Contracting Oversight Subcommittee on Alaska Native Corporations

Senate hearing on Alaska Native Corporations planned for July 16th

June 23, 2009 -- WASHINGTON, D.C. – As the Subcommittee on Contracting Oversight continues its investigation into Alaska Native Corporations (ANC) and contracting policies that favor them, Chairman Claire McCaskill today released a preliminary analysis of publicly-available data about contracts awarded to ANCs from 2000 through 2008.

This information shows that federal government contracts to ANCs have increased dramatically and that ANCs have received a disproportionate share of small business loans. The preliminary analysis also indicates many ANCs are not based in Alaska and most of the work awarded to ANCs, which primarily contract through the Department of Defense, is not performed in Alaska at all.

ANCs have come under criticism because of a federal law that exempts them from small business contracting rules, which allows them to qualify for large contracts while circumventing the normal competition process. The subcommittee is currently conducting an investigation into ANCs and will hold a hearing on July 16th to examine the issue. In addition to reviewing publicly available data, the subcommittee is in the process of studying and analyzing materials produced by 20 ANCs in response to Subcommittee document requests sent in May.

Preliminary ANC Contract Award Data
The following date is based on information compiled by Eagle Eye, Inc., from the Federal Procurement Data System, the federal contract tracking system established by the General Services Administration. Unless otherwise noted, years cited denote fiscal years.

ANC spending has increased dramatically

* Between 2000 and 2008, contract awards to Alaska Native Corporations increased by $4.6 billion, from $508.4 million to $5.2 billion.
* In percentage terms, ANC contract spending increased 915 percent from 2000 to 2008, an average increase of 33.6 percent per year.
* In total, ANCs received $23.8 billion in federal contracts between 2000 and 2008.

ANC spending has increased faster than overall federal contract spending

* ANC contract spending increased at a rate six times greater than that of overall federal contract spending.
* Overall federal contract spending increased 149 percent between 2000 and 2008, while ANCs have increased by 915 percent during the same period.

Most ANC contracts are performed outside Alaska

* Between 2000 and 2008, only 21 percent of all contract dollars awarded to ANCs ($5 billion) were performed in the state of Alaska.
* The state with the next highest percentage of contract dollars is Virginia ($4.4 billion or 19 percent), followed by Maryland ($1.6 billion or 6.7 percent), Florida ($1.4 billion or 5.7 percent), and California ($1.1 billion or 4.7 percent).
* In 2004, 2006, 2007, and 2008, more ANC contract dollars were performed in Virginia than in Alaska.

Many ANC contractors are located outside Alaska

* Between 2000 and 2008, approximately 40 percent of all ANC contract dollars were awarded to companies located outside of Alaska.
* 18 percent of all ANC contract dollars ($4.3 billion) was awarded to companies based in Virginia.

ANCs receive a disproportionate share of 8(a) contracts

* Between 2000 and 2008, ANCs received $12.1 billion in federal contracts through the 8(a) program.
* In 2008, awards to ANCs constituted 19 percent of all the federal contract dollars awarded through 8(a) prime contracts.
* In 2008, 74 percent of contract dollars awarded to ANCs were awarded through the 8(a) program.
* Between 2000 and 2008, ANCs received $17.2 billion in 8(a) contracts valued at more than $3.5 million – the statutory limit for sole-source awards to 8(a) companies.

ANCs are primarily used by the Department of Defense

* The Department of Defense is by far the largest user of ANC contracts.
* In total, the Department of Defense spent $16.9 billion on contracts with ANCs from 2000 to 2008, more than 70 percent of ANC spending overall.
* The agencies with the next highest proportion of ANC contracts are the Department of the Interior ($1 billion, or 4.1 percent) and the Department of Homeland Security ($980 million, or 4 percent).

What are Alaska Native Corporations?
The Alaska Native Corporations were created by a 1971 law that aimed to foster economic development in Alaska. It established 13 regional and approximately 180 village, urban, and group ANCs, apportioning land and money among those entities. Under the law, the ANCs are for-profit organizations whose shareholders must be indigenous Alaskans, but there are no legal requirements that the companies’ employees be native Alaskans or that they locate their offices in the state.

Why have ANCs received special treatment in federal contracting?
In 1986, Congress made ANCs eligible to participate in the Small Business Administration’s 8(a) program. Under that program, companies can be awarded small federal contracts on a sole-source basis with little to no competition. To qualify for the 8(a) program the contract must be relatively small – valued at under $5.5 million for goods or $3.5 million for services. Congress carved out an exemption for ANCs, giving them the ability to receive no-bid contracts of any size under the 8(a) program. As a result, ANCs are uniquely eligible to receive huge federal contracts without having to compete with other bidders.

Source: Senator Claire McCaskill