The federal government has fallen short in its oversight of the hundreds of millions of dollars in no-bid contracts awarded to Alaska Native corporations, according to a congressional investigation.

The Government Accountability Office, the auditing arm of Congress, found that the Small Business Administration is not properly monitoring a system that steered $1.1 billion worth of work to Native firms in 2004.

While the GAO's 86-page report released Thursday did not fault the Native firms, it said that without stepped up scrutiny by the SBA, "there is clearly the potential for unintended consequences or abuse."

The report concluded that the SBA should collect more information on what Native firms are doing and how they're doing it and determine whether they have a "substantial unfair competitive advantage" because of the contracting perks they receive under the 8(a) program.

The program, named for a section of SBA regulations, sets aside a portion of government work for small and disadvantaged companies. The contracts can be awarded without competition.

But unlike black, Hispanic, Asian or women-owned businesses whose contracts are capped at $3 million or $5 million, depending on the type, Alaska Native-owned firms can get contracts of unlimited size. That has triggered an intense backlash from minorities, union and government watchdog groups that say Native businesses have an unfair advantage.

Native executives say they are playing by the rules that Congress set up in the 1980s and 1990s.

The SBA has not tailored its policies and practices to account for the unique status of Native firms, the GAO concluded.

The agency does not know if other small businesses are losing contracts to Native firms. It also does not know if the Alaska companies are properly joint-venturing with bigger firms or are being used as fronts simply to win no-bid contracts, according to the report.

Native contracting with the federal government has become big business. In just a few years, some relatively small Native companies have been catapulted into the ranks of the state's largest firms.

From 2000 to 2004, the government awarded work totalling $4.6 billion to Alaska's congressionally created Native corporations. Of that, $2.9 billion was through the 8(a) program, and 77 percent of it was sole-sourced, meaning without competitive bidding, the GAO found.

Karen Forsland, director of the SBA's Anchorage office, did not return a phone call seeking comment Thursday.

In a response to a draft of the GAO's findings, which were leaked to the media earlier this month, an SBA official in Washington said the tone was the report was "unsettling."

Native firms are using the 8(a) program to bring resources back to their communities as allowed, wrote Calvin Jenkins, a deputy in the SBA's government contracting division.

"The tone of the report could lead one to conclude that GAO has concerns with this result," he wrote.

He also said many of the concerns raised were subjective and that the analysis relies far too heavily on individual anecdotes.

"We strongly disagree with this characterization," the GAO said. "Our findings are supported by the facts."

The SBA has said it recently took steps to improve its oversight of the 8(a) program, the GAO noted. But "we were not provided with any evidence that this or any other planned action had been taken, despite our requests for the information," the report said.

U.S. Sen. Ted Stevens, R-Alaska, authored many of the provisions that allowed Native corporations to achieve special status in obtaining government work. In a recent interview, Stevens said he had no problem with stepped-up scrutiny by the SBA.

His spokeswoman, Courtney Boone, said Thursday that Stevens' staff was still reviewing the GAO findings.

Jeff Hueners, chief operating officer for Chenega Corp., said he feels "pretty good" about the report.

"There isn't any real finding of abuse or of an Alaska Native corporation not following the rules," Hueners said.

But the negative attention Native contracting has generated has damaged the companies' abilities to work with the federal government to some extent, he said.

In a long-awaited report, the Government Accountability Office criticized the Small Business Administration and other federal agencies for failing to ensure that contracts to Alaska Native corporations comply with procurement law.

The report (GAO-06-399) stated that Alaska Native firms often receive no-bid contracts through the 8(a) program for small and disadvantaged business because their special status in the program allows contracting officers to make large awards more quickly than they could otherwise. GAO also found that contracting officers often failed to comply with requirements to monitor the contracts, and SBA did not collect enough information on work awarded to Alaska Native companies.

Awards to such firms through the 8(a) program have skyrocketed: In fiscal 2000, Alaska Native corporations won $265 million worth of contracts, and in fiscal 2004 they received $1.1 billion, which was 13 percent of total 8(a) awards. More than three-quarters of those awards were made without competition, GAO reported.

Alaska Native corporations, which were created by the 1971 Alaska Native Claims Settlement Act with the intent of helping native communities, are exempt from the standard limit of $3 million -- or $5 million for manufacturing -- on no-bid contracts awarded through the 8(a) program. This has caused some resentment in the small business community.

The report found that contracting officers were sometimes confused about whose job it was to monitor subcontracting relationships and that they had no planned response for contractors that violated subcontracting rules. In fall 2004, the Los Angeles Times, The New York Times and The Washington Post reported that the Defense and Homeland Security departments awarded large contracts to Alaska Native corporations, which then subcontracted sizable chunks of the work to other companies, many of them large federal contractors.

GAO reserved its most pointed criticism for SBA, stating the agency's policies and procedures were not tailored to address Alaska Native corporations' unique status. The agency has not, for example, determined whether other small businesses have lost contracting opportunities to Alaska Native corporations, or whether the tribally owned companies have an unfair competitive advantage. The report added that SBA failed to collect adequate information on the corporations' activity in the 8(a) program and that SBA's Alaska regional office was unable to keep up with its heavy workload.

When GAO investigators first began their work, the report said, SBA officials did not even seem to be aware of the growth of Alaska Native corporations in the 8(a) program.

SBA responded that GAO's report "relies far too heavily on isolated individual anecdotes," adding that the "tone of the report is unsettling. The tribally owned corporations are using the statute to bring resources back to improve their Native Alaskan communities...The tone of the report could lead one to conclude that GAO has concerns with this result."

The GAO report did outline the benefits Alaska Native corporations provide to their communities, such as investments in low-cost Internet service for remote villages, investments in insurance for local communities, subsidies for heating oil for a remote community, shareholder payments ranging from $1.71 to $171 per share, and jobs, scholarships and internships for members of the Native community.

The Native American Contractors Association, a Washington-based group that represents tribally owned corporations, said Thursday that the report demonstrates the success of the program for Alaska Native corporations. "We are not surprised, but are nonetheless gratified with the key findings," said Chris McNeil, chairman of NACA and president and chief executive officer of Sealaska Corp.

Tribally owned companies, he added, improve "the dismal socioeconomic environment" of Alaska Native communities.

At the same time, McNeil said, NACA agrees with GAO's suggestion that there should be more administrative oversight.

NACA said in a letter to GAO that the report "implies that [Alaska Native corporations] antagonize small businesses." The association said many other problems, including bundled contracts and the increasing dollar size of contracts, are the cause of contracting challenges for small businesses.