Alaska's native corporations are turning up in unexpected places, report Robert O'Harrow and Scott Higham in last Thursday's Washington Post: "Alaska Native Corporations Cash In on Contracting Edge"
"In July 2002, U.S. Customs Service officials announced they were preparing to award a half-billion-dollar contract for maintenance of thousands of gamma-ray, X-ray and other scanning machines at the nation's ports and borders. Some of the nation's biggest defense contractors, including Lockheed Martin Corp. and DynCorp, were asked to consider bidding for the work.
But a year later, Customs officials issued a statement saying there would not be competition for the work, after all. Instead, they decided to give a no-bid contract to a little-known company [Chenega Technology Services Corp. - Ben] owned by Native Alaskans....
Chenega had little experience maintaining high-tech scanning machines. So it ended up subcontracting much of the work to some of the big companies that had originally expressed interest in the contract...
Chenega did offer Customs officials a unique opportunity. By hiring Chenega, Customs could avoid the slow and costly competitive bidding process for government contracts that is designed to ensure that taxpayers get the most for their money.
Chenega Technology Services Corp. is one of more than 200 privately held Alaska Native Corporations permitted to operate as disadvantaged small businesses as part of government efforts to encourage Native American participation in federal contracting. The corporations have benefited from legislation introduced by members of Congress, most prominently Sen. Ted Stevens (R-Alaska), the powerful chairman of the Senate Appropriations Committee.
Alaska Native Corporations can maintain their small-business status, even if their parent companies have millions of dollars in revenue and thousands of employees. They are exempt from the $3 million federal cap on no-bid service contracts that are in place for other minority small businesses. The corporations do not have to be run by Native Alaskans. And they can subcontract much of their work to other firms, but their employees must do at least 50 percent of the work."
What are these Alaska Native Corporations?
"Chenega Corp., the parent of Chenega Technology, was formed as an Alaska Native Village Corporation in 1974. Three years earlier, the federal government had settled historical land disputes under the Alaska Native Claims Settlement Act. The act created a network of 13 regional and more than 200 village corporations to handle $962 million and 44 million acres from the federal government. They were also given the right to operate as profit-making businesses."
How did they get the competitive contracting advantage?:
"In their first 20 years of operation, many of the Alaska Native Corporations struggled, with several teetering on the edge of financial ruin.
Then, in the early 1990s, Stevens and other lawmakers stepped in. Stevens, 81, a senator since 1968, has enormous clout on Capitol Hill as chairman of the Senate Appropriations Committee. He introduced language that changed the Alaska Native Claims Settlement Act in 1992 to enable the corporations to be treated preferentially as small businesses for federal contracting.
Stevens also introduced language that negated, for contracts awarded to corporations owned by Native Americans, a Defense Department requirement of elaborate cost-benefit analyses before government work could be outsourced to private companies."
The article doesn't suggest that Chenega does poor work.
P.S. December 1: Today's Anchorage Daily News carries a story by Robert O'Harrow of the Washington Post indicating that the Transportation Safety Administration (TSA) has decided not to award Chenega a similar sole-source technology maintenance contract, that had been under consideration: "TSA opts for bids; Chenega bows out . MAINTENANCE: Native corporation was in line for sole-source contract".
"The Transportation Security Administration this week said it would resume plans to seek bids for a large technology maintenance contract, ending consideration of a proposal to give the work to an Alaska Native corporation without competition.
The TSA had been considering whether it might speed up the maintenance work by awarding the contract to Chenega Technology Services Corp., one of more than 200 privately held Alaska Native corporations permitted by Congress to sidestep normal procurement rules because of their status as disadvantaged small businesses.
Chenega Technology had earlier secured a $500 million sole-source deal with U.S. Customs and Border Protection to maintain that agency's screening machinery. In a meeting last month attended by Chenega executives and by staff members from the offices of Alaska's Republican senators, Lisa Murkowski and Ted Stevens, TSA officials were urged to piggyback on the Customs contract.
The proposed contract covers maintenance work for the metal detectors, X-ray machines and Explosive Trace Detectors at the nation's 450 commercial airports. The contractor is to take over for Boeing Co., which was paid $1.2 billion under a competitive contract that was criticized by the Department of Homeland Security's inspector general for more than doubling in size.
The TSA suspended plans for a competition after meeting with Chenega Technology officials in October. In a letter to contractors on Nov. 15, the agency said it "has been made aware of an alternative approach" to award the contract and needed to "exercise due diligence" to determine whether the approach had merit.
On Monday, TSA officials dropped that idea.
"After carefully reviewing the options and weighing the opinions of the experts, the TSA concluded that the competitive bidding process provides the right avenue to a contractor that will provide the government the best value," said Rear Adm. David M. Stone, the assistant secretary of homeland security for the TSA. "As good stewards of the taxpayers' dollars, we can do no less..."
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