PUBLISHED: 2:31 PM on Wednesday, June 27, 2007
Legislation could affect local Native corporations
Federal contracts to Alaska Native corporations are now worth more than a billion dollars per year. The Small Business Fairness in Contracting Act passed the U.S. House in May. It would limit the amount of those contracts won through the Small Business Administration's 8A program. The legislation is now in the Senate. CEOs of local Alaska Native Corporations warn of negative consequences for shareholders if the bill passes in the Senate.

The SBA's 8A program for minority businesses gives special preference to Alaska Native and tribal corporations. Since 1986, these firms have been eligible for single source contracts worth more than $5 million and have been allowed to establish several subsidiaries to compete for very large projects.

Photo by Amanda Gragert
  Native corporations such as Goldbelt Incorporated, which runs Mt. Roberts Tram, pay out dividend payments to shareholders each year.
Such preferences have helped Goldbelt Incorporated win federal contracts, according to president and CEO Gary Droubay. He said Juneau's urban native corporation paid dividends this year for the first time since 1999 largely as a result of earnings from federal contracts.

"Am I concerned about (the 8A preference program) going away? Absolutely. If it goes away it will hurt us and the Goldbelt shareholders."

Goldbelt has 3,200 shareholders. They received dividend payments of $1.25 cents per share in February.

The Small Business Fairness in Contracting Act passed the House 409 to 13. Alaska Congressman Don Young voted for it but in a prepared statement expressed reservations about its impact on Alaska Native business.

"My one concern with this bill was its seeming lack of support for our Alaska Native Corporation's 8A program. I have been assured by House leadership that the 8A issue will be looked into," Young said.

Iowa Democrat representative Bruce Braley sponsored the bill. On his Web site, the congressman said the bill would level the playing field between small business and large corporations.

"The Small Business Fairness in Contracting Act ensures that small businesses have the same opportunities as large corporations to earn government business. When government contracts are awarded through huge super-contracts, small businesses just can't compete," according to Braley.

In a report prepared for the U.S. Government Accountability Office, the House Government Reform Committee found Alaska Native Corporations placed in five of the top ten slots for federal 8a contracts awarded to disadvantaged minority small businesses in fiscal year 2004.

One complaint against Alaska Native corporations is they're not small business. Kootznoowoo Inc. CEO Peter Naoroz said his company is small and the community it represents lacks certain basics necessary to start individual businesses. Kootznoowoo is the native corporation for the City of Angoon whose 450 residents continue to rely on a subsistence life style. The company has almost 1000 shareholders.

Naoroz said a Kootznoowoo subsidiary was one of the first Alaska Native corporations to be qualified under the 8A program; it built computers. Although that business didn't pan out, Naoroz said he's trying to win other federal contracts.

"It's important to us to have an opportunity to compete in the global marketplace and this is the type of thing I believe is a solution. Right now we're looking for opportunities in the 8A business. We're in discussions with a group in D.C. right now," he said.

Afognak Corporation is among the state's most successful native companies. Based in Kodiak, it represents 700 shareholders. The company employs more than 3,000 people in manufacturing, technology, construction and security. Last year it had revenues of 537 million dollars due largely to federal government contracts. Afognak spokeswoman Sarah Lukin said it's hard to compare Afognak to other disadvantaged small businesses. She said some small businesses generate revenues for a handful of founders. Afognak and other native corporations provide for entire communities.

"The Alaska Native Corporations are considered small businesses programs under the 8A program because we represent so many shareholders; our shareholders have been classified as economically and socially disadvantaged," according to Lukin.

She said Afognak and other native corporations are working through the Native American Contractors Association in Washington, D.C. to lobby legislators against limiting contracts to Alaska Native businesses.

Legislation modifying contracting procedures is now before the Senate Committee on Small Business and Entrepreneurship. Action on it could come as early as this summer.