NORTHERN LIGHTS AND PROCUREMENT PLIGHTS:

THE EFFECT OF THE ANC PROGRAM ON FEDERAL PROCUREMENT AND ALASKA NATIVE

CORPORATION

JOINT HEARING

BEFORE THE

COMMITTEE ON GOVERNMENT REFORM

AND THE

COMMITTEE ON SMALL BUSINESS

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

JUNE 21, 2006

Serial No. 109–185

Committee on Government Reform

Serial No. 109–56

Committee on Small Business

Printed for the use of the Committees on Government Reform and Small

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NORTHERN LIGHTS AND PROCUREMENT PLIGHTS: THE EFFECT OF THE ANC PROGRAM

ON FEDERAL PROCUREMENT AND ALASKA NATIVE CORPORATION

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NORTHERN LIGHTS AND PROCUREMENT PLIGHTS:

THE EFFECT OF THE ANC PROGRAM ON FEDERAL PROCUREMENT AND ALASKA NATIVE

CORPORATION

JOINT HEARING

BEFORE THE

COMMITTEE ON GOVERNMENT REFORM

AND THE

COMMITTEE ON SMALL BUSINESS

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

JUNE 21, 2006

Serial No. 109–185

Committee on Government Reform

Serial No. 109–56

Committee on Small Business

Printed for the use of the Committees on Government Reform and Small

Business

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

CHRISTOPHER SHAYS, Connecticut

DAN BURTON, Indiana

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

CANDICE S. MILLER, Michigan

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

JON C. PORTER, Nevada

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

CHARLES W. DENT, Pennsylvania

VIRGINIA FOXX, North Carolina

JEAN SCHMIDT, Ohio

——— ———

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. DUTCH RUPPERSBERGER, Maryland

BRIAN HIGGINS, New York

ELEANOR HOLMES NORTON, District of

Columbia

———

BERNARD SANDERS, Vermont

(Independent)

DAVID MARIN, Staff Director

LAWRENCE HALLORAN, Deputy Staff Director

TERESA AUSTIN, Chief Clerk

PHIL BARNETT, Minority Chief of Staff/Chief Counsel

COMMITTEE ON SMALL BUSINESS

DONALD A. MANZULLO, Illinois, Chairman

ROSCOE BARTLETT, Maryland, Vice

Chairman

SUE KELLY, New York

STEVE CHABOT, Ohio

SAM GRAVES, Missouri

TODD AKIN, Missouri

BILL SHUSTER, Pennsylvania

MARILYN MUSGRAVE, Colorado

JEB BRADLEY, New Hampshire

STEVE KING, Iowa

THADDEUS MCCOTTER, Michigan

RIC KELLER, Florida

TED POE, Texas

MICHAEL SODREL, Indiana

JEFF FORTENBERRY, Nebraska

MICHAEL FITZPATRICK, Pennsylvania

LYNN WESTMORELAND, Georgia

LOUIE GOHMERT, Texas

NYDIA VELA ́ ZQUEZ, New York

JUANITA MILLENDER-MCDONALD,

California

TOM UDALL, New Mexico

DANIEL LIPINSKI, Illinois

ENI FALEOMAVAEGA, American Samoa

DONNA CHRISTENSEN, Virgin Islands

DANNY DAVIS, Illinois

ED CASE, Hawaii

MADELEINE BORDALLO, Guam

RAU ́ L GRIJALVA, Arizona

MICHAEL MICHAUD, Maine

LINDA SA ́ NCHEZ, California

JOHN BARROW, Georgia

MELISSA BEAN, Illinois

GWEN MOORE, Wisconsin

J. MATTHEW SZYMANSKI, Chief of Staff

PHIL ESKELAND, Deputy Chief of Staff/Policy Director

MICHAEL DAY, Minority Staff Director

(III)

(V)

C O N T E N T S

Page

Hearing held on June 21, 2006 ............................................................................... 1

Statement of:

Alford, Harry, president and CEO, National Black Chamber of Commerce; Ann Sullivan, president, Madison Services Group, Inc. on behalf

of Women Impacting Public Policy; Chris E. McNeil, Jr., chairman,

Native American Contractors Association and president and CEO,

Sealaska Corp.; Helvi Sandvik, president, Nana Development Corp.;

Bart Garber, Tyonek Native Corp.; Julie Kitka, president, Alaska Federation of Natives; and Charles Totemoff, president and CEO, Chenega

Corp. ............................................................................................................... 172

Alford, Harry ............................................................................................. 172

Garber, Bart ............................................................................................... 237

Kitka, Julie ................................................................................................ 257

McNeil, Chris E., Jr., ................................................................................ 185

Sandvik, Helvi ........................................................................................... 221

Sullivan, Ann ............................................................................................. 178

Totemoff, Charles ...................................................................................... 255

Jenkins, Calvin, Deputy Associate Deputy Administrator, Office of Government Contracting and Business Development, Small Business Administration; David Cooper, Director, Acquisition and Management,

Government Accountability Office; Frank Ramos, Director, Small Business Programs, Office of the Under Secretary of Defense, Acquisition,

Technology, and Logistics, Department of Defense; and Melodee Stith,

Associate Director, Acquisition and Financial Assistance, Office of Acquisition and Property Management, Department of Interior .................. 126

Cooper, David ............................................................................................ 134

Jenkins, Calvin .......................................................................................... 126

Ramos, Frank ............................................................................................ 146

Stith, Melodee ............................................................................................ 153

Young, Hon. Don, a Representative in Congress from the State of Alaska,

chairman, Committee on Transportation and Infrastructure ................... 121

Letters, statements, etc., submitted for the record by:

Alford, Harry, president and CEO, National Black Chamber of Commerce, prepared statement of ...................................................................... 175

Cooper, David, Director, Acquisition and Management, Government Accountability Office, prepared statement of ................................................. 136

Cummings, Hon. Elijah E., a Representative in Congress from the State

of Maryland, prepared statement of ............................................................ 288

Davis, Chairman Tom, a Representative in Congress from the State of

Virginia, prepared statement of ................................................................... 4

Garber, Bart, Tyonek Native Corp., prepared statement of ......................... 239

Jenkins, Calvin, Deputy Associate Deputy Administrator, Office of Government Contracting and Business Development, Small Business Administration, prepared statement of ........................................................... 129

Kitka, Julie, president, Alaska Federation of Natives, prepared statement

of ..................................................................................................................... 259

McNeil, Chris E., Jr., chairman, Native American Contractors Association

and president and CEO, Sealaska Corp., prepared statement of ............. 187

Ramos, Frank, Director, Small Business Programs, Office of the Under

Secretary of Defense, Acquisition, Technology, and Logistics, Department of Defense, prepared statement of ..................................................... 148

Sandvik, Helvi, president, Nana Development Corp., prepared statement

of ..................................................................................................................... 224

Page

VI

Letters, statements, etc., submitted for the record by—Continued

Stith, Melodee, Associate Director, Acquisition and Financial Assistance,

Office of Acquisition and Property Management, Department of Interior, prepared statement of .......................................................................... 155

Sullivan, Ann, president, Madison Services Group, Inc. on behalf of

Women Impacting Public Policy, prepared statement of ........................... 180

Waxman, Hon. Henry A., a Representative in Congress from the State

of California, prepared statement of ........................................................... 10

(1)

NORTHERN LIGHTS AND PROCUREMENT

PLIGHTS: THE EFFECT OF THE ANC PROGRAM ON FEDERAL PROCUREMENT AND

ALASKA NATIVE CORPORATION

WEDNESDAY, JUNE 21, 2006

HOUSE OF REPRESENTATIVES, COMMITTEE ON GOVERNMENT REFORM, JOINT WITH THE COMMITTEE ON SMALL

BUSINESS,

Washington, DC.

The committees met, pursuant to notice, at 1 p.m., in room 2154,

Rayburn House Office Building, Hon. Tom Davis of Virginia (chairman of the Committee on Government Reform) presiding.

Present from the Committee on Government Reform: Representatives Tom Davis, Platts, Schmidt, Waxman, Cummings, Watson,

Van Hollen, Ruppersberger, and Norton.

Present from the Committee on Small Business: Representatives

Manzullo, Bartlett, Velazquez, Lipinski, Bordallo, Barrow, and

Moore.

Staff present from the Committee on Government Reform: David

Marin, staff director; Keith Ausbrook, chief counsel; Patrick Lyden,

parliamentarian; Rob White, communications director; Andrea

LeBlanc, deputy director of communications; Edward Kidd, professional staff member; John Brosnan, procurement counsel; Teresa

Austin, chief clerk; Sarah D’Orsie, deputy clerk; and Leneal Scott,

computer systems manager.

Chairman TOM DAVIS. The meeting will come to order. I want to

welcome everybody to today’s joint hearing with the Small Business Committee on the awarding of contracts by Federal agencies

to Alaska Native Corporations [ANCs], participating in the Small

Business Administration’s 8(a) program.

I want to extend a special welcome to Chairman Manzullo and

Ranking Member Velazquez and all members of the Small Business Committee participating in the hearing today. Further, we are

honored by the participation of our distinguished member from

Alaska and chairman of the Committee on Transportation and Infrastructure, the Honorable Don Young, who will be our lead-off

witness.

Over the last few years, the increased participation of ANCs in

the Government market through the use of non-competitive contracts has spawned various newspaper articles and concerns that

the Government’s competitive acquisition system is being circumvented. Therefore, our committee and the Small Business Committee tasked the Government Accountability Office to review the

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role of ANCs in our competitive acquisition system and within the

SBA’s 8(a) program. The GAO report issued this April showed that

sole-source awards to ANCs have been on the rise in recent years

and that SBA has not tailored its policies and practices to account

for ANC’s unique status and growth in the 8(a) program.

Through this hearing today, I want to explore the impact of the

special exemption to the standard of full and open competition

granted ANCs. I also expect to hear about SBA’s management of

the program and whether the Alaska Native people are receiving

the appropriate benefits from the acquisition advantages they have

been given. I recognize that the ANC program has a complex background and that the ANCs were created in a context independent

of any participation in the acquisition system.

The Alaska Native Claims Settlement Act was enacted in 1971

to resolve land claims and to foster economic development for the

Alaska Native people. ANCs were established under the act to become the vehicle for distributing land and monetary benefits in lieu

of a reservation system. ANCs are to be used for the benefit of

Alaska Native peoples. Alaska Natives are eligible for membership

in the ANC for their village and locality and, as shareholders, are

entitled to a voice in management and a share in the assets and

income. A part of this income in many but not all of the ANCs

comes from Government contract revenues.

ANCs have been permitted since 1986 to participate in the SBA

8(a) program. The 8(a) program was established to help socially

and economically disadvantaged groups start small businesses and

develop them, at least in part by contracting with the Federal Government. Under the program, Federal agencies are allowed to

award contracts without competition to small businesses that are

certified by the SBA as 8(a) firms. For most firms, these sole-source awards are limited to $5 million for manufacturing and $3 million for other goods and services.

Acquisitions above these thresholds must be competed among eligible 8(a) certified small businesses, but these limitations don’t apply

to ANC firms participating in the 8(a) program.

ANCs are subject to different requirements than other 8(a) firms

in a number of respects. For example, ANCs are not subject to the

affiliation rule which requires other 8(a) small business to count affiliates or subsidiaries of the business to determine whether the

business concern is small.

The GAO review of the ANC program found that expenditures

obligated to ANC firms through the 8(a) program have grown from

$265 million in 2000 to $1.1 billion in 2004. My concern is centered

on GAO’s finding that the spending of six Federal agencies—DOD,

Energy, Homeland Security, Interior, State, Transportation, and

NASA—through sole-source contracts to ANC firms rose from

about $180 million in 2000 to $876 million in 2004.

These sole-source contracts represented a broad range of services

such as contracts for construction in Brazil, training of security

guards in Iraq, and information technology services in Washington,

DC.

According to the GAO report, agency officials said they had used

ANC firms as a quick, easy, and legal method of awarding contracts of any value. At the same time, the officials noted these conVerDate 11-MAY-2000 12:28 Dec 04, 2006 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 D:\DOCS\30341.TXT HGOVREF1 PsN: HGOVREF1
3

tracts helped them meet small business goals. It is notable, I think,

that nowhere in the GAO report is there a statement that the contracts were awarded to ANCs because of the quality or value of

performance offered. Further, according to GAO, SBA has not tailored its policies and practices to account for ANCs’ unique status

in the 8(a) program or their growth in Federal contracting.

I have concerns about the impact of this program on our already

overburdened competitive acquisition system. Ideally, the system is

designed to permit all segments of the global competitive market

to contend to provide our Government with the best value goods

and services available, but we have increasingly burdened our system with restrictions on competition. We prohibit acquisitions from

overseas suppliers, and we limit competition to a bewildering array

of special types of businesses. While these various restrictions often

have laudable social goals, they all come at a price. Whenever competition is limited for reasons that are not tied to the needs of the

Government, taxpayers pay the price in quality and cost.

I hope this hearing today will clarify the impact of the ANC program on our competitive acquisition process and the value of the

ANC program to the Alaska Native people. I look forward to the

witnesses’ views on ways to improve the management, oversight,

and structure of the ANC program, so that appropriate benefits go

to the Alaska Native people and taxpayers get the benefit of the

best value goods and services available from the marketplace.

I will now recognize Mr. Manzullo, the chairman of the Small

Business Committee, and then I will go to Mr. Waxman and Ms.

Velazquez.

[The prepared statement of Chairman Tom Davis follows:]

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Chairman MANZULLO. Thank you. Good morning and welcome to

this joint hearing by the Committee on Government Reform and

the Committee on Small Business. Special thanks to those witnesses who have come a great distance to participate and attend

this hearing.

I welcome this hearing since there have been various newspaper

articles concerning the increased use of Alaska Native Corporations. This increased use is the subject of a U.S. Government Accountability Office study released in April of this year. GAO found

that the amount of 8(a) contracts going to ANCs increased from

$265 million in fiscal year 2001 to $1.1 billion in 2004, which represents 13 percent of all the 8(a) contract dollars in that year.

Federal agencies have awarded large sole-source contracts to

Alaska Native Corporations since they enjoyed statutory advantages not enjoyed by other 8(a) contractors. Federal agencies may

award contracts on a sole-source basis to Alaska Native Corporations without reference to the dollar value of the contract. Other

8(a) contractors must compete among themselves if the procurement is in excess of $5 million for manufacturing or $3 million for

services and goods.

In addition, Alaska Native Corporations are not subject to the affiliation rule which requires for other certified 8(a) small businesses that affiliates or subsidiaries of the small business be counted in determining the size of a business concern. The result is that

the Alaska Native Corporations, including their subsidiaries, can

grow to large businesses in comparison with other 8(a) small businesses that are constrained by size standards. In fact, the GAO report states that for fiscal year 1988 to 2005, Alaska Native Corporations 8(a) subsidiaries increased from one subsidiary owned by

one ANC to 154 subsidiaries owned by 49 ANCs.

Alaska Native Corporations have used their procurement advantages to help stockholders of the corporations in Alaska with various benefits being enjoyed by Alaska Natives including dividends,

jobs, education, scholarships, etc.

Again, I welcome this hearing as another means of getting the

facts concerning Alaska Native Corporations enrolled in the 8(a)

contracting program. I want to thank my good friend and colleague,

Chairman Davis for joining with the Committee on Small Business

and holding this hearing.

Chairman TOM DAVIS. Thank you very much.

Mr. Waxman.

Mr. WAXMAN. Thank you very much, Mr. Chairman, for holding

this hearing on Federal contracts with Alaska Native Corporations.

On Monday, I released a major report entitled ‘‘Dollars, Not

Sense: Government contracting under the Bush Administration.’’

This report, which is based on a review of over 500 Government

audits, is the first comprehensive assessment of Federal contracting under the Bush Administration. I would like to ask that this

report be made part of today’s hearing record.

Chairman TOM DAVIS. Without objection.

Mr. WAXMAN. As the report documents, procurement spending

has grown rapidly over the last 5 years, nearly twice as fast as the

rest of the Federal budget, and the result is that 40 cents of every

discretionary Federal dollar now goes to private contractors, which

8

is a record level. Unfortunately, while contract spending has

soared, oversight has been discouraged and accountability undermined. The result is that mistakes have been made in virtually

every step of the contracting process, from pre-contract planning

through contract award and oversight to recovery of contract overcharges. Contractors get rich, and taxpayers get gouged. The report identifies 118 contracts worth $745 billion that have

experienced significant overcharges, wasteful spending or mismanagement over the last 5 years. Well, that is the big picture.

True, we are going to focus today on one small but important

part of the problem, and I think it is an important one as we put

it in the context of this bigger picture. Today, we are going to look

at Federal contracts with Alaska Native Corporations.

This is our first hearing on these contracts, but Chairman Davis

and I began our oversight of this issue over a year ago. To lay a

foundation of this hearing, we jointly asked the Government Accountability Office to investigate, and we requested contract documents from the Departments of the Defense, Homeland Security,

and State.

Our investigation is focused on the special contracting privileges

that Alaska Native Corporations [ANCs], have under Federal law.

Federal contracting law provides a valuable but limited privilege

for small minority and economically disadvantaged businesses.

Under Section 8(a) of the Small Business Act, these companies can

be awarded contracts worth up to $5 million without competition,

but a 1986 law eliminated the $5 million ceiling for all Alaska Native Corporations. The result is that Alaska Native Corporations

can be awarded Federal contracts of any size without competition.

What both the GAO investigation and the contracting report I released found is that this contracting ‘‘flexibility’’ has been grossly

abused by the Bush administration. In 2000, the last year of the

Clinton administration, Alaska Native Corporations received only

$265 million in Federal contracts. Four years later, spending on

these contracts has ballooned to over $1 billion per year.

The original purpose of the special ANC contracting privileges

was to encourage economic opportunities for Alaskan natives living

in Alaska, but the administration has used ANC contracts to manage commercial property in Virginia, renovate buildings in Brazil,

and train security guards in Iraq, and much of the work has been

done by non-Native companies working as subcontractors. In effect,

the contracts become a convenient vehicle for circumventing open

competition requirements at a great expense to the taxpayers.

Today, I am releasing an analysis of some of the documents that

the committee has received. The documents show how congressional pressure has been placed on agency officials to provide special treatment to Alaska Native Corporations in contracting actions. They also show that the Alaska Native Corporation received

large fee awards, despite repeatedly receiving poor security performance evaluations. I would like to ask that this analysis and the

documents it cites be made part of the hearing record.

Chairman TOM DAVIS. Without objection.

Mr. WAXMAN. When GAO examined how Federal agencies are

using the ANC contracting provisions, it found the administration

officials view the provisions as ‘‘an open checkbook.’’ GAO also

9

found almost no evidence that contracting officials are effectively

enforcing the legal requirements that at least 50 percent of the

work under these contracts be performed by Alaska Native Corporations rather than large non-Native subcontractors.

In one case identified by GAO, an agency wanted to contract

with a particular company but could not award a no-bid contract

directly to that company. The agency solved the problem. They

awarded a passthrough contract to an ANC and required it to subcontract with the favored company.

The abuse of the ANC provision has been costly to the taxpayers,

in one case described by GAO, the State Department awarded a nobid contract to an ANC even though its initial proposed price was

double the Government’s cost estimate. In another case, rather

than buying water and fuel tanks directly from a manufacturer,

the Army awarded a no-bid contract to an ANC which had the effect of adding an unnecessary layer of fees to the contract. When

an ANC was used to provide emergency classrooms after Hurricane

Katrina, prices again doubled.

The special contracting privileges for Alaska Native Corporations

were established with the best of intentions, but along the way and

especially over the last 5 years, these good intentions have been replaced by avarice and indifference to the interests of the U.S. taxpayer. Fundamental changes in the law are needed, and I hope this

hearing will be the first step on the road to reform.

Thank you.

[NOTE.—The April 2006 GAO report entitled, ‘‘Contract Management, Increased Use of Alaska Native Corporations’ Special 8(a)

Provisions Calls for Tailored Oversight, GAO–06–399’’ may be

found in committee files.]

[The prepared statement of Hon. Henry A. Waxman follows:]

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Chairman TOM DAVIS. Ms. Velazquez.

Ms. VELAZQUEZ. Thank you, Mr. Chairman.

The Federal Government has grown to become the biggest buyer

of goods and services in the world. In the last year alone, Federal

purchasing power increased by 3 percent to $295 billion.

In order to achieve a vibrant and open Federal marketplace, it

is essential for small firms to be included in the procurement equation. Small businesses have always played a key role in ensuring

our Government is able to effectively operate and continue in this

role. These businesses are capable of providing quality services at

the best value for the American taxpayer’s dollars.

There are many Federal Government programs designed to encourage agencies to utilize small business owners in their Federal

buying strategies. These are valuable programs that serve an important purpose and have provided the Government with the highest quality products for the taxpayer’s dollar. However, it is all too

often that many of these programs are unfairly singled out, not because they are ineffective but due to the current administration’s

failure to properly modernize, fund, and administer these initiatives.

The 8(a) program, our Nation’s only remaining Federal initiative

focused solely on the development of minority entrepreneurs, is one

such initiative. It has been responsible for the development of more

than 20,000 companies that have received almost $100 billion in

Federal contracts. Yet, for all the good the 8(a) program has done,

the Small Business Administration has allowed it to deteriorate

significantly. Without sufficient funding, manpower, and oversight,

the 8(a) program has faltered in its ability to serve low income

communities and aid in the development of minority entrepreneurs.

Today, we have the opportunity to discuss the findings of a recent Government Accountability Office report which takes an indepth look at the current state of affairs with the 8(a) program, in

particular, the dramatic increase in 8(a) contracts awarded to Alaska Native Corporations and the impact this might have on the future of the program.

In fiscal year 2004, ANCs were awarded $1.1 billion or 13 percent of the total 8(a) dollars. This should be contrasted with the

fact that between fiscal year 2003 and fiscal year 2004, the 8(a)

program as a whole, minus ANCs, declined by $2 billion. The reality is that the ANC participation is increasing while 8(a) contracts are declining. The reason for this decline is in large part due

to SBA sheer lack of attention to the program.

The GAO has outlined 10 recommendations for the SBA to increase its oversight. Without this, the GAO has pointed out that

there is clearly the potential for unintended consequences or abuse.

This situation not only takes away valuable contracting opportunities for small business owners but also diminishes the ability of the

8(a) program to fulfill its role of aiding economic and community

development.

The important issue we are facing today with this hearing is to

attempt to strike a balance between the need to provide economic

development to Alaska Natives while ensuring small and minority

business owners do not see further contract dollar declines. As we

continue to look for ways to foster economic development in minorVerDate 11-MAY-2000 12:28 Dec 04, 2006 Jkt 000000 PO 00000 Frm 00130 Fmt 6633 Sfmt 6633 D:\DOCS\30341.TXT HGOVREF1 PsN: HGOVREF1
121

ity and under-served communities, it is essential that we do not

lose sight of the capabilities of the 8(a) program. This initiative has

always been and should continue to be a key element in building

strong communities and local economics.

I am hopeful that the two of our committees can find common

ground to refocus the 8(a) program and reengage the SBA in seeing

that this initiative is truly able to accomplish its intended mission.

Thank you, Mr. Chairman.

Chairman TOM DAVIS. Thank you very much.

We have our lead witness, the Honorable Don Young, our Representative for Alaska and great friend. Don, thank you for being

with us.

STATEMENT OF HON. DON YOUNG, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF ALASKA, CHAIRMAN, COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

Mr. YOUNG. Thank you, Mr. Chairman and ranking members

and committee members for having this hearing.

You will have a panel before you from Alaska that is a broad representation of the ANC program. Mr. Chairman, with your permission, I would ask at this time to allow those individuals who will

testify to be able to rely upon the people who accompany them to

answer some technical questions if there are any technical questions.

Chairman TOM DAVIS. Without objection.

Mr. YOUNG. The ANC contracting, Mr. Chairman, to get a fair

hearing and a fair review, this committee and Congress must look

at the broad picture of Federal Government contracting as a whole,

so that the ANCs’ contracting can be put in the proper context.

Mr. Chairman, I am hear to say these folks are doing right by

the Federal Government; they are doing right by the American taxpayer; and, most importantly, they are doing right by the impoverished communities back home in Alaska.

A razor focus on just Alaska Native Corporations [ANCs], contracting would be a disservice to the Federal agencies who have

given the ANCs very high performance ratings generally and to

ANCs who have done a good job executing the contracts they have

been awarded.

The issues of the hearing we will be looking at are not just small

business policies or general Government procurement policies but

rather are the important part of the National Indian policy emanating from Congress’ constitutional mandate to set Indian policy.

I am here to tell you that the efforts to find fault and criticize

Alaska Native Corporations participating in Small Business Administration SBA Section 8(a) programs, frankly, I think is a thinly

disguised attack on Native Alaskan people and the corporations

precisely because a few of them enjoy great success.

As the senior member of the House Committee on Resources, I

intend to work with Chairman Pombo and Ranking Member Rahall

on the National Indian policy ramifications of the GAO report and

any proposed regulatory or statutory changes that may be developed.

Mr. Chairman, I request your committee put on the record the

following: The total amount of Federal contracting and the percent

122

of that total that has been awarded to ANCs, it is my understanding that according to the Government’s own data base, total Federal contracting was $300 billion in 2004; the total ANC contracting for all sources, both 8(a) and non–8(a), was $2.2 billion in 2004,

about 7 cents of 1 percent, 7 cents for every $100 the Fed spent

on contracting. If you look at the percentage of total Federal contracting that went into ANC 8(a) contracts alone, the percent follows to a little over one-half of 1 percent. In other words, every

$100 the Government spends on procurement, all the ANCs combined are getting a little over 50 cents through the 8(a) program.

In addition, your two committees should also examine the percent of Federal contracting that goes to the 8(a) program. Regarding the percent of the 8(a) program that goes to ANCs over the period of years, the GAO report said 17 percent of the 8(a) contracts

went to ANCs in 2004. Regarding the total amount of sole-source

contracts for all Federal contracts, the percent of total sole-source

contracts that have been awarded to non-ANC and non–8(a) companies compared to the percent of sole-source contracts that go to

ANCs, looking only at ANCs regarding sole-source contracts is ignoring the larger issues.

When the Federal Government’s own studies from the 10 largest

defense contractors—and I believe Mr. Waxman has mentioned

this—none of them were ANCs by the way. From 1999 to 2003, 6

years, only one of them had more than 50 percent of its contracts

from competitive procurements. All the rest of what I call the big

boys had more than 50 percent of their contracts through solesource and non-competitive awards. I submit that the dollar

amounts going to these large contracts are huge compared to what

we have in the ANCs.

Finally, I want to point out ANC contracts have been and is a

good thing for the Government. It is a good thing for the Alaskan

Natives. The SBA 8(a) program, as it relates to businesses owned

by Alaskan Natives and Native American tribes, has been one of

the few Federal Native programs that is actually working. The

ANCs should be proud that the GAO report made no recommendation for statutory changes and reported no wrongdoing on their

part. In fact, the one wrongdoing that was reported was actually

a competitive contract awarded to somebody outside of the ANCs.

This SBA program has benefited not only ANCs and the Alaska

Native, but it has created job opportunities and developments of

small businesses in 49 of the 50 States in virtually every one of the

Congressional Districts represented by members of the two committees.

Now, you know I have a long involvement in Native American

issues, such issues as the Alaskan Native Land Claims Settlement

Act and the subsequent amendments. There is absolutely no question that the program you are looking at today is an integral part

of the economic settlement of ANCSA. Alaska Natives ceded millions of acres of land claims in exchange for the ability to provide

for economic self-sufficiency for their people. This is part of the National Indian Policy, something that has been reaffirmed by the

U.S. District Court of Appeals as recently as June 2003. The Supreme Court declined to review that decision, letting stand the provision indeed called Indian Policy.

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This was the promise of ANCSA, Alaskan Native Land Claim

Settlement Act. It is clear to me, from all my experience, that the

Federal Government record in dealing with Native Americans is a

dismal one, one marked by the fact that too many times the Government sets out a policy only to go back on its word. The Government should not break its promises, and by the way, the Government being this Congress.

It seems to be the case that particularly Native Americans are

actually succeeding and benefiting from the policy set forth. It is

my strong belief that the Federal Government cannot go back on

its word again. If we need to make proper adjustments to the program, if we have to have more oversight, let us do that, but let us

allow the program to continue to help fulfill the responsibility that

we have as a Nation to all the Native Americans.

Mr. Chairman, I suggest respectfully that the people you will

hear from on the panel from Alaska will give you the more integral

results of what this program has been able to do for their stockholders and the people in Alaska.

With that, Mr. Chairman, I will answer any questions.

Chairman TOM DAVIS. Don, thank you very much and thank you

for putting that in a historical context.

I will just say my only concern, as you look at the 8(a) program

and what it was designed to do, is this squeezes out, because it is

not being done in a competitive way, other opportunities for other

8(a)’s. I think that is one of the concerns that has been expressed

on that.

Mr. YOUNG. That is a legitimate concern. The thing I want to

again bring out and my testimony said it also, is this is an attempt

to try to rectify, I think, a lot of injustices over the history of America and the Congress to the American Natives. It is not just Alaska

Natives. We have an exception; that is correct. Contrary to what

you read in the paper, we have impoverished areas in Alaska that

have really very little opportunity which have used this program

now where they are building schools and they are doing things

that, very frankly, are the Government’s responsibility.

Chairman TOM DAVIS. I appreciate that.

Mr. YOUNG. I just want you to know that.

Chairman TOM DAVIS. Thank you.

Anyone else? Mr. Waxman.

Mr. WAXMAN. Thank you very much, Chairman Young for your

testimony.

From my perspective, I think I made this clear in my opening

comments, if we are talking about a contract where it is more than

$100 million, it ought to be competed for. It ought not to be given

any special weight with the ability to waive the rules that require

competition, without limits that we put on for small businesses.

From the taxpayer point of view, when there is not competition or

where there aren’t the market forces, we end up paying more

money.

I would agree with you that maybe you turn the other way if it

is going to benefit people who have been disadvantaged in the past.

I am not sure that I agree with that. But we are talking about subcontractors who do the work, who are not even Native Alaskans

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and they are not even doing it in Alaska. They are doing work in

Virginia and Iraq and other places.

Mr. YOUNG. I understand that, Mr. Waxman. I understand, Mr.

Congressman, but the point that I think you have to keep in mind

is in the GAO report—and you have read it—there is no one who

says the taxpayer is not getting a good deal out of this. If you want

to have a $100 million contract that is not going to go to an Alaskan Native Corporation, it is going to go to you know who, the 10

big ones because they can outbid it.

Now, you don’t need your staff to tell you the answer to that

question right now. That always irritates me when that happens,

sir. I mean I am the chairman, and I will not, very frankly, allow

that to happen. If I can’t do that on my own, you can ask me a

question and I can answer it, but let you and I talk together,

please. I think that is important.

But you understand what I am saying. This is an attempt. You

say it is not bid on. If there is a report from the GAO that says

the taxpayer didn’t get the best bang for their buck, then let us see

that.

Mr. WAXMAN. I think you and I read the report in a different

way because it seems to me the GAO has reported a number of instances of excessive costs, and that is what bothers me.

Mr. YOUNG. Some of those instances were requirements of the

agency which let the contract. Let us say for a defense contract for

security, they let that contract and they required further training

of the people in the guard positions, which costs more.

I am just saying, when you study this, make sure that the agency that requested the contract, make sure that they are not the

ones that caused the higher cost. They created the higher cost, and

I think you will hear that testimony.

Mr. WAXMAN. Well, I want to see competition, and I want to see

costs held down.

Mr. YOUNG. I understand.

Mr. WAXMAN. That is the objective, and I think it is an important one.

Mr. YOUNG. Yes.

Chairman TOM DAVIS. Chairman Manzullo.

Chairman MANZULLO. I guess my concern is it is not just 8(a)

versus 8(a); it is Alaska and the ANC 8(a) versus other small businesses. I mean 1 of the 154 ANCs is Chenega Technology Services.

Mr. YOUNG. Chenega.

Chairman MANZULLO. Chenega, of the 2,300 employees who work

there, only 33 are Alaskan Natives.

Mr. YOUNG. That is true, and those are 33 more Alaskans who

wouldn’t be working. Remember, Chenega is a very small, small

community. The one thing is it does bring money back into the

community. Like I said, I think you will hear testimony later on

about the benefit of this.

One of the things that has always concerned me about this is

every time there is an act of Congress and it seems as if we are

successful in doing what we attempted to do and it becomes a

greater success, there seems to be a notion of, well, we didn’t mean

it to be that successful.

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Now, under this act, and they were given this specifically and purposely, they could go above $5 million, so they could in fact be

non-competitive if they want to, but they are offering a service. If

the agencies come back and say, we are not getting the services,

then let us look at it. All due respect to every gentleman who has

read that report, there is no one who says they haven’t done the

services.

You can’t expect a village of 300——

Chairman MANZULLO. Let me ask the question.

Mr. YOUNG. OK.

Chairman MANZULLO. The issue is not the quality of the service

because if the issue was the quality of the service, then that company would not be getting another contract unless the contracting

agent came before this committee or my committee and tried to justify that. The issue is the fairness to the other small businesses.

I have an area that I represent, chairman, that in 1980 led the Nation in unemployment at over 25 percent. There are serious issues

of unemployment throughout the Continental 48 States in addition

to what is going on in Alaska.

As we have been approached to take a look at the ANCs, it is

the question of whether or not there is overemphasis upon helping

out Alaska as opposed to the rest of the States. In fact, Madeleine

Bordallo who represents Guam, natives of her island in Guam tried

to get a contract to repair ships, and they were bumped by an

ANC. This is Guam.

And so, these issues are coming up all over, literally all over the

world as to not the quality of the services nor the fact that the

services help out the people that you so ably represent but as to

the fairness to the other small businesses and to the other 8(a)’s

across the Nation. That is the reason for the hearing.

Mr. YOUNG. I understand that. I will just leave you guys alone.

I am just suggesting respectfully that if the other small businesses

could do this, it might be all right, but these contracts are let to

get the best result. I thought we were here to save the taxpayers

some money, and they are doing the job.

No one can show me, and your staff has read that report. They

have not been charged with not fulfilling the obligation with which

they were charged by the agency which contracted with them. You

will hear from the agencies, I hope. If there is one person per agency who says they haven’t done the job, I would like to hear because

I have asked each one of them. Have they or have they not done

the job? They have always said they have done a great job. They

have a good rapport. I thought that was also part of the hearing.

Thank you, Mr. Chairman.

Chairman TOM DAVIS. Thank you for the historical context of

this. I think sometimes as we get caught up in this, we need to understand historically how this came to be and what it was trying

to do. We appreciate it, and anything else you would like in the

record, we would be happy to submit.

Mr. YOUNG. Thank you.

Chairman TOM DAVIS. Thank you.

The Health Centers Renewal Act is a 15 minute vote, followed

by a 5 minute vote on the Children’s Hospital GME Support Reauthorization Act.

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So we have an hour. Let us get our first panel up here. Thank

you very much.

So, we have votes at 2:30, and I think we can get through this.

Let us start with the first panel: Mr. David Cooper, Director of Acquisition and Sourcing Management at the GAO; Mr. Calvin Jenkins, the Deputy Associate Deputy Administration of the Office of

Government Contracting and Business Development, Small Business Administration; Mr. Frank Ramos who is the Director of the

SBA Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics, Department of Defense; and Ms. Melodee

Stith, the Associate Director of Acquisition and Financial Assistance in the Office of Acquisition and Property Management, U.S.

Department of the Interior.

It is our policy that we swear you in before you testify, if you

would just rise and raise your hands and if there is anyone with

you who may be advising you on anything.

[Witnesses sworn.]

Chairman TOM DAVIS. Mr. Jenkins, we will start with you. Your

entire written statement is in the record. You will have a light in

front of you that turns green when you start, orange after 4 minutes, red after 5 minutes. If we can keep to that, I think we can

get through this panel before the first votes and maybe swear in

the second panel. If you need longer, we don’t mind, if you think

it is important. Thank you for your work on this.

STATEMENTS OF CALVIN JENKINS, DEPUTY ASSOCIATE DEPUTY ADMINISTRATOR, OFFICE OF GOVERNMENT CONTRACTING AND BUSINESS DEVELOPMENT, SMALL BUSINESS ADMINISTRATION; DAVID COOPER, DIRECTOR, ACQUISITION

AND MANAGEMENT, GOVERNMENT ACCOUNTABILITY OFFICE; FRANK RAMOS, DIRECTOR, SMALL BUSINESS PROGRAMS, OFFICE OF THE UNDER SECRETARY OF DEFENSE,

ACQUISITION, TECHNOLOGY, AND LOGISTICS, DEPARTMENT

OF DEFENSE; AND MELODEE STITH, ASSOCIATE DIRECTOR,

ACQUISITION AND FINANCIAL ASSISTANCE, OFFICE OF ACQUISITION AND PROPERTY MANAGEMENT, DEPARTMENT OF

INTERIOR

STATEMENT OF CALVIN JENKINS

Mr. JENKINS. Chairman Manzullo, Chairman Davis, and Ranking

Member Velazquez, Ranking Member Waxman, and members of

the Small Business and Government Reform Committees, thank

you for inviting me here today to discuss the participation of the

Alaska Native Corporations [ANCs], in the 8(a) business development program.

The 8(a) program was enacted during the 1960’s to assist eligible

small businesses’ concerns to compete in the American economy

through business development. The Small Business Act authorized

SBA to develop business ownership among groups that own and

control little productive capital.

Individual applicants must demonstrate social and economic disadvantage. Although some groups are presumed to be socially disadvantaged, they as well as other applicants must demonstrate economic disadvantage. ANC-owned firms are deemed by statute to be

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socially and economically disadvantaged. All U.S. citizens who can

demonstrate social and economic disadvantage as well as comply

with other eligibility requirements are welcome to apply for participation in the 8(a) program.

In addition to management and technical assistance provided

under the program, certified 8(a) firms may be eligible to receive

contracts that Federal agencies offer for the 8(a) program. Furthermore, under 8(a) program, the Government is able to award contracts to participating firms without competition below a certain

dollar threshold. Also, the government can restrict competition for

Federal contracts above stated dollar thresholds to 8(a) certified

firms.

In 1986, a significant change was made to the 8(a) program when

Congress enacted legislation that allowed agencies, Native Hawaiian organizations, community development corporations, and tribally owned firms to participate in the 8(a) program to force the economic development to respective communities. Since 1986, Congress has extended special procurement advantages 8(a) ANC

firms.

The 8(a) program design anticipates that organizational-owned

firms including ANCs will utilize the program to provide economic

development to their respective communities. All other 8(a) participating firms utilize the program to receive individual business development assistance.

I must emphasize that, as the law is currently written, the 8(a)

program is simultaneously providing business development to disadvantaged individuals while also providing regional or community

economic development to organizational-owned firms including

ANCs.

The GAO report addressed some of the differences I have mentioned. The report also states that ANCs have utilized the 8(a) program to improve local economic conditions and provide increased

social services to Alaskan Natives. The report notes that Federal

contract dollars obligated to firms owned by ANCs grew from $265

million in fiscal year 2000 to $1.1 billion in fiscal year 2004. Importantly, there is no indication within this report of wrongdoing by

any participants in this program. In fact, the issues addressed in

the report come from activities that are part of the program as

Congress designed it.

The GAO report failed to note the significant increase in Federal

contract dollars to other groups during the same period of time. In

fiscal year 2004, women-owned small businesses grew from $5.5

billion to $9.1 billion; service-disabled veteran small businesses

grew from $554 million to $1.2 billion; HUBZone firms grew from

$1.6 billion to $4.8 billion; and overall, small businesses grew from

$50.1 billion to $69.2 billion.

The Federal Government achieved its goal during fiscal year

2003 and 2004 that 23 percent of its prime contracting dollars were

awarded to businesses that certified as small businesses including

ANCs. Though there is a small disadvantaged business goal which

includes 8(a), there is no small goal for 8(a). However, in fiscal year

2004, 8(a) were awarded $8.4 billion of the SDB achievement of

$18.5 billion.

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Information recently released by SBA indicates that the 8(a) program has increased from Fiscal year 2004 to fiscal year 2005 by

$2.1 billion.

Frankly, I would like to talk about oversight. The SBA takes its

oversight responsibility very seriously. Prior to the release of the

GAO report, the SBA had taken a number of steps to improve the

oversight of the 8(a) program, including taking into consideration

special provisions afforded to 8(a) concerns owned and controlled by

ANCs, Native Hawaiian organizations, CDCs, and Indian tribes.

For instance, the agency is revising its partnership agreement,

delegating 8(a) authority from SBA to various Federal procuring

agencies to clarify their role and responsibility for monitoring contract compliance of and performance by 8(a) firms. SBA has also

increased training to field staff responsible for working on the 8(a)

issues. In addition, the agency is exploring possible regulatory

changes that will strengthen the program and increase SBA’s oversight capabilities. SBA also recently installed a new management,

a new experienced management team to oversee the 8(a) program.

In closing, let me emphasize SBA’s responsibilities to implement

the existing law.

Thank you for allowing me to share SBA’s reviews with you

today, and I will be happy to answer any questions you have.

[The prepared statement of Mr. Jenkins follows:]

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Chairman TOM DAVIS. Thank you.

Mr. Cooper.

STATEMENT OF DAVID COOPER

Mr. COOPER. Chairman Davis, Chairman Manzullo, Ranking

Member Waxman, and Ranking Member Velazquez, and members

of both committees, it is a pleasure to be here this afternoon to

share with you and discuss the results of the GAO review on Alaska Native Corporations’ participation in the 8(a) program.

In response to your request, we issued a report in April that

shows that Federal agencies are turning increasingly to ANC 8(a)

firms to meet their requirements and to do their contracts. Although representing a small portion of the total Federal procurement spending obligations, obligations to ANC firms increased from

$265 million in 2000 to $1.1 billion 2004. During that 5-year period, Federal agencies obligated a total of $4.6 billion to ANC 8(a)

firms, of which $2.9 billion of that went through the 8(a) program.

In 2004, the amount of obligations to 8(a) ANC firms represented

about 13 percent of total 8(a) business.

The ANCs are using the 8(a) program as one of many tools to

generate revenue with the goal of benefiting or providing benefits

to Alaskan Natives, their shareholders. Benefits take many forms

including dividend payments, scholarships, elder support, and cultural preservation, and there is no doubt, because I visited some

of the villages, that the revenues from the 8(a) program have benefited the communities in Alaska. Appendix 10 in our April report

contains a detailed description of the kinds of benefits that have

been provided.

Since 1986, when ANC firms were permitted to participate in the

8(a) program, Congress has extended procurement advantages to

those firms beyond those afforded to other 8(a) businesses. For example, ANC firms are permitted to receive non-competitive contracts without any limits, whereas other 8(a) businesses are subject

to a competitive threshold of $3 million or $5 million if it is a manufacturing contract. ANCs can also own multiple firms participating in the 8(a) program, and as Chairman Manzullo pointed out,

there has been a significant growth in the number of firms doing

that.

While these advantages have been controversial, I want to be

clear that GAO is not challenging them. Congress passed those provisions to allow the ANCs to provide economic development and

benefits to their shareholders.

However, our work shows that Federal agency contracting officials need to do a better job of complying with certain requirements

that are intended to preclude abuses of the 8(a) program. Specifically, I am referring to the need for procuring agencies to inform

SBA when work under an 8(a) contract is expanded or modified

and to monitor the performance of the contract to ensure subcontract limitations are not exceeded. Our work also shows that

SBA needs to tailor its oversight to account for ANC’s unique status and growth in the program.

For example, we believe SBA needs to track the business industries in which ANC firms have 8(a) contracts to ensure that more

than one firm of the same ANC is not generating the majority of

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its revenue in the same industry. SBA regulations do not allow an

ANC to have more than one firm operating in the same primary

industry.

We also believe SBA needs to more consistently determine

whether other small businesses are losing contract opportunities

and to collect better information about the 8(a) program.

During our review, SBA officials recognized that ANC firms

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

companies and told us they faced a challenge in overseeing the increased activity. The officials agreed that improvements are needed

in their oversight and said they are considering various actions in

that regard.

We have made several recommendations in our April report to

both the procuring agencies and to SBA to improve oversight and

ensure that firms are operating in the 8(a) program as it was intended.

That concludes my statement. I will be glad to answer any questions you might have.

[The prepared statement of Mr. Cooper follows:]

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Chairman TOM DAVIS. Thank you very much.

Mr. Ramos.

STATEMENT OF FRANK RAMOS

Mr. RAMOS. Chairman Davis, Ms. Velazquez, Chairman Manzullo, Mr. Waxman, and distinguished members of both committees, it is an honor to speak before you about the Department of

Defense’s interactions with Alaska Native Corporations [ANCs].

ANCs are a part of a talented pool of entrepreneurs and business

people and, by law, are considered part of the small business community. The important contributions made by small businesses

have firmly established them as an integral part of the Department

of Defense warfighting mission and the American economy. The

Department of Defense is committed to providing our men and

women in uniform with the best technology, products, and services

that are available to us. The Department looks to dependable small

businesses, including ANC-owned firms participating in the Small

Business Administration’s 8(a) business development program, as

suppliers of the innovation needed to deliver technology into the

hands of the warfighters.

Congress has enacted legislation over the years enabling the Department to offer greater procurement opportunities to small business, and I thank you for this.

Through the authority you have granted and the guidance you

have provided, we have been able to successfully leverage the capabilities of small business in a number of technological areas such

as composite materials, modeling and simulation, unmanned aerial

vehicles, and robotics. This has served to strengthen the defense industrial base.

I am also pleased to note that the small business program has

a record-breaking performance for fiscal year 2005. The information just released today from the Department of Defense prime contracted awards was recorded at 24.5 which is a historical record.

Our prime contracting dollars is $52.9 billion, and this is information as released by the SBA and OMB, and I checked with OMB

before I released this information.

Now, let me focus on the areas of interest relative to 8(a) ANC

firms participating in the SBA 8(a) program. There are three key

pieces of legislation that set forth parameters for doing business

with the 8(a) ANCs by the Federal Government including DOD.

They are the Small Business Act, the Alaskan Native Claim Settlement Act, and the Business Opportunity Development Reform Act.

I will not go into the details of each of the acts as they have been

clearly addressed by GAO in your letter of invitation.

However, I would like to reference the basis of that statute that

permits all Federal agencies, including DOD, to transact business

with Native Americans, specifically ANCs, and that is Section 602

of the Business Opportunity Development Act, which states that

‘‘These dollar thresholds shall not apply to programs participants

that are owned and controlled by economically disadvantaged Indian tribes.’’

The Business Opportunity Reform Act of 1988 limits sole-source

authority for traditional 8(a) program participants to $5 million for

manufacturing, $3 million for other goods and services. The act

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permits concerns that are owned by either tribes or Alaska Native

Corporations to receive 8(a) sole-source contracts beyond those dollar thresholds.

I would like clarify why I did not answer the questions in the letter of invitation. I viewed, in general, that the questions posed are

best responded to by those Federal agencies that may such program assessments for the Federal Government. However, if you

have specific questions pertaining to the Department of Defense, I

will be glad, I will be happy to answer those questions.

I view my role as a chief small business advocate for the Secretary of Defense is to ensure that our Department’s acquisitions

system affords every small business seeking DOD contracts every

privilege that they are entitled to under the law as passed by Congress. I believe that the Department of Defense has diligently attempted to meet that requirement to the best of our ability.

I look forward to your questions. Thank you.

[The prepared statement of Mr. Ramos follows:]

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Chairman TOM DAVIS. Thank you.

Ms. Stith.

STATEMENT OF MELODEE STITH

Ms. STITH. Messrs. Chairmen, thank you for providing me with

the opportunity to present the views of the Department of the Interior on the award of contracts by Federal agencies to Alaska Native

Corporations participating in the Small Business Administration

8(a) program.

In December 1971, Congress enacted the Alaskan Native Claims

Settlement Act to resolve land claims and to foster economic development for Alaskan Natives. The statute created Alaska Native

Corporations as a means for distributing land and monetary benefits to Alaskan Natives in lieu of a reservation system. Since 1986,

ANCs have been permitted to participate in the SBA’s 8(a) program, a program developed to foster the growth and development

of small businesses owned by socially and economically disadvantaged individuals.

By law and regulation, certain limitations that apply to other

8(a)-certified small businesses are not applicable to ANCs. In one

example, for most 8(a) firms, sole-source awards are limited to $5

million for manufacturing and to $3 million for other goods and

services. Acquisition requirements above these thresholds must be

competed among eligible 8(a)-certified small businesses. However,

Section 124.506(b) of Title 13 of the Code of Federal Regulations

provides an exemption from the sole-source threshold limitation

that a procurement be competed before it is awarded on a solesource basis for tribally owned concerns including ANCs.

Have ANCs been successful in attracting Federal contract

awards under the 8(a) program? The answer appears to be a strong

affirmative. According to the Government Accountability Office’s

April 2006 report, ‘‘Contract Management Increased Use of Alaska

Native Corporations’ Special 8(a) Provisions Call for Tailored Oversight,’’ 8(a) obligations to firms owned by ANCs increased from

$265 million to $1.1 billion in 2004.

The Department of the Interior has a significant presence in

Alaska and considerable interaction with the Alaska Native people.

From the standpoint of our responsibilities to Alaskan Natives, we

definitely have an interest in providing continuing economic opportunities through Federal contracts.

The GAO identified the need for the Federal contracting community to better understand the nature of ANCs and to mitigate any

risk of their misuse under the program.

We concurred with the draft and final GAO report’s recommendation made to the Departments of Defense, Energy, Homeland Security, the Interior, State, and Transportation, and the National Aeronautics and Space Administration to work with SBA to

develop guidance to agency contracting officers on how to comply

with the requirements of 8(a) programs such as limitations on subcontracting and notifying SBA of contract modifications, particularly when contracting with 8(a) ANC firms. In fact, we proposed

that an interagency work group be established and headed by SBA

to develop this important and much needed guidance for our contracting and small and disadvantaged business utilization and deVerDate 11-MAY-2000 12:28 Dec 04, 2006 Jkt 000000 PO 00000 Frm 00163 Fmt 6633 Sfmt 6633 D:\DOCS\30341.TXT HGOVREF1 PsN: HGOVREF1
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velopment communities. We look forward to partnering with our

colleagues in developing the guidance.

Messrs. Chairmen, this concludes my prepared remarks. I will be

happy to answer any questions you or other members of the committees might have.

[The prepared statement of Ms. Stith follows:]

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Chairman TOM DAVIS. Thank you all.

Let me start, Mr. Ramos and Ms. Stith, with you. When the Department enters into sole-source negotiations with an ANC, how

does it determine if the Government is getting a fair and reasonable price?

Mr. RAMOS. You are asking about the Department of Defense,

right?

Chairman TOM DAVIS. I am.

Mr. RAMOS. One thing about the sole-source at the Department

of Defense, there is a lot more scrutiny than people realize. First

of all, the contracting officer, given the circumstance and environment that they make decisions on, has to negotiate a reasonable

price with the firm. What is unknown to most people is that the

defense contracting agency may scrutinize that contract, so it has

more scrutiny in terms of a sole-source as compared to a competitive contract. From our view with respect to the GAO report, and

we worked very closely——

Chairman TOM DAVIS. DCAA gets a lot of that on the back end.

Mr. RAMOS. Pardon me?

Chairman TOM DAVIS. DCAA gets a lot of that on the back end.

Do they do it on the front end as well?

Mr. RAMOS. Yes, it can be done at the front end. Now that is a

part of the oversight that the Department of Defense has up front.

There is always that opportunity for them to come back at the back

end.

My point with respect to the Government Accountability Office

report, we didn’t see or hear of any specific major concern outside

of doing things to inform our people how to manage those contracts

a little better.

Chairman TOM DAVIS. Nobody is saying anybody has broken the

law or anything. What we are looking at here is everybody has applied the law as it reads.

The question is for other 8(a)s, they have a threshold of $3 mil- lion or $5 million for sole-source. Everything else is competed. For

ANCs, there is no such ceiling. So you have a lot of large contracts

going out for which they get 8(a) credit, but it is not being competed and sometimes when you are competing against another company, prices come down. When you are competing against a Government negotiator, they are not likely to. Is there something

wrong with my reasoning there as someone who sits there in DOD?

Mr. RAMOS. Here again, I think you have to look at the circumstance and the environment that contracting officer is making

that decision.

Chairman TOM DAVIS. Isn’t it a fact that if you do an ANC, you

get good 8(a) credit, your numbers go up, everything looks great,

and it is a lot easier to negotiate one no-bid sole-source contract

with an ANC than it is going out and maybe finding 10 that you

have to compete with other 8(a) companies to get the same amount,

just to put it bluntly?

Mr. RAMOS. I would say that we probably get the best value in

any case. We are doing a lot of hypotheticals here, Congressman.

Let me make a point here, if I may. We are focusing on ANCs,

but the Native American tribes also have the same opportunity,

and they are getting more contracts in the Department of Defense

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than ANCs. So, in answer to your question, there is a form of competition on best price when that contract officer deals with that.

Chairman TOM DAVIS. I know there is. I am just saying don’t you

get more when you are out there competing and asking two or

three or four companies to come in instead of just one?

Mr. RAMOS. That is a subjective question.

Chairman TOM DAVIS. It is a subjective question. You are sitting

there, and I am asking you from your experience. Doesn’t that

make sense to you?

Mr. RAMOS. I am saying that——

Chairman TOM DAVIS. You are trying hard not to offend anybody.

Mr. RAMOS. No. I am saying, I am saying that it all depends on

that set of circumstances. Most of the time, we get a fair value, and

I think——

Chairman TOM DAVIS. Could you get a fairer value if it were

competed? Could you get a better price, do you think, if you were

competing, if you had three companies up there instead of one?

Mr. RAMOS. My sense is that it would be an almost close price

depending on circumstances, Congressman.

Chairman TOM DAVIS. OK. Ms. Stith, what about you? How do

you feel on that? Do you have any comments?

Mr. SUTFIN. Mr. Chairman Davis, I would be happy to respond

on the part of the Interior Department. Generally, a contracting officer relies on technical experts to advise on matters of the products and services that are being bought. So you have experts that

can give you advice on whether or not you are making good decisions. Also——

Chairman TOM DAVIS. Mr. Sutfin, I was a general counsel to a

billion dollar defense contractor. I have seen how the system works.

What I am asking is a very simple question. If you are a Government negotiator, and you are trying to get your 8(a) numbers up,

it is a lot easier to go out if you could do a sole-source with a large

company than it is having to do maybe 10 competitive contracts

with smaller companies. I guess my question ultimately is: Don’t

you think, as a general proposition, that if you have more competition, you are likely to drive price down than if you are negotiating

sole-source?

Mr. SUTFIN. I think if price, low price is the ultimate objective,

you are right. Most nowadays are under a best value.

Chairman TOM DAVIS. Even better value, even better value because price is a component of value. If you have three people competing or four companies competing versus one, aren’t you more

likely to have people come down on price?

Mr. SUTFIN. I think that is a fair statement.

Chairman TOM DAVIS. OK, thank you. I am glad. I feel better

about the Interior Department than I do about DOD on this. My

time is up.

Mr. Manzullo.

Chairman MANZULLO. I guess I have more of a comment than a

question, especially with regard to DOD. I spend most of my time

in this place, working on manufacturing issues, and I find it just

absolutely ironic that DOD does everything possible to buy stuff

from China, to eviscerate the Barry amendment, to enter into

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memorandums of agreement that essentially nullify our defense industrial base, all on the use of the words, best value. Every time

I hear those words, best value, from DOD, it is almost like that

song: There goes another American job.

The question here is I think there is laziness going on at DOD.

When you take a look at the article that appeared in the Washington Post on Thursday, November 25th, we have these bureaucrats

in agencies all across the Government that are being enticed by

ANCs because there is no required cross comparison, the solesource awards cannot be protested, and the ANCs come in and say,

hey, we are going to make this real easy for you. Then no one is

talking about best value.

I mean, surely, Mr. Ramos, in the discussions we have had for

numerous years, every time one of my companies gets unfairly

treated by DOD giving a Government contract overseas and thereby helping to eviscerate the defense industrial base, someone yells,

best value. I don’t even hear that term being used here. Why not?

How can you say that when these sole-source agreements or solesource contracts are given, and the rules specifically say no required cross comparison? How could you possibly know that you

are getting the best value?

Mr. RAMOS. I think that the best value is the objective that the

contracting officer, I am trying to allude to the circumstance here.

There may be circumstances where the decision of that contracting

officer may be where the best value is not the outcome because of

the circumstances you are drawing it in.

Chairman MANZULLO. No one has ever given me that answer in

14 years of trying to get business to the dwindling industrial base

that I have in my District. No one has ever said that, that there

is something besides price. Now the first time I hear that is in defense of what ANC is doing.

Mr. RAMOS. Congressman, I think it is in the GAO report, and

it has to do with the decision made during the startup of the Iraqi

War where they had to get the fuel and the water. That was an

example of a decision that was made to support the warfighter at

that time.

Chairman MANZULLO. I am not talking about those exigent circumstances. I am just saying, for example, do you know how many

contracts DOD has with ANCs?

Mr. RAMOS. I can get it to you in a minute.

Chairman MANZULLO. Ms. Stith, have you seen the advertising

proposals from ANCs? For example, the one that appeared in this

Washington Post article says: Fast, efficient, streamlined acquisitions where ANCs will come to a contracting officers and say, let

me make your job a lot easier for you. There are no contract ceilings, no required cost comparisons. Sole-source awards cannot be

protested, even if it costs more.

There is something wrong with that, isn’t there?

Mr. Ramos, do you have the answer there?

Mr. RAMOS. No, I don’t have the answer. I have the dollars for

the contracts for the ANCs.

Chairman MANZULLO. Give us what you have.

Mr. RAMOS. The set aside dollars for the ANCs is $1.1 billion,

and we ran the DOD’s numbers from GAO to come up with this

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for 2005. This is what I was trying to allude to Congressman Davis

earlier. As a comparison, we had—these are setaside dollars—Native Americans is $1.7 billion; Hispanics, $1.4; African-American,

$1.2; and then the fourth location we would have is the ANCs at

$1.1. So, from the DOD perspective, it appears from the data, that

there is a balance in terms of the contracting dollars to these different competing entities.

So, if the concern of Congress is for the Department of Defense

to level the playing field, the legislation has to change that, so that

all these different entities that are competing against one another

have the same opportunity to compete on that level playing field

because they are disparate.

Chairman MANZULLO. Thank you.

Chairman TOM DAVIS. Mr. Waxman is going to have questions.

I just would add, at the end of the day, I think what we want to

do is get competition with all these different entities and make

sure everybody gets the same piece. I think we are comparing apples to oranges.

Mr. Waxman.

Mr. WAXMAN. Thank you, Mr. Chairman.

I just insist that full and open competition is the gold standard

in Federal contracting or should be. One reason why competition

is so important is that it disciplines costs. It is much easier for the

Government to get a reasonable price for goods or services if multiple companies submit competing bids. I think that is obvious. I

would dispute anybody who would say if they are trying to contract

out for some work on their home, they will have one contractor

only and just pay that contractor whatever he asks for. You want

to see what the competition is going to charge.

When the Government awards large no-bid contracts to Alaska

Native Corporations, it leaves the taxpayers vulnerable to inflated

costs. Congressman Young testified that GAO hasn’t found that no

big contracts for ANCs are a bad deal for taxpayers. That is not

my understanding of the GAO report.

Mr. Cooper, I would like to ask you about this issue. In the aftermath of Hurricane Katrina, an ANC named Akima received a contract to supply portable classrooms in Mississippi. When GAO assessed the reasonable of Akima’s prices, what did it find?

Mr. COOPER. We found those prices were inflated.

Mr. WAXMAN. In fact, those prices——

Mr. COOPER. Mr. Waxman, can I just clarify? I think what Congressman Young was talking about is the report that we did at the

request of the committees. What you are talking about with the

classrooms for Mississippi, that was a separate report. So I just

want to clarify that.

Mr. WAXMAN. Well, they are still part of the same issue because

the ANCs get a contract. The Corps accepted Akima’s proposed

price of $39.5 million, although it had information that the cost of

the classrooms was significantly less than what Akima was

changed. I am reading now from the GAO report. It may have been

a GAO report, but it is still the same thing. The prices for similar

units from GSA’s scheduled contracts would have been a lot lower.

Now, GAO also examined the Army’s use of ANCs to provide security guards at Army facilities in the United States. In this case,

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the two ANCs that received no-bid contracts actually lost a subsequent Army competition for security guard services. Nevertheless,

the Army continued to give the ANCs additional work.

Mr. Cooper, could the Army have saved money by awarding the

work to the companies that actually won the competition?

Mr. COOPER. Let me explain what we found in that report. The

Army had a three-phase acquisition strategy. The first phase was

to——

Mr. WAXMAN. Just answer my question because I have a limited

time. Could they have saved money?

Mr. COOPER. Yes, we believe they could have, and we recommended that they take action to compete those, the third phase.

Mr. WAXMAN. How much money are we talking about?

Mr. COOPER. Well, the Army did a study, and when they competed the contracts for guard services, they paid 27 percent less

than what they did when they didn’t use competition.

Mr. WAXMAN. On the classrooms, the prices were double what

they should have been, isn’t that right?

Mr. COOPER. They were really too high.

Mr. WAXMAN. I would like to look at an example from GAO’s

most recent report on ANCs. In 2002, the State Department was

looking for a contractor to renovate U.S. Government office buildings in Sao Paulo, Brazil. According to documents the committee

obtained from the State Department, the Department developed an

independent price estimate of $46.8 million for the work. In January 2002, Alutiiq and ANC formed a joint venture with Fluor, a

large non-Native contractor. Rather than conduct a competition, a

request for proposals was sent to just one contractor in March

2002, the Alutiiq-Fluor joint venture. Two months later in May

2002, the joint venture submitted a price proposal of $81.8 million.

This was $35 million higher than the Government’s estimate. The

agency rightly noted that there was a great disparity and that the

proposal was significantly high.

Mr. Cooper, does that match what GAO found, an initial proposed price that was almost double the Government’s cost estimate?

Mr. COOPER. In that case, yes, but the State Department contracting officer actually did his job in that case because they got

subsequent proposals and negotiated a much lower price before

awarding the contract.

Mr. WAXMAN. Well, they had a second proposal that was received

in June 2002, that was still too high. In fact, the Department considered seeking competitive bids at that time, but it didn’t shift to

competition. Instead, in July, the Department accepted the contractor’s bottom line offer of $54.5 million even though this was $20

million above the Government’s original cost estimate and millions

higher than its revised estimates.

In other words, it took the State Department 4 months to award

a no-bid contract to this ANC joint venture for an amount that was

substantially higher than its own cost estimate. Do you think that

was a good deal for the taxpayers, Mr. Cooper?

Mr. COOPER. The ultimate deal turned out to be only $2 million

different than the State Department’s revised estimate. So it

wasn’t that bad of a deal.

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Mr. WAXMAN. So it wasn’t that bad of a deal.

Mr. COOPER. Right.

Mr. WAXMAN. OK. If it was going to take 4 months to award a

no-bid contract, why didn’t the State Department hold a competition? Wouldn’t open competition produce even a better buy?

Mr. COOPER. They probably, they realize now that they probably

should have gone competitive to start with, yes.

Mr. WAXMAN. I know my time is up. The obvious point of all of

this is if you don’t have competition, the taxpayers pay more

money, and the ANCs are often being used to circumvent the opportunity for real competition. Thank you.

Mr. COOPER. Can I respond to that? I agree with you fully. Competition is the gold standard for Federal contracting, and when you

don’t have competition, you better have the safeguards in place to

make sure you are not paying too much. Going back to what Chairman Manzullo said, sometimes contracting officials, I don’t know

that they are lazy, but they are certainly not doing the job that

they should be doing for whatever reasons.

I think if you look at Federal procurement in general today, we

have work force problems. The work force is being asked to do

things that they either don’t think they have time to do or they

don’t think is necessary to do, and when they don’t do those kind

of things, like some of the things we identified in our report, you

put yourself at risk.

Mr. WAXMAN. You put the taxpayers at risk.

Mr. COOPER. That is what I mean. You put the taxpayers at risk,

no question.

Chairman TOM DAVIS. A couple of up-front dollars in training

and giving that to people would probably save you a lot of money

downstream.

Mr. WAXMAN. I would agree, yes.

Chairman TOM DAVIS. This is the last question.

Mr. WAXMAN. Can I just ask a followup?

Chairman TOM DAVIS. Yes.

Mr. WAXMAN. So, up-front training for the procurement officers,

but you don’t want to contract private companies to do that job,

would you?

Mr. COOPER. No, I don’t. I don’t. I want the Government people

to do it.

Mr. WAXMAN. You want the best value. [Laughter.]

Chairman TOM DAVIS. Thank you.

Ms. Velazquez.

Ms. VELAZQUEZ. Thank you, Mr. Chairman.

Mr. Jenkins, of the agencies involved in this report, six of them

agreed with the Government Accountability Office’s recommendations. SBA appears to be the only one that has taken issue with

the report. On a similar proof of ANCs and security guard contracts, the Department of Defense agreed with all seven recommendations and even rebid the contracts at all 54 locations.

Don’t you find it at all interesting that the SBA, the agency

charged with ANC oversight, is the only one that has a problem

with the report?

Mr. JENKINS. I think SBA’s concerns with the GAO report was

that it was sort of, it wasn’t consistent with all of the data that we

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saw, relating to all of the other categories of small businesses that

increased at the same time. We certainly, as I mentioned in our

testimony, take our oversight responsibility very seriously, and we

have been working with the various agencies through our PCRs,

through our local district offices. We have considered the GAO recommendations, and we will look at every opportunity to improve

our oversight.

Ms. VELAZQUEZ. Mr. Jenkins, you might take it seriously, but the

facts of the matter are that you are doing a very poor job. You

know that your own Office of Advocacy stated in their report that

$2 billion were miscoded as going to small businesses when in fact

they were given to large businesses. So if there is one thing that

SBA should have taken seriously, it is that no one is tracking that

large businesses are performing the majority of the work on ANC

contracts.

I will ask Mr. Cooper. In your review, did you find that ANCs

are not performing work with their own work force and passing

through contracts to large corporations?

Mr. COOPER. We did not find that specifically, but what we did

find is that no one knew whether the subcontracting limitations

were being complied with, and that was a recommendation that we

had made in the report for the Federal agencies to assume responsibility. I think it is really a shared responsibility between the

agencies awarding the contract and SBA with the 8(a) program.

Ms. VELAZQUEZ. Mr. Cooper, what are some of the ways that

ANCs have competitive advantages over other 8(a) companies?

Mr. COOPER. Our report points out, we include a chart in there

that shows the way that ANCs have used the 8(a) program. I mentioned two examples in my oral statement about being able to have

contracts awarded to them without any limitations on the amount,

non-competitive contracts. They have been very successful in hiring

talented people who know the 8(a) program and know how to use

the 8(a) program, and they have just been very successful in doing

it.

Ms. VELAZQUEZ. Can ANCs afford to hire professional marketers?

Mr. COOPER. Professional?

Ms. VELAZQUEZ. Marketers.

Mr. COOPER. Some ANCs did use firms to help identify contracting opportunities.

Ms. VELAZQUEZ. Can they afford to pay as much as $1 million

in annual salary?

Mr. COOPER. And they did that as our report points out.

Ms. VELAZQUEZ. Do they have advantages of size with their subsidiary being able to access funds from the parent corporation?

Mr. COOPER. They do have those benefits.

Ms. VELAZQUEZ. No minority executive of ANCs are able to get

as much as 49 percent of the profits. For the program that the primary purpose is economic development, does that seem to be in

keeping with the mission?

Mr. COOPER. I think the difference between the 8(a) program as

it was initially designed and as it has evolved over the years, it has

changed in character to serve two purposes: One, the individual

business development that you talk about, but at the same time,

and that is why we, as a matter of policy, are not challenging what

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Congress has put in place, is it is also intended to serve a different

purpose, and that is to help Alaska Native Corporations develop

the capability to benefit their shareholders.

Ms. VELAZQUEZ. Mr. Cooper, how would you characterize SBA’s

comment letter to the Government Accountability Office’s report?

Mr. COOPER. I am sorry, would you say that again?

Ms. VELAZQUEZ. How would you characterize SBA’s comment letter to the GAO report?

Mr. COOPER. I would characterize it as disappointing.

Ms. VELAZQUEZ. Dismissive?

Mr. COOPER. We thought we would get a different kind of response from SBA? And I would add that, listening to the statement

today, I think that is a different tone than the letter that we got

in response to our report. It sounds like SBA is considering some

actions and is probably going to work with agencies like Interior

to make things better.

Ms. VELAZQUEZ. OK, so let me ask you this question. In terms

of all the recommendations that you have made to SBA on the reports and investigations that you have made before, how would you

qualify the track record of SBA complying with the recommendations?

Mr. COOPER. I think in several cases, SBA has been slow to respond to our recommendations.

Ms. VELAZQUEZ. Thank you very much, Mr. Chairman.

Chairman TOM DAVIS. Thank you.

Mr. Van Hollen.

Mr. VAN HOLLEN. Thank you, Mr. Chairman. I want to thank the

chairman and ranking members of both committees for holding this

hearing. Thank you to the witnesses.

As I see it, there are really two separate issues before us. One

is the overall policy issue and the framework that Congress put in

place with respect to special treatment for ANCs, and the second

issue is the extent to which SBA and other agencies are complying

with the existing regulations, implementing the program, and

whether they are doing it effectively.

Let me just start with the first one, and I do want to jump ahead

to some of the testimony we are going to hear from the next panel.

Just to quote from the representatives testifying on behalf of

Women Impacting Public Policy, they state in their testimony that

WIPP members have lost opportunities to ANCs both at the prime

contract level and at the subcontract level. That is because they are

not subject to the same affiliation rules and competitive thresholds

to what other businesses participating in the 8(a) program adhere.

They conclude in this section by saying, ‘‘It seems to us Congress

should consider treating all participants in the 8(a) program equally and they should all adhere to the same rules.’’

The testimony from that National Black Chamber of Commerce

is along the same lines. They say that ANCs reap the 8(a) benefits

such as receiving awards without competition but also get the enormous benefit of waiving contract dollar maximums and exceeding

the size standard for small businesses, and they go on to point out

several other things.

Now I know that the GAO in its report looked at the extent to

which there was compliance with the existing framework and the

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laws set out by Congress, but let me just ask all of you whether

you would take issue from a policy standpoint with the recommendation raised, which really goes to the fundamental issue of

no-bid contracts and the ceilings, by Women Impacting Public Policy, where they conclude that treating all participants in the 8(a)

program equally is the right way to go, and that they should all

adhere to the same rules.

Does anybody think, as a matter of public policy, that equal

treatment of all these entities would be the best way to go in terms

of protecting the taxpayers’ interests? Does anybody dispute that

recommendation and conclusion from the perspective of protecting

taxpayer’s interests?

I take that no one thinks that. Everyone agrees that this recommendation would better protect the taxpayers’ interest.

Let me just go on to ask with respect to the issue of subcontracts

and pass through contracts. As I understand it, when you do a subcontract, when Alaska Native Corporations receives a no-bid contract under the 8(a) program and they subcontract it out, they are

limited to requiring that 50 percent of costs, the contract’s personnel costs, must be from the ANC’s own employees, is that correct?

Mr. COOPER. That is correct unless it is a construction contract,

and in that case, the subtracting would be 85 percent.

Mr. VAN HOLLEN. As I understand it, when you looked at this

issue and you said just a moment ago, no one knows whether subcontracting limitations were being complied with. You looked at

about 16 contracts to see if agencies were monitoring these subcontracting requirements, is that right?

Mr. COOPER. That is correct. Of the 16 we looked at, 14 of them

had subcontracts at work and almost every one, the contracting officer and the agency were not doing any kind of surveillance to

make sure the subcontract limitation was not exceeded.

Mr. VAN HOLLEN. Right. Based on that assessment, as we are assembled here in the room today and as you are testifying, you have

absolutely no basis and it is your understanding these contracting

officers have absolutely no basis for knowing whether or not that

50 percent limitation is being complied with, is that correct?

Mr. COOPER. That is correct.

Mr. VAN HOLLEN. Whose responsibility is it to enforce that Federal acquisition regulation requirement?

Mr. COOPER. I would respond to say in this case, it is a shared

responsibility between SBA and the agency who is getting the contract. There are, they are called partnership agreements, where

SBA has delegated authority to directly award 8(a) contracts to

Federal agencies. When we went out and talked to the contracting

community, there was just a lot of confusion about who was responsible for what, and I think this is an excellent example of that confusion.

Mr. VAN HOLLEN. I understand in actually looking at your testimony, you found a case where an agency wanted a contract with

a particular non-Native company but couldn’t award a no-bid contract directly to that company, and so the agency solved the problem by awarding a pass through contract to an ANC and requiring

it to subcontract with the desired non-Native company. Could you

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talk a little bit about that and why that is an example of how this

system is being effectively circumvented?

Mr. COOPER. That is exactly what can happen, and it is not limited to 8(a) ANC contracts. We have, over the years, issued a number of reports expressing concern about, again as Mr. Waxman

pointed out, the lack of competition. What we see is, and primarily

in the Department of Defense, is that instead of the contracting

people making the decisions about what the best solution is in

terms of getting a contract, program people are directing the contracting people to award a contract to a firm and instruct them to

pass it on to the firm they really want.

It has happened over at GSA. The Get It Right Program, I think

was put in place to stop, cut that kind of contracting out. It is not

good contracting because you end up paying layered costs, multiple

fees, multiple profits, multiple overhead. It is just not a good business decision on the part of Federal agencies to do that kind of contracting.

Mr. VAN HOLLEN. Thank you.

Mr. Chairman, I would just say Congress may have set up a system where these different kind of shenanigans are encouraged or,

at the very least, allowed to happen, but it seems to me we should,

as joint committees, get to that fundamental issue.

Mr. COOPER. Can I respond? I think one of the problems is we

now have a lot of interagency contracting where an agency get fees

for doing contracting work for another agency, and there is an incentive to generate revenue and do business because the contract,

the agency awarding the contract for another agency makes money

on it and can do things, operations and that kind of thing. So,

while interagency contracting might be a great contracting vehicle,

the incentives are driving it in the wrong direction.

Mr. VAN HOLLEN. The incentive there is for the agencies themselves to take a cut, rather than have the savings passed on to the

taxpayer.

Thank you, Mr. Chairman.

Chairman TOM DAVIS. Thank you.

Mr. Barrow.

Mr. BARROW. No, thank you.

Chairman TOM DAVIS. OK.

Ms. Watson.

Ms. Watson. I would like to make some comments on competition. I think what the GAO is reporting is that there has been

some abuse, we think, of using the ANC formula and applying it

across the board. Maybe, Mr. Cooper, you can help our thinking on

this issue. As I understand, the original purpose of that legislation

created a preference to encourage economic opportunities for Alaskan Natives. The report that we got from the GAO suggests that

the preference is used by contracting officials primarily as a way

to circumvent just exactly what we are trying to get to, to circumvent competition requirements on contracts—they are worth

hundreds of millions of dollars—and often passing the work to

large non-Native corporations or to help meet small business goals.

Maybe you can shed some light on why the use of ANC preferences seems to be increasing so rapidly. Also, while you are doing

that, it appears that the report references that no-bid ANC conVerDate 11-MAY-2000 12:28 Dec 04, 2006 Jkt 000000 PO 00000 Frm 00177 Fmt 6633 Sfmt 6633 D:\DOCS\30341.TXT HGOVREF1 PsN: HGOVREF1
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tracts are like an open checkbook. Can you explain this to me how

this formula has been misused?

Mr. COOPER. What we found when we went and talked to contracting officials who awarded those 16 contracts is that they felt

the use of a non-competitive vehicle with no limits on dollar,

thresholds, or anything was a fast, quick, easy way for them to

meet a requirement. Again, I think this is a situation where the

intent of the Congress is probably being diluted because the contracting people are not using due diligence in using the flexibilities

and the authorities.

In my initial oral statement, I said I wanted to make it clear that

we do not take issue with the flexibilities that the ANCs have been

provided, and we take that position because we believe that if contracting officials exercise due diligence and fulfill their responsibilities and comply with the requirements that they are required to

do in awarding these contracts, the potential for abuse would be

minimized.

I will give the example that we have talked about a little, subcontracting. Alaska Native Corporations can subcontract up to 49–

50 percent of the work that they get. That was provided by the

Congress. That authority was provided by the Congress. We don’t

take issue with that, but at the same time, we want to make sure

that the controls that have been put in place, and that is monitoring the subcontract limitation clause, is followed and is not just

done frivolously without taking it very serious and complying with

requirements.

Ms. Watson. OK, you never know what these bells are implying.

Chairman TOM DAVIS. We are about ready to have a vote, but

you still have a couple of minutes left.

Ms. Watson. I have to go back to the Akima contract as it relates

to the classroom issue, and I don’t know of the ANC contract was

used for buying those mobile units that are stuck in the mud in

Arkansas and some other places. Let me not get into that. Akima

raised its price for the classrooms from about $23 million on last

September the 16, to close to $31 million 1 day later, and the unit

price of some classrooms rose almost 50 percent in a single day.

How does that happen?

We are going to run out, so if you can’t finish, I can’t take my

answer in writing, but go ahead.

Mr. COOPER. I was very much in the review of that contract. This

is a clear cut case where the contracting officer blew it. I mean I

don’t know any other way to say it. They had information provided

by Akima, as a matter of fact, that indicated the classroom prices

should be lower than what was negotiated in that contract. I sat

across the table from the contracting officer and asked her, why

didn’t she use the information to negotiate a lower price? And she

told me, I wasn’t involved in the details; I just signed the contract.

That may be lazy, as Chairman Manzullo pointed out, but it is

not giving the Government a good deal, and contracting officers

need to use due diligence and protect the taxpayers’ interests,

whether it is a competitive, non-competitive, or any other kind of

contract.

Ms. Watson. We are not utilizing the people’s money and the

trust that is put in us when we do deals like that. I think the origiVerDate 11-MAY-2000 12:28 Dec 04, 2006 Jkt 000000 PO 00000 Frm 00178 Fmt 6633 Sfmt 6633 D:\DOCS\30341.TXT HGOVREF1 PsN: HGOVREF1
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nal purpose of ANC was the right way to go, but just the people,

to whom these programs were directed, miss out.

I want to thank you for that information. I am glad you recognized that there were some mismanagement and some insensitivity. We appreciate it. That is what we are trying to get to the bottom of here with this hearing.

I want to thank you, Mr. Chairman.

Chairman TOM DAVIS. Thank you.

Ms. Bordallo.

Ms. BORDALLO. Thank you very much, Chairman Davis and

Chairman Manzullo. For calling this meeting, and I do want to

thank Chairman Manzullo for mentioning the difficulties we are

having with our shipyard in Guam. So, thank you, Mr. Chairman

for that.

Mr. Jenkins, I have a question for you. Increased contracts

awards for the ANCs are of great concern to the business community in my District, the District of Guam. While there is a public

good in having preferences for Native Alaskans, the same can be

said for the indigenous people of Guam, the Chamorros. Chamorros

on Guam experience many of the same social and economic disadvantages as Alaskan Natives and other disadvantaged groups

recognized by Federal law. Yet, the Chamorros have no set aside

or preference program that benefits them specifically. When Federal contracts for work on Guam are unbundled, the ANCs swoop

in, use their set aside preferences to win the no-bid contracts, and

Chamorro businesses are relegated to being hired as subcontractors

at best.

If the Federal Government is going to support social policy

through Government contracting that is trying to improve economic

opportunity for the disadvantaged communities through the awarding of Federal contracts, then I would hope that these contracting

policies could be implementing fairly across the board in order to

benefit all of the disadvantaged indigenous groups. Oversight is

key to ensure that this happened.

In your testimony, you mentioned that the SBA takes its oversight responsibilities seriously. You mentioned that the SBA, even

before the GAO report’s release, began to improve its oversight of

the 8(a) program. Your testimony is short on detail regarding the

progress that the SBA has made toward improving its oversight of

this program.

Can you describe for me today the progress the SBA has made

of late toward improving its oversight of the 8(a) program, and also

can you describe how the April GAO report on the increased use

of ANCs in Government contracting has impacted the SBA’s efforts

toward increasing oversight of the 8(a) program?

Mr. JENKINS. OK, thank you. First of all, as I mentioned, one of

the things that we felt was very important and we had started this

discussion prior to the GAO report is to look at our partnership

agreements with the various agencies. SBA, in order to ensure that

the 8(a) program was properly being administered, placed responsibilities on the procuring agencies, and that is to follow the requirements in the Federal acquisition regulation. The issues regarding the limitation on subcontracting is no difference than the

issues with small business set asides. That is the responsibility of

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Federal contracting officials as described in the Federal acquisition

regulation.

SBA felt, however, the need to increase our relationships with

the agencies. And so, with the partnership agreements, we have already begun to revise those agreements to make it very clear what

we expect the agencies to be responsible for. We are also increasing

our training—training not only to our own staff, SBA staff, but also

training with the various Federal agencies through our procurement center representatives as well as through our district offices.

So I think there are a number of things that we are trying to do

to improve, and we certainly will consider the GAO recommendations as well as other recommendations that we have.

Ms. BORDALLO. Thank you very much.

I don’t vote, Mr. Chairman, so I could continue.

Chairman TOM DAVIS. I am not stopping you now. We can go. We

have about 5 more minutes before I have to leave.

Ms. BORDALLO. Very good, all right.

I am just curious. One real quick question before I get to my second question: Are Native Hawaiians participating in these programs?

Mr. JENKINS. Yes, the Native Hawaiian-owned firms that are

owned by Native Hawaiian organizations——

Ms. BORDALLO. The ANCs?

Mr. JENKINS. Excuse me?

Ms. BORDALLO. The 8(a) program?

Mr. JENKINS. Yes, the 8(a) program.

Chairman TOM DAVIS. Are they treated as ANCs or as 8(a)’s? I

think that is her question.

Mr. JENKINS. They are treated as 8(a)’s, but not ANCs. ANCs has

a special designation.

Ms. BORDALLO. I see. I don’t quite understand that. Why

wouldn’t they qualify?

Chairman TOM DAVIS. The thresholds are different.

Mr. JENKINS. Yes, the statute allows for Hawaiian Native organizations, small businesses owned by Hawaiian Native organizations,

to be considered as 8(a) firms. They can apply for the program, and

we will look at them and certify them. It is different, however, in

terms of the tools that they can use are different than what they

have for the Alaska Native Corporations in terms of the sole-source

requirements.

Ms. BORDALLO. I see.

The other question I have is for Mr. Frank Ramos. I am concerned by the testimony provided by Mr. Cooper from GAO to the

committees today, regarding the findings in the April GAO report.

Mr. Cooper stated in his prepared remarks that the contracting officers interviewed during the GAO investigation claimed that contracting with 8(a) ANC firm is a quick, easy, and legal way to

award contracts while at the same time helping their agencies

meet small business goals. Policies are in place to ensure that Federal contracting supports disadvantaged groups. These policies are

not in place to make it easier for agencies to avoid the hard work

of supporting small businesses.

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cers? Also, what roles do your offices and that of your peers in

other agencies play in overseeing or monitoring your respective

agencies’ contracting behavior?

Mr. RAMOS. In my oral testimony, I said that the statutes that

the contracting officers use allow them to make certain decisions

with respect to ease of contracting, if you want to use that term.

It is not an ease of contracting that is used in a negative term, but

it facilitates them to use that contracting authority to make decisions that best fit the interests of the Department of Defense at

that particular time.

With respect, as I understood your second question as to what we

are trying to do bring conformance to this behavior that the Government Accountability Office alluded to, we have provided, as a

result of the Government Accountability Office report, in our small

business conference, a panel to discuss those things that we must

do to bring conformance to our behavior within the Department of

Defense. Mr. Assad who is the Director of Defense Procurement is

going to be meeting with Mr. Crowther, I believe tomorrow to talk

about some of those concerns that you have raised. He is the Director of and has oversight of the contracting officers, and I believe

he is going to address that issue. We have discussions, and I feel

comfortable that we are going to be in conformance in that respect.

Ms. BORDALLO. Thank you very much.

Thank you, Mr. Chairman.

Chairman TOM DAVIS. Thank you very much.

Before I dismiss the panel, let me just note and, Mr. Ramos, I

will address to you. I think it is clear that if you can meet your

8(a) goals by going to a larger vehicle and not have to compete, it

makes it a lot easier for the contracting officer to do so. We try to

do so many things with our procurement system. We try to make

sure that we buy American. We try to make sure that we have domestic content. We have a whole myriad of views up here in this

committee over how that ought to be done. We try to make sure

that small businesses and 8(a) minority groups get opportunities.

The more bells and whistles we attach to the system, the less efficient we become. In passing the ANC, we recognize in doing so,

that there may be some inefficiencies to the system by allowing

them some leg-up in contracting. All we are trying to do here is

have an honest discussion over what that cost is. I think that is

what we are trying to get out of here. Then we will try, as policymakers, to try to see if there is anything we can or should do about

it or appropriate oversight of the executive branch as a way.

I appreciate everybody being here for this hearing. I will dismiss

this panel. We will take a 15 minute recess while we go over to

vote, and we will come back with our next panel. Thank you.

[Recess.]

Chairman MANZULLO. It is the policy of the committee that all

witnesses be sworn before they testify. Please rise and raise your

right hands.

[Witnesses sworn.]

Chairman MANZULLO. We will now recognize our third panel: Mr.

Harry Alford, president and CEO of the National Black Chamber

of Commerce; Ms. Ann Sullivan, president of Madison Services

Group, Inc., on behalf of Women Impacting Public Policy [WIPP];

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Mr. Chris E. McNeil, Jr., chairman, Native American Contractors

Association and president and CEO of Sealaska Corp.; Ms. Helvi

Sandvik, president, NANA Development Corp.; Mr. Bart Garber,

Tyonek Native Corp.; Mr. Charles Totemoff, president and CEO of

Chenega Corp.; Ms. Julie Kitka, president of Alaska Federation of

Natives.

In order to allow time for discussion, please limit your testimony

to 5 minutes. When you see the yellow light, you are at 4. When

you see the red, you are at 5. Your entire statement will be made

part of the record.

The first witness is Mr. Harry Alford. Mr. Alford.

STATEMENTS OF HARRY ALFORD, PRESIDENT AND CEO, NATIONAL BLACK CHAMBER OF COMMERCE; ANN SULLIVAN,

PRESIDENT, MADISON SERVICES GROUP, INC. ON BEHALF

OF WOMEN IMPACTING PUBLIC POLICY; CHRIS E. MCNEIL,

JR., CHAIRMAN, NATIVE AMERICAN CONTRACTORS ASSOCIATION AND PRESIDENT AND CEO, SEALASKA CORP.;

HELVI SANDVIK, PRESIDENT, NANA DEVELOPMENT CORP.;

BART GARBER, TYONEK NATIVE CORP.; JULIE KITKA, PRESIDENT, ALASKA FEDERATION OF NATIVES; AND CHARLES

TOTEMOFF, PRESIDENT AND CEO, CHENEGA CORP.

STATEMENT OF HARRY ALFORD

Mr. ALFORD. Honorable Chairmen Davis and Manzullo and distinguished members of both committees, thank you for allowing the

National Black Chamber of Commerce, Inc. to provide input and

comments on the Alaskan Native Corporations.

This is a very serious and sensitive subject to my constituents.

We hope and pray that this hearing will become a catalyst for

change and progress. Let me also make it clear that the NBCC believes in the importance of economic development for Alaskan Natives and will defend their right to such.

The Honorables Parren J. Mitchell and Adam Clayton Powell insisted on inclusion of African-American business owners in the

Federal procurement arenas. They rightly believed that AfricanAmericans had been and were being severely discriminated by the

very institutions, National and local, that were supposed to protect

the freedom and equal opportunity of all Americans. The programs

that evolved from the implementation of the Civil Rights Act of

1964 were to correct the economic ills created from decades of a

Jim Crow economy. This economy directly affected African-Americans.

These programs, as they developed, included all minority groups

including Native Americans, where there was some sort of discriminatory evidence. It is without a doubt that the most prolific and

successful program to evolve is the SBA 8(a) program. I estimate

that at least 80 percent of the larger businesses within the NBCC

network are graduates of the 8(a) program. This program has produced more Black millionaires than all other Federal programs

combined.

On average, 8(a) firms employ 20 people each, while small businesses in general employ an average of 2 people. That is a significant difference.

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With the above in mind, the members sitting on both the House

Small Business Committee and the House Government Reform

Committee represent a total of 1,780 8(a) companies which equate

to nearly 20 percent of all 8(a) participants. These 1,780 businesses

employ an estimated 35,600 people. I believe each and every one

of you considers that appreciable. In sum, the 8(a) program is a

source of employment in all States as well as the District of Columbia, Guam, Puerto Rico, and the Virgin Islands.

For some very peculiar rationale, Alaskan Native Corporations,

as they are called, have been permitted since 1986 to participate

in the SBA 8(a) program. For the most part, ANCs are not minority, not even Native American. ANCs are not small businesses.

ANCs repeat the 8(a) benefits such as receiving awards without

competition but also get the enormous benefit of waiving contract

dollar maximums and exceeding the size standard for small businesses, size standards.

What we have today are billion dollar corporations, waiver on the

affiliation rule, located in places like North Carolina, Virginia,

Maryland, etc.—corporations located in places that are totally remote to Alaska and void of minority management or control. These

ANC components, often LLCs, are supposed to benefit Alaska Natives. I strongly suggest that very little of the revenue obtained

through Federal contracting finds its way to Alaska Natives. Avarice has no end and what we have here is a tool for avaristic manipulators.

Federal procurement is booming. However, if you take away ANC

volume from the 8(a) contract awards, you will find that the 8(a)

program has been decreasing steadily. Two things have negatively

affected the program. One, the practice of bundling contracts, tantamount to sole-sourcing for the Fortune 200, and the emergence

of the ANC game manipulating the 8(a) program. Certain lobbyists

and a few slick law firms have mastered this game. Major corporations are getting into the ANC program and are drawing 8(a) contracts by the billions. Quick thinking procurement agents have

identified this as an attractive tool to quickly boost 8(a) and SDB

volume. Some SBA officials rush to take advantage of this also.

The ugliness of this came together when the Katrina and Rita

disasters hit the Gulf Region last summer and fall. Billion dollar

sole-source contracts were immediately let to a few companies that

would eventually flip the scope to various smaller companies at reduced rates and would then pocket the difference. Ashbritt, a Florida company, received a significant prime contract for debris removal, and the company does not own one truck.

Likewise, ANC companies were sought out for contracts that had

no relation to their NAICs or expertise. The first Minority Participation Report I received from the Army Corps of Engineers for the

Gulf rebuilding activity was 98.2 percent ANC, 1.8 percent legitimate SDB.

Building, excuse me, bundling and a runaway freight train,

known as the ANCs, is wreaking havoc on 8(a) firms in the African-American, Hispanic, Asia, and yes, the Native America communities. We are losing jobs, destroying businesses, negatively communities who need progress the most. ANCs, in effect, have become

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predators on the minority business community. Shame on all of us

for letting it get this far.

The only rational thing to do now is to bring it to a close. The

NBCC suggests the following.

Chairman MANZULLO. Is your testimony coming to a close like

the freight train?

Mr. ALFORD. Yes, I have about 20 seconds.

Chairman MANZULLO. All right.

Mr. ALFORD. One, conduct thorough audits on how much revenue

is actually being received by Alaska Natives. What are the

amounts of dollars, programs, end results?

Two, are most of the agencies run by Caucasians? How many minorities actually work ANCs? We need EEO surveys to be performed by the Department of Labor.

Three, is there a strong correlation with certain lobbying firms,

law firms, and political contributions?

Four, and last, let us separate the ANCs from the 8(a) program.

It is an abomination as it is currently structured with all of the

oddities. ANC numbers should not be counted toward small business and/or minority business goals.

Thank you for the extra 20 seconds, Mr. Chairman.

[The prepared statement of Mr. Alford follows:]

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Chairman MANZULLO. You sound like the trailer on all those

credit card advertisements, Harry. [Laughter.]

Our next witness is Ann Sullivan on behalf of Women Impacting

Public Policy.

Now, remember, your complete statements are in the record, and

you can take as much time within the 5-minutes as you want.

What we are really interested in is the impact because we all know

that there are different rules that apply to the ANCs, and we don’t

have to repeat those in all the testimony. If you could center your

testimony on the impact, thank you.

STATEMENT OF ANN SULLIVAN

Ms. SULLIVAN. Thank you, Mr. Chairman Davis, Chairman Manzullo.

Good afternoon, my name is Ann Sullivan. I am representing

Women Impacting Public Policy. I represent them in Washington.

WIPP is a bipartisan women’s business organization representing

over 550,000 women and minorities nationwide. Our umbrella includes 42 business organizations as well as individual members.

Thank you for inviting us today.

As background, 10.6 million women-owned firms in the United

States employ 1 out of 7 employees in this country and generate

$2.5 trillion in sales. Yet, the Federal Government has awarded

only 3 percent of its contracts to women-owned companies as of

2004. Although the Congress set a 5 percent women-owned goal for

the agencies, they have never met that goal. In addition, Public

Law 106–554 which would allow contracting officers to restrict

competition to women-owned firms has yet to be implemented.

That law was enacted in the year 2000.

For the past several years, WIPP members have felt the competitive pinch of increased Federal programs for non-women-owned

businesses. WIPP members have lost opportunities to ANCs, both

at the prime contract level and the subcontract level.

We have also felt the effects of contract bundling. Despite the

president’s unbundling initiative in 2002, the trend has proven otherwise. In 2002, the OMB reported that for every $100 awarded on

a bundled contract, there is a $33 decrease to small business. Despite strong evidence that bundling is not good for small business

or the Government, a 2004 GAO report shows that the Federal

agencies are confused over what constitutes contract bundling and

it results in poor accountability and disparity in reporting.

According to a 2005 SBA Office of Inspector General audit, the

SBA reviewed only 13 percent of bundled contracts reported to the

agencies. Those 192 bundled contracts not reviewed amounted to

$384 million. SBA has cited that their lack of resources is why they

did not review more contracts.

The agencies have a challenge meeting their small business requirements with larger contracts. It seems to us that Congress

should consider treating all businesses in the 8(a) program equally

and they should all adhere to the same rules. Perhaps this is not

the right program for the ANCs since the 8(a) program is a business development program, but the ANC program is an economic

development program for communities. While the economic goals

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for the ANCs seem appropriate, trying to fit them into the 8(a) program is like trying to fit a square peg in a round hole.

In the absence of congressional changes in the 8(a) program, we

give you the following recommendations which we think would

strengthen all of the programs. One, establish a subcontracting requirement for very large sole-source contracts awarded to ANCs.

Two, strengthen the 8(a) program for all participants by increasing

the competitive thresholds and the personal net worth level that

has not changed since 1989. Three, provide SBA with the tools necessary to review solicitations being placed into the 8(a) program to

determine adverse impact on other 8(a) companies or small business programs.

We understand that although ANCs benefit from contract bundling and procurement work force staffing issues, they are, ANCs

are not the source of these problems, nor do they dominate the

small business market. In fact, their contract dollars is only a fraction of the $69.2 billion awarded to all small businesses. The GAO

report sheds light on contracting problems affecting all small businesses and SBA’s lack of resources and staff to implement good

oversight of the 8(a) program.

The goal should be for all groups to work together to increase the

amount of awards to small businesses, regardless of race, ethnicity,

or gender, and to implement a meaningful women’s business program. If the small business community moves forward collectively

to increase the source of supply to the Federal Government, the result will be a stronger America.

Thank you.

[The prepared statement of Ms. Sullivan follows:]

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Chairman MANZULLO. Thank you. Our next witness is Chris

McNeil, Jr. of the Native American Contractors Association.

Mr. McNeil.

STATEMENT OF CHRIS E. MCNEIL, JR.

Mr. MCNEIL. Chairman Manzullo and Chairman Davis, members

of the committee, we really appreciate the opportunity here to testify today.

My name is Chris McNeil. I am a member of the Tlingit and

Nisga Nations. I am the chairman of the Native American Contractors Association and also the president of Sealaska. I am here to

testify on behalf of the Native American Contractors Association.

Our organization represents, has 27 members, including 19 Native

corporations and 7 tribally owned enterprises and Native Hawaiian

organizations. We have over 100,000 tribal member shareholders

who own our ANCSA corporations from all over the United States.

Congress meant to benefit Alaska Natives no matter where they

live.

We are here to discuss the SBA 8(a) program as it applies to

ANCSA corporations and tribes, and this is a rare program because

it is a program that actually does work. That is in the context of

really decades of failed Federal programs to promote Indian economic development. It promotes self-determination, self-sufficiency,

and it points toward sustainable economies which is inherent in

Alaska, the goal of the Alaska Native Claims Settlement Act, and

it provides a mechanism upon which Alaska Natives have offered

increased professional opportunities.

The GAO study itself listed five single-spaced pages of benefits,

the various benefits that are provided by the 8(a) contracting that

the corporations provide to its shareholders. Our Federal contracting and participation in it has permitted the Native corporations

and tribes to participate in a greater way in the commercial marketplace, and the majority of Native corporations and federally recognized tribes have just begun to participate in it.

The GAO report is the subject of this hearing. I think it is important to note that it did not find any evidence of abuse by the Native

corporations. It did not recommend legislative changes, and it

doesn’t suggest any dissatisfaction on the part of the agencies in

the performance by the Native corporations. It was critical in some

respects, and it indicates some flaws in the administration of the

program.

There is a key difference between the Alaska Native and tribal

8(a) programs and the individually owned 8(a) enterprises. We,

each Native corporation represents hundreds and, in some cases,

thousands of tribal member shareholders that benefit from them.

In the case of the individually owned enterprises, it benefits only

a few people who are the owners of the corporations and the significant differences.

All of this arises from the Federal trust responsibility for tribes

and for Alaska Native people. Any Federal program that benefits

Alaska Natives or federally recognized Indian tribes arises from

our Constitution. It is embedded in the power to regulate commerce

with Indian tribes which is called the Indian Commerce Clause and

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denced in the Indian Treaties which are the supreme law of the

land.

Our Alaska Native Claims Settlement Act of 1971 was a modern

day statutory Indian Treaty. This was a large congressional experiment with Native people. This land that we received back would

normally have been held in trust in the United States, and the concept was to provide new economic vehicles to develop sustainable

economies for Native people and to benefit our tribal member

shareholders. That is our goal, and that has been Congress’ commitment. In effect, the Native Claims Settlement Act arose from a

negotiation in which we relinquished claims of 300 million acres.

In exchange, we received back 44.5 million acres and about $962

million to benefit over 100,000 tribal shareholders.

Now, the 8(a) program is an amendment to the Alaska Native

Claims Settlement Act, and it was intended to provide benefits

under the Claims Settlement Act for Alaska Native people. So, everything in ANCSA, we, in effect, have paid for by providing and

relinquishing the claims to all the land to which we had claims,

and that is our statutory treaty. The Alaska Native Claims

benefit——

Chairman MANZULLO. How are you doing on time? We are running out of time here.

Mr. MCNEIL. Yes, I understand that. Mr. Chairman, I would conclude then by saying that this program does work to the benefit of

Alaska Native people. I think there is significant evidence of that

in order to provide the sustainable economies for Native people.

Thank you very much.

[The prepared statement of Mr. McNeil follows:]

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Chairman MANZULLO. Thank you very much.

The next witness is Ms. Helvi, is it Sandvik?

Ms. SANDVIK. Yes, that is correct.

Chairman MANZULLO. You are recognized. Thank you.

STATEMENT OF HELVI SANDVIK

Ms. SANDVIK. Good afternoon. My name is Helvi Sandvik. I am

an Inupiaq Eskimo shareholder of NANA Regional Corp. and president of NANA Development Corp. which is a business arm of our

parent corporation. I originally come from the village of Kiana, a

400-person village located above the Arctic Circle in the northwest

corner of our State. I appreciate the opportunity to speak on behalf

of the 11,200 Inupiaq Eskimo shareholders of the NANA Region

and also for the employees of NANA Development Corp.

I would like to note that I have been joined today by one of our

board members, Dude Lincoln from Kotzebue, and several young

men and women from the NANA Region, all of whom are down

here working in our Government contracting companies, gaining

the experience they need to take over as the next generation of Native leaders and business leaders in our company.

Today, I hope to provide you with a better understanding of the

challenges we face as Alaska Natives who are mandated by Congress under the ANCSA act to provide for the social and cultural

and economic well-being of our owners. I would also like the record

to reflect that we have submitted more detailed written comments

for this hearing. I appreciate the opportunity to respond to some

of the questions and the criticism that has been vocalized in recent

months, and I do also have to say that we have been appalled by

some of the stories that have appeared in the press recently that

we believe to be very serious misrepresentation and distortion of

the facts.

As we focus on the Federal contracting opportunities with respect

to the ANC 8(a) program, I believe we ought to put into proper perspective the scope of ANC participation in the Federal programs.

As a shareholder of an Alaska Native Corporation, I believe it is

important to emphasize how important that 0.2 percent of Alaskan

Native Corporations participation in Federal contracting is to the

Native communities in Alaska. In the 35 years since we were established, we have focused on trying to pursue and develop business interests that will provide for sustainable benefits to our current and future generations of NANA shareholders.

The majority of our shareholders live in the 11 villages in the

NANA Region. The NANA Region is 38,000 square miles in size,

about the size of the State of Ohio, and yet 60 percent of the lands

within our region are owned by the Federal program in conservation system units established by the Federal law that Congress

passed, the Alaska National Interest Lands Conservation Act.

There are no roads connecting our villages to one another or to the

rest of the State or to the lower 48 States. Our communities are

only accessible year-round by air. Most of our villages do have

about a 3,500 foot gravel strip to provide their air service. Some

of our communities but not all can receive barge service in the

summer months, and in the winter months, our primary means of

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access is on snow machines. Three of our villages do not yet have

running water.

As you might imagine, being so remote, we deal with horrendous

transportation costs. The cost of gasoline and fuel oil in some of our

villages recently rose to $8 per gallon, and electricity costs 55 cents

for kilowatt hour in northwest Alaska.

Opportunities for economic development or even to develop alternative energy solutions to reduce the cost of living are substantially

restricted because of the Federal conservation units that I mentioned earlier.

The sole purpose of NANA is to provide benefits to its shareholders. As a for profit corporation, since we were formed, NANA has

distributed very close to 100 percent of our profits to our shareholders. However, cash dividends are but a small part of the overall

benefits that we provide to our owners. We spend part of our annual operating income to directly provide for social and cultural

services. We also manage the lands that we received under ANCSA

which are used primarily for traditional subsistence—hunting, fishing, and gathering activities that are critical to maintain our cultural identity.

We administer programs to help increase job skills, provide internships, award direct scholarships, pay college tuition, and develop leadership and mentoring programs. We also fund social and

cultural programs that are provided by other non-profit organizations including search and rescue, so critical in the remote area

that we live in, as well as other health services.

As a business, we are successful in providing jobs for our shareholders. In 2005, 13 percent of NANA shareholders between the

ages of 18 and 64 worked either directly for NANA or for one of

our associated companies. These shareholder employees were paid

$27 million in wages last year.

When we first learned that the GAO would be looking into the

Alaskan Native Corporations’ participation in the SBA 8(a) program, I was confident that the GAO would find that the ANCs

have taken their responsibility and delivered with integrity the

services that the Government was asking us to deliver. After much

investigation, that is exactly what the GAO report found. It did not

cite any waste.

Chairman MANZULLO. We have some time issues here.

Ms. SANDVIK. OK. I will finish up here.

It didn’t cite any waste.

Chairman MANZULLO. You have 20 seconds on the Harry Alford

clock.

Ms. SANDVIK. Thank you.

In short, the GAO report found that the ANCs were living within

the law that they provided. However, additional resources were

needed to improve oversight.

To conclude, we firmly believe that the 8(a) program for the

ANCs was created by Congress for the right reason. We are providing business opportunities that pay dividends, provide scholarships,

cultural program support, social service, and job opportunities for

Native shareholder/owners of our companies. As demonstrated by

the high performance marks we receive from our customers, both

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in the Government sector and commercial sector, we are providing

excellent value and quality work for our clients.

Thank you.

[The prepared statement of Ms. Sandvik follows:]

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Chairman MANZULLO. Our next witness is Mr. Bart Garber from,

is it Tyonek?

Mr. GARBER. Tyonek.

Chairman MANZULLO. Tyonek Native Corp. We look forward to

your testimony. Thank you.

STATEMENT OF BART GARBER

Mr. GARBER. Thank you very much, Mr. Manzullo and Mr. Davis

and the rest of the committee members. There will also be a

PowerPoint up there if you like to watch things instead of listen.

I am a tribal member of the Native village of Tyonek and the

president of the Tyonek Group. Tyonek Native Corp. is a claims act

village for the Native community of Tyonek. Tyonek lies about 43

miles southwest of Anchorage, and access, just like NANA, is limited by air and boat. No roads lead to us. We are called Dena’ina

Beach People. About 400 of our 600 tribal members and tribal corporate shareholders live outside the village in Alaska and throughout the United States. We were established in 1973 and are entitled to about 200,000 acres of land in south central Alaska.

For over 20 years, the company’s business opportunities have

been primarily limited to conservative passive investments in surface land leases. In 1995, after a long series of meetings with

shareholders and the board, the board instructed us in management to acquire or begin active managed companies. When I was

hired at Tyonek Native Corp. in 1995, I was the third employee.

TNC owned an apartment building and a startup IT company.

Total operating revenues that year were $500,000. TNC relied upon

one-time asset sales and resource revenues to finance its operating

deficits.

Ten years later, TNC now has operating revenues now approaching $50 million with pre-tax profits between $1.5 and $2 million.

The company no longer depends upon earnings from surface leases

and resource sales to balance its books. I am happy to say that we

have had a large number of women-owned businesses, Asianowned, disabled service vets, and Black-owned business who have

helped us get to this point through either joint ventures or subcontract relationships.

In 2005, our manufacturing revenues were over $30 million derived from 128 negotiated task orders, about 15 percent of the revenue derived from non–8(a) sources. That percentage is actually increasing on newer work.

In most situations, a business case must be made for all fixed

price bids. The Government uses weighted criteria to determine

final rates and prices. They usually have past prices for many

items. Particularly in our obsolescence programs, our bids represent a significant cost savings to the Government over former

suppliers due to our lower rates and new technology. We have similar experiences in our service contracts.

Tyonek Native Corp. employs nearly 300 people in seven States.

Our primary lines of in 8(a) business are in defense manufacturing and engineering services and aircraft maintenance. On the

commercial side, we are in oil field services, civil construction, port

operations, and land and resource development.

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Our CEO is an Alaska Native, and the managers of our two operating divisions, the Alaska Division and Tyonek Group, both

Tyonek shareholders. Fifty percent of our Alaska corporate administrative staff is Tyonek shareholders. All five of our Alaska operating subsidiaries are managed or co-owned by Tyonek shareholders.

I was CEO of Tyonek Native corporation for 9 years. In May, I

transitioned to the role of president of the Tyonek Group which includes all of our 8(a) operating subsidiaries. As CEO, I oversaw the

creation and planning for all of our 8(a) and non–8(a) companies.

At the present time, our VP of operations for defense manufacturing is William Jolly, a Chippewa/Metis propulsion engineer, and

our saying in the company is it does take a rocket scientist. Scott

Pfeifer, whose family is Alaska Native, manages our services companies. The CEO and I are paid $200,000 with performance bonuses that are no more than half of that, and they are tied directly

to profit. Our management and direct labor staff share in bonus

pools based on profit projections and are recovered as part of our

GNA expenses.

Our profit performance over the years has averaged about 5 to

7 percent of gross revenues. You don’t get rich in the Government

contracting business. The company policy is to distribute 30 percent of after tax profits to shareholders as dividends. The balance

of the profits are reinvested into the businesses.

Benefits to our shareholders are listed below in five different

areas: scholarship, internships, job opportunities, community

projects, and funeral benefits. We contribute hard dollars, both to

scholarships and internships. We have two of our interns from

Alaska going to our operating plants in the lower 48 every 6

months and are getting trained as electrical technicians, welders,

and others. Some have remained and are employed in our plants.

We have two shareholder representatives who work solely on employment opportunities for Alaska Natives in Alaska. Nearly 100

percent of our direct labor staff in Alaska are shareholders.

Community projects range from education to cultural matters to

employment benefits for education. And, as you can see, we have

employment, we have funeral benefits for our shareholders. But, by

far, the most significant benefit is a stronger well-managed company. We would never have been where we are with our accounting

systems or our management capability without the 8(a) program,

and this benefits our businesses in Alaska. You can see that we

have distinct lines of businesses that are unique to us, and we believe that those will survive over time in 8(a) program and allow

us to compete in the outside world.

[The prepared statement of Mr. Garber follows:]

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Chairman MANZULLO. Thank you, Mr. Garber.

The next witness is Charles Totemoff.

STATEMENT OF CHARLES TOTEMOFF

Mr. TOTEMOFF. Honorable Chairmen, members of the combined

Committees on Government Reform and Small Business, thank you

for an opportunity to provide testimony to you on the topic of the

success of the Alaska Natives participating in the U.S. Small Business Administration and Minority Enterprise Development Program, also know as the SBA 8(a) program.

I must state that we appear with serious misgivings about the

preconceptions of the committee members and staff. The very title,

‘‘Northern Lights and Procurement Plights: The Effect of the ANC

Program on Federal Procurement in Alaska Native Corporations,’’

conveys a prejudice and a lack of understanding of Alaska Natives.

I come before you today to speak directly to those points with facts

and supported by independent verification by the very Federal

agencies and the U.S. Government Accountability Office that provided testimony to you today.

Again, my name is Charles Totemoff, and I am the president and

CEO of the Chenega Corp. Chenega is an Alaska Native village settled thousands of years ago by our forefathers. I am an Alaska Native, a shareholder of the Chenega Corp., and I have served on the

board of the corporation since 1983. I grew up in the village of

Chenega and have been with the corporation from the beginning

when we had nothing to provide to our elders and shareholders.

Like my fellow Alaska Native leader sitting beside me, I work each

day to help my people achieve self-sufficiency.

In the late 1980’s, Congress and the SBA recognized that Native

villages like Chenega and lower 48 tribes as well faced a real problem in Government contracting. Unlike other small businesses,

they did not simply represent a family or partnership but were

supposed to be engines of economic opportunity for entire communities and cultures. Changes needed to be made to recognize this

fact and allow Native-run small business to grow larger, to obtain

larger contracts, and to remain in the program longer. I recognize

that these changes have been controversial, but they have allowed

the program to work for Native communities that participate. We

are doing exactly what the Federal Government told us to do, and

we are doing it well. The program has not worked perfectly, to be

sure, but I challenge you to show me another Federal program that

works as well for the Native communities that agree to work hard

and play by the rules.

I am proud to say that eventually, as a result of much hard

work, Chenega has been successful in the Government contracting

business, but it was not an overnight success. There were many

lean years as the company made the investments in time and resources, learning the business. Chenega Corp. was pleased to be a

participant in the GAO audit. Chenega Corp., its shareholders, and

the Federal customers with which Chenega does business are

proud to relate that the GAO did not cite a single incident of waste,

fraud, or abuse by an Alaskan Native Corporation, nor were the

Chenega Corp. and its subsidiaries found to be performing any

Federal contracts at below superior standards.

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Mr. Chairman, the SBA Native 8(a) has been around a long time.

Nobody complained when we were simply getting contracts to perform maintenance at Federal facilities, but now that we have

grown, gained expertise, and actually succeeded at getting Federal

contracts in substantive areas, people don’t want to see Natives at

the table.

Let me tell you about a couple of our shareholders and the direct

impact this program has had on our lives.

Jason Totemoff is a young Chenega Corp. shareholder and a full

time employee of our company. He received his degree in Process

Technology, which he was able to obtain through scholarships

Chenega Corp. provided to him and to hundreds of others of our

students. While attending the university, Jason completed a formal

internship with Chenega Technology Services Corp. which is a

Chenega Corp. subsidiary. Jason says of his experience, ‘‘My experience at CTSC is nothing less than incredible. The skills that I

have obtained will benefit me throughout my life and give me the

possibilities to venture into careers I otherwise would not have.’’ If

it were not for what the Chenega Corp. provides, Jason would not

have this option.

Then consider Margaret Brodken, one of Chenega’s revered elders in her late eighties. Margaret, like most Alaska Native elders,

never worked for a corporation that would 1 day provide her with

a pension. She relies greatly on the quarterly dividends Chenega

Corp. provides to help pay for her groceries and heating bill. Margaret spoke recently at a corporation-sponsored language preservation meeting that she is very proud of the corporation and what it

has accomplished. I am thankful it is here to help care for her.

Chenega will never forget our elders.

Unlike most corporations, our mission has a dual purpose. In addition to our business execution, we use the results of our business

to further our societal, cultural, and community needs and activities. Many cultures will allow others to take care of their people.

Alaska Natives takes care of their own in a cultural fashion of caring and sharing.

Chairman MANZULLO. And I have to take care of the clock. How

are you doing?

Mr. TOTEMOFF. I will conclude then.

Chairman MANZULLO. You have 20 Alford seconds.

Mr. TOTEMOFF. Pardon me?

Chairman MANZULLO. Twenty Alford seconds.

Mr. TOTEMOFF. OK.

In summary, the Chenega Corp. and its subsidiaries go to great

lengths to provide tangible benefits to the shareholder and their

families. These benefits go beyond that of the normal role of a traditional corporation but reflect the special obligations. We do this

while providing excellent service to our Federal customers.

Finally, let me stress something about the SBA 8(a) program. It

is not wealth redistribution. Despite the many wonderful things

the program has done for our shareholders, this is not a welfare

program. It is not a jobs program. It is a means by which our villages can learn to stand on their feet.

Chairman MANZULLO. I have to interrupt at that point. Thank

you for your testimony.

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Mr. TOTEMOFF. Thank you.

Chairman MANZULLO. The next witness is Julie Kitka with the

Alaska Federation of Natives. We look forward to your testimony.

STATEMENT OF JULIE KITKA

Ms. KITKA. Thank you, Mr. Chairman and members of the committee for the opportunity to appear before you to testify on the importance of the SBA 8(a) program to the Native people of Alaska

and to offer some recommendations, and we offer seven recommendations.

I am testifying in my capacity as president of the Alaska Federation of Natives. By way of background, AFN is the largest Statewide Native organization in Alaska, representing more than

125,000 Alaska Natives residing in Alaska and more than 120,000

Alaska Natives scattered over the rest of the 49 States. AFN was

organized in 1966 to advocate for one voice for fair settlement of

our aboriginal land claims.

The discovery of oil in Prudhoe Bay and the need to bring clear

title to the land needed to build a pipeline to bring that world class

discovery online and the sense of urgency it produced in terms of

providing for the energy needs of our country created a historic opportunity for a settlement of our land claims. In December 1971,

after years of efforts by Members of the Congress, the Alaska Native leadership, and others, the Alaska Native Claims Settlement

Act was signed into law by President Richard Nixon. ANCSA extinguished aboriginal claims, and Alaska Natives were compensated

as mentioned in previous testimony. Unlike previous Indian land

claims settlements, the assets, land, and resources provided for in

the settlement in 13 regional for profit corporations and more than

200 village corporations.

Today, the Alaska Federation of Natives is governed by a 37

member board of directors, representing villages, both federally recognized tribes, ANCSA village corporations, 12 regional non-profit

organizations who run hospitals, health clinics, non-profit law enforcement, so forth, and the 13 regional ANCSA regional corporations.

Geographic considerations, in my written testimony, I describe

the sheer size of Alaska and its lack of basic infrastructure in rural

areas which makes it exceedingly difficult to build sustainable

economies. Alaska, as you know, is two and a half times the size

of Texas and about a fifth the size of the lower 48. If you look at

a map that I have included in the testimony, when you compare

it to Europe, the size of Alaska completely engulfs or touches within the boundaries of at least 16 countries from Portugal to Turkey.

Alaska has one of the largest Native populations in the United

States, making up about 22 percent of the total population in Alaska. If you take a look and think of that, the length and the logistics, not even to mention the Arctic conditions, you will understand

our challenges in building sustainable economies.

In settling our land claims, Alaska Natives gave up a lot. Our

land holdings were significantly reduced, yet we accepted the settlement because we believe the United States would honor its trust

obligation to us, and our people would benefit from the land capital

in corporations created by ANCSA.

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I want to mention, some news articles have talked about whether

or not the 8(a) companies are a front for somebody else. Alaska Natives have been involved, just enmeshed in capitalism, for over 34

years because our land claim settlement was structured by the

Congress in the corporate forum. And so, we have had to learn to

maneuver and how to make capitalism work and the forums of corporate structure work for our people, and that is a fundamental difference between us and other Native people within the United

States. We have no reservations. We have no trust lands. Our

whole, the viability of our cultures and ownership of our lands depend upon the viability of our corporations to maintain fiscal stability and in order to protect our land because it is not trust land.

We considered the amendment on the 8(a) program to be an integral part of the ANCSA economic settlement, and I was involved

in 1986 in testifying before the Congress, asking for the inclusion

of the SBA amendment as well as a whole package of other amendments that we felt were absolutely essential for the success of the

land claim settlement and for our people.

I also want to say, Alaska Natives have lived in our homelands

for over 10,000 years, and we continue that, and we are here to

stay. We have a land base, and we are building our capacity. One

of the most important things of the 8(a) contracting is the capacitybuilding, the opportunity for mentorship, what we are learning in

how to do business—absolute essential.

What we have also done recently is we have commissioned a 30-

year trend analysis to see how we have done in the last 30 years

on a whole range of indicators, whether or not you are talking

about education, health, infant mortality, life expectancy, and so

forth. And I am here to report to you that we have made tremendous success in the last 30 years.

I will give, for example, poverty rates among Alaska Natives.

Thirty years ago, our poverty rates among our people were in the

60 percent plus. Now, the poverty rate among Alaska Natives is

down to 20 percent, and that is with a population that increases

every 23 years and doubles in its population. That is a remarkable

achievement by any standard and should be something held up by

the U.S. Congress and the administration to other parts of the

world of how to reduce poverty linked to economic growth.

Chairman MANZULLO. We have a red light here.

Ms. KITKA. In conclusion——

Chairman MANZULLO. You know what that means.

Ms. KITKA. Yes.

In conclusion, Mr. Chairman, the program is a success. We are

proud to be a part of it. We have seven recommendations which we

urge your consideration and which we think can make good economic policy for Alaska Natives, Native Americans, and I note for

the delegate from Guam, many of those recommendations could

specifically address some of the concerns that she has with the

Chamorro people in Guam.

Thank you.

[The prepared statement of Ms. Kitka follows:]

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Chairman MANZULLO. Thank you very much.

I think we are talking about two different things. I think Mr.

Alford hit it on the head. It is that 8(a) was not set up to be a community development program. It was set up to be a helping hand

for small, struggling businesses until they get their legs firmly put

upon the land and develop some business practices and are able to

go out and compete on their own. So we have two different things

going here.

There is a good argument, a good factual argument that these

8(a) exceptions have helped dramatically the Alaska Natives. But

if you take a look at Mr. Ramos’ figures of the Department of Defense, he said that of the contracts awarded, I believe that $1.1 billion goes to Alaska Native Corporations, $1.2 billion to AfricanAmerican, and about the same to Hispanics. If I do the calculations, if 22 percent of the people in Alaska fall into the category

for inclusion as Alaska Natives, that is about 144,000 people that

are not only situated just in Alaska, but according to the testimony

of Mr. Garber, 400 of the 600 live I believe outside of Alaska.

Mr. GARBER. No.

Ms. KITKA. Mr. Chairman.

Chairman MANZULLO. Is that correct?

Mr. GARBER. No. They live in the village. They live in the region.

Ms. KITKA. Mr. Chairman.

Mr. GARBER. Outside the zone. They live in the region.

Chairman MANZULLO. OK.

Mr. GARBER. Within 50 miles of the village.

Chairman MANZULLO. OK, all right. Now my question is——

Ms. KITKA. Mr. Chairman.

Chairman MANZULLO. Yes.

Ms. KITKA. The current census says 125,000 Alaska Natives

within the borders of our State, 120,000 Alaska Natives scattered

over the rest of the United States.

Chairman MANZULLO. OK. Now, as to the latter, are they included in the dividends that are paid by the ANCs, just based upon

meeting the qualifications to belong to Alaska Native tribes?

Ms. KITKA. Mr. Chairman, I could address that. The requirements in enrolling for the land claims is you had to meet a certain

blood quantum, you had to have been alive on December 18, 1971.

Chairman MANZULLO. No. I understand. I am talking about the

corporations when the dividends are paid.

Ms. KITKA. Yes, what I am saying is when you enrolled in 1971,

no matter where you lived, if you lived if Seattle, if you——

Chairman MANZULLO. There are people who are Alaska Natives

that are not working with the corporations, the ANCs, that have

their own businesses, regardless of their wealth, that are still the

beneficiaries simply because they belong to the qualifying tribe by

tribal definition, isn’t that correct?

Mr. MCNEIL. That is so, under the Alaska Native Claims Settlement Act.

Chairman MANZULLO. That is right, and I am not trying to say

there is anything wrong with that. But what I am saying——

Mr. MCNEIL. There is even a——

Chairman MANZULLO. Let me finish my point. What I am saying

is what Mr. Alford is talking about is the 8(a)’s that are representVerDate 11-MAY-2000 12:28 Dec 04, 2006 Jkt 000000 PO 00000 Frm 00285 Fmt 6633 Sfmt 6633 D:\DOCS\30341.TXT HGOVREF1 PsN: HGOVREF1
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ing the African-American and the Hispanic community and the others covered by 8(a), those are individual businesses where the owners themselves who are working, not just because they are members of a corporation to get the share and the benefit of the profits

of the corporation. That is the struggle going on here as to 8(a)

being used as a tool of economic development for ANCs and 8(a)

being used as a helping hand up for the other so-called, well, for

the other minorities that are involved in it.

That is where we are having our problems as Members of Congress because to the Harry Alford and to the Hispanic community,

they see this gross disparity of amounts of money going to the

ANCs in terms of the awarding of the contracts as opposed to the

other minorities. This program is working well, but that is not

what 8(a) ever intended was to work this well toward just one

group of people that are involved in these contracts.

Mr. McNeil.

Mr. MCNEIL. Yes, Mr. Chairman. Congressional policy certainly

has evolved over time and including the advent of the Alaska Native Claims Settlement Act. The Native people of Alaska gave up

quite a bit for that claims settlement, and that is part of it.

Chairman MANZULLO. I understand, but so did other Native

American tribes——

Mr. MCNEIL. That is true.

Chairman MANZULLO. That are not included with the special exceptions.

Mr. MCNEIL. The other, the Native Americans are also included

in the same program.

Chairman MANZULLO. OK, all right.

Mr. GARBER. Mr. Chairman.

Chairman MANZULLO. Yes.

Mr. GARBER. The program has evolved in community development. I would say that there is a strong argument to say that our

8(a) exception isn’t necessarily pointed at community development.

It is development of businesses and the benefits, and there is a

larger beneficiary pool, not just the shareholders, but there is also

descendants who all gain from the benefits of our scholarships and

the like.

The new HUBZone regs are all about community development in

places that have nothing to do with Indians.

Chairman MANZULLO. I understand.

Mr. Davis.

Chairman TOM DAVIS. I have a couple questions.

Look, nobody quarrels with the intent of the Native Claims Act

or of the ANC. We understand what the purpose is.

I come at it from a different point of view. I oversee the committee that oversees all Federal procurement. Whenever you let people

go out with sole-source bids, we just don’t think you get the same

value as when they are competed. You talk about a seat at the

table, and I think the comment from Mr. Totemoff was that people

don’t want to see Natives at the table. I want you at the table; I

just don’t want you to have your own table. We want you out there

competing with these others, with other 8(a) companies and the

like. They have written different rules for you, so that when we go

out and you compete for a contract, you are in a class by yourself.

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For a Government procurement officer, a small business officer

to go out, they can negotiate just with you and other 8(a)’s but you

count against 8(a) percentages and everything else, and it just

makes it a little too neat and convenient. That is the concern.

We are trying to figure out what the best way is. There is a cost

to the Government for doing that. We are just trying to take a look

at it in this context. I don’t think anybody, any ANC has abused

the process. These were the rules that were written. You are doing

what you ought to be doing. I just think on the Government side

sometimes, as this has grown, it has grown at the expense of people who could have been in there bidding and offering the best

deal.

Mr. Alford.

Mr. ALFORD. Congressman Davis, it is rather hideous to hear Mr.

Ramos say that everything is on par because they all have a billion

a piece. Forty million African-Americans, forty million Hispanics,

the population of Alaska Natives, less than half the district, any

one of your Districts, and they are on par? For the gentleman to

say, well, I just made $200,000 a year. Ninety percent of my constituents would love to make $200,000 a year.

Chairman TOM DAVIS. I wouldn’t mind it.

Mr. ALFORD. Thank you. I am wondering about the reality of the

whole thing.

One last thing, Akima has been mentioned—Charlotte, NC,

spawned in Charlotte, NC. Look at the Katrina rebuilding and the

ANC involvement—Norfolk, VA; Greenbelt, MD.

Chairman TOM DAVIS. They have some in my District, too. Let

me just say——

Mr. ALFORD. Are they Alaska Natives?

Chairman TOM DAVIS. Well, the shareholders are Alaska Natives

and that is where the money goes. The profits go back into Alaska.

Mr. ALFORD. They are not Alaska Natives though.

Chairman TOM DAVIS. The employees may not be, but the owners of the corporation, as I understand, are Alaska Natives, and it

gets channeled back there. I don’t think there is anything improper

about that, but here is what concerns me. What concerns me is,

again, getting the Government’s best value.

Mr. Waxman brought this up earlier. Henry and I don’t agree on

everything with Government contracting, but he has been very consistent in saying that we should not be doing a lot of sole-source

contracting, no-bid contracting where you are just sitting across the

table with one company and a Government negotiator. You ought

to have other companies there. The difficulty on the ANCs is you

are not at the table. Your 8(a)’s aren’t at the table. Other 8(a)

aren’t at the table. Other large companies aren’t at the table. We

think in competition, ANC still may end up getting the work. They

do a lot of good work, but we just think the Government is going

to get a better value if they do that.

That is my point. If you take exception to that, but that is——

Mr. GARBER. Mr. Chairman, I am one of the few at the table actually who actually operate these companies, and I am right there.

We have substantial cost savings to the Government in multiple

millions of dollars in manufacturing. For the most part, our primary areas in the 8(a) are heavy-duty aircraft maintenance of jets

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and helicopters. We have very, very few, if any, small businesses

who do that. We do——

Chairman TOM DAVIS. Do you object to competing?

Mr. GARBER. We are actually beating large business and the

proof in the pudding is that large business, after a number of

years, is coming to us to subcontract because our rates are cheaper

and we are——

Chairman TOM DAVIS. But you shouldn’t be afraid of competition,

that is all I am saying.

Mr. GARBER. Over time, I wouldn’t be, except that, as you know

better than I do, large businesses can do any number of different

contracts.

Chairman TOM DAVIS. I wouldn’t mind you competing against

other 8(a)’s. That would be fine. The difficulty is that their threshold for sole-source is $3 million or $5 million, and you have no

threshold.

Mr. GARBER. In most situations, there are reasons why we have

actually avoided the pools of under five and under three.

Chairman TOM DAVIS. Let me ask you this. How many contracts

do you have that are open contracts that are basically open to everybody?

Mr. GARBER. We compete almost 100 percent right now of our

services contracts in small business competes.

Chairman TOM DAVIS. But you are small business. How many

contracts have you won that are full and open?

Mr. GARBER. On the services side, on the manufacturing side,

like I said, 10 to 15 percent. On the services side, we have only

been bidding for the last 9 months.

Chairman TOM DAVIS. So you are new. In time, you think you

can move to that, is what you are saying.

Mr. GARBER. Yes.

Chairman TOM DAVIS. Let me ask you the others. I am not advocating it. I am just trying to get a flavor for how many contracts

you are winning in the open marketplace.

Mr. GARBER. Well, I also, you are making the point that we are

losing money for the Government. We are winning. Our rates are

about one half to two-thirds big businesses.

Chairman TOM DAVIS. Well, if they are, why can’t we compete it

against others, if your rates are so good?

Mr. GARBER. Because the effect of these things on us is that big

business is being protected from us.

Chairman TOM DAVIS. Why in the world can’t you compete

against other small businesses?

Mr. GARBER. Because they can’t do what we do.

Chairman TOM DAVIS. Then you are not afraid of competition.

My point is a very simple one. We can compete against you in an

8(a) pool, and you would be treated like other 8(a)’s. The difficulty

isn’t that we don’t want you at the table. We want you at the table.

We would just like to have other people at the table. That is the

only concern.

I don’t want to upset something that is working for Alaska Natives. Congressman Young, I think made a very eloquent presentation today about what this is doing, going back historically. We

are not trying to upset the whole thing, but there is a concern, at

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this committee level, whenever anybody is given these no-bid contracts and you are sitting across with a Government negotiator. I

did this for a living for 20 years. I understand the way it works.

If you have a couple other companies there with you, small businesses if they can find them, but right now, they are prohibited

from looking at them because they have a threshold. For Mr.

Alford’s company, it is $3 million to $5 million. When you are sitting down with a $30 million, you are the only guys in town, and

that is the concern. I just say that.

Now you do a lot of good work. This is the right way to do it.

You are earning your way. You have done nothing wrong. You are

operating under rules that we have written. Our question is:

Should we revisit the rules a little bit and tweak them a little bit,

so maybe we can include a little bit more competition, not from the

large companies but maybe from other small companies in this

pool?

Mr. GARBER. That is my problem, and I guess that is the point

that you don’t understand, that the vast majority of all the source

contracts, sole-source contracts are big business. They are not

small business, and they are not us. In the time that we have been

speaking——

Chairman TOM DAVIS. I agree with that.

Mr. GARBER [continuing]. At this hearing, there are more solesource contracts——

Chairman TOM DAVIS. Let me tell you something. This committee has jumped all over other agencies, just so you understand, because of sole-source, even in emergency situations. We have four

areas in Iraq. So I don’t need a lecture from you to tell me what

we are doing on that.

Mr. GARBER. Oh, I am sorry.

Chairman TOM DAVIS. We are going after sole-source and these

no-bid contracts everywhere. So this is a small piece of that. I am

asking you, though, if you could compete with other small businesses, that is OK, isn’t it? You can beat them straight up, can’t

you?

Ms. BORDALLO. In our areas, it would be a concern. We do now,

and there are not that many who can do what we do.

Chairman TOM DAVIS. So you ought to be OK, and that is the

concern. The difficulty is that a lot of small 8(a) businesses can’t

compete with you because of the size limitations that they have

that you don’t have.

Mr. GARBER. That is not the reason they can’t compete with me.

Not many mom and pop’s maintain jets and not many mom and

pop’s have the manufacturing organizations.

Chairman TOM DAVIS. Then that is fine. That is fine. I don’t

have a problem with that, but in some of the IT and some of the

other areas, there certainly are competitive parts to this.

Mr. ALFORD. Sir, I would like to introduce him to some 8(a) firms

who do maintain jets.

Chairman TOM DAVIS. Well, I think the Government can find

them if they do it, and if they can find them, I think you are still

going to win a lot of contracts.

Mr. GARBER. We compete against that.

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Chairman TOM DAVIS. I still think you are doing a lot of good.

That is my only point.

Ms. SANDVIK. Excuse me, a couple of points I would like to make.

No. 1, there seems to be some question about whether it is appropriate to have different caps, limits placed, and that somehow or

another, there is a suggestion that is inappropriate for Alaskan Native Corporations to not be subject to the same caps that some of

the smaller, individually owned businesses are.

Frankly, we believe it is absolutely appropriate. As I mentioned

in my testimony, there are 11,200 beneficiaries of all of NANA’s

business efforts, and so we distribute our profits amongst 11,200

people. If we were held to the same threshold as the $3 million,

and we earned a typical margin on that work of 5 percent, that

means $150,000 would be distributed to 11,200, yielding a $13.15

return.

Chairman TOM DAVIS. Ms. Sandvik, in a vacuum, you are right,

but here is the practical side of it. We drive these procurement officers to meet a certain percent and threshold of 8(a) contracts that

they are letting out. Because it is so easy for them to go no-bid,

sole-source to you, basically they don’t give it to other people, and

that is the difficulty with this. So we want to try to figure out a

way out of it. It is an unintended consequence.

I am not griping or complaining about what you are doing and

the way this has come about. I am just saying I think it always

works better for the Government when we are looking at contracts

to have two or three potential bidders out there. If we can find two

or three ANCs, that would be fine. I would feel better about that,

but we can’t. The record shows that we haven’t been able to do

that. This is driving some fairly large procurements at this point.

That is the concern.

I think some of the other concerns, I think you have addressed

very well today, but that is the concern.

Mr. WAXMAN. Thank you.

Mr. Totemoff, let me ask you some questions about a TSA contract for maintenance of airport screening equipment. This is a contract that Chenega sought but did not receive.

In late 2004, TSA planned to hold a competition for this contract,

and the plan was for companies to submit informal white paper

proposals before a formal request for proposal was sent to a smaller

number of select contractors. Both Chenega and Siemens were

among the contractors that made it to the second round, is that

correct?

Mr. TOTEMOFF. Yes, I believe so.

Mr. WAXMAN. At this point, the competition was halted because

of political pressure. According to a November 1, 2004 e-mail from

Lee Kair, the Acting Assistant Secretary for Acquisition, the entire

Alaska congressional delegation was pushing for Chenega to receive the work under a no-bid contract it had with Customs and

Border Patrol. The e-mail states, ‘‘Staff from these offices have

been adamant that we evaluate an option using a CBP contract

with Chenega for similar services.’’ Then the other documents confirm that TSA officials met with the staff of the two Senators from

Alaska on October 19, 2004.

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Mr. Totemoff, did Chenega ask the Alaska delegation to intervene with TSA on Chenega’s behalf?

Mr. TOTEMOFF. I am not aware of any such thing.

Mr. WAXMAN. What specifically did you ask them to do?

Mr. TOTEMOFF. I really don’t recall the TSA contract.

Mr. WAXMAN. Then if you didn’t ask them, the two Senators and

a Congressman just decided on their own to begin pressuring TSA

to consider giving the work to Chenega without a competition.

Mr. TOTEMOFF. Maybe.

Mr. WAXMAN. That is what happened. Do you think that is what

happened?

Mr. TOTEMOFF. It is possible.

Mr. WAXMAN. The documents also show that TSA succumbed to

this political pressure by giving Chenega special access to present

its no-bid plan to TSA. Is that true? Did Chenega make a presentation about its proposal to a TSA panel on November 29, 2004.

Mr. TOTEMOFF. I don’t recall that far back, no.

Mr. WAXMAN. 2004?

Mr. TOTEMOFF. Yes.

Mr. WAXMAN. November? Well, according to the TSA documents

obtained by the committee, Chenega proposed using Siemens as its

subcontractor. A November 24, 2004 memo from Mr. Kair said,

‘‘Chenega stated that Siemens would deliver 100 percent of the

technical effort.’’ In other words, Siemens ‘‘will execute the technical work under Chenega’s management.’’

Is that right, Mr. Totemoff? Did Chenega propose to have a large

non-Native subcontractor do all of the actual maintenance work?

Mr. TOTEMOFF. I don’t recall again. I don’t recall those e-mails

that you are referring to.

Mr. WAXMAN. Do you recall this whole issue of this contract?

Mr. TOTEMOFF. I recall we didn’t receive the contract.

Mr. WAXMAN. In this case, TSA ultimately resisted the political

pressure because it didn’t think a no-bid contract to Chenega would

be a good deal for the taxpayer. Mr. Kair, the acquisition official,

wrote, ‘‘While it asserted that it was convinced it could save over

the current prime, Chenega was unable to demonstrate knowledge

of current costs or provide a projected order of magnitude of savings.’’ In addition, he concluded, ‘‘Sole-source negotiations simply

cannot yield the kind of savings or pressure that the market brings

to bear.’’

On November 29, 2004, TSA announced that it was resuming the

competition. Siemens ultimately received the contract on March 1,

2005.

Mr. Totemoff, do you think it makes sense to award Federal contracts on the basis of who has connections to Members of Congress?

Mr. TOTEMOFF. I don’t believe so.

Mr. WAXMAN. Although Chenega didn’t receive this contract, this

is a disturbing case. An ongoing competition was halted due to political pressure. This is not supposed to happen in our procurement

system.

This contract highlights another major drawback of a no-bid

ANC contract. In the absence of competition and with a clear criteria for selecting contractors, contracting officials are susceptible

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cessful effort, but nevertheless it raises the question of if you don’t

have competition, then the pressure is on to maybe give political

favors to a bidder which means the taxpayers don’t get the benefit

of competition and the procurement people feel they better go along

with the political pressure, even though the taxpayers may not get

the best deal.

Mr. TOTEMOFF. I think our corporation is ethically far better

than that. I mean from my viewpoint, as being the president and

CEO, I tell all my managers that we are going to either do things

above board and always do the right thing.

Mr. WAXMAN. Do you think it was reasonable to have a contract

that you wouldn’t be handling but Siemens would be handling and

then get it on a no-bid basis?

Mr. TOTEMOFF. Again, I don’t recall the final negotiations of the

TSA contract. What I do recall is we didn’t get it.

Mr. WAXMAN. Thank you.

Thank you, Mr. Chairman.

Chairman MANZULLO. Ms. Velazquez.

Ms. VELAZQUEZ. Thank you, Mr. Chairman.

Mr. Totemoff.

Mr. TOTEMOFF. Yes.

Ms. VELAZQUEZ. You know you made a comment about the fact

that this is all about people not wanting to see Native Americans

at the table. You are totally wrong. We in Congress are in the business of making sure that things are done the right way and if there

are fixes that need to be done, that is our responsibility. Since SBA

has not taken oversight seriously for the last 5 years, we need to

make sure the taxpayers’ moneys are protected.

Mr. Alford, agencies want to buy things the fastest and easiest

way possible. If agencies were split off from the 8(a) program, agencies will have the choice of the 8(a) program with no contract dollar

limit or 8(a) with its restriction on the company, the owner, and

the contract. Even considering civil rights implications and the possibility of not achieving contracting goals, which are limited multiweighted factors, wouldn’t we be setting up a situation where contracts would disappear from the 8(a) program in a monumental

fashion, even faster than they are now.

Mr. ALFORD. Congresslady, the best agency that uses 8(a) contracting programs and has the best results and diversity is HUD,

and Secretary Jackson will tell you: I use the 8(a) program to make

sure we have diversity in HUD. They are the best agency, and I

don’t see ANCs proliferating over there because they use the true

spirit of the 8(a) program.

God bless ANCs and give them half the Federal treasury if he

deems necessary, but let them have a program that does not prey

on Hispanic, African-American, and Asian 8(a) companies. A $2 billion increase, ANC; $2 billion increase, other ethnicities. There is

a direct correlation there.

Ms. VELAZQUEZ. Again, as you know, ANCs are able to receive

multimillion or billion dollar contracts without competition. The rationale for that was to encourage economic development that we all

support. Given this, do you think we should be making sure that

the profits from these contracts are used for the stated purpose of

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economic development and not to line the pockets of executives who

have nothing to do with Native Alaskan communities?

Mr. ALFORD. Absolutely, and my concern in this whole thing

came out of these ANC ‘‘companies’’ in the good old South and

going to their facilities, not seeing one Alaska Native and seeing

billion dollar companies that have a subsidiary arm called an ANC

that is feeding the other companies of this conglomerate. So I think

there should be some serious auditing done to see exactly where is

the money done.

Ms. VELAZQUEZ. Thank you.

Ms. Sullivan, can you talk to the committees a little bit about

how ANCs serve as enablers for agencies to do more contract bundling?

Ms. SULLIVAN. I had a difficult time hearing you. Would you

mind repeating the question?

Ms. VELAZQUEZ. Can you talk to the committees a little bit about

how ANCs serve as enablers for agencies to do more contracting

bundling?

Ms. SULLIVAN. The larger the contracts that they are allowed to

award, the more bundling that we think happens. So, because the

ANCs do not have the same limitations that other 8(a) companies

do in terms of sole-sourcing, I think that it is pretty clear there is

a trend toward larger contracts.

Ms. VELAZQUEZ. What do we need to do about this?

Ms. SULLIVAN. You know, there are a lot of recommendations.

The President, in 2002, in his contract bundling initiative, laid out

nine steps. But it seems, and the 2005 SBA IG audit, they are saying that SBA failed to create a statutorily required data base for

tracking bundled contracts. The agencies have told the GAO that

the definitions are complex and unclear. And so, there is a lot of

work, in our opinion, that needs to be done by the agencies to make

sure that contract bundling is properly reviewed.

Ms. VELAZQUEZ. In what way do you think the definition of bundling should be modified?

Ms. SULLIVAN. You know, I have the definition somewhere here

in my papers, but it is very, very long and it is a number of pages.

I would like to be able to come back to you with that answer because I think that takes some serious review on our part.

Ms. VELAZQUEZ. Thank you.

Mr. Chairman, I just would like to add for the record that we

have in the 8(a) program, 9,700 8(a) firms and 154 8(a) ANCs. That

get 13 percent of all the 8(a) contracting dollars. Less than 2 percent of the 8(a) contracts go to the ANCs. The problem here that

we have is, to have a level playing field, the ANCs, without competing and sole-source, which the rest of the minorities who are under

the 8(a) program do not have. How can we benefit or allow for the

8(a) contractors, minority contractors to have a level playing field,

so that we allow for them to have access to the fair marketplace?

There is no level playing field, and I think we need to look into

ways legislatively that we can address that imbalance.

Thank you.

Chairman MANZULLO. Mr. Alford and Ms. Sullivan, actually anybody, can you describe to me a typical 8(a) company?

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Mr. ALFORD. Over the last 5 to 6 years, a typical 8(a) company,

a college graduate with Fortune 1000 experience and a specific degree, usually family owned, husband and wife, two brothers, with

skill sets that identify them as probably going to be successful, just

need to get into the program and get that break and get that experience and they grow.

One of our larger companies, S.R. Smoot Corp., a construction

company, has been around since 1946. Lewis Smoot, second generation, comes out of Michigan State with an engineering degree and

convinces his father and uncles that they can take this company

farther if they employ the right people and do the right thing. He

convinces them to get into the 8(a) program in the 1970’s. Today,

they do about $800 million in construction and do a lot around here

in Washington, DC.

Chairman MANZULLO. Are they still 8(a)?

Mr. ALFORD. Oh, no. They graduated years ago. But I am saying

and as I said in my report, most of these 8(a)’s, when they graduate, are probably going to spell big success, the ones who are getting the contracts and know how to market and get through it.

There are many 8(a)’s, and that is becoming less and less, who rely

totally on the 8(a) program and don’t prepare for graduation. But

today that curve is changed, and as I said in my testimony, the majority of our businesses who have succeeded are 8(a) graduates.

Chairman MANZULLO. Do you know of companies that lost contracts to 8(a) ANCs?

Mr. ALFORD. I know companies that are livid. Jerry Harris, Cirrus Technology, Huntsville, AL, you would have to arrest him if he

came into this room right now today. He couldn’t control himself.

He has lost many millions of dollars. He is 8(a). He is AfricanAmerican.

Chairman MANZULLO. How many employees?

Mr. ALFORD. Probably at the top, 100. Disabled veteran, top secret clearance, Vietnam Vet, can do maintenance on jets, but he is

livid about the contracts that he has lost. He calls me monthly.

What are we going to do about the ANCs?

I think what we have here, you have apples and oranges, and

they have a serious situation, but it is not similar to the situation

of a typical 8(a). So, why are they in the same arena? Why can’t

Congress come up with a program specific for the ANCs that

doesn’t create them as being predators to the traditional 8(a) company.

Chairman MANZULLO. The other Native American tribes do not

enjoy the same exceptions.

Mr. GARBER. Yes, they do.

Chairman MANZULLO. Do they, under the $5 million and $3 million? They don’t take advantage of it.

Mr. ALFORD. Let me, something I am kicking around, there are

African-Americans Indians, Pequots in Connecticut, plenty in Oklahoma. I am going to get some of them into the ANC program and

then probably it will go away when that happens.

Chairman MANZULLO. I just have one other question. There is a

reason for this hearing, and that is that members from across the

Nation have approached me and Mr. Davis about why there are

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8(a)’s who are not even 8(a)’s. We are outside the realm of 8(a)’s

with regard to competition.

If I look at the demographics, the population of Alaska in 2004

is 655,435. The Natives, and this is according to the Government

definition, is 96,505 or 15.4 percent. The 8(a) program has evolved

into something that it was never intended to do. This is coming

from Congress that we are in a position where obviously we represent our congressional districts, but as a whole, I see this going

in the wrong direction. It is self-destructive, and it could end.

It could be big problems for the future of the 8(a) program, if the

complaints continue to come this way from the 8(a) participants

themselves. They are wondering, why even have an 8(a) program

when 13 percent of the contracts are going to 154 companies representing 96,000 people as opposed to 9,700 companies representing tens of millions of others that come within the definition of minorities within the 8(a). That is the reason for the hearing.

Nobody here is picking on the Native Americans in Alaska. That

is not the purpose of the hearing. It is to show that there are huge

concerns, and the message has been very clear. That is that the industry itself ought to take a serious look at trying to resolve this

issue. The last thing you want to do is have Congress try to fix it

and foul it up again because this place is notorious for trying to fix

issues like this one which have to be resolved within the industry.

I have no further questions.

Mr. Waxman, did you have any questions?

Mr. WAXMAN. Yes.

Mr. MCNEIL. Can I comment on the equal playing field issue?

Chairman MANZULLO. Yes, sir.

Mr. MCNEIL. I think the story is incomplete here in the sense

that comparing our owners and constituents of Native people as

tribal members with the very large numbers of other minority

groups because it would be the same and it would be a good analogy, if in fact those 9,700 individual entrepreneurs distributed all

the benefits to 40 million people, and they don’t. That is an obligation that we have to essentially distribute the benefits to our people, and we have done it. I think there is very good evidence of

that.

But I think that is a very important fact here because if there

was that sharing that went out to a broad base of people, then I

think the analogy would make some sense.

Ms. VELAZQUEZ. May I ask you a question?

Mr. MCNEIL. Yes, ma’am.

Ms. VELAZQUEZ. In any given contract, can you give 49 percent

of the contract profits to a non-Alaskan executive?

Mr. GARBER. Any 8(a) can do that.

Mr. MCNEIL. Yes, any 8(a) can.

Mr. GARBER. Us or the individually owned ones, that is an 8(a)

regulation not unique to Alaska Natives.

Mr. MCNEIL. Let me clarify that as well.

Ms. VELAZQUEZ. I don’t think that is the intent of the law.

Mr. GARBER. The law applies to all 8(a)’s.

Mr. MCNEIL. Representative Velazquez, there is a mentor-protege program that does allow participation in a partnership, and I

believe the question here is really what benefit occurs in that kind

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of partnership. The benefit that we, as Alaska Native people, as

tribes, achieve in those partnerships is that they build capacity in

our companies that we don’t have or in our people because it provides a level of expertise that we are able to develop over a period

of time. I think that is one of the key intents of those relationships

which are permissible under the law and regulations.

Chairman MANZULLO. Yes, Ms. Kitka.

Ms. KITKA. Mr. Chairman, I just had one comment. You raised

earlier the concern about the jobs leaving the country, going into

other countries and the loss of jobs. Our recommendation No. 3 addresses that, and it is, we put that forward with the good will that

what we would like to see this committee, this joint committee do

is expand the economic pie for Alaska Natives, Native Americans,

other minorities in this country and not pit us against one another.

We very carefully calculated some different recommendations

which we think would be very, very timely. This one in particularly, especially taking a look over the past months of the controversy of Dubai on wanting to take over the ports, on that, we

have spent some time studying what they were doing. They were

building a first of its kind, world class outsourcing tax/trade-free

zone. For U.S. businesses, including homegrown ones like Alaska

Natives, for us to be competitive in the global economy, we need

to be able to match up on that.

I really strongly commit, strongly urge the committee to take a

look at our recommendations and look at how to expand the economic pie and how to create incentives that will benefit Hispanics,

African-Americans, Alaska Natives, Native Americans. There are

ways to solve some of these issues and these conflicts by expanding

the opportunities as opposed to pitting us against each other. So

I just respectfully urge you to consider some of these things.

We are very concerned about the jobs leaving the United States

and would like to really engage in some talking about how do we

create more economic opportunities; how do we make American

companies more competitive in the global economy; and how do we

grow the investment climate in our country, so that we become

magnets for these jobs as opposed to them going over to India or

China or other places as well.

So, thank you very much.

Mr. ALFORD. Mr. Chairman.

Chairman MANZULLO. Yes, sir.

Mr. ALFORD. Take $2 billion from our community and then say,

now, let us get along. It is a cancer to us, and we are not going

to get along with it.

And I was saying about the size of the populations, how ludicrous it would be if my constituents had that same scale. I am not

asking for it. I think it is crazy. But, as the scale clearly shows,

it is a different animal from us. We are different animals. We don’t

belong in the same corral.

Chairman MANZULLO. Well, I hate to end on that note, Harry.

You all have been extremely gracious with your time, extremely

sincere, and I appreciate your testimony. I certainly want to thank

the witnesses for coming today, especially those who have traveled

from a great distance.

The committees stand adjourned.

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[Whereupon, at 4:34 p.m., the committees were adjourned.]

[The prepared statement of Hon. Elijah E. Cummings and additional information submitted for the hearing record follow:]

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