On March 30, 2005, Nigel Stephens, Staff Assistant to Senator John Kerry who resides as the Co-Chairman of the Senate Committee on Small Business & Entrepreneurship, held an invite-only meeting at the Senate Russell Office Building.  The discussion during the meeting remained focused on the controversy over the Alaska Native 8(a) Corporation�s (ANCs) ability to receive sole source contracts as a means of economic development for their respective villages.

As recently reported in the Washington Post, Congress intends to ask the General Accounting Office (GAO), the investigative arm of Congress, to examine substantial military contracts awarded to ANCs. The investigation comes at the request of Representative Thomas M. Davis, Republican representative of Virginia and Chairman of the House Government Reform Committee, along with Henry A. Waxman, Representative from California and the panel�s ranking Democrat. Although ANCs are currently the subject of the Congressional probe, the entire 8(a) program which allows tribal federal contracting for Indian Country may be threatened as well as the economic future of all Native American and Minority businesses.

Alaska Native Corporations have been granted special contracting rights as a result of the 1971 Alaska Native Claims Settlement Act to resolve historical land disputes. The ANCs are under scrutiny even though ANC businesses are eligible to receive sole source contracts regardless of the contract size.  Congress provided this opportunity because they recognize the ANCs need more substantial contracts as an economic stimulus to pull their entire village membership up from poverty.

The meeting began with Nigel Stephens, who served as chair and overseer of the meeting, emphasizing the need for federal 8(a) disadvantaged business contracting and how special federal contracting rights for ANCs came to be in 1971.  Mr. Stephens asserted the primary question under discussion was whether or not the program is functioning as Congress intended. The agenda presented listed numerous talking points including; a discussion of the Adarand case and how it affects ANCs and Tribal enterprises, the primary debate surrounding ANC 8(a) corporations and the differential rights relative to non-ANC companies and contract size of the ANCs receiving benefits as small disadvantaged businesses and, the overall objective of the meeting which was to determine how to resolve the disputes surrounding ANC programs and discuss solutions.

            After introductions, Mr. Stephens opened the floor for questions and comments.  Harry Alford, President of the National Black Chamber of Commerce, expounded upon the affect of ANC sole source contracting in the Black business community. He referred to the contracting as abusive because ANCs receive a disproportionate share of set aside contracts that would have gone to traditional 8(a) small disadvantaged businesses.  Mr. Alford even went as far as to state ANCs were fronts for large non-Native contractors and that the ANCs refused to subcontract with other minority businesses.  His conclusion was that ANCs should be removed from the 8(a) program altogether.  He justified his conclusion by stating Alaska Natives have no rights to preference contracting because the United States purchased the state of Alaska from Russia. 

Hank Wilfong, President of the National Association of Small and Disadvantaged Businesses, explained that Black Americans worked with Congress to develop the 8(a) program from its inception and it was initially intended to help Black American businesses. He stated that former Congressman Parin Mitchell established the 8(a) program specifically for Black American businesses.

Chris McNeil, President of the Native American Contractors Association (NACA), reported that the Alaska Native Claims Settlement Act was established in 1971 to resolve long-standing land disputes.  Under this Act the Alaska Native Corporations were granted special federal contracting privileges confirmed by provisions in federal law.  The law acknowledged and addressed the horrific losses incurred by American Indians and Alaska Natives.  Even with the special contracting provisions, Indian reservations and Alaska Native Villages suffer from some of the worst poverty in the country with unemployment levels in some Indian communities between 40 and 70 percent.  These communities have little access to resources and inadequate infrastructure needed to facilitate individual entrepreneurship and economic development.  Given the lack of access and tools, Indian tribal governments and ANCs are still responsible for promoting economic development for an entire village or reservation.  Mr. McNeil pointed out that it is both appropriate and necessary to use the federal government�s massive procurement activity as a means of jumpstarting village and reservation economies; and as a result, Congress was justified in giving tribes and ANCs unique rights under the federal procurement process.

Mr. Wilfong, most likely concerned with the amount of revenue going to ANCs, asked Mr. McNeil how the ANCs spend their profits.  McNeil informed him that funds go toward community development programs that create jobs and community services.  According to Mr. Wilfong, federal contracts should not assist in community development because the program is designed to create small businesses.  Moreover, he insisted that Black business owners do not use federal contracting for community development.  Pete Homer, NIBA President, reminded Mr. Wilfong that black communities have Community Development Corporations (CDCs) which qualify to receive set aside contracting to specifically promote community development.  Mr. Wilfong agreed.

Anthony Robinson, President of the Minority Business Enterprise Legal Defense and Education Fund eloquently stated the urgent need to find solutions to these discussions.  He acknowledged that many small businesses with federal contracts suffered great injustices when ANCs received bundled contracts and apparently did not sub-contract with the local minority businesses.  Robinson emphasized that we must go down the path together and if we didn�t, we would be making a big mistake.  Mr. Robinson stated the need to focus on solutions or amendments to improve the 8(a) program which included the consideration of creating a special program or changes to the current program.  

Steve Denlinger, the President of the Latin American Management Association, acknowledged the law allowing ANC companies special rights, however, he stated there were perceived loopholes that existed within the special rights given to ANC companies. Mr. Denlinger stated the laws have led to inequities and he presented a specific case of misuse reported to him by five disgruntled 8(a) company employees. He presented letters from the five businesses with complaints against Chugach Alaska Corporation (Chugach), an ANC from Anchorage, Alaska. The letters claimed Chugach went to New Mexico with a sole source one-hundred million dollar contract in which they apparently did not subcontract to any companies within New Mexico.  The employees of the disgruntled business had worked the previous contract prior to Chugach becoming the prime contractor and were under the impression they would receive additional subcontracts under the new contract. In fact, one business reported that they felt certain to receive a subcontract since they submitted a proposal with quotes; nevertheless, Chugach used the proposal information to compare and solicit bids from other businesses. In the end, Chugach contracted with other out-of-state businesses.

Pam Mazza, a legal advocate for minority business owners at Piliero, Mazza & Parament, brought up specific concerns with the program. First, she stated the focus of the investigation was based on whether the sole source awards resulted in inflated costs and if there was adequate performance by those receiving the contracts. Ms. Mazza also brought attention to the fact that government agencies may be using the large contracts to satisfy their minority contracting goals. These large contracts would have the effect of increased minority contracting when in fact, most of the work would go to a few firms. 

 Chris McNeil said he was unaware that Chugach did not use any local subcontractors or teaming agreements. He also stated that most ANCs do subcontract. Mr. Denlinger asked if ANCs kept contract records, to which Mr. McNeil responded that all of the ANC contract records are available on their website for public viewing.

            Mr. Homer brought the discussion back to the initial purpose of the tribal federal contracting program stating the purpose of its creation was to remove institutional barriers to tribal economic development. He was deeply concerned that if federal contracting for ANCs is questioned, so too are those of our Tribal governments since both were created to improve economic development in remote and disadvantaged communities, that had little or no say on where to locate � a luxury of other small business owners.  In addition, Mr. Homer stated that given the state of the current political climate the issue did not solely impact Indians; all minority 8(a) contracting will suffer if this set-aside program undergoes change.  Today we are witnessing increased calls to end federal small business programs and therefore, minority 8(a) set-aside contracting will most likely be challenged when any change is made.  Mr. Homer called on our friends from the various minority organizations to stand together with the Indian community and make certain that Congress holds a fair and equitable investigation of ANCs federal contracting.