WASHINGTON _ The debate over the sole-source contracting privileges that Alaska Native corporations have used to make billions of dollars is flaring in Congress with a new government audit that found lax oversight of the program.
The Government Accountability Office says there's scant government monitoring of how much of the work actually is done by Alaska Native corporations, which are supposed to benefit from the program, and how much is subcontracted to big Lower 48 companies.
"We found no evidence of regular and systematic monitoring of the limitations on subcontracting," says the report from the GAO, the auditing and investigative arm of Congress.
The report, released Tuesday, also suggests that some Alaska Native corporations "effectively operate as large firms" in what's meant as a small-business program.
Massachusetts Democratic Rep. Edward Markey called for congressional hearings on the GAO's findings, saying Congress should ensure that Alaska Native corporations' "advantages are not wrongly exploited and that taxpayers are receiving fair value for contracted work."
Companies owned by tribal entities have special advantages in the Small Business Administration's 8(a) federal contracting program and can receive sole-source contracts _ which don't require them to compete with other bidders for the jobs _ for any amount. The audit found that most of the federal contracting dollars for tribal 8(a) firms go to Alaska Native corporations, whose take rose from $1.9 billion in 2005 to $4.7 billion in 2010.
Alaska's congressional delegation defended the Native corporations Tuesday. Alaska's Democratic Sen. Mark Begich said in an interview that the GAO report didn't target the corporations and was mainly about how government agencies could manage the program better.
"What we do know is Alaska Native corporations are good corporate citizens, providing jobs and economic stimulus in Alaska and across the country," Begich said. "I've always said we need better training and oversight, and this report just confirms that."
The group Native 8 (a) Works, set up by Native organizations to counter criticism of the program, sent out a statement that said the program benefited Native shareholders and helped rural economic development. "Alaska Native corporations participating in the 8(a) program embrace additional oversight and monitoring," said Will Anderson, the chief executive of Koniag Inc., a Native corporation in Kodiak, Alaska.
The audit release follows a recent bribery and kickback scandal involving an executive at a subsidiary of the Eyak Corp., the village corporation for Native shareholders in Cordova, Alaska. The $20 million scheme allegedly involved corrupt Army Corps of Engineers officers working with an executive of EyakTek, a subsidiary, to pocket kickbacks from a federal contract.
The audit also comes as longtime critics of the program, such as Missouri Democratic Sen. Claire McCaskill, continue to argue that Alaska Native corporation privileges lead to waste as the money is funneled to Washington subcontractors.
McCaskill and Markey are among the six members of Congress who requested the audit. Begich and Alaska Republican Rep. Don Young, who say they want to ensure that the program is working properly, also are on the list of the audit requesters.
Young said in a statement Tuesday that Alaska Native corporations had become an unjustified target of criticism. The corporations receive just a tiny fraction of sole-source federal government contracts, and oversight in the program is being improved, he said.
"This report is innocuous and should not be spun as an excuse to undermine a critical tool to empower Native communities," Young said.
The 78-page GAO report found that federal contracting officials are attracted to sole-source contracts under the program as quick and easy, allowing them to avoid potential bid protests and meet their goals for small business development.
Regulations limit the amount of work that subcontractors can perform. An 8(a) firm is supposed to generate at least 15 percent of the labor costs in-house for general construction contracts and 50 percent in-house for service contracts. But no one knows whether that's happening, the report says.
The GAO says contracting officers are confused over which agency is responsible for the monitoring and how they're supposed to figure out how much work is subcontracted.
The report also says that some Alaska Native firms promote the fact that they're part of a larger corporate brand and can access vast resources. It found one unnamed Alaska Native corporation saying it was "without geographical limitations" and established in 49 states. Another Alaska Native corporation reported that it could transfer staff between subsidiaries and access 6,700 employees nationwide, according to the GAO report.