Native corporation trade association forms

A new trade association of Native American corporations is forming as congressional scrutiny of federal contract set-asides for these businesses grows.

The 20-member Native American Contracting Association is working with law and lobbying firm Podesta Mattoon to develop a public-relations strategy. Piliero Mazza & Pargament, another law firm, is helping to direct the association.
Courtesy of Rep. McHugh’s office
Rep. John McHugh (R-N.Y.)

The group, which was created a year ago, plans a formal launch later this winter or spring. It was formed to “promote understanding” of contracting opportunities available to native-run corporations and how the contracts help tribal members, said Pamela Mazza of the firm.

The association’s official unveiling may come at a critical time. Congressional interest appears to be growing after new criticism of the favored contracting status the native corporations enjoy.

A spokesman for House Government Reform Chairman Tom Davis said the Virginia Republican is directing staff to look into the issue.

“Representative Davis is a purist when it comes to acquisition policy,” spokesman David Marin said, and wants to make sure that contract preferences are benefiting the people they are intended to help. No hearings are yet scheduled.

Rep. John McHugh (R-N.Y.), a member of Davis’s committee, has questioned Army contracting decisions after hearing complaints from firms in his district that lost out to native-run corporations for service work at the Fort Drum Army base, according to press secretary Brynn Barnett.

Any native corporation is eligible for a special contracting status under the Small Business Administration’s (SBA) 8(a) program, which provides the parameters for awarding contracts to disadvantaged or minority-owned businesses.

Because of the structure of the law, many of the native companies are based in Alaska and are called Alaska native corporations (ANCs). Congress first created ANCs in 1972 after state and tribal negotiations over how native communities would benefit from the state’s oil reserves.

About 15 years ago, Congress gave ANCs and other native corporations special contracting status, even compared to other disadvantaged businesses. But only in the past year or two have federal awards to native corporations really begun to jump.

The native companies have two primary advantages. They are exempt from a cap on no-bid service contracts valued at $3 million or above that applies to other 8(a) companies. Usually, any contract award higher than that has to be made through a competitive bidding process.

 Also, the cumbersome A-76 contracting process, which refers to the circular issued by the Office of Management and Budget that lays out contracting rules, doesn’t apply to these companies. Typically, a government contracting official has to use A-76 to justify outsourcing any government function done by 10 or more federal employees.

Supporters say the native corporations should be eligible for larger contracts because of the dire economic conditions of the tribes they represent.

“The tribes and ANCs carry an additional responsibility to pull up their communities, most of which are in severe poverty,” said Daniel Press, an attorney at Van Ness Feldman who represents a number of ANCs.

The program “is creating jobs on reservations where unemployment is at 60 percent,” said Press, who helped craft the law that exempts native corporations from the $3 million limit.

But while the program may have good intentions, critics see a danger of abuse.

“It’s not even an unlevel playing field. They have the key to the treasury on these no-bid contracts,” said Keith Ashdown, vice president for policy at Taxpayers for Common Sense, a government-spending watchdog group.

While Ashdown said it was in the “national interest” to help native communities “pull themselves up by the bootstraps,” the no-bid contracts often don’t benefit tribal members. Instead, the money goes to front companies that take advantage of the law and its allowance of no-bid contracts, Ashdown said.

Marin said Davis wants to measure the scope of the contract awards and why they appear to be increasing. But Davis is not “prejudging the program,” Marin said.

Contracts awarded through the 8(a) program nearly doubled in just one year, from $5.6 billion in 2002 to $10.1 billion in 2003, according to the SBA. Most of that increase is thought to come from the increasing popularity of the native-corporation set-asides.

The growth is expected to have continued through 2004.

To be eligible, native corporations have to do at least 50 percent of the work. Critics complain, however, that the companies aren’t required to have a minimum number of tribal members on their rosters.

A Washington Post article in November that prompted some of the current scrutiny found that Chenega Corp., an Anchorage-based company, and its subsidiaries have 2,300 employees, only 33 of whom are Native Alaskans.