currie Oles Morrison

Update: Legislation Introduced to Eliminate Contracting Preferences for Alaska Native Corporations

Tue Jan 4, 2011

On Wednesday Senator Claire McCaskill (D-Mo.) introduced legislation aimed at diminishing the federal contracting preferences for Alaska Native Corporations (ANCs) under the Small Business Administration’s 8(a) program.  McCaskill, a long-time critic of the ANC contracting program, stated that the purpose of the legislation is to close currently existing loopholes that have led to waste and abuse, while providing little benefit for Alaska Native communities.

The legislation would eliminate the ANCs ability to be awarded sole-source contracts above the caps ($3.5 million for services and $5.5 million for goods) that apply to other 8(a) businesses.  It would also require ANC companies to demonstrate they are socially and economically disadvantaged.  Currently, ANC companies are not considered affiliated with related companies and subsidiaries for size determinations, this exemption would also be eliminated.

The bill has been anticipated for some time, as studies in recent years have shown the program has led to situations where the true beneficiaries are large non-Native companies that use loopholes in the program to obtain valuable federal contracts without competition.  McCaskill held a hearing in July 2009 where she harshly criticized the program and argued that only a small percentage of federal contracting dollars trickle down to Native communities.

Alaska Senators Lisa Murkowski and Mark Begich, as well as several ANCs have admitted the need for reform of the program.  However, they maintain that McCaskill’s bill is misguided, untenable and fails to adequately address the problems with the program.  They argue that rather than working with the ANCs to develop reforms that will increase the benefit to Native peoples while reducing abuse by non-Native companies, McCaskill’s legislation essentially seeks to strip the ANCs of any benefit the program was meant to provide.

Begich stated to The Washington Post that the ANCs provide hundreds of jobs for Alaskans and provide assistance to Alaska’s remote, high-cost communities.  One direct benefit provided by ANCsare dividends paid to their shareholders.  For example, on November 12, 2010, the Anchorage Daily News reported that NANA Regional Corp. distributed about $20 million in dividends to its 12,000 shareholders.  In 2009, the company paid out $17.2 million in dividends.

For more details on the legislation click here