Conclusion of the Troubled ANC Program

Government Executive completed its series of articles accompanying the feature "Out in the Cold" , which appeared in the March issue of the magazine. This series focused on the contracting preferences for Alaska Native Corporations (ANC), and the need to reform the program now that former Sen. Ted Stevens (R-AK) is no longer in Congress. This series demonstrated how the ANCs have been used and abused, and painted an overall disturbing picture of how the ANCs have shifted the playing the filed in their favor, eliminated competition, and became holding companies and siphons for big business to continue receiving small business contracts.

In the fourth article in the series, Robert Brodsky reported on the frustrations and unfair competitive advantage ANCs have in “competing” for contracts:

…Jennifer Bisceglie decided early on that there was no point in competing against Alaska native corporations for government contracts.

"It comes down to time and money and resources and who do you really want to spend your time competing against," said Bisceglie, who runs InTEROS Solutions Inc., a four-year-old supply chain management consulting company in McLean, Va. "There is no way to win against an ANC as a small business."…

… Paul Miller, a small business lobbyist and partner with Miller Wenhold Capitol Strategies in Fairfax, Va., said many of his clients have abandoned any attempts to win work with the government, in part because of their frustration in competing against ANCs.

"People in the small business community said 'Forget about it. There is no way to get the business,'" Miller said. "So they don't want to waste the resources and manpower to try to go after it when it's futile."…

This has been a common theme among many 8(a) companies that face competition from ANCs as ANCs enjoy a unique business model that illustrates the need to reform this program. Part of the problem is the ability of ANCs to win sole-source contracts of unlimited value, in addition to being able to have multiple affiliate businesses in the program, as long as they operate in different sectors and become holding companies. This has allowed ANCs to skew 8(a) award data in their favor, and has been used by the acquisition workforce to award large contracts without the need for competition or the normal procurement process. Exacerbating the problem is the lack of oversight by the SBA:

…But Calvin Jenkins, deputy associate administrator for SBA's Office of Government Contracting and Business Development, argued that the federal contracting pie is large enough to accommodate all types of small businesses. Small firms earned more than $83 billion in government contracts in fiscal 2007.

"There is enough opportunity and a lot of room for us to assist all of these groups," Jenkins said. "We just need to be more strategic in doing that."

...SBA has not conducted an economic impact study of whether the contracting advantages provided to ANCs have hurt other types of small firms, but would consider such an examination, Jenkins said…

and the inherent corruption in the program:

…Contracting data shows that many of the more successful ANCs have these advantages in spite of the fact that they possess the capital, experience and workforce typical of larger prime contractors…

The last comment by the SBA rep is very telling, and indicative of the cavalier attitude by the SBA to ensure the viability of 8(a) companies, but also the inherent disinterest by the government in ensuring best value and being good buyers by simply awarding to ANCs on a sole source basis due to a perceived burdensome procurement process. The procurement process could be more efficient if the government could make strategic decisions on how it buys and ensures the procurement process is focused out favorable outcomes.

Some of the reforms that have been proposed are to bring the ANC program more in line with the normal 8(a) program, such as caps on the sole-source value and the ability to graduate from the small business category after a certain time period.

Defenders of the ANC program often point out to the fact that they are being improperly targeted and do good work for the government. No one is disputing this, but the argument is fairness and equity by being good stewards of taxpayer resources. This can be accomplished by ensuring the government receives best value for its investments through normal avenues of competition. Congress is discussing the elimination of the HUBZone program, but the discussion should include reforming the ANC program as well.