Introduction of Legislation to Reform the Treatment of Alaska Native Corporations Under SBA's Program

Floor Speech

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Mr. Speaker, today, I am introducing legislation to level the playing field in the Small Business Administration's, SBA, 8(a) small and disadvantaged business program by eliminating the preferences and special rules that exist for Alaska Native Corporations, ANCs.

The 8(a) program was established to improve participation rates for small, minority-owned and operated, economically and socially disadvantaged businesses in the Federal marketplace.

Under the program, eligible businesses receive training, technical assistance, and Federal contracting opportunities through set-asides and contract awards without competition.

In the current economic climate, 8(a) contracting opportunities can sometimes be the difference between success and failure for small struggling businesses all across America.

Yet, all too often, small businesses are crowded out of the Federal marketplace by ANCs who, since 1986, have benefited from a carve-out which allows these firms to receive contracts under the 8(a) program with "special procurement advantages''--including the ability to win uncapped no-bid contracts. These benefits are not conferred to other 8(a) firms.

As a result, ANCs, who only make up about 2 percent of eligible firms under the 8(a) program, actually receive more than a fourth of 8(a) contracts.

Between FY2000 and FY2008, Federal contract dollars awarded to ANCs and their subsidiaries grew by 1,386 percent, and have more than tripled in recent years, from $1.1 billion in FY 2004 to $3.9 billion in FY 2008.

The Washington Post, and more recently Pro Publica, have published exposes that reveal the inequities of the ANC carve-out and how it has contributed to government waste.

My partner in the Senate in this effort is Senator Claire McCaskill of Missouri has done extensive oversight of the ANC carve-out through her work on the Senate Homeland Security and Governmental Affairs Committee Ad-hoc Subcommittee on Contracting Oversight.

I have been interested in the distorting effect of the ANC carve-out since 2005, when FEMA disproportionately awarded post-Katrina recovery contracts to ANC.

At my request, the Government Accountability Office studied the program and, in 2006, reported that the SBA's oversight of ANCs has ``fallen short'' and as a result there is ``clearly the potential for unintended consequences or abuse.'' GAO further found that ``sizable 8(a) revenues do not guarantee a higher level of shareholder benefits'' to Alaska Natives.

The evidence for whether these revenues have benefited Native Alaskans is anecdotal at best but, interestingly, the poverty rate in Alaska has actually gone up since 1986, from 8.8 percent to 9.4 percent.

There are many glaring inconsistencies between the treatment of ANCs and all other 8(a) firms.

For example: while awards to regular 8(a) firms are capped at $3.5 million for services contracts (or $5.5 million for goods), they are uncapped for ANCs and are often awarded through sole-source, no-bid contracts; while regular 8(a) firms may not participate in the program for more than nine years, ANCs can remain in the program indefinitely as long as they keep creating new subsidiaries; while regular 8(a) firms have to prove every year that they are socially and economically disadvantaged, ANCs are presumed to be socially and economically disadvantaged; while regular 8(a) firms have to be run by an economically disadvantaged minority, ANCs do not have to be minority-owned and operated and are actually often run by wealthy non-Native managers.

My legislation will: (1) standardize the eligibility requirements for all 8(a) firms; (2) require ANCs to show that they are actually economically and socially disadvantaged, as is required by other 8(a) firms; (3) require all 8(a) firms, including ANCs, to show, on an annual basis, that they are owned and operated by social and economical disadvantaged persons; require the SBA to ensure that the size of ANCs participating in the 8(a) program meet the same "small business'' definition as other 8(a) firms; (5) require ANCs to submit an annual report indicating 8(a) program-related payments, total revenue, and the total amount of benefits paid to ANC shareholders; (6) strike the provision that allow ANCs to receive sole-source contracts in excess of $3.5 million for services and $5.5 million for goods; and (7) remove the provision that allows ANCs to participate in the 8(a) program beyond 9 years, the limitation in place on other 8(a) firms.

I urge Members to review my legislation and cosponsor this bill to ensure that eligible small businesses, in your community and mine, can reap the full benefit of the 8(a) program.

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