United States Government Accountability Office

GAO Report to Congressional Requesters

CONTRACT 

MANAGEMENT 

Increased Use of 

Alaska Native 

Corporations’ Special 

8(a) Provisions Calls 

for Tailored Oversight 

April 2006 

 

GAO-06-399 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

April 2006 

CONTRACT MANAGEMENT 

Increased Use of Alaska Native 

Corporations’ Special 8(a) Provisions 

Calls for Tailored Oversight 

Highlights of GAO-06-399, a report to 

congressional requesters 

Alaska Native corporations (ANC) 

were created to settle land claims 

with Alaska Natives and foster

economic development. In 1986, 

legislation passed that allowed

ANCs to participate in the Small 

Business Administration’s (SBA) 

8(a) program. Since then, Congress

has extended special procurement

advantages to 8(a) ANC firms, such

as the ability to win sole-source

contracts for any dollar amount. 

This report identifies (1) trends in 

the government’s 8(a) contracting 

with ANC firms, (2) the reasons

agencies have awarded 8(a) solesource contracts to ANC firms and 

the facts and circumstances behind 

some of these contracts, and (3) 

how ANCs are using the 8(a) 

program. GAO also evaluated 

SBA’s oversight of 8(a) ANC firms. 

What GAO Recommends

GAO recommends that SBA take 

actions to improve oversight of 

ANC 8(a) activity and recommends 

that the seven procuring agencies 

in this review provide guidance to 

contracting officers. GAO received

comments on the draft report from

all 8 agencies in the review and the

Native American Contractors 

Association. The procuring

agencies agreed with the 

recommendation, except for the 

Department of Energy which did 

not address it. SBA expressed 

concern with aspects of the report 

and, in a subsequent e-mail,

disagreed with several of our 

recommendations. GAO disagrees 

with SBA’s comments and believes

its recommendations need to be 

implemented. 

While representing a small amount of total federal procurement spending,

8(a) obligations to firms owned by ANCs increased from $265 million in 

fiscal year 2000 to $1.1 billion in 2004. In fiscal year 2004, obligations to ANC 

firms represented 13 percent of total 8(a) dollars. Sole-source awards 

represented about 77 percent of 8(a) ANC obligations for the six procuring 

agencies that accounted for the vast majority of total ANC obligations over 

the 5-year period. These sole-source contracts can represent a broad range 

of services, as illustrated in GAO’s contract file sample, which included 

contracts for construction in Brazil, training of security guards in Iraq, and 

information technology services in Washington, D.C. 

In general, acquisition officials at the agencies reviewed told GAO that the 

option of using ANC firms under the 8(a) program allows them to quickly, 

easily, and legally award contracts for any value. They also noted that these 

contracts help them meet small business goals. In reviewing selected large, 

sole-source 8(a) contracts awarded to ANC firms, GAO found that 

contracting officials had not always complied with certain requirements, 

such as notifying SBA of contract modifications and monitoring the percent

of work that is subcontracted. 

ANCs use the 8(a) program to generate revenue with the goal of providing 

benefits to their shareholders. These benefits take many forms, including 

dividend payments, scholarships, internships, and support for elder 

shareholders. A detailed discussion of the benefits provided by the ANCs is 

included as appendix X of the report. Some ANCs are heavily reliant on the 

8(a) program for revenues, while others approach the program as one of 

many revenue-generating opportunities. GAO found that some ANCs have 

increasingly made use of the congressionally authorized advantages afforded 

to them. One of the key practices is the creation of multiple 8(a)

subsidiaries, sometimes in highly diversified lines of business. From fiscal 

year 1988 to 2005, ANC 8(a) subsidiaries increased from one subsidiary

owned by one ANC to 154 subsidiaries owned by 49 ANCs. 

SBA, which is responsible for implementing the 8(a) program, has not 

tailored its policies and practices to account for ANCs’ unique status and 

growth in the 8(a) program, even though SBA officials recognize that ANCs 

enter into more complex business relationships than other 8(a) participants. 

Areas where SBA’s oversight has fallen short include: determining whether 

more than one subsidiary of the same ANC is generating a majority of its 

revenue in the same primary industry, consistently determining whether 

awards to 8(a) ANC firms have resulted in other small businesses losing 

contract opportunities, and ensuring that the partnerships between 8(a) ANC 

firms and large firms are functioning in the way they were intended. During 

our review, SBA officials agreed that improvements are needed and said they 

are planning to revise their regulations and policies. 

www.gao.gov/cgi-bin/getrpt?GAO-06-399.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Katherine 

Schinasi at (202) 512-4841 or 

schinasik@gao.gov. 
Contents 

Letter 1

Results in Brief 6 

Background 9

Increase in 8(a) Federal Contracting with ANC Firms 11 

Federal Agencies Contract with ANC Firms for a Variety of 

Services Worldwide 14 

Agency Officials View Contracting with ANC Firms as Quick and 

Easy, but Rules Not Always Followed 16 

ANCs Use the 8(a) Program to Increase Revenue and Provide 

Benefits 23

Improvements Needed in Oversight of ANCs in the 8(a) Program 33 

Conclusion 39

Recommendations for Executive Action 40 

Agency Comments and Our Evaluation 41 

Appendix I Scope and Methodology 48 

Appendix II Comments from the Small Business Administration 53 

Appendix III Comments from the Department of Homeland 

Security 55 

Appendix IV Comments from the Department of the Interior 57 

Appendix V Comments from the National Aeronautics and 

Space Administration 59 

Appendix VI Comments from the Department of State 60 

Appendix VII Comments from the Department of Energy 65 

Page i GAO-06-399 Alaska Native Corporations
Appendix VIII Comments from the Native American Contractors 

Association 67 

Appendix IX Alaska Native Corporations with Subsidiaries 

Participating in the 8(a) Program 78 

Appendix X Benefits That Alaska Native Corporations Provide 

to Their Shareholders 80 

Appendix XI Example of an Alaska Native Corporation Owning 

Subsidiaries That Market Their Capabilities under 

Overlapping NAICS Codes 85 

Appendix XII GAO Contact and Staff Acknowledgments 86 

Tables 

Table 1: Differences in Requirements for Other 8(a) Businesses and 

8(a) ANC Firms 3 

Table 2: Overview of Number of Shareholders and Net Incomes for 

the Corporations We Reviewed (Fiscal Year 2004 Data) 10 

Table 3. Location and Services for Selected 8(a) ANC Sole-Source 

Contracts 15

Table 4: Practices Pertaining to Owning Multiple Subsidiaries 28 

Table 5: ANCs with Subsidiaries Participating in the 8(a) 

Program (26) 50 

Table 6: ANCs That Do Not Have Subsidiaries Participating in the 

8(a) Program (4) 51 

Table 7: Villages Visited 51 

Page ii GAO-06-399 Alaska Native Corporations
Figures 

Figure 1: ANCSA Regions and Sites We Visited 5 

Figure 2: 8(a) and Non-8(a) Obligations to ANC Firms 

Governmentwide for Fiscal Years 2000 to 2004 (in 

Millions) 12

Figure 3: Obligations to 8(a) Firms Overall and to 8(a) ANC Firms, 

Governmentwide, for Fiscal Years 2000 to 2004 (in 

Millions) 13

Figure 4: Sole-Source Obligations to 8(a) ANC Firms for Fiscal 

Years 2000 to 2004 for Selected Agencies (in Millions) 14 

Figure 5: Revenue Sources for a Sample ANC 24 

Figure 6: Number of ANC Parent Corporations and Subsidiaries 

Active in 8(a) Program, 1988 to 2005 26 

Figure 7: Sample ANC with Holding Company 31 

Abbreviations 

ANC Alaska Native corporations 

ANCSA Alaska Native Claims Settlement Act 

CIFA Counter Intelligence Field Activity 

DOD Department of Defense 

DUNS Data Universal Numbering System 

FPDS Federal Procurement Data System 

MOU memorandums of understanding 

NAICS North American Industry Classification System 

NASA National Aeronautics and Space Administration

SBA Small Business Administration 

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Page iii GAO-06-399 Alaska Native Corporations
United States Government Accountability Office

Washington, DC 20548 

April 27, 2006

Congressional Requesters: 

In December 1971, Congress enacted the Alaska Native Claims Settlement 

Act (ANCSA)

1

 to resolve long-standing aboriginal land claims and to foster 

economic development for Alaska Natives. This legislation created Alaska

Native corporations (ANC), which would become the vehicle for 

distributing land and monetary benefits to Alaska Natives in lieu of a 

reservation system.2

 ANSCA permitted the conveyance of about 44 million 

acres of land to the ANCs, along with cash payments of almost $1 billion in 

exchange for extinguishing the aboriginal land claims in Alaska. Regional

corporations were required to be formed as profit-making entities, while 

village, urban, and group corporations could decide whether to be profit or

nonprofit entities. As of December 2005, there were 13 regional 

corporations and 182 village, urban, and group corporations. ANCSA does 

not set any requirements on how ANCs are to use the profits they 

generate.

In 1986, legislation passed that allowed ANC-owned businesses to 

participate in the Small Business Administration’s (SBA) 8(a) program—

one of the federal government’s primary means for developing small 

businesses owned by socially and economically disadvantaged individuals. 

This program allows the government to award contracts to participating 

small businesses without competition below certain dollar thresholds. 

Congress has repeatedly emphasized in legislation the business 

development aspects of the 8(a) program. Each 8(a) firm, including those 

owned by ANCs, must qualify as small under an industry size standard as 

measured by number of employees or average revenues from the previous 

3 years, and must be majority-owned by a disadvantaged individual or a 

qualified entity, such as an ANC. Firms approved as 8(a) participants can 

receive business development assistance from SBA and are eligible to

receive contracts that agencies offer to SBA for the 8(a) program. In 1998, 

SBA started negotiating memorandums of understanding (MOU) that 

 1

Pub.L. 92-203 (codified as amended in 43 U.S.C. 1601, et seq.). 

2

 Aside from monetary benefits, ANCs also provide other benefits to their shareholders, 

such as scholarships, internships, burial assistance, and benefits for elder shareholders. 

The benefits ANCs provide are discussed in detail in appendix X.

Page 1 GAO-06-399 Alaska Native Corporations
allowed federal agencies to contract directly with 8(a) firms. The MOUs 

(also called partnership agreements), delegate contract execution 

responsibility to the agencies and require them to monitor certain 

requirements of the contract. 

Since 1986, Congress has extended special procurement advantages to 

ANC firms beyond those afforded to other 8(a) businesses.3

 Table 1 shows 

the advantages. 4

 3

In this report, the term “ANC” refers to the parent corporation, usually located in Alaska. 

The term “ANC firm” denotes a business owned by an ANC. This has the same meaning as

“ANC-owned concern” which is the term used in SBA’s small business regulation. We use 

the term “subsidiary,” as used in ANSCA, to refer to direct and indirect ANC subsidiaries. 

4

We found the legislative history leading to the procurement advantages to be sparse and to

contain some confusing language. For example, legislative language suggests that 8(a)

businesses owned by Indian tribes (defined to include ANCs) were exempt from solesource dollar thresholds because such businesses are located on reservations and account 

for the major employment of the workforce. ANCs, however, do not have reservations. 

Page 2 GAO-06-399 Alaska Native Corporations
Table 1: Differences in Requirements for Other 8(a) Businesses and 8(a) ANC Firms 

Requirement Other 8(a) businesses 8(a) ANC firms 

Number of firms an 8(a) 

participant may own 

Only one in a lifetime and no more than 20 percent 

of another 8(a) firm 

No limit as long as each business is in a different 

primary industry 

Size determination for 

eligibility in 8(a) program 

For-profit, nonprofit, domestic, and foreign affiliates 

considered in size determination 

Other affiliated companies not considered in size 

determination; however, SBA may find the 

existence of affiliation if, for example, it determines 

that the 8(a) ANC firm or firms have a substantial 

unfair competitive advantage within an industry. 

Competitive threshold Can receive sole-source contracts for up to $5 

million for manufacturing or $3 million for all other 

contracts. 

Procurements must be competed whenever

possible before being accepted on a sole-source 

basis. 

No threshold 

Procurements need not be competed before being 

accepted on a sole-source basis. 

Demonstration of social 

and economic 

disadvantage 

Must (1) be a member of a group deemed as

socially disadvantaged or prove social disadvantage 

by meeting certain standards and (2) must prove 

economic disadvantage 

Deemed in legislation as socially and economically 

disadvantaged

Management background President/chief executive officer must be a 

disadvantaged individual 

President/chief executive officer need not be a 

disadvantaged individual 

Potential for success Must be in business in primary industry 

classification for at least 2 years before 8(a) 

application date 

SBA can waive the requirement if certain conditions 

are met, such as substantial business experience, 

adequate capital, and past success on contracts. 

Must be in business in primary industry 

classification for at least 2 years before 8(a) 

application date or demonstrate to SBA potential for 

success (i.e., technical and management 

experience; financial capability; past experience). 

 

Source: GAO analysis.

Note: Other groups, such as Indian tribes, Native Hawaiian Organizations, and Community 

Development Corporations, have some advantages in the 8(a) program similar to those afforded 

ANCs. Further, Congress has provided preferences to businesses owned by Indian tribes (defined to

include ANCs), under the Office of Management and Budget’s A-76 program in several prior Defense 

Appropriation Acts, including the Defense Appropriations Act for fiscal year 2006. Department of 

Defense Appropriations Act, 2006, Pub. L. 109-148 § 8014(b)(1)(C).

Recently, a number of high-dollar, sole-source 8(a) contracts awarded to 

ANC firms have attracted the attention of Congress and the media. This 

report identifies (1) trends in the government’s 8(a) contracting with ANCs 

from fiscal years 2000 to 2004; (2) the reasons agencies have awarded 8(a) 

sole-source contracts to ANC firms and the facts and circumstances 

behind some of these contracts; and (3) how ANCs are using the 8(a) 

program. In addition, we evaluated SBA’s oversight of 8(a) ANC firms, 

given these companies’ unique procurement advantages. 

Page 3 GAO-06-399 Alaska Native Corporations
To gather data on federal 8(a) contracting with ANCs, we identified each 

ANC firm’s Data Universal Numbering System (DUNS) number5

 and used 

this information to obtain data from the Federal Procurement Data System 

(FPDS) for fiscal years 2000 through 2004. We tested the FPDS data for 

reliability by comparing this information with procurement data submitted 

by six agencies that accounted for almost 85 percent of total 8(a) ANC 

obligations over the 5-year period: the departments of Defense, Energy, 

the Interior, State, and Transportation and the National Aeronautics and 

Space Administration (NASA). We planned to include the Department of 

Homeland Security’s data in our trend analysis but did not do so for two 

reasons. First, because the department became operational in March 2003,

FPDS data would reflect only part of fiscal year 2003 and beyond. Second, 

we found that the data from Homeland Security were inconsistent, and 

therefore questioned the reliability of the data overall. 

We analyzed documents provided by SBA’s headquarters and Alaska 

district office and interviewed officials from those offices. We reviewed 

16 large, sole-source 8(a) contracts awarded to ANC firms by the six 

agencies cited above as well as by the Department of Homeland Security

and interviewed appropriate contracting officials. We traveled to Alaska 

and met with executives representing 30 ANCs, including each of the 

13 regional ANCs and 17 village or urban corporations. Of the 

30 corporations, 26 were participating in the 8(a) program and 4 were not

at the time of our review. We also spoke with Alaska Native shareholders 

and reviewed the companies’ annual reports and other relevant 

documentation. Figure 1 depicts the sites we visited in Alaska. 

 5

A DUNS number is a 9-digit identification number assigned by Dun & Bradstreet, Inc., to 

identify unique business entities. 

Page 4 GAO-06-399 Alaska Native Corporations
Figure 1: ANCSA Regions and Sites We Visited 

Chugach

Cook Inlet

Doyon

Arctic Slope

NANA

Bering Straits

Calista

Aleut

Bristol Bay

Koniag

Sealaska

Ahtna

Source: GAO analysis of Census Bureau information.

Note: Stars identify villages and urban areas where we conducted our work. See appendix I for the 

names of the villages and corporations. 

We also spoke with representatives from small businesses, an 8(a) 

association, and the Native American Contractors Association. Our work 

included a detailed review of the laws, regulations, and legislative history

that afforded ANCs their special 8(a) provisions. Appendix I contains more 

Page 5 GAO-06-399 Alaska Native Corporations
details on our scope and methodology. We conducted our review from 

April 2005 to March 2006 in accordance with generally accepted 

government auditing standards. 

While representing a small amount of total federal procurement spending, 

dollars obligated to ANC firms through the 8(a) program grew from 

$265 million in fiscal year 2000 to $1.1 billion in 2004, with a noticeable 

increase in 2003. Overall during the 5-year period, the government 

obligated $4.6 billion to ANC firms, of which $2.9 billion, or 63 percent, 

went through the 8(a) program. About 13 percent of total 8(a) dollars were 

obligated to ANC firms in fiscal year 2004. For the six agencies included in

our trend analysis, sole-source 8(a) obligations to ANC firms rose from 

about $180 million in fiscal year 2000 to $876 million in fiscal year 2004, 

representing about 77 percent of these agencies’ total obligations to 8(a) 

ANC firms over the 5-year period. As illustrated in our contract file sample, 

these sole-source contracts can represent a broad range of services, such

as contracts for construction in Brazil, training of security guards in Iraq, 

and information technology services in Washington, D.C. 

Results in Brief 

Agency officials told us they have turned to 8(a) ANC firms as a quick, 

easy, and legal method of awarding contracts for any value. At the same 

time, the officials noted that these contracts help them meet small 

business goals. In our review of selected large dollar value, sole-source 

contracts, we found that contracting officials had not always complied 

with requirements to notify SBA when modifying the contracts to increase

the scope or dollar value and to monitor the percentage of work 

performed by the ANC firms versus their subcontractors. One contracting 

officer was under the impression that the scope of work could be 

expanded to include any additional lines of business not in the original 

contract because it was a sole-source 8(a) ANC contract. 

ANCs use the 8(a) program as one of many tools to generate revenue with 

the goal of benefiting their shareholders. Appendix X contains detailed

information on benefits the corporations are providing. Some ANCs are 

heavily reliant on the 8(a) program for revenues, while others approach 

the program as one of many revenue-generating opportunities, such as 

investments in stocks or real estate. ANCs are using the congressionally 

authorized advantages afforded to them, such as ownership of multiple 

8(a) subsidiaries, sometimes in diversified lines of business. From fiscal 

year 1988 to 2005, numbers increased from one 8(a) subsidiary owned by 

one ANC to 154 subsidiaries owned by 49 ANCs, with the largest growth 

occurring in recent years. ANCs sometimes leverage expertise and 

Page 6 GAO-06-399 Alaska Native Corporations
management by sharing staff and expertise among subsidiaries to win new 

contracts and create a subsidiary to win a follow-on contract when the 

original subsidiary outgrows its designation as “small.” Another practice is

partial ownership of subsidiaries, which in some cases means that 

subsidiary executives retain a portion of the profit they generate—up to 

44 percent in one case we found. Other ANCs have purposely limited their 

8(a) involvement to a targeted industry with the goal of becoming 

independently sustainable—a strategy that, in their view, is consistent 

with the business development intent of the 8(a) program. ANCs have also 

formed partnerships with other ANCs or other firms to increase 

opportunities to obtain federal contracts. Finally, some ANCs have created 

holding companies to increase efficiency across multiple subsidiaries. 

SBA has not tailored its policies and practices to account for ANCs’ unique 

status in the 8(a) program and their growth in federal contracting, even 

though SBA officials recognize that ANC firms enter into more complex 

business relationships than other 8(a) participants. The officials agreed 

that improvements are needed and told us they are planning to revise their 

regulations and policies. Examples where SBA’s oversight has fallen short 

include not 

• determining whether more than one subsidiary of the same ANC is 

generating the majority of revenue under the same primary industry;6

• consistently determining whether other small businesses are losing 

contracting opportunities when large, sole-source 8(a) contracts are 

awarded to ANC firms; 

• adhering to a legislative and regulatory requirement to ascertain 

whether 8(a) ANC firms have, or are likely to obtain, a substantial 

unfair competitive advantage within an industry;

• ensuring that the partnerships between ANC firms and large firms are 

functioning in the way they were intended under the 8(a) program; and 

• maintaining information on ANCs’ 8(a) activity. 

SBA officials told us that they have faced a challenge in overseeing the 

activity of the 8(a) ANC firms because ANCs’ charter under ANCSA is not 

always consistent with the business development intent of the 8(a) 

program. They noted that the goal of ANCs—economic development for 

Alaska Natives from a community standpoint—can be in conflict with the 

 6

The primary industry is the primary line of work that the 8(a) firm performs. 8(a) concerns

may also seek opportunities through secondary business activities, as long as they qualify 

as small for the size standards pertaining to each line of work. 

Page 7 GAO-06-399 Alaska Native Corporations
primary purpose of the 8(a) program, which is business development for 

individual small, disadvantaged businesses. 

We make recommendations in this report to SBA on actions that can be 

taken in revising its regulations and policies as well as ways to improve 

practices pertaining to its oversight of ANC 8(a) procurements. We also 

recommend that the procuring agencies involved in our review work with 

SBA to develop guidance for their contracting officers on how to comply 

with the requirements of the 8(a) program to help address some problems 

we found with the 8(a) sole-source contracts we reviewed. 

Six of the procuring agencies involved in our review agreed with the 

recommendation we made to them. The Department of Energy did not 

comment on the recommendation. In some cases, the agencies provided 

technical comments or clarifications, which we incorporated as 

appropriate. We also received written comments from the Native 

American Contractors Association. The association believes that we 

should more fully acknowledge the legal and policy basis of 8(a) program 

rules for native entities and that we should provide a broader perspective 

on issues that impact the entire federal procurement system. We believe

we have adequately addressed the legal and policy basis for the ANCs’ 8(a) 

provisions. While we have reported in the past on the broader issues 

raised by the association,7

 these matters were outside the scope of this 

particular audit. In separate technical comments, the association 

suggested we add, for context, total federal government spending. We 

have added this information as a note to figure 3. 

In written comments on a draft of this report, SBA took issue with several 

aspects of the report, stating that the concerns we raised were “subjective”

and based on isolated individual anecdotes. We strongly disagree with 

SBA’s characterization of our report. Our findings are supported by the 

facts we gathered during our audit and the analyses we conducted, and 

these findings directly support the recommendations we make. It is an 

 7

 For example: GAO, Federal Procurement: Spending and Workforce Trends, GAO-03-443

(Washington, D.C.: April 30, 2003); GAO, Contract Management: Impact of Strategy to 

Mitigate Effects of Contract Bundling on Small Business is Uncertain, GAO-04-454

(Washington, D.C.: May 27, 2004); GAO, Small Business Contracting: Concerns About the

Administration’s Plan to Address Contract Bundling Issues, GAO-03-559T (Washington,

D.C.: March 18, 2003); GAO, Reporting of Small Business Contract Awards Does Not 

Reflect Current Business Size, GAO-03-776R (Washington, D.C.: May 7, 2003); and GAO, 

Interagency Contracting: Problems with DOD’s and Interior’s Orders to Support Military 

Operations, GAO-05-201 (Washington, D.C.: April 29, 2005).

Page 8 GAO-06-399 Alaska Native Corporations
undisputed fact that 8(a) ANC activity has increased in recent years. 

Clearly, 6 of the 7 procuring agencies involved in our review—which 

account for most of the government’s 8(a) dollars to ANC firms—agree 

that they need to partner with SBA to ensure that contracting officers 

understand the tailored provisions Congress has provided these firms. 

SBA stated that it has taken a number of steps to improve oversight of the 

8(a) program, including taking into consideration special provisions 

afforded to ANC concerns. Despite our requests throughout our review for 

specific information on actions SBA was taking, the agency did not 

provide us with any evidence that would support its statement. SBA’s 

comment letter did not indicate whether it plans to implement our 

recommendations, but in a subsequent e-mail SBA expressed 

disagreement with several of them. A detailed discussion of the comments 

begins in the “Agency Comments” section of this report. 

The written comments we received are included in their entirety in 

appendixes II through VIII. 

ANSCA created 12 regional ANCs, each representing a region of Alaska, 

and a 13th corporation for Alaska Natives living outside Alaska. There are 

also 182 village, urban, and group corporations located within the 

12 regions.8

 In most cases, the regional corporations received a mixture of 

surface and subsurface rights to land while the village, urban, or group 

corporations received only surface rights. Some village corporations opted 

out of the ANCSA settlement to receive surface and subsurface rights to 

their former reservation lands and relinquished all ANSCA benefits, 

including claims to additional land, monetary payments, or shares of stock 

in a regional corporation. Additionally, in some cases, village corporations 

merged with each other or with the regional corporation. 

Background 

The legislative history of ANSCA is focused on economic development for 

the benefit of Alaska Natives. Each eligible Alaska Native is generally 

entitled to membership both in the corporation established for his or her 

village and in the regional corporation in which the village is located. As 

shareholders, Alaska Natives are entitled to a voice in the management of

and a share in the lands, assets, and income as decided by the board of 

 8

ANCSA created village corporations for communities of 25 or more Alaska Natives, group 

corporations for associations of fewer than 25 Alaska Natives, and urban corporations for 

urban communities of Alaska Natives. 

Page 9 GAO-06-399 Alaska Native Corporations
directors of the corporations, which own and manage the land and money. 

ANCSA implemented restrictions that generally allow original 

shareholders to transfer shares only under certain circumstances, such as 

divorce or through a gift or a will.9

 Additionally, four of the 

30 corporations we reviewed have chosen to issue new stock to 

descendants of the original shareholders or those who did not have the 

opportunity to enroll as a shareholder originally.

ANCs vary widely in number of shareholders and profitability. Table 2 

illustrates some examples. 

Table 2: Overview of Number of Shareholders and Net Incomes for the Corporations 

We Reviewed (Fiscal Year 2004 Data) 

 

Most 

shareholders

Fewest

shareholders

ANCs with net 

income over 

$10 million 

ANCs with 

net loss 

Regional corporations 17,242 1,137 4 3

Village and urban 

corporations 

3,238 137 2 5

Source: GAO analysis of data provided by ANCs. 

For ANC firms in the 8(a) program, SBA has specific oversight 

responsibility for 

• accepting the firm into the 8(a) program, which includes ensuring that 

the ANC does not have more than one 8(a) firm in the same primary 

line of business, defined by a North American Industry Classification 

System (NAICS) code;10

 9

43 U.S.C. 1606(g)(2) and (h)(1)(C). Although the ANCs have ownership and control over

their lands, the act provided that Alaska Natives could not sell their shares of corporation

stock to the public for 20 years after December 18, 1971 (Pub.L. 92-203 § 7(h)). In 1988, 

Congress extended this provision, but gave the individual Natives the option to sell the

stock publicly if a majority of the shareholders approved. (Pub.L. 100-241 § 8 codified at 

43 U.S.C. 1629c). 

10SBA has designated a small business size standard for every NAICS code. 8(a) applicants 

must qualify as small under their primary NAICS code at the time of application and SBA’s

certification date. SBA regulation requires that at least 2 years lapse after an ANC firm exits 

the 8(a) program before another firm owned by the same parent ANC can enter the 

program with the prior firm’s primary NAICS code. However, once accepted into the 

program, 8(a) firms may pursue contracts in any line of work, called secondary NAICS 

codes.

Page 10 GAO-06-399 Alaska Native Corporations
• verifying each firm’s size status to ensure that it qualifies as small 

under the NAICS code assigned to the procurement; and 

• annually reviewing 8(a) firms to track their progress in the 8(a) 

program. 

There is a 9-year limit to participation in the 8(a) program, and firms—

including ANC firms—are required to obtain a certain percentage of non8(a) revenue during the last five years to demonstrate their progress in 

developing a viable business that is not reliant on the 8(a) program. SBA’s 

district offices are responsible for tracking the business mix of 8(a) and 

non-8(a) revenue on an annual basis. If a firm does not meet its required 

business mix during one of the last five years, SBA invokes a plan of 

remedial action for the next year, in which the firm reports to SBA its 

progress toward compliance with the required business mix. Until the 

required mix is demonstrated, the firm will not be eligible for sole-source 

8(a) contracts. Currently there are over 9,400 firms in the 8(a) program. 

From fiscal year 2000 to 2004, the federal government obligated a total of 

about $4.6 billion to ANC firms, of which $2.9 billion, or 63 percent, went 

through the 8(a) program. About 13 percent of total 8(a) dollars were 

obligated to ANC firms in fiscal year 2004. Further, from fiscal year 2000 to

2004, sole-source awards accounted for 77 percent of ANC 8(a) contracts 

for the six agencies in our trend analysis. The sole-source 8(a) contracts 

that we reviewed demonstrate the wide diversity of services provided by

ANC firms worldwide. 

Our analysis, based on FPDS data, shows that federal dollars obligated to

ANC firms through the 8(a) program grew from $265 million in fiscal year 

2000 to $1.1 billion in 2004, with a noticeable increase in 2003. Over the 

5-year period, about 63 percent of the government’s obligations to ANC 

firms went through the 8(a) program. Figure 2 shows the breakdown 

between 8(a) and non-8(a) dollars obligated to ANC firms. 

Increase in 8(a) 

Federal Contracting 

with ANC Firms 

Dollars to ANC Firms 

Governmentwide Have 

Increased 

Page 11 GAO-06-399 Alaska Native Corporations
Figure 2: 8(a) and Non-8(a) Obligations to ANC Firms Governmentwide for Fiscal 

Years 2000 to 2004 (in Millions) 

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2000 2001 2002 2003 2004

In millions

Fiscal year

Non-8(a) 

8(a) 

Source: GAO analysis based on information from the Federal Procurement Data System.

Increasing Percentage of 

Total 8(a) Dollars 

Obligated to ANC Firms 

We also analyzed the percentage of total 8(a) dollars obligated to ANC 

firms from fiscal years 2000 to 2004. Total obligations to all 8(a) firms grew

from about $5.8 billion in fiscal year 2000 to about $8.4 billion in fiscal year 

2004. The percentage obligated to 8(a) ANC firms grew from about 

5 percent to about 13 percent during this time period. Whereas obligations 

to 8(a) ANC firms decreased only slightly between fiscal years 2003 and 

2004, dollars obligated to other 8(a) firms decreased by almost $2 billion

during that same time frame. SBA officials could not explain the decrease. 

Figure 3 depicts this trend. 

Page 12 GAO-06-399 Alaska Native Corporations
Figure 3: Obligations to 8(a) Firms Overall and to 8(a) ANC Firms, Governmentwide, 

for Fiscal Years 2000 to 2004 (in Millions) 

0

2,000

4,000

6,000

8,000

10,000

12,000

2000 2001 2002 2004 2003

In millions

Source: GAO analysis based on information from the Federal Procurement Data System.

Fiscal year

8(a)

ANC 8(a)

Notes: Excluding dollars obligated to 8(a) ANC firms does not change the overall trend of total 8(a)

dollars (top line of graph). For context, total federal government procurement spending in fiscal year 

2004 was more than $341 billion, according to FPDS data. 

For the six agencies included in our 8(a) trend analysis, sole-source 

obligations to ANC firms increased from about $180 million in fiscal year 

2000 to almost $876 million in fiscal year 2004. Over the five-year period, 

sole-source obligations represented about 77 percent of these agencies’ 

total obligations to 8(a) ANC firms. 

Sole-Source Contracts 

Represent Majority of 8(a) 

ANC Obligations for 

Selected Agencies

Figure 4 depicts the trend in 8(a) sole-source obligations to ANC firms for 

the six agencies. 

Page 13 GAO-06-399 Alaska Native Corporations
Figure 4: Sole-Source Obligations to 8(a) ANC Firms for Fiscal Years 2000 to 2004 

for Selected Agencies (in Millions) 

0

200

400

600

800

1,000

1,200

2000 2001 2002 2004 2003

In millions

Source: GAO analysis of data provided by the departments of Defense, Energy, the Interior, State, Transportation, and NASA.

Fiscal year

8(a)

Sole Source

In recent years, ANC firms have performed a wide variety of services for 

the federal government, spanning 18 broad industries, across the United 

States and overseas. The services included facilities support services; 

construction; professional, scientific, and technical services; information 

technology services; and manufacturing. Our review of selected large solesource 8(a) contracts further demonstrates the wide diversity of services

provided by ANC firms, as shown in table 3. 

Federal Agencies 

Contract with ANC 

Firms for a Variety of 

Services Worldwide 

Page 14 GAO-06-399 Alaska Native Corporations
Table 3. Location and Services for Selected 8(a) ANC Sole-Source Contracts 

Agency Location Contractor

Approximate

contract value

(in millions) Services 

Defense Florida Chugach Management Services, 

Inc. 

$593 Facilities support services 

Defense Alabama Chugach Management Services, 

Inc. 

230 Facilities support services 

Defense Nationwide Bowhead Manufacturing

Company, LLC

33 Distribution of water and fuel 

tanks to U.S. storages sites in 

support of the Iraq War 

Defense Iraq ASRC Airfield & Range Services, 

Inc. 

50 Train and equip security guards 

Energy Former Soviet

Union and other 

unsecured 

countries 

Ahtna Government Services 

Corporation 

80 Design, construction, and 

installation of radiation portals

and communication equipment 

Energy New Mexico Sage Systems Technologies, LLC 25 Analysis and assessment of 

organizational effectiveness 

Homeland Security New York Ahtna Technical Services, Inc. 20 Detention facility operations 

support 

Homeland Security Florida Ahtna Technical Services, Inc. 11 Detention facility operations 

support 

Interior 

(contract awarded on

behalf of Homeland 

Security) 

New York Field Support Services, Inc. 65 Facilities operation and 

maintenance 

Interior (contract awarded 

on behalf of Defense) 

Virginia TKC Communications, LLC 100 Leasing and management of 

commercial property and 

construction oversight 

NASA Virginia and

Maryland 

ASRC Aerospace Corporation 32 Scientific and technical 

information content acquisition 

and management and 

information technology support 

NASA Ohio Akima Corporation 60 Technical and fabrication support 

services 

State Worldwide KUK/KBRS Global, a joint venture 

between Kuk Construction LLC 

and Kellogg Brown & Root 

Services, Inc. 

145 Compound security upgrades at 

multiple facilities

State Sao Paolo,

Brazil 

Alutiiq Fluor Constructors, LLC, a 

joint venture between Alutiiq 

Management Services, LLC and 

Fluor Federal Services 

55 Renovation of existing office 

buildings 

Transportation Washington

D.C. 

Bowhead Information Technology 

Services, Inc. 

$200 Consolidated information 

technology services 

Page 15 GAO-06-399 Alaska Native Corporations
Agency Location Contractor

Approximate

contract value

(in millions) Services 

Transportation Washington

D.C. 

Bowhead Support Services, a 

division of Bowhead 

Transportation Company, Inc. 

20 Information technology support 

services 

Source: Agency contract files and discussions with contracting officials. 

Notes: Some of the contracts included in our review were indefinite quantity contracts. For these, the 

approximate contract value reflects the base year plus all potential option years. 

The Homeland Security contracts were awarded by the former Immigration and Naturalization Service

prior to the department’s creation. Homeland Security’s Immigration and Customs Enforcement 

organization now has responsibility for the contracts in our sample. 

In general, acquisition officials at the agencies we reviewed told us that 

the option of using ANC firms under the 8(a) program allows them to 

quickly, easily, and legally award contracts for any value. They also 

pointed out that awarding 8(a) contracts to ANC firms helps agencies meet 

their small business goals. Our review of 16 large sole-source contracts 

found that contracting officials had not always complied with 

requirements to notify SBA when modifying contracts, such as increasing 

the scope of work or the dollar value, and to monitor the percentage of the 

work performed by 8(a) firms versus their subcontractors. 

Agency officials told us that awarding sole-source contracts to 8(a) ANC 

firms is an easy and expedient method of meeting time-sensitive 

requirements. Some examples follow. 

Agency Officials View 

Contracting with ANC 

Firms as Quick and 

Easy, but Rules Not 

Always Followed 

Sole-Source 8(a) Contracts 

to ANC Firms Viewed as 

Expedient 

• An Army contracting official told us that his agency’s limited 

contracting staff was the primary reason his office awarded an 8(a) 

sole-source contract to an ANC firm for base operations support. The 

official added that this contract had been competitively awarded three 

times previously to large businesses, but in 1999 his office decided it 

did not have the staff to administer another full and open competition. 

• Another Army official commented that she had to fill an urgent 

requirement for water and fuel tanks in support of the war in Iraq. 

Rather than directly award to a large manufacturer, which would 

require a justification and approval process for a sole-source award, 

the contract went sole source to an 8(a) ANC firm as a quicker 

acquisition strategy given the time-sensitive nature of the requirement. 

• An e-mail in the contract file from a NASA official remarked that a solesource award to an ANC firm would save much time as opposed to 

having to work through a competitive process, since the office was 

running short on available staff. Another NASA official stated that the 

Page 16 GAO-06-399 Alaska Native Corporations
additional resources needed to run a competitive procurement would 

likely negate any monetary savings that might be gained through 

competition. 

• Another contracting official told us that it was the “unofficial” policy in 

his organization that for urgent requirements over the competitive 

limits for other 8(a) firms, an ANC firm is sought out. He described 

contracting with ANC firms as an “open checkbook” since sole-source 

awards can be made for any dollar amount. 

We found one example, however, where the process of awarding to an 

8(a) ANC firm was not particularly expedient. An ANC firm proposed a 

price for a State Department construction contract that was almost twice 

as much as the government’s original cost estimate. The State Department 

negotiated extensively for over a month, requesting four different price 

proposals from the contractor. At one point, the contracting office 

considered terminating the solicitation and awarding competitively to a 

prequalified firm, but due to time constraints the department decided to

accept the ANC firm’s final proposal, which was still slightly over the 

government’s estimate. 

In another example from our file review, the Interior Department’s 

GovWorks11 awarded a sole-source 8(a) contract on behalf of the 

Department of Defense’s (DOD) Counter Intelligence Field Activity (CIFA) 

to an ANC firm. The contract was primarily to consolidate and co-locate 

the space available for contractor personnel, but also included some work 

to oversee construction and facilities program management. This 

contractor, which specialized in information technology services, told us it 

had been approached by CIFA for this project because it had successfully 

obtained space for another government agency. When awarding the 

contract, GovWorks did not consider any alternatives other than solesource contracting with the ANC firm because CIFA had requested that 

firm. Contractor officials told us that the cost of the office space was 

incidental to a larger project for CIFA, yet we found that over 80 percent 

of the contract price was for the space. Furthermore, although SBA’s 

 11GovWorks is a franchise fund within the Department of the Interior. Franchise funds are

government-run, self-supporting businesslike enterprises managed by federal employees.

They provide a variety of common administrative services, such as payroll processing and

contracting support, to government agencies. We recently reported on franchise funds and

placed management of interagency contracting on our high risk list. GAO, Interagency 

Contracting: Franchise Funds Provide Convenience, but Value to DOD is Not 

Demonstrated, GAO-05-456, (Washington, D.C.: July 29, 2005) and GAO, High-Risk Series:

An Update, GAO-05-207 (Washington, D.C.: Jan. 2005). 

Page 17 GAO-06-399 Alaska Native Corporations
Alaska district office had accepted the contract under the 8(a) program, a 

subsequent size determination found that at the time of award, the 

contractor did not qualify as small under the size standard for the 

contract.12

We also found an example where an agency could have competed the 

contract had there been adequate acquisition planning, but chose to award 

sole-source to an ANC firm because it was easier method. The Immigration 

and Naturalization Service13 awarded a facilities operation and 

maintenance contract for a federal detention facility. A contracting official 

who reviewed the presolicitation and pre-award packages told us that this

was a recurring requirement and the contracting officer should have 

known well in advance that the existing contract was expiring. With 

sufficient acquisition planning the agency could have awarded an 

8(a) competitive contract, according to this official. However, he was 

advised by the contracting officer that awarding to an ANC firm was the 

quickest and easiest method and avoided competition. We reviewed the 

contract file and did not find a formal acquisition plan that addressed the 

strategy used. We reported in 2003 that the lack of adequate advanced 

planning by the Immigration and Naturalization Service for several 

detention center contracts limited opportunities for competition.14

ANC 8(a) Awards Help 

Agencies Meet Small 

Business Goals 

The Small Business Reauthorization Act of 1997 directed the President to 

establish a goal of not less than 23 percent of the federal government’s 

prime contracting dollars to be awarded to small businesses each fiscal 

year.15 As part of this goal, Congress has directed that 5 percent of prime 

contract dollars be directed to small, disadvantaged businesses. SBA is 

 12According to an SBA official, a calculation error was made in determining the ANC firm’s

average revenues over the past 3 years, which resulted in the SBA’s Alaska district office 

approving the ANC firm for the contract. 

13The Immigration and Naturalization Service was absorbed into the Department of

Homeland Security in March 2003. 

14GAO, Contract Management: INS Contracting Weaknesses Need Attention from the 

Department of Homeland Security, GAO-03-799 (Washington, D.C.: July 25, 2003). 

1515 U.S.C. 644(g)(1).

Page 18 GAO-06-399 Alaska Native Corporations
charged with working with federal agencies to ensure that agency goals, in 

the aggregate, meet or exceed these goals.16

Several contracting officers told us that they had turned to 8(a) ANC 

contracts as a way to help their agencies meet small business goals. ANC 

firms in the 8(a) program are deemed in legislation as socially and 

economically disadvantaged. Because contract awards can be categorized 

by agencies to allow them to take credit in more than one small business 

category, awards to 8(a) ANC firms can be applied to the agencies’ overall 

small business goal as well as to their small, disadvantaged business goal. 

One Energy contracting official told us that there is tremendous pressure 

to award contracts to small businesses, so she turns to 8(a) ANC firms 

whenever possible. A NASA official told us that his contracting office had 

been aggressive in promoting socioeconomic development with small 

disadvantaged businesses and had particularly wanted to award a contract 

to benefit the Native American community. Although several small 

businesses expressed interest in NASA’s requirement for technical and

fabrication support services, rather than compete the procurement, NASA 

opted for a sole-source award with an 8(a) ANC firm. 

Required Notifications of 

Contract Modifications 

Not Always Done 

SBA regulation requires that, where the contract execution function is 

delegated to the agencies, they must report to SBA all 8(a) contract 

awards, modifications, and options. Further, the MOUs between SBA and

the agencies require the agencies to provide SBA with copies of all 8(a) 

contracts, including modifications, within 15 days of the date of award. 

However, we found that contracting officers were not consistently 

following this requirement. While some had notified SBA when 

incorporating additional services into the contract or when modifying the

contract ceiling amount, others had not. 

One contracting official told us that SBA has “stepped aside” when it 

comes to overseeing 8(a) contracts and that it would not occur to her to 

coordinate a contract modification, such as a scope change, with SBA. We

also found the following example where the contracting officer was under 

 16On June 3, 2005, a rule was proposed to amend the Federal Acquisition Regulation to

allow, among other things, large businesses to count subcontracts to ANC firms toward

their small business subcontracting goals, even if the firms are not small businesses,

certified small disadvantaged businesses, or certified 8(a) firms under SBA’s regulations. 

This rule proposes to amend the Federal Acquisition Regulation to implement § 702 of

Pub.L. 107-117, as amended by § 3003 of Pub.L. 107-206. 

Page 19 GAO-06-399 Alaska Native Corporations
the impression that the scope of work could be expanded to include any 

additional lines of business not in the original contract because it was a 

sole-source 8(a) ANC contract. 

• The Department of Energy awarded an $8.5 million sole-source 

contract to an ANC firm for administrative and general management 

consulting services, but one year later broadened the scope of work to 

include 10 additional lines of business related to facilities management 

support and engineering services. The additional work almost tripled 

the cost of the contract, raising it to $25 million. None of these changes 

were coordinated with SBA, despite the fact that SBA’s letter to the 

Department of Energy approving the procurement clearly stated that if 

the statement of work was changed, SBA would have to re-determine 

the appropriateness of the NAICS code and the acceptability of the 

offer under the 8(a) program. The contracting official acknowledged 

that the scope change should have been coordinated with SBA, but her 

understanding was that because it was an ANC firm, anything could be 

added to the contract regardless of the dollar amount. By adding 

additional lines of business to the contract, the contracting officer was 

potentially improperly expanding beyond the scope of the contract. 

Moreover, by not notifying SBA, the agency had no assurance that this 

ANC firm qualified as small under the contract’s additional lines of 

business. 

We found that SBA’s letters to the agencies approving 8(a) procurements 

did not always reiterate the notification requirement. Of the 16 contract 

files we reviewed, we found only five cases where the letter requested that 

all contract modifications be coordinated with SBA. Four of these 

specifically requested the agency to forward a copy of any scope changes. 

SBA officials could not explain why the acceptance letters were 

inconsistent. SBA officials in Alaska recently revised their approval letter

template, which now requests copies of contract modifications if 

additional work is being added to the original contract or an option year is

being exercised. 

Contracting Officials Not 

Consistently Monitoring 

Subcontracting 

The “limitations on subcontracting” clause in the Federal Acquisition 

Regulation requires that, for 8(a) service contracts with subcontracting 

activity, the 8(a) firm must incur at least 50 percent of the personnel costs 

with its own employees (for general construction contracts, the firm must 

Page 20 GAO-06-399 Alaska Native Corporations
incur at least 15 percent of the personnel costs).17 The purpose of this 

provision, which limits the amount of work that can be performed by the 

subcontractor, is to insure that small businesses do not pass along the 

benefits of their contracts to their subcontractors.18 For the 16 files we 

reviewed, we found almost no evidence that the agencies are effectively 

monitoring compliance with this requirement, particularly where 8(a) ANC 

firms have partnered with large firms. As a result, there is an increased 

risk that an inappropriate degree of the work is being done by large 

businesses rather than by the ANC firms. 

The procuring agency and the 8(a) firm both play a role in ensuring 

compliance with the limitations on subcontracting clause. The MOUs 

between SBA and the procuring agencies state that the agencies are 

responsible for the monitoring. SBA’s regulation requires the 8(a) firms to

certify in their offers to the appropriate SBA district office that they will 

meet the applicable percentage of work requirement for each contract 

when subcontracting. 

In general, the contracting officers we spoke with were confused about 

whose responsibility it is to monitor compliance with the subcontracting 

limitations. Some thought it was SBA’s responsibility; one asserted that the 

contractor was responsible for self-monitoring; and others acknowledged 

that it was their responsibility but were not monitoring it formally. For the 

contracts in our file review, SBA’s letters to agencies approving the 8(a) 

procurements were not consistent in reminding contracting officers to 

include the limitations on subcontracting clause in the contract. Six of the 

letters did not include this language. We brought this discrepancy to the 

attention of SBA officials, who stated that all approval letters should 

contain this requirement as standard language. In addition, we found that 

two of the awarded contracts did not contain the limitation on 

subcontracting clause, as required. The responsible contracting officials 

told us the clause should have been included and was omitted as a result 

of an oversight. 

 17FAR 52.219-14, “Limitations on Subcontracting.” FAR 19.811-3(e). In the case of a contract 

for supplies (other than procurement from a non-manufacturer in such supplies), the

concern will perform at least 50 percent of the cost of manufacturing the supplies, not 

including the cost of materials. 

18See United States Court of Federal Claims, Transatlantic Lines LLC vs. United States of 

America and Strong Vessel Operators LLC. No. 05-866C filed September 30, 2005. 

Page 21 GAO-06-399 Alaska Native Corporations
We also found that contracting officers were unclear about how to 

monitor the subcontracting requirements under indefinite quantity 

contracts, under which agencies place task or delivery orders.19 SBA’s 8(a) 

regulation states that for indefinite quantity service or supply contracts, 

the participant must demonstrate semi-annually whether it has performed 

50 percent of personnel costs with its own employees for the combined 

total of all task or delivery orders at the end of each 6-month period. This 

does not mean that the 50-percent minimum requirement applies to work 

performed under each individual task order or that a contractor must meet 

the requirement cumulatively for all work performed under all task orders 

at any given point in time. We found contracting officers who 

misinterpreted the regulation to mean that the contractor must perform 

the required percentage over the life of the entire contract. As a result, one 

contracting officer decided it was too difficult and thus did not monitor 

the subcontracting effort. 

In one example from our file review, the Energy Department awarded a 

sole-source indefinite quantity contract for a construction project to an 

8(a) ANC firm primarily because this firm had a previous business 

relationship with the large incumbent contractor and planned to use the 

incumbent as a subcontractor for the new contract. The contracting 

officer believed that the limitations on subcontracting must be 

demonstrated by the end of the entire contract period. We reviewed an 

invoice that showed that cumulatively for all tasks to date, the subcontract 

labor costs made up 90 percent of the total labor, which would indicate 

the need for attention to be paid to the 6-month task order review 

requirement.20

An agency contracting official told us that it is not uncommon for large 

businesses to approach him wanting to know how to “partner” with an 

ANC firm. Furthermore, representatives from one ANC firm told us that an 

agency had awarded it a “pass-through” contract, or one where the 

subcontractor performs most of the work, to take advantage of the 8(a) 

ANC firm’s ability to obtain sole-source contracts. The agency wanted to 

 19This type of contract provides for an indefinite quantity, within stated limits, of supplies

or services during a fixed period. The government places orders for individual 

requirements. Quantity limits may be stated as number of units or as dollar values. 

20SBA regulation states that for indefinite quantity contracts for general construction, the

participant must demonstrate semi-annually that it has incurred 15 percent minimum of the 

personnel cost for all orders issued. 

Page 22 GAO-06-399 Alaska Native Corporations
contract with a particular business, but could not award a sole-source 

contract directly to that business. The agency awarded the contract to the

ANC firm and required it, through a directed subcontracting plan, to 

subcontract with the desired business. 

When asked what recourse contracting officers would take if they found 

an 8(a) firm to be out of compliance with the limitations on 

subcontracting, some agency officials responded that they had no plan in

place. In fact, one contracting officer commented that he would be 

“laughed out of the office” if he brought up the compliance issue as a 

reason for terminating the contract. Several contracting officials told us 

that they review the cost proposals to assess how much work was planned 

to be subcontracted out, but they do not follow up during contract 

performance to ensure that the prime contractor complies with the plan.

In one case, we found that an 8(a) ANC firm’s technical proposal to the 

Department of Transportation for an information technology consolidation 

project included an intention to subcontract with a large firm, yet did not

clearly delineate the breakout of work between the firms. From reviewing 

the agency’s evaluation of the proposal, we did not find any evidence that

contracting officials questioned the relationship or the division of labor 

prior to contract award. Later, however, the contracting officer modified 

the contract to require the 8(a) firm to provide semi-annual subcontracting 

reports that would detail the subcontracting percentage for the previous 

6 months. 

ANCs use the 8(a) program as one of many tools to generate revenue with 

the goal of providing benefits to their shareholders. ANCs participating in

the 8(a) program have various business strategies to maximize revenue. 

For example, some own multiple 8(a) subsidiaries, either in niche markets 

or diversified industries. Others recruit outside expertise to manage their 

8(a) operations. Additionally, many form partnerships—with other ANCs 

or other businesses—and holding companies for increased efficiencies. 

Federal contracts awarded through the 8(a) program are one of a number 

of sources of revenue, such as timber, tourism, real estate, or market 

investments, for ANCs participating in the 8(a) program. Corporations 

consolidate their income to fund operations at the parent level, to invest in 

subsidiary operations, and to provide benefits to shareholders. Figure 5 

shows a sample ANC’s revenue sources. 

ANCs Use the 8(a) 

Program to Increase 

Revenue and Provide 

Benefits

8(a) Program among 

Revenue Sources for ANCs 

to Provide Benefits 

Page 23 GAO-06-399 Alaska Native Corporations
Figure 5: Revenue Sources for a Sample ANC 

Alaska Native corporation (parent)

Board of directors is

100 percent Alaska Native

8(a) subsidiary Non-8(a) subsidiary Real estate Market investments

Source: GAO analysis.

Some corporations rely on federal contracting with 8(a) subsidiaries as a 

primary revenue source, while others do not. For example, of the five 

corporations whose subsidiaries comprised 76 percent of the 

government’s 8(a) ANC dollars from fiscal years 2000 to 2004, three 

depend almost exclusively on current, exited, or planned participants in 

the 8(a) program for their revenues. However, for the other two 

corporations, 8(a) subsidiaries are only one investment in a diversified 

portfolio that includes energy services, telecommunications, and oil-field 

and mining support. We also interviewed four corporations that do not 

participate in the 8(a) program, relying instead on telecommunications, 

real estate, tourism, natural resources, and other investments. 

The ANCs we reviewed do not track the benefits provided to their 

shareholders specifically generated from 8(a) activity. Thus, an explicit 

link between the revenues generated from the 8(a) program and benefits

provided to shareholders is not documented. However, ANCs do track 

benefits generated from their consolidated revenue sources. Benefits vary 

among corporations, but include dividend payments, scholarships, 

internships, burial assistance, land gifting or leasing, shareholder hire, 

cultural programs, and support of the subsistence lifestyle. For more 

information on benefits, see appendix X. 

We found that sizable 8(a) revenues do not guarantee a higher level of 

shareholder benefits, as two of the five ANCs that account for most of the 

8(a) ANC dollars obligated from fiscal years 2000 to 2004 demonstrate. 

• One corporation, which provides sizable benefits, credits the 8(a) 

program with its continued existence, its return to profitability after 

declaring bankruptcy, and its ability to provide monetary benefits. In 

Page 24 GAO-06-399 Alaska Native Corporations
the early 1990s, the corporation was required to pay off its debts before 

paying any dividends.21 Its board and management attribute its return to 

profitability to its heavy participation in the 8(a) program. By 2004, the 

ANC paid out dividend amounts that were among the highest of all 

regional corporations. An original shareholder owning 100 shares, for 

example, received $3,500 in dividends in 2004. The ANC also provided a

number of other benefits to its shareholders, their spouses and 

descendants, such as scholarships and a business assistance program. 

• In contrast, another ANC with a high level of activity in the 8(a) 

program is currently unable to provide a comparable level of monetary 

benefits. This corporation encountered a few years of heavy losses due 

to lawsuits and management malfeasance. Since being in financial 

recovery for the past 5 years, it has not been allowed to issue dividends 

to shareholders.22 However, it provides other benefits, such as 

scholarships and protection of land and subsistence rights for its 

shareholders. 

We also found that a high level of benefits can exist even if an ANC is not 

participating in the 8(a) program at all. For example, at the time of our 

review, one regional corporation received all of its revenues from its 

diverse non-8(a) investments, including real estate, natural resources, 

telecommunications, tourism, golf resorts, casino gaming, construction, 

and oil-field services. From 2000 to 2004, this corporation provided 

dividend payments that were substantially higher than any others we 

reviewed and also provided a number of additional types of benefits to its 

shareholders. 

Key Practice Is Creation of 

Multiple 8(a) Subsidiaries 

To generate revenue, many ANCs own multiple businesses in the 8(a) 

program, taking advantage of their special ability to do so. Many of the 

subsidiaries have offices that are located outside of Alaska, which is not 

prohibited by statute or regulation. As Figure 6 demonstrates, the number 

of 8(a) ANC subsidiaries has increased markedly.

 21Alaska Corporations Code, § 10.06.358(a)(1); 10.06.360; 10.06.960(h)(1). 

22Id. 

Page 25 GAO-06-399 Alaska Native Corporations
Figure 6: Number of ANC Parent Corporations and Subsidiaries Active in 8(a) Program, 1988 to 2005 

0

20

40

60

80

100

120

140

160

199

1999

2000

2001

2002

2003

2004

2005

8

19

1990

1991

1992

1993

1994

1995

1996

1997

89

1988

Source: GAO analysis of SBA data.

Year

Number of ANCs owning subsidiaries in 8(a) program

Number of ANC subsidiaries in 8(a) program

Number

As of December 2005, 49 ANCs owned a total of 154 8(a) firms and 

30 ANCs owned more than one 8(a) firm. See appendix IX for a listing of 

these 49 ANCs. The corporation owning the most subsidiaries had a total 

of 14 active or graduated 8(a) subsidiaries. The five corporations that 

represented the largest volume of 8(a) ANC dollars from 2000 to 2004 

owned a total of 45 active and exited 8(a) subsidiaries, or 24 percent of the 

total. Regional corporations have been more active than the village and 

urban corporations in forming multiple subsidiaries.23

SBA’s 8(a) regulation requires that the subsidiaries of each ANC be 

certified in the 8(a) program under a different primary NAICS code, 

representing different lines of business. However, the 8(a) businesses can 

pursue work in an unlimited number of secondary NAICS codes, 

regardless of their primary line of work declared at the time they apply to

the 8(a) program. This means that an 8(a) subsidiary of an ANC may 

 23None of the group corporations participated in the 8(a) program at the time of this report.

Page 26 GAO-06-399 Alaska Native Corporations
pursue government contracts under any of its primary or secondary 

NAICS codes, including those that overlap with the secondary NAICS code 

of another 8(a) subsidiary owned by the same parent corporation. 

ANCs use their ability to own multiple businesses in the 8(a) program, as 

allowed by law, in different ways. The following table summarizes some of 

the practices we identified in our interviews with ANCs and our review of 

their documentation. 

Page 27 GAO-06-399 Alaska Native Corporations
Table 4: Practices Pertaining to Owning Multiple Subsidiaries 

Practices ANCs are using Our observations

Own multiple subsidiaries with overlapping 

NAICS codes, either as a primary or 

secondary line of business. 

Six of seven 8(a) subsidiaries of one corporation marketed their ability to perform work 

under the same NAICS code for facilities support services, either as the primary or 

secondary NAICS code for each subsidiary. Appendix XI provides an example. 

Leverage the expertise and management 

from existing subsidiaries to aid with the 

development of the newer subsidiaries. 

One corporation shared staff and management between its older and newer 8(a) 

subsidiaries. Additionally, the two subsidiaries market themselves together on one 

website. 

Officials from one ANC told us it had an 8(a) ANC firm with only 2 employees. 

Nevertheless, the firm had leveraged the expertise and management of other 

subsidiaries owned by the ANC to be in a position to enter negotiations with NASA for a 

$30 million sole-source contract. 

Create a second subsidiary to win follow-on 

work from a graduating subsidiary. 

One corporation created a second subsidiary in anticipation of its first one’s graduation 

from the 8(a) program. The newer firm successfully obtained a sole-source follow-on 

contract that the original subsidiary had performed. 

In another example, an ANC subsidiary had an 8(a) contract that was expiring, yet the 

subsidiary was graduating from the 8(a) program. Based on its experience with this 

ANC firm, the government agency awarded a $21 million follow-on contract to a 

different subsidiary of the same ANC. 

Some ANCs wholly own their 8(a) 

subsidiaries, while others invest in partiallyowned subsidiaries.a

Of the 26 ANCs we reviewed that were active in the 8(a) program, 13 wholly-owned all 

of their 8(a) subsidiaries and 13 partially-owned at least one 8(a) subsidiary. 

Some ANCs shared ownership of 8(a) subsidiaries with other ANCs. Other corporations 

shared ownership with subsidiary executives. For example, one corporation owns 56

percent of its 8(a) subsidiary, and the subsidiary executives, who were not Alaska 

Natives, retain 44 percent of profits. 

Some ANCs own subsidiaries that specialize 

in a niche market with the goal of developing 

an independently sustainable business. 

Two corporations we interviewed said they take this specialized approach, rather than 

creating individual subsidiaries with multiple capabilities. Both corporations noted that 

the intent of the 8(a) program is business development. 

One corporation’s subsidiaries specialize in aircraft maintenance and niche

manufacturing, with the intent of reducing future competition and increasing the 

potential for long-term success past graduation from the 8(a) program. 

Other ANCs diversify their subsidiaries’ 

capabilities to increase opportunities to win 

government contracts in various industries. 

One subsidiary marketed its abilities to perform work in construction, landscaping, 

manufacturing, computer and software wholesaling, engineering, management 

consulting, research and development, and administrative services. 

Some corporations stated that they diversified their subsidiaries’ capabilities in 

response to requests from agencies to perform work that was outside the companies’ 

original focus. 

Source: GAO analysis of ANC data. 

a

 To be eligible for the special provisions for ANCs in the 8(a) program, an ANC must be the majority 

owner of the business. The minority owners receive a percentage of the profits the subsidiary 

generates based on ownership arrangements. 

According to SBA data, 36 ANC firms exited the 8(a) program from 1998

through 2005. Eleven subsidiaries exited because they completed their 

9-year term in the program. The remaining 25 subsidiaries exited the 

Page 28 GAO-06-399 Alaska Native Corporations
program before completing the full 9-year term. Of these, seven graduated

early from the program after exceeding SBA’s size standards for revenue 

or number of employees. Though no longer 8(a) participants, these 

subsidiaries are obligated to continue to perform work on previously 

awarded 8(a) contracts, including any priced options that may be 

exercised. Another subsidiary lost its 8(a) status after failing to file 

paperwork with SBA. Other subsidiaries dissolved, became inactive, or 

were sold to other businesses. 

ANCs Pursue Other 8(a) 

Business Strategies 

We found a variety of other strategies that ANCs use to generate revenue,

as discussed below. 

Although all of the ANCs that we reviewed retained a board composed 

entirely of Alaska Natives, several have recruited outside executives who 

are not Alaska Natives to manage the parent corporation or their 8(a) 

operations. Some corporations recruited these executives for their specific 

experience in the 8(a) program, which they gained working on other 

government contracts or in operations at other 8(a) ANC subsidiaries. 

Some corporation executives stated that this managerial expertise was a 

key factor to success in the 8(a) program. For example, representatives 

from one corporation told us that its 8(a) subsidiary suffered after its 

executive left to work at another ANC. Some of these managers command 

salaries significantly higher than those of the executives at the parent 

corporation. For example, in 2004, a corporation paid one of its chief 

executive officers for 8(a) operations almost $1 million — more than three 

times as much as the highest-paid executive of the parent corporation. 

Relying on Outside Expertise 

Additionally, a few ANCs hire outside marketing firms to assist them with

securing contracts. One such firm provides services such as locating 

potential contracts for its ANC client, interviewing potential partners on 

the project, meeting with contracting agencies, and following up with the 

contracting officer after award. 

Another business strategy is to create partnerships with individuals or 

other businesses to gain access to capital, experience, or expertise. For 

example, one corporation entered into a partnership by sharing subsidiary 

ownership with another ANC when it did not have the necessary capital to 

create a new subsidiary. The other corporation benefited from the 

partnership because it was new to the 8(a) program and needed the other 

corporation’s experience. 

Creating Partnership 

Arrangements 

Page 29 GAO-06-399 Alaska Native Corporations
In addition to ownership arrangements, many ANCs pursue other types of 

partnerships, such as joint ventures and mentor-protégé relationships, as a 

business strategy to better position themselves for federal contract 

opportunities through the 8(a) program. 

Joint venture agreements. A “joint venture” is an agreement between an 

8(a) participant and one or more businesses to work together on a specific 

8(a) contract.

24 With SBA’s approval, an 8(a) subsidiary may enter into an 

unlimited number of joint venture agreements. Of the 26 corporations we 

interviewed that were participating in the 8(a) program, 22 owned 

subsidiaries that participated in a total of 57 joint venture agreements. In 

2001, a joint venture between two ANCs was awarded a $2.1 billion 

contract by the National Imagery and Mapping Agency. 

Mentor-protégé agreements. SBA established the mentor-protégé program

to encourage relationships between 8(a) businesses and other firms that 

act as mentors to provide technical, financial, and other assistance to their 

protégés.25 An 8(a) subsidiary may be a protégé to only one mentor at a 

time.26 Of the ANCs that we interviewed that were participating in the 8(a) 

program, 19 owned a total of 24 subsidiaries participating in mentorprotégé agreements. 

ANCs create holding companies – non-8(a) subsidiaries that provide 

shared administrative services to other subsidiaries, for a fee – which also

aid their participation in the 8(a) program. Of the 30 corporations we 

interviewed, 11 had formed holding companies. Two corporations had 

established three separate holding companies. 

Forming Holding Companies 

Figure 7 shows a sample ANC with a holding company for subsidiaries in 

and outside of the 8(a) program. 

 24SBA’s regulations allow two or more businesses to joint venture on no more than three

business ventures over 2 years. 

25Individual agencies, including Defense, Energy, Homeland Security, State, Transportation, 

and NASA, have their own mentor-protégé programs with slightly different guidelines. 

26However, a firm may mentor more than one 8(a) business at a time as long as the protégé 

firms are not competitors and the mentor firm is capable of handling multiple protégés. The 

SBA regulations note that generally, a mentor will have no more than one protégé at a time. 

Page 30 GAO-06-399 Alaska Native Corporations
Figure 7: Sample ANC with Holding Company 

Alaska Native corporation (parent)

Board of directors is

100 percent Alaska Native

8(a) subsidiary

100 percent owned by 

holding company

Non-8(a) subsidiary

51 percent owned by holding company

49 percent owned by minority interest

Holding company

100 percent owned by 

ANC parent

8(a) subsidiary

51 percent owned by holding company

49 percent owned by minority interest

Source: GAO analysis.

SBA requests that ANCs seek approval before forming a holding company,

which must be wholly-owned by the parent ANC for the subsidiaries to be 

eligible for the 8(a) program. During the course of our review, we found 

one holding company that was 80-percent owned by the parent ANC and 

20-percent owned by two holding company executives. SBA’s records, 

however, showed the company as 100-percent owned by the parent ANC. 

A representative of the holding company told us that the ownership 

arrangement was changed after SBA’s initial approval of the holding 

company. The company did not notify SBA of the change because the 

holding company is not itself a participant in the 8(a) program and it 

wholly owns all of its subsidiaries, thereby maintaining compliance with 

the minimum 51-percent ownership requirement. SBA points to the statute 

and its regulations, which show that ANC 8(a) participants must be 

majority-owned by an ANC or a wholly-owned entity of an ANC. 

Therefore, subsidiaries under a partially-owned holding company are no 

longer eligible to participate in the 8(a) program. Since this situation came

to light, the ANC and the holding company executives rescinded the 

20-percent ownership arrangement to maintain compliance with SBA 

requirements. Further, the SBA Alaska district office revised its template 

letter approving a change in ownership to clarify the restrictions on 

ownership of a holding company. 

ANC executives told us the benefits of holding companies included: 

Page 31 GAO-06-399 Alaska Native Corporations
Greater efficiencies. The holding companies can provide accounting, 

human resources, legal, marketing, or other services, allowing the ANC to 

operate more efficiently. Since subsidiaries underneath the holding 

company do not need to perform these functions, they may employ fewer 

administrative staff and instead employ only technical staff. A lean staff is 

especially important since subsidiaries can become ineligible for the 8(a) 

program when they exceed a certain number of employees. 

Consistent policies and procedures. Some corporations established 

holding companies to facilitate consistent policies, procedures, and 

corporate governance across the subsidiaries. 

Easier administration. Corporation officials cited several administrative

benefits to establishing holding companies, including the following 

examples: 

• The holding company’s smaller board allowed for faster decisions than 

assembling the parent corporation’s entire board.

• Only one entity—the holding company—would be audited by the 

Defense Contract Audit Agency as opposed to each of the individual 

subsidiaries. 

• The holding company saved time on security clearances. For example, 

for a contract involving classified work, the holding company 

management and board of directors already had security clearances, 

saving the time of performing background checks on the corporationlevel management and board of directors. 

Coordination among subsidiaries. One corporation official told us that 

the holding company helps prevent competition among its subsidiaries for 

the same contracting opportunities. 

Legal protection. Representatives from two corporations stated that the 

holding company separates the parent company from most liability that a 

subsidiary may incur. For example, if the subsidiary went bankrupt, the 

parent corporation generally could not be held legally or financially 

responsible. 

Page 32 GAO-06-399 Alaska Native Corporations
SBA has not tailored its policies and practices to account for ANCs’ unique 

status in the 8(a) program and growth in federal contracting, even though

officials recognize that ANCs enter into more complex business 

relationships than other 8(a) participants. SBA officials told us that they 

have faced a challenge in overseeing the activity of the 8(a) ANC firms 

because ANCs’ charter under ANCSA is not always consistent with the 

business development intent of the 8(a) program. The officials noted that 

the goal of ANCs—economic development for Alaska Natives from a 

community standpoint—can be in conflict with the primary purpose of the 

8(a) program, which is business development for individual small, 

disadvantaged businesses. 

However, the officials agreed that improvements are needed in their 

oversight and said they are considering various actions in this regard. They 

told us that they are planning to revise their regulations and policies to 

address ANCs’ unique status in the 8(a) program. Moreover, they are now 

in the process of implementing a new, automated data collection tool to 

more readily collect information on 8(a) firms. It is expected to be 

operational during fiscal year 2007. 

SBA’s oversight has fallen short in that it does not 

• track the business industries in which ANC subsidiaries have 8(a) 

contracts to ensure that more than one subsidiary of the same ANC is 

not generating the majority of its revenue under the same primary 

NAICS code; 

Improvements 

Needed in Oversight 

of ANCs in the 8(a) 

Program 

SBA Oversight of ANCs in 

the 8(a) Program Is Not 

Adequate 

• consistently determine whether other small businesses are losing 

contracting opportunities when large, sole-source contracts are 

awarded to 8(a) ANC firms; 

• adhere to a legislative and regulatory requirement to ascertain whether 

8(a) ANC firms, when entering the 8(a) program or for each contract 

award, have, or are likely to have, a substantial unfair competitive 

advantage within an industry; 

• ensure that partnerships between 8(a) ANC firms and large firms are 

functioning in the way they were intended under the 8(a) program; and 

• maintain information on ANC 8(a) activity. 

SBA officials from the Alaska district office reported to headquarters in 

the most recent quality service review that the make-up of their 8(a) 

portfolio is challenging and requires more contracting knowledge and 

business savvy than usual because the majority of the firms they oversee 

are owned by ANCs and tribal entities. The officials commented that these 

firms tend to pursue complex business relationships and tend to be 

Page 33 GAO-06-399 Alaska Native Corporations
awarded large and often complex contracts. We found that the district 

office officials were having difficulty managing their large volume and the

unique type of work in their 8(a) portfolio. When we began our review, 

SBA headquarters officials responsible for overseeing the 8(a) program did 

not seem aware of the growth in the ANC 8(a) portfolio and had not taken

steps to address the increased volume of work in their Alaska office. 

As discussed above, ANCs can create multiple 8(a) subsidiaries that can be

based across the United States. SBA’s Alaska district office, which is 

responsible for overseeing most 8(a) ANC contracting activity, does not 

track the business industries in which the subsidiaries win 8(a) contracts 

under secondary NAICS codes. Thus, SBA is not ensuring that a firm’s 

secondary NAICS codes do not, in effect, become the primary business 

line by generating the majority of revenue. This situation could allow an

ANC to have more than one 8(a) subsidiary perform most of its work 

under the same primary NAICS code, which SBA regulation does not 

allow. Appendix XI shows an example of an ANC with subsidiaries 

marketing their ability to perform work in a number of different industries. 

Not Tracking Secondary Lines 

of Business across Multiple 

8(a) Firms Owned by One ANC 

Headquarters officials told us that they do not monitor the industries from

which 8(a) participants receive revenue because they do not want to stifle 

the growth of the company. However, the officials acknowledged that they 

would be concerned if a subsidiary’s primary industry revenue source 

changed without SBA being notified. They have not developed a plan to

increase monitoring of ANCs’ secondary NAICS codes, even though many 

of these firms take advantage of their ability to obtain contracts under 

secondary lines of business. 

We found cases where SBA did not take action when incumbent small 

businesses lost contract opportunities when an 8(a) ANC firm was 

awarded a large sole-source contract. For example: 

Not Consistently Determining 

Whether Other Small 

Businesses Are Losing Contract 

Opportunities • The Department of Transportation awarded an information technology 

contract to an 8(a) ANC firm in an effort to support transition to a 

single integrated infrastructure. According to the department’s 

acquisition plan, the goal is to create a more mission-effective, secure, 

and cost-effective computing environment that will provide common 

services. Previously, this service was being provided under separate 

contracts with eight small businesses. The consolidation project will 

likely discontinue the work performed by these small businesses and 

replace it with the single infrastructure managed by the 8(a) ANC firm. 

One of the incumbent small businesses protested the award to our 

agency. In its submission to our bid protest office, SBA acknowledged 

Page 34 GAO-06-399 Alaska Native Corporations
that it had not conducted the required adverse impact analysis, but 

asserted that it had viewed the requirement as “new” and therefore had 

incorrectly concluded it was not required to perform the analysis. SBA 

also noted that the 8(a) regulation provides that, even where there is a 

presumption of adverse impact, SBA “may”—rather than “shall”—

determine whether adverse impact exists. SBA interprets this to mean 

that it has the discretion to accept a contract into the 8(a) program 

even where one of the contractors meets the presumption of adverse 

impact.27

• The scope of an Air Force base contract with an ANC firm has been 

expanded as additional base civil engineering services, previously 

provided by small businesses, have been absorbed into the contract. 

Since the initial contract award, the estimated contract value has 

increased by $46 million to nearly $600 million. The contracting official

coordinated these changes with SBA via e-mail. Rather than 

disapproving the request or evaluating the impact on other small 

businesses, SBA only expressed concern that the contracting officers 

were absorbing work into the contract that was well within the 

capability of other 8(a) contractors, indicating that it was “troubled” 

over the loss of a prime contracting opportunity for other small 

businesses. The contracting officer told us that the Air Force has now 

decided to stop adding services to the contract and will maintain the 

other existing small business contracts. 

When a procuring agency is interested in offering a requirement to a 

specific participant in the 8(a) program for a sole-source contract, the 

agency is required to send SBA an offering letter with information on the 

description of the work, the NAICS code, anticipated dollar value of the 

requirement, and the names and addresses of any small business 

contractors that have performed on the requirement during the previous 

24 months, among other things. At the time that SBA accepts a 

procurement for award into the 8(a) program, it is required to consider 

whether individual small businesses, a group of small businesses in a 

geographical area, or other business programs will be adversely 

 27GAO ultimately denied the protest on the basis that GAO is required to give deference to 

an agency’s reasonable interpretation of its regulations and SBA’s analysis showed that the

small business protestor would appear not to have met the requirements for presuming 

adverse impact. Catapult Technology, Ltd., B-294936, B-294936.2, January 13, 2005. 

Page 35 GAO-06-399 Alaska Native Corporations
impacted.28 Adverse impact is determined to be present where, among 

other things, a small business has been performing the requirement 

outside the 8(a) program and this work represents 25 percent or more of 

its revenue.29

In almost all cases for the 16 large sole-source contract we reviewed, 

SBA’s letters to the agencies approving the procurements contained 

boilerplate language: “a determination has been made that acceptance of

this procurement will cause no adverse impact on another small business 

concern.” The language in the acceptance letters suggests that SBA 

conducted a formal adverse impact study, yet this was not the case for any 

of the contracts we reviewed. The letters do not clarify whether the 

determination was made based on a formal adverse impact study or 

whether no determination was required because the requirement was new 

or previously had been performed by a large business. SBA officials told us

that the language is intended to encompass all situations where there is no

adverse impact. 

SBA officials stated that it is difficult for them to ensure that other small 

businesses are not negatively affected because they are relying on the 

procuring agency to provide the procurement history, and, in their view, 

procuring agencies are not always forthcoming. During our review, the 

Alaska district office revised its standard letter to agencies to state that the 

adverse impact determination was made based on the procurement history 

the agency provided to SBA in its letter offering the procurement to the 

8(a) program. The letter also now states that the determination that 

acceptance of the procurement will cause no adverse impact on another 

small business was made on the basis of the agency’s identifying the 

requirement as new or not identifying an incumbent contractor. 

 28If the requirement was already being performed under an 8(a) contract or is considered a 

new requirement, SBA is not required to perform the adverse impact study. SBA is 

required, under certain circumstances, to consider that adverse impact may exist if the

requirement is a consolidation of work previously performed by small businesses. 

29The other requirements are that the small business concern must have performed the 

requirement for at least 24 months and is currently performing the requirement or finished 

performing within 30 days of the offering into the 8(a) program. 

Page 36 GAO-06-399 Alaska Native Corporations
Failing to De The Small Business Act states the following termine 

Substantial Unfair Competitive 

Advantage In determining the size of a small business concern owned by a socially and

economically disadvantaged Indian tribe30 (or wholly owned business entity of 

such tribe) each firm’s size shall be independently determined without regard to

its affiliation with the tribe, any entity of the tribal government, or any other 

business enterprise owned by the tribe, unless the Administrator determines that 

one or more such tribally owned business concerns have obtained, or are likely to 

obtain, a substantial unfair competitive advantage within an industry category.31

SBA has incorporated this language into its 8(a) regulation, but is not 

making the determinations that these business concerns have obtained, or 

are likely to obtain, a substantial unfair competitive advantage. In fact, the 

agency has no procedure in place to make these determinations. Officials 

told us that the language in the statute is confusing and that they are not 

sure how to implement it. They had not taken steps to obtain clarification 

and make any needed revisions to the 8(a) regulation or their standard 

operating procedures. SBA officials noted that the amount of participation 

by ANCs in the federal contracting market is so minimal when compared

to all other businesses that they do not expect an ANC would have a 

substantial unfair competitive advantage in one industry. 

SBA is required to approve partnerships between 8(a) and other firms, 

such as mentor-protégé and joint venture arrangements, to ensure the 

agreements are fair and equitable and will be of substantial benefit to the 

8(a) concern. Where SBA concludes that an 8(a) concern brings very little 

to the joint venture relationship in terms of resources and expertise other 

than its 8(a) status, SBA regulations state that SBA will not approve the 

joint venture agreement. SBA officials told us that they work closely with

the partnership firms to ensure that the 8(a) company has control in the 

joint venture and will be gaining from the relationship. Further, SBA’s 

regulations state that SBA will not approve a mentor-protégé relationship 

that it determines is merely a vehicle to enable a non-8(a) participant to 

receive 8(a) contracts. 

Not Ensuring That Partnerships 

between ANCs and Large Firms 

Operate As Intended 

 30Indian tribe in this case is defined to include ANCs.

3115 U.S.C. § 636(j)(10)(J)(ii)(II). 

Page 37 GAO-06-399 Alaska Native Corporations
We found indications that oversight of these partnership relationships, 

particularly in the context of ANCs’ unique provisions and large 

businesses that want to take advantage of those provisions, may not be 

adequate. For example, representatives from an ANC firm told us that its 

mentor firm exploited it for its 8(a) status. In pursuit of a particular 

contract, the Alaska-based subsidiary invested in an office and staff in 

Arkansas at the advice of its mentor. When the contract was not won, the 

mentor deserted the protégé, and the subsidiary was left to search for 

federal work on its own in Arkansas. 

ANC firms in the 8(a) program provide information to SBA on their 

partnership arrangements as part of the annual review process, and SBA is 

reliant on this information to assess the partnerships’ success. Therefore,

SBA may not obtain all necessary information to determine if the 

partnership is working as intended, even though SBA has primary 

responsibility to monitor these arrangements.32

We found examples where the procuring agency had concerns about a 

partnership situation, but did not report its concerns to SBA, nor did SBA 

ever inquire whether the partnership was working as intended. 

• A State Department program official told us that his office had good 

intentions when it identified a joint venture between an 8(a) ANC firm 

and a large firm for a sole-source 8(a) award of an international 

construction services contract. In line with the business development 

aspect of SBA’s mentor protégé program, the State Department official 

had envisioned that the ANC firm would gain construction experience 

from the globally recognized larger partner and then compete on its 

own for other construction work at the State Department. However, 

the official, who was also the contracting officer representative, 

expressed concern that all the actual construction work was being 

subcontracted out and the joint venture was only doing construction 

management, which was not the intent when the requirement was 

offered to the 8(a) program. Moreover, in an e-mail to the contracting 

officer, this official suggested that the contractor had some 

performance problems and may have been circumventing the prices 

negotiated in the contract by using subcontracts for all the work. The 

program official never made these concerns known to SBA, nor did 

SBA ever inquire whether the partnership was working as intended. 

 32SBA can request additional information from the participant as it deems necessary as part 

of its annual review. 

Page 38 GAO-06-399 Alaska Native Corporations
According to State Department officials, the contracting officer looked 

into the matter and found the concerns were unfounded. 

• In another example at the State Department, officials had some 

concerns that the 8(a) ANC firm was a front company for the large 

business in a joint venture for another construction project. In 

response to the concerns, representatives from the joint venture 

presented information to State officials on the role of the ANC firm, 

stating that it was involved with management from top to bottom and 

that the large firm would provide construction expertise where needed. 

We found no evidence that State officials contacted SBA about this 

issue at the time. 

SBA recognizes that the mentor-protégé aspect of the 8(a) program can be

an important component of the overall business development of small 

businesses. However, officials believe that joint ventures between mentors 

and their protégés may be inappropriate for 8(a) sole-source contracts 

above competitive thresholds set for other 8(a) firms. SBA cites 

complaints that non-8(a) firms have received substantial benefits through 

the performance of large sole-source 8(a) contracts as joint venture 

partners with tribally-owned and 8(a) ANC firms. Further, where the joint 

venture involves a large business mentor, SBA recognizes a perception 

that large businesses may be unduly benefiting from the 8(a) program. 

SBA lacks adequate data regarding the 8(a) program in general and does 

not collect any information on ANCs’ 8(a) activity. SBA could not provide 

us with reliable data for ANC revenues in the 8(a) program, even though

all program participants are required to report this information annually. 

An SBA official explained that the district offices stopped using the 

database that collects this information and therefore the agency had no 

recent data on 8(a) participants’ revenues. Overall, data on ANC 8(a) 

contracting activity were not readily available. There is no mechanism in 

place for agencies to code 8(a) awards to ANCs in FPDS, for example. 

Not Collecting Information on 

ANC Participation 

The complex nature of some ANCs’ 8(a) business practices, combined 

with the competing ANCSA and 8(a) program goals of economic 

development for Alaska Natives versus development of individual small 

businesses, create the need for SBA to tailor its regulations and policies as

well as to provide greater oversight in practice. Furthermore, since 

agencies can contract directly with ANC firms, they too have responsibility 

to ensure that these firms are operating in the program as intended. 

Conclusion 

Page 39 GAO-06-399 Alaska Native Corporations
Without this level of oversight, there is clearly the potential for unintended 

consequences or abuse.

We recommend that the Administrator of SBA take the following five 

actions when revising relevant regulations and policies: 

• Ascertain and then clearly articulate in regulation how SBA will 

comply with existing law to determine whether and when one or more 

ANC firms are obtaining, or are likely to obtain, a substantial unfair 

competitive advantage in an industry.

Recommendations for 

Executive Action 

• In regulation, specifically address SBA’s role in monitoring ownership 

of ANC holding companies that manage 8(a) operations to ensure that 

the companies are wholly owned by the ANC and that any changes in 

ownership are reported to SBA. 

• Collect information on ANCs’ 8(a) participation as part of required 

overall 8(a) monitoring, to include tracking the primary revenue 

generators for 8(a) ANC firms to ensure that multiple subsidiaries 

under one ANC are not generating their revenue in the same primary 

industry. 

• Revisit regulation that requires agencies to notify SBA of all contract 

modifications and consider establishing thresholds for notification, 

such as when new NAICS codes are added to the contract or there is a 

certain percentage increase in the dollar value of the contract.

• Once notification criteria are determined, provide guidance to

the agencies on when to notify SBA of contract modifications 

and scope changes. 

• Consistently determine whether other small businesses are losing 

contracting opportunities when awarding contracts through the 8(a) 

program to ANC firms. 

We also recommend that the Administrator of SBA take the following five 

actions to improve practices pertaining to SBA’s oversight. 

• Standardize approval letters for each 8(a) procurement to clearly 

assign accountability for monitoring of subcontracting and for 

notifying SBA of contract modifications. 

Page 40 GAO-06-399 Alaska Native Corporations
• Tailor wording in approval letters to explain the basis for adverse 

impact determinations. 

• Clarify MOUs with procuring agencies to state that it is the agency 

contracting officer’s responsibility to monitor compliance with the 

limitation on subcontracting clause.

• Evaluate staffing levels and training needed to effectively oversee ANC 

participation in the 8(a) program and take steps to allocate appropriate 

resources to the Alaska district office. 

• Provide more training to agencies on the 8(a) program, specifically 

including a component on ANC 8(a) participants.

To ensure that agencies are properly overseeing ANC 8(a) contracts, we 

recommend that the Secretaries of the Departments of Defense, Energy, 

Homeland Security, the Interior, State, and Transportation and the 

Administrator of NASA take the following action:

• Work with SBA to develop guidance to agency contracting officers 

on how to comply with requirements of the 8(a) program such as 

limitations on subcontracting and notifying SBA of contract 

modifications, particularly when contracting with 8(a) ANC firms. 

We provided a draft of this report to the departments of Defense, Energy, 

Homeland Security, Interior, State, and Transportation and to NASA and 

SBA. We received written comments from SBA, Homeland Security, the 

Interior, NASA, State, and Energy. We received official oral comments 

from Defense and Transportation. We also received written comments 

from the Native American Contractors Association. The written comments 

we received are included as appendixes II through VIII. 

Agency Comments 

and Our Evaluation 

In its written comments, SBA took issue with several aspects of the report. 

Its letter did not indicate whether or not it plans to implement the 

recommendations we made, but in a subsequent email the agency 

expressed disagreement with several of them. SBA’s comments and our 

views on them follow. 

• The agency referred to the concerns we raise as “subjective” and 

stated that our analysis relies “far too heavily on isolated individual 

anecdotes” to support findings and recommendations pertaining to 

8(a) ANC activity. We strongly disagree with this characterization. 

Page 41 GAO-06-399 Alaska Native Corporations
Our findings are supported by the facts we gathered and our 

analysis of regulations, policies, contract files, ANC annual reports, 

FPDS and agency data, and other relevant documentation, as well 

as interviews with agency contracting officers and acquisition 

officials, SBA officials in headquarters and the Alaska district 

office, and representatives of 30 ANCs. The findings we developed 

and the shortcomings in oversight we found directly support the 

10 recommendations we make to SBA. Further, it is an undisputed 

fact that there has been significant growth in federal dollars 

awarded to 8(a) ANC firms in recent years, as recognized by SBA 

in its comment letter. Clearly, 6 of the 7 procuring agencies in our 

review--which account for most of the government’s 8(a) dollars to 

ANC firms--agree that there is a need for them to work with SBA to 

develop guidance for contracting officers in light of the unique 

procurement advantages Congress has provided 8(a) ANC firms. 

• SBA believes that our report should cite federal dollars to womenowned and other small business categories and the government’s 

achievement of small business goals in general. That information is 

not relevant to this report. Our review focused specifically on ANC 

activity in the 8(a) program, as set forth in appendix I, which 

outlines our scope and methodology.

• SBA states that it has recently taken a number of steps to improve 

oversight of the 8(a) program, including taking into consideration 

special provisions afforded to 8(a) ANC firms, Native Hawaiian 

Organizations, and Indian tribes. It is unclear what steps SBA is 

referring to. While we note in our report that SBA officials told us 

they were planning to revise regulations and policies, we were not 

provided with any evidence that this or any other planned action 

had been taken, despite our requests for the information. 

• SBA states that it is “conjecture” to make recommendations 

pertaining to data on 8(a) ANC activity until the lack of data 

explaining 8(a) participants’ economic activities, including ANC 

firms, is resolved. Our recommendation on data collection is 

intended to address this very gap. It is directed at SBA because that 

agency is responsible for managing the 8(a) program. We found 

that SBA lacked adequate data on the 8(a) program in general and 

was not collecting any information on ANC firms’ activity 

specifically.

Page 42 GAO-06-399 Alaska Native Corporations
• SBA pointed out that the statutory language refers to “substantial” 

unfair competitive advantage, a change we have made to the

report. SBA found our focus on this issue unreasonable, stating 

that all 8(a) participants have been accorded a competitive 

advantage. During our review, it was clear that SBA had in place no

policy or procedure to make unfair competitive advantage 

determinations. We do not understand how SBA can ignore the fact 

that Congress has directed it to make these determinations 

specifically for ANC firms in the 8(a) program. 

• SBA refers to the tone of our report as “unsettling” and suggests 

that it could lead readers to conclude that we have concerns with 

the fact that agencies can count 8(a) ANC contracts toward their 

federal small business goals. We express no concerns of the kind. 

Rather, our concerns, as reflected in the recommendations to SBA, 

pertain to the level of oversight it is exercising over 8(a) ANC 

activity. 

• In an e-mail sent after the comment letter, SBA expressed 

disagreement with several of the recommendations but did not 

address the others. It stated that its annual reviews track 

ownership changes and the business mix of all 8(a) participants 

and that its regulations require contracting officers to report 

contract modifications. These comments are not responsive to our 

recommendations. Our recommendations specifically discuss

monitoring ownership of ANC holding companies, tracking primary 

revenue generators across 8(a) ANC subsidiaries, and establishing 

thresholds for notification of 8(a) contract modifications. SBA 

disagreed with the recommendation on determining whether other 

small businesses are losing contracting opportunities, stating that 

it already does so for all 8(a) sole-source offerings. As illustrated 

by the examples in our report, this is not the case. 

SBA’s written comments are included as appendix II. 

The Department of Homeland Security agreed with the recommendation 

affecting it and indicated it would partner with SBA to ensure that the 

department’s contracting officers have a thorough understanding of all 

contracting regulations on awarding contracts under SBA’s 8(a) program. 

Homeland Security requested that we reflect that the department has only 

been in existence since 2003 and that FPDS data would not be available

for the 5-year period. We agreed and added this point to our explanation of

why we did not include the department in our trend analysis. In addition, 

Page 43 GAO-06-399 Alaska Native Corporations
the department stated that, in providing us a list of contracts awarded to 

firms with the DUNS numbers we provided, officials did not indicate that 

it included all contracts awarded to ANC firms. Homeland Security 

attempted to reconcile the identified missing contracts from the list of 

contracts awarded to ANCs; however, we still determined that the 

agency’s data were inadequate to include in our trend analysis. Homeland 

Security’s written comments are included as appendix III. 

The Department of the Interior agreed with the recommendation affecting 

it and proposed that an interagency work group be established and headed 

by the SBA to develop guidance for contracting officers. The department 

also provided specific comments on the contract awarded to an ANC firm 

on behalf of DOD’s Counter Intelligence Field Activity (CIFA). The Interior 

Department said that the referenced contract was not awarded to the ANC 

firm “because CIFA...had requested that firm.” The evidence we gathered

from the contract file, as well as interviews with the contracting officer 

and the ANC firm, support the facts as we have stated them. CIFA, through 

a preauthorization letter, had arranged with the ANC firm to provide a 

variety of urgently needed services and requested that GovWorks award 

the contract to that firm. Interior’s written comments are included as 

appendix IV. 

NASA agreed with the recommendation affecting it and indicated that it 

will work with the SBA to develop guidance and to provide whatever 

assistance SBA may need to address the recommendations directed to it. 

NASA’s written comments are included as appendix V. 

The State Department agreed with the recommendation affecting it, stating 

that it will work with the SBA to develop standardized guidance to 

contracting officers on monitoring limitations on subcontracting and SBA 

notification of contract modifications. The State Department noted that 

the contract negotiations involving an 8(a) ANC joint venture took place in

a compressed acquisition cycle and that SBA was in direct contact with 

the venturing parties at the time they were negotiating the contract. State

concludes that because of SBA’s “simultaneous interaction” with the 

venturing parties and with State’s contracting officer, a formal request for 

SBA intervention would have been superfluous. However, our discussion 

focuses on the concerns about the extent of work being performed by the 

8(a) ANC firm versus that of its joint venturing partner. These issues were 

raised within the State Department several months after the contract was 

awarded, and SBA was not notified at that time. The department also 

suggested some technical changes, which we incorporated as appropriate.

The department’s written comments are included as appendix VI. 

Page 44 GAO-06-399 Alaska Native Corporations
The Department of Energy did not comment on the recommendation. It 

stated that our report gives the impression that agencies rely 

“significantly” on the ANC program to achieve small business goals. Our 

report does not state or imply that. Rather, we note that contracting 

officers have turned to 8(a) ANC firms as a way to help them meet their 

goals. The department also pointed to a perceived inconsistency in the 

report dealing with the “limitations on subcontracting” clause as it 

pertains to construction contracts. We disagree; the section in the report 

on this matter clearly establishes that the limitation for construction 

contracts is different than for other services. Energy’s written response is 

included as appendix VII. 

In official oral comments, DOD agreed with the recommendation, stating 

that the development of additional guidance by the department to ensure 

the effective oversight of 8(a) ANC contracts is necessary and that the 

department will work closely with SBA to develop this guidance. DOD 

added that, prior to commencement of these efforts, it is imperative that 

SBA undertake the actions we recommended for revising its relevant

regulations and policies and improving its oversight practices concerning

8(a) ANC contracts, as these changes will form the basis of the new or 

expanded DOD-specific guidance. 

In official oral comments, the Department of Transportation agreed with 

the recommendation. Transportation also provided some technical 

comments that we incorporated as appropriate. 

We also received written comments from the Native American Contractors 

Association. The association believes that we should more fully 

acknowledge the legal and policy basis of 8(a) program rules for Native 

Entities. We believe the report thoroughly explains the legislative basis for 

8(a) ANC firms’ procurement provisions and that it sets forth the rules for 

ANC firms as compared to those for other 8(a) firms. The association also

raised several broader issues that impact the entire federal procurement 

system that it believes we should have included, such as in the areas of 

contract bundling, acquisition workforce, improper counting toward small 

business goals, and modifications to contract scope. While these are areas

that we have reported on in the past, the focus of this audit was on 8(a) 

ANC contracting. Contrary to the association’s assertion, we do place 

certain findings—particularly with regard to the limitations on 

subcontracting and notification to SBA of contract modifications—in the 

context of the 8(a) program in general. For example, our 

recommendations to SBA on these issues are not limited solely to 8(a) 

ANC contracting activity. In technical comments provided separately, the 

Page 45 GAO-06-399 Alaska Native Corporations
association suggested that, for context, we include reference to total 

federal procurement spending on goods and services. We have added this 

information as a note to figure 3. The association’s comments are included

as appendix VIII. 

We are sending copies of this report to the Secretaries of Defense, Energy,

Homeland Security, the Interior, State, and Transportation; the 

Administrators of SBA and NASA; the Director, Office of Management and 

Budget; the Native American Contractors Association; and other interested

congressional committees. We will make copies available to others upon 

request. In addition, this report will be available at no charge on GAO’s 

Web site at http://www.gao.gov. 

If you or your staff have questions about this report, please call me at 

(202) 512-4841 or schinasik@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. See appendix XII for a list of major contributors to this 

report. 

Katherine V. Schinasi 

Managing Director 

Acquisition and Sourcing Management 

Page 46 GAO-06-399 Alaska Native Corporations
LIST OF REQUESTERS

The Honorable Donald Manzullo 

Chairman 

The Honorable Nydia M. Velazquez 

Ranking Minority Member 

Committee on Small Business 

House of Representatives 

The Honorable Tom Davis 

Chairman 

The Honorable Henry A. Waxman 

Ranking Minority Member 

Committee on Government Reform 

House of Representatives 

The Honorable Don Young 

House of Representatives 

The Honorable Peter T. King 

Chairman 

The Honorable Bennie G. Thompson

Ranking Minority Member 

Committee on Homeland Security 

House of Representatives 

The Honorable Olympia J. Snowe 

Chair 

The Honorable John F. Kerry 

Ranking Minority Member 

Committee on Small Business and Entrepreneurship 

U.S. Senate 

Page 47 GAO-06-399 Alaska Native Corporations
Appendix I: Scope and Methodology Appendix I: Scope and Methodology 

We conducted our work at the Small Business Administration (SBA), 

including its national headquarters and district office in Anchorage, 

Alaska; the Departments of Defense, Energy, Homeland Security, the 

Interior; State, and Transportation, and the National Aeronautics and 

Space Administration (NASA). We traveled to Alaska and met with 

representatives of 30 Alaska Native corporations (ANC). We also met with

representatives of the Native American Contractors Association in 

Washington, D.C. and interviewed officials from a number of small 

businesses as well as representatives from an 8(a) association. We 

reviewed relevant legislation, including the Alaska Native Claims 

Settlement Act (ANSCA) for background on the ANC corporate structure 

and the Small Business Act and other relevant legislation to understand 

the pertinent procurement advantages that ANC firms receive in the 8(a) 

program. 

To identify overall trends in the government’s contracting with ANCs, we 

obtained data from the Federal Data Procurement System (FPDS) for 

fiscal years 2000 through 2004. To gather data on federal 8(a) contracting 

with ANCs, we identified each ANC firm’s Data Universal Numbering 

System (DUNS) number and used this information to obtain data from 

FPDS and agencies. To assess the reliability of the procurement data used 

in our 5-year trend analysis, we (1) compared FPDS and agency data to 

verify the accuracy of the data; (2) reviewed related documentation, 

including contract files; and (3) worked closely with agency officials to 

identify and resolve any data problems. When we found discrepancies, we

brought them to the agency’s attention and worked with them to correct 

the discrepancies before conducting our analyses. We determined that the 

data were sufficiently reliable for the purposes of our report. We had 

planned to include Homeland Security in our trend analysis, but did not do 

so for two reasons. First, since FPDS only includes Homeland Security 

contract data for part of fiscal year 2003 and beyond, we were unable to 

confirm the reliability of the data for the purposes of our 5-year trend 

analysis. Second, we found that the data from Homeland Security were 

inconsistent and therefore questioned the reliability of the data overall.

For example, the data provided did not include contracts awarded by 

Immigration and Customs Enforcement and contained other data errors, 

such as contracts recorded with either an incorrect dollar value or as sole 

source when awarded competitively. 

To assess the trends in government 8(a) sole-source contracting with 

ANCs from fiscal years 2000 to 2004, we reviewed data from the six federal 

agencies that, according to FPDS, comprise about 85 percent of total 

federal dollars obligated to ANCs via the 8(a) program. These agencies 

Page 48 GAO-06-399 Alaska Native Corporations
Appendix I: Scope and Methodology 

were the departments of Defense, Energy, the Interior, State, and 

Transportation and NASA, which obligated about $2.5 billion in solesource contracts to ANCs for fiscal years 2000 through 2004. To 

understand the facts and circumstances surrounding specific contract 

awards, we reviewed contract files, interviewed agency contracting 

officers, and reviewed any relevant bid protests for 16 large dollar value, 

sole-source 8(a) contracts at seven agencies. Whereas we included six 

agencies in our 8(a) sole source trend analysis, we added the Department 

of Homeland Security to our contract file review. To identify two solesource contracts awarded by Homeland Security, we began reviewing the 

contracts with the largest dollar awards from the data provided, but had to

exclude a number of the largest contracts from our file review due to 

errors in the data. We brought significant data errors to the attention of 

Homeland Security officials and the department stated that it has initiated 

corrective action. For the seven agencies, we selected contracts based on 

high ultimate award values and high dollars obligated to date that 

represented a variety of contractors and services. We made the initial 

contract selections based on the available data at that time. 

To assess how ANCs use the 8(a) program, we reviewed documentation 

and spoke with representatives from 30 Alaska Native corporations—all 

13 regional and 17 selected village or urban corporations—and some of 

their 8(a) subsidiaries. In selecting corporations to interview, we 

considered diversity in geography, financial strategy and profitability, and 

participation in the 8(a) program. Tables 5 and 6 show the corporations 

included in our review. 

Page 49 GAO-06-399 Alaska Native Corporations
Appendix I: Scope and Methodology 

Table 5: ANCs with Subsidiaries Participating in the 8(a) Program (26) 

Regional corporations (12) 

Ahtna, Incorporated 

Arctic Slope Regional Corporation 

Bering Straits Native Corporation 

Bristol Bay Native Corporation

Calista Corporation 

Chugach Alaska Corporation 

Doyon, Limited 

Koniag, Incorporated 

NANA Regional Corporation 

Sealaska Corporation 

The Aleut Corporation 

The 13th Regional Corporation 

Village and urban corporations (14) 

Corporation Village(s) or urban area Region 

Afognak Native Corporation Afognak, Port Lions Koniag 

Baan o yeel kon Corporation Rampart Doyon 

Bethel Native Corporation Bethel Calista 

Chenega Corporation Chenega Chugach 

Choggiung, Limited Dillingham Bristol Bay 

Goldbelt, Incorporated Juneau Sealaska 

Kikiktagruk Inupiat Corporation Kotzebue NANA 

K’oyitl’ots’ina, Limited Allakaket, Alatna, Hughes, Huslia Doyon 

MTNT, Limited McGrath, Telida, Nikolai, Takotna Doyon 

Olgoonik Corporation Wainwright Arctic Slope 

Tanadgusix Corporation Saint Paul Aleut 

The Eyak Corporation Cordova, Eyak Chugach 

Tyonek Native Corporation Tyonek Cook Inlet 

Ukpeagvik Inupiat Corporation Barrow Arctic Slope 

Source: Documentation provided by the ANCs. 

Page 50 GAO-06-399 Alaska Native Corporations
Appendix I: Scope and Methodology 

Table 6: ANCs That Do Not Have Subsidiaries Participating in the 8(a) Program (4)

Regional (1) 

Cook Inlet Region, Incorporated 

Village (3)

Corporation Village(s) or urban area Region 

Huna Totem Corporation Hoonah Sealaska 

Kuukpik Corporation Nuisqut Arctic Slope 

Yak-Tat Kwaan, Incorporated Yakutat Sealaska 

Source: Documentation provided by the ANCs. 

Additionally, we visited seven villages with populations that had a high 

percentage of Alaska Natives to understand the lifestyle and livelihood of 

the Alaska Native people. We selected these villages based on diversity in 

geography, population, average per capita income, and shareholder culture 

and history. We also attended a shareholders’ annual meeting at one of 

these villages to observe communication and relations between 

shareholders and corporate management. Table 7 shows the villages we 

visited. 

Table 7: Villages Visited 

Village 

Associated village 

corporation

Corporation

participating

in 8(a) 

program? Region 

Estimated

population

(2004)

Average per 

capita income 

Percentage Alaska 

Nativea

Bethel Bethel Native Corporation Yes Calista 5,888 $20,267 68%

Chenega Bay Chenega Corporation Yes Chugach 81 $13,381 78%

Dillingham Choggiung, Limited Yes Bristol Bay 2,422 $21,537 61%

McGrath MTNT, Limited Yes Doyon 367 $21,553 55%

Napaskiak Napaskiak, Incorporated No Calista 436 $8,162 98%

Nikolai MTNT, Limited Yes Doyon 121 $11,029 81%

Yakutat Yak-Tat Kwaan, Incorporated No Sealaska 680 $22,579 47%

Source: State of Alaska, Department of Commerce. 

a

 Defined as percent of population reporting race as Alaska Native alone or in combination with one or 

more races 

To understand the structure, shareholder population, and involvement in 

the 8(a) program of each corporation, we examined annual reports and 

other documentation from our selected 30 corporations and spoke with 

Alaska Native shareholders. We also interviewed ANC executives on 

Page 51 GAO-06-399 Alaska Native Corporations
Appendix I: Scope and Methodology 

corporate governance, strategies for participation in the 8(a) program, and 

benefits provided to shareholders. Additionally, we met with executives at 

selected subsidiaries participating in the 8(a) program to understand their 

structure, business strategies, and relationship to their parent

corporations. 

To establish whether SBA’s oversight over ANCs in the 8(a) program is 

adequate, we reviewed relevant regulations and operating procedures to 

understand the requirements for oversight of the 8(a) program and of ANC 

8(a) activity. We interviewed SBA officials at the Alaska district office and

reviewed relevant files to understand that staff’s oversight role and 

workload priorities. Finally, we analyzed documents from and spoke with 

SBA headquarters officials in the Washington, D.C. office to understand 

their oversight of district offices and the 8(a) program and whether the 

officials have assessed and addressed the impact of increased ANC activity 

on the 8(a) program. 

Page 52 GAO-06-399 Alaska Native Corporations
Appendix II: Comments from the Small Appendix II: Comments from the Small Business Administration 

Business Administration 

Page 53 GAO-06-399 Alaska Native Corporations
Appendix II: Comments from the Small 

Business Administration 

Page 54 GAO-06-399 Alaska Native Corporations
Appendix III: Comments from the Department Appendix III: Comments from the of Homeland Security

Department of Homeland Security 

Note: Page numbers in 

the draft report may differ 

from those in this report. 

Page 55 GAO-06-399 Alaska Native Corporations
Appendix III: Comments from the Department 

of Homeland Security

Page 56 GAO-06-399 Alaska Native Corporations
Appendix IV: Comments from the Department of the Appendix IVInterior : Comments from the 

Department of the Interior 

Note: Page numbers in 

the draft report may differ 

from those in this report. 

Page 57 GAO-06-399 Alaska Native Corporations
Appendix IV: Comments from the Department of the 

Interior 

Page 58 GAO-06-399 Alaska Native Corporations
Appendix V: Comments from the National Appendix V Aeronautics and Space Administration : Comments from the National 

Aeronautics and Space Administration 

Page 59 GAO-06-399 Alaska Native Corporations
Appendix VI: Comments from the Department Appendix VI: Comments from the of State 

Department of State 

Page 60 GAO-06-399 Alaska Native Corporations
Appendix VI: Comments from the Department 

of State 

Page 61 GAO-06-399 Alaska Native Corporations
Appendix VI: Comments from the Department 

of State 

Page 62 GAO-06-399 Alaska Native Corporations
Appendix VI: Comments from the Department 

of State 

Page 63 GAO-06-399 Alaska Native Corporations
Appendix VI: Comments from the Department 

of State 

Page 64 GAO-06-399 Alaska Native Corporations
Appendix VII: Comments from the Appendix VII: Comments from the Department of Energy 

Department of Energy 

Note: Page numbers in 

the draft report may differ 

from those in this report. 

Page 65 GAO-06-399 Alaska Native Corporations
Appendix VII: Comments from the 

Department of Energy 

Page 66 GAO-06-399 Alaska Native Corporations
Appendix VIII: Comments from the Native American Appendix VIII: Comments from the Native Contractors Association

American Contractors Association 

Note: Page numbers in 

the draft report may differ 

from those in this report. 

Page 67 GAO-06-399 Alaska Native Corporations
Appendix VIII: Comments from the Native American 

Contractors Association

Page 68 GAO-06-399 Alaska Native Corporations
Appendix VIII: Comments from the Native American 

Contractors Association

Page 69 GAO-06-399 Alaska Native Corporations
Appendix VIII: Comments from the Native American 

Contractors Association

Page 70 GAO-06-399 Alaska Native Corporations
Appendix VIII: Comments from the Native American 

Contractors Association

Page 71 GAO-06-399 Alaska Native Corporations
Appendix VIII: Comments from the Native American 

Contractors Association

Page 72 GAO-06-399 Alaska Native Corporations
Appendix VIII: Comments from the Native American 

Contractors Association

Page 73 GAO-06-399 Alaska Native Corporations
Appendix VIII: Comments from the Native American 

Contractors Association

Page 74 GAO-06-399 Alaska Native Corporations
Appendix VIII: Comments from the Native American 

Contractors Association

Page 75 GAO-06-399 Alaska Native Corporations
Appendix VIII: Comments from the Native American 

Contractors Association

Page 76 GAO-06-399 Alaska Native Corporations
Appendix VIII: Comments from the Native American 

Contractors Association

Page 77 GAO-06-399 Alaska Native Corporations
Appendix IX: Alaska Native Corporations 

with Subsidiaries Participating in the 8(a) Appendix IX: Alaska Native Corporations Program 

with Subsidiaries Participating in the 8(a) 

Program 

Below is a list of Alaska Native corporations that own subsidiaries 

participating in the 8(a) program as of December 2005: 

Ahtna, Incorporated 

Arctic Slope Regional Corporation 

Bering Straits Native Corporation 

Bristol Bay Native Corporation 

Calista Corporation 

Chugach Alaska Corporation 

Doyon, Limited 

Koniag, Incorporated 

NANA Regional Corporation 

Sealaska Corporation 

The Aleut Corporation 

The 13th Regional Corporation 

Regional Corporations (12) 

Afognak Native Corporation 

Alaska Peninsula Corporation 

Baan o yeel kon Corporation 

Becharof Corporation 

Bethel Native Corporation 

Cape Fox Corporation 

Chenega Corporation 

Choggiung, Limited 

Cully Corporation 

Deloycheet, Incorporated

Dinyea Corporation 

Gana-a’Yoo, Limited 

Kaktovik Inupiat Corporation 

Kikiktagruk Inupiat Corporation 

Klukwan, Incorporated

K’oyitl’ots’ina, Limited 

MTNT Limited 

Ninilchik Native Association, Incorporated 

Old Harbor Native Corporation 

Olgoonik Corporation 

Ouzinkie Native Corporation 

Paug-Vik, Limited 

Port Graham Corporation 

Sea Lion Corporation 

Sitnasauk Native Corporation 

St. George Tanaq Corporation 

Village Corporations (33) 

Page 78 GAO-06-399 Alaska Native Corporations
Appendix IX: Alaska Native Corporations 

with Subsidiaries Participating in the 8(a)

Program 

Tanadgusix Corporation 

The Eyak Corporation 

The Kuskokwim Corporation 

The Tatitlek Corporation 

Tikigaq Corporation 

Tyonek Native Corporation 

Ukpeagvik Inupiat Corporation 

 

Goldbelt, Incorporated

Natives of Kodiak, Incorporated 

Kenai Natives Associtation, Incorporated 

Shee Atika, Incorporated

Urban Corporations (4) 

Group Corporations (0) 

Page 79 GAO-06-399 Alaska Native Corporations
Appendix X: Benefits That Alaska Native Appendix X: Benefits That Alaska Native Corporations Provide to Their Shareholders 

Corporations Provide to Their Shareholders 

Through our review of documentation provided by the 13 regional and 

17 village or urban Alaska Native corporations (ANC) included in our 

review, as well as interviews with corporation representatives and 

shareholders, we gained an understanding of how the corporations 

communicate with and obtain input from their shareholders and of the 

benefits they provide. 

The ANCs communicated with their shareholders through surveys, Web 

sites, newsletters, annual reports, local media, shareholder committees, 

and annual and other periodic meetings. Some had “open door” policies, 

which gave shareholders the opportunity to voice their opinions to 

management at any time. Additionally, corporations took steps to reach 

out to shareholders both out of state and in the villages. For example, one

corporation’s officials conducted the annual meeting via Web cast and 

noted that Internet attendance was beginning to outpace in-person 

attendance. Another corporation rotated its annual meeting among 

Anchorage, Seattle, and its regional hub. Additionally, several of the 

regional corporations regularly traveled to their villages to seek input. 

Steps taken by one to facilitate village outreach included moving the 

location of its annual meeting from the regional hub to the villages; 

holding the meeting in the native language; and investing in a boat to 

facilitate transport to the region’s villages. 

Shareholder preferences for benefits differed among corporations. For 

example, one corporation stated that its shareholders prioritized 

protection of their land and the subsistence lifestyle.1

 Shareholders of 

other corporations placed a greater value on dividends, scholarships, 

training, and job opportunities. 

Corporations reported targeting benefits towards the needs of their 

shareholders. Such projects included 

• investing in low-cost Internet service as a tool to reduce the isolation of 

a particularly remote village; 

• issuing death benefits in the form of food vouchers because the 

cultural tradition among its shareholders is to host and feed visitors 

from the time of death through burial services; 

 1

 The subsistence lifestyle depends on wild resources for basic needs such as food,

clothing, and fuel as well as for trade, arts, and ceremony. 

Page 80 GAO-06-399 Alaska Native Corporations
Appendix X: Benefits That Alaska Native 

Corporations Provide to Their Shareholders 

• investing in an insurance company when other insurance companies 

were reluctant to insure shareholders’ homes; and 

• subsidizing heating oil for residents of a small, remote community 

north of the Arctic Circle, absorbing a loss of $2.75-$3.00 per gallon. 

Some regional corporations stated that they required sizable revenues to

provide benefits to a large shareholder base. Of the corporations we 

reviewed, the 13 regional corporations had approximately 102,000 

shareholders, and the 17 village and urban corporations had about 

17,000 shareholders.2

 Overall, the corporations we reviewed saw a 

31 percent increase in their number of shareholders since incorporation.3

The number of shareholders at two regional corporations more than 

doubled since incorporation. 

The 30 ANCs included in our review reported providing three categories of

benefits 

• dividends, 

• other direct benefits, and 

• indirect benefits 

Dividends: In 2004, the 30 corporations paid a total of $121.6 million in 

dividends. Eleven corporations issued no dividends. Of the corporations 

that issued dividends, payments ranged from $1.71 per share to $171.00 per 

share. In a given year, a shareholder may have received a dividend from 

his or her village corporation and an additional dividend from his or her 

regional corporation. 

Corporate officials noted that dividend payments, no matter how small, 

meant much to their shareholders in many rural villages where basic 

necessities were expensive—for example, milk cost $12 per gallon and 

fuel cost $5 per gallon. 

Original shareholders received 100 shares upon incorporation. One village 

corporation’s 137 shareholders owned as few as one and up to 200 shares, 

with an average of about 50 shares. 

 2

Each eligible Alaska Native is generally entitled to membership both in the corporation 

established for his or her village and in the regional corporation in which the village is 

located. 

3

 One corporation was unable to provide us with its original enrollment data. 

Page 81 GAO-06-399 Alaska Native Corporations
Appendix X: Benefits That Alaska Native 

Corporations Provide to Their Shareholders 

A third of the ANCs created permanent funds to build up a reserve for 

future dividends. Two corporations told us that these funds allowed them 

to issue dividends even in years when they were unprofitable. 

Half of the ANCs established policies specifying an amount or percentage 

of net income to be distributed as shareholder dividends. For example, 

one corporation’s board required an increase in its annual dividend 

amount by 10 percent over the previous year. Another corporation 

annually distributed 66 percent of its average net income for the prior 

5 years to shareholders. The result of this policy coupled with some 

unprofitable years was that in 2004, this ANC paid 100 percent of its 

income in dividends to shareholders. 

• Shareholder hiring preference and job opportunities. All of the 

corporations we interviewed reported a hiring preference for 

shareholders. Some corporations extended this preference to

shareholders’ families, other Alaska Natives, and/or other Native 

Americans. 

Other Direct Benefits: 

• Other employment assistance programs. In addition to offering a 

shareholder hire preference, corporations made efforts to encourage 

other shareholder employment. Nine of the 30 corporations offered a 

management training program. Some corporations had agreements 

with partner companies encouraging shareholder hire. One corporation 

had a preference to conduct business with shareholder-owned 

businesses. Another corporation’s employment assistance programs 

included mentoring; one-on-one counseling; business and career fairs; 

survey of shareholders over 18 seeking employment; and tracking 

shareholder employment status and interests in a database. 

• Benefits for elder shareholders. Twelve of the 30 corporations we 

interviewed reported issuing benefits for elder shareholders. Some 

corporations paid additional regular dividends to elders, while others 

made one-time financial payments. Two corporations made in-kind 

benefits for elders, such as a lunch program or a bus service.

• Scholarships. Almost all corporations offered scholarships for 

shareholders. 

• Internships and other youth programs. Many corporations provided 

internships or other youth programs for shareholders at parent and 

subsidiary companies. Two Washington, D.C.-based subsidiaries 

provided housing and other relocation assistance to their interns. 

Additionally, one corporation instituted the Young Adult Advisory 

Page 82 GAO-06-399 Alaska Native Corporations
Appendix X: Benefits That Alaska Native 

Corporations Provide to Their Shareholders 

Mentor program, which allows its youth to participate in the 

corporation. Corporate officials told us that they instituted mentoring 

and internship programs to lead to future involvement of shareholders 

in management and leadership roles. 

• Burial assistance. Twenty-two of the 30 corporations reported 

providing some kind of assistance to the family of a deceased 

shareholder. Forms of burial assistance include cash, life insurance 

payments, or in-kind donations. 

• Land leasing, gifting or other use. Most of the village and urban 

corporations we interviewed leased, gifted, or made other use of the 

land given to the village corporation in the Alaska Native Claims 

Settlement Act4

 settlement for shareholders. For example, one 

corporation gifted five acres to any shareholder who requested it. 

• Community infrastructure. Several corporations invested in the 

infrastructure of their villages. For example, after the Department of 

the Interior’s Bureau of Indian Affairs ceased barge service to its 

remote village, one corporation established a transportation company 

that became the only mechanism to bring goods to the community. 

Other projects included remodeling the community washateria5

 and 

administering and subsidizing a village’s cable and Internet utilities. 

• Support of the subsistence lifestyle. Corporations took steps to protect 

and maintain the subsistence lifestyle of their shareholders. One 

corporation built in subsistence leave into its personnel policy. Another 

corporation leased its land for “fish camps,” or plots along a river for 

shareholders to catch and smoke fish in the summertime. 

Indirect Benefits: 

• Cultural preservation. Twenty-four of the 30 corporations we 

interviewed invested in cultural and heritage programs, which included 

museums, culture camps, or native language preservation. 

• Establishment and support of affiliated foundations or nonprofit 

organizations. Twenty-one of the 30 corporations established affiliated 

foundations or nonprofit organizations. 

 4

 Pub.L.92-203 (codified as amended in 43 U.S.C. 1601, et seq.). 

5

A washateria is a community laundry and shower facility found in villages without running 

water. 

Page 83 GAO-06-399 Alaska Native Corporations
Appendix X: Benefits That Alaska Native 

Corporations Provide to Their Shareholders 

• Donations to other nonprofit organizations. Almost all of the 

corporations donated to various nonprofit organizations. For example, 

one corporation donated to organizations that advocate for Alaska 

Natives, such as the Alaska Federation of Natives, Alaska Native Arts 

Foundation, Alaska Native Justice Center, and Get Out the Native Vote. 

• Support to other corporations. Some regional corporations provided 

various kinds of assistance to the village corporations in their regions. 

For example, one regional corporation is trying to develop 8(a) 

partnerships with its village corporations to help them enter the 8(a) 

program with lower start-up and administrative costs. Other regional 

corporations provided recordkeeping, natural resources, and

regulatory and community planning services for their village 

corporations. 

Page 84 GAO-06-399 Alaska Native Corporations
Appendix XI: Example of an Alaska Native

Corporation Owning Subsidiaries That 

Market Their Capabilities under Overlapping 

NAICS Codes 

Appendix XI: Example of an Alaska Native 

Corporation Owning Subsidiaries That 

Market Their Capabilities under Overlapping 

NAICS Codes 

One Alaska Native corporation that we reviewed owned seven subsidiaries 

participating in the 8(a) program, with six of them marketing their abilities 

to perform work in the same line of business. 

Subsidiary 

NAICS 

Codes

443120 Computer and software stores

511210 Software publishers 

541512 Computer systems design services 

Subsidiary A 

561210 Facilities support services 

221112 Fossil fuel electric power generation

531130 Lessors of miniwarehouses and self-storage units 

561210 Facilities support services 

Subsidiary B 

562111 Solid waste collection 

335312 Motor and generator manufacturing 

335313 Switchgear and switchboard apparatus manufacturing 

336611 Ship building and repairing 

561210 Facilities support services 

561612 Security guards and patrol services 

Subsidiary C 

611430 Professional and management development training 

443120 Computer and software stores

511210 Software publishers 

517310 Telecommunications resellers

Subsidiary D 

561210 Facilities support services 

238210 Electrical contractors 

541511 Custom computer programming services 

561210 Facilities support servicesa Subsidiary E 

562111 Solid waste collection 

541618 Management consulting services 

541930 Translation and interpretation services 

561210 Facilities support services 

Subsidiary F

611420 Computer training 

Source: GAO analysis of ANC data. 

a Subsidiary E marketed 561210 (Facilities Support Services) as its primary NAICS code. 

Page 85 GAO-06-399 Alaska Native Corporations
Appendix XII: 

A

GAO Contact and Staff 

cknowledgments 

Page 86 GAO-06-399

Appendix XII: GAO Contact and Staff 

Acknowledgments 

Katherine Schinasi (202) 512-4841 or schinasik@gao.gov

In addition to the individual named above, Michele Mackin, Assistant 

Director; Theresa Chen; David E. Cooper; Barry DeWeese; Art James, Jr.; 

Julia Kennon; Jeff Malcolm; Meaghan Marshall; Sylvia Schatz; Robert 

Tagorda; and Tatiana Winger made key contributions to this report. 

Alaska Native Corporations

GAO Contact 

Staff 

Acknowledgments 

(120437) 
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