The Alaska Native contract industry has exploded in the last five years without adequate oversight from the federal government, the Government Accountability Office said in a report on Thursday.

In fiscal year 2000, Alaska Native corporations were awarded $265 million in small business contracts. By fiscal year 2004, that figure grew to $1.1 billion, the GAO said in the long-awaited report.

The contracts represent only a small amount of total federal contract spending, the report noted. But viewed in context of the Small Business Administration, Alaska Native corporations landed 13 percent of the work set aside for socially and economically disadvantaged individuals, the GAO said.

The upward trend has drawn the attention of the media, labor unions, certain members of Congress and other minority groups. They believe Alaska Native corporations are exploiting the SBA's 8(a) program with the help of advantages -- such as large-dollar, sole-source contracts -- not available to other small businesses.

But American Indian and Alaska Native business leaders argue that the policy is working as Congress intended. Kenneth Robbins, the president and chief executive officer of the National Center for American Indian Enterprise Development, said the report confirms that Native contracting is "fostering self-sustaining economic enterprises and self-reliance in many Native communities that historically have suffered from poverty and lack of economic stimulation."

The GAO found that Alaska Native corporations are indeed using contracts to increase revenue. Of five corporations who received the majority of 8(a) work from 2000 to 2004, three of them "depend almost exclusively" on federal government work, the report said.

But the report said it was not possible to determine an "explicit link" between the contracts and improved services for Alaska Native shareholders because none of the corporations keep track of such data.

According to the GAO, one corporation with a large amount of contract work was able to increase dividends for its shareholders. Yet another corporation experienced a "few years of heavy losses due to lawsuits and management malfeasance" despite a high level of 8(a) activity, investigators said.

Some people are definitely benefiting from the boon in contracting, the report noted. But in one case, it was a non-Native executive who garnered a higher salary than his Native bosses and, in another case, a group of non-Native executives who retained 44 percent of the profits.

"For example, in 2004, a corporation paid one of its chief executive officers for 8(a) operations almost $1 million -- more than three times as much as the highest-paid executive of the parent corporation," the GAO wrote.

To ensure compliance with the law, the GAO made recommendations to eight federal agencies that award contracts to Alaska Native corporations. All but one of them agreed they should improve oversight of the 8(a) process. The Energy Department didn't address the recommendation, the GAO said.

But the agency that received the most pointed criticism -- the SBA -- took issue with the investigation and with the GAO's recommendations. "The tone of the report is unsettling," Calvin Jenkins, the agency's deputy associate deputy administrator wrote in a letter dated April 19.

"The ANCs are using the statute to bring resources back to improve their Native Alaskan communities," Jenkins said, noting that federal law sets a goal for 23 percent of contracts to be awarded to small businesses.

Jenkins argued that the report unfairly targets Alaska Natives even though other sectors of the federal contracting industry have grown substantially since 2000. He said women-owned businesses landed $9.1 billion and disabled veteran-owned businesses won $1.2 billion in contracts in 2004, compared to the $1.1 billion for Alaska Native corporations in the same year.

After sending the April 19 letter, the SBA sent another e-mail to the GAO that took issue with the report's recommendations. A copy of the message was not included.

The GAO delivered its report to the House Committee on Government Reform. The committee is expected to hold hearings on what ranking member Rep. Henry Waxman (D-California) said yesterday were efforts to "avoid competition" in the awarding of federal contracts.

GAO Report "Contract Management: Increased Use of Alaska Native Corporations� Special 8(a) Provisions Calls for Tailored Oversight":
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Relevant Links:
Native American Contractors Association - http://www.nativeamericancontractors.org
House Committee on Government Reform -