<DOC>
[109th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:30341.wais]
NORTHERN LIGHTS AND PROCUREMENT PLIGHTS: THE EFFECT OF THE ANC PROGRAM
ON FEDERAL PROCUREMENT AND ALASKA NATIVE CORPORATION
=======================================================================
JOINT HEARING
before the
COMMITTEE ON GOVERNMENT REFORM
and the
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
JUNE 21, 2006
__________
Serial No. 109-185
Committee on Government Reform
Serial No. 109-56
Committee on Small Business
__________
Printed for the use of the Committees on Government Reform and Small
Business
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
http://www.house.gov/reform
NORTHERN LIGHTS AND PROCUREMENT PLIGHTS: THE EFFECT OF THE ANC PROGRAM
ON FEDERAL PROCUREMENT AND ALASKA NATIVE CORPORATION
=======================================================================
JOINT HEARING
before the
COMMITTEE ON GOVERNMENT REFORM
and the
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
JUNE 21, 2006
__________
Serial No. 109-185
Committee on Government Reform
Serial No. 109-56
Committee on Small Business
__________
Printed for the use of the Committees on Government Reform and Small
Business
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
http://www.house.gov/reform
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512ÿ091800
Fax: (202) 512ÿ092250 Mail: Stop SSOP, Washington, DC 20402ÿ090001
COMMITTEE ON GOVERNMENT REFORM
TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut HENRY A. WAXMAN, California
DAN BURTON, Indiana TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee DIANE E. WATSON, California
CANDICE S. MILLER, Michigan STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California LINDA T. SANCHEZ, California
JON C. PORTER, Nevada C.A. DUTCH RUPPERSBERGER, Maryland
KENNY MARCHANT, Texas BRIAN HIGGINS, New York
LYNN A. WESTMORELAND, Georgia ELEANOR HOLMES NORTON, District of
PATRICK T. McHENRY, North Carolina Columbia
CHARLES W. DENT, Pennsylvania ------
VIRGINIA FOXX, North Carolina BERNARD SANDERS, Vermont
JEAN SCHMIDT, Ohio (Independent)
------ ------
David Marin, Staff Director
Lawrence Halloran, Deputy Staff Director
Teresa Austin, Chief Clerk
Phil Barnett, Minority Chief of Staff/Chief Counsel
?
COMMITTEE ON SMALL BUSINESS
DONALD A. MANZULLO, Illinois, Chairman
ROSCOE BARTLETT, Maryland, Vice NYDIA VELAZQUEZ, New York
Chairman JUANITA MILLENDER-McDONALD,
SUE KELLY, New York California
STEVE CHABOT, Ohio TOM UDALL, New Mexico
SAM GRAVES, Missouri DANIEL LIPINSKI, Illinois
TODD AKIN, Missouri ENI FALEOMAVAEGA, American Samoa
BILL SHUSTER, Pennsylvania DONNA CHRISTENSEN, Virgin Islands
MARILYN MUSGRAVE, Colorado DANNY DAVIS, Illinois
JEB BRADLEY, New Hampshire ED CASE, Hawaii
STEVE KING, Iowa MADELEINE BORDALLO, Guam
THADDEUS McCOTTER, Michigan RAUL GRIJALVA, Arizona
RIC KELLER, Florida MICHAEL MICHAUD, Maine
TED POE, Texas LINDA SANCHEZ, California
MICHAEL SODREL, Indiana JOHN BARROW, Georgia
JEFF FORTENBERRY, Nebraska MELISSA BEAN, Illinois
MICHAEL FITZPATRICK, Pennsylvania GWEN MOORE, Wisconsin
LYNN WESTMORELAND, Georgia
LOUIE GOHMERT, Texas
J. Matthew Szymanski, Chief of Staff
Phil Eskeland, Deputy Chief of Staff/Policy Director
Michael Day, Minority Staff Director
(iii)
C O N T E N T S
----------
Page
Hearing held on June 21, 2006.................................... 1
Statement of:
Alford, Harry, president and CEO, National Black Chamber of
Commerce; Ann Sullivan, president, Madison Services Group,
Inc. on behalf of Women Impacting Public Policy; Chris E.
McNeil, Jr., chairman, Native American Contractors
Association and president and CEO, Sealaska Corp.; Helvi
Sandvik, president, Nana Development Corp.; Bart Garber,
Tyonek Native Corp.; Julie Kitka, president, Alaska
Federation of Natives; and Charles Totemoff, president and
CEO, Chenega Corp.......................................... 172
Alford, Harry............................................ 172
Garber, Bart............................................. 237
Kitka, Julie............................................. 257
McNeil, Chris E., Jr.,................................... 185
Sandvik, Helvi........................................... 221
Sullivan, Ann............................................ 178
Totemoff, Charles........................................ 255
Jenkins, Calvin, Deputy Associate Deputy Administrator,
Office of Government Contracting and Business Development,
Small Business Administration; David Cooper, Director,
Acquisition and Management, Government Accountability
Office; Frank Ramos, Director, Small Business Programs,
Office of the Under Secretary of Defense, Acquisition,
Technology, and Logistics, Department of Defense; and
Melodee Stith, Associate Director, Acquisition and
Financial Assistance, Office of Acquisition and Property
Management, Department of Interior......................... 126
Cooper, David............................................ 134
Jenkins, Calvin.......................................... 126
Ramos, Frank............................................. 146
Stith, Melodee........................................... 153
Young, Hon. Don, a Representative in Congress from the State
of Alaska, chairman, Committee on Transportation and
Infrastructure............................................. 121
Letters, statements, etc., submitted for the record by:
Alford, Harry, president and CEO, National Black Chamber of
Commerce, prepared statement of............................ 175
Cooper, David, Director, Acquisition and Management,
Government Accountability Office, prepared statement of.... 136
Cummings, Hon. Elijah E., a Representative in Congress from
the State of Maryland, prepared statement of............... 288
Davis, Chairman Tom, a Representative in Congress from the
State of Virginia, prepared statement of................... 4
Garber, Bart, Tyonek Native Corp., prepared statement of..... 239
Jenkins, Calvin, Deputy Associate Deputy Administrator,
Office of Government Contracting and Business Development,
Small Business Administration, prepared statement of....... 129
Kitka, Julie, president, Alaska Federation of Natives,
prepared statement of...................................... 259
McNeil, Chris E., Jr., chairman, Native American Contractors
Association and president and CEO, Sealaska Corp., prepared
statement of............................................... 187
Ramos, Frank, Director, Small Business Programs, Office of
the Under Secretary of Defense, Acquisition, Technology,
and Logistics, Department of Defense, prepared statement of 148
Sandvik, Helvi, president, Nana Development Corp., prepared
statement of............................................... 224
Stith, Melodee, Associate Director, Acquisition and Financial
Assistance, Office of Acquisition and Property Management,
Department of Interior, prepared statement of.............. 155
Sullivan, Ann, president, Madison Services Group, Inc. on
behalf of Women Impacting Public Policy, prepared statement
of......................................................... 180
Waxman, Hon. Henry A., a Representative in Congress from the
State of California, prepared statement of................. 10
NORTHERN LIGHTS AND PROCUREMENT PLIGHTS: THE EFFECT OF THE ANC PROGRAM
ON FEDERAL PROCUREMENT AND ALASKA NATIVE CORPORATION
----------
WEDNESDAY, JUNE 21, 2006
House of Representatives, Committee on Government
Reform, joint with the Committee on Small
Business,
Washington, DC.
The committees met, pursuant to notice, at 1 p.m., in room
2154, Rayburn House Office Building, Hon. Tom Davis of Virginia
(chairman of the Committee on Government Reform) presiding.
Present from the Committee on Government Reform:
Representatives Tom Davis, Platts, Schmidt, Waxman, Cummings,
Watson, Van Hollen, Ruppersberger, and Norton.
Present from the Committee on Small Business:
Representatives Manzullo, Bartlett, Velazquez, Lipinski,
Bordallo, Barrow, and Moore.
Staff present from the Committee on Government Reform:
David Marin, staff director; Keith Ausbrook, chief counsel;
Patrick Lyden, parliamentarian; Rob White, communications
director; Andrea LeBlanc, deputy director of communications;
Edward Kidd, professional staff member; John Brosnan,
procurement counsel; Teresa Austin, chief clerk; Sarah D'Orsie,
deputy clerk; and Leneal Scott, computer systems manager.
Chairman Tom Davis. The meeting will come to order. I want
to welcome everybody to today's joint hearing with the Small
Business Committee on the awarding of contracts by Federal
agencies to Alaska Native Corporations [ANCs], participating in
the Small Business Administration's 8(a) program.
I want to extend a special welcome to Chairman Manzullo and
Ranking Member Velazquez and all members of the Small Business
Committee participating in the hearing today. Further, we are
honored by the participation of our distinguished member from
Alaska and chairman of the Committee on Transportation and
Infrastructure, the Honorable Don Young, who will be our lead-
off witness.
Over the last few years, the increased participation of
ANCs in the Government market through the use of non-
competitive contracts has spawned various newspaper articles
and concerns that the Government's competitive acquisition
system is being circumvented. Therefore, our committee and the
Small Business Committee tasked the Government Accountability
Office to review the role of ANCs in our competitive
acquisition system and within the SBA's 8(a) program. The GAO
report issued this April showed that sole-source awards to ANCs
have been on the rise in recent years and that SBA has not
tailored its policies and practices to account for ANC's unique
status and growth in the 8(a) program.
Through this hearing today, I want to explore the impact of
the special exemption to the standard of full and open
competition granted ANCs. I also expect to hear about SBA's
management of the program and whether the Alaska Native people
are receiving the appropriate benefits from the acquisition
advantages they have been given. I recognize that the ANC
program has a complex background and that the ANCs were created
in a context independent of any participation in the
acquisition system.
The Alaska Native Claims Settlement Act was enacted in 1971
to resolve land claims and to foster economic development for
the Alaska Native people. ANCs were established under the act
to become the vehicle for distributing land and monetary
benefits in lieu of a reservation system. ANCs are to be used
for the benefit of Alaska Native peoples. Alaska Natives are
eligible for membership in the ANC for their village and
locality and, as shareholders, are entitled to a voice in
management and a share in the assets and income. A part of this
income in many but not all of the ANCs comes from Government
contract revenues.
ANCs have been permitted since 1986 to participate in the
SBA 8(a) program. The 8(a) program was established to help
socially and economically disadvantaged groups start small
businesses and develop them, at least in part by contracting
with the Federal Government. Under the program, Federal
agencies are allowed to award contracts without competition to
small businesses that are certified by the SBA as 8(a) firms.
For most firms, these sole-source awards are limited to $5
million for manufacturing and $3 million for other goods and
services. Acquisitions above these thresholds must be competed
among eligible 8(a) certified small businesses, but these
limitations don't apply to ANC firms participating in the 8(a)
program.
ANCs are subject to different requirements than other 8(a)
firms in a number of respects. For example, ANCs are not
subject to the affiliation rule which requires other 8(a) small
business to count affiliates or subsidiaries of the business to
determine whether the business concern is small.
The GAO review of the ANC program found that expenditures
obligated to ANC firms through the 8(a) program have grown from
$265 million in 2000 to $1.1 billion in 2004. My concern is
centered on GAO's finding that the spending of six Federal
agencies--DOD, Energy, Homeland Security, Interior, State,
Transportation, and NASA--through sole-source contracts to ANC
firms rose from about $180 million in 2000 to $876 million in
2004.
These sole-source contracts represented a broad range of
services such as contracts for construction in Brazil, training
of security guards in Iraq, and information technology services
in Washington, DC.
According to the GAO report, agency officials said they had
used ANC firms as a quick, easy, and legal method of awarding
contracts of any value. At the same time, the officials noted
these contracts helped them meet small business goals. It is
notable, I think, that nowhere in the GAO report is there a
statement that the contracts were awarded to ANCs because of
the quality or value of performance offered. Further, according
to GAO, SBA has not tailored its policies and practices to
account for ANCs' unique status in the 8(a) program or their
growth in Federal contracting.
I have concerns about the impact of this program on our
already overburdened competitive acquisition system. Ideally,
the system is designed to permit all segments of the global
competitive market to contend to provide our Government with
the best value goods and services available, but we have
increasingly burdened our system with restrictions on
competition. We prohibit acquisitions from overseas suppliers,
and we limit competition to a bewildering array of special
types of businesses. While these various restrictions often
have laudable social goals, they all come at a price. Whenever
competition is limited for reasons that are not tied to the
needs of the Government, taxpayers pay the price in quality and
cost.
I hope this hearing today will clarify the impact of the
ANC program on our competitive acquisition process and the
value of the ANC program to the Alaska Native people. I look
forward to the witnesses' views on ways to improve the
management, oversight, and structure of the ANC program, so
that appropriate benefits go to the Alaska Native people and
taxpayers get the benefit of the best value goods and services
available from the marketplace.
I will now recognize Mr. Manzullo, the chairman of the
Small Business Committee, and then I will go to Mr. Waxman and
Ms. Velazquez.
[The prepared statement of Chairman Tom Davis follows:]
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Chairman Manzullo. Thank you. Good morning and welcome to
this joint hearing by the Committee on Government Reform and
the Committee on Small Business. Special thanks to those
witnesses who have come a great distance to participate and
attend this hearing.
I welcome this hearing since there have been various
newspaper articles concerning the increased use of Alaska
Native Corporations. This increased use is the subject of a
U.S. Government Accountability Office study released in April
of this year. GAO found that the amount of 8(a) contracts going
to ANCs increased from $265 million in fiscal year 2001 to $1.1
billion in 2004, which represents 13 percent of all the 8(a)
contract dollars in that year.
Federal agencies have awarded large sole-source contracts
to Alaska Native Corporations since they enjoyed statutory
advantages not enjoyed by other 8(a) contractors. Federal
agencies may award contracts on a sole-source basis to Alaska
Native Corporations without reference to the dollar value of
the contract. Other 8(a) contractors must compete among
themselves if the procurement is in excess of $5 million for
manufacturing or $3 million for services and goods.
In addition, Alaska Native Corporations are not subject to
the affiliation rule which requires for other certified 8(a)
small businesses that affiliates or subsidiaries of the small
business be counted in determining the size of a business
concern. The result is that the Alaska Native Corporations,
including their subsidiaries, can grow to large businesses in
comparison with other 8(a) small businesses that are
constrained by size standards. In fact, the GAO report states
that for fiscal year 1988 to 2005, Alaska Native Corporations
8(a) subsidiaries increased from one subsidiary owned by one
ANC to 154 subsidiaries owned by 49 ANCs.
Alaska Native Corporations have used their procurement
advantages to help stockholders of the corporations in Alaska
with various benefits being enjoyed by Alaska Natives including
dividends, jobs, education, scholarships, etc.
Again, I welcome this hearing as another means of getting
the facts concerning Alaska Native Corporations enrolled in the
8(a) contracting program. I want to thank my good friend and
colleague, Chairman Davis for joining with the Committee on
Small Business and holding this hearing.
Chairman Tom Davis. Thank you very much.
Mr. Waxman.
Mr. Waxman. Thank you very much, Mr. Chairman, for holding
this hearing on Federal contracts with Alaska Native
Corporations.
On Monday, I released a major report entitled ``Dollars,
Not Sense: Government contracting under the Bush
Administration.'' This report, which is based on a review of
over 500 Government audits, is the first comprehensive
assessment of Federal contracting under the Bush
Administration. I would like to ask that this report be made
part of today's hearing record.
Chairman Tom Davis. Without objection.
Mr. Waxman. As the report documents, procurement spending
has grown rapidly over the last 5 years, nearly twice as fast
as the rest of the Federal budget, and the result is that 40
cents of every discretionary Federal dollar now goes to private
contractors, which is a record level. Unfortunately, while
contract spending has soared, oversight has been discouraged
and accountability undermined. The result is that mistakes have
been made in virtually every step of the contracting process,
from pre-contract planning through contract award and oversight
to recovery of contract overcharges. Contractors get rich, and
taxpayers get gouged.
The report identifies 118 contracts worth $745 billion that
have experienced significant overcharges, wasteful spending or
mismanagement over the last 5 years. Well, that is the big
picture.
True, we are going to focus today on one small but
important part of the problem, and I think it is an important
one as we put it in the context of this bigger picture. Today,
we are going to look at Federal contracts with Alaska Native
Corporations.
This is our first hearing on these contracts, but Chairman
Davis and I began our oversight of this issue over a year ago.
To lay a foundation of this hearing, we jointly asked the
Government Accountability Office to investigate, and we
requested contract documents from the Departments of the
Defense, Homeland Security, and State.
Our investigation is focused on the special contracting
privileges that Alaska Native Corporations [ANCs], have under
Federal law. Federal contracting law provides a valuable but
limited privilege for small minority and economically
disadvantaged businesses. Under Section 8(a) of the Small
Business Act, these companies can be awarded contracts worth up
to $5 million without competition, but a 1986 law eliminated
the $5 million ceiling for all Alaska Native Corporations. The
result is that Alaska Native Corporations can be awarded
Federal contracts of any size without competition.
What both the GAO investigation and the contracting report
I released found is that this contracting ``flexibility'' has
been grossly abused by the Bush administration. In 2000, the
last year of the Clinton administration, Alaska Native
Corporations received only $265 million in Federal contracts.
Four years later, spending on these contracts has ballooned to
over $1 billion per year.
The original purpose of the special ANC contracting
privileges was to encourage economic opportunities for Alaskan
natives living in Alaska, but the administration has used ANC
contracts to manage commercial property in Virginia, renovate
buildings in Brazil, and train security guards in Iraq, and
much of the work has been done by non-Native companies working
as subcontractors. In effect, the contracts become a convenient
vehicle for circumventing open competition requirements at a
great expense to the taxpayers.
Today, I am releasing an analysis of some of the documents
that the committee has received. The documents show how
congressional pressure has been placed on agency officials to
provide special treatment to Alaska Native Corporations in
contracting actions. They also show that the Alaska Native
Corporation received large fee awards, despite repeatedly
receiving poor security performance evaluations. I would like
to ask that this analysis and the documents it cites be made
part of the hearing record.
Chairman Tom Davis. Without objection.
Mr. Waxman. When GAO examined how Federal agencies are
using the ANC contracting provisions, it found the
administration officials view the provisions as ``an open
checkbook.'' GAO also found almost no evidence that contracting
officials are effectively enforcing the legal requirements that
at least 50 percent of the work under these contracts be
performed by Alaska Native Corporations rather than large non-
Native subcontractors.
In one case identified by GAO, an agency wanted to contract
with a particular company but could not award a no-bid contract
directly to that company. The agency solved the problem. They
awarded a passthrough contract to an ANC and required it to
subcontract with the favored company.
The abuse of the ANC provision has been costly to the
taxpayers, in one case described by GAO, the State Department
awarded a no-bid contract to an ANC even though its initial
proposed price was double the Government's cost estimate. In
another case, rather than buying water and fuel tanks directly
from a manufacturer, the Army awarded a no-bid contract to an
ANC which had the effect of adding an unnecessary layer of fees
to the contract. When an ANC was used to provide emergency
classrooms after Hurricane Katrina, prices again doubled.
The special contracting privileges for Alaska Native
Corporations were established with the best of intentions, but
along the way and especially over the last 5 years, these good
intentions have been replaced by avarice and indifference to
the interests of the U.S. taxpayer. Fundamental changes in the
law are needed, and I hope this hearing will be the first step
on the road to reform.
Thank you.
[Note.--The April 2006 GAO report entitled, ``Contract
Management, Increased Use of Alaska Native Corporations'
Special 8(a) Provisions Calls for Tailored Oversight, GAO-06-
399'' may be found in committee files.]
[The prepared statement of Hon. Henry A. Waxman follows:]
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Chairman Tom Davis. Ms. Velazquez.
Ms. Velazquez. Thank you, Mr. Chairman.
The Federal Government has grown to become the biggest
buyer of goods and services in the world. In the last year
alone, Federal purchasing power increased by 3 percent to $295
billion.
In order to achieve a vibrant and open Federal marketplace,
it is essential for small firms to be included in the
procurement equation. Small businesses have always played a key
role in ensuring our Government is able to effectively operate
and continue in this role. These businesses are capable of
providing quality services at the best value for the American
taxpayer's dollars.
There are many Federal Government programs designed to
encourage agencies to utilize small business owners in their
Federal buying strategies. These are valuable programs that
serve an important purpose and have provided the Government
with the highest quality products for the taxpayer's dollar.
However, it is all too often that many of these programs are
unfairly singled out, not because they are ineffective but due
to the current administration's failure to properly modernize,
fund, and administer these initiatives.
The 8(a) program, our Nation's only remaining Federal
initiative focused solely on the development of minority
entrepreneurs, is one such initiative. It has been responsible
for the development of more than 20,000 companies that have
received almost $100 billion in Federal contracts. Yet, for all
the good the 8(a) program has done, the Small Business
Administration has allowed it to deteriorate significantly.
Without sufficient funding, manpower, and oversight, the 8(a)
program has faltered in its ability to serve low income
communities and aid in the development of minority
entrepreneurs.
Today, we have the opportunity to discuss the findings of a
recent Government Accountability Office report which takes an
in-depth look at the current state of affairs with the 8(a)
program, in particular, the dramatic increase in 8(a) contracts
awarded to Alaska Native Corporations and the impact this might
have on the future of the program.
In fiscal year 2004, ANCs were awarded $1.1 billion or 13
percent of the total 8(a) dollars. This should be contrasted
with the fact that between fiscal year 2003 and fiscal year
2004, the 8(a) program as a whole, minus ANCs, declined by $2
billion. The reality is that the ANC participation is
increasing while 8(a) contracts are declining. The reason for
this decline is in large part due to SBA sheer lack of
attention to the program.
The GAO has outlined 10 recommendations for the SBA to
increase its oversight. Without this, the GAO has pointed out
that there is clearly the potential for unintended consequences
or abuse. This situation not only takes away valuable
contracting opportunities for small business owners but also
diminishes the ability of the 8(a) program to fulfill its role
of aiding economic and community development.
The important issue we are facing today with this hearing
is to attempt to strike a balance between the need to provide
economic development to Alaska Natives while ensuring small and
minority business owners do not see further contract dollar
declines. As we continue to look for ways to foster economic
development in minority and under-served communities, it is
essential that we do not lose sight of the capabilities of the
8(a) program. This initiative has always been and should
continue to be a key element in building strong communities and
local economics.
I am hopeful that the two of our committees can find common
ground to refocus the 8(a) program and reengage the SBA in
seeing that this initiative is truly able to accomplish its
intended mission.
Thank you, Mr. Chairman.
Chairman Tom Davis. Thank you very much.
We have our lead witness, the Honorable Don Young, our
Representative for Alaska and great friend. Don, thank you for
being with us.
STATEMENT OF HON. DON YOUNG, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF ALASKA, CHAIRMAN, COMMITTEE ON TRANSPORTATION AND
INFRASTRUCTURE
Mr. Young. Thank you, Mr. Chairman and ranking members and
committee members for having this hearing.
You will have a panel before you from Alaska that is a
broad representation of the ANC program. Mr. Chairman, with
your permission, I would ask at this time to allow those
individuals who will testify to be able to rely upon the people
who accompany them to answer some technical questions if there
are any technical questions.
Chairman Tom Davis. Without objection.
Mr. Young. The ANC contracting, Mr. Chairman, to get a fair
hearing and a fair review, this committee and Congress must
look at the broad picture of Federal Government contracting as
a whole, so that the ANCs' contracting can be put in the proper
context.
Mr. Chairman, I am hear to say these folks are doing right
by the Federal Government; they are doing right by the American
taxpayer; and, most importantly, they are doing right by the
impoverished communities back home in Alaska.
A razor focus on just Alaska Native Corporations [ANCs],
contracting would be a disservice to the Federal agencies who
have given the ANCs very high performance ratings generally and
to ANCs who have done a good job executing the contracts they
have been awarded.
The issues of the hearing we will be looking at are not
just small business policies or general Government procurement
policies but rather are the important part of the National
Indian policy emanating from Congress' constitutional mandate
to set Indian policy.
I am here to tell you that the efforts to find fault and
criticize Alaska Native Corporations participating in Small
Business Administration SBA Section 8(a) programs, frankly, I
think is a thinly disguised attack on Native Alaskan people and
the corporations precisely because a few of them enjoy great
success.
As the senior member of the House Committee on Resources, I
intend to work with Chairman Pombo and Ranking Member Rahall on
the National Indian policy ramifications of the GAO report and
any proposed regulatory or statutory changes that may be
developed.
Mr. Chairman, I request your committee put on the record
the following: The total amount of Federal contracting and the
percent of that total that has been awarded to ANCs, it is my
understanding that according to the Government's own data base,
total Federal contracting was $300 billion in 2004; the total
ANC contracting for all sources, both 8(a) and non-8(a), was
$2.2 billion in 2004, about 7 cents of 1 percent, 7 cents for
every $100 the Fed spent on contracting. If you look at the
percentage of total Federal contracting that went into ANC 8(a)
contracts alone, the percent follows to a little over one-half
of 1 percent. In other words, every $100 the Government spends
on procurement, all the ANCs combined are getting a little over
50 cents through the 8(a) program.
In addition, your two committees should also examine the
percent of Federal contracting that goes to the 8(a) program.
Regarding the percent of the 8(a) program that goes to ANCs
over the period of years, the GAO report said 17 percent of the
8(a) contracts went to ANCs in 2004. Regarding the total amount
of sole-source contracts for all Federal contracts, the percent
of total sole-source contracts that have been awarded to non-
ANC and non-8(a) companies compared to the percent of sole-
source contracts that go to ANCs, looking only at ANCs
regarding sole-source contracts is ignoring the larger issues.
When the Federal Government's own studies from the 10
largest defense contractors--and I believe Mr. Waxman has
mentioned this--none of them were ANCs by the way. From 1999 to
2003, 6 years, only one of them had more than 50 percent of its
contracts from competitive procurements. All the rest of what I
call the big boys had more than 50 percent of their contracts
through sole-source and non-competitive awards. I submit that
the dollar amounts going to these large contracts are huge
compared to what we have in the ANCs.
Finally, I want to point out ANC contracts have been and is
a good thing for the Government. It is a good thing for the
Alaskan Natives. The SBA 8(a) program, as it relates to
businesses owned by Alaskan Natives and Native American tribes,
has been one of the few Federal Native programs that is
actually working. The ANCs should be proud that the GAO report
made no recommendation for statutory changes and reported no
wrongdoing on their part. In fact, the one wrongdoing that was
reported was actually a competitive contract awarded to
somebody outside of the ANCs.
This SBA program has benefited not only ANCs and the Alaska
Native, but it has created job opportunities and developments
of small businesses in 49 of the 50 States in virtually every
one of the Congressional Districts represented by members of
the two committees.
Now, you know I have a long involvement in Native American
issues, such issues as the Alaskan Native Land Claims
Settlement Act and the subsequent amendments. There is
absolutely no question that the program you are looking at
today is an integral part of the economic settlement of ANCSA.
Alaska Natives ceded millions of acres of land claims in
exchange for the ability to provide for economic self-
sufficiency for their people. This is part of the National
Indian Policy, something that has been reaffirmed by the U.S.
District Court of Appeals as recently as June 2003. The Supreme
Court declined to review that decision, letting stand the
provision indeed called Indian Policy.
This was the promise of ANCSA, Alaskan Native Land Claim
Settlement Act. It is clear to me, from all my experience, that
the Federal Government record in dealing with Native Americans
is a dismal one, one marked by the fact that too many times the
Government sets out a policy only to go back on its word. The
Government should not break its promises, and by the way, the
Government being this Congress.
It seems to be the case that particularly Native Americans
are actually succeeding and benefiting from the policy set
forth. It is my strong belief that the Federal Government
cannot go back on its word again. If we need to make proper
adjustments to the program, if we have to have more oversight,
let us do that, but let us allow the program to continue to
help fulfill the responsibility that we have as a Nation to all
the Native Americans.
Mr. Chairman, I suggest respectfully that the people you
will hear from on the panel from Alaska will give you the more
integral results of what this program has been able to do for
their stockholders and the people in Alaska.
With that, Mr. Chairman, I will answer any questions.
Chairman Tom Davis. Don, thank you very much and thank you
for putting that in a historical context.
I will just say my only concern, as you look at the 8(a)
program and what it was designed to do, is this squeezes out,
because it is not being done in a competitive way, other
opportunities for other 8(a)'s. I think that is one of the
concerns that has been expressed on that.
Mr. Young. That is a legitimate concern. The thing I want
to again bring out and my testimony said it also, is this is an
attempt to try to rectify, I think, a lot of injustices over
the history of America and the Congress to the American
Natives. It is not just Alaska Natives. We have an exception;
that is correct. Contrary to what you read in the paper, we
have impoverished areas in Alaska that have really very little
opportunity which have used this program now where they are
building schools and they are doing things that, very frankly,
are the Government's responsibility.
Chairman Tom Davis. I appreciate that.
Mr. Young. I just want you to know that.
Chairman Tom Davis. Thank you.
Anyone else? Mr. Waxman.
Mr. Waxman. Thank you very much, Chairman Young for your
testimony.
From my perspective, I think I made this clear in my
opening comments, if we are talking about a contract where it
is more than $100 million, it ought to be competed for. It
ought not to be given any special weight with the ability to
waive the rules that require competition, without limits that
we put on for small businesses. From the taxpayer point of
view, when there is not competition or where there aren't the
market forces, we end up paying more money.
I would agree with you that maybe you turn the other way if
it is going to benefit people who have been disadvantaged in
the past. I am not sure that I agree with that. But we are
talking about subcontractors who do the work, who are not even
Native Alaskans and they are not even doing it in Alaska. They
are doing work in Virginia and Iraq and other places.
Mr. Young. I understand that, Mr. Waxman. I understand, Mr.
Congressman, but the point that I think you have to keep in
mind is in the GAO report--and you have read it--there is no
one who says the taxpayer is not getting a good deal out of
this. If you want to have a $100 million contract that is not
going to go to an Alaskan Native Corporation, it is going to go
to you know who, the 10 big ones because they can outbid it.
Now, you don't need your staff to tell you the answer to
that question right now. That always irritates me when that
happens, sir. I mean I am the chairman, and I will not, very
frankly, allow that to happen. If I can't do that on my own,
you can ask me a question and I can answer it, but let you and
I talk together, please. I think that is important.
But you understand what I am saying. This is an attempt.
You say it is not bid on. If there is a report from the GAO
that says the taxpayer didn't get the best bang for their buck,
then let us see that.
Mr. Waxman. I think you and I read the report in a
different way because it seems to me the GAO has reported a
number of instances of excessive costs, and that is what
bothers me.
Mr. Young. Some of those instances were requirements of the
agency which let the contract. Let us say for a defense
contract for security, they let that contract and they required
further training of the people in the guard positions, which
costs more.
I am just saying, when you study this, make sure that the
agency that requested the contract, make sure that they are not
the ones that caused the higher cost. They created the higher
cost, and I think you will hear that testimony.
Mr. Waxman. Well, I want to see competition, and I want to
see costs held down.
Mr. Young. I understand.
Mr. Waxman. That is the objective, and I think it is an
important one.
Mr. Young. Yes.
Chairman Tom Davis. Chairman Manzullo.
Chairman Manzullo. I guess my concern is it is not just
8(a) versus 8(a); it is Alaska and the ANC 8(a) versus other
small businesses. I mean 1 of the 154 ANCs is Chenega
Technology Services.
Mr. Young. Chenega.
Chairman Manzullo. Chenega, of the 2,300 employees who work
there, only 33 are Alaskan Natives.
Mr. Young. That is true, and those are 33 more Alaskans who
wouldn't be working. Remember, Chenega is a very small, small
community. The one thing is it does bring money back into the
community. Like I said, I think you will hear testimony later
on about the benefit of this.
One of the things that has always concerned me about this
is every time there is an act of Congress and it seems as if we
are successful in doing what we attempted to do and it becomes
a greater success, there seems to be a notion of, well, we
didn't mean it to be that successful.
Now, under this act, and they were given this specifically
and purposely, they could go above $5 million, so they could in
fact be non-competitive if they want to, but they are offering
a service. If the agencies come back and say, we are not
getting the services, then let us look at it. All due respect
to every gentleman who has read that report, there is no one
who says they haven't done the services.
You can't expect a village of 300----
Chairman Manzullo. Let me ask the question.
Mr. Young. OK.
Chairman Manzullo. The issue is not the quality of the
service because if the issue was the quality of the service,
then that company would not be getting another contract unless
the contracting agent came before this committee or my
committee and tried to justify that. The issue is the fairness
to the other small businesses. I have an area that I represent,
chairman, that in 1980 led the Nation in unemployment at over
25 percent. There are serious issues of unemployment throughout
the Continental 48 States in addition to what is going on in
Alaska.
As we have been approached to take a look at the ANCs, it
is the question of whether or not there is overemphasis upon
helping out Alaska as opposed to the rest of the States. In
fact, Madeleine Bordallo who represents Guam, natives of her
island in Guam tried to get a contract to repair ships, and
they were bumped by an ANC. This is Guam.
And so, these issues are coming up all over, literally all
over the world as to not the quality of the services nor the
fact that the services help out the people that you so ably
represent but as to the fairness to the other small businesses
and to the other 8(a)'s across the Nation. That is the reason
for the hearing.
Mr. Young. I understand that. I will just leave you guys
alone. I am just suggesting respectfully that if the other
small businesses could do this, it might be all right, but
these contracts are let to get the best result. I thought we
were here to save the taxpayers some money, and they are doing
the job.
No one can show me, and your staff has read that report.
They have not been charged with not fulfilling the obligation
with which they were charged by the agency which contracted
with them. You will hear from the agencies, I hope. If there is
one person per agency who says they haven't done the job, I
would like to hear because I have asked each one of them. Have
they or have they not done the job? They have always said they
have done a great job. They have a good rapport. I thought that
was also part of the hearing.
Thank you, Mr. Chairman.
Chairman Tom Davis. Thank you for the historical context of
this. I think sometimes as we get caught up in this, we need to
understand historically how this came to be and what it was
trying to do. We appreciate it, and anything else you would
like in the record, we would be happy to submit.
Mr. Young. Thank you.
Chairman Tom Davis. Thank you.
The Health Centers Renewal Act is a 15 minute vote,
followed by a 5 minute vote on the Children's Hospital GME
Support Reauthorization Act.
So we have an hour. Let us get our first panel up here.
Thank you very much.
So, we have votes at 2:30, and I think we can get through
this. Let us start with the first panel: Mr. David Cooper,
Director of Acquisition and Sourcing Management at the GAO; Mr.
Calvin Jenkins, the Deputy Associate Deputy Administration of
the Office of Government Contracting and Business Development,
Small Business Administration; Mr. Frank Ramos who is the
Director of the SBA Office of the Under Secretary of Defense
for Acquisition, Technology, and Logistics, Department of
Defense; and Ms. Melodee Stith, the Associate Director of
Acquisition and Financial Assistance in the Office of
Acquisition and Property Management, U.S. Department of the
Interior.
It is our policy that we swear you in before you testify,
if you would just rise and raise your hands and if there is
anyone with you who may be advising you on anything.
[Witnesses sworn.]
Chairman Tom Davis. Mr. Jenkins, we will start with you.
Your entire written statement is in the record. You will have a
light in front of you that turns green when you start, orange
after 4 minutes, red after 5 minutes. If we can keep to that, I
think we can get through this panel before the first votes and
maybe swear in the second panel. If you need longer, we don't
mind, if you think it is important. Thank you for your work on
this.
STATEMENTS OF CALVIN JENKINS, DEPUTY ASSOCIATE DEPUTY
ADMINISTRATOR, OFFICE OF GOVERNMENT CONTRACTING AND BUSINESS
DEVELOPMENT, SMALL BUSINESS ADMINISTRATION; DAVID COOPER,
DIRECTOR, ACQUISITION AND MANAGEMENT, GOVERNMENT ACCOUNTABILITY
OFFICE; FRANK RAMOS, DIRECTOR, SMALL BUSINESS PROGRAMS, OFFICE
OF THE UNDER SECRETARY OF DEFENSE, ACQUISITION, TECHNOLOGY, AND
LOGISTICS, DEPARTMENT OF DEFENSE; AND MELODEE STITH, ASSOCIATE
DIRECTOR, ACQUISITION AND FINANCIAL ASSISTANCE, OFFICE OF
ACQUISITION AND PROPERTY MANAGEMENT, DEPARTMENT OF INTERIOR
STATEMENT OF CALVIN JENKINS
Mr. Jenkins. Chairman Manzullo, Chairman Davis, and Ranking
Member Velazquez, Ranking Member Waxman, and members of the
Small Business and Government Reform Committees, thank you for
inviting me here today to discuss the participation of the
Alaska Native Corporations [ANCs], in the 8(a) business
development program.
The 8(a) program was enacted during the 1960's to assist
eligible small businesses' concerns to compete in the American
economy through business development. The Small Business Act
authorized SBA to develop business ownership among groups that
own and control little productive capital.
Individual applicants must demonstrate social and economic
disadvantage. Although some groups are presumed to be socially
disadvantaged, they as well as other applicants must
demonstrate economic disadvantage. ANC-owned firms are deemed
by statute to be socially and economically disadvantaged. All
U.S. citizens who can demonstrate social and economic
disadvantage as well as comply with other eligibility
requirements are welcome to apply for participation in the 8(a)
program.
In addition to management and technical assistance provided
under the program, certified 8(a) firms may be eligible to
receive contracts that Federal agencies offer for the 8(a)
program. Furthermore, under 8(a) program, the Government is
able to award contracts to participating firms without
competition below a certain dollar threshold. Also, the
government can restrict competition for Federal contracts above
stated dollar thresholds to 8(a) certified firms.
In 1986, a significant change was made to the 8(a) program
when Congress enacted legislation that allowed agencies, Native
Hawaiian organizations, community development corporations, and
tribally owned firms to participate in the 8(a) program to
force the economic development to respective communities. Since
1986, Congress has extended special procurement advantages 8(a)
ANC firms.
The 8(a) program design anticipates that organizational-
owned firms including ANCs will utilize the program to provide
economic development to their respective communities. All other
8(a) participating firms utilize the program to receive
individual business development assistance.
I must emphasize that, as the law is currently written, the
8(a) program is simultaneously providing business development
to disadvantaged individuals while also providing regional or
community economic development to organizational-owned firms
including ANCs.
The GAO report addressed some of the differences I have
mentioned. The report also states that ANCs have utilized the
8(a) program to improve local economic conditions and provide
increased social services to Alaskan Natives. The report notes
that Federal contract dollars obligated to firms owned by ANCs
grew from $265 million in fiscal year 2000 to $1.1 billion in
fiscal year 2004. Importantly, there is no indication within
this report of wrongdoing by any participants in this program.
In fact, the issues addressed in the report come from
activities that are part of the program as Congress designed
it.
The GAO report failed to note the significant increase in
Federal contract dollars to other groups during the same period
of time. In fiscal year 2004, women-owned small businesses grew
from $5.5 billion to $9.1 billion; service-disabled veteran
small businesses grew from $554 million to $1.2 billion;
HUBZone firms grew from $1.6 billion to $4.8 billion; and
overall, small businesses grew from $50.1 billion to $69.2
billion.
The Federal Government achieved its goal during fiscal year
2003 and 2004 that 23 percent of its prime contracting dollars
were awarded to businesses that certified as small businesses
including ANCs. Though there is a small disadvantaged business
goal which includes 8(a), there is no small goal for 8(a).
However, in fiscal year 2004, 8(a) were awarded $8.4 billion of
the SDB achievement of $18.5 billion.
Information recently released by SBA indicates that the
8(a) program has increased from Fiscal year 2004 to fiscal year
2005 by $2.1 billion.
Frankly, I would like to talk about oversight. The SBA
takes its oversight responsibility very seriously. Prior to the
release of the GAO report, the SBA had taken a number of steps
to improve the oversight of the 8(a) program, including taking
into consideration special provisions afforded to 8(a) concerns
owned and controlled by ANCs, Native Hawaiian organizations,
CDCs, and Indian tribes.
For instance, the agency is revising its partnership
agreement, delegating 8(a) authority from SBA to various
Federal procuring agencies to clarify their role and
responsibility for monitoring contract compliance of and
performance by 8(a) firms. SBA has also increased training to
field staff responsible for working on the 8(a) issues. In
addition, the agency is exploring possible regulatory changes
that will strengthen the program and increase SBA's oversight
capabilities. SBA also recently installed a new management, a
new experienced management team to oversee the 8(a) program.
In closing, let me emphasize SBA's responsibilities to
implement the existing law.
Thank you for allowing me to share SBA's reviews with you
today, and I will be happy to answer any questions you have.
[The prepared statement of Mr. Jenkins follows:]
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Chairman Tom Davis. Thank you.
Mr. Cooper.
STATEMENT OF DAVID COOPER
Mr. Cooper. Chairman Davis, Chairman Manzullo, Ranking
Member Waxman, and Ranking Member Velazquez, and members of
both committees, it is a pleasure to be here this afternoon to
share with you and discuss the results of the GAO review on
Alaska Native Corporations' participation in the 8(a) program.
In response to your request, we issued a report in April
that shows that Federal agencies are turning increasingly to
ANC 8(a) firms to meet their requirements and to do their
contracts. Although representing a small portion of the total
Federal procurement spending obligations, obligations to ANC
firms increased from $265 million in 2000 to $1.1 billion 2004.
During that 5-year period, Federal agencies obligated a total
of $4.6 billion to ANC 8(a) firms, of which $2.9 billion of
that went through the 8(a) program. In 2004, the amount of
obligations to 8(a) ANC firms represented about 13 percent of
total 8(a) business.
The ANCs are using the 8(a) program as one of many tools to
generate revenue with the goal of benefiting or providing
benefits to Alaskan Natives, their shareholders. Benefits take
many forms including dividend payments, scholarships, elder
support, and cultural preservation, and there is no doubt,
because I visited some of the villages, that the revenues from
the 8(a) program have benefited the communities in Alaska.
Appendix 10 in our April report contains a detailed description
of the kinds of benefits that have been provided.
Since 1986, when ANC firms were permitted to participate in
the 8(a) program, Congress has extended procurement advantages
to those firms beyond those afforded to other 8(a) businesses.
For example, ANC firms are permitted to receive non-competitive
contracts without any limits, whereas other 8(a) businesses are
subject to a competitive threshold of $3 million or $5 million
if it is a manufacturing contract. ANCs can also own multiple
firms participating in the 8(a) program, and as Chairman
Manzullo pointed out, there has been a significant growth in
the number of firms doing that.
While these advantages have been controversial, I want to
be clear that GAO is not challenging them. Congress passed
those provisions to allow the ANCs to provide economic
development and benefits to their shareholders.
However, our work shows that Federal agency contracting
officials need to do a better job of complying with certain
requirements that are intended to preclude abuses of the 8(a)
program. Specifically, I am referring to the need for procuring
agencies to inform SBA when work under an 8(a) contract is
expanded or modified and to monitor the performance of the
contract to ensure subcontract limitations are not exceeded.
Our work also shows that SBA needs to tailor its oversight to
account for ANC's unique status and growth in the program.
For example, we believe SBA needs to track the business
industries in which ANC firms have 8(a) contracts to ensure
that more than one firm of the same ANC is not generating the
majority of its revenue in the same industry. SBA regulations
do not allow an ANC to have more than one firm operating in the
same primary industry.
We also believe SBA needs to more consistently determine
whether other small businesses are losing contract
opportunities and to collect better information about the 8(a)
program.
During our review, SBA officials recognized that ANC firms
enter into more complex business relationships than other 8(a)
companies and told us they faced a challenge in overseeing the
increased activity. The officials agreed that improvements are
needed in their oversight and said they are considering various
actions in that regard.
We have made several recommendations in our April report to
both the procuring agencies and to SBA to improve oversight and
ensure that firms are operating in the 8(a) program as it was
intended.
That concludes my statement. I will be glad to answer any
questions you might have.
[The prepared statement of Mr. Cooper follows:]
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Chairman Tom Davis. Thank you very much.
Mr. Ramos.
STATEMENT OF FRANK RAMOS
Mr. Ramos. Chairman Davis, Ms. Velazquez, Chairman
Manzullo, Mr. Waxman, and distinguished members of both
committees, it is an honor to speak before you about the
Department of Defense's interactions with Alaska Native
Corporations [ANCs].
ANCs are a part of a talented pool of entrepreneurs and
business people and, by law, are considered part of the small
business community. The important contributions made by small
businesses have firmly established them as an integral part of
the Department of Defense warfighting mission and the American
economy. The Department of Defense is committed to providing
our men and women in uniform with the best technology,
products, and services that are available to us. The Department
looks to dependable small businesses, including ANC-owned firms
participating in the Small Business Administration's 8(a)
business development program, as suppliers of the innovation
needed to deliver technology into the hands of the warfighters.
Congress has enacted legislation over the years enabling
the Department to offer greater procurement opportunities to
small business, and I thank you for this.
Through the authority you have granted and the guidance you
have provided, we have been able to successfully leverage the
capabilities of small business in a number of technological
areas such as composite materials, modeling and simulation,
unmanned aerial vehicles, and robotics. This has served to
strengthen the defense industrial base.
I am also pleased to note that the small business program
has a record-breaking performance for fiscal year 2005. The
information just released today from the Department of Defense
prime contracted awards was recorded at 24.5 which is a
historical record. Our prime contracting dollars is $52.9
billion, and this is information as released by the SBA and
OMB, and I checked with OMB before I released this information.
Now, let me focus on the areas of interest relative to 8(a)
ANC firms participating in the SBA 8(a) program. There are
three key pieces of legislation that set forth parameters for
doing business with the 8(a) ANCs by the Federal Government
including DOD. They are the Small Business Act, the Alaskan
Native Claim Settlement Act, and the Business Opportunity
Development Reform Act. I will not go into the details of each
of the acts as they have been clearly addressed by GAO in your
letter of invitation.
However, I would like to reference the basis of that
statute that permits all Federal agencies, including DOD, to
transact business with Native Americans, specifically ANCs, and
that is Section 602 of the Business Opportunity Development
Act, which states that ``These dollar thresholds shall not
apply to programs participants that are owned and controlled by
economically disadvantaged Indian tribes.''
The Business Opportunity Reform Act of 1988 limits sole-
source authority for traditional 8(a) program participants to
$5 million for manufacturing, $3 million for other goods and
services. The act permits concerns that are owned by either
tribes or Alaska Native Corporations to receive 8(a) sole-
source contracts beyond those dollar thresholds.
I would like clarify why I did not answer the questions in
the letter of invitation. I viewed, in general, that the
questions posed are best responded to by those Federal agencies
that may such program assessments for the Federal Government.
However, if you have specific questions pertaining to the
Department of Defense, I will be glad, I will be happy to
answer those questions.
I view my role as a chief small business advocate for the
Secretary of Defense is to ensure that our Department's
acquisitions system affords every small business seeking DOD
contracts every privilege that they are entitled to under the
law as passed by Congress. I believe that the Department of
Defense has diligently attempted to meet that requirement to
the best of our ability.
I look forward to your questions. Thank you.
[The prepared statement of Mr. Ramos follows:]
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Chairman Tom Davis. Thank you.
Ms. Stith.
STATEMENT OF MELODEE STITH
Ms. Stith. Messrs. Chairmen, thank you for providing me
with the opportunity to present the views of the Department of
the Interior on the award of contracts by Federal agencies to
Alaska Native Corporations participating in the Small Business
Administration 8(a) program.
In December 1971, Congress enacted the Alaskan Native
Claims Settlement Act to resolve land claims and to foster
economic development for Alaskan Natives. The statute created
Alaska Native Corporations as a means for distributing land and
monetary benefits to Alaskan Natives in lieu of a reservation
system. Since 1986, ANCs have been permitted to participate in
the SBA's 8(a) program, a program developed to foster the
growth and development of small businesses owned by socially
and economically disadvantaged individuals.
By law and regulation, certain limitations that apply to
other 8(a)-certified small businesses are not applicable to
ANCs. In one example, for most 8(a) firms, sole-source awards
are limited to $5 million for manufacturing and to $3 million
for other goods and services. Acquisition requirements above
these thresholds must be competed among eligible 8(a)-certified
small businesses. However, Section 124.506(b) of Title 13 of
the Code of Federal Regulations provides an exemption from the
sole-source threshold limitation that a procurement be competed
before it is awarded on a sole-source basis for tribally owned
concerns including ANCs.
Have ANCs been successful in attracting Federal contract
awards under the 8(a) program? The answer appears to be a
strong affirmative. According to the Government Accountability
Office's April 2006 report, ``Contract Management Increased Use
of Alaska Native Corporations' Special 8(a) Provisions Call for
Tailored Oversight,'' 8(a) obligations to firms owned by ANCs
increased from $265 million to $1.1 billion in 2004.
The Department of the Interior has a significant presence
in Alaska and considerable interaction with the Alaska Native
people. From the standpoint of our responsibilities to Alaskan
Natives, we definitely have an interest in providing continuing
economic opportunities through Federal contracts.
The GAO identified the need for the Federal contracting
community to better understand the nature of ANCs and to
mitigate any risk of their misuse under the program.
We concurred with the draft and final GAO report's
recommendation made to the Departments of Defense, Energy,
Homeland Security, the Interior, State, and Transportation, and
the National Aeronautics and Space Administration to work with
SBA to develop guidance to agency contracting officers on how
to comply with the requirements of 8(a) programs such as
limitations on subcontracting and notifying SBA of contract
modifications, particularly when contracting with 8(a) ANC
firms. In fact, we proposed that an interagency work group be
established and headed by SBA to develop this important and
much needed guidance for our contracting and small and
disadvantaged business utilization and development communities.
We look forward to partnering with our colleagues in developing
the guidance.
Messrs. Chairmen, this concludes my prepared remarks. I
will be happy to answer any questions you or other members of
the committees might have.
[The prepared statement of Ms. Stith follows:]
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Chairman Tom Davis. Thank you all.
Let me start, Mr. Ramos and Ms. Stith, with you. When the
Department enters into sole-source negotiations with an ANC,
how does it determine if the Government is getting a fair and
reasonable price?
Mr. Ramos. You are asking about the Department of Defense,
right?
Chairman Tom Davis. I am.
Mr. Ramos. One thing about the sole-source at the
Department of Defense, there is a lot more scrutiny than people
realize. First of all, the contracting officer, given the
circumstance and environment that they make decisions on, has
to negotiate a reasonable price with the firm. What is unknown
to most people is that the defense contracting agency may
scrutinize that contract, so it has more scrutiny in terms of a
sole-source as compared to a competitive contract. From our
view with respect to the GAO report, and we worked very
closely----
Chairman Tom Davis. DCAA gets a lot of that on the back
end.
Mr. Ramos. Pardon me?
Chairman Tom Davis. DCAA gets a lot of that on the back
end. Do they do it on the front end as well?
Mr. Ramos. Yes, it can be done at the front end. Now that
is a part of the oversight that the Department of Defense has
up front. There is always that opportunity for them to come
back at the back end.
My point with respect to the Government Accountability
Office report, we didn't see or hear of any specific major
concern outside of doing things to inform our people how to
manage those contracts a little better.
Chairman Tom Davis. Nobody is saying anybody has broken the
law or anything. What we are looking at here is everybody has
applied the law as it reads.
The question is for other 8(a)s, they have a threshold of
$3 million or $5 million for sole-source. Everything else is
competed. For ANCs, there is no such ceiling. So you have a lot
of large contracts going out for which they get 8(a) credit,
but it is not being competed and sometimes when you are
competing against another company, prices come down. When you
are competing against a Government negotiator, they are not
likely to. Is there something wrong with my reasoning there as
someone who sits there in DOD?
Mr. Ramos. Here again, I think you have to look at the
circumstance and the environment that contracting officer is
making that decision.
Chairman Tom Davis. Isn't it a fact that if you do an ANC,
you get good 8(a) credit, your numbers go up, everything looks
great, and it is a lot easier to negotiate one no-bid sole-
source contract with an ANC than it is going out and maybe
finding 10 that you have to compete with other 8(a) companies
to get the same amount, just to put it bluntly?
Mr. Ramos. I would say that we probably get the best value
in any case. We are doing a lot of hypotheticals here,
Congressman.
Let me make a point here, if I may. We are focusing on
ANCs, but the Native American tribes also have the same
opportunity, and they are getting more contracts in the
Department of Defense than ANCs. So, in answer to your
question, there is a form of competition on best price when
that contract officer deals with that.
Chairman Tom Davis. I know there is. I am just saying don't
you get more when you are out there competing and asking two or
three or four companies to come in instead of just one?
Mr. Ramos. That is a subjective question.
Chairman Tom Davis. It is a subjective question. You are
sitting there, and I am asking you from your experience.
Doesn't that make sense to you?
Mr. Ramos. I am saying that----
Chairman Tom Davis. You are trying hard not to offend
anybody.
Mr. Ramos. No. I am saying, I am saying that it all depends
on that set of circumstances. Most of the time, we get a fair
value, and I think----
Chairman Tom Davis. Could you get a fairer value if it were
competed? Could you get a better price, do you think, if you
were competing, if you had three companies up there instead of
one?
Mr. Ramos. My sense is that it would be an almost close
price depending on circumstances, Congressman.
Chairman Tom Davis. OK. Ms. Stith, what about you? How do
you feel on that? Do you have any comments?
Mr. Sutfin. Mr. Chairman Davis, I would be happy to respond
on the part of the Interior Department. Generally, a
contracting officer relies on technical experts to advise on
matters of the products and services that are being bought. So
you have experts that can give you advice on whether or not you
are making good decisions. Also----
Chairman Tom Davis. Mr. Sutfin, I was a general counsel to
a billion dollar defense contractor. I have seen how the system
works.
What I am asking is a very simple question. If you are a
Government negotiator, and you are trying to get your 8(a)
numbers up, it is a lot easier to go out if you could do a
sole-source with a large company than it is having to do maybe
10 competitive contracts with smaller companies. I guess my
question ultimately is: Don't you think, as a general
proposition, that if you have more competition, you are likely
to drive price down than if you are negotiating sole-source?
Mr. Sutfin. I think if price, low price is the ultimate
objective, you are right. Most nowadays are under a best value.
Chairman Tom Davis. Even better value, even better value
because price is a component of value. If you have three people
competing or four companies competing versus one, aren't you
more likely to have people come down on price?
Mr. Sutfin. I think that is a fair statement.
Chairman Tom Davis. OK, thank you. I am glad. I feel better
about the Interior Department than I do about DOD on this. My
time is up.
Mr. Manzullo.
Chairman Manzullo. I guess I have more of a comment than a
question, especially with regard to DOD. I spend most of my
time in this place, working on manufacturing issues, and I find
it just absolutely ironic that DOD does everything possible to
buy stuff from China, to eviscerate the Barry amendment, to
enter into memorandums of agreement that essentially nullify
our defense industrial base, all on the use of the words, best
value. Every time I hear those words, best value, from DOD, it
is almost like that song: There goes another American job.
The question here is I think there is laziness going on at
DOD. When you take a look at the article that appeared in the
Washington Post on Thursday, November 25th, we have these
bureaucrats in agencies all across the Government that are
being enticed by ANCs because there is no required cross
comparison, the sole-source awards cannot be protested, and the
ANCs come in and say, hey, we are going to make this real easy
for you. Then no one is talking about best value.
I mean, surely, Mr. Ramos, in the discussions we have had
for numerous years, every time one of my companies gets
unfairly treated by DOD giving a Government contract overseas
and thereby helping to eviscerate the defense industrial base,
someone yells, best value. I don't even hear that term being
used here. Why not?
How can you say that when these sole-source agreements or
sole-source contracts are given, and the rules specifically say
no required cross comparison? How could you possibly know that
you are getting the best value?
Mr. Ramos. I think that the best value is the objective
that the contracting officer, I am trying to allude to the
circumstance here. There may be circumstances where the
decision of that contracting officer may be where the best
value is not the outcome because of the circumstances you are
drawing it in.
Chairman Manzullo. No one has ever given me that answer in
14 years of trying to get business to the dwindling industrial
base that I have in my District. No one has ever said that,
that there is something besides price. Now the first time I
hear that is in defense of what ANC is doing.
Mr. Ramos. Congressman, I think it is in the GAO report,
and it has to do with the decision made during the startup of
the Iraqi War where they had to get the fuel and the water.
That was an example of a decision that was made to support the
warfighter at that time.
Chairman Manzullo. I am not talking about those exigent
circumstances. I am just saying, for example, do you know how
many contracts DOD has with ANCs?
Mr. Ramos. I can get it to you in a minute.
Chairman Manzullo. Ms. Stith, have you seen the advertising
proposals from ANCs? For example, the one that appeared in this
Washington Post article says: Fast, efficient, streamlined
acquisitions where ANCs will come to a contracting officers and
say, let me make your job a lot easier for you. There are no
contract ceilings, no required cost comparisons. Sole-source
awards cannot be protested, even if it costs more.
There is something wrong with that, isn't there?
Mr. Ramos, do you have the answer there?
Mr. Ramos. No, I don't have the answer. I have the dollars
for the contracts for the ANCs.
Chairman Manzullo. Give us what you have.
Mr. Ramos. The set aside dollars for the ANCs is $1.1
billion, and we ran the DOD's numbers from GAO to come up with
this for 2005. This is what I was trying to allude to
Congressman Davis earlier. As a comparison, we had--these are
setaside dollars--Native Americans is $1.7 billion; Hispanics,
$1.4; African-American, $1.2; and then the fourth location we
would have is the ANCs at $1.1. So, from the DOD perspective,
it appears from the data, that there is a balance in terms of
the contracting dollars to these different competing entities.
So, if the concern of Congress is for the Department of
Defense to level the playing field, the legislation has to
change that, so that all these different entities that are
competing against one another have the same opportunity to
compete on that level playing field because they are disparate.
Chairman Manzullo. Thank you.
Chairman Tom Davis. Mr. Waxman is going to have questions.
I just would add, at the end of the day, I think what we want
to do is get competition with all these different entities and
make sure everybody gets the same piece. I think we are
comparing apples to oranges.
Mr. Waxman.
Mr. Waxman. Thank you, Mr. Chairman.
I just insist that full and open competition is the gold
standard in Federal contracting or should be. One reason why
competition is so important is that it disciplines costs. It is
much easier for the Government to get a reasonable price for
goods or services if multiple companies submit competing bids.
I think that is obvious. I would dispute anybody who would say
if they are trying to contract out for some work on their home,
they will have one contractor only and just pay that contractor
whatever he asks for. You want to see what the competition is
going to charge.
When the Government awards large no-bid contracts to Alaska
Native Corporations, it leaves the taxpayers vulnerable to
inflated costs. Congressman Young testified that GAO hasn't
found that no big contracts for ANCs are a bad deal for
taxpayers. That is not my understanding of the GAO report.
Mr. Cooper, I would like to ask you about this issue. In
the aftermath of Hurricane Katrina, an ANC named Akima received
a contract to supply portable classrooms in Mississippi. When
GAO assessed the reasonable of Akima's prices, what did it
find?
Mr. Cooper. We found those prices were inflated.
Mr. Waxman. In fact, those prices----
Mr. Cooper. Mr. Waxman, can I just clarify? I think what
Congressman Young was talking about is the report that we did
at the request of the committees. What you are talking about
with the classrooms for Mississippi, that was a separate
report. So I just want to clarify that.
Mr. Waxman. Well, they are still part of the same issue
because the ANCs get a contract. The Corps accepted Akima's
proposed price of $39.5 million, although it had information
that the cost of the classrooms was significantly less than
what Akima was changed. I am reading now from the GAO report.
It may have been a GAO report, but it is still the same thing.
The prices for similar units from GSA's scheduled contracts
would have been a lot lower.
Now, GAO also examined the Army's use of ANCs to provide
security guards at Army facilities in the United States. In
this case, the two ANCs that received no-bid contracts actually
lost a subsequent Army competition for security guard services.
Nevertheless, the Army continued to give the ANCs additional
work.
Mr. Cooper, could the Army have saved money by awarding the
work to the companies that actually won the competition?
Mr. Cooper. Let me explain what we found in that report.
The Army had a three-phase acquisition strategy. The first
phase was to----
Mr. Waxman. Just answer my question because I have a
limited time. Could they have saved money?
Mr. Cooper. Yes, we believe they could have, and we
recommended that they take action to compete those, the third
phase.
Mr. Waxman. How much money are we talking about?
Mr. Cooper. Well, the Army did a study, and when they
competed the contracts for guard services, they paid 27 percent
less than what they did when they didn't use competition.
Mr. Waxman. On the classrooms, the prices were double what
they should have been, isn't that right?
Mr. Cooper. They were really too high.
Mr. Waxman. I would like to look at an example from GAO's
most recent report on ANCs. In 2002, the State Department was
looking for a contractor to renovate U.S. Government office
buildings in Sao Paulo, Brazil. According to documents the
committee obtained from the State Department, the Department
developed an independent price estimate of $46.8 million for
the work. In January 2002, Alutiiq and ANC formed a joint
venture with Fluor, a large non-Native contractor. Rather than
conduct a competition, a request for proposals was sent to just
one contractor in March 2002, the Alutiiq-Fluor joint venture.
Two months later in May 2002, the joint venture submitted a
price proposal of $81.8 million. This was $35 million higher
than the Government's estimate. The agency rightly noted that
there was a great disparity and that the proposal was
significantly high.
Mr. Cooper, does that match what GAO found, an initial
proposed price that was almost double the Government's cost
estimate?
Mr. Cooper. In that case, yes, but the State Department
contracting officer actually did his job in that case because
they got subsequent proposals and negotiated a much lower price
before awarding the contract.
Mr. Waxman. Well, they had a second proposal that was
received in June 2002, that was still too high. In fact, the
Department considered seeking competitive bids at that time,
but it didn't shift to competition. Instead, in July, the
Department accepted the contractor's bottom line offer of $54.5
million even though this was $20 million above the Government's
original cost estimate and millions higher than its revised
estimates.
In other words, it took the State Department 4 months to
award a no-bid contract to this ANC joint venture for an amount
that was substantially higher than its own cost estimate. Do
you think that was a good deal for the taxpayers, Mr. Cooper?
Mr. Cooper. The ultimate deal turned out to be only $2
million different than the State Department's revised estimate.
So it wasn't that bad of a deal.
Mr. Waxman. So it wasn't that bad of a deal.
Mr. Cooper. Right.
Mr. Waxman. OK. If it was going to take 4 months to award a
no-bid contract, why didn't the State Department hold a
competition? Wouldn't open competition produce even a better
buy?
Mr. Cooper. They probably, they realize now that they
probably should have gone competitive to start with, yes.
Mr. Waxman. I know my time is up. The obvious point of all
of this is if you don't have competition, the taxpayers pay
more money, and the ANCs are often being used to circumvent the
opportunity for real competition. Thank you.
Mr. Cooper. Can I respond to that? I agree with you fully.
Competition is the gold standard for Federal contracting, and
when you don't have competition, you better have the safeguards
in place to make sure you are not paying too much. Going back
to what Chairman Manzullo said, sometimes contracting
officials, I don't know that they are lazy, but they are
certainly not doing the job that they should be doing for
whatever reasons.
I think if you look at Federal procurement in general
today, we have work force problems. The work force is being
asked to do things that they either don't think they have time
to do or they don't think is necessary to do, and when they
don't do those kind of things, like some of the things we
identified in our report, you put yourself at risk.
Mr. Waxman. You put the taxpayers at risk.
Mr. Cooper. That is what I mean. You put the taxpayers at
risk, no question.
Chairman Tom Davis. A couple of up-front dollars in
training and giving that to people would probably save you a
lot of money downstream.
Mr. Waxman. I would agree, yes.
Chairman Tom Davis. This is the last question.
Mr. Waxman. Can I just ask a followup?
Chairman Tom Davis. Yes.
Mr. Waxman. So, up-front training for the procurement
officers, but you don't want to contract private companies to
do that job, would you?
Mr. Cooper. No, I don't. I don't. I want the Government
people to do it.
Mr. Waxman. You want the best value. [Laughter.]
Chairman Tom Davis. Thank you.
Ms. Velazquez.
Ms. Velazquez. Thank you, Mr. Chairman.
Mr. Jenkins, of the agencies involved in this report, six
of them agreed with the Government Accountability Office's
recommendations. SBA appears to be the only one that has taken
issue with the report. On a similar proof of ANCs and security
guard contracts, the Department of Defense agreed with all
seven recommendations and even rebid the contracts at all 54
locations. Don't you find it at all interesting that the SBA,
the agency charged with ANC oversight, is the only one that has
a problem with the report?
Mr. Jenkins. I think SBA's concerns with the GAO report was
that it was sort of, it wasn't consistent with all of the data
that we saw, relating to all of the other categories of small
businesses that increased at the same time. We certainly, as I
mentioned in our testimony, take our oversight responsibility
very seriously, and we have been working with the various
agencies through our PCRs, through our local district offices.
We have considered the GAO recommendations, and we will look at
every opportunity to improve our oversight.
Ms. Velazquez. Mr. Jenkins, you might take it seriously,
but the facts of the matter are that you are doing a very poor
job. You know that your own Office of Advocacy stated in their
report that $2 billion were miscoded as going to small
businesses when in fact they were given to large businesses. So
if there is one thing that SBA should have taken seriously, it
is that no one is tracking that large businesses are performing
the majority of the work on ANC contracts.
I will ask Mr. Cooper. In your review, did you find that
ANCs are not performing work with their own work force and
passing through contracts to large corporations?
Mr. Cooper. We did not find that specifically, but what we
did find is that no one knew whether the subcontracting
limitations were being complied with, and that was a
recommendation that we had made in the report for the Federal
agencies to assume responsibility. I think it is really a
shared responsibility between the agencies awarding the
contract and SBA with the 8(a) program.
Ms. Velazquez. Mr. Cooper, what are some of the ways that
ANCs have competitive advantages over other 8(a) companies?
Mr. Cooper. Our report points out, we include a chart in
there that shows the way that ANCs have used the 8(a) program.
I mentioned two examples in my oral statement about being able
to have contracts awarded to them without any limitations on
the amount, non-competitive contracts. They have been very
successful in hiring talented people who know the 8(a) program
and know how to use the 8(a) program, and they have just been
very successful in doing it.
Ms. Velazquez. Can ANCs afford to hire professional
marketers?
Mr. Cooper. Professional?
Ms. Velazquez. Marketers.
Mr. Cooper. Some ANCs did use firms to help identify
contracting opportunities.
Ms. Velazquez. Can they afford to pay as much as $1 million
in annual salary?
Mr. Cooper. And they did that as our report points out.
Ms. Velazquez. Do they have advantages of size with their
subsidiary being able to access funds from the parent
corporation?
Mr. Cooper. They do have those benefits.
Ms. Velazquez. No minority executive of ANCs are able to
get as much as 49 percent of the profits. For the program that
the primary purpose is economic development, does that seem to
be in keeping with the mission?
Mr. Cooper. I think the difference between the 8(a) program
as it was initially designed and as it has evolved over the
years, it has changed in character to serve two purposes: One,
the individual business development that you talk about, but at
the same time, and that is why we, as a matter of policy, are
not challenging what Congress has put in place, is it is also
intended to serve a different purpose, and that is to help
Alaska Native Corporations develop the capability to benefit
their shareholders.
Ms. Velazquez. Mr. Cooper, how would you characterize SBA's
comment letter to the Government Accountability Office's
report?
Mr. Cooper. I am sorry, would you say that again?
Ms. Velazquez. How would you characterize SBA's comment
letter to the GAO report?
Mr. Cooper. I would characterize it as disappointing.
Ms. Velazquez. Dismissive?
Mr. Cooper. We thought we would get a different kind of
response from SBA? And I would add that, listening to the
statement today, I think that is a different tone than the
letter that we got in response to our report. It sounds like
SBA is considering some actions and is probably going to work
with agencies like Interior to make things better.
Ms. Velazquez. OK, so let me ask you this question. In
terms of all the recommendations that you have made to SBA on
the reports and investigations that you have made before, how
would you qualify the track record of SBA complying with the
recommendations?
Mr. Cooper. I think in several cases, SBA has been slow to
respond to our recommendations.
Ms. Velazquez. Thank you very much, Mr. Chairman.
Chairman Tom Davis. Thank you.
Mr. Van Hollen.
Mr. Van Hollen. Thank you, Mr. Chairman. I want to thank
the chairman and ranking members of both committees for holding
this hearing. Thank you to the witnesses.
As I see it, there are really two separate issues before
us. One is the overall policy issue and the framework that
Congress put in place with respect to special treatment for
ANCs, and the second issue is the extent to which SBA and other
agencies are complying with the existing regulations,
implementing the program, and whether they are doing it
effectively.
Let me just start with the first one, and I do want to jump
ahead to some of the testimony we are going to hear from the
next panel. Just to quote from the representatives testifying
on behalf of Women Impacting Public Policy, they state in their
testimony that WIPP members have lost opportunities to ANCs
both at the prime contract level and at the subcontract level.
That is because they are not subject to the same affiliation
rules and competitive thresholds to what other businesses
participating in the 8(a) program adhere. They conclude in this
section by saying, ``It seems to us Congress should consider
treating all participants in the 8(a) program equally and they
should all adhere to the same rules.''
The testimony from that National Black Chamber of Commerce
is along the same lines. They say that ANCs reap the 8(a)
benefits such as receiving awards without competition but also
get the enormous benefit of waiving contract dollar maximums
and exceeding the size standard for small businesses, and they
go on to point out several other things.
Now I know that the GAO in its report looked at the extent
to which there was compliance with the existing framework and
the laws set out by Congress, but let me just ask all of you
whether you would take issue from a policy standpoint with the
recommendation raised, which really goes to the fundamental
issue of no-bid contracts and the ceilings, by Women Impacting
Public Policy, where they conclude that treating all
participants in the 8(a) program equally is the right way to
go, and that they should all adhere to the same rules.
Does anybody think, as a matter of public policy, that
equal treatment of all these entities would be the best way to
go in terms of protecting the taxpayers' interests? Does
anybody dispute that recommendation and conclusion from the
perspective of protecting taxpayer's interests?
I take that no one thinks that. Everyone agrees that this
recommendation would better protect the taxpayers' interest.
Let me just go on to ask with respect to the issue of
subcontracts and pass through contracts. As I understand it,
when you do a subcontract, when Alaska Native Corporations
receives a no-bid contract under the 8(a) program and they
subcontract it out, they are limited to requiring that 50
percent of costs, the contract's personnel costs, must be from
the ANC's own employees, is that correct?
Mr. Cooper. That is correct unless it is a construction
contract, and in that case, the subtracting would be 85
percent.
Mr. Van Hollen. As I understand it, when you looked at this
issue and you said just a moment ago, no one knows whether
subcontracting limitations were being complied with. You looked
at about 16 contracts to see if agencies were monitoring these
subcontracting requirements, is that right?
Mr. Cooper. That is correct. Of the 16 we looked at, 14 of
them had subcontracts at work and almost every one, the
contracting officer and the agency were not doing any kind of
surveillance to make sure the subcontract limitation was not
exceeded.
Mr. Van Hollen. Right. Based on that assessment, as we are
assembled here in the room today and as you are testifying, you
have absolutely no basis and it is your understanding these
contracting officers have absolutely no basis for knowing
whether or not that 50 percent limitation is being complied
with, is that correct?
Mr. Cooper. That is correct.
Mr. Van Hollen. Whose responsibility is it to enforce that
Federal acquisition regulation requirement?
Mr. Cooper. I would respond to say in this case, it is a
shared responsibility between SBA and the agency who is getting
the contract. There are, they are called partnership
agreements, where SBA has delegated authority to directly award
8(a) contracts to Federal agencies. When we went out and talked
to the contracting community, there was just a lot of confusion
about who was responsible for what, and I think this is an
excellent example of that confusion.
Mr. Van Hollen. I understand in actually looking at your
testimony, you found a case where an agency wanted a contract
with a particular non-Native company but couldn't award a no-
bid contract directly to that company, and so the agency solved
the problem by awarding a pass through contract to an ANC and
requiring it to subcontract with the desired non-Native
company. Could you talk a little bit about that and why that is
an example of how this system is being effectively
circumvented?
Mr. Cooper. That is exactly what can happen, and it is not
limited to 8(a) ANC contracts. We have, over the years, issued
a number of reports expressing concern about, again as Mr.
Waxman pointed out, the lack of competition. What we see is,
and primarily in the Department of Defense, is that instead of
the contracting people making the decisions about what the best
solution is in terms of getting a contract, program people are
directing the contracting people to award a contract to a firm
and instruct them to pass it on to the firm they really want.
It has happened over at GSA. The Get It Right Program, I
think was put in place to stop, cut that kind of contracting
out. It is not good contracting because you end up paying
layered costs, multiple fees, multiple profits, multiple
overhead. It is just not a good business decision on the part
of Federal agencies to do that kind of contracting.
Mr. Van Hollen. Thank you.
Mr. Chairman, I would just say Congress may have set up a
system where these different kind of shenanigans are encouraged
or, at the very least, allowed to happen, but it seems to me we
should, as joint committees, get to that fundamental issue.
Mr. Cooper. Can I respond? I think one of the problems is
we now have a lot of interagency contracting where an agency
get fees for doing contracting work for another agency, and
there is an incentive to generate revenue and do business
because the contract, the agency awarding the contract for
another agency makes money on it and can do things, operations
and that kind of thing. So, while interagency contracting might
be a great contracting vehicle, the incentives are driving it
in the wrong direction.
Mr. Van Hollen. The incentive there is for the agencies
themselves to take a cut, rather than have the savings passed
on to the taxpayer.
Thank you, Mr. Chairman.
Chairman Tom Davis. Thank you.
Mr. Barrow.
Mr. Barrow. No, thank you.
Chairman Tom Davis. OK.
Ms. Watson.
Ms. Watson. I would like to make some comments on
competition. I think what the GAO is reporting is that there
has been some abuse, we think, of using the ANC formula and
applying it across the board. Maybe, Mr. Cooper, you can help
our thinking on this issue. As I understand, the original
purpose of that legislation created a preference to encourage
economic opportunities for Alaskan Natives. The report that we
got from the GAO suggests that the preference is used by
contracting officials primarily as a way to circumvent just
exactly what we are trying to get to, to circumvent competition
requirements on contracts--they are worth hundreds of millions
of dollars--and often passing the work to large non-Native
corporations or to help meet small business goals.
Maybe you can shed some light on why the use of ANC
preferences seems to be increasing so rapidly. Also, while you
are doing that, it appears that the report references that no-
bid ANC contracts are like an open checkbook. Can you explain
this to me how this formula has been misused?
Mr. Cooper. What we found when we went and talked to
contracting officials who awarded those 16 contracts is that
they felt the use of a non-competitive vehicle with no limits
on dollar, thresholds, or anything was a fast, quick, easy way
for them to meet a requirement. Again, I think this is a
situation where the intent of the Congress is probably being
diluted because the contracting people are not using due
diligence in using the flexibilities and the authorities.
In my initial oral statement, I said I wanted to make it
clear that we do not take issue with the flexibilities that the
ANCs have been provided, and we take that position because we
believe that if contracting officials exercise due diligence
and fulfill their responsibilities and comply with the
requirements that they are required to do in awarding these
contracts, the potential for abuse would be minimized.
I will give the example that we have talked about a little,
subcontracting. Alaska Native Corporations can subcontract up
to 49-50 percent of the work that they get. That was provided
by the Congress. That authority was provided by the Congress.
We don't take issue with that, but at the same time, we want to
make sure that the controls that have been put in place, and
that is monitoring the subcontract limitation clause, is
followed and is not just done frivolously without taking it
very serious and complying with requirements.
Ms. Watson. OK, you never know what these bells are
implying.
Chairman Tom Davis. We are about ready to have a vote, but
you still have a couple of minutes left.
Ms. Watson. I have to go back to the Akima contract as it
relates to the classroom issue, and I don't know of the ANC
contract was used for buying those mobile units that are stuck
in the mud in Arkansas and some other places. Let me not get
into that. Akima raised its price for the classrooms from about
$23 million on last September the 16, to close to $31 million 1
day later, and the unit price of some classrooms rose almost 50
percent in a single day. How does that happen?
We are going to run out, so if you can't finish, I can't
take my answer in writing, but go ahead.
Mr. Cooper. I was very much in the review of that contract.
This is a clear cut case where the contracting officer blew it.
I mean I don't know any other way to say it. They had
information provided by Akima, as a matter of fact, that
indicated the classroom prices should be lower than what was
negotiated in that contract. I sat across the table from the
contracting officer and asked her, why didn't she use the
information to negotiate a lower price? And she told me, I
wasn't involved in the details; I just signed the contract.
That may be lazy, as Chairman Manzullo pointed out, but it
is not giving the Government a good deal, and contracting
officers need to use due diligence and protect the taxpayers'
interests, whether it is a competitive, non-competitive, or any
other kind of contract.
Ms. Watson. We are not utilizing the people's money and the
trust that is put in us when we do deals like that. I think the
original purpose of ANC was the right way to go, but just the
people, to whom these programs were directed, miss out.
I want to thank you for that information. I am glad you
recognized that there were some mismanagement and some
insensitivity. We appreciate it. That is what we are trying to
get to the bottom of here with this hearing.
I want to thank you, Mr. Chairman.
Chairman Tom Davis. Thank you.
Ms. Bordallo.
Ms. Bordallo. Thank you very much, Chairman Davis and
Chairman Manzullo. For calling this meeting, and I do want to
thank Chairman Manzullo for mentioning the difficulties we are
having with our shipyard in Guam. So, thank you, Mr. Chairman
for that.
Mr. Jenkins, I have a question for you. Increased contracts
awards for the ANCs are of great concern to the business
community in my District, the District of Guam. While there is
a public good in having preferences for Native Alaskans, the
same can be said for the indigenous people of Guam, the
Chamorros. Chamorros on Guam experience many of the same social
and economic disadvantages as Alaskan Natives and other
disadvantaged groups recognized by Federal law. Yet, the
Chamorros have no set aside or preference program that benefits
them specifically. When Federal contracts for work on Guam are
unbundled, the ANCs swoop in, use their set aside preferences
to win the no-bid contracts, and Chamorro businesses are
relegated to being hired as subcontractors at best.
If the Federal Government is going to support social policy
through Government contracting that is trying to improve
economic opportunity for the disadvantaged communities through
the awarding of Federal contracts, then I would hope that these
contracting policies could be implementing fairly across the
board in order to benefit all of the disadvantaged indigenous
groups. Oversight is key to ensure that this happened.
In your testimony, you mentioned that the SBA takes its
oversight responsibilities seriously. You mentioned that the
SBA, even before the GAO report's release, began to improve its
oversight of the 8(a) program. Your testimony is short on
detail regarding the progress that the SBA has made toward
improving its oversight of this program.
Can you describe for me today the progress the SBA has made
of late toward improving its oversight of the 8(a) program, and
also can you describe how the April GAO report on the increased
use of ANCs in Government contracting has impacted the SBA's
efforts toward increasing oversight of the 8(a) program?
Mr. Jenkins. OK, thank you. First of all, as I mentioned,
one of the things that we felt was very important and we had
started this discussion prior to the GAO report is to look at
our partnership agreements with the various agencies. SBA, in
order to ensure that the 8(a) program was properly being
administered, placed responsibilities on the procuring
agencies, and that is to follow the requirements in the Federal
acquisition regulation. The issues regarding the limitation on
subcontracting is no difference than the issues with small
business set asides. That is the responsibility of Federal
contracting officials as described in the Federal acquisition
regulation.
SBA felt, however, the need to increase our relationships
with the agencies. And so, with the partnership agreements, we
have already begun to revise those agreements to make it very
clear what we expect the agencies to be responsible for. We are
also increasing our training--training not only to our own
staff, SBA staff, but also training with the various Federal
agencies through our procurement center representatives as well
as through our district offices.
So I think there are a number of things that we are trying
to do to improve, and we certainly will consider the GAO
recommendations as well as other recommendations that we have.
Ms. Bordallo. Thank you very much.
I don't vote, Mr. Chairman, so I could continue.
Chairman Tom Davis. I am not stopping you now. We can go.
We have about 5 more minutes before I have to leave.
Ms. Bordallo. Very good, all right.
I am just curious. One real quick question before I get to
my second question: Are Native Hawaiians participating in these
programs?
Mr. Jenkins. Yes, the Native Hawaiian-owned firms that are
owned by Native Hawaiian organizations----
Ms. Bordallo. The ANCs?
Mr. Jenkins. Excuse me?
Ms. Bordallo. The 8(a) program?
Mr. Jenkins. Yes, the 8(a) program.
Chairman Tom Davis. Are they treated as ANCs or as 8(a)'s?
I think that is her question.
Mr. Jenkins. They are treated as 8(a)'s, but not ANCs. ANCs
has a special designation.
Ms. Bordallo. I see. I don't quite understand that. Why
wouldn't they qualify?
Chairman Tom Davis. The thresholds are different.
Mr. Jenkins. Yes, the statute allows for Hawaiian Native
organizations, small businesses owned by Hawaiian Native
organizations, to be considered as 8(a) firms. They can apply
for the program, and we will look at them and certify them. It
is different, however, in terms of the tools that they can use
are different than what they have for the Alaska Native
Corporations in terms of the sole-source requirements.
Ms. Bordallo. I see.
The other question I have is for Mr. Frank Ramos. I am
concerned by the testimony provided by Mr. Cooper from GAO to
the committees today, regarding the findings in the April GAO
report. Mr. Cooper stated in his prepared remarks that the
contracting officers interviewed during the GAO investigation
claimed that contracting with 8(a) ANC firm is a quick, easy,
and legal way to award contracts while at the same time helping
their agencies meet small business goals. Policies are in place
to ensure that Federal contracting supports disadvantaged
groups. These policies are not in place to make it easier for
agencies to avoid the hard work of supporting small businesses.
Would you agree that supporting small businesses should be
the priority, not the relative ease of workload for the
contracting officers? Also, what roles do your offices and that
of your peers in other agencies play in overseeing or
monitoring your respective agencies' contracting behavior?
Mr. Ramos. In my oral testimony, I said that the statutes
that the contracting officers use allow them to make certain
decisions with respect to ease of contracting, if you want to
use that term. It is not an ease of contracting that is used in
a negative term, but it facilitates them to use that
contracting authority to make decisions that best fit the
interests of the Department of Defense at that particular time.
With respect, as I understood your second question as to
what we are trying to do bring conformance to this behavior
that the Government Accountability Office alluded to, we have
provided, as a result of the Government Accountability Office
report, in our small business conference, a panel to discuss
those things that we must do to bring conformance to our
behavior within the Department of Defense. Mr. Assad who is the
Director of Defense Procurement is going to be meeting with Mr.
Crowther, I believe tomorrow to talk about some of those
concerns that you have raised. He is the Director of and has
oversight of the contracting officers, and I believe he is
going to address that issue. We have discussions, and I feel
comfortable that we are going to be in conformance in that
respect.
Ms. Bordallo. Thank you very much.
Thank you, Mr. Chairman.
Chairman Tom Davis. Thank you very much.
Before I dismiss the panel, let me just note and, Mr.
Ramos, I will address to you. I think it is clear that if you
can meet your 8(a) goals by going to a larger vehicle and not
have to compete, it makes it a lot easier for the contracting
officer to do so. We try to do so many things with our
procurement system. We try to make sure that we buy American.
We try to make sure that we have domestic content. We have a
whole myriad of views up here in this committee over how that
ought to be done. We try to make sure that small businesses and
8(a) minority groups get opportunities.
The more bells and whistles we attach to the system, the
less efficient we become. In passing the ANC, we recognize in
doing so, that there may be some inefficiencies to the system
by allowing them some leg-up in contracting. All we are trying
to do here is have an honest discussion over what that cost is.
I think that is what we are trying to get out of here. Then we
will try, as policymakers, to try to see if there is anything
we can or should do about it or appropriate oversight of the
executive branch as a way.
I appreciate everybody being here for this hearing. I will
dismiss this panel. We will take a 15 minute recess while we go
over to vote, and we will come back with our next panel. Thank
you.
[Recess.]
Chairman Manzullo. It is the policy of the committee that
all witnesses be sworn before they testify. Please rise and
raise your right hands.
[Witnesses sworn.]
Chairman Manzullo. We will now recognize our third panel:
Mr. Harry Alford, president and CEO of the National Black
Chamber of Commerce; Ms. Ann Sullivan, president of Madison
Services Group, Inc., on behalf of Women Impacting Public
Policy [WIPP]; Mr. Chris E. McNeil, Jr., chairman, Native
American Contractors Association and president and CEO of
Sealaska Corp.; Ms. Helvi Sandvik, president, NANA Development
Corp.; Mr. Bart Garber, Tyonek Native Corp.; Mr. Charles
Totemoff, president and CEO of Chenega Corp.; Ms. Julie Kitka,
president of Alaska Federation of Natives.
In order to allow time for discussion, please limit your
testimony to 5 minutes. When you see the yellow light, you are
at 4. When you see the red, you are at 5. Your entire statement
will be made part of the record.
The first witness is Mr. Harry Alford. Mr. Alford.
STATEMENTS OF HARRY ALFORD, PRESIDENT AND CEO, NATIONAL BLACK
CHAMBER OF COMMERCE; ANN SULLIVAN, PRESIDENT, MADISON SERVICES
GROUP, INC. ON BEHALF OF WOMEN IMPACTING PUBLIC POLICY; CHRIS
E. MCNEIL, JR., CHAIRMAN, NATIVE AMERICAN CONTRACTORS
ASSOCIATION AND PRESIDENT AND CEO, SEALASKA CORP.; HELVI
SANDVIK, PRESIDENT, NANA DEVELOPMENT CORP.; BART GARBER, TYONEK
NATIVE CORP.; JULIE KITKA, PRESIDENT, ALASKA FEDERATION OF
NATIVES; AND CHARLES TOTEMOFF, PRESIDENT AND CEO, CHENEGA CORP.
STATEMENT OF HARRY ALFORD
Mr. Alford. Honorable Chairmen Davis and Manzullo and
distinguished members of both committees, thank you for
allowing the National Black Chamber of Commerce, Inc. to
provide input and comments on the Alaskan Native Corporations.
This is a very serious and sensitive subject to my
constituents. We hope and pray that this hearing will become a
catalyst for change and progress. Let me also make it clear
that the NBCC believes in the importance of economic
development for Alaskan Natives and will defend their right to
such.
The Honorables Parren J. Mitchell and Adam Clayton Powell
insisted on inclusion of African-American business owners in
the Federal procurement arenas. They rightly believed that
African-Americans had been and were being severely
discriminated by the very institutions, National and local,
that were supposed to protect the freedom and equal opportunity
of all Americans. The programs that evolved from the
implementation of the Civil Rights Act of 1964 were to correct
the economic ills created from decades of a Jim Crow economy.
This economy directly affected African-Americans.
These programs, as they developed, included all minority
groups including Native Americans, where there was some sort of
discriminatory evidence. It is without a doubt that the most
prolific and successful program to evolve is the SBA 8(a)
program. I estimate that at least 80 percent of the larger
businesses within the NBCC network are graduates of the 8(a)
program. This program has produced more Black millionaires than
all other Federal programs combined.
On average, 8(a) firms employ 20 people each, while small
businesses in general employ an average of 2 people. That is a
significant difference.
With the above in mind, the members sitting on both the
House Small Business Committee and the House Government Reform
Committee represent a total of 1,780 8(a) companies which
equate to nearly 20 percent of all 8(a) participants. These
1,780 businesses employ an estimated 35,600 people. I believe
each and every one of you considers that appreciable. In sum,
the 8(a) program is a source of employment in all States as
well as the District of Columbia, Guam, Puerto Rico, and the
Virgin Islands.
For some very peculiar rationale, Alaskan Native
Corporations, as they are called, have been permitted since
1986 to participate in the SBA 8(a) program. For the most part,
ANCs are not minority, not even Native American. ANCs are not
small businesses. ANCs repeat the 8(a) benefits such as
receiving awards without competition but also get the enormous
benefit of waiving contract dollar maximums and exceeding the
size standard for small businesses, size standards.
What we have today are billion dollar corporations, waiver
on the affiliation rule, located in places like North Carolina,
Virginia, Maryland, etc.--corporations located in places that
are totally remote to Alaska and void of minority management or
control. These ANC components, often LLCs, are supposed to
benefit Alaska Natives. I strongly suggest that very little of
the revenue obtained through Federal contracting finds its way
to Alaska Natives. Avarice has no end and what we have here is
a tool for avaristic manipulators.
Federal procurement is booming. However, if you take away
ANC volume from the 8(a) contract awards, you will find that
the 8(a) program has been decreasing steadily. Two things have
negatively affected the program. One, the practice of bundling
contracts, tantamount to sole-sourcing for the Fortune 200, and
the emergence of the ANC game manipulating the 8(a) program.
Certain lobbyists and a few slick law firms have mastered this
game. Major corporations are getting into the ANC program and
are drawing 8(a) contracts by the billions. Quick thinking
procurement agents have identified this as an attractive tool
to quickly boost 8(a) and SDB volume. Some SBA officials rush
to take advantage of this also.
The ugliness of this came together when the Katrina and
Rita disasters hit the Gulf Region last summer and fall.
Billion dollar sole-source contracts were immediately let to a
few companies that would eventually flip the scope to various
smaller companies at reduced rates and would then pocket the
difference. Ashbritt, a Florida company, received a significant
prime contract for debris removal, and the company does not own
one truck.
Likewise, ANC companies were sought out for contracts that
had no relation to their NAICs or expertise. The first Minority
Participation Report I received from the Army Corps of
Engineers for the Gulf rebuilding activity was 98.2 percent
ANC, 1.8 percent legitimate SDB.
Building, excuse me, bundling and a runaway freight train,
known as the ANCs, is wreaking havoc on 8(a) firms in the
African-American, Hispanic, Asia, and yes, the Native America
communities. We are losing jobs, destroying businesses,
negatively communities who need progress the most. ANCs, in
effect, have become predators on the minority business
community. Shame on all of us for letting it get this far.
The only rational thing to do now is to bring it to a
close. The NBCC suggests the following.
Chairman Manzullo. Is your testimony coming to a close like
the freight train?
Mr. Alford. Yes, I have about 20 seconds.
Chairman Manzullo. All right.
Mr. Alford. One, conduct thorough audits on how much
revenue is actually being received by Alaska Natives. What are
the amounts of dollars, programs, end results?
Two, are most of the agencies run by Caucasians? How many
minorities actually work ANCs? We need EEO surveys to be
performed by the Department of Labor.
Three, is there a strong correlation with certain lobbying
firms, law firms, and political contributions?
Four, and last, let us separate the ANCs from the 8(a)
program. It is an abomination as it is currently structured
with all of the oddities. ANC numbers should not be counted
toward small business and/or minority business goals.
Thank you for the extra 20 seconds, Mr. Chairman.
[The prepared statement of Mr. Alford follows:]
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Chairman Manzullo. You sound like the trailer on all those
credit card advertisements, Harry. [Laughter.]
Our next witness is Ann Sullivan on behalf of Women
Impacting Public Policy.
Now, remember, your complete statements are in the record,
and you can take as much time within the 5-minutes as you want.
What we are really interested in is the impact because we all
know that there are different rules that apply to the ANCs, and
we don't have to repeat those in all the testimony. If you
could center your testimony on the impact, thank you.
STATEMENT OF ANN SULLIVAN
Ms. Sullivan. Thank you, Mr. Chairman Davis, Chairman
Manzullo.
Good afternoon, my name is Ann Sullivan. I am representing
Women Impacting Public Policy. I represent them in Washington.
WIPP is a bipartisan women's business organization representing
over 550,000 women and minorities nationwide. Our umbrella
includes 42 business organizations as well as individual
members. Thank you for inviting us today.
As background, 10.6 million women-owned firms in the United
States employ 1 out of 7 employees in this country and generate
$2.5 trillion in sales. Yet, the Federal Government has awarded
only 3 percent of its contracts to women-owned companies as of
2004. Although the Congress set a 5 percent women-owned goal
for the agencies, they have never met that goal. In addition,
Public Law 106-554 which would allow contracting officers to
restrict competition to women-owned firms has yet to be
implemented. That law was enacted in the year 2000.
For the past several years, WIPP members have felt the
competitive pinch of increased Federal programs for non-women-
owned businesses. WIPP members have lost opportunities to ANCs,
both at the prime contract level and the subcontract level.
We have also felt the effects of contract bundling. Despite
the president's unbundling initiative in 2002, the trend has
proven otherwise. In 2002, the OMB reported that for every $100
awarded on a bundled contract, there is a $33 decrease to small
business. Despite strong evidence that bundling is not good for
small business or the Government, a 2004 GAO report shows that
the Federal agencies are confused over what constitutes
contract bundling and it results in poor accountability and
disparity in reporting.
According to a 2005 SBA Office of Inspector General audit,
the SBA reviewed only 13 percent of bundled contracts reported
to the agencies. Those 192 bundled contracts not reviewed
amounted to $384 million. SBA has cited that their lack of
resources is why they did not review more contracts.
The agencies have a challenge meeting their small business
requirements with larger contracts. It seems to us that
Congress should consider treating all businesses in the 8(a)
program equally and they should all adhere to the same rules.
Perhaps this is not the right program for the ANCs since the
8(a) program is a business development program, but the ANC
program is an economic development program for communities.
While the economic goals for the ANCs seem appropriate, trying
to fit them into the 8(a) program is like trying to fit a
square peg in a round hole.
In the absence of congressional changes in the 8(a)
program, we give you the following recommendations which we
think would strengthen all of the programs. One, establish a
subcontracting requirement for very large sole-source contracts
awarded to ANCs. Two, strengthen the 8(a) program for all
participants by increasing the competitive thresholds and the
personal net worth level that has not changed since 1989.
Three, provide SBA with the tools necessary to review
solicitations being placed into the 8(a) program to determine
adverse impact on other 8(a) companies or small business
programs.
We understand that although ANCs benefit from contract
bundling and procurement work force staffing issues, they are,
ANCs are not the source of these problems, nor do they dominate
the small business market. In fact, their contract dollars is
only a fraction of the $69.2 billion awarded to all small
businesses. The GAO report sheds light on contracting problems
affecting all small businesses and SBA's lack of resources and
staff to implement good oversight of the 8(a) program.
The goal should be for all groups to work together to
increase the amount of awards to small businesses, regardless
of race, ethnicity, or gender, and to implement a meaningful
women's business program. If the small business community moves
forward collectively to increase the source of supply to the
Federal Government, the result will be a stronger America.
Thank you.
[The prepared statement of Ms. Sullivan follows:]
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Chairman Manzullo. Thank you. Our next witness is Chris
McNeil, Jr. of the Native American Contractors Association.
Mr. McNeil.
STATEMENT OF CHRIS E. MCNEIL, JR.
Mr. McNeil. Chairman Manzullo and Chairman Davis, members
of the committee, we really appreciate the opportunity here to
testify today.
My name is Chris McNeil. I am a member of the Tlingit and
Nisga Nations. I am the chairman of the Native American
Contractors Association and also the president of Sealaska. I
am here to testify on behalf of the Native American Contractors
Association. Our organization represents, has 27 members,
including 19 Native corporations and 7 tribally owned
enterprises and Native Hawaiian organizations. We have over
100,000 tribal member shareholders who own our ANCSA
corporations from all over the United States. Congress meant to
benefit Alaska Natives no matter where they live.
We are here to discuss the SBA 8(a) program as it applies
to ANCSA corporations and tribes, and this is a rare program
because it is a program that actually does work. That is in the
context of really decades of failed Federal programs to promote
Indian economic development. It promotes self-determination,
self-sufficiency, and it points toward sustainable economies
which is inherent in Alaska, the goal of the Alaska Native
Claims Settlement Act, and it provides a mechanism upon which
Alaska Natives have offered increased professional
opportunities.
The GAO study itself listed five single-spaced pages of
benefits, the various benefits that are provided by the 8(a)
contracting that the corporations provide to its shareholders.
Our Federal contracting and participation in it has permitted
the Native corporations and tribes to participate in a greater
way in the commercial marketplace, and the majority of Native
corporations and federally recognized tribes have just begun to
participate in it.
The GAO report is the subject of this hearing. I think it
is important to note that it did not find any evidence of abuse
by the Native corporations. It did not recommend legislative
changes, and it doesn't suggest any dissatisfaction on the part
of the agencies in the performance by the Native corporations.
It was critical in some respects, and it indicates some flaws
in the administration of the program.
There is a key difference between the Alaska Native and
tribal 8(a) programs and the individually owned 8(a)
enterprises. We, each Native corporation represents hundreds
and, in some cases, thousands of tribal member shareholders
that benefit from them. In the case of the individually owned
enterprises, it benefits only a few people who are the owners
of the corporations and the significant differences.
All of this arises from the Federal trust responsibility
for tribes and for Alaska Native people. Any Federal program
that benefits Alaska Natives or federally recognized Indian
tribes arises from our Constitution. It is embedded in the
power to regulate commerce with Indian tribes which is called
the Indian Commerce Clause and arises from many U.S. Supreme
Court decisions. This also is evidenced in the Indian Treaties
which are the supreme law of the land.
Our Alaska Native Claims Settlement Act of 1971 was a
modern day statutory Indian Treaty. This was a large
congressional experiment with Native people. This land that we
received back would normally have been held in trust in the
United States, and the concept was to provide new economic
vehicles to develop sustainable economies for Native people and
to benefit our tribal member shareholders. That is our goal,
and that has been Congress' commitment. In effect, the Native
Claims Settlement Act arose from a negotiation in which we
relinquished claims of 300 million acres. In exchange, we
received back 44.5 million acres and about $962 million to
benefit over 100,000 tribal shareholders.
Now, the 8(a) program is an amendment to the Alaska Native
Claims Settlement Act, and it was intended to provide benefits
under the Claims Settlement Act for Alaska Native people. So,
everything in ANCSA, we, in effect, have paid for by providing
and relinquishing the claims to all the land to which we had
claims, and that is our statutory treaty. The Alaska Native
Claims benefit----
Chairman Manzullo. How are you doing on time? We are
running out of time here.
Mr. McNeil. Yes, I understand that. Mr. Chairman, I would
conclude then by saying that this program does work to the
benefit of Alaska Native people. I think there is significant
evidence of that in order to provide the sustainable economies
for Native people.
Thank you very much.
[The prepared statement of Mr. McNeil follows:]
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Chairman Manzullo. Thank you very much.
The next witness is Ms. Helvi, is it Sandvik?
Ms. Sandvik. Yes, that is correct.
Chairman Manzullo. You are recognized. Thank you.
STATEMENT OF HELVI SANDVIK
Ms. Sandvik. Good afternoon. My name is Helvi Sandvik. I am
an Inupiaq Eskimo shareholder of NANA Regional Corp. and
president of NANA Development Corp. which is a business arm of
our parent corporation. I originally come from the village of
Kiana, a 400-person village located above the Arctic Circle in
the northwest corner of our State. I appreciate the opportunity
to speak on behalf of the 11,200 Inupiaq Eskimo shareholders of
the NANA Region and also for the employees of NANA Development
Corp.
I would like to note that I have been joined today by one
of our board members, Dude Lincoln from Kotzebue, and several
young men and women from the NANA Region, all of whom are down
here working in our Government contracting companies, gaining
the experience they need to take over as the next generation of
Native leaders and business leaders in our company.
Today, I hope to provide you with a better understanding of
the challenges we face as Alaska Natives who are mandated by
Congress under the ANCSA act to provide for the social and
cultural and economic well-being of our owners. I would also
like the record to reflect that we have submitted more detailed
written comments for this hearing. I appreciate the opportunity
to respond to some of the questions and the criticism that has
been vocalized in recent months, and I do also have to say that
we have been appalled by some of the stories that have appeared
in the press recently that we believe to be very serious
misrepresentation and distortion of the facts.
As we focus on the Federal contracting opportunities with
respect to the ANC 8(a) program, I believe we ought to put into
proper perspective the scope of ANC participation in the
Federal programs. As a shareholder of an Alaska Native
Corporation, I believe it is important to emphasize how
important that 0.2 percent of Alaskan Native Corporations
participation in Federal contracting is to the Native
communities in Alaska. In the 35 years since we were
established, we have focused on trying to pursue and develop
business interests that will provide for sustainable benefits
to our current and future generations of NANA shareholders.
The majority of our shareholders live in the 11 villages in
the NANA Region. The NANA Region is 38,000 square miles in
size, about the size of the State of Ohio, and yet 60 percent
of the lands within our region are owned by the Federal program
in conservation system units established by the Federal law
that Congress passed, the Alaska National Interest Lands
Conservation Act. There are no roads connecting our villages to
one another or to the rest of the State or to the lower 48
States. Our communities are only accessible year-round by air.
Most of our villages do have about a 3,500 foot gravel strip to
provide their air service. Some of our communities but not all
can receive barge service in the summer months, and in the
winter months, our primary means of access is on snow machines.
Three of our villages do not yet have running water.
As you might imagine, being so remote, we deal with
horrendous transportation costs. The cost of gasoline and fuel
oil in some of our villages recently rose to $8 per gallon, and
electricity costs 55 cents for kilowatt hour in northwest
Alaska.
Opportunities for economic development or even to develop
alternative energy solutions to reduce the cost of living are
substantially restricted because of the Federal conservation
units that I mentioned earlier.
The sole purpose of NANA is to provide benefits to its
shareholders. As a for profit corporation, since we were
formed, NANA has distributed very close to 100 percent of our
profits to our shareholders. However, cash dividends are but a
small part of the overall benefits that we provide to our
owners. We spend part of our annual operating income to
directly provide for social and cultural services. We also
manage the lands that we received under ANCSA which are used
primarily for traditional subsistence--hunting, fishing, and
gathering activities that are critical to maintain our cultural
identity.
We administer programs to help increase job skills, provide
internships, award direct scholarships, pay college tuition,
and develop leadership and mentoring programs. We also fund
social and cultural programs that are provided by other non-
profit organizations including search and rescue, so critical
in the remote area that we live in, as well as other health
services.
As a business, we are successful in providing jobs for our
shareholders. In 2005, 13 percent of NANA shareholders between
the ages of 18 and 64 worked either directly for NANA or for
one of our associated companies. These shareholder employees
were paid $27 million in wages last year.
When we first learned that the GAO would be looking into
the Alaskan Native Corporations' participation in the SBA 8(a)
program, I was confident that the GAO would find that the ANCs
have taken their responsibility and delivered with integrity
the services that the Government was asking us to deliver.
After much investigation, that is exactly what the GAO report
found. It did not cite any waste.
Chairman Manzullo. We have some time issues here.
Ms. Sandvik. OK. I will finish up here.
It didn't cite any waste.
Chairman Manzullo. You have 20 seconds on the Harry Alford
clock.
Ms. Sandvik. Thank you.
In short, the GAO report found that the ANCs were living
within the law that they provided. However, additional
resources were needed to improve oversight.
To conclude, we firmly believe that the 8(a) program for
the ANCs was created by Congress for the right reason. We are
providing business opportunities that pay dividends, provide
scholarships, cultural program support, social service, and job
opportunities for Native shareholder/owners of our companies.
As demonstrated by the high performance marks we receive from
our customers, both in the Government sector and commercial
sector, we are providing excellent value and quality work for
our clients.
Thank you.
[The prepared statement of Ms. Sandvik follows:]
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Chairman Manzullo. Our next witness is Mr. Bart Garber
from, is it Tyonek?
Mr. Garber. Tyonek.
Chairman Manzullo. Tyonek Native Corp. We look forward to
your testimony. Thank you.
STATEMENT OF BART GARBER
Mr. Garber. Thank you very much, Mr. Manzullo and Mr. Davis
and the rest of the committee members. There will also be a
PowerPoint up there if you like to watch things instead of
listen.
I am a tribal member of the Native village of Tyonek and
the president of the Tyonek Group. Tyonek Native Corp. is a
claims act village for the Native community of Tyonek. Tyonek
lies about 43 miles southwest of Anchorage, and access, just
like NANA, is limited by air and boat. No roads lead to us. We
are called Dena'ina Beach People. About 400 of our 600 tribal
members and tribal corporate shareholders live outside the
village in Alaska and throughout the United States. We were
established in 1973 and are entitled to about 200,000 acres of
land in south central Alaska.
For over 20 years, the company's business opportunities
have been primarily limited to conservative passive investments
in surface land leases. In 1995, after a long series of
meetings with shareholders and the board, the board instructed
us in management to acquire or begin active managed companies.
When I was hired at Tyonek Native Corp. in 1995, I was the
third employee. TNC owned an apartment building and a startup
IT company. Total operating revenues that year were $500,000.
TNC relied upon one-time asset sales and resource revenues to
finance its operating deficits.
Ten years later, TNC now has operating revenues now
approaching $50 million with pre-tax profits between $1.5 and
$2 million. The company no longer depends upon earnings from
surface leases and resource sales to balance its books. I am
happy to say that we have had a large number of women-owned
businesses, Asian-owned, disabled service vets, and Black-owned
business who have helped us get to this point through either
joint ventures or subcontract relationships.
In 2005, our manufacturing revenues were over $30 million
derived from 128 negotiated task orders, about 15 percent of
the revenue derived from non-8(a) sources. That percentage is
actually increasing on newer work.
In most situations, a business case must be made for all
fixed price bids. The Government uses weighted criteria to
determine final rates and prices. They usually have past prices
for many items. Particularly in our obsolescence programs, our
bids represent a significant cost savings to the Government
over former suppliers due to our lower rates and new
technology. We have similar experiences in our service
contracts.
Tyonek Native Corp. employs nearly 300 people in seven
States.
Our primary lines of in 8(a) business are in defense
manufacturing and engineering services and aircraft
maintenance. On the commercial side, we are in oil field
services, civil construction, port operations, and land and
resource development.
Our CEO is an Alaska Native, and the managers of our two
operating divisions, the Alaska Division and Tyonek Group, both
Tyonek shareholders. Fifty percent of our Alaska corporate
administrative staff is Tyonek shareholders. All five of our
Alaska operating subsidiaries are managed or co-owned by Tyonek
shareholders.
I was CEO of Tyonek Native corporation for 9 years. In May,
I transitioned to the role of president of the Tyonek Group
which includes all of our 8(a) operating subsidiaries. As CEO,
I oversaw the creation and planning for all of our 8(a) and
non-8(a) companies.
At the present time, our VP of operations for defense
manufacturing is William Jolly, a Chippewa/Metis propulsion
engineer, and our saying in the company is it does take a
rocket scientist. Scott Pfeifer, whose family is Alaska Native,
manages our services companies. The CEO and I are paid $200,000
with performance bonuses that are no more than half of that,
and they are tied directly to profit. Our management and direct
labor staff share in bonus pools based on profit projections
and are recovered as part of our GNA expenses.
Our profit performance over the years has averaged about 5
to 7 percent of gross revenues. You don't get rich in the
Government contracting business. The company policy is to
distribute 30 percent of after tax profits to shareholders as
dividends. The balance of the profits are reinvested into the
businesses.
Benefits to our shareholders are listed below in five
different areas: scholarship, internships, job opportunities,
community projects, and funeral benefits. We contribute hard
dollars, both to scholarships and internships. We have two of
our interns from Alaska going to our operating plants in the
lower 48 every 6 months and are getting trained as electrical
technicians, welders, and others. Some have remained and are
employed in our plants. We have two shareholder representatives
who work solely on employment opportunities for Alaska Natives
in Alaska. Nearly 100 percent of our direct labor staff in
Alaska are shareholders.
Community projects range from education to cultural matters
to employment benefits for education. And, as you can see, we
have employment, we have funeral benefits for our shareholders.
But, by far, the most significant benefit is a stronger well-
managed company. We would never have been where we are with our
accounting systems or our management capability without the
8(a) program, and this benefits our businesses in Alaska. You
can see that we have distinct lines of businesses that are
unique to us, and we believe that those will survive over time
in 8(a) program and allow us to compete in the outside world.
[The prepared statement of Mr. Garber follows:]
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Chairman Manzullo. Thank you, Mr. Garber.
The next witness is Charles Totemoff.
STATEMENT OF CHARLES TOTEMOFF
Mr. Totemoff. Honorable Chairmen, members of the combined
Committees on Government Reform and Small Business, thank you
for an opportunity to provide testimony to you on the topic of
the success of the Alaska Natives participating in the U.S.
Small Business Administration and Minority Enterprise
Development Program, also know as the SBA 8(a) program.
I must state that we appear with serious misgivings about
the preconceptions of the committee members and staff. The very
title, ``Northern Lights and Procurement Plights: The Effect of
the ANC Program on Federal Procurement in Alaska Native
Corporations,'' conveys a prejudice and a lack of understanding
of Alaska Natives. I come before you today to speak directly to
those points with facts and supported by independent
verification by the very Federal agencies and the U.S.
Government Accountability Office that provided testimony to you
today.
Again, my name is Charles Totemoff, and I am the president
and CEO of the Chenega Corp. Chenega is an Alaska Native
village settled thousands of years ago by our forefathers. I am
an Alaska Native, a shareholder of the Chenega Corp., and I
have served on the board of the corporation since 1983. I grew
up in the village of Chenega and have been with the corporation
from the beginning when we had nothing to provide to our elders
and shareholders. Like my fellow Alaska Native leader sitting
beside me, I work each day to help my people achieve self-
sufficiency.
In the late 1980's, Congress and the SBA recognized that
Native villages like Chenega and lower 48 tribes as well faced
a real problem in Government contracting. Unlike other small
businesses, they did not simply represent a family or
partnership but were supposed to be engines of economic
opportunity for entire communities and cultures. Changes needed
to be made to recognize this fact and allow Native-run small
business to grow larger, to obtain larger contracts, and to
remain in the program longer. I recognize that these changes
have been controversial, but they have allowed the program to
work for Native communities that participate. We are doing
exactly what the Federal Government told us to do, and we are
doing it well. The program has not worked perfectly, to be
sure, but I challenge you to show me another Federal program
that works as well for the Native communities that agree to
work hard and play by the rules.
I am proud to say that eventually, as a result of much hard
work, Chenega has been successful in the Government contracting
business, but it was not an overnight success. There were many
lean years as the company made the investments in time and
resources, learning the business. Chenega Corp. was pleased to
be a participant in the GAO audit. Chenega Corp., its
shareholders, and the Federal customers with which Chenega does
business are proud to relate that the GAO did not cite a single
incident of waste, fraud, or abuse by an Alaskan Native
Corporation, nor were the Chenega Corp. and its subsidiaries
found to be performing any Federal contracts at below superior
standards.
Mr. Chairman, the SBA Native 8(a) has been around a long
time. Nobody complained when we were simply getting contracts
to perform maintenance at Federal facilities, but now that we
have grown, gained expertise, and actually succeeded at getting
Federal contracts in substantive areas, people don't want to
see Natives at the table.
Let me tell you about a couple of our shareholders and the
direct impact this program has had on our lives.
Jason Totemoff is a young Chenega Corp. shareholder and a
full time employee of our company. He received his degree in
Process Technology, which he was able to obtain through
scholarships Chenega Corp. provided to him and to hundreds of
others of our students. While attending the university, Jason
completed a formal internship with Chenega Technology Services
Corp. which is a Chenega Corp. subsidiary. Jason says of his
experience, ``My experience at CTSC is nothing less than
incredible. The skills that I have obtained will benefit me
throughout my life and give me the possibilities to venture
into careers I otherwise would not have.'' If it were not for
what the Chenega Corp. provides, Jason would not have this
option.
Then consider Margaret Brodken, one of Chenega's revered
elders in her late eighties. Margaret, like most Alaska Native
elders, never worked for a corporation that would 1 day provide
her with a pension. She relies greatly on the quarterly
dividends Chenega Corp. provides to help pay for her groceries
and heating bill. Margaret spoke recently at a corporation-
sponsored language preservation meeting that she is very proud
of the corporation and what it has accomplished. I am thankful
it is here to help care for her. Chenega will never forget our
elders.
Unlike most corporations, our mission has a dual purpose.
In addition to our business execution, we use the results of
our business to further our societal, cultural, and community
needs and activities. Many cultures will allow others to take
care of their people. Alaska Natives takes care of their own in
a cultural fashion of caring and sharing.
Chairman Manzullo. And I have to take care of the clock.
How are you doing?
Mr. Totemoff. I will conclude then.
Chairman Manzullo. You have 20 Alford seconds.
Mr. Totemoff. Pardon me?
Chairman Manzullo. Twenty Alford seconds.
Mr. Totemoff. OK.
In summary, the Chenega Corp. and its subsidiaries go to
great lengths to provide tangible benefits to the shareholder
and their families. These benefits go beyond that of the normal
role of a traditional corporation but reflect the special
obligations. We do this while providing excellent service to
our Federal customers.
Finally, let me stress something about the SBA 8(a)
program. It is not wealth redistribution. Despite the many
wonderful things the program has done for our shareholders,
this is not a welfare program. It is not a jobs program. It is
a means by which our villages can learn to stand on their feet.
Chairman Manzullo. I have to interrupt at that point. Thank
you for your testimony.
Mr. Totemoff. Thank you.
Chairman Manzullo. The next witness is Julie Kitka with the
Alaska Federation of Natives. We look forward to your
testimony.
STATEMENT OF JULIE KITKA
Ms. Kitka. Thank you, Mr. Chairman and members of the
committee for the opportunity to appear before you to testify
on the importance of the SBA 8(a) program to the Native people
of Alaska and to offer some recommendations, and we offer seven
recommendations.
I am testifying in my capacity as president of the Alaska
Federation of Natives. By way of background, AFN is the largest
Statewide Native organization in Alaska, representing more than
125,000 Alaska Natives residing in Alaska and more than 120,000
Alaska Natives scattered over the rest of the 49 States. AFN
was organized in 1966 to advocate for one voice for fair
settlement of our aboriginal land claims.
The discovery of oil in Prudhoe Bay and the need to bring
clear title to the land needed to build a pipeline to bring
that world class discovery online and the sense of urgency it
produced in terms of providing for the energy needs of our
country created a historic opportunity for a settlement of our
land claims. In December 1971, after years of efforts by
Members of the Congress, the Alaska Native leadership, and
others, the Alaska Native Claims Settlement Act was signed into
law by President Richard Nixon. ANCSA extinguished aboriginal
claims, and Alaska Natives were compensated as mentioned in
previous testimony. Unlike previous Indian land claims
settlements, the assets, land, and resources provided for in
the settlement in 13 regional for profit corporations and more
than 200 village corporations.
Today, the Alaska Federation of Natives is governed by a 37
member board of directors, representing villages, both
federally recognized tribes, ANCSA village corporations, 12
regional non-profit organizations who run hospitals, health
clinics, non-profit law enforcement, so forth, and the 13
regional ANCSA regional corporations.
Geographic considerations, in my written testimony, I
describe the sheer size of Alaska and its lack of basic
infrastructure in rural areas which makes it exceedingly
difficult to build sustainable economies. Alaska, as you know,
is two and a half times the size of Texas and about a fifth the
size of the lower 48. If you look at a map that I have included
in the testimony, when you compare it to Europe, the size of
Alaska completely engulfs or touches within the boundaries of
at least 16 countries from Portugal to Turkey. Alaska has one
of the largest Native populations in the United States, making
up about 22 percent of the total population in Alaska. If you
take a look and think of that, the length and the logistics,
not even to mention the Arctic conditions, you will understand
our challenges in building sustainable economies.
In settling our land claims, Alaska Natives gave up a lot.
Our land holdings were significantly reduced, yet we accepted
the settlement because we believe the United States would honor
its trust obligation to us, and our people would benefit from
the land capital in corporations created by ANCSA.
I want to mention, some news articles have talked about
whether or not the 8(a) companies are a front for somebody
else. Alaska Natives have been involved, just enmeshed in
capitalism, for over 34 years because our land claim settlement
was structured by the Congress in the corporate forum. And so,
we have had to learn to maneuver and how to make capitalism
work and the forums of corporate structure work for our people,
and that is a fundamental difference between us and other
Native people within the United States. We have no
reservations. We have no trust lands. Our whole, the viability
of our cultures and ownership of our lands depend upon the
viability of our corporations to maintain fiscal stability and
in order to protect our land because it is not trust land.
We considered the amendment on the 8(a) program to be an
integral part of the ANCSA economic settlement, and I was
involved in 1986 in testifying before the Congress, asking for
the inclusion of the SBA amendment as well as a whole package
of other amendments that we felt were absolutely essential for
the success of the land claim settlement and for our people.
I also want to say, Alaska Natives have lived in our
homelands for over 10,000 years, and we continue that, and we
are here to stay. We have a land base, and we are building our
capacity. One of the most important things of the 8(a)
contracting is the capacity-building, the opportunity for
mentorship, what we are learning in how to do business--
absolute essential.
What we have also done recently is we have commissioned a
30-year trend analysis to see how we have done in the last 30
years on a whole range of indicators, whether or not you are
talking about education, health, infant mortality, life
expectancy, and so forth. And I am here to report to you that
we have made tremendous success in the last 30 years.
I will give, for example, poverty rates among Alaska
Natives. Thirty years ago, our poverty rates among our people
were in the 60 percent plus. Now, the poverty rate among Alaska
Natives is down to 20 percent, and that is with a population
that increases every 23 years and doubles in its population.
That is a remarkable achievement by any standard and should be
something held up by the U.S. Congress and the administration
to other parts of the world of how to reduce poverty linked to
economic growth.
Chairman Manzullo. We have a red light here.
Ms. Kitka. In conclusion----
Chairman Manzullo. You know what that means.
Ms. Kitka. Yes.
In conclusion, Mr. Chairman, the program is a success. We
are proud to be a part of it. We have seven recommendations
which we urge your consideration and which we think can make
good economic policy for Alaska Natives, Native Americans, and
I note for the delegate from Guam, many of those
recommendations could specifically address some of the concerns
that she has with the Chamorro people in Guam.
Thank you.
[The prepared statement of Ms. Kitka follows:]
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Chairman Manzullo. Thank you very much.
I think we are talking about two different things. I think
Mr. Alford hit it on the head. It is that 8(a) was not set up
to be a community development program. It was set up to be a
helping hand for small, struggling businesses until they get
their legs firmly put upon the land and develop some business
practices and are able to go out and compete on their own. So
we have two different things going here.
There is a good argument, a good factual argument that
these 8(a) exceptions have helped dramatically the Alaska
Natives. But if you take a look at Mr. Ramos' figures of the
Department of Defense, he said that of the contracts awarded, I
believe that $1.1 billion goes to Alaska Native Corporations,
$1.2 billion to African-American, and about the same to
Hispanics. If I do the calculations, if 22 percent of the
people in Alaska fall into the category for inclusion as Alaska
Natives, that is about 144,000 people that are not only
situated just in Alaska, but according to the testimony of Mr.
Garber, 400 of the 600 live I believe outside of Alaska.
Mr. Garber. No.
Ms. Kitka. Mr. Chairman.
Chairman Manzullo. Is that correct?
Mr. Garber. No. They live in the village. They live in the
region.
Ms. Kitka. Mr. Chairman.
Mr. Garber. Outside the zone. They live in the region.
Chairman Manzullo. OK.
Mr. Garber. Within 50 miles of the village.
Chairman Manzullo. OK, all right. Now my question is----
Ms. Kitka. Mr. Chairman.
Chairman Manzullo. Yes.
Ms. Kitka. The current census says 125,000 Alaska Natives
within the borders of our State, 120,000 Alaska Natives
scattered over the rest of the United States.
Chairman Manzullo. OK. Now, as to the latter, are they
included in the dividends that are paid by the ANCs, just based
upon meeting the qualifications to belong to Alaska Native
tribes?
Ms. Kitka. Mr. Chairman, I could address that. The
requirements in enrolling for the land claims is you had to
meet a certain blood quantum, you had to have been alive on
December 18, 1971.
Chairman Manzullo. No. I understand. I am talking about the
corporations when the dividends are paid.
Ms. Kitka. Yes, what I am saying is when you enrolled in
1971, no matter where you lived, if you lived if Seattle, if
you----
Chairman Manzullo. There are people who are Alaska Natives
that are not working with the corporations, the ANCs, that have
their own businesses, regardless of their wealth, that are
still the beneficiaries simply because they belong to the
qualifying tribe by tribal definition, isn't that correct?
Mr. McNeil. That is so, under the Alaska Native Claims
Settlement Act.
Chairman Manzullo. That is right, and I am not trying to
say there is anything wrong with that. But what I am saying----
Mr. McNeil. There is even a----
Chairman Manzullo. Let me finish my point. What I am saying
is what Mr. Alford is talking about is the 8(a)'s that are
representing the African-American and the Hispanic community
and the others covered by 8(a), those are individual businesses
where the owners themselves who are working, not just because
they are members of a corporation to get the share and the
benefit of the profits of the corporation. That is the struggle
going on here as to 8(a) being used as a tool of economic
development for ANCs and 8(a) being used as a helping hand up
for the other so-called, well, for the other minorities that
are involved in it.
That is where we are having our problems as Members of
Congress because to the Harry Alford and to the Hispanic
community, they see this gross disparity of amounts of money
going to the ANCs in terms of the awarding of the contracts as
opposed to the other minorities. This program is working well,
but that is not what 8(a) ever intended was to work this well
toward just one group of people that are involved in these
contracts.
Mr. McNeil.
Mr. McNeil. Yes, Mr. Chairman. Congressional policy
certainly has evolved over time and including the advent of the
Alaska Native Claims Settlement Act. The Native people of
Alaska gave up quite a bit for that claims settlement, and that
is part of it.
Chairman Manzullo. I understand, but so did other Native
American tribes----
Mr. McNeil. That is true.
Chairman Manzullo. That are not included with the special
exceptions.
Mr. McNeil. The other, the Native Americans are also
included in the same program.
Chairman Manzullo. OK, all right.
Mr. Garber. Mr. Chairman.
Chairman Manzullo. Yes.
Mr. Garber. The program has evolved in community
development. I would say that there is a strong argument to say
that our 8(a) exception isn't necessarily pointed at community
development. It is development of businesses and the benefits,
and there is a larger beneficiary pool, not just the
shareholders, but there is also descendants who all gain from
the benefits of our scholarships and the like.
The new HUBZone regs are all about community development in
places that have nothing to do with Indians.
Chairman Manzullo. I understand.
Mr. Davis.
Chairman Tom Davis. I have a couple questions.
Look, nobody quarrels with the intent of the Native Claims
Act or of the ANC. We understand what the purpose is.
I come at it from a different point of view. I oversee the
committee that oversees all Federal procurement. Whenever you
let people go out with sole-source bids, we just don't think
you get the same value as when they are competed. You talk
about a seat at the table, and I think the comment from Mr.
Totemoff was that people don't want to see Natives at the
table. I want you at the table; I just don't want you to have
your own table. We want you out there competing with these
others, with other 8(a) companies and the like. They have
written different rules for you, so that when we go out and you
compete for a contract, you are in a class by yourself.
For a Government procurement officer, a small business
officer to go out, they can negotiate just with you and other
8(a)'s but you count against 8(a) percentages and everything
else, and it just makes it a little too neat and convenient.
That is the concern.
We are trying to figure out what the best way is. There is
a cost to the Government for doing that. We are just trying to
take a look at it in this context. I don't think anybody, any
ANC has abused the process. These were the rules that were
written. You are doing what you ought to be doing. I just think
on the Government side sometimes, as this has grown, it has
grown at the expense of people who could have been in there
bidding and offering the best deal.
Mr. Alford.
Mr. Alford. Congressman Davis, it is rather hideous to hear
Mr. Ramos say that everything is on par because they all have a
billion a piece. Forty million African-Americans, forty million
Hispanics, the population of Alaska Natives, less than half the
district, any one of your Districts, and they are on par? For
the gentleman to say, well, I just made $200,000 a year. Ninety
percent of my constituents would love to make $200,000 a year.
Chairman Tom Davis. I wouldn't mind it.
Mr. Alford. Thank you. I am wondering about the reality of
the whole thing.
One last thing, Akima has been mentioned--Charlotte, NC,
spawned in Charlotte, NC. Look at the Katrina rebuilding and
the ANC involvement--Norfolk, VA; Greenbelt, MD.
Chairman Tom Davis. They have some in my District, too. Let
me just say----
Mr. Alford. Are they Alaska Natives?
Chairman Tom Davis. Well, the shareholders are Alaska
Natives and that is where the money goes. The profits go back
into Alaska.
Mr. Alford. They are not Alaska Natives though.
Chairman Tom Davis. The employees may not be, but the
owners of the corporation, as I understand, are Alaska Natives,
and it gets channeled back there. I don't think there is
anything improper about that, but here is what concerns me.
What concerns me is, again, getting the Government's best
value.
Mr. Waxman brought this up earlier. Henry and I don't agree
on everything with Government contracting, but he has been very
consistent in saying that we should not be doing a lot of sole-
source contracting, no-bid contracting where you are just
sitting across the table with one company and a Government
negotiator. You ought to have other companies there. The
difficulty on the ANCs is you are not at the table. Your 8(a)'s
aren't at the table. Other 8(a) aren't at the table. Other
large companies aren't at the table. We think in competition,
ANC still may end up getting the work. They do a lot of good
work, but we just think the Government is going to get a better
value if they do that.
That is my point. If you take exception to that, but that
is----
Mr. Garber. Mr. Chairman, I am one of the few at the table
actually who actually operate these companies, and I am right
there. We have substantial cost savings to the Government in
multiple millions of dollars in manufacturing. For the most
part, our primary areas in the 8(a) are heavy-duty aircraft
maintenance of jets and helicopters. We have very, very few, if
any, small businesses who do that. We do----
Chairman Tom Davis. Do you object to competing?
Mr. Garber. We are actually beating large business and the
proof in the pudding is that large business, after a number of
years, is coming to us to subcontract because our rates are
cheaper and we are----
Chairman Tom Davis. But you shouldn't be afraid of
competition, that is all I am saying.
Mr. Garber. Over time, I wouldn't be, except that, as you
know better than I do, large businesses can do any number of
different contracts.
Chairman Tom Davis. I wouldn't mind you competing against
other 8(a)'s. That would be fine. The difficulty is that their
threshold for sole-source is $3 million or $5 million, and you
have no threshold.
Mr. Garber. In most situations, there are reasons why we
have actually avoided the pools of under five and under three.
Chairman Tom Davis. Let me ask you this. How many contracts
do you have that are open contracts that are basically open to
everybody?
Mr. Garber. We compete almost 100 percent right now of our
services contracts in small business competes.
Chairman Tom Davis. But you are small business. How many
contracts have you won that are full and open?
Mr. Garber. On the services side, on the manufacturing
side, like I said, 10 to 15 percent. On the services side, we
have only been bidding for the last 9 months.
Chairman Tom Davis. So you are new. In time, you think you
can move to that, is what you are saying.
Mr. Garber. Yes.
Chairman Tom Davis. Let me ask you the others. I am not
advocating it. I am just trying to get a flavor for how many
contracts you are winning in the open marketplace.
Mr. Garber. Well, I also, you are making the point that we
are losing money for the Government. We are winning. Our rates
are about one half to two-thirds big businesses.
Chairman Tom Davis. Well, if they are, why can't we compete
it against others, if your rates are so good?
Mr. Garber. Because the effect of these things on us is
that big business is being protected from us.
Chairman Tom Davis. Why in the world can't you compete
against other small businesses?
Mr. Garber. Because they can't do what we do.
Chairman Tom Davis. Then you are not afraid of competition.
My point is a very simple one. We can compete against you in an
8(a) pool, and you would be treated like other 8(a)'s. The
difficulty isn't that we don't want you at the table. We want
you at the table. We would just like to have other people at
the table. That is the only concern.
I don't want to upset something that is working for Alaska
Natives. Congressman Young, I think made a very eloquent
presentation today about what this is doing, going back
historically. We are not trying to upset the whole thing, but
there is a concern, at this committee level, whenever anybody
is given these no-bid contracts and you are sitting across with
a Government negotiator. I did this for a living for 20 years.
I understand the way it works.
If you have a couple other companies there with you, small
businesses if they can find them, but right now, they are
prohibited from looking at them because they have a threshold.
For Mr. Alford's company, it is $3 million to $5 million. When
you are sitting down with a $30 million, you are the only guys
in town, and that is the concern. I just say that.
Now you do a lot of good work. This is the right way to do
it. You are earning your way. You have done nothing wrong. You
are operating under rules that we have written. Our question
is: Should we revisit the rules a little bit and tweak them a
little bit, so maybe we can include a little bit more
competition, not from the large companies but maybe from other
small companies in this pool?
Mr. Garber. That is my problem, and I guess that is the
point that you don't understand, that the vast majority of all
the source contracts, sole-source contracts are big business.
They are not small business, and they are not us. In the time
that we have been speaking----
Chairman Tom Davis. I agree with that.
Mr. Garber [continuing]. At this hearing, there are more
sole-source contracts----
Chairman Tom Davis. Let me tell you something. This
committee has jumped all over other agencies, just so you
understand, because of sole-source, even in emergency
situations. We have four areas in Iraq. So I don't need a
lecture from you to tell me what we are doing on that.
Mr. Garber. Oh, I am sorry.
Chairman Tom Davis. We are going after sole-source and
these no-bid contracts everywhere. So this is a small piece of
that. I am asking you, though, if you could compete with other
small businesses, that is OK, isn't it? You can beat them
straight up, can't you?
Ms. Bordallo. In our areas, it would be a concern. We do
now, and there are not that many who can do what we do.
Chairman Tom Davis. So you ought to be OK, and that is the
concern. The difficulty is that a lot of small 8(a) businesses
can't compete with you because of the size limitations that
they have that you don't have.
Mr. Garber. That is not the reason they can't compete with
me. Not many mom and pop's maintain jets and not many mom and
pop's have the manufacturing organizations.
Chairman Tom Davis. Then that is fine. That is fine. I
don't have a problem with that, but in some of the IT and some
of the other areas, there certainly are competitive parts to
this.
Mr. Alford. Sir, I would like to introduce him to some 8(a)
firms who do maintain jets.
Chairman Tom Davis. Well, I think the Government can find
them if they do it, and if they can find them, I think you are
still going to win a lot of contracts.
Mr. Garber. We compete against that.
Chairman Tom Davis. I still think you are doing a lot of
good. That is my only point.
Ms. Sandvik. Excuse me, a couple of points I would like to
make. No. 1, there seems to be some question about whether it
is appropriate to have different caps, limits placed, and that
somehow or another, there is a suggestion that is inappropriate
for Alaskan Native Corporations to not be subject to the same
caps that some of the smaller, individually owned businesses
are.
Frankly, we believe it is absolutely appropriate. As I
mentioned in my testimony, there are 11,200 beneficiaries of
all of NANA's business efforts, and so we distribute our
profits amongst 11,200 people. If we were held to the same
threshold as the $3 million, and we earned a typical margin on
that work of 5 percent, that means $150,000 would be
distributed to 11,200, yielding a $13.15 return.
Chairman Tom Davis. Ms. Sandvik, in a vacuum, you are
right, but here is the practical side of it. We drive these
procurement officers to meet a certain percent and threshold of
8(a) contracts that they are letting out. Because it is so easy
for them to go no-bid, sole-source to you, basically they don't
give it to other people, and that is the difficulty with this.
So we want to try to figure out a way out of it. It is an
unintended consequence.
I am not griping or complaining about what you are doing
and the way this has come about. I am just saying I think it
always works better for the Government when we are looking at
contracts to have two or three potential bidders out there. If
we can find two or three ANCs, that would be fine. I would feel
better about that, but we can't. The record shows that we
haven't been able to do that. This is driving some fairly large
procurements at this point. That is the concern.
I think some of the other concerns, I think you have
addressed very well today, but that is the concern.
Mr. Waxman. Thank you.
Mr. Totemoff, let me ask you some questions about a TSA
contract for maintenance of airport screening equipment. This
is a contract that Chenega sought but did not receive.
In late 2004, TSA planned to hold a competition for this
contract, and the plan was for companies to submit informal
white paper proposals before a formal request for proposal was
sent to a smaller number of select contractors. Both Chenega
and Siemens were among the contractors that made it to the
second round, is that correct?
Mr. Totemoff. Yes, I believe so.
Mr. Waxman. At this point, the competition was halted
because of political pressure. According to a November 1, 2004
e-mail from Lee Kair, the Acting Assistant Secretary for
Acquisition, the entire Alaska congressional delegation was
pushing for Chenega to receive the work under a no-bid contract
it had with Customs and Border Patrol. The e-mail states,
``Staff from these offices have been adamant that we evaluate
an option using a CBP contract with Chenega for similar
services.'' Then the other documents confirm that TSA officials
met with the staff of the two Senators from Alaska on October
19, 2004.
Mr. Totemoff, did Chenega ask the Alaska delegation to
intervene with TSA on Chenega's behalf?
Mr. Totemoff. I am not aware of any such thing.
Mr. Waxman. What specifically did you ask them to do?
Mr. Totemoff. I really don't recall the TSA contract.
Mr. Waxman. Then if you didn't ask them, the two Senators
and a Congressman just decided on their own to begin pressuring
TSA to consider giving the work to Chenega without a
competition.
Mr. Totemoff. Maybe.
Mr. Waxman. That is what happened. Do you think that is
what happened?
Mr. Totemoff. It is possible.
Mr. Waxman. The documents also show that TSA succumbed to
this political pressure by giving Chenega special access to
present its no-bid plan to TSA. Is that true? Did Chenega make
a presentation about its proposal to a TSA panel on November
29, 2004.
Mr. Totemoff. I don't recall that far back, no.
Mr. Waxman. 2004?
Mr. Totemoff. Yes.
Mr. Waxman. November? Well, according to the TSA documents
obtained by the committee, Chenega proposed using Siemens as
its subcontractor. A November 24, 2004 memo from Mr. Kair said,
``Chenega stated that Siemens would deliver 100 percent of the
technical effort.'' In other words, Siemens ``will execute the
technical work under Chenega's management.''
Is that right, Mr. Totemoff? Did Chenega propose to have a
large non-Native subcontractor do all of the actual maintenance
work?
Mr. Totemoff. I don't recall again. I don't recall those e-
mails that you are referring to.
Mr. Waxman. Do you recall this whole issue of this
contract?
Mr. Totemoff. I recall we didn't receive the contract.
Mr. Waxman. In this case, TSA ultimately resisted the
political pressure because it didn't think a no-bid contract to
Chenega would be a good deal for the taxpayer. Mr. Kair, the
acquisition official, wrote, ``While it asserted that it was
convinced it could save over the current prime, Chenega was
unable to demonstrate knowledge of current costs or provide a
projected order of magnitude of savings.'' In addition, he
concluded, ``Sole-source negotiations simply cannot yield the
kind of savings or pressure that the market brings to bear.''
On November 29, 2004, TSA announced that it was resuming
the competition. Siemens ultimately received the contract on
March 1, 2005.
Mr. Totemoff, do you think it makes sense to award Federal
contracts on the basis of who has connections to Members of
Congress?
Mr. Totemoff. I don't believe so.
Mr. Waxman. Although Chenega didn't receive this contract,
this is a disturbing case. An ongoing competition was halted
due to political pressure. This is not supposed to happen in
our procurement system.
This contract highlights another major drawback of a no-bid
ANC contract. In the absence of competition and with a clear
criteria for selecting contractors, contracting officials are
susceptible to political pressure and lobbying. What I
described is an unsuccessful effort, but nevertheless it raises
the question of if you don't have competition, then the
pressure is on to maybe give political favors to a bidder which
means the taxpayers don't get the benefit of competition and
the procurement people feel they better go along with the
political pressure, even though the taxpayers may not get the
best deal.
Mr. Totemoff. I think our corporation is ethically far
better than that. I mean from my viewpoint, as being the
president and CEO, I tell all my managers that we are going to
either do things above board and always do the right thing.
Mr. Waxman. Do you think it was reasonable to have a
contract that you wouldn't be handling but Siemens would be
handling and then get it on a no-bid basis?
Mr. Totemoff. Again, I don't recall the final negotiations
of the TSA contract. What I do recall is we didn't get it.
Mr. Waxman. Thank you.
Thank you, Mr. Chairman.
Chairman Manzullo. Ms. Velazquez.
Ms. Velazquez. Thank you, Mr. Chairman.
Mr. Totemoff.
Mr. Totemoff. Yes.
Ms. Velazquez. You know you made a comment about the fact
that this is all about people not wanting to see Native
Americans at the table. You are totally wrong. We in Congress
are in the business of making sure that things are done the
right way and if there are fixes that need to be done, that is
our responsibility. Since SBA has not taken oversight seriously
for the last 5 years, we need to make sure the taxpayers'
moneys are protected.
Mr. Alford, agencies want to buy things the fastest and
easiest way possible. If agencies were split off from the 8(a)
program, agencies will have the choice of the 8(a) program with
no contract dollar limit or 8(a) with its restriction on the
company, the owner, and the contract. Even considering civil
rights implications and the possibility of not achieving
contracting goals, which are limited multi-weighted factors,
wouldn't we be setting up a situation where contracts would
disappear from the 8(a) program in a monumental fashion, even
faster than they are now.
Mr. Alford. Congresslady, the best agency that uses 8(a)
contracting programs and has the best results and diversity is
HUD, and Secretary Jackson will tell you: I use the 8(a)
program to make sure we have diversity in HUD. They are the
best agency, and I don't see ANCs proliferating over there
because they use the true spirit of the 8(a) program.
God bless ANCs and give them half the Federal treasury if
he deems necessary, but let them have a program that does not
prey on Hispanic, African-American, and Asian 8(a) companies. A
$2 billion increase, ANC; $2 billion increase, other
ethnicities. There is a direct correlation there.
Ms. Velazquez. Again, as you know, ANCs are able to receive
multimillion or billion dollar contracts without competition.
The rationale for that was to encourage economic development
that we all support. Given this, do you think we should be
making sure that the profits from these contracts are used for
the stated purpose of economic development and not to line the
pockets of executives who have nothing to do with Native
Alaskan communities?
Mr. Alford. Absolutely, and my concern in this whole thing
came out of these ANC ``companies'' in the good old South and
going to their facilities, not seeing one Alaska Native and
seeing billion dollar companies that have a subsidiary arm
called an ANC that is feeding the other companies of this
conglomerate. So I think there should be some serious auditing
done to see exactly where is the money done.
Ms. Velazquez. Thank you.
Ms. Sullivan, can you talk to the committees a little bit
about how ANCs serve as enablers for agencies to do more
contract bundling?
Ms. Sullivan. I had a difficult time hearing you. Would you
mind repeating the question?
Ms. Velazquez. Can you talk to the committees a little bit
about how ANCs serve as enablers for agencies to do more
contracting bundling?
Ms. Sullivan. The larger the contracts that they are
allowed to award, the more bundling that we think happens. So,
because the ANCs do not have the same limitations that other
8(a) companies do in terms of sole-sourcing, I think that it is
pretty clear there is a trend toward larger contracts.
Ms. Velazquez. What do we need to do about this?
Ms. Sullivan. You know, there are a lot of recommendations.
The President, in 2002, in his contract bundling initiative,
laid out nine steps. But it seems, and the 2005 SBA IG audit,
they are saying that SBA failed to create a statutorily
required data base for tracking bundled contracts. The agencies
have told the GAO that the definitions are complex and unclear.
And so, there is a lot of work, in our opinion, that needs to
be done by the agencies to make sure that contract bundling is
properly reviewed.
Ms. Velazquez. In what way do you think the definition of
bundling should be modified?
Ms. Sullivan. You know, I have the definition somewhere
here in my papers, but it is very, very long and it is a number
of pages. I would like to be able to come back to you with that
answer because I think that takes some serious review on our
part.
Ms. Velazquez. Thank you.
Mr. Chairman, I just would like to add for the record that
we have in the 8(a) program, 9,700 8(a) firms and 154 8(a)
ANCs. That get 13 percent of all the 8(a) contracting dollars.
Less than 2 percent of the 8(a) contracts go to the ANCs. The
problem here that we have is, to have a level playing field,
the ANCs, without competing and sole-source, which the rest of
the minorities who are under the 8(a) program do not have. How
can we benefit or allow for the 8(a) contractors, minority
contractors to have a level playing field, so that we allow for
them to have access to the fair marketplace?
There is no level playing field, and I think we need to
look into ways legislatively that we can address that
imbalance.
Thank you.
Chairman Manzullo. Mr. Alford and Ms. Sullivan, actually
anybody, can you describe to me a typical 8(a) company?
Mr. Alford. Over the last 5 to 6 years, a typical 8(a)
company, a college graduate with Fortune 1000 experience and a
specific degree, usually family owned, husband and wife, two
brothers, with skill sets that identify them as probably going
to be successful, just need to get into the program and get
that break and get that experience and they grow.
One of our larger companies, S.R. Smoot Corp., a
construction company, has been around since 1946. Lewis Smoot,
second generation, comes out of Michigan State with an
engineering degree and convinces his father and uncles that
they can take this company farther if they employ the right
people and do the right thing. He convinces them to get into
the 8(a) program in the 1970's. Today, they do about $800
million in construction and do a lot around here in Washington,
DC.
Chairman Manzullo. Are they still 8(a)?
Mr. Alford. Oh, no. They graduated years ago. But I am
saying and as I said in my report, most of these 8(a)'s, when
they graduate, are probably going to spell big success, the
ones who are getting the contracts and know how to market and
get through it. There are many 8(a)'s, and that is becoming
less and less, who rely totally on the 8(a) program and don't
prepare for graduation. But today that curve is changed, and as
I said in my testimony, the majority of our businesses who have
succeeded are 8(a) graduates.
Chairman Manzullo. Do you know of companies that lost
contracts to 8(a) ANCs?
Mr. Alford. I know companies that are livid. Jerry Harris,
Cirrus Technology, Huntsville, AL, you would have to arrest him
if he came into this room right now today. He couldn't control
himself. He has lost many millions of dollars. He is 8(a). He
is African-American.
Chairman Manzullo. How many employees?
Mr. Alford. Probably at the top, 100. Disabled veteran, top
secret clearance, Vietnam Vet, can do maintenance on jets, but
he is livid about the contracts that he has lost. He calls me
monthly. What are we going to do about the ANCs?
I think what we have here, you have apples and oranges, and
they have a serious situation, but it is not similar to the
situation of a typical 8(a). So, why are they in the same
arena? Why can't Congress come up with a program specific for
the ANCs that doesn't create them as being predators to the
traditional 8(a) company.
Chairman Manzullo. The other Native American tribes do not
enjoy the same exceptions.
Mr. Garber. Yes, they do.
Chairman Manzullo. Do they, under the $5 million and $3
million? They don't take advantage of it.
Mr. Alford. Let me, something I am kicking around, there
are African-Americans Indians, Pequots in Connecticut, plenty
in Oklahoma. I am going to get some of them into the ANC
program and then probably it will go away when that happens.
Chairman Manzullo. I just have one other question. There is
a reason for this hearing, and that is that members from across
the Nation have approached me and Mr. Davis about why there are
8(a)'s who are not even 8(a)'s. We are outside the realm of
8(a)'s with regard to competition.
If I look at the demographics, the population of Alaska in
2004 is 655,435. The Natives, and this is according to the
Government definition, is 96,505 or 15.4 percent. The 8(a)
program has evolved into something that it was never intended
to do. This is coming from Congress that we are in a position
where obviously we represent our congressional districts, but
as a whole, I see this going in the wrong direction. It is
self-destructive, and it could end.
It could be big problems for the future of the 8(a)
program, if the complaints continue to come this way from the
8(a) participants themselves. They are wondering, why even have
an 8(a) program when 13 percent of the contracts are going to
154 companies representing 96,000 people as opposed to 9,700
companies representing tens of millions of others that come
within the definition of minorities within the 8(a). That is
the reason for the hearing.
Nobody here is picking on the Native Americans in Alaska.
That is not the purpose of the hearing. It is to show that
there are huge concerns, and the message has been very clear.
That is that the industry itself ought to take a serious look
at trying to resolve this issue. The last thing you want to do
is have Congress try to fix it and foul it up again because
this place is notorious for trying to fix issues like this one
which have to be resolved within the industry.
I have no further questions.
Mr. Waxman, did you have any questions?
Mr. Waxman. Yes.
Mr. McNeil. Can I comment on the equal playing field issue?
Chairman Manzullo. Yes, sir.
Mr. McNeil. I think the story is incomplete here in the
sense that comparing our owners and constituents of Native
people as tribal members with the very large numbers of other
minority groups because it would be the same and it would be a
good analogy, if in fact those 9,700 individual entrepreneurs
distributed all the benefits to 40 million people, and they
don't. That is an obligation that we have to essentially
distribute the benefits to our people, and we have done it. I
think there is very good evidence of that.
But I think that is a very important fact here because if
there was that sharing that went out to a broad base of people,
then I think the analogy would make some sense.
Ms. Velazquez. May I ask you a question?
Mr. McNeil. Yes, ma'am.
Ms. Velazquez. In any given contract, can you give 49
percent of the contract profits to a non-Alaskan executive?
Mr. Garber. Any 8(a) can do that.
Mr. McNeil. Yes, any 8(a) can.
Mr. Garber. Us or the individually owned ones, that is an
8(a) regulation not unique to Alaska Natives.
Mr. McNeil. Let me clarify that as well.
Ms. Velazquez. I don't think that is the intent of the law.
Mr. Garber. The law applies to all 8(a)'s.
Mr. McNeil. Representative Velazquez, there is a mentor-
protege program that does allow participation in a partnership,
and I believe the question here is really what benefit occurs
in that kind of partnership. The benefit that we, as Alaska
Native people, as tribes, achieve in those partnerships is that
they build capacity in our companies that we don't have or in
our people because it provides a level of expertise that we are
able to develop over a period of time. I think that is one of
the key intents of those relationships which are permissible
under the law and regulations.
Chairman Manzullo. Yes, Ms. Kitka.
Ms. Kitka. Mr. Chairman, I just had one comment. You raised
earlier the concern about the jobs leaving the country, going
into other countries and the loss of jobs. Our recommendation
No. 3 addresses that, and it is, we put that forward with the
good will that what we would like to see this committee, this
joint committee do is expand the economic pie for Alaska
Natives, Native Americans, other minorities in this country and
not pit us against one another.
We very carefully calculated some different recommendations
which we think would be very, very timely. This one in
particularly, especially taking a look over the past months of
the controversy of Dubai on wanting to take over the ports, on
that, we have spent some time studying what they were doing.
They were building a first of its kind, world class outsourcing
tax/trade-free zone. For U.S. businesses, including homegrown
ones like Alaska Natives, for us to be competitive in the
global economy, we need to be able to match up on that.
I really strongly commit, strongly urge the committee to
take a look at our recommendations and look at how to expand
the economic pie and how to create incentives that will benefit
Hispanics, African-Americans, Alaska Natives, Native Americans.
There are ways to solve some of these issues and these
conflicts by expanding the opportunities as opposed to pitting
us against each other. So I just respectfully urge you to
consider some of these things.
We are very concerned about the jobs leaving the United
States and would like to really engage in some talking about
how do we create more economic opportunities; how do we make
American companies more competitive in the global economy; and
how do we grow the investment climate in our country, so that
we become magnets for these jobs as opposed to them going over
to India or China or other places as well.
So, thank you very much.
Mr. Alford. Mr. Chairman.
Chairman Manzullo. Yes, sir.
Mr. Alford. Take $2 billion from our community and then
say, now, let us get along. It is a cancer to us, and we are
not going to get along with it.
And I was saying about the size of the populations, how
ludicrous it would be if my constituents had that same scale. I
am not asking for it. I think it is crazy. But, as the scale
clearly shows, it is a different animal from us. We are
different animals. We don't belong in the same corral.
Chairman Manzullo. Well, I hate to end on that note, Harry.
You all have been extremely gracious with your time,
extremely sincere, and I appreciate your testimony. I certainly
want to thank the witnesses for coming today, especially those
who have traveled from a great distance.
The committees stand adjourned.
[Whereupon, at 4:34 p.m., the committees were adjourned.]
[The prepared statement of Hon. Elijah E. Cummings and
additional information submitted for the hearing record
follow:]
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