Establish Fair Competition Rules for Alaska Native Corporations

Background:

• Alaska Native Corporations (ANCs) were developed in order to settle many long-standing land claims and to foster economic growth for Alaska Natives. In 1986, legislation was passed to allow ANCs to participate in the SBA’s 8(a) program for socially and economically disadvantaged businesses.  The special exemptions afforded to ANCs have harmed the businesses the 8(a) program was intended to assist as well as other small businesses involved in the federal market.

AGC Message:

• ANCs Have Extraordinary Special Preferences that Significantly Reduce Federal Contracting Opportunities for Traditional Small Businesses.  The following special preferences available to ANCs give them advantages not available to other socially and economically disadvantaged business owners:
  • The lack of any ceilings on sole-source contracts with the federal government
  • An exemption that allows ANCs that would otherwise be too large to qualify for 8(a) status
  • Special rules that allow ANCs to be managed by individuals who are not required to demonstrate social or economic disadvantage as required of other participants in the Section 8(a) Program.
• Some ANCs Have Taken Excessive Advantage of their Special Benefits to Obtain Multi-Million Dollar Sole-Source Government Contracts.  In April 2006, the General Accounting Office issued a report demonstrating how ANCs have been using the SBA program, reporting that amounts from the SBA’s 8(a) programs used for ANCs went from $265 million in FY 2000 to $1.1 billion in FY2004. By FY 2005, ANC contracting dollars had more than doubled to $2.4 billion.  During the five-year period from FY 2000 to FY 2004, 77 percent of 8(a) ANC contracts were sole source awards. 
• The SBA Must Better Track the Growth of ANCs.  While the GAO report states that this government program is fulfilling its purpose, it is clear that the SBA must improve its management and oversight of the program. SBA must examine the impact these preferences have had on other disadvantaged groups, not to mention the inefficiencies in government contracting and the cost to taxpayers. The GAO proposed better compliance through monitoring performance, tightening controls on subcontracting, and ensuring that an ANC owns only one subsidiary that generates revenue within a primary industry. SBA must quickly work to implement these suggestions.