SBA Defends Alaska Native 8(a) Contract Preferences SBA’s top contracting official said there is no evidence that large sole-source awards to Alaska Native companies are robbing contracts from other 8(a) businesses. The Alaska companies took in 25% of 8(a) contract dollars in 2008, although they account for only 2% of companies in the program. Alaska Native Corporations and other tribally owned businesses are allowed to receive sole-source awards in unlimited amounts, and a few of them have won contracts worth hundreds of millions of dollars, while other 8(a)s are restricted to sole-source contracts up to $3.5 million, or $5.5 million for manufacturing. SBA has begun analyzing the impact of the preferences on the 8(a) program, said Joe Jordan, associate administrator for government contracting and business development. “As yet we’ve seen no data that would say it disadvantages other program participants,” he testified at an April 7 hearing of the Senate Indian Affairs Committee. Legislation is pending that would strip the Alaska Native companies of their procurement preferences and put them on an equal footing with other 8(a) businesses. Jordan declined to take a position on the legislation. Representatives of Alaska Natives and other tribally owned firms joined SBA’s Jordan in defending the preferences at the hearing. A spate of recent news reports as well as audits by the Government Accountability Office and the SBA inspector general have documented abuses by several Alaska 8(a) companies, including passing through the lion’s share of their work to large corporations. Jordan said new regulations will rein in some of the abusive practices. The SBA rules require the 8(a) firm to perform at least 40% of the work of any joint venture between an 8(a) and non-8(a) company. In addition, Congress has mandated that agencies execute a justification and approval for any 8(a) sole-source award above $20 million. The new SBA rules also limit compensation for executives, consultants and agents working for 8(a) firms. News reports have documented instances where Alaska 8(a)’s paid lavish salaries and commissions to executives and consultants while sending little money home to their native shareholders. “This is fundamentally unfair to the people who are supposed to be the recipients, the Native Alaskans,” said Sen. John McCain, R-AZ, a member of the committee. Jordan and representatives of the Alaska natives said the new rules should be given a chance to work before any additional changes are made. “There is no doubt in my mind this is one of most successful programs we’ve ever seen,” said Julie Kitka, president of the Alaska Federation of Natives. “…SBA 8(a) contracting has created the benefits that it was intended to create. … Our corporations have built up a capacity to provide jobs and help young people see what it takes to succeed in modern America. They have built, as intended, a managerial and business expertise that can carry forward. They have helped create an economic stability where none existed before.” However, the staff of the Senate contracting oversight subcommittee found that less than 5% of Alaska Native Corporation employees were natives and that some of the largest Alaska 8(a)’s paid out an average of only $615 in dividends for each native shareholder. The new SBA rules will require the companies to document how their 8(a) contracts have helped native communities. Sen. Lisa Murkowski, R-AK, said only a small number of native companies have been accused of wrongdoing. “When they discovered that they had made mistakes in the selection of business partners, they correct those mistakes,” she said. “And they remember the lessons they have learned. And when they discover they’ve been ripped off by business partners, they don’t sweep things under the rug and hope that nobody’s going to notice. They go to court, they recover what’s rightfully theirs, and they regain control of their businesses.”