How the Alaska Exception Challenges Federal Contracting Orthodoxy

Last Updated Apr 23, 2010 4:44 PM EDT

Native American-owned companies get preferential treatment when bidding for federal contracts. These companies are treated as a favored small business along with women-, minority- and disabled veteran-owned under the 8(a) program.

The normal limit on such contracts is $20 million -- except for those from Alaska.

In the 1980s, Republican Senator Ted Stevens managed to create a rule that removed all contract limits on Alaskan Native-American owned companies. Not surprisingly, this special treatment for a small subset of those considered disadvantaged for the purpose of federal law has been controversial, and there have been several attempts to gut or kill it.

The rule is good for Alaskan corporations and the state as well. It gives the companies a big advantage over the competition. There are twelve regional native corporations in Alaska. They often have several subsidiaries that are qualified for 8(a) contracts and have substantial revenue. In 2002, for example, Chugach had more than $40 million in IT contracts.

Stevens lost his Senate seat in 2008, so it is up to Senator Lisa Murkowski (R-AK) (pictured) and Senator Mark Begich (D-AK) as well as the state's lone Congressman, Don Young (R-AK), to protect it. It won't be easy.

While they have been able to fend off attacks on the Alaska-only rule, other efforts to improve contracting and limit sole source awards are having an effect. In the 2010 defense budget, for example, the Senate required a written justification for any no-bid contract over $20 million. Those who wish to change the rules, such as Senator McCaskill (D-MO), argue that the original goal of the whole 8(a) program -- to favor disadvantaged businesses in compensation for past neglect and discrimination -- is no longer justification enough for large, non-competitive contracts. A higher priority, they believe, is efficient contracting and saving money.

Murkowski is trying to delay implementation of the regulation by requiring consultations between the government and the tribes in Alaska.

There will doubtless be further attempts to reduce or eliminate contracting provisions for favored social groups would be a major change in federal contracting practice. It would also be bitterly fought. But with the federal budget under pressure, the issue is not going to go away.

  • Matthew Potter

    Matthew Potter is a resident of Huntsville, Ala., where he works supporting U.S. Army aviation programs. After serving in the U.S. Navy, he began work as a defense contractor in Washington D.C. specializing in program management and budget development and execution. In the last 15 years Matthew has worked for several companies, large and small, involved in all aspects of government contracting and procurement. He holds two degrees in history as well as studying at the Defense Acquisition University. He has written for Seeking Alpha and at his own website, DefenseProcurementNews.com.