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Advantage for Alaska Native Corporations Leads to Unbalanced Distribution of Small Business Set-Asides

February 14, 2012

Federal government data indicates that at least one third of all federal contracts awarded through the Small Business Administration’s (SBA) 8(a) business development program have been awarded to large Alaska Native Corporations (ANCs). The American Small Business League (ASBL) reviewed the top 100 8(a) contractors for FY 2011 and found that 33 were ANCs that exceeded normal small business size standards. These 33 large corporations won $2.6 billion (37 percent) of the $6.9 billion awarded to the top 100 8(a) firms.

ANCs are able to take advantage of several regulatory and legislative privileges, which allow them to exist as large businesses in the 8(a) program, which is designed to benefit small businesses. Unlike other 8(a) participants, ANCs have access to no-bid/no ceiling 8(a) contracts and do not have to be managed by someone who meets the programs definition of a disadvantaged individual. ANCs have come under scrutiny by Congress and the GAO as the percentage of contracts awarded to ANCs has increased six times faster than overall federal contract spending.

Congressman Ed Markey (D-MA) has requested a hearing on ANC privileges in 8(a) contracting, and Senator Claire McCaskill (D-MO) introduced legislation in 2011 to strip ANCs of their special status. An analysis of ANC contracting requested by McCaskill found that “Although ANCs provide some benefits to their shareholders, those benefits may not be in proportion to the potential for waste, fraud, and abuse created by the ANCs’ contracting preferences.”

The ASBL has long viewed special preferences for ANCs as bad policy that allows large companies to win contract dollars meant for small disadvantaged businesses. In addition, the lack of oversight and sheer volume of federal dollars flowing to ANCs has fostered corruption, which includes ANCs passing on contracts to large non-native subcontractors located near Washington D.C.

Moreover, the ANC 8(a) program disrupts transparency in small business contracting. Data suggests that the government is hitting its small business procurement goal in large part by including no-bid/no ceiling ANC 8(a) contracts.

The ASBL hopes that publishing independent research that points to the alarming rate that the government uses large ANCs to achieve small business procurement goals will help lead to program reforms.

“Federal investigators have been finding fraud and abuse in ANC preference programs for years,” said ASBL President Lloyd Chapman. “It is time for these programs to come to an end.”



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