Contracts Take Alaska to Iraq
Snow-covered Alaska is a long way from the deserts of Iraq, but that doesn’t worry Janet Reiser, the president of an Anchorage-based company planning to help rebuild the war-torn country.
Because of the efforts of Sen. Ted Stevens, Alaska Native-owned businesses like Reiser’s are allowed to receive government contracts of unlimited size without going through the normal bidding process. Pentagon officials are turning to them to speed up the rebuilding of Iraq.
“If you exchange snow for sand, work in Iraq is similar to the work we’ve done in Alaska,” said Reiser, whose Nana Pacific engineering company is in the final stages of negotiating a multimillion-dollar contract that will be awarded without competitive bidding. “We know how to do logistics in remote areas.”
Over the years, Stevens, the Alaska Republican who is the powerful chairman of the Senate Appropriations Committee, has made sure that Nana Pacific and other small businesses owned by Alaska Native corporations and Native Americans enjoy special benefits in government contracting.
Their unique ability to land government contracts of any size, free of the bidding process -- which no other minority- or women-owned small businesses enjoy -- was a largely unknown part of contracting law until last fall, when Congress passed an $18.6-billion aid package earmarked for Iraqi reconstruction that contained restrictions calling for full and open competition.
Stevens, however, made sure the final bill contained language to protect Alaska Native corporations’ ability to win no-bid contracts under federal law, according to Republican and Democratic budget analysts familiar with the process.
At the same time, Alaska Native officials and their lobbyists frequented industry conferences, the Defense Department and Capitol Hill in an effort to drum up Iraq business.
Some Pentagon officials responded by pushing the Alaska Native corporations as a way to quickly get work accomplished without going through the bidding process, which can take months.
Although only a handful of Alaskan and small tribal businesses have sought contracts to date, Pentagon officials said they hoped the number would increase. So far, many contracting officers have been skeptical of the companies’ abilities to win no-bid contracts.
“Everybody was looking at this as though it were some sort of scam,” said John Shaw, the deputy undersecretary of Defense for international technology security, who has been pushing contracting officials to take a close look at Alaska Native corporations. “In point of fact, it was all aboveboard, and, indeed, mandated.”
Unions and government watchdogs, however, question whether the Alaska Native small businesses’ ability to win no-bid contracts -- designed to help them in competition against bigger companies -- is now being abused.
“The rationale behind the exceptions is that they’ll lead to an automatic trickle-down” for the Natives, said Gerry Swanke, a national vice president for the American Federation of Government Employees, whose district covers Alaska. “But nobody ever talks about the corporate greed side of things that inevitably raises its ugly head.” Alaska Native corporations came into existence in the early 1970s, when the federal government created them as a way to settle outstanding claims from Alaska Natives and improve standards of living.
Thirteen regional corporations and scores of smaller village corporations were formed, with tribal members becoming shareholders. The idea was that the corporations would be able to use oil, mining and timber rights to provide impoverished Natives with income and jobs. Nana Pacific, for instance, is a small subsidiary of Nana Regional Corp., whose shareholders are Natives living in a section of northwestern Alaska.
By the 1980s, however, many of the corporations had plunged into debt or were verging on bankruptcy, either through mismanagement or failed business dealings. That’s when Michael Brown stepped in.
Brown, a former Navy officer with experience in government contracting who retired in Alaska, realized that small businesses owned by Alaska Native firms had unique opportunities.
To promote the growth of small businesses owned by women and minorities, federal law permits U.S. government agencies to award them contracts of up to $5 million without the competitive bidding process that is normally required.
Alaska Native corporations had an additional advantage: They didn’t have to be small operations. They can have thousands of shareholders and hundreds of millions of dollars in revenue.
As a result, Brown, who was employed by an Alaska Native company, said he worked in the 1980s with Stevens and other congressional members interested in tribal issues, leading to removal of the $5-million cap and allowing government agencies to award contracts of unlimited value to Alaska Native and small tribal companies.
“The logic there is, if it’s a guy and his wife, then a $3-million project can provide significant economic benefit,” said Brown, who is now a consultant for Arctic Slope Regional Corp. “But if you’re dealing with a tribe with several million people, you’ve got to have larger contracts.”
The result has been a tremendous, largely unnoticed boom for Alaska Native corporations. In 2002, the last year for which complete figures are available from the U.S. Small Business Administration, Alaska Native firms made up less than 2% of all small businesses, but won 12% of the $5.6 billion in government contracts awarded to small businesses.
Some of the awards have been massive. In December 2001, for instance, a joint venture of two Alaska Native small businesses won a 15-year, $2.2-billion no-bid contract to revamp technology operations for the National Imagery and Mapping Agency.
While the firms must be at least 51% owned by Alaska Natives to enjoy the bidding advantages, there is no requirement that they employ Alaska Natives. As a result, many of the firms can hire workers from specialized fields like science and engineering to do the work.
“It’s become such a big elephant,” said Steve Colt, an economist with the University of Alaska in Anchorage who has studied the corporations. “Ten years ago, I had a complete picture of [the corporations’ activities] in my head, and now that’s impossible.”
The firms’ record of improving life for Alaska Natives is mixed. Many of the firms pay annual dividends to their shareholders, often a few thousand dollars per year. The firms employ more than 12,000 Alaska Natives. And many offer benefits such as scholarships and healthcare.
Still, while the percentage of Alaska Natives living in poverty has dropped by half since 1970, they continue to economically lag behind other groups. For example, in the 2000 census, the per capita income of Alaska Natives was $12,500, compared with $26,418 for whites.
Critics say that is because the corporations, while performing good works, are not required to focus directly on improving tribal conditions.
“Essentially, the Native corporations are no different than any other corporations,” said Evon Peter, the former chief of an Alaskan tribe which chose not to form a corporation. “They’re looking for ways to profit their corporation.”
Stevens’ support for Alaska Native corporations has also raised concerns about whether he may benefit from contracts they receive.
The Times reported in December that the largest Alaska Native corporation, Arctic Slope Regional Corp., pays $6 million a year as part of a 20-year lease to rent space in an office tower in Anchorage in which Stevens is a partner.
Officials for Arctic Slope, a company with $1 billion a year in sales, did not respond to calls for comment, but there is no indication the firm has sought or received contracts in Iraq.
Stevens did not respond to requests for comment for this article. In December, he told The Times that he would “continue to work with all Alaska Native corporations -- both individually and collectively” in his official capacity.
The latest frontier for the Alaska Native firms is Iraq.
A half-dozen Alaska Native companies showed up for the first major industry conference on Iraqi reconstruction held in November, and several firms have registered with lobbyists this year.
Nana Pacific was among the most aggressive. Reiser, the president of Nana Pacific, said that company officials visited members of the Alaska delegation, including Stevens, to make sure the representatives were aware of the company’s interest in bidding in Iraq.
In its final form, the Iraqi reconstruction bill contained tough measures requiring full and open competition on contracts. But Stevens, congressional sources said, made sure the bill also specifically exempted small U.S. businesses from those requirements -- including Alaska Native corporations.
“We helped make sure there was language” in the bill, Reiser said. “We wanted to make sure that the sole sourcing was preserved, so we worked with Sen. Stevens’ staff and the congressional delegations.”
A Nana lobbyist then approached Shaw, the Defense undersecretary who was helping plan the rebuilding of communications and transportation in Iraq. At first, Shaw was skeptical that an Alaskan firm could help. But when he learned of their exemption from competitive bidding, he realized that they could be used to speed up the contract process.
Speed was most important in the dredging of Umm al Qasr, Iraq’s only deep-water port. Nana had paired up with SSA Marine, a family-run Seattle business that is one of the largest port-operations companies in the world.
SSA was one of the first firms to win a controversial, limited-bid contract from the U.S. Agency for International Development after President Bush declared an end to major hostilities in May.
Shaw, the Defense undersecretary, said that using Nana’s no-bid abilities seemed ideal given the pressing need for more dredging at the port before handing over sovereignty to Iraqis, scheduled for June 30. Nana is also expected to join with other companies to build an emergency communications network in Baghdad.
“We wanted to light a fire under Umm al Qasr, and this was a way to do it,” Shaw said. “The key question will be, looking back on July 1, how much will Nana have put in place? My suspicion is we’ll see a very impressive array of things in place.”
Nana said that negotiations between the contracting officer at the U.S.-led Coalition Provisional Authority and the company were tough, but that the final price would be fair.
Still, critics wonder why the bid was not put out to competition. And, they question how the government can be sure that it has received the best price.
“This represents a real problem,” said Bill Allison, a spokesman for the Center for Public Integrity. “When a company can get a contract without going through the competitive bidding process, where is the public accountability? Do taxpayers really know that they’re getting the most building for the buck?”