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Alaska Native Firms Shift Stimulus Work to Outsiders

A ProPublica analysis shows that Alaska Native Corporations rely heavily on subcontracts with non-native companies to perform stimulus projects they’ve won through special contracting privileges.

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Suulutaaq Inc., an Alaska Native Corporation, won a $57 million contract to replace bridges on California's Napa River (pictured). It subcontracted two-thirds of the work, mostly to a division of one of the largest construction firms in the world. (Image from U.S. Army Corps of Engineers)

When Alutiiq Manufacturing Contractors won a $28 million stimulus contract to replace windows at a federal building in Boston, it wasn’t just a win for Alutiiq natives on Alaska’s Kodiak Island.

The company, which can obtain large government contracts without competition under a program meant to help Alaska natives, took what’s become a common step. It subcontracted out $23 million, or about 80 percent of the project, to a more experienced firm—in Alabama.

Critics of Alaska Native Corporations (ANCs) say such pass-throughs increase costs for taxpayers and undermine the intent of the contracting privileges by diverting benefits to non-native firms. ANCs respond that they are simply trying to build the most-qualified team to do the government’s work.

ANCs have been under fire by some members of Congress who want to strip them of the special advantages they have over other minority firms. But some key questions have been unanswered in the debate: How often do ANCs use subcontractors? And who is getting a share of their business?

An analysis by ProPublica, drawing on detailed reports of federal stimulus projects, shows for the first time that ANCs turned to subcontractors at twice the rate of all other federal contractors and significantly more often than other small, minority-owned firms.

And at least some of this work has gone to large firms—General Electric, Kiewit and Lockheed Martin—the stimulus reports show, echoing government audits that have fueled the criticism of ANCs.

Through September, ANCs had won stimulus contracts worth $823 million for 742 projects, according to the most recent government data. More than 350 projects, or nearly half, rely on subcontractors to do at least some of the work.

By comparison, all other stimulus contractors subcontracted more than 5,600 of nearly 26,000 stimulus projects, or 22 percent. Other minority-owned firms hired subcontractors on 33 percent of their projects.

ProPublica’s analysis is based on government data compiled for our Recovery Tracker, an ongoing project to follow stimulus spending. The data offer a previously unavailable window into ANC activity because Congress specifically required stimulus recipients to report subcontractors to the public, unlike the rules governing other federal contracts.

ANCs receive more than $5 billion in federal contracts each year, so the stimulus projects account for a significant share of their revenue. Because subcontracting data isn’t available for other contracts, it’s possible that the overall subcontracting ratio for ANC projects could be different.

After reviewing ProPublica’s findings, Scott Amey, a contracting expert at the Project on Government Oversight, said the lack of complete subcontracting data is a barrier. At a minimum, Amey said, the analysis “raises a red flag with ANC contracts.”

Sen. Claire McCaskill, D-Mo., released an investigation of ANCs in 2009 as chairwoman of a Senate subcommittee that oversees federal contracting. She has said outside contractors and consultants are cashing in at the expense of Alaska natives. McCaskill and Rep. Bennie Thompson, D-Miss., have introduced bills to roll back ANC privileges so they are no different than other small minority firms.

“Alaska Native Corporations are subcontracting huge amounts of their work, which is hindering the program’s ability to help Alaska natives,” McCaskill said in a statement to ProPublica. “Alaskans deserve a program that will provide a leg up for individuals,” she said, but the program “in its current form is not effectively achieving that goal.”

ProPublica reported last month on the Cape Fox Corporation in southeast Alaska, where outside consultants made millions in fees. While contract revenue skyrocketed over just a few years, Cape Fox’s native shareholders saw few jobs and no increase in their regular dividends as a result.

The Native American Contractors Association, which represents many tribal firms, says such cases are few and far between and that the program is working as intended.

The contracting program is “one of the only federal Indian programs that is working to improve the lives of native people,” Sarah Lukin, the association’s executive director said in December. “Now is not the time to roll back the clock on years of socio-economic progress.”

Helped by Special Exemptions

ANCs were created by Congress in 1971 to provide economic benefits, such as dividends and jobs, to natives whose ancient lands were taken for the Alaska oil pipeline. Congress later allowed ANCs to participate in the U.S. Small Business Administration’s business development program, which allows minority firms to receive no-bid contracts with a goal of eventually graduating to compete on their own.

In recent years, ANC subsidiaries have come to dominate the SBA program.

While other firms in the program have a limit of $3.5 million on contracts for services and $5.5 million on contracts for goods, ANCs are exempt and have won awards exceeding $100 million.

The exemption makes ANCs a potentially lucrative partner for large firms acting as subcontractors. And government contracting officers turn to ANCs to avoid lengthy competitions and meet their small business contracting goals. ANCs also may compete for contracts.

The stimulus reports suggest that ANC subcontracting sends a substantial portion of revenue to outsiders. Of the $470 million in ANC stimulus projects that are at least halfway completed, native corporations awarded about $200 million to other contractors, ProPublica found.

For example, Suulutaaq Inc., owned by Yup’ik Eskimos and Athabascan Indians in villages along the Kuskokwim River, won a $57 million contract to replace bridges on the flood-prone Napa River in California. It subcontracted two-thirds of the work, mostly to a division of Kiewit Corp., one of the largest construction firms in the world.

Facility Support Services LLC, owned by natives in Juneau, won a $14 million contract to build a testing facility for energy-efficient appliances at the National Energy Technology Laboratory in Morgantown, W. Va. It subcontracted 75 percent to TJR Enterprises, a Hispanic-owned firm that has worked at the lab for several years but doesn’t qualify for no-bid contracts anymore because it already completed the SBA program.

Under SBA rules, firms in the minority business development program cannot outsource more than 85 percent of construction contracts. The stimulus reports show that ANCs were above this limit in 40 construction projects. The largest ANC stimulus contractor, CCI Group, subcontracted 95 percent of some of its projects at the Army’s Fort Wainwright near Fairbanks, according to reports it filed.

The SBA says that doesn’t necessarily indicate a violation because the limit doesn’t apply until a contract is complete, and one contract may contain hundreds of projects over several years.

There’s no rule specifying what type of work a prime contractor has to perform. Many, such as Alutiiq Manufacturing Contractors, mainly do back office work managing the project. But at least some employees have to be doing construction, said SBA contracting official Calvin Jenkins.

Some larger ANCs have begun to question whether other ANCs are living up to the goals of the SBA’s program if they perform only the bare minimum of work.

“The intent is to create these long-term successful businesses,” said Aaron Schutt, chief operating officer of Doyon Ltd., an ANC that represents a vast area of central Alaska including Fairbanks. “One measure of success is how much you rely on subcontractors. There should in my opinion be a lessening of that reliance in your overall business as you mature in the program.”

The native contractors group says ANCs use subcontractors for the same reason other federal contractors do—to assemble a qualified team to handle the work in a timely and cost-efficient manner.

Lukin said the government’s stimulus reports provide only a snapshot of ANC contracts, making it impossible to discern whether firms are complying with the subcontracting limit. The only way to judge would be to examine the full contracts when they’re completed, she said.

But such information isn’t publicly available. Until the stimulus, federal agencies weren’t required to report subcontractors. The government began reporting subcontractor data on large contracts last fall, but that information won’t be available on most contracts until later this year.

Big Contractors Cash In

Past reports that large multinational corporations obtained work through ANC contracting preferences have helped drive the controversy over native corporations.

Olgoonik Corporation, based on Alaska’s North Slope, received $225 million in military construction contracts, but much of the work was done by Halliburton, according to a 2005 article in Mother Jones magazine.

In 2006, the Government Accountability Office reported that contracts to guard Army bases were awarded to Alutiiq LLC and Chenega Corp. but subcontracted to the giant security firms Wackenhut Services and Vance International.

Alutiiq’s heavy use of subcontractors also came under fire in 2009 by McCaskill’s subcommittee. The report used the Afognak Native Corporation, which owns Alutiiq, as a case study. It noted that from 2000 to 2008, Afognak paid subcontractors more than half the revenue on 91 of its nearly 300 contracts.

In addition to Kiewit, other large contractors received stimulus subcontracts from ANCs, though for lesser amounts. Lockheed Martin received $1.4 million, or 17 percent, of a NASA spacecraft project from ASRC Aerospace, an ANC firm representing natives on the North Slope. It also subcontracted 17 percent of another NASA project to GE Aviation Systems.

Alutiiq’s project in Boston calls for replacing windows at the John F. Kennedy Federal Building to make it more energy efficient.

The subcontractor, Physical Security LLC, based in Bessemer, Ala., describes itself as one of a handful of companies that make blast-resistant windows. It has worked on the U.S. Embassy in Moscow, the new Oklahoma City federal building and the Pentagon after 9/11.

In contrast, according to federal procurement records, Alutiiq Manufacturing Contractors has four employees and says it specializes in producing modular buildings for offices and health clinics. The JFK Building contract is seven times larger than the annual revenue of $3.7 million it reported in 2010.

Afognak spokeswoman Jana Turvey said the subsidiary now has 45 employees, and its parent company has prior experience with projects of similar size and complexity.

Unlike other minority businesses, ANC firms are allowed to cite the past performance and experience of other subsidiaries owned by their parent company when making the case for a contract.

Many federal agencies use no-bid minority contracts because they are quicker than soliciting and reviewing competitive bids. But GSA issued its first notice on the JFK project in May 2009—10 months before giving the no-bid contract to Alutiiq Manufacturing Contractors in March.

With Afognak’s reliance on subcontracting, it reported a profit margin of just 2 percent in 2009. But because Afognak has only 750 shareholders and had $733 million in contracts, it was still enough to pay the typical native shareholder about $24,000 in dividends.

Such a large dividend is unusual, however. Most ANC shareholders receive less than $500 a year in dividends, according to an earlier ProPublica review of ANC financial documents.

Perpetual Access to Contracts

The SBA program is meant to help minority-owned companies grow by giving them access to no-bid contracts for nine years or until they have the revenue and experience to graduate. But McCaskill and other critics say some ANCs have no intention of standing on their own.

Under SBA rules, minority business owners can participate in the program only once. But tribal corporations are exempt and can keep receiving no-bid contracts indefinitely.

ANCs may have multiple subsidiaries in the program at one time, and once a subsidiary grows too large for the program, an ANC can simply create a new firm in the same industry to remain eligible.

One example of this occurred with CCI Group, the stimulus contractor that subcontracted 95 percent of some of its projects. The company is owned by the Bristol Bay Native Corporation, which represents Yup’ik Eskimos and other natives in southwest Alaska.

According to the corporation’s 2008 annual report, CCI Group was formed in 2008 after another Bristol Bay subsidiary, CCI Inc., graduated from the SBA program, making it ineligible for no-bid contracts. But that didn’t mean Bristol Bay’s access was shut off.

“CCI Group was formed during 2008 to pursue work that CCI Inc. will no longer be able to accept,” the report said. Duncan Morrison, a top employee at CCI Inc., moved over to become president and CEO of CCI Group. Morrison declined to comment, and Bristol Bay did not return calls.

Under the stimulus, CCI Group has received $106 million in projects, more than any other ANC subsidiary. But much of that work has been subcontracted out, including 20 construction projects in which the subcontract exceeded 85 percent of the project cost.

The SBA hopes that after the agency invests government resources to help a firm, it will be successful, contracting official Jenkins said. But under the law, there’s nothing the agency can do if an ANC starts a new firm to keep getting no-bid contracts. Congress allowed it to foster economic development in the native communities and because some ANCs support thousands of natives.

In November, McCaskill and Thompson introduced bills that would eliminate ANCs’ ability to have more than one subsidiary in the SBA program and to subcontract to larger firms. “We’ve seen that a very small portion of these companies’ profits are reaching native Alaskans,” McCaskill said at the time, “so it’s time to acknowledge the fact that this program is not effective for either native Alaskans or taxpayers.”

In December, McCaskill told the Tundra Drums newspaper, which is owned by an ANC, that she would be open to alternatives to help Alaska natives, but not through “noncompetitive, huge multimillion dollar contracts.”

The legislation hasn’t received much attention in the new Congress yet and has been widely criticized by ANCs, native groups and Alaska’s congressional delegation.

“In Washington, we are forced to respond to attacks on your success in the 8(a) program,” Sen. Lisa Murkowski, R-Alaska, told attendees at the 2010 annual convention of the Alaska Federation of Natives. “All of these unfortunate situations remind us that we must remain vigilant against those who would try to reverse the progress that’s been made over the last 50 years.”

54   Arctic slope Regional Corporation   439015537
55   Nana Regional Corporation   429673300
65   Eyak Technology   342368972
68   Chenega Corporation   324548094
80   Chugach Alaska Corporation   229526943
84   Alutiq LLC   219762894
     
     
     
      1,984,895,740

6 ANC’s made the top 100.  The total of all contracts for the 6 ANC’s was just under 2 billion dollars. 

#1 Lockheed Martin Corp. $16,700,588,328, nearly 17 billion dollars.  What did the average shareholder for Lockheed Martin Corp recieve in the form of monetary dividends?  6 ANC’s made less than 2 billion combined revenue.  The top 15 Government Contractors made more money individually that 6 ANC’s made Combined.  Is there any scrutiny into these corporations?  What are they paying their shareholders?  Is this merely a “Good Old Boy” club that has problems with Alaskan Natives recieving a small percentage of government contracts?  When the amount of money that is being made from the top 15 corps all equal more than the 6 ANC’s combined revenues, it makes me wonder if Senator Mckaskill and the Washington Post are asking the right questions to the right ethnic group or are they trying to take all eyes off the bigger picture and profile a race of people to take the blame?

Just remember that the Alaskan Natives had rights to the lands of Alaska.  Big Government greedy for oil $$$$$ came and “took” away the native land and in return for the billions of $$$ 1000 times over, Big government alloted the original native owners of oil rich, timber rich, subsistence rich land with parcels of land.  In their “deal” for the Alaskan Natives they wrote in stipulations that would benefit Alaskan Natives, programs such as 8(a) contracting that were meant to benefit the ANC’s for all of the land Big Government stole from the Alaskan Native People.  There were stipulations for 100% medical care for Alaskan natives as well as part of big Governments “deal” also for stealing the Alaska Native Land for Oil $$$$$, billions and billions and billions of $$$ 1000 times over.  Now Alaskan Natives were never percieved by the big government to ever take advantage of the meager compensation allowed in the ANSCA act of 1971.  Well over the last 5 years Alaskan Natives have started taking advantage of the crumbs allotted to us.  Because we weren’t expected to, Alaska Natives are now under attack because as usual, Big Government and the Good Old Boys clubs want all of the pie, they even want to sweep up the crumbs that were intended for stealing Alaska Native Land.  Nothing new and the reporters of groups like this and the Washington Post and folks like Senator Mcaskill insist on making sure the Good Old Boys get what they want.  Maybe the question should be whose back pockets are they in?

January 27th, 2011

ANCHORAGE, AK (January 27, 2011):  Afognak Native Corporation (Afognak) expressed criticism over a recently published ProPublica story containing misleading information regarding Alutiiq Manufacturing Contractors’ (AMC) work on a federal building contract in Boston, MA.  AMC is a subsidiary of Afognak. The story inappropriately targets AMC and several other Alaska Native Corporations (ANCs) who have been awarded American Recovery and Reinvestment Act (ARRA) contracts.

Afognak provided the author key information about the contract, explaining that AMC is fully compliant with all federal rules and regulations on the contract.  In fact, contrary to ProPublica’s characterization, Afognak explained that AMC is currently performing in excess of the minimum work requirements as set and determined by the federal government.

“It is unfortunate that ProPublica has published another story based on incomplete data and irresponsible conclusions,” stated Afognak’s Vice-President of Corporate Affairs, Jana Turvey. “It is apparent with this latest attack that neither ProPublica nor any of the critics of ANC participation in the SBA 8(a) Program know how to calculate self-performance under the Agency regulations.”

Federal rules require that small businesses performing a general construction contract perform at least 15 percent of the cost of the contract with their own employees.  This calculation is performed after removing the costs of materials. “Even by ProPublica’s own calculations, AMC is exceeding federal requirements on this contract,” said Ms. Turvey. “It is hard to understand how a story about a Company being in compliance is newsworthy.”

In addition, Afognak provided a detailed description of the work being performed by AMC on the contract. Nonetheless, the story ignores those details and incorrectly asserts the contract was a “pass-through”. “AMC’s performance of essential general contracting support services ensures the project is on budget, on schedule and that all tasks are completed according to contract specifications.”  Ms. Turvey added, “Like any company, as our experience has grown we have improved our competitive strengths and learned how to offer a better, more valuable product to our customer. Afognak is proud of AMC’s exemplary performance record on behalf of the U.S. Government, and we will continue to provide all of our customers with first rate federal contracting service and support.”

For additional information contact Jana Turvey at 907.222.9500

The racial bias argument is a strawman. This whole program has been exploited by the biggest of the big at the expense of actual small businesses.

For example with CCI at Ft. Wainwright, those 95% subcontractors used to work directly for DoD without any special program but now they still do the work and have to ask to get paid from someone other than DoD. What value is added by CCI’s involvement?

I am an Alaska Native shareholder.  My corporations, both regional and village, are engaged in 8(A) contracting.  It has been a huge boon for us, and has made a significant impact in our lives and standard of living. I have received dividends from net profits in the past 5 years one hundred fold what I received prior to my corp. getting into contracting.  My children receive scholarships from our foundation which had almost nothing prior to gov’t contracting.  Our lands, which were only partially returned to us just 40 years ago, can only be protected by viable, stable, companies. AND my corps. have done a very good job for the gov’t.  We have received commendations for our work.  We are learning new trades, and employing many people around the country, and even the world.  We get to stay in our homelands, and invest in these companies which bring back to us, dividends and other important returns.  If our corps. fail, we lose the land. It’s that simple, and I can’t help but believe, THAT is what it’s all about—somebody wants our lands.  It’s an old sad song.

Strawman?  Take a look at the numbers provided in the first post by aidah bug. Better yet, google the Top 100 Fedral Contractors and take a look at all of them.  Do the math.  It is all about numbers and the numbers tell the story.  First ANC is #54 and doesn’t even come close to all of those before them.  Where is the scrutiny for the first 30 or so?  Where do their money trails lead?  How much are their shareholders recieving in monetary dividends?  Are those companies providing education for their shareholders dependants, are they doing what they can to keep their cultures alive?  How much money is the CEO of Lockheed Martin paid?  What about all of their consultants?

Strawman?  It is called diversion.  Wouldn’t be surprised if some of those top 20 are big donators to the causes of the Washington Post, Pro Publica, the state of Missouri, McCaskills campaign fund etc.

Follow the numbers don’t always believe the reporters. Look through the first things you see and see if there is anything else between the lines.

Kind of coincidental, that with 53 other government contractors making a lot more money than the ANC’s, that a ethnic minority being targeted.  Doesn’t seem like no strawman from this perspective.

shifting work to outsiders?  At least the outsiders, if this is true are INSIDE the USA!  What about big corps because of big gov shipping factories, work, money oversea’s and across borders?  That used to be a big problem, still is.  Now these mindless reports and reporters and senators are worried that corporations are shifting work from state to state within our nations borders?  Give me a break, like someone previously mentioned, read between the lines.  Diversion tactics and good, honest, and thinking Americans are supposed to fall for this?

You are comparing apples to oranges. The scale of federal contracting throughout the U.S. to the scale and impact of these practices on local, state and regional economies.

They aren’t taking work away from the global conglomerates, they are taking it away from other small businesses who didn’t happen to get chartered under ANCSA.

In fact, all these audits, reports and stories tell us that the money is temporarily diverted through the 8(a) program just to end up back in the hands of the already massive global defense contractors - or the endlessly revolving door of non-Native employees who circulate between them all.

Diane, I get it.  You lost a contract or job when an ANC got a contract. ANC’s did get a special dispensation under the 8(a) rules and other small businesses were ticked off by that. I get that. But the ANC’s represent thousands of shareholders, not just one or two, as other 8(a) contractors do. many of those small businesses teamed up with ANC’s in their fields, but some got displaced by the system. It’s not perfect, but it is not anywhere nearly as badly broken as the hyper ventilating media has made it. Let’s fix what needs fixing in what is a good program.

Rent a Native - federal contracting at its finest.

Rent-A-Native is exactly why a consortium of ANC’s contributed several million dollars to fund Lisa Murcowski’s write in campaign - because she’s all for renting natives and sticking it to the tax payer and stiffing your kids and other kids in other states with the bill. 

That’s why the rented natives at Alaskans Lying Together launched the worse smear campaign in Alaska history.

Roxanne… you don’t have to turn on that red light.

"facebbooks" Sealaska Shareholders Underground

Feb. 4, 2011, 6:05 p.m.

I would need access to all Sealaska proxy statements and annual reports. I would need the records about our natural resources and how much have been sold and the prices the assets were sold at. Appraisals of properties sold and who the buyers were. Donations,costs and benefits paid to those in management and Boards of directors.
The purpose of my request is transparency where we Shareholders know more about corporate transactions so we can make educated decisions affecting our rights as shareholders and stock values.
Sealaska / shareholder

RESPONSE;
As I have communicated to you on several occasions, over many years, all other documentation you request below is not among the books and records of account available to shareholders. They are confidential and proprietary documents pertaining to the operations of Sealaska and to the compensation of individuals, which is information protected by state and federal privacy laws.
VP Sealaska Corp.

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