[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
DIVERSIFYING NATIVE ECONOMIES
=======================================================================
OVERSIGHT HEARING
before the
COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
Wednesday, September 19, 2007
__________
Serial No. 110-44
__________
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COMMITTEE ON NATURAL RESOURCES
NICK J. RAHALL II, West Virginia, Chairman
DON YOUNG, Alaska, Ranking Republican Member
Dale E. Kildee, Michigan Jim Saxton, New Jersey
Eni F.H. Faleomavaega, American Elton Gallegly, California
Samoa John J. Duncan, Jr., Tennessee
Neil Abercrombie, Hawaii Wayne T. Gilchrest, Maryland
Solomon P. Ortiz, Texas Chris Cannon, Utah
Frank Pallone, Jr., New Jersey Thomas G. Tancredo, Colorado
Donna M. Christensen, Virgin Jeff Flake, Arizona
Islands Stevan Pearce, New Mexico
Grace F. Napolitano, California Henry E. Brown, Jr., South
Rush D. Holt, New Jersey Carolina
Raul M. Grijalva, Arizona Luis G. Fortuno, Puerto Rico
Madeleine Z. Bordallo, Guam Cathy McMorris Rodgers, Washington
Jim Costa, California Bobby Jindal, Louisiana
Dan Boren, Oklahoma Louie Gohmert, Texas
John P. Sarbanes, Maryland Tom Cole, Oklahoma
George Miller, California Rob Bishop, Utah
Edward J. Markey, Massachusetts Bill Shuster, Pennsylvania
Peter A. DeFazio, Oregon Dean Heller, Nevada
Maurice D. Hinchey, New York Bill Sali, Idaho
Patrick J. Kennedy, Rhode Island Doug Lamborn, Colorado
Ron Kind, Wisconsin Mary Fallin, Oklahoma
Lois Capps, California Kevin McCarthy, California
Jay Inslee, Washington
Mark Udall, Colorado
Joe Baca, California
Hilda L. Solis, California
Stephanie Herseth, South Dakota
Heath Shuler, North Carolina
James H. Zoia, Chief of Staff
Jeffrey P. Petrich, Chief Counsel
Lloyd Jones, Republican Staff Director
Lisa Pittman, Republican Chief Counsel
------
CONTENTS
----------
Page
Hearing held on Wednesday, September 19, 2007.................... 1
Statement of Members:
Bishop, Hon. Rob, a Representative in Congress from the State
of Utah, Prepared statement of............................. 34
Cole, Hon. Tom, a Representative in Congress from the State
of Oklahoma................................................ 2
Napolitano, Hon. Grace F., a Representative in Congress from
the State of California.................................... 5
Rahall, Hon. Nick J., II, a Representative in Congress from
the State of West Virginia................................. 1
Prepared statement of.................................... 2
Shuler, Hon. Heath, a Representative in Congress from the
State of North Carolina.................................... 5
Young, Hon. Don, a Representative in Congress from the State
of Alaska, Prepared statement of........................... 4
Statement of Witnesses:
DuMontier, Greg, Chairman, Native American Contractors
Association, Washington, D.C............................... 56
Prepared statement of.................................... 58
Garcia, Joe, President, National Congress of American
Indians, Washington, D.C................................... 48
Prepared statement of.................................... 50
Hall, Tex G., Chairman and CEO, Inter-Tribal Economic
Alliance, Mandaree, North Dakota........................... 43
Prepared statement of.................................... 45
Kitka, Julie E., President, Alaska Federation of Natives,
Anchorage, Alaska.......................................... 71
Prepared statement of.................................... 73
Largent, William H., Assistant Administrator, Office of
Native American Affairs, U.S. Small Business
Administration, Washington, D.C............................ 12
Prepared statement of.................................... 14
Lukin, Sarah L., Director of External Relations, Afognak
Native Corporation and Alutiiq, LLC, Anchorage, Alaska..... 94
Prepared statement of.................................... 95
McCaleb, Neal, Chairman of the Board of Directors, Chickasaw
Nation Industries, Inc., Ada, Oklahoma..................... 106
Prepared statement of.................................... 108
Middleton, Dr. Robert W., Director, Office of Indian Energy
and Economic Development, U.S. Department of the Interior,
Washington, D.C............................................ 6
Prepared statement of.................................... 7
Schinasi, Katherine V., Managing Director, Acquisition and
Sourcing Management, United States Government
Accountability Office, Washington, D.C..................... 17
Prepared statement of.................................... 20
Taylor, Jonathan B., Research Associate, The Harvard Project
on American Indian Economic Development, Harvard
University, Cambridge, Massachusetts, and Senior Policy
Associate, Native Nations Institute, University of Arizona,
Tucson, Arizona, and President, The Taylor Policy Group,
Inc., Cambridge, Massachusetts............................. 115
Prepared statement of.................................... 117
Additional materials supplied:
Denson, Beasley, Tribal Miko (Chief), Mississippi Band of
Choctaw Indians, Statement submitted for the record........ 126
NACA Joint Legislative Proposal on Small Business Contracting
submitted for the record................................... 128
National Center for American Indian Enterprise Development,
Statement submitted for the record......................... 129
OVERSIGHT HEARING ON ``DIVERSIFYING NATIVE ECONOMIES''
----------
Wednesday, September 19, 2007
U.S. House of Representatives
Committee on Natural Resources
Washington, D.C.
----------
The Committee met, pursuant to call, at 10:02 a.m. in Room
1324, Longworth House Office Building, Hon. Nick J. Rahall, II
[Chairman of the Committee] presiding.
Present: Representatives Rahall, Young, Kildee,
Faleomavaega, Christensen, Napolitano, Grijalva, Boren, Inslee,
Baca, Herseth Sandlin, Shuler, Fortuno, Cole and Bishop.
STATEMENT OF THE HONORABLE NICK J. RAHALL, II, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF WEST VIRGINIA
The Chairman. Committee on Natural Resources will come to
order.
At the beginning of this Congress, I stated that the
Committee would focus on economic development options and other
issues of importance to Native America. The Committee is
meeting today to hold the first in a series of hearings on
Diversifying Native Economies.
Today's hearing will focus on the Small Business
Administration's Native 8[a] program designed to provide
business opportunities to Indian tribes and Alaska Native
Corporations.
With a 26 percent poverty rate in Indian Country and
unemployment rates as high as 80 percent, the need for economic
development in Native communities is pretty self-evident. Some
Native governments have made great strides in combating this
situation while others continue to struggle. Likewise, some
Federal programs have worked better than others.
The Native 8[a] program demonstrates Congress' commitment
to promoting tribal self-determination and self-sufficiency.
The program reflects the unique character of Native governments
and their responsibility to provide governmental services and
other benefits to their members. Testimony today will discuss
the benefits that the Native 8[a] program has brought to Native
America.
Data shows that Tribal and Alaska Native Corporations
received less than 1 percent--less than 1 percent of the $377.5
billion awarded through Federal procurement contracts. Of the
$145 billion awarded through some source contracts, Tribal and
Alaska Native Corporations only received approximately 1.4
percent of that amount.
At the same time, the GAO issued a report last year
highlighting the need for better oversight and administration
of the program. So I look forward to today's testimony on how
this program affects Native communities and how it can be
improved to ensure that it is working as intended.
Congress needs to carefully examine the barriers and the
challenges facing Native governments as well as which programs
are working and why they are working. In doing so, we must
ensure that the Federal programs designed to assist Native
governments in addressing their needs are fair and working
appropriately.
I now recognize the Acting Ranking Member, the gentleman
from Oklahoma, Mr. Cole.
[The prepared statement of Mr. Rahall follows:]
Statement of The Honorable Nick J. Rahall, II, Chairman,
Committee on Natural Resources
At the beginning of this Congress, I stated that the Committee
would focus on economic development options and other issues of
importance to Native America. The Committee is meeting to hold the
first in a series of hearings on Diversifying Native Economies.
Today's hearing will focus on the Small Business Administration's
Native 8(a) program designed to provide business opportunities to
Indian tribes and Alaska Native corporations.
With a 26% poverty rate in Indian country and unemployment rates as
high as 80%, the need for economic development in Native communities is
self-evident. Some Native governments have made great strides in
combating this situation while others continue to struggle. Likewise,
some Federal programs have worked better than others.
The Native 8(a) program demonstrates Congress' commitment to
promoting tribal self-determination and self-sufficiency. The program
reflects the unique character of Native governments and their
responsibility to provide governmental services and other benefits to
their members. Testimony today will discuss the benefits that the
Native 8(a) program has brought to Native America.
Data shows that Tribal and Alaska Native Corporations received less
than 1% of the $377.5 billion awarded through Federal procurement
contracts. Of the $145 billion awarded through sole source contracts,
Tribal and Alaska Native Corporations only received approximately 1.4%
of that amount.
At the same time, the General Accountability Office issued a report
last year highlighting the need for better oversight and administration
of the program. I look forward to hearing testimony on how this program
affects Native communities and how it can be improved to ensure that it
is working as intended.
Congress needs to carefully examine the barriers and challenges
facing Native governments as well as which programs are working and
why. In doing so, we must ensure that Federal programs designed to
assist Native governments in addressing their needs are fair and
working appropriately.
Thank you.
______
STATEMENT OF THE HONORABLE TOM COLE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OKLAHOMA
Mr. Cole. Thank you very much, Mr. Chairman. I want to
begin by reading Ranking Member Young's statement in the
record, and then if I may, I will make a couple of brief
comments of my own.
Mr. Chairman, I commend you for holding this hearing today
on the subject of diversifying Native economies. My
understanding is that you plan on holding a series of hearings
on this broad theme. I hope these hearings are a tool to
measure progress in implementing Indian self-determination, a
policy set forth in 1970.
For anyone who wants to read the eloquent statement which
launched the present era of self-determination, he should read
President Richard Nixon's Special Message to the Congress on
Indian Affairs dated July 8, 1970. Let me quote the first lines
of this message.
``The first Americans, the Indians, are the most deprived
and most isolated minority group in our nation on virtually
every scale of measurement--unemployment, income, education,
health--the condition of Indian people ranks at the bottom.''
Today, conditions are greatly improved for the first
Americans. They are closing the gap. Sadly, they still rank
below the total population of the United States in the
measurements described by President Nixon. There is much more
work to be done. Progress that has been achieved so far has
been achieved through a policy of self-determination. We should
reenforce it as the primary means for Indians to improve their
lives and control their destinies.
These days, Native Americans' summits and conferences tend
to involve bankers, lenders, tax experts, natural resource
managers and investors more than government workers. This is a
healthy sign that Native Americans have taken the reins of
their destinies.
One area in which Native enterprises has been a success is
in the 8[a] contracting program. There have been some
misconceptions about Native involvement in 8[a], bubbling up in
various news reports and in other committees in Congress.
Today's hearing will air out these issues and give the
witnesses an opportunity to explain how the program is working
for Native American economies.
That concludes Chairman Young's statement. Let me add, if I
may, Mr. Chairman, from my own perspective----
The Chairman. This is Ranking Member Young.
Mr. Cole. Did I--you know. We can always hope, you know.
Don't have much else right now.
[Laughter.]
Mr. Cole. He is present, by the way. In case you didn't
know that, those were his words.
The Chairman. Oh, OK.
Mr. Young. It seems like you are doing an outstanding job.
[Laughter.]
Mr. Cole. Well, that is because I was reading from your
script. You usually tell me that, Mr. Young, when I do that.
But I do want to note that I am very privileged to
represent a district that has an enormous amount of Tribal
activity, Mr. Chairman. Obviously, my own tribe, the
Chickasaws, but also the Choctaw Nation, Comanche Nation, Fort
Sill Apaches, Cheyenne, you know, Southern Cheyenne, Arapaho,
others, and they are in various states of economic development.
This program has made an enormous difference, and I see tribal
entities, frankly, investing in areas in my district that
nobody else would invest in, bringing in resources,
opportunities and jobs, and I think, as you eloquently point
out in your statement, and Mr. Young in his statement, there is
no question that if we looked at it on a per capita basis,
there is not an undue amount of Federal money or contracts
flowing into Tribal economies, but they have taken what is
there and leveraged it and provided enormous opportunity for
their people, and frankly, in the case of my tribe, we have
11,000 employees, and we are a tribe of over 40,000 people, so
we are very substantial, the majority of those jobs are to non-
Native Americans, frankly.
There are other people in depressed areas that are brought
into the economy other than just Native Americans by Native
American activity.
So I want to commend you very personally and very sincerely
for holding this hearing and giving us an opportunity to
educate the rest of Congress about how important this is so we
don't inadvertently kill the goose that has laid at least one
or two golden eggs along the way, and I mean that quite
sincerely. So thank you so much for holding the hearing, Mr.
Chairman.
The Chairman. Thank you, Mr. Cole, for your statement and
the Chair will recognize the Ranking Member if he has any
additional comments to make.
Mr. Young. Thank you again, Mr. Chairman, for having this
hearing. This issue is something dear to my heart. We have done
much to try to help, especially the Alaskan Native and American
Natives, in this committee, and we have succeeded in some areas
and failed in other areas, but this is one area, this ability
to get involved economically has been quite successful. It is
under attack, and I think it is time we have a chance to expose
what it has done for groups within the nation, especially in
the State of Alaska, and this is what this is all about.
I believe there is going to be another hearing in another
committee. For some reason, they want to attack this program
when it has been successful, and we ought to be patting people
on the back and saying this is the right way to go, and there
is nothing that has been a better success story than this
story.
So again thank you for these hearings. I want to thank the
witnesses that are going to be here from the administration and
from especially the State of Alaska for flying this long
distance to be here to give their side of the story as it
should be for the record.
With that, I yield back the balance of my time.
[The prepared statement of Mr. Young follows:]
Statement of The Honorable Don Young, Ranking Republican,
Committee on Natural Resources
Mr. Chairman and Members of the Committee, I want to thank you for
holding this hearing. This is an issue that is very important to Alaska
Natives and Indian Tribes and I would like to thank the witnesses for
being here today. I know that many have traveled great distances to
testify before this committee.
I'd like to start out by briefly going over the history of the
Alaskan Native Corporations, or ANCs and their participation in the
8(a) program. The Alaskan Native Corporations were formed in a deal
between Alaska Native leaders and the federal government. In exchange
for giving up their land claims, 12 Alaska Native regional corporations
were created, along with over 200 village corporations. These
corporations were also given one ninth of the land that they had
aboriginal claim to and a monetary settlement as part of the deal. A
thirteenth regional corporation was later created for the Alaskan
Natives that had moved from the state.
Each ANC is owned entirely by Native shareholders, none of whom can
sell their shares. Any profits the corporations make are returned to
the shareholders through a dividend, reinvested in the company or used
to support the Native community, through cultural and social programs
and scholarships.
The 8(a) program has been a success story for the Alaskan Native
community. It has allowed the ANCs to create economic opportunity for
their communities while preserving their culture and heritage. Most
Alaskan Native villages are unreachable except by plane, severely
limiting their ability to develop economically. Without this
development, life in the villages would be one of day to day survival.
As it is, many villages do not have water or sewer systems, offer few
opportunities for employment and lack some of the modern conveniences
that people in the Lower 48 take for granted, such as electricity and
telephones.
Of the almost 200 regional and village corporations, only twelve
are significant participants in government contracting. These twelve
receive less than 1% of all federal contracts and less than 17% of all
contracts awarded through the 8(a) program. They have still had a huge
impact on the Alaskan Native community, employing over 3100 Natives,
awarding $22 million in scholarships and donations to programs to
preserve their culture and improving the lives of Alaskans in the
villages.
This is a good start. However, more Alaska Native Corporations and
Indian Tribes from the Lower 48 should be encouraged to participate in
the 8(a) program so that their communities can also benefit.
Native participation in the 8(a) program allows the United States
to keep its promises to Alaskan Natives and Indian tribes while
creating the opportunities they need to create better lives for
themselves. It is important that we continue to honor our promises and
allow Alaska Natives and Indian Tribes to continue to work to better
their lives while maintaining their cultural heritage.
I applaud Chairman Rahall (D-WV) for holding this hearing to
discuss diversifying Native economies. I am glad to see that the
Natural Resources Committee is exercising its jurisdiction over this
important part of National Indian Policy.
______
The Chairman. The Chair thanks the gentleman from Alaska as
well for his comments, and totally agreed with him.
The Chair will recognize for the record the gentleman from
North Carolina, Mr. Heath Shuler is also present. If he has any
comments, he is certainly welcome.
STATEMENT OF THE HONORABLE HEATH SHULER, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NORTH CAROLINA
Mr. Shuler. I would like to thank the Chairman and the
Ranking Member and Mr. Cole for their statements. We have seen
so often, growing up close to the Cherokee Indian Reservation
in North Carolina, how difficult the struggles have been for
quite some time. We are seeing how some of these policies that
we have done that actually have worked, and if we continue to
work together within this committee, I do think that we can
save it, and I commend both the Ranking Member, Mr. Cole, and
the Chairman for their hard work and their continued
dedication, that we can work together and we can make a
difference in their lives.
Thank you, sir.
The Chairman. Thank you, Mr. Shuler.
The Chair recognizes the gentlelady from California, Ms.
Napolitano.
STATEMENT OF THE HONORABLE GRACE F. NAPOLITANO, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Napolitano. Thank you, Mr. Chair, and it is a pleasure
to be here on such an important subject.
Being a minority, we understand many of the perplexities
that face minority business and contracting out, and we have
been for many years trying to get the Federal government to
live up to the Federal mandate of the MWBE, Minority Owned,
Women Owned, et cetera, and it has not been easy. In the Small
Business Committee, they try to hold them accountable, they try
to have them come in and explain why they can't meet that
government mandate, and it is still not anywhere near where it
should be.
Somewhere along the line the powers that be don't impress
upon some of the agencies the importance of being able to allow
minority business to have a piece of the government contact,
which is huge, and there is no reason for that other than
possibly some of the people are not interested in taking the
time to help some of these entities along, and I think it is
time that we begin to really scrutinize and have them
understand the importance of allowing small business growth so
that we don't have to import the groups that come in from
outside, from other countries to take over our business and
decimate our own economy.
So thank you, Mr. Chair, Mr. Ranking Member. This is of
great importance to some of us. Thank you.
The Chairman. Thank you. We will now turn to our panel, the
first of which consists of Dr. Robert Middleton, the Office of
Indian Energy and Economic Development, Department of the
Interior; Mr. William Largent is Assistant Administrator,
Office of Native American Affairs, Small Business
Administration; and Ms. Katherine Schinasi, Managing Director,
Acquisition and Sourcing Manager, General Accountability
Office.
Mr. Largent, I understand that you work on Native policy
issues, not the 8[a] contracting program, so your testimony, as
I understand, will focus on Native issues, and you will respond
to the Committee in writing with any questions that are outside
of your issue area, am I correct? Thank you.
Lady and gentlemen, you may proceed. Dr. Middleton, do you
want to go first since I introduced you first?
STATEMENT OF ROBERT MIDDLETON, DIRECTOR, OFFICE OF INDIAN
ENERGY AND ECONOMIC DEVELOPMENT, U.S. DEPARTMENT OF THE
INTERIOR, WASHINGTON, D.C.
Mr. Middleton. I would be pleased to do that.
Good morning, Mr. Chairman and members of the Committee. My
name is Bob Middleton. I am Director of the Office of Indian
Energy and Economic Development at the Department of the
Interior, and I am pleased to be here to deliver the
department's statement about diversifying Native economies.
As you are aware, Secretary Kempthorne has implemented two
initiatives: one, to promote safe Indian communities, and the
second to strengthen educational opportunities for Indian
youth. However, Secretary Kempthorne and Assistant Secretary
Artman also realize that building sound and foundational Native
economies is a key ingredient to achieve the goals of these two
initiatives, and they both strongly support our Indian economic
development programs.
Without viable economies, jobs, physical stability, any
initiative to fight for safe Indian communities and to increase
Indian student achievement will have an uphill battle. The
efforts to enhance Indian educational levels and graduation
rates may be compromised if students are not given the hope of
a stable job opportunity and a better life after graduation. A
sustainable wage and the ability to allow individuals to
support a family are vital to successful Indian communities.
In addition, many of the troubles plaguing reservations,
including increases in drug and alcohol abuse, continuing
domestic violence, high unemployment rates, are often derived
from the lack of meaningful, fulfilling, and life-sustaining
work, and work that is located in the local reservation
communities.
A strong and diverse Tribal economy also goes to the heart
of sovereignty. It is hard to imagine that Tribes could be and
feel truly sovereign if they primarily rely on Federal programs
to sustain their governments. Economic self-sufficiency will
improve with Tribes' ability to achieve self-governance and
self-determination.
Now, the Secretary of Interior created my office to develop
and implement innovative programs that benefit Native American
economies by increasing Tribal business knowledge, increasing
the number of successful Indian-owned businesses, increasing
capital investment in Indian Country and to provide technical
assistance for economic development of their energy and mineral
resources.
Now, my programs are achieving these goals by partnering
with other Federal agencies, American Indian organizations and
tribes, and facilitating economic development opportunities in
Indian Country. We also collaborate with private organizations
and colleges and universities to provide training and financial
services to Indian Country. Using these partnerships, we
leverage our existing resources to enhance and strengthen
Tribal economies and economic development opportunities.
The 8[a] program has been one of the tools that has been
available to us to work with Tribal governments to, in fact,
develop and enhance economies out on reservations.
Thank you for the opportunity to participate in this
important discussion, and I will be happy to answer any
questions you have either now or after the panel concludes.
[The prepared statement of Mr. Middleton follows:]
Statement of Dr. Robert W. Middleton, Director, Office of Indian Energy
and Economic Development, Office of the Assistant Secretary--Indian
Affairs, U.S. Department of the Interior
Good morning, Mr. Chairman and Members of the Committee. My name is
Bob Middleton, and I am the Director of the Office of Indian Energy and
Economic Development (IEED) at the Department of the Interior
(Department). I am pleased to be here today to deliver the Department's
statement about diversifying Native economies.
Strengthening Indian Economies
Without viable economies, jobs, and fiscal stability, any
initiatives to fight for safe Indian communities and to increase Indian
student achievement will have an uphill battle. The efforts to enhance
Indian education levels and graduation rates may be compromised if
students are not given the hope of a stable job opportunity after
graduation. A sustainable wage and the ability to allow individuals to
support a family are vital to successful Indian communities.
It is also likely that any incentive for students to engage in a
new education initiative will not be effective if students do not see
the possibility of meaningful employment and a better life as an
outcome. In addition, many of the troubles plaguing reservations,
including the increases in drug and alcohol abuse, continuing domestic
violence, and high unemployment rates are often derived from a lack of
meaningful, fulfilling, and life-sustaining work opportunities in the
local reservation communities.
IEED was created to develop and implement innovative programs that
benefit Native American economies. These efforts focus on:
improving Indian economic development,
increasing tribal business knowledge,
increasing jobs and the number of successful small and
medium Indian-owned businesses,
increasing capital investment, and
providing technical assistance in developing energy and
mineral resources.
National Economic Development Summit
In May 2007, the National Summit on Economic Development in Indian
Country was held in Phoenix, Arizona. We worked in partnership with
other Federal agencies and organizations including the National
Congress of American Indians (NCAI), the Affiliated Tribes of Northwest
Indians, the Alaska Federation of Natives, the United South and Eastern
Tribes, and the Inter Tribal Council of Arizona. The participants
provided information on what activities would provide the most economic
stimulation for Indian businesses and identified the impediments in
technical capabilities, training, capital investment, and
infrastructure that are preventing the development of sustainable
reservation economies.
The Summit was a huge success with over 500 registered attendees
ranging from tribal leaders and individuals, to tribal governments,
tribal organizations, federal agencies and private industry.
The Summit examined Native American economic development issues in
three areas:
(1) Access to capital and finance;
(2) Improving physical and legal infrastructure; and
(3) Fostering domestic and international business enterprises.
The Summit resulted in a list of economic development impediments
identified by the participants and a corresponding list of recommended
regulatory and legislative solutions. The information flowing from the
Summit sessions was tremendous in volume and more ideas and
perspectives are communicated to us daily that need to be incorporated
into the list. Accordingly, we are working in conjunction with NCAI on
a number of new tasks, including:
A follow-on discussion about access to capital and
finance was conducted on September 4-5, 2007, in Jersey City, New
Jersey, sponsored by the Department in conjunction with NCAI and the
Native American Finance Officers Association's (NAFOA). This ``Wall
Street'' conference was presented to help tribal leaders and their
finance professionals obtain a clarity of vision for the present and
future, and continue to preserve and promote sovereignty through strong
financial management.
A follow-on discussion on tribal community comprehensive
planning will be jointly hosted by the Department, NCAI, the University
of New Mexico (UNM) and Arizona State University (ASU) on October 5-6,
2007, at the ASU campus in Tempe, Arizona. The conference will bring
together tribal planners from Arizona and New Mexico, key policy
stakeholders, and university planning faculty from the UNM School of
Architecture and ASU School of Planning. The conference is considered
an important step toward defining comprehensive planning and its role
in tribal communities. The conference will be supported by a white
paper on the topic.
A follow-on discussion about tribal legal infrastructure
will be jointly hosted by the Department, NCAI and ASU on November 29-
30, 2007. Improving the tribal legal infrastructure is critical to
creating a business friendly environment and sustaining tribal
development, including reform of tribal constitutions and establishing
tribal commercial laws to create a business-friendly environment for
sustainable tribal development.
Economic Development
IEED is continuing to build upon a successful start and expand
programs that are improving the quality of life and communities for
American Indians and Alaska Natives. We have taken the initial action
to improve economic development by assisting in: (1) building the
Indian Country physical and legal infrastructure vibrant economies
require; (2) creating new jobs and expanding existing tribal and
Indian-owned enterprises; (3) training existing tribal and native
business executives; (4) increasing access to capital investments; and
(5) providing technical assistance to develop Indian Country's sizeable
energy and mineral assets.
Build a Strong Legal Infrastructure
Indian Affairs is working towards a strong legal infrastructure to
support economic growth. In 2006, we initiated a tribal commercial law
project. We began by funding some of the tribes who had helped develop
a model tribal secured transactions law in consultation with the
Federal Reserve Bank's Helena, Montana Branch and the National
Conference of Commissioners on Uniform State Laws (NCCUSL). To date,
the Chippewa Cree Tribe, Crow Nation, the Umatilla Tribes and the Warm
Springs Tribes have enacted various tribal commercial laws, including
secured transactions law, in the belief that such laws will aid their
reservation economies. To complement the enactment of commercial laws,
we funded NCCUSL to develop a curriculum on commercial law to train
tribal law administrators. We expect the curriculum to be used in
future classes offered to the tribes.
Increase Jobs and Businesses
A great many of Indian Country's 56 million acres of land are
abundant in commercially and strategically important minerals and other
natural resources. In addition, IEED, through small grants, assisted
remote villages in Alaska and the Pribilof Islands in evaluating wind
power to supplement expensive diesel fuel. We helped the Laguna Pueblo
use local resources to generate power for a tribal electrical utility.
In FY 2007, grants were provided to assist: (1) the Cherokee Nation of
Oklahoma to develop a hydropower generating plant, (2) the St. Regis
Mohawk Tribe to save money and provide cheaper energy to local
businesses by developing a hydroelectric power plant, (3) the
Passamaquoddy Tribe to take advantage of its coastal location by
developing tidal energy, (4) the Coquille Indian Tribe to plan and
build a woody biomass generating facility, and (5) the Jicarilla Apache
Tribe and San Juan Pueblo to embark upon a joint venture to produce
from timber resources fuel wood pellets and select lumber.
We have assisted tribes in formulating long-term, strategic plans
to accelerate employment opportunities. In FY 2006-2007, funds were
provided for economic planning professionals to work with tribal
leaders to identify tribal job creation and enterprise needs based on
the unique circumstances of each reservation. Notably, the Ysleta Del
Sur Pueblo used this funding to retain successful economic planners
from the Winnebago Tribe of Nebraska and the Harvard Project on
American Indian Economic Development to identify ways to diversify and
resuscitate its moribund economy.
Under its Native American Business Development Institute (NABDI)
conceived in FY 2006, IEED has developed partnerships with the Nation's
elite business schools to assist tribal businesses in the preparation
of business plans, the assessment of financial opportunities, and to
enhance their skills in drafting proposals to obtain financing and loan
guarantees from private lenders, foundations, and government entities.
IEED and the teaching staff of these business schools coordinate with
tribes in identifying specific economic development projects. These
schools assign a high-performing Masters in Business Administration
candidate or candidates, as part of their academic curriculum, to work
directly with a tribe to prepare a business plan.
The NABDI helps tribes assess how to expand their role in a market
or region, and increase their profitability. Some examples follow and
are broken out by fiscal year:
FY 2006:
Performed a wind energy study for the Inter-Tribal
Council on Utility Policy in the Great Plains, and
Developed a meat processing business plan for the Fort
Belknap Indian Community.
FY 2007:
Helped the Jamestown S'Klallam Tribe analyze the
potential of a business park, a security business, and a medical supply
business;
Assisted the Yakama Tribe in expanding employment
opportunities in the tribe's timber production;
Helped the Ft. Peck and Crow Tribes review the potential
for new jobs in upland bird hunting;
Assisted the Ysleta del Sur Pueblo in its desire to
create new economic development uses for a dormant tribal wellness/
recreation center; and
Helped the Mescalero Apache Tribe review the potential
for new employment opportunities through the installation of a glass-
covered greenhouse heated by way of woody biomass.
We are also expanding the Buy-Indian Act efforts, including
coordination with other federal agencies to encourage Federal
Government-wide purchases of American Indian goods and services. This
will increase Indian employment opportunities and revenues for Indian
owned firms. Indian Affairs has used the Secretary's Buy-Indian Act
authority to expand Departmental purchases of Indian goods and
services. In FY 2007, a new performance measure was established to
increase by 5 percent the FY 2006 total dollar value of $13.6 million
of Indian Affairs government charge card purchases from Buy-Indian
vendors of office supplies, followed by a 1 percent increase annually
in subsequent Fiscal Years 2008-2011. IEED achieved the 5 percent goal
for FY 2007 ($675,000).
Since 1994, Indian Affairs has implemented Pub. L. 102-477 which
allows tribes to integrate 10 Federal programs from the Department of
Health and Human Services, Department of Labor, and Bureau of Indian
Affairs (BIA) into one comprehensive resource for education, training,
job placement, welfare reform, child care and related services. The
program has been highly acclaimed by tribal leaders, the Congress and
independent evaluations. The ``477'' program has received the highest
PART score from the Office of Management and Budget of all American
Indian programs in the Department. The ``477'' program is an effective
tool for creating jobs, training and educating tribal members and
assisting them in becoming self-sufficient, and promoting economic
development. Tribes participating in ``477'' are more effective in
moving people from welfare-to-work and reducing their dependence on
public welfare due to the ability of tribes to provide comprehensive
consolidated resources.
Increase Business Knowledge in Tribal Communities
To carry out its long-term goal of increasing business knowledge,
we have pursued programs to train young Native Americans in
entrepreneurship and tribal businessmen on how to avoid common
competitive pitfalls, take advantage of federal procurement and Buy-
Indian Act opportunities, and expand their businesses. Our goal is to
equip hundreds more tribal entrepreneurs and those who aspire to be
entrepreneurs with business knowledge that will enhance their prospects
of success.
During this fiscal year, we have funded a one-year Entrepreneurial
Education pilot project designed for students at five reservation high
schools. The pilot project is a collaborative effort with the Bureau of
Indian Education (BIE) and the National Foundation for Teaching
Entrepreneurship (NFTE). NFTE has developed award-winning text books,
teaching plans, and support materials along with a Certified
Entrepreneurship Teacher Training Program.
In FY 2006-2007, we also partnered with the top-rated Tuck School
of Business at Dartmouth College to provide a series of intensive
training workshops for executives of Native American businesses that
focus on developing and improving business management skills;
establishing and running a business; maintaining accounting records;
assessing performance; creating high-performing enterprises; and
expanding existing operations. In fact, members of my staff are
assisting with one of these workshops this week in Fort Yates, North
Dakota near the Standing Rock Sioux reservation. These training
sessions receive uniform praise from participants. We will also augment
the number of business training sessions conducted by distinguished
business school academics for American Indian businesses.
We are also working with tribes to expand business opportunities
through the 8(a) program within the Small Business Administration
(SBA). As part of the process, IEED is encouraging tribal leaders,
where appropriate, to begin the process of applying for tribal 8(a)
status, and offering to connect the tribe with 8(a) experts if the
tribe is interested in using a consultant to aid them in this process.
We offer guidance to tribal businesses seeking Federal, Commercial and
Tribal opportunities, and we help facilitate Mentor/Protege
relationships with the SBA, the Department of Defense or other
appropriate Federal agencies during the 8(a) application process.
We are currently working with the BIA Procurement Division and the
Division of Policy and Planning to explore policies that will increase
the use of Tribal 8(a) businesses. In addition, IEED is also working
with the General Services Administration to develop a tracking system
of contracts awarded to Tribal 8(a)s and Alaska Native Corporations.
IEED continues to partner with SBA to present Regional Procurement
Workshops to provide training on the 8(a) and other Small Business
Programs which include the following highlights:
The background of 8(a), the purpose of 8(a), how tribes
can use 8(a) in business planning, the difference between individual
8(a) and tribal 8(a), and information about how to apply for tribal
8(a) status.
One-on-one meetings with SBA staff and tribal economic
planners during workshops for more in-depth discussions about
individual tribe's 8(a) potential.
Work with SBA and other appropriate Federal agencies to
pursue sub-contracting opportunities both during the application
process and once 8(a) status has been approved.
Serve as liaison with the Department's Office of Small
and Disadvantaged Business Utilization and other Federal agency small
business programs to identify projects that will enhance tribal
procurement opportunities including planning, policies, training, and
development of outreach materials for procurement personnel.
Increase Access to Capital Investment
Part of our mission is to help tribal communities develop viable
business enterprises and foster sustainable economic growth. Our
Division of Capital Investment offers assistance predominantly through
programs established under the Indian Financing Act of 1974, as
amended. We seek parity in accessing capital and sustainable economic
growth between Indian and non-Indian communities.
We operate the Loan Guaranty, Insurance, and Interest Subsidy
Program, 25 U.S.C. Sec. 1481 et seq. and 25 CFR Part 103 (``Program'').
This Program offers private lenders Federal guarantees and insurance to
cover the risk that a loan made to an American Indian-owned business
will not be repaid in full or on time. By enhancing loan security in
this manner, the Program enables lenders to make loans that they
otherwise would not make and the opportunity to offer loan terms
substantially better than what they would offer absent the Program
guaranty or insurance.
This Program leverages appropriated funds in a significant way. For
example, in FY 2006, from the $6.25 million appropriated for the Loan
Guaranty, Insurance and Interest Subsidy Program, the Program was able
to guarantee about $108 million in loans to American Indian owned
businesses and administer the program. In addition, we maintained a
loss percentage of less than 2 percent.
We are currently writing regulations to implement changes to the
Indian Financing Act from Title IV of the Native American Technical
Corrections Act of 2006 (``Act''). We are using this opportunity to
make other changes to the Loan Guaranty, Insurance, and Interest
Subsidy Program regulations as well, both to reflect changes under the
Act and to improve management of the loan guarantee program.
Development of Energy and Mineral Assets
Absent the gaming and timber industries, the development of energy
and mineral resources provides the best economic development
opportunities for many tribes. In FY 2006, alone, these resources
generated $579 million in royalty revenue paid to Indian individuals
and tribes. We estimate that about 25 percent of Indian and tribal
lands contain undeveloped energy and mineral resources. The
Department's goal is to help tribes gain access to these energy and
non-energy mineral resources while ensuring the responsible use of
lands that are developed.
In consultation with tribes, we provide ongoing assistance in the
exploration and development of over 2 million acres of actively
producing energy and mineral leases. This activity includes the
collection of resource assessment data, feasibility studies, market
analyses and other resource development initiatives, as well as
overseeing leasehold agreements of oil, gas, coal and industrial
mineral deposits located on Indian lands for the benefit of tribes and
individual Indian owners. Through collection and analysis of
exploration data we help tribes and individual Indian landowners with
the assessment of their energy and mineral resources to determine the
potential value of their lands for leasing purposes and assist in
resource development planning. Information about land status and the
activities that impact this status is a key component in effective
decision-making.
We also provide timely information, economic analysis,
recommendations, and support to tribes during the negotiation and
approval phases of the Mineral Development Agreements as authorized
under the Indian Mineral Development Act of 1982. We also provide
monetary grants through our Energy and Mineral Development Program to
allow tribes to evaluate energy and mineral resource potential through
the acquisition of exploratory data and geotechnical data
interpretation. Program funds also support the development of computer-
based systems to make this information readily accessible to the Indian
mineral owner. By providing this type of information to the Indian
energy and mineral owner before negotiations with developers begin, we
greatly enhance the ability of the tribe to maximize income from the
development of their resources. As a result, requests for assistance
from tribes to determine their energy and mineral resources development
potential continue to increase.
We sponsor national and regional conferences on energy and mineral
development opportunities in Indian Country. This outreach program
helps to stimulate industry interest in pursuing economic development
opportunities for Alaska Natives and on Indian reservations. It
provides a forum for tribes and Alaska Natives interested in
considering energy and mineral proposals, publishes geotechnical data
on mineral resources on American Indian trust lands, and discusses the
positive effects of doing business on American Indian lands.
The successful development of energy and non-energy mineral
resources creates many long-term career level jobs for American Indians
and Alaska Natives, provides sustainable, supplemental funding streams
for tribal government operations and improves the overall quality of
life within reservation communities.
Conclusion
We will continue to partner with the tribes, other Federal
agencies, and American Indian organizations to facilitate economic
development opportunities in Indian Country. We will also seek ways to
leverage our existing appropriations to maximize benefits to enhance
and strengthen tribal economies and economic development opportunities.
Thank you for holding this hearing on diversifying Native economies. I
will be happy to answer any questions you may have.
______
STATEMENT OF WILLIAM H. LARGENT, ASSISTANT ADMINISTRATOR,
OFFICE OF NATIVE AMERICAN AFFAIRS, U.S. SMALL BUSINESS
ADMINISTRATION, WASHINGTON, D.C.
Mr. Largent. Chairman Rahall, Ranking Member Cole,
Distinguished Members of the Committee, thank you for inviting
me here today to discuss diversifying native economies and the
Small Business Administration's efforts along these lines.
My name is Bill Largent. I am the Assistant Administrator
of the Small Business Administration's Office of Native
American Affairs. The Office of Native American Affairs' goal
is to promote and support economic activities for Native
Americans, Alaska Natives, and Native Hawaiian business
development. We engage in numerous activities, including tribal
consultations and development and participating in national
economic development conferences.
Since the Office of Native American Affairs is not the
program office responsible for administering the 8[a] program,
I will limit my discussion of the program to a brief overview
of 8[a], its history, and comment briefly on the April 2006
Government Accountability Office report concerning Alaska
Native Corporation's use of the 8[a] program. I will also
address other issues and projects important to enhancing and
diversifying Native economies that the Office of Native
American Affairs is working on.
Before I talk about what the office is doing with respect
to economic development and business ownership, it might be
helpful for the Committee to know a little about me. I was
appointed to the position of Assistant Administrator in
February of last year. I am a member of the Keweenaw Bay Indian
Community, Lake Superior Band of Chippewa, Martin Clan in
Michigan's Upper Peninsula.
I started my first business on the reservation in 1976. It
was not sophisticated or high tech, but a small commercial
janitorial service that allowed me to support myself and my
family. After I started the company, members of my Tribe and
even family members often asked me how it was I knew how to
start a business and what made me believe I could own and run a
business.
I tell you this to make a simple point. In 1976, the
concept of owning and running businesses was unfamiliar to my
people. Since then, Tribes have increased their focus in
economic development and job creation. However, there is more
to do, especially for potential small business owners, and that
is where the SBA and the agency's Office of Native American
Affairs comes in.
For the moment, let me shift my attention to the 8[a]
program. The 8[a] program was enacted during the 1960s, to
assist eligible small, disadvantaged business concerns to
compete in the American economy through business development.
The Small Business Act authorizes SBA to develop business
ownership programs for people whose ability to compete in the
free enterprise system have been impaired due to diminished
credit and capital opportunities.
Alaska Native Corporations, Native Hawaiian Organizations,
Community Development Corporations, and Tribally owned 8[a]
firms are deemed by statute to be socially and economically
disadvantaged. The primary difference between ANC-owned 8[a]
firms and non-ANC-owned firms lies in the intent of their
participation in the program. The 8[a] program's design
anticipates that organization-owned firms, including ANCs, will
utilize the program to provide economic development to the
respective communities.
I must emphasize that as the law is currently written the
8[a] program is simultaneously providing business development
programs to disadvantaged individuals while also providing
regional or community economic development to organization-
owned firms, including ANCs.
In April of 2006, the Government Accountability Office
published a report entitled ``Increased Use of Alaskan Native
Corporation's Special 8[a] Provisions'' called for tailored
oversight to address some of the differences I just mentioned.
The report notes that Federal contract dollars awarded to firms
owned by ANCs grew from 265 million in Fiscal Year 2001 to 1.1
billion in Fiscal Year 2004.
The SBA takes it oversight responsibility over Federal
procurements very seriously. Even before the release of the GAO
report, the agency had taken a number of steps to improve the
oversight of the 8[a] concerns owned and controlled by ANCs,
Native Hawaiian Organizations, and Indian Tribes, and the
agency has continued to look at ways to strengthen the program
and increase SBA's oversight capabilities.
While the Office of Government Contracting and Business
Development is working with the Federal agencies, the President
has tasked my office, the Office of Native American Affairs, to
host tribal consultations to allow Tribes to provide insight
into how the SBA can better manage the programs and address
concerns.
As I mentioned earlier in my testimony, when I started my
first business there was a lack of awareness of business
principles. I saw much of the same situation through my work as
a board member of the Native American Business Alliance. When
NABA expanded its mission to include businesses located on
reservations, both tribally owned and individual entrepreneurs,
I was asked to travel to Indian Country to determine the
interested tribes and the best method for representing those
interests. It was during this period that I came to fully
appreciate the unenviable position of Tribal leaders for
identifying, creating, and running the economic engines that
create jobs and revenue streams without the basic resources
available to virtually every other government in the United
States.
The key barriers to success are more than just remote
locations, lack of capital, absence of internet or even basic
utilities, these are substantial hurtles, but the unawareness
of how business is conducted, the speed, competitiveness,
demand and measures of quality are little understood or even
discussed.
The unique nature of Native governance and culture makes
business creation in Indian Country especially challenging.
Because of this, I have come to the realization that what
Indian Country needs is a tool that will prove a comprehensive
checklist, an assessment of inventory of assets, so the
decisionmakers can pursue businesses that are consistent with
their unique governance, culture, vision, internal capabilities
and the resources available to them.
To assist business development in Indian Country, it
envisioned a web-based system that will be available to anyone
with internet access though we also anticipate that hard copy
will be utilized in some areas. The tool is being developed by
the Office of Native American Affairs with the help of over 25
well-respected volunteer private sector attorneys, economists,
Tribal leaders, small and large business people of Native
descent who are well versed in Indian issues.
It is important to note that the tool will not be a magic
box. It will not solve problems, nor will it recommend specific
solutions. It will only reflect the value, culture, and
strengths and weakness of the communities that utilize it.
While the Office of Native American Affairs has other
responsibilities, the Tribal self-assessment tool is our
priority. The goal is to provide decisionmaking tools that will
enable tribes to create a positive business environment where
they can compete effectively in the private sector.
After a business environment that fits the Tribe's culture
has been developed, other SBA programs, such as our loan
programs and technical assistance, will be of greater value.
Again, thank you for inviting me to testify on this
important subject. I will be happy to address questions you
might have about how the Office of Native American Affairs
works.
[The prepared statement of Mr. Largent follows:]
Statement of Bill Largent, Assistant Administrator,
Office of Native American Affairs, Small Business Administration
Chairman Rahall, Ranking Member Young, distinguished members of the
Committee, thank you for inviting me here today to discuss
``Diversifying Native Economies'' and the Small Business
Administration's efforts along these lines.
My name is Bill Largent and I am the Assistant Administrator of the
Small Business Administration (SBA) Office of Native American Affairs.
The Office of Native American Affairs' goal is to promote and support
economic activities for Native Americans, Native Alaskans, and Native
Hawaiian entrepreneurs. We engage in numerous activities including
tribal consultations, developing tools to support economic development
and participating in national economic development conferences. Other
offices within SBA oversee loan programs, individual entrepreneurial
training opportunities and business development and government
contracting programs.
Since the Office of Native American Affairs (ONAA) is not the
program office responsible for administering the 8(a), I will limit my
discussion of the program to a brief overview of 8(a) and comment
briefly on the April 2006 GAO report concerning Alaska Native
Corporations' use of the 8(a) program. I will also address other issues
and projects important to enhancing and diversifying native economies
that ONAA is working on.
Before I talk about what ONAA is doing with respect to economic
development and business ownership it might be helpful for the
Committee to know a little about my own experiences. I was appointed to
the position of Assistant Administrator of the Office of Native
American Affairs in February of last year. I am a member of the
Keweenaw Bay Indian Community, Lake Superior Band of Chippewa, Marten
clan in Michigan's Upper Peninsula. I started my first business on the
Reservation in 1976. My business was not sophisticated or high tech,
but a small commercial janitorial service that allowed me to support
myself and my family.
When we started it was just me and my partner but it grew to 15
employees doing commercial janitorial, carpet cleaning, and fire
restoration along with equipment and supply sales. I sold it in 1986
and moved to Detroit where I continued my entrepreneurial endeavors in
various fields of business.
After I started my first company, members of my Tribe and even
family members often asked me how I knew how to start a business and
what made me believe I could own and run a business. I tell you this to
make a simple point. In 1976 the concept of owning and running
businesses was unfamiliar to my people, and Keweenaw Bay is not, and
was not then, entirely isolated. Since then the Tribes are much more
aware of the value of sustainable economic development. However, there
is more to do, especially for potential small business owners, and that
is where the SBA and the Agency's Office of Native American Affairs
come in.
The 8(a) Business Development Program
Since the Committee has specifically expressed an interest in the
SBA's 8(a) Business Development Program or the 8(a) program, as it is
commonly known, I will begin with a quick overview of that program. The
8(a) program was enacted during the 1960s to assist eligible small
disadvantaged business concerns to compete in the American economy
through business development. The Small Business Act authorizes SBA to
develop business ownership programs for people whose ability to compete
in the free enterprise system has been impaired due to diminished
credit and capital opportunities. Individual applicants must
demonstrate social and economic disadvantage. Although some groups are
presumed to be socially disadvantaged, they, as well as all other
applicants, must also demonstrate economic disadvantage. Alaskan Native
Corporations (ANCs), Native Hawaiian Organizations (NHOs), Community
Development Corporations (CDCs) and Tribally-owned 8(a) firms are
deemed by statute to be socially and economically disadvantaged. In
addition, all U.S. citizens who can demonstrate social and economic
disadvantage as well as compliance with the other eligibility
requirements are welcome to apply for participation in the 8(a)
program. Besides the management and technical assistance provided under
the program, firms that are certified for 8(a) program participation
may be eligible to receive contracts that Federal Agencies offer to SBA
for the 8(a) program through either sole source or restricted
competition.
In 1986, Congress enacted legislation that allowed ANCs, NHOs, CDCs
and Tribally-owned firms to participate in the 8(a) program. Congress
intended this legislation to foster economic development to these
respective communities.
Under the Alaska Native Claims Settlement Act, Congress extended
certain procurement advantages to 8(a) ANC firms, such as the ability
to win sole-source contracts for any dollar amount. In comparison, non
ANC-owned 8(a) firms can receive sole-source contracts for up to $5
million for manufacturing or $3 million for all other contracts;
contracts above those amounts must be competed.
Additionally, for non-ANC 8(a) firms, procurements must be competed
whenever possible before being accepted on a sole-source basis while
for ANC-owned 8(a) firms, procurements need not be competed before
being accepted on a sole-source basis. Another way ANC-owned firms
differ from non-ANC 8(a) firms: there is no limit on the number of
firms an ANC 8(a) participant may own as long as each business is in a
different primary industry. Moreover, the president or CEO of a non-ANC
8(a) must be a disadvantaged individual, whereas the management of an
ANC-owned 8(a) firm need not be a disadvantaged individual.
The primary difference between ANC-owned 8(a) firms and non ANC-
owned firms lies in the intent of their participation in the 8(a)
program. The 8(a) program design anticipates that organization owned
firms, including ANCs, will utilize the program to provide economic
development to their respective communities. All other 8(a) participant
firms utilize the program to receive individual business development,
as was the initial intent of Congress. Again, I must emphasize that as
the law is currently written, the 8(a) program is simultaneously
providing a business development program to disadvantaged individuals
while also providing regional or community economic development to
organization owned firms including ANCs.
In April 2006 GAO published a report entitled ``Increased Use of
Alaska Native Corporations' Special 8(a) Provisions Call for Tailored
Oversight'' to addresses some of the differences I just mentioned. The
report notes that Federal contract dollars awarded to firms owned by
ANCs grew from $265 million in Fiscal Year 2001 to $1.1 billion in
Fiscal Year 2004. While there is no indication within this report of
wrongdoing by any participants in this program, the report did find
that ANCs are increasingly utilizing the special advantages Congress
has provided them. The report also found that contracting officers
often need guidance on how to effectively use the program to ensure
taxpayer dollars are spent wisely, and SBA could make improvements to
its oversight of the program.
Also, significant increases in Federal contract dollars went to
other groups during the same period of time. From Fiscal Year 2001 to
Fiscal Year 2004, contract awards to women-owned small business 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 business grew from
$50.1 billion to $69.2 billion. The Federal Government achieved its
goal during Fiscal Year 2003 and Fiscal Year 2004 that 23 percent of
its prime contracting dollars were awarded to businesses that qualified
as small businesses, including ANCs. Although there is a small
disadvantaged business contracting goal which includes the 8(a)
program; there is no separate goal for 8(a). However, in Fiscal Year
2004, 8(a) firms were awarded $8.4 billion of the SDB achievement of
$18.5 billion.
SBA takes its oversight responsibility over Federal procurement
programs very seriously. Even before the release of the GAO Report, the
Agency had taken a number of steps to improve the oversight of the 8(a)
concerns owned and controlled by ANCs, NHOs, and Indian Tribes and the
Agency has continued to look at ways to strengthen the program and
increase SBA's oversight capabilities. For instance, the Agency is
exploring possible additions to the Business Development Management
Information System (BD-MIS) being built to electronically manage all
aspects of the 8(a) operations. SBA's efforts also include addressing
the staffing levels in the Alaska district office.
Additionally, SBA's Office of Government Contracting and Business
Development has been holding meetings with all Agencies to discuss our
concerns with Partnership Agreements, which delegate 8(a) contracting
authority from SBA to various Federal procuring agencies, to clarify
their roles and responsibilities for monitoring contract compliance of
and performance by 8(a) firms. SBA has also increased training to field
staff responsible for working on 8(a) issues and created a roundtable
with the seven largest contracting Agencies to specifically discuss ANC
and 8(a) issues.
Office of Native American Affairs and Native American Economic
Development
While the Office of Government Contracting and Business Development
is working with Federal Agencies, the President has tasked SBA-ONAA
(through Executive Order 13175) to host tribal consultations to allow
tribes to provide insight into how SBA can better manage the program
and address concerns.
As I mentioned earlier in my testimony, when I started my first
business there was a lack of awareness of business principles. I saw
much of the same situation through my work as a Board Member of the
Native American Business Alliance (NABA). When NABA expanded its
mission to include businesses located on reservations, both tribally
owned and individual entrepreneurs, I was asked to travel to Indian
Country to determine the interest of tribes and the best method for
representing their interest. It was during this period that I had come
to fully appreciate the unenviable position of Tribal Leaders for
identifying, creating and running the economic engines that would
create jobs and revenue streams, without the basic resources available
to virtually every other government in the United States.
Traveling around Indian Country, I came to understand that much if
not most of Indian Country was not ready to be in business. The key
barriers to success are more than just remote locations, lack of
capital, absence of Internet, or even basic utilities, but an
unawareness of how business is conducted. The speed, competitiveness,
demand and measures of quality are little understood or even discussed.
The unique nature of the Native governance and culture make
business creation in Indian Country especially challenging. Because of
this I came to the realization that what Indian Country needs is a tool
that will provide a comprehensive checklist, assessment and inventory
of assets so that decision makers can pursue businesses that are
consistent with their unique governance, culture, vision, internal
capabilities and resources available to them.
To assist business development in Indian Country I envision a web-
based system that will be available to anyone with internet access,
though we anticipate that hard copies will be utilized in some areas.
This tool is being developed by ONAA with the help of over 25 well
respected volunteer private sector attorneys, economists, Tribal
leaders and small and large businesspersons of Native descent who are
well versed in Indian issues.
Topics in the tool range from the highly technical to the
practical, including issues such as:
Constitutional reform,
Development of judicial codes,
The role of government in business,
Inventorying assets and resources such as hard assets,
natural resources, workforce education and skill,
Assessing relationships with states, local governments,
non-tribal members, tribal members living off the reservation,
Assessing how business practices like hiring,
bereavement, compensation and decision making work within the Tribal
way of life,
How does expanding a business economy impact traditional
culture,
Assessing organizational, physical and technical
infrastructure.
It is important to note that the tool will not be a magic box, nor
will it recommend specific solutions. It will only reflect the value,
culture, strengths and weaknesses of the communities that utilize it.
Whether it is gaming or other tourism and entertainment endeavors,
manufacturing, technology, natural resources, energy or alternative
energy, retail or building entrepreneurial environments, the decision
is theirs.
While ONAA has other responsibilities and numerous other
initiatives, projects and ad hoc tasks the Tribal self assessment tool
is our priority. The goal is to provide decision making tools that will
enable Tribes to create a positive business environment where they can
compete effectively in the private sector. After basic assessments have
been made and a business environment that fits the Tribe's culture has
been developed, issues such as the SBA loan guarantee programs and
entrepreneurial technical assistance will be of greater value. This is
why ONAA believes that focusing on providing the basics through the
self assessment tool is the first, and most important, course of action
in developing, enhancing and diversifying Native economies.
Again, thank you for inviting me to testify on this important
subject. I will be happy to address questions you might have about
ONAA's work.
______
The Chairman. Thank you. Ms. Schinasi. I hope I pronounced
it correctly.
Ms. Schinasi. Pardon me?
The Chairman. I hope I pronounced your name correctly.
Ms. Schinasi. That was perfect. Thank you. And unusual.
[Laughter.]
STATEMENT OF KATHERINE V. SCHINASI, MANAGING DIRECTOR,
ACQUISITION AND SOURCING MANAGEMENT, U.S. GOVERNMENT
ACCOUNTABILITY OFFICE, WASHINGTON, D.C.
Ms. Schinasi. Thank you for inviting me today to testify on
our prior work on Alaska Native participation in the Small
Business Administration's 8[a] business development program.
With your permission, I would like to put my full statement
in the record and summarize it right now.
The Chairman. Without objection.
Ms. Schinasi. As you know, the 8[a] program is one of the
Federal government's primary mechanisms for developing small
businesses owned by socially and economically disadvantaged
individuals, and Congress has extended additional procurement
advantages to ANC firms participating in the 8[a] program, the
most significant of these is the ability to receive sole source
contracts for any amount, and the ability of the Alaska Native
Corporations to create numerous subsidiaries to receive
government contracts.
My statement today focuses on the findings and
recommendations we made in an April 2006 report. Because of the
scope of our work, we offer observations neither in support of
nor challenge to the program itself. Rather, we evaluated the
trends in 8[a] ANC contracting, how ANCs are using the 8[a]
program, and the facts and circumstances behind the award of a
sample of large sole source contracts.
We made a number of recommendations and my statement today
also includes information on actions that SBA and the procuring
agencies are taking or plan to take to address our
recommendations for improved oversight.
It is important to point out that management of this
program is a shared responsibility among government agencies as
SBA has delegated the contract execution function to Federal
procuring agencies through its partnership agreements. SBA,
however, remains primarily responsible for implementing the
8[a] program.
Let me start with some trends. By one measure, Mr.
Chairman, as you said, 8[a] ANC contracting continues to
represent a very small amount of total Federal procurement
spending. However, as Mr. Largent pointed out, the contracts
awarded to the 8[a] ANCs increased four-fold over the five-year
period that was in the scope of our review--That is 2000 to
2004--growing from $265 million to $1.1 billion.
Dollars obligated under sole source contracts to the 8[a]
ANC firms during that period from the six agencies in our
sample also increased from about $180 million in 2000 to about
$876 million in 2004, which represented about 77 percent of the
8[a] contracts awarded to ANCs over that period by the agencies
in our sample.
Another trend that we noted was the increasing complexity
of the corporations' business arrangements, including use of
subsidiaries. In 1998, one ANC owned one subsidiary. By 2005,
49 ANCs owned 154 subsidiaries.
We found that the Alaska Native Corporations were using the
8[a] program in a variety of ways. Our GAO team traveled to
Alaska and met with representatives of 30 village and regional
corporations of various sizes who were engaged in a wide
variety of business activities, and used various business
models, including some that did not participate in the 8[a]
program at all.
We found for the ANCs that do participate in the 8[a]
program some are heavily reliant on the program to generate
revenues for the benefit of their shareholders, while others
approach it as one of many revenue-generating opportunities
that also include investments in stocks or real estate.
We also looked at the facts and circumstances behind the
award of 16 large sole source contracts awarded to 8[a] ANC
firms by seven Federal agencies. These covered a wide range of
services, such as facility support services in the U.S. and
overseas, training and equipping security guards in Iraq,
detention facility operation support, and information
technology services. The contracts that we reviewed ranged in
value from $11 million to almost $600 million.
As you know, Alaska Native Corporations in the 8[a] may be
awarded sole source contracts without regard to dollar
thresholds, which contrasts with the thresholds that have been
established for sole source awards to other 8[a] firms, and the
preference for competition in structuring most other government
contract awards.
Our review found that agency officials view contracting
with 8[a] ANC firms as a quick, easy and legal way to award
contracts while at the same time helping their agencies meet
the small business goals. In several cases agency official
stated that they turn to 8[a] ANC firms because they do not
have the time nor the people needed to structure competitive
awards.
Let me say now a few words about the oversight of the
program. When we looked, we found shortcomings in both the
procuring agencies and in SBA regarding their management of the
program. Some of these shortfalls stem from the very nature of
the complex business arrangements that the ANC 8[a] firms are
involved in.
For example, SBA was not tracking subsidiary participation
in secondary industry codes to ensure that only one subsidiary
of an ANC generate most of its revenue as is required. In other
cases, agency contracting officers believed that SBA had
responsibility for actions that SBA relied on the agencies to
undertake. This was true, for example, in monitoring compliance
with the Federal Acquisition Regulation limitation on
subcontracting clause which requires 50 percent of personnel
costs to be maintained by the prime contractor.
With respect to SBA itself, we found that the agency had
not tailored its policies and practices to account for the ANCs
unique status and rapid growth in the 8[a] program. SBA
officials told us they face a challenge in this regard. They
noted that the goal of ANCs, which is economic development for
Alaska Natives from a community standpoint, is not always
consistent with the primary purpose of the larger 8[a] program,
which is business development for individual small
disadvantaged businesses.
We made a number of recommendations to SBA on actions that
can be taken to revise regulation and policy as well as to
improve their oversight practices. At the time of our review,
SBA officials stated that they were planning to revise their
regulations and policies to address the ANCs unique status in
the 8[a] program. They have not yet done so.
However, the agency has taken actions to implement one of
the recommendations, which is to revise its partnership
agreements with the procuring agencies to emphasize that it is
the procuring agency's responsibility to monitor compliance
with such things as the limitations on subcontracting. SBA has
also instituted training for its own personnel and for those in
the procuring agencies.
Also during the time of our review, SBA indicated that a
new automated data collection tool would help them more readily
collect information on 8[a] firms, and thereby help their
monitoring efforts. The system was expected to be operational
during this fiscal year. Although that could be helpful to SBA,
I would also note that GAO's work has shown that upgrading the
technology and management information systems is useful only
when the underlying management policies and practices work
well.
We also recommended that the procuring agencies in our
review work with SBA to develop guidance for contracting
officers on how to comply with requirements of the 8[a]
program, in particular, when contracting with ANC firms. Most
of the agencies have begun to address this recommendation.
We will continue to follow up on agency actions to
implement our recommendations. Until strong oversight is in
place, there is a potential for abuse and unintended
consequences.
Mr. Chairman, that concludes my summary, and I would be
happy to answer any questions you or the members have.
[The prepared statement of Ms. Schinasi follows:]
Statement of Katherine V. Schinasi, Managing Director, Acquisition and
Sourcing Management, United States Government Accountability Office
Mr. Chairman and Members of the Committee:
I am pleased to be here today to discuss our April 2006 report on
Alaska Native Corporation (ANC) 8(a) firms. 1 In December
1971, Congress enacted the Alaska Native Claims Settlement Act to
resolve long-standing aboriginal land claims and to foster economic
development for Alaska Natives. This legislation created ANCs, which
would become the vehicle for distributing land and monetary benefits to
Alaska Natives in lieu of a reservation system. As of December 2005,
there were 13 regional ANCs and 182 village, urban, and group
corporations.
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\1\ GAO, Contract Management: Increased Use of Alaska Native
Corporations' Special 8(a) Provisions Calls for Tailored Oversight,
GAO-06-399, (Washington, D.C.: Apr. 27, 2006).
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In 1986, legislation was enacted that allowed ANC-owned firms to
participate in the Small Business Administration's (SBA) 8(a) program--
one of the federal government's primary means for developing small
businesses owned by socially and economically disadvantaged
individuals. Since then, Congress has extended special procurement
advantages to ANC firms. For example, ANC firms are permitted to
receive noncompetitive contracts for any amount, whereas other 8(a)
companies are subject to competitive thresholds of $5 million for
manufacturing contracts or $3 million for all other contracts. ANCs can
also own multiple subsidiaries participating in the 8(a) program,
2 unlike other 8(a) firms that may own only one in a
lifetime and no more than 20 percent of another 8(a) firm.
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\2\ Each 8(a) ANC firm must be in a different primary industry.
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Our 2006 report on 8(a) ANC contracting identified (1) trends in
contracting with ANC firms, (2) the reasons agencies have awarded 8(a)
sole-source contracts to ANC firms and the facts and circumstances
behind some of these contracts, and (3) how ANCs are using the 8(a)
program. We also evaluated SBA's oversight of 8(a) ANC firms. We made a
number of recommendations to SBA and also recommended that the agencies
in our review work with SBA to develop training for their contracting
personnel.
Today I will discuss the highlights of our report and provide an
update on actions SBA and the other agencies have taken to address our
recommendations.
To address the objectives of our 2006 report, we obtained data on
federal 8(a) contracting with ANCs. It is important to note that there
is no readily available central source of information on ANC 8(a)
contracting activity. We obtained each ANC firm's Data Universal
Numbering System (DUNS) number and used this information to obtain data
from the Federal Procurement Data System (FPDS) and agencies. To assess
the reliability of the procurement data, we (1) compared FPDS and
agency data to verify its accuracy, (2) reviewed related documentation,
including contract files, and (3) worked closely with agency officials
to identify and resolve any data problems. When we found discrepancies,
we brought them to the agency's attention and worked with them to
correct the discrepancies before conducting our analyses. We also
analyzed 16 large, sole-source 8(a) contracts awarded to ANC firms from
the departments of Defense, Energy, the Interior, State,
Transportation, and Homeland Security and the National Aeronautics and
Space Administration (NASA). We selected the contracts based on high
ultimate award values and high dollar obligations that represented a
variety of contractors and services. We traveled to Alaska and met with
executives of 13 regional ANCs and 17 village or urban corporations.
The report on which this testimony is based was prepared in accordance
with generally accepted government auditing standards.
Our work did not include within its scope an objective or analyses
that either support or challenge special ANC advantages within the 8(a)
program. The program has been established in law and any changes are up
to the Congress.
ANC Trends in and Use of 8(a) Contracting
8(a) ANC contracting represents a small amount of total federal
procurement spending. However, dollars obligated to ANC firms through
the 8(a) program grew from $265 million in Fiscal Year 2000 to $1.1
billion in 2004. Overall, during the 5-year period, the government
obligated $4.6 billion to ANC firms, of which $2.9 billion, or 63
percent, went through the 8(a) program.
During this period, six federal agencies--the departments of
Defense, Energy, the Interior, State, and Transportation and NASA--
accounted for almost 85 percent of total 8(a) ANC obligations.
Obligations for 8(a) sole- source contracts by these agencies to ANC
firms increased from about $180 million in Fiscal Year 2000 to about
$876 million in Fiscal Year 2004.
ANCs use the 8(a) program as one of many tools to generate revenue
with the goal of benefiting their shareholders. Some ANCs are heavily
reliant on the 8(a) program for revenues, while others approach the
program as one of many revenue-generating opportunities, such as
investments in stocks or real estate. ANCs are using the
congressionally authorized advantages afforded to them, such as
ownership of multiple 8(a) subsidiaries, 3 sometimes in
diversified lines of business. From Fiscal Year 1988 to 2005, numbers
increased from one 8(a) subsidiary owned by one ANC to 154 subsidiaries
owned by 49 ANCs. Figure 1 shows the recent growth in ANCs' 8(a)
subsidiaries.
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\3\ In this testimony, ``ANC'' refers to the parent corporation.
The term ``ANC firm'' denotes a business owned by an ANC. We use the
term ``ANC firm'' and ``subsidiary'' interchangeably.
[GRAPHIC] [TIFF OMITTED] T7848.001
ANCs use their ability to own multiple businesses in the 8(a)
program, as allowed by law, in different ways. For example, some ANCs
create a second subsidiary in anticipation of winning
follow-on work from one of their graduating subsidiaries; 4
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\4\ There is a 9-year limit to participation in the 8(a) program;
firms could graduate earlier if they outgrow their primary industry
size standards.
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wholly own their 8(a) subsidiaries, while others invest
in partially-owned subsidiaries; and
diversify their subsidiaries' capabilities to increase
opportunities to win government contracts in various industries.
Contract Execution Shortfalls
Our review of 16 large sole-source contracts awarded by 7 agencies
found that agency officials view contracting with 8(a) ANC firms as a
quick, easy, and legal way to award contracts while at the same time
helping their agencies meet small business goals. 5
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\5\ ANC firms in the 8(a) program are deemed by law as socially and
economically disadvantaged. Awards to these firms are credited to
agencies' small business goals.
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Memoranda of Understanding (partnership agreements) between SBA and
agencies delegate the contract execution function to federal agencies,
although SBA remains responsible for implementing the 8(a) program. We
found that contracting officials had not always complied with
requirements to notify SBA when modifying contracts, such as increasing
the scope of work or the dollar value, and to monitor the percentage of
the work performed by the 8(a) firms versus their subcontractors. For
example:
Federal regulation requires that when 8(a) firms
subcontract under an 8(a) service contract, they incur at least 50
percent of the personnel costs with their own employees. 6
The purpose of this provision, which limits the amount of work that can
be performed by the subcontractor, is to ensure that small businesses
do not pass along the benefits of their contracts to their
subcontractors. For the 16 files we reviewed, we found almost no
evidence that the agencies are effectively monitoring compliance with
this requirement. In general, the contracting officers we spoke with
were confused about whose responsibility it is.
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\6\ For general construction, the 8(a) firm is required to incur at
least 15 percent of the personnel costs.
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Agencies are also required to notify SBA of all 8(a)
contract awards, modifications, and exercised options where the
contract execution function has been delegated to the agencies in the
partnership agreements. We found that not all contracting officers were
doing so. In one case, the Department of Energy contracting officer had
broadened the scope of a contract a year after award, adding 10
additional lines of business that almost tripled the value of the
contract. These changes were not coordinated with SBA.
SBA Lacks Oversight of 8(a) ANC Activity
We reported in 2006 that SBA had not tailored its policies and
practices to account for ANCs' unique status and growth in the 8(a)
program, even though officials recognize that ANC firms enter into more
complex business relationships than other 8(a) participants. SBA
officials told us that they have faced a challenge in overseeing the
activity of the 8(a) ANC firms because ANCs' charter under the Alaska
Native Claims Settlement Act is not always consistent with the business
development intent of the 8(a) program. The officials noted that the
goal of ANCs--economic development for Alaska Natives from a community
standpoint--can be in conflict with the primary purpose of the 8(a)
program, which is business development for individual small,
disadvantaged businesses.
SBA's oversight fell short in that it did not:
track the primary business industries in which ANC
subsidiaries had 8(a) contracts to ensure that more than one subsidiary
of the same ANC was not generating the majority of its revenue under
the same primary industry code;
consistently determine whether other small businesses
were losing contracting opportunities when large sole-source contracts
were awarded to 8(a) ANC firms;
adhere to a statutory and regulatory requirement to
ascertain whether 8(a) ANC firms, when entering the 8(a) program or for
each contract award, had, or were likely to obtain, a substantial
unfair competitive advantage within an industry; 7 ensure
that partnerships between 8(a) ANC firms and large firms were
functioning in the way they were intended under the 8(a) program; and
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\7\ This requirement is set forth in the Small Business Act (15
U.S.C. Sec. 636(j)(10)(J)(ii)(II)).
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maintain information on ANC 8(a) activity.
SBA officials from the Alaska district office had reported to
headquarters that the makeup of their 8(a) portfolio was challenging
and required more contracting knowledge and business savvy than usual
because the majority of the firms they oversee are owned by ANCs and
tribal entities. The officials commented that these firms tend to
pursue complex business relationships and tend to be awarded large and
often complex contracts. We found that the district office officials
were having difficulty managing their large volume and the unique type
of work in their 8(a) portfolio. When we began our review, SBA
headquarters officials responsible for overseeing the 8(a) program did
not seem aware of the growth in the ANC 8(a) portfolio and had not
taken steps to address the increased volume of work in their Alaska
office.
Previous Conclusions, Recommendations, and Agency Responses
In 2006, we reported that ANCs were increasingly using the
contracting advantages Congress has provided them. Our work showed that
procuring agencies' contracting officers are in need of guidance on how
to use these contracts while exercising diligence to ensure that
taxpayer dollars are spent effectively. Equally important, we stated,
significant improvements were needed in SBA's oversight of the program.
Without stronger oversight, we noted the potential for abuse and
unintended consequences.
In our April 2006 report, we made 10 recommendations to SBA on
actions that can be taken to revise its regulations and policies and to
improve practices pertaining to its oversight of ANC 8(a) procurements.
Our recommendations and SBA's June 2007 response are as follows.
We recommended that the Administrator of SBA:
1. Ascertain and then clearly articulate in regulation how SBA
will comply with existing law to determine whether and when one or more
ANC firms are obtaining, or are likely to obtain, a substantial unfair
competitive advantage in an industry.
SBA response: SBA is exploring possible regulatory changes
that would address the issue of better controlling the award of
sole-source 8(a) contracts over the competitive threshold
dollar limitation to joint ventures between tribally and ANC-
owned 8(a) firms and other business concerns.
2. In regulation, specifically address SBA's role in monitoring
ownership of ANC holding companies that manage 8(a) operations to
ensure that the companies are wholly owned by the ANC and that any
changes in ownership are reported to SBA.
SBA response: SBA is building a Business Development
Management Information System to electronically manage all
aspects of the 8(a) program. According to SBA, this system,
scheduled to be completed in Fiscal Year 2008, will monitor
program participants' continuing eligibility in the 8(a)
program and could include an ANC element in the electronic
annual review that would monitor the ownership of ANC holding
companies that manage 8(a) operations and ensure that any
changes in ownership are reported to SBA.
3. Collect information on ANCs' 8(a) participation as part of
required overall 8(a) monitoring, to include tracking the primary
revenue generators for 8(a) ANC firms to ensure that multiple
subsidiaries under one ANC are not generating their revenue in the same
primary industry.
SBA response: The planned electronic annual review can
collect information on ANCs' multiple subsidiaries to ensure
that they are not generating the majority of their revenues
from the same primary industry. Further, to ensure that an ANC-
owned firm does not enter the 8(a) program with the same North
American Industry Classification System (NAICS) code
8 as another current or former 8(a) firm owned by
that ANC, the ANC-owned applicant must certify that it operates
in a distinct primary industry and must demonstrate that fact
through revenues generated. SBA notes that the planned annual
electronic reviews can validate this information.
---------------------------------------------------------------------------
\8\ SBA has designated a small business size standard for every
NAICS code. 8(a) applicants must qualify as small under their primary
NAICS code at the time of application and SBA's certification date. SBA
regulation requires that at least 2 years lapse after an ANC firm exits
the 8(a) program before another firm owned by the same parent ANC can
enter the program with the prior firm's primary NAICS code. However,
once accepted into the program, 8(a) firms may pursue contracts in any
line of work, called secondary NAICS codes.
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4. Revisit regulation that requires agencies to notify SBA of all
contract modifications and consider establishing thresholds for
notification, such as when new NAICS codes are added to the contract or
there is a certain percentage increase in the dollar value of the
contract. Once notification criteria are determined, provide guidance
to the agencies on when to notify SBA of contract modifications and
scope changes.
SBA response: SBA stated that its revisions to its
partnership agreements with federal agencies address this
recommendation. However, we note that the revised agreement
does not establish thresholds or include new criteria for when
agencies should send SBA contract modifications or award
documentation. The agreement states that agencies ``shall
provide a copy of any contract...including basic contracts,
orders, modifications, and purchase orders'' to SBA.
5. Consistently determine whether other small businesses are
losing contracting opportunities when awarding contracts through the
8(a) program to ANC firms.
SBA response: SBA stated that it plans to require the
contracting agencies to include impact statements in their
contract offer letters to SBA.
6. Standardize approval letters for each 8(a) procurement to
clearly assign accountability for monitoring of subcontracting and for
notifying SBA of contract modifications.
SBA response: SBA agreed with the recommendation but did
not indicate an action taken or planned.
7. Tailor wording in approval letters to explain the basis for
adverse impact determinations.
SBA response: SBA agreed with the recommendation but did
not indicate an action taken or planned.
8. Clarify memorandums of understanding (known as partnership
agreements) with procuring agencies to state that it is the agency
contracting officer's responsibility to monitor compliance with the
limitation on subcontracting clause.
SBA response: SBA has implemented this recommendation by
revising the partnership agreements with the procuring
agencies. It added several provisions that delineate the
agencies' responsibilities for oversight, monitoring, and
compliance with procurement laws and regulations governing 8(a)
contracts, including the limitation on subcontracting clause.
9. Evaluate staffing levels and training needed to effectively
oversee ANC participation in the 8(a) program and take steps to
allocate appropriate resources to the Alaska district office.
SBA response: SBA stated that the planned Business
Development Management Information System should help the
Alaska district office more effectively oversee ANC
participation in the 8(a) program. It stated that it is
providing training to the Alaska district office. However, no
plans were in place to evaluate staffing levels at the office.
10. Provide more training to agencies on the 8(a) program,
specifically including a component on ANC 8(a) participation.
SBA response: SBA has provided training to agencies on the
revised 8(a) partnership agreements; however, our review of the
slides SBA used for the training found no reference to ANC 8(a)
firms specifically. According to an SBA official, SBA will
include a component on ANC 8(a) participants in future training
sessions.
We also recommended that procuring agencies provide guidance to
contracting officers to ensure proper oversight of ANC contracts. The
procuring agencies generally agreed with the recommendation. Some
agencies are waiting for SBA to implement our recommendations before
they take their own actions, but others have taken steps to tighten
their oversight of contracts with 8(a) ANC firms. The Department of
Homeland Security, for example, recently issued an ``acquisition
alert'' requiring that its heads of contracting activities provide
guidance and training on the use of 8(a) firms owned by ANCs. The alert
provides that use of the authority to award sole-source 8(a) contracts
to ANCs must be judicious with appropriate safeguards to ensure that
the cost/price is fair and reasonable, that the ANC has the technical
ability to perform the work, that the ANC will be performing the
required percentage of the work and that the award is in the best
interests of the government. The Department of Energy revised its
acquisition guidance regarding small business programs to remind
contracting officers to use care in awarding and administering ANC
contracts, to include notifying SBA of contract modifications and
monitoring the limits on subcontracting. The Department also provided
training on the 8(a) program, to include contracting with ANC firms. By
providing contracting officers with appropriate training on these
issues, the government is taking steps to ensure that the ANC firms are
operating in the program as intended, thereby mitigating the risk of
unintended consequences or abuse of some of the privileges provided to
these firms.
This concludes my testimony. I would be happy to answer any
questions you may have.
Contacts and Staff Acknowledgements
For further information regarding this testimony, please contact
Katherine V. Schinasi at (202) 512-4841 or [email protected]. Contact
points for our Offices of Congressional Relations and Public Affairs
may be found on the last page of this statement. Key contributors were
Michele Mackin, Sylvia Schatz, and Tatiana Winger.
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______
[GRAPHIC] [TIFF OMITTED] T7848.002
The Chairman. Thank you. The Chair would like to thank
each of you for your time and testimony today as well as for
your public service and your commitment to Indian Country, and
your help to our Native Americans. We all deeply appreciate
that service.
Let me start with Dr. Middleton first. Your testimony
indicated that your office is encouraging other Federal
agencies to increases purchases of American Indian goods and
services. My question is does this include encouraging the use
of tribally owned and Alaska Native Corporation 8[a] companies?
Mr. Middleton. Yes, it does. Under the Buy Indian Act, we
are trying to encourage Federal government to be a procurer of
goods and services from Indian-owned businesses, whether they
are individually Indian-owned or tribally owned, and which
would include 8[a] firms.
The Chairman. And are tribally owned and/or Alaska Native
Corporation 8[a] companies eligible for the training provided
by your office?
Mr. Middleton. They are actually. We go out and we provide
a series of conferences to talk about business development in
Indian Country, and any firms that may be applying for or in
fact have applied for 8[a] status would be eligible for this
training. One in particular would be the training we provide
through Dartmouth College. That is in fat put in place to be
able to allow existing businesses to either enhance their
business development or expand their business development. It
has been very effective and they can in fact participate in
those programs.
The Chairman. Your testimony indicates that your office is
working with the GSA to develop a tracking system of contracts
awarded to Tribal 8[a] and Alaska Native Corporations. Does the
tracking system that is being developed track contracts awarded
by all Federal agencies to Tribal and Alaska Native 8[a]s or
only those awarded by the DOI?
Mr. Middleton. We are looking to do it government wide. The
existing system in GSA at this time does not allow for
designation of tribally owned 8[a] businesses, only 8[a]
businesses, and so we are trying to work with GSA to try and
identify those Native American 8[a] businesses that are in fact
getting contracts across the Federal government.
The Chairman. Mr. Largent, in its 2006 report on Alaska
Native Corporation in the 8[a] programs, the GAO recommended
that the SBA improve the monitoring and oversight of Alaska
Native Corporations in 8[a] program. Does the Small Business
Administration have a way to track procurement data on Tribal
and Alaska Native Corporation participation in the program?
Mr. Largent. I don't know that I could answer that question
with any reliability. Can we get back to you in writing on
that?
The Chairman. Sure. Let me ask you one final one. Can the
SBA develop and make recommendations to other Federal agencies
to develop mechanisms to accurate track Tribal and Alaska
Native Corporation procurement data?
Mr. Largent. I am aware that a meeting has been scheduled
with seven of the largest agencies that do procurement with
Indian Country and 8[a]s. I think that meeting is scheduled in
October, and we can give you more detail on that in writing
also.
The Chairman. OK. The Committee would appreciate it.
Ms. Schinasi, in your written testimony you indicated that
from Fiscal Year 2000 to 2004 contracts to ANCs increased by
265 million to 1.1 billion. Was there an increase in the total
amount of contracts obligated by the Federal government from
the same time period, 2000 to 2004, to all entities?
Ms. Schinasi. Yes, sir. We see the same explosion in
service contracting generally.
The Chairman. In your study, I noticed that you indicated
that the SBA and the Federal contracting agencies were not
conducting adequate oversight. Did you find any illegal
activity being performed by the ANCs?
Ms. Schinasi. No, sir.
The Chairman. OK, I appreciate it. That concludes my
questions. I will turn to the Ranking Member, Mr. Cole, Mr.
Young. I am sorry.
Mr. Young. Thank you, Mr. Chairman.
Katherine, I won't pronounce your last name, I would rather
say Katherine, it is a lot easier.
[Laugher.]
The Chairman. I slaughtered the language anyway.
Mr. Young. You said that the SBA has made some progress or
significant progress toward implementing your changes that were
recommended. Do you believe the SBA and procuring agencies will
be able to make the remaining changes on their own without
significant intervention by this body or any other body?
Ms. Schinasi. Yes, sir, I do.
Mr. Young. I am glad the question was asked by the Chairman
about the growth of this total contracting because I was a
little concerned when you mentioned that it went from 200
million to 1.5 billion. If you look at the total number of
contracts, it is still, I believe, 0.5 percent of the total
contracts that are let. So it is not a huge growth. It is a
growth, but everybody else grew too, so I think it is good.
I don't have any other questions, Mr. Chairman. I think you
did quite a good job on it. I want to thank the witnesses for
being here, and again, this whole program is a success and I
hope we encourage it instead of discourage it. The oversight
part is probably needed, and I think it is good for everybody.
I have found no one that has an interview with your agency that
objected to that. I think that is good for the SBA. I think it
is good for the 8[a]s, and we will encourage that. Thank you.
The Chairman. The gentleman from North Carolina, Mr.
Shuler.
Mr. Shuler. Thank you, Mr. Chairman.
Mr. Largent, can you share with us how the process for
deciding if a Tribe is deemed social or economically
disadvantaged, and does gaming enter into this decision?
Mr. Largent. Again, that is not my area. I am not with the
program office. I do know that it is incredibly thorough
assessment. It takes a considerable amount of time, and we are
looking to streamline that process so that Tribes that are
applying for 8[a] certification can more easily navigate it,
but it is a comprehensive and thorough process, and I would be
happy to get back to you from the program office if you would
like.
Mr. Shuler. Very good. And this could be for anyone on the
witness panel. Can you give me some examples of Tribes who have
entered into the process of the 8[a] program and graduated from
that and actually become more self-sufficient based upon the
success that they have had in the program?
Mr. Largent. Actually, sitting right behind me, and I
believe you will hear testimony a little later from former
Secretary Neal McCaleb, Chickasaw Nation is a wonderful
example. At one point I believe they had 12 Tribal 8[a]s. I
think five have graduated. They employ over 2,000 people, have
a very diversified economy and a far better quality of life
than they had 20 years ago because of 8[a]. S&K Technologies,
Kootenai and Salish Reservation is another example, but there
are few. There are few Tribes that have been able to enjoy any
real benefits from the 8[a] program, and we are working
feverishly to change that.
Mr. Shuler. Very good. I commend all of you for your
service, and Mr. Chairman, I yield back.
The Chairman. Mr. Cole.
Mr. Cole. Thank you very much, Mr. Chairman, and thank each
of you for your testimony. I only have a few questions. Let me
begin by picking up where Mr. Shuler left off.
I would ask you just to elaborate going forward. We have
some examples of Tribes, Mr. Largent, obviously that have been
successful in taking 8[a] contracting and moving out more
broadly. What are the things you think we can do to make sure
that that success is shared by more Tribes?
Mr. Largent. Congressman, I would defer to the specifics on
that to the actual Tribes and Native villages, but I will tell
you that I travel extensively. I have been to remote Alaskan
villages, spent the night there, been to a number of
reservations, attend regular conferences, host meetings in my
office, and with the Administrator with Tribal delegations, and
I cannot recall one meeting where the issue and the importance
of 8[a] has not come up.
Mr. Cole. So this is a pretty important tool in a lot of
different Tribal toolboxes in terms of making their people
self-sufficient and providing opportunities that simply haven't
been there in the past?
Mr. Largent. That is the message that is delivered to me
and that I deliver to the Administrator.
Mr. Cole. Mr. Middleton, we have a lot of interesting ideas
in the broader society about the nature of Native economies,
and most people I run into be outside that universe quite often
think that all Tribes are now rich due to gaming. Could you
comment on how accurate that is or how much that might reflect
the reality?
Mr. Middleton. Well, actually, I, in talking to non-native
citizens of the United States, I have them relay that exact
message to me also, and it is absolutely not true as evident by
the unemployment rates that are currently out there in a number
of reservations. It is true that some Tribes in fact have been
fortunate, that gaming has contributed significantly to their
well being, but there are many Tribes out there that may in
fact that have gaming but are not doing as well or just barely
breaking even, or in fact not have gaming, and they are in
remote locations.
So any way that we can enhance the economies of those areas
absent having gaming opportunities allows the Tribes to in fact
enjoy a better life. I will give you one example.
I was traveling to Duck Valley, which is on the Idaho/
Nevada border, recently, and had a chance to go to a computer
center where some local Tribal members were there, and a young
man was there sitting at the computer. And I struck up a
conversation with him, and they are desperate to have some sort
of economic development opportunities in Duck Valley. We are
working closely with them to try and make that happen. But I
talked to him. I said, well, what are you doing now? And he
said he graduated from high school about a year ago. And I
said, well, you know, what is happening? And he just said, I am
just bored, there is nothing to do, there is no jobs, no job
opportunities, and so he will come to the computer center and
sit there and get on the computer and look at the outside
world, and not be able to participate, and those are the type
of things that we need to change.
Mr. Cole. Appreciate that. Ms. Schinasi, and I hope I
pronounced it right, you did mention, and I want to go back to
this point about the trend line, the growth. Is there anything
that would surprise you about that particularly? Given the fact
that we sort of set this policy out, and people have taken
advantage of it, and I would expect in the early stages if you
start at zero or a relatively low number, the numbers look
pretty dramatic if you talk in terms of percentage increases.
But is there anything that is alarming or surprising about the
speed with which people have taken advantage of the opportunity
or Tribes have taken advantage of the opportunity?
Ms. Schinasi. The trends that we see here, interestingly
enough, parallel the trends that we see in government
contracting as a whole, and I talk about that not because there
is anything in the absolute dollar value that has any value in
and of itself in that number, but what we look at that for is
whether or not there are risks from a management perspective.
And so we have taken a very similar positions when we look at
service contracting as a whole.
When you have rapid growth and you have at the same time
cuts in your workforce, and you have more complicated contract
vehicles, then the agencies need to be paying more attention to
what is going on.
Mr. Cole. But just for the record, there is no reason to
think that it is any different than any other phase of
government contracting, no reason to particularly single out
this particular area of Federal contracting?
Ms. Schinasi. Not in terms of the dollars spent. No, sir.
Mr. Cole. Thank you very much. Thank you, Mr. Chairman.
The Chairman. Gentlelady from California, Ms. Napolitano.
Ms. Napolitano. Thank you, Mr. Chair, and this is really an
interesting conversation, but I am trying to find out, Mr.
Largent, whether--because I sat on the Small Business Committee
for six years, and I learned a lot about what agencies, Federal
agencies are not doing, because I have known contractors that
have been 8[a] certified, this is minorities, and never got a
contract once for years.
So are we having SBA work with the Federal agencies to
change their mindset in terms of being able to assist minority
outreach? Because it is all well and good that your agency may
be focusing on that, but if you don't change the mindset of the
procurement officers in the Federal agencies, it is not going
to help you increase at the way it should be.
Then the second question would be are you looking at
diverse areas of the United States where you have your Tribal
groups in the area? Because I know you have talked about the
ones that have gaming, some of them are doing very well, and
they have done outreach to help other tribes, but you need to
start teaching the young people at the school level and
advising them where they can begin to look for getting into the
economy, getting into business, being able to be--how would I
say--successful in business enterprises, and I don't hear any
of that. Sir?
Mr. Largent. With respect to your first question, in
general terms I can tell you that, yes, I know that the Office
of Advocacy works specifically on this issue. I have had the
opportunity to accompany Tribal delegations to other agencies
to talk about opportunity.
With respect to specific methodology, I would prefer to get
back in writing from the program office that is responsible for
that because my focus is very, very narrow. I work with
Indians, Native Hawaiians, Alaska Natives and the Islands of
Guam and American Samoa, and probably won't get there. So if
that is OK, I would prefer to get back in greater detail with
people that can give you that answer.
With respect to your second question, absolutely, and this
is one of the reasons that we travel so much. We have put
together a team of people to help us develop a tool that is
both diverse from a business and educational background and
also diverse from a geographic background.
I cannot emphasize enough the challenge that Tribal leaders
have in trying to build economies. It is more than just access
to capital or better education or access to markets. I recently
had an opportunity to travel to a reservation and was touring
one of their facilities, a very nice facility, and they were
explaining to me because of the high incidence of diabetes in
the community that they have to schedule their workforce
because every two or three days people need to leave for three
hours for treatment. Factor that into a competitive business
analysis and you see the challenge, and that is one component.
So developing this tool that I keep talking about, we have
identified 130 separate components at this point that we
believe are instrumental or integral to developing sustainable
economies, things from as broad and powerful and well known as
Tribal governance structure to things as nuanced as bereavement
policy. It is a very complicated mix and we are working very,
very hard.
This past Sunday I flew to San Francisco to meet with Wilma
Mankiller, former Cherokee chief, to get her insights as to how
we can roll this out. A lot of people are working very hard to
address that issue.
Ms. Napolitano. Do you work in California?
Mr. Largent. No, I work here. I live in Michigan. I fly in
on Mondays. I fly home on Fridays.
Ms. Napolitano. So your outreach is not into the Western--
--
Mr. Largent. I go everywhere. I go everywhere. I was in San
Francisco. I have been to Alaska.
Ms. Napolitano. OK.
Mr. Largent. We are in the process right now of trying to
finalize an inner-tribal in Oklahoma, Nevada, New Mexico,
California, and somewhere else where we will sit down with
broad delegations of Tribal leadership to say here is what we
are doing, what do you need.
Ms. Napolitano. I hate to stop you but my time will be very
limited, and that is, do you actually have the ability to do
other outreach through new technologies such as video
conferencing so you don't have to travel?
Mr. Largent. Yes, although it is difficult to effect the
trust and the nuance, the understanding. But the tool that we
are building is on a sheer point platform where more and more
people can access it from remote locations and provide their
insights, yes.
Ms. Napolitano. OK. The other question would be the Small
Business Committee under former Chairman Donald Manzullo had
begun establishing a one-stop shop for small business. Are you
aware? Do you work with that? Because they were going to be
able to try to hone in on assisting small business, that is any
small business.
Mr. Largent. Are you referring specifically to Indian
reservations?
Ms. Napolitano. No. Generally small business that could be
useful in being able to use this tool to further some of the
contacts of some of the Tribes.
Mr. Largent. If we can draw a distinction, Congresswoman,
there is a unique distinct set of circumstances between
individual Indians and Tribes. So for individual entrepreneurs
such as myself, I have been self-employed for 30 years, being
able to access the resources of the Small Business
Administration or other Federal programs are available to them
like they would be anybody.
But for developing sustainable economies on reservations,
that is an entirely different matter, and I believe that one-
stop shops would have limited, if any, value in that particular
context.
Ms. Napolitano. Well, that may be so for some, but others
may be in a position to be able to have some benefit from that.
Mr. Largent. If you could elaborate.
Ms. Napolitano. Some may already be in business and may be
able to expand and being able to access information available
on that one-stop shop.
Mr. Largent. Agreed, and again those resources are already
available and we are trying to direct individuals and Tribes to
those resources where appropriate. But in remote locations,
such as the villages of Alaska, or the big land mass Tribes out
West, we have not had a great deal of success because it is
just a unique circumstance to work in. Accessing capital is
very difficult, for example. Pretty hard to start a business
without money.
Ms. Napolitano. Thank you, Mr. Chair. I would like to go
for a second round, if available.
The Chairman. Sure. The gentleman from Puerto Rico, Mr.
Fortuno? Next on our side is the gentleman from California, Mr.
Baca.
Mr. Baca. Thank you very much, Mr. Chairman, and I want to
thank the panelists for coming and giving their insight, and I
guess we have heard a lot of positive things, but I want to
continue to hear. What can be done to improve the current
system that we have right now in doing the outreach in
reference to the 8[a] programs, and what kind of educational
programs are we developing in conjunction with our K through
12, our community colleges or state colleges to make a lot of
the people aware of the programs that are available for them?
Any one of you can elaborate on that in terms of what can be
done to improve what we are doing now, and if there is any
changes or corrections that we need to do to make sure that we
do the outreach too as well and letting many individuals that
they have an opportunity to apply to create, not only diversify
themselves and jobs and opportunities within the area.
Mr. Middleton. I will let Mr. Largent speak toward ongoing
improvements of the 8[a] program. I would like to speak to the
educational opportunities that Congresswoman Napolitano also
raised.
It is important for us to get out and talk with Indian
youth at an early period in their educational process. We have
gone out and found that many Indian youth really need to have
an understanding of what entrepreneurship is, what small
business development is. I think, as this committee is aware,
small businesses create well over 50 percent of the jobs in the
United States, and we need to promote more small business
development in Indian Country.
We have started an initiative in the Department of Interior
in conjunction with a financial education nonprofit to do a
demonstration project with six of our schools to, in fact,
start teaching entrepreneurship. We think this is going to be a
successful program, and one that we can expand to the other
schools that we have in place.
We are also looking to reach out to youth through some of
our conferences that we are putting on across country to talk
about business development and providing them the tools and
skills and financial expertise they need, in fact a step in the
small business development as tribes start developing their
economies. How do you fill in with some of those on-location
businesses that in fact could be supporting services for some
of the other businesses that are in place.
In addition, both Mr. Largent and I sit in on a monthly
meeting at the White House. We have a work group that includes
all of the agencies across Federal government that have Indian
programs and are dealing with Indian issues, and through that
meeting and that committee that we sit on we provide a lot of
cross-fertilization across information across agencies so that
we in fact are trying to leverage our programs as best we can
so that we are not stove-piped, and we think that has shown
some success on a number of occasions.
Mr. Baca. Mr. Largent, can you elaborate a little bit more?
Mr. Largent. In addition, the Office of Native American
Affairs in partnership with the Small Business Training
Network, which is an office inside the SBA that develops online
training materials, last year we partnered to link some of
those materials to the Tribal colleges and universities, which
are managed under the White House Initiative of Tribal Colleges
and Universities, and this year we are in the process of
developing a Native-specific curriculum for entrepreneurial
development, basically a first step of what it means to be an
entrepreneur, and again I can't overstate the importance and
the difference in the way that Indian people look at business
and economic development.
I was in a meeting last week and I had a conversation with
a Tribal leader who said to me, what is economic development?
He said, to us, our festivals are so important that we take
part time and seasonal work because it is more important to be
at a festival with our people, celebrating who we are, than to
be working five days a week. So these are cultural differences
and trying to create training programs and making technical
resources available that will have meaning is a difficult thing
to do.
I had one other thing I wanted to tell you and it slipped
my mind, so if I can tap dance for a minute and come back to
it.
Mr. Middleton. And I would be glad to fill in a little more
on this also. For small business development, actually one of
the hindrances of small business development is getting capital
to be able to start small businesses, and Congress last year
passed an amendment to the Indian Finance Act, in fact, is
going to provide us some very useful tools for providing
capital investment out to Indian Country for small business
development. It is going to allow the guaranteed loan program
of the Department of the Interior to provide guaranteed loans
to 501[c][3]s, which includes community development financial
institutions.
Currently, our program typically makes loans on the order
of $250,000 to our largest is about $18 million, and because we
work with the lenders, lenders typically don't want to deal
with smaller business loans because it is the same amount of
paperwork for them. By allowing us to do guaranteed loans to
some of these 501[c][3]s, it is going to allow us to set up a
revolving guaranteed loan account there that can meet the needs
of let us say a mechanic who wants to start a mechanic
business, needs to buy tools, needs to buy equipment, needs to
set up a shop in the $80,000 to $100,000 range, and we think
this is going to show some great benefits in future years.
Mr. Baca. I know that my time has expired but, Mr. Chair,
if I may ask my final question. Just a quick yes answer would
be to the question.
Is it true that because of these programs have come into
existence and not only in small business development and
creating opportunities and jobs, that these jobs are truly
created here in the United States and they are given
opportunities to individuals to obtain jobs here comparison to
every other corporation that is out-sourcing Native American
Indians and Indian Country are creating jobs right here in the
United States for the American people, is that true?
Mr. Largent. That is absolutely true, and if I can take
more than a couple of words just to give you an example. I am
working with a group of Tribes and a private sector company to
put together call center operations off a central node located
in the urban environment.
Mr. Baca. Thank you.
The Chairman. Gentleman from Utah, Mr. Bishop.
Mr. Bishop. Thank you, Mr. Chairman. I apologize for being
here late, but I realize that no well-run institution would
there ever be three hearings and a markup scheduled at the same
time in the morning.
[Laughter.]
Mr. Bishop. But since Mr. Kildee was able to do it, I am
appreciative that I was able to join him. And by the way, Mr.
Kildee, happy birthday on Sunday.
I am glad I was able to catch Dr. Middleton here, and I
appreciate the approach they have taken in realizing the
diversity amongst our Native American Bands and Tribes so that
multiple approaches have to take place so that one size just
doesn't fit all. We can't be stereotypical with that. I am
especially grateful for the 8[a] program under Dr. Middleton's
direction.
The Northwest Shoshone Band is based in my home city of
Brigham City, and they have used this program very effectively
in a number of projects and an ever-increasing expansion of
projects that have added toward their economic benefit and the
benefit not only of this particular Band but also the area.
I would ask unanimous consent, Mr. Chairman, to have a
statement added to the record.
The Chairman. Without objection.
[The prepared statement of Mr. Bishop follows:]
Statement of The Honorable Rob Bishop, a Representative in Congress
from the State of Utah
The Northwestern Band of Shoshone Nation, based in Brigham City,
Utah, started their Economic Development Corporation three years ago.
With $10,000 borrowed from the Tribe and no employees, they were able
to start a company that took advantage of the 8(a) program. Now the
Company performs contracts for the Intelligence Community (translation
services, intelligence analysis and Information Technology) and
construction (over 60 projects throughout the country). The tribal
company has over 100 employees, and is still 100% owned and run by the
Tribe.
Half of the Company's profits go to tribal infrastructure--the
Tribe built a new housing development (10 house subdivision in Ogden),
new tribal offices (in Brigham City) and reacquired the site where the
Tribe was massacred by federal troops (33 acres NW of Preston, Idaho).
The Tribe continues to open new offices throughout Utah, and has
extended employment opportunities not only to Shoshones, but also
member of other Tribes (Navajo, Sioux, Cherokee, etc.).
Taking the Harvard Project for American Indian Economic Development
to heart, the Tribe follows ``Nation-building'' principles. Tribal
representatives run the businesses without interference from politics.
Now other tribes, including gaming tribes, are turning to the
Northwestern Shoshone to diversify economic development through joint
ventures with the Tribe to promote 8(a) work.
______
The Chairman. The gentleman from American Samoa, Mr.
Faleomavaega.
Mr. Faleomavaega. Thank you, Mr. Chairman. Not only do I
want to wish the gentleman from Michigan a very happy birthday,
but I do want to personally commend him for his authorship of
the legislation that was recently passed by the House of
Representatives concerning giving greater assistance to the
housing needs of our Native American community, and I do want
to personally commend him for that and for you too, Mr.
Chairman, coming from Alaska, and Mr. Cole, this was a
bipartisan effort, and I am just so happy that this legislation
went through.
I just want to commend the members of the panel for their
excellent statements. I do have a couple of questions. I am not
a very good mathematician. If I read this correctly that here
we have a pot of $378 billion, and out of this whole thing we
are talking about--is it five-tenth of 1 percent that has been
used for our Native American community? Five-tenths of 1
percent of $378 billion.
I was just wondering with this $378 billion pot, how about
maybe earmarking $5 billion as--well, maybe I had better not
use the word.
[Laughter.]
Mr. Faleomavaega. Let us earmark it or set it aside or
allocate it or appropriate. Yes, I would be the first one to
volunteer to earmark $5 billion out of this $378 billion pot
that we are talking about.
You know, with 38 percent unemployment, 56 percent of the
minimum wages of household goods, the highest rate of diabetes,
the health conditions that our Native American community are
experiencing, and it is just nice to give out the money. I
mean, this is the way to do it. Encourage them to do business,
but I am very concerned that we haven't really got to the very
root of the problems.
As you had indicated earlier, Mr. Largent, that it is not
just say, OK, let us start a business. Are the people educated
enough to do a business? What kind of an educational system or
educational facilities even that a Native American community
has been given?
We have some 24 Tribal colleges all over the country, and
maybe this is another area that we need to focus on, not just
to say do business, but we haven't really started from the
roots on how we can better prepare our Native American
community, not only through education, through providing better
health, infrastructure, and I honestly believe that what--what
is your response? Do you think $5 billion may be a help in that
direction if we can find some way or some how?
I am just throwing out a number. If I see five-tenths of 1
percent of the $378 billion pot, and we are only giving 1.7
billion to the Native American community, somehow it just
doesn't seem to jive with me on that. Can you comment on that?
Mr. Largent. No.
[Laughter.]
Mr. Largent. But I can say that as Tribes and Alaska Native
Corporations and Native Hawaiians and individuals wade in----
Mr. Faleomavaega. By the way, I am a member of the Samoan
Tribe. Is there any hope for me?
Mr. Largent. We can talk afterwards.
As they wade into business the capacity and capability gets
broader and stronger every year. I mentioned an organization
earlier in my testimony called ``NABA'', Native American
Business Alliance, and NABA was formed, I had left the
reservation after I sold my company in 1986, and NABA was
formed by urban Indians to do business in the private sector.
And when I introduced the idea that our credibility was at
stake without the support of Tribes, it was a very heated
debate that lasted for a year before we finally decided to
shift our mission. And as I said in my testimony, there was
very little understanding of how business works, how
competitive it is.
Today, we are seeing improvements and it is my belief that
as Tribes get a better understanding of what makes sense for
them, because of their internal capabilities, their culture,
the resources that are available to them, they will be able to
excel in the private sector, and I think we are going to see
that kind of diversification as time goes on, but we need some
time because we are dealing with a 250-year legacy of not just
neutral activity but in many cases harmful activity to Native
concerns.
Mr. Faleomavaega. Just a real quick question to Ms.
Schinasi. It sounds like you are either Navajo or Pueblo or
Comanche. Schinasi sounds very much southwestern.
I was listening to your testimony and other than greater
oversight and all of this, but do you have any recommendations
on how we can even amend the law to make it even better for the
needs, to provide for the needs of your Native American
community?
Ms. Schinasi. I think most of what needs to be done can be
done without legislative change, and I would offer that our
recommendations to SBA were at some level generally to protect
the taxpayer dollars, but also at some level to protect the
firms who are participating in these programs, because when you
don't have an idea of what joint ventures look like or whether
or not contracts are let based on pass-through contracts and
things like that, it can be the firms themselves who can suffer
in an arrangement like that. So I think better oversight is in
fact one way to help the ANC 8[a] corporations.
Mr. Faleomavaega. Thank you, Mr. Chairman. My time is up.
The Chairman. Gentlelady from the Virgin Islands, Ms.
Christensen.
Ms. Christensen. Thank you, Mr. Chairman. I wondered,
because most of the discussion was around reservations, as I
understand it, and I realize I did have to step out, but how
are you reaching the urban Indian populations, and is the
situation there any different? Anybody or all could answer.
Mr. Largent. The Small Business Administration has
significant presence in urban and suburban areas. I recently
had the opportunity to address the Wisconsin American Indian
Chamber of Commerce in Milwaukee where they recently received a
grant to become a lending entity to small businesses in urban
areas as well as Tribal areas. So we have a plethora of
programs on technical assistance, access. One of the businesses
I have owned in my career, I got an SBA loan. So there is
plenty of assistance from my agency for urban Indians, and that
is why the focus of my office is exclusively on remote
locations, Alaskan villages and Tribes that are in remote
geographic areas, as well as Hawaii.
Ms. Christensen. Anyone else?
Have any specific areas of economic activity or any
specific types of businesses been identified? Has there been
any kind of study to see what kind of businesses might be most
profitable or have the most opportunity for creating businesses
in Indian communities and Alaskan Native?
Mr. Middleton. I can speak a little bit to that. Absent
having gaming opportunities, probably one of the largest
opportunities for Tribes, particularly in the lower 48, is
energy and mineral development. There is a significant amount
of energy and mineral development on Tribal lands that has been
unexplored. As a matter of fact, I think some of the estimates
that we have in place are fairly conservative simply because we
don't have enough data, seismic data or geological data to be
able to determine what the extent of the resources are.
A number of tribes are starting to take advantage of this,
the Crow Tribe in Montana, for example, which has large land
base and significant coal, natural gas, and other mineral
resources.
But I have to speak a little bit toward the development of
these energy and mineral resources because our philosophy on
this is that we would like to see Tribes get away from this
landlord/lessee arrangement of just leasing the lands and just
leasing the resource capacity to outside companies. We would
like to see Tribes start their own companies. For example, if
they have gypsum deposit, as many Tribes do, rather than just
selling it off at a cents per ton manner, we would like to see
them think about setting up a wallboard plant, which is what--
gypsum is made into wallboard, set up a wallboard plant and
actually capture that value added, capture those jobs rather
than moving those jobs off a reservation.
So that is the approach we are taking, but we think there
are significant opportunities in energy and mineral
development.
Mr. Largent. And Dr. Middleton raises a good point, and my
agency is working in concert with them. As we travel around and
find Tribes that think they have a business idea because of a
resource, whether it be alternative energy like ethanol or
biomass or wind, or manufacturing, or niche IT, we look to work
with them both to help them find the capital and the expertise
and the education to make this a reality, and that is really
what I was referring to when I said it will be an evolutionary
process, much like gaming.
When gaming first came, and my Tribe was one of the first
in the country to have gaming, we imported non-Native gaming
managers to come in and run our operations for us. Now we are
pretty much self-sufficient in that area.
So given the opportunity over time, we will find additional
value add opportunities in the various natural resources or
other assets that we have to work with
Ms. Christensen. OK. Is that it?
Is it your birthday today? Oh, we share a birthday. OK.
Happy birthday.
Mr. Largent. And as a fellow Michigander, Congressman, I
wanted to say happy birthday too.
The Chairman. The gentleman from Michigan is now
recognized, Mr. Kildee.
Mr. Kildee. Thank you very much. It is my privilege to
welcome a fellow Michigander today.
I have been involved in Indian matters since my election to
the state legislature in 1965. One of the first bills I
introduced was the Indian Tuition Waiver Act in Michigan. Any
Michigan Indian can go to a public college in Michigan and the
state pays the tuition. I introduced that because I read the
Treaty of Detroit, and treaties are very, very important, and
we have moral and legal obligations to those treaties.
So I met many a Indian from Michigan who went to college
because of that Michigan Indian Tuition Waiver Act, and I also
introduced the bill back in 1966, I think, to establish the
Michigan Indian Commission, because many agencies in Michigan
had no idea what the responsibilities were, so they advise the
other agencies of government.
But on this bill here, very often we find what is supposed
to be a solution to what is not a problem, and I worked with
Mr. Waxman, because he had rather Draconian language in the
bill, which would have put limits of an $8 million cap on
services and $10 million on goods, and I put some place-holder
language in there which I worked out with the Native American
community. They would have preferred no language at all, but I
put some place-holder language in there just to hold things for
awhile.
With that in mind, I would like to address a question to
Ms. Schinasi. You indicated, I think, a couple of times now in
your testimony that you felt most of this, of not all of this,
could be handled administratively. Could you elaborate on that,
the problem that Mr. Waxman was seeking a solution for, and I'm
not sure there is a problem?
Ms. Schinasi. The recommendations that we have in our
report go to the findings that we developed during our review
that said there was some confusion in who was responsible for
which piece of managing the 8[a] ANC firms as well as a
limitation on the information that SBA had in order to carry
out its responsibilities, and the resources that had been
devoted, particularly to the part of SBA that was responsible
for the local monitoring of the ANC 8[a] firms.
So those recommendations went more to the management of the
program and really can be accomplished within the statutes that
are now set out.
We did not talk about support or challenge for the program
as a whole, and my understanding is that that legislation had
to do with what the appropriate level was for contracting
dollars to go to the ANC 8[a] firms and corporations, and so
that was not within the scope of our work, and was not
reflected in any of our recommendations.
Mr. Kildee. At this point you are not pushing this
legislation that Mr. Waxman originally had in the bill or even
the place-holder language that I put in to make it----
Ms. Schinasi. That is correct. We have no position on that.
Mr. Kildee. You have no position on that. I appreciate
that.
I think in all these things we have to recognize that for
so many years--when I first started visiting Indian
reservations in 1965, in Michigan, some of them were like Third
World countries. The injustice was horrible, and now we are
finding some sensitivity in government for programs like this,
but some people think that every Tribal agency has, you know,
got huge casinos someplace, but the poverty that you still find
and the need for economic growth in an Indian community and
Native American community is still great, and I think whenever
we see legislation that is offering a solution for a problem
that doesn't exist, we should be very cautious, and probably
leave it up to you people to try to find how the law should be
administered if there is some problem there and you feel that
can be done, I would prefer at this point.
Of course, I will also keep my options open when the
administration maybe does do something that we feel is too
tight, we can come back and try to soften that too. But at this
point I would trust you to take care of that, but hope that my
place-holder language, which I worked out with the Native
American community, could be just dropped from this legislation
and let you do your job.
I yield back the balance of my time.
The Chairman. The Chair thanks the gentleman from Michigan.
The gentlelady from California, Ms. Napolitano, is
recognized.
Ms. Napolitano. Thank you, Mr. Chair.
A lot of the discussion on the oversight of the Native 8[a]
program, but Mr. Largent, has there been an increase or a
decrease, and can you tell us the amount of appropriations
since 2000? And how has that affected the contracting officers?
How many contracting officers are there? What is the level of
training provided to those officers to be able to deal with the
Native Americans and to the Alaskan Natives? Then, of course,
the volume of work performed by those officers. Those are all
questions that come to mind as I hear you speak.
Mr. Largent. Again, my office is not part of the program
office that has oversight for the 8[a] program. That would be
Government Contracting and Business Development. I am generally
aware that we have increased staff. We have had staff-specific
training around this issue. As we alluded to earlier----
Ms. Napolitano. That is very general. Could you put it in
writing, sir?
Mr. Largent. I absolutely could. Yes, ma'am.
Ms. Napolitano. Because that is very general. I could just
tell you something and not be able to back it up with facts and
figures.
It just begs the question because I can't remember the year
but not too long ago SBA's budget was supposed to be cut by 43
percent. Now that means a lot across the board. Now, of course,
that came back because there was a hue of an outcry from the
small business community, and most of it was put back. I think
33 percent. But it begs the question of how much is actually
being put into the SBA programs to help achieve this.
Then the other issue that came up, you mentioned the fact
that small business finds it hard to get loans from the lending
institutions, the ANCs. Have you tried credit unions because
they have an agreement with SBA to be able to do small loans?
And I am talking micro 2, I am not sure of the amount, but they
have done a wonderful job in supplanting the banks' inability
to do the small loans because they don't want to spend the time
and the money to do that, and that is a known fact. Have you?
Mr. Largent. With respect to your first question, I have
staff right behind me. We will get back to you in detail on
that question.
In regards to your second question, the issue is not so
much the size of packaging a loan, although banks are sensitive
to that, we have programs such as Community Express which
require very little documentation. The issue is sovereignty.
Ms. Napolitano. OK.
Mr. Largent. Banks have no recourse in the event of
default. There is no way to go in and recapture any collateral
because Tribes are sovereign nations.
Ms. Napolitano. Right.
Mr. Largent. So we are having extensive conversations not
only in my agency but Indian Country-wide, and most of the
people in the room behind me can talk to you in detail about
this, on how we can address that issue.
Ms. Napolitano. Is there a possibility then that your
specific area of expertise might be able to help develop the
greening of some of the Tribes, the focus on being able to
learn how to green?
And you talked about wind turbines and others. What about
solar panels? That is something that is going to have to be in
the future for us to save electricity and the energy because we
are having global warming, and drought in the Western states,
which means there is not enough water in the rivers and the
dams to be able to generate the electricity.
So if we are then able to start a process of teaching them
where to begin setting up so they can connect to a grid and
sell their electricity, is that something that you might be
able to look at and begin to foster?
Mr. Largent. All of these are under discussion. There is a
new assistant secretary or deputy assistant secretary, I
believe, at the Department of Energy who I am in very close
contact with, and we have regular conversations about this, as
does most of the Indian Country. So yes, these are all
opportunities that we are looking at.
There are fundamental and structural issues that need to be
dealt with ahead of time. We can't rush head-long into this,
throw capital at something, and then realize that we missed a
component. So it is thoughtful and cautious, but there are
approaches we are looking at.
And as an aside if I may, I would like to thank Congressman
Kildee because I am also one of the recipients of the Michigan
Tuition Waiver Act.
Ms. Napolitano. I would love to maybe have some
conversation with both--actually all three--because I am the
Chair of the Subcommittee on Water and Power, and the grids are
under the jurisdiction of my subcommittee.
Mr. Middleton. Congresswoman Napolitano, if I could address
that. Part of the program that I administer is energy
development, and we are working closely with a number of tribes
on energy development, on renewable energy resources, wind,
solar, biomass, geo-thermal. A number of tribes would like to
reach out and in fact develop more extensively their
opportunities for renewable energy development, and are doing
so.
So we are working in partnership with the Department of
Energy, the National Renewable Energy Lab in Golden, Colorado,
to go out and determine whether in fact they have sufficient
wind resources to be able to in fact establish wind turbines.
One of the problems we are running into though is in fact
that when Tribes determine that they in fact have wind
resources getting access to turbines has become problematic
because, as the renewable--I am sorry--the subsidy for
renewable energy gets renewed every two years, there is a big
spike on requests from companies that are actually out there
doing it for a for-profit, and Tribes need to be able to put
money down to be able to even get in line to be able to gain
access to the turbine industry, turbines that are being
developed. So we are working through that with tribes, but we
think there is a large opportunity for wind development,
particularly in the northern plains, and getting access to the
grid through the Western Area Power Administration is a key
opportunity for us to develop the resource.
Ms. Napolitano. Thank you. And certainly wind is one of the
energies that we should be able to develop and foster the
growth of, but also solar power. The National Electrical
Contractors are teaming up with the IBEW to do a lot of
greening of businesses which could be a new way of being able
to address energy consumption by the business, which is their
largest portion of expense.
Thank you, Mr. Chair.
The Chairman. The gentleman for Puerto Rico, Mr. Fortuno.
Mr. Fortuno. Thank you, Mr. Chairman, and I commend you for
this hearing, and I join my colleagues in congratulating Mr.
Kildee on his birthday, certainly. I also apologize for being
late, and having to leave also--a number of us are having three
hearings, including some markups at the same time during this
morning.
But this is a topic of interest to me. I believe there are
some parallel comparisons to the territories, and that is why
it is of interest to me, and I was wondering if anyone may want
to comment on I wonder if the programs are in place are doing
what they are supposed to do. I have read at times the concern
that there will be a--that anything we may do may be or may
impact in any way culture or way of doing things for many
centuries, but by the same token certainly, I believe we have a
common interest in developing an entrepreneurship amongst
different Tribes.
So I am wondering if what we are doing makes sense and
where are we failing. It is the educational system? Where are
we failing here. I don't know if you want to comment on that,
any of the three.
Mr. Middleton. I think from our department's perspective
that, although we haven't done as good a job in the past as we
possibly could have. I think things are changing for the
better, and the 8[a] program is one of the tools that has been
in place that is allowing us to make progress, but there are
other things we are doing such as trying to teach at a young
age entrepreneurship and the meaning of business development,
financial education of those types of opportunities.
In addition, many of the Tribes are recognizing that they
need to make some changes in order to take advantage of the
opportunities they have for business development. Many tribes
looked at changing their constitutions because they realize
that the constitutions in fact may have been holding them back.
The Crow Tribes is one example of this. Other Tribes are
looking at the way their governments are structured, realizing
that if they have a separate business arm, that they in fact
can grow their own expertise for developing their business
opportunities and business resources rather than making
everything a political decision that is looked at by new
administrations within the Tribe as being past administration's
policy.
In addition, we have a number of tribes, such as the
Southern Ute, that have done very well in managing their growth
fund and managing their energy and mineral resources. They
currently have a AAA bond rating on Wall Street, which is
significant, and they own partial interests in a number of let
us say offshore oil and gas wells. So they in fact have grown
the expertise they need to move forward, and many other Tribes
are seeing this and taking the examples to heart, and trying to
decide what they need to do in fact to put them on parallel
with some of these successful Tribes that have developed
economically.
Mr. Largent. I would just say that Dr. Middleton's comments
are accurate, 100 percent accurate, that economy in the sense
of the U.S. economy is a new concept to Indian Country. In my
opening testimony, I talked about forming a company in 1976.
That was 31 years ago. And people in my community came to me
and said, what made you think you could do that? They truly
were perplexed. Where did the idea come from and where did the
confidence come from that I could actually run a business? That
was 31 years ago.
So it was the advent of gaming for some, and I recently
read a report, and if I am correct, I think it said that 37
percent of all gaming dollars in Indian Country are controlled
by 15 Tribes, so it certainly has not been an across-the-board
distribution. But gaming has given some tribes at least to
beginning to start the seed capital to go out and now
diversify, and the Tribes that have had the best leadership,
the most consistent leadership, well educated workforce, access
to markets, and a culture that understood the importance of
this have done very, very well. Chickasaw comes to mind, doing
a remarkable job. Still a long ways to go, but a remarkable job
relative to the Tribe's that Congressman Kildee was just
talking about where you go in, there is just no activity at
all.
So I think we are heading in the right direction. We are
making progress. I think we need some time.
Mr. Fortuno. Thank you.
The Chairman. Gentleman from Oklahoma, Mr. Boren.
Mr. Boren. Thank you, Mr. Chairman. I appreciate--sorry I
was also late, had several meetings. We have 200 Oklahomans who
have flown in this week, and so we have a lot of different
meetings. I am glad to see my good friend Mr. Cole, and also
our great Oklahoman Neal McCaleb being here today as well.
We have 39 federally recognized Tribes in Oklahoma. So many
of them are doing great things, creating small businesses,
employing a lot of people. In my district, Tribes like the
Chickasaw Nation, the Choctaw Nation, and others, my concern is
making sure that we have everyone, all of our smaller Tribes in
the northeastern part of my state we have Tribes like the
Quapaws and the Miamis and other tribes who need--we need to
make sure that everyone has a chance, and I appreciate the
efforts of the Small Business Administration and also of Tribal
leaders in making sure that we diversify our economies.
I want to thank the Chairman for holding this hearing, and
for letting me be a part of it. Thank you.
The Chairman. Thank you, Mr. Boren.
No further questions. We will proceed to our second panel.
The Chair again thanks the panel for their testimony and
service.
Our next panel is composed of The Honorable Tex Hall,
Chairman and CEO, Inter-Tribal Economic Alliance, Mandaree,
North Dakota, and speaking of birthdays, just had a birthday
yesterday so we wish Tex a birthday as well. This seems to be
happy birthday day; The Honorable Joe Garcia, President,
National Congress of American Indians, Washington, D.C.; Mr.
Greg DuMontier, Chairman of the Native American Contractors
Association, Washington, D.C., and Ms. Julie Kitka, President,
Alaska Federation of Natives from Anchorage, Alaska.
Lady and gentlemen, we have your prepared testimony. It
will be made part of the record as actually read, and Tex, we
will start with you, and just a warning, we are expecting three
roll call votes shortly on the Floor of the House so we may be
having to recess during this panel's testimony. Tex, welcome.
STATEMENT OF THE HONORABLE TEX HALL, CHAIRMAN AND CEO, INTER-
TRIBAL ECONOMIC ALLIANCE, MANDAREE, NORTH DAKOTA
Mr. Hall. Thank you, Chairman Rahall, and Ranking Member
Young, and Members of the Committee, Co-Chair Kildee and Co-
Chair Cole, thank you for your service to Indian Country. It is
a great honor, Chairman Rahall, to speak to the Committee on
this topic of diversifying Native American economies.
I want to make sure the Committee knows that this is one of
the hot topics in Indian Country today, is diversifying the
economies. So you are right on target, Chairman Rahall.
I do want to say that I am grateful to you and your staff
for the outstanding work that you have done on behalf of Indian
Country, and the Committee. Twelve hearingss, 12 issues,
critical issues, you have already marked up 12 Native American
bills that include the Indian Health Improvement Act, and the
Native Hawaiian Government Reorganization Act, and today's
hearing on economic development is just an extension of the
work and the commitment that you have shown to Indian Country,
so thank you, Chairman Rahall, for your work on that.
Today I am here as the Chairman of the Inter-Tribal
Economic Alliance, which I helped co-found in 2001. When I
first became National Congress of American Indians' president,
the topic of economic development, high unemployment, high
poverty rates was discussed at that time and long before that.
So we thought a need for an economic development organization
like the ITEA was needed to really create jobs, and we put a
goal out there of 200,000 jobs because of the high unemployment
and high poverty on the reservation, on the Native Alaska
villages, and the homelands, so we thought creating new
businesses is critical and key to putting a dent on this
poverty.
So experience has taught us that we cannot rely solely on
the Federal government to win this war on unemployment and
poverty, and we had to take this challenge in Indian Country up
ourselves, and so we have. And so ITEA has created new
businesses since 2001 in energy. We have created a private
equity fund, a $200 million private equity fund, multi-tribal
construction, a natural beef and buffalo that is chemical free,
uses all natural grass fed, telecommunications and also we are
managing a contract with the Marine Corps, an $80 million
contract for digitization and document conversion for military
manuals.
Nonetheless, as we heard today, poverty is still
widespread. It is still over 31 percent, and that is almost a
third of our Native families, and today Native American
households report a median income of over $33,000. We must
simply do better than that.
As we know, the United States has a treaty-backed trust
responsibility to Indian Tribes, and that responsibility must
extend to economic development because you understand just how
important diverse Native economies are. We are certain that we
use the full power and jurisdiction of this committee to
protect and defend the programs such as the Native 8[a]
programs that are working in Indian Country, and have created
new jobs and economic opportunities.
So the 8[a] is a prime example of the Federal initiative
that created these real benefits. It is working. I wish, as Eni
was talking about, Congressman, that it should do more, and I
think we really should be talking about those discussions about
how to improve. As we all heard, it is less than 1 percent of
all procurements set aside for Native businesses.
So I think there is many new Native businesses that are
just starting. Some haven't got contracts. And there is many
that are back logged in the application process, waiting to get
SBA certified. So we somehow have to address those that are not
even certified that haven't got the opportunity, Mr. Chairman.
But I do want to focus on the last few comments, as I know
my time is short, and that is, the proceeds from the Native
businesses, the Native Tribal businesses go back into the
community, there is no question about that, and I think that is
a huge misunderstanding when you have individual entrepreneurs
and companies that are looking at the profit and the bottom
line that are benefitting for their company versus a Native
Tribal company, and that is part of the culture of Native
America, I mean, that the benefits go back into the Tribal
community.
So I have never heard that discussion talked about from any
of the discussions, and I have been around for awhile, Mr.
Chairman, as you know, and I haven't heard that discussion at
the table about what is the difference between Native
businesses and individually owned corporate businesses where
those benefit that individual.
So I think that was the reasons that Congress created the
Native 8[a] program in the early 1980s or late 1970s or
thereabouts, and so it is troubling to now, 2007, and it
appears that some Members of Congress still do not have that
understanding that that is the major differences.
Health care, we know that it is less than 50 percent
funded, so we know that new diabetes equipment will be
purchased by some companies with those profits. We know that
eye glasses, dentures for the elderly program, a ramp so they
can at least get up their stairs into their house are many
examples of how these profits benefit the elders and then the
head starts and the playground equipment. That is a lot
different scenario than what is being portrayed on many of
these Native businesses that are supposedly taking advantage
and getting billions and billions of dollars. It is simply not
the case, Mr. Chairman and Members of the Committee.
And here at ITEA, we created six companies in the last few
years. Because we are about 400 miles from the closest BIA
regional office, we are 400 miles from the SBA office, we are
in the middle of North Dakota and South Dakota, and so we have
to find a table somewhere and say let us look at our ideas, and
let us try to create something here based on what we have in
front of us. And we had grass, so we said beef and buffalo. We
have wind and solar. I am glad Congresswoman, you really
stressed that. Getting access to the grid though is really
critical. We can put all of the wind turbines we want, but if
we don't have access to the grid it is just going to sit there.
There is a book called ``You Damned Indians,'' and that is
because they dammed us up. They should at least let us get
access back to that dam transmission if they are going to dam
us up.
So in closing, Mr. Chairman, we are really--I must say
about gaming is that in working with the National Indian Gaming
Association, they have come a long ways in working with us on a
potential agreement with the Inter-Tribal Economic Alliance to
assist us in developing that private equity fund to create--if
we created a number of small businesses, that 200,000 job
initiative, putting that war on poverty would--we could
actually accomplish that. So the gaming Tribes are looking to
invest in the private equity fund and assist small business
development.
So thank you, Mr. Chairman, for allowing me to talk a
little bit about the Inter-Tribal Economic Alliance.
[The prepared statement of Mr. Hall follows:]
Statement of Tex G. Hall, Chairman and C.E.O.,
The Inter-Tribal Economic Alliance
Dosha! Good morning Chairman Rahall, Ranking Member Young and
distinguished members of the U.S. House Committee on Natural Resources.
Thank you for your invitation to appear before the Committee on Natural
Resources, particularly on the topic of Diversifying Native Economies.
This is a powerful subject and one that we in Indian Country, our
leaders and our communities are talking about all across our great
country. We are grateful to the Committee for its remarkable record of
activity which shows just how seriously the Chairman cares about the
needs of Indian Country.
My name is Tex Hall and I am Hidatsa and Mandan. I served two terms
as the President of the National Congress of American Indians and eight
years as Chairman of the Mandan, Hidatsa, and Arikara Nation in North
Dakota.
I am here today as Chairman of the Inter-Tribal Economic Alliance
(ITEA), a national engine of economic development whose mission is to
create communities of hope on American Indian reservations, Alaska
Native villages and Native Hawaiian homelands. The ITEA was formed in
2001 by Native leaders hailing from many states across the nation and
we are a tribally-driven business. We work day-in and day-out to fight
poverty by creating new business opportunities and new jobs in diverse
industries such as information technology, private equity, energy
development, natural beef and buffalo, and call center operations.
Poverty remains widespread across Indian Country. According to the
2000 census, the poverty rate on reservations is 31.2 percent while
nationally 24.3 percent of American Indians and Alaska Natives live in
poverty, a rate more than twice that of Whites and Asians. Native
American households report a median income of only $33,132.
While Native Americans are making progress in pockets around the
country, the big picture remains that we lag well behind the rest of
the nation. We can and must do better. The condition and state of
Indian country, however, has many fathers. Over the last 200 years, our
federal and state governments, whether legislative bodies like Congress
or various government agencies, have all played a role in landing us in
the condition we find ourselves in today. Nevertheless, those same
actors can make amends and help us in forging a bright future ahead of
us. All we ask is that the United States acknowledge its treaty-backed
trust responsibility to the first peoples of this nation and support,
strengthen and protect programs that have successfully advanced our
economic well-being.
Chairman Rahall, Committee members, your call for a hearing on the
topic of Diversifying Native Economies is a good beginning to work
together. We welcome the dialogue and being asked to the table to
create a new future for our people, for Indian Country.
Native Communal Commerce
We believe that native communal commerce works. It is what Native
governments believe in and it has worked for them for thousands of
years. Native communal commerce is very different, in fact it is the
opposite, of what the United States government has been trying to force
on Native peoples through federal policies for the past two hundred
years. The ITEA itself is a model of communal commerce.
In native economies, the benefits and profits of work and industry
flow back to the community. They do not flow back to individual
business owners. For instance, the ITEA is structured so the profits of
all of our ventures flow back to tribes. The profits from our
businesses, for instance, go back to a tribe and are used to invest in
health care, housing, and schools. This is a profoundly different model
than say, IBM or even Univision, where corporate profits are
distributed to individual owners or investors.
Indian Country believes that the Native communal model works well
and better than any of the failed models of commerce--the General
Allotment Act program or the Indian Reorganization Act--forced upon us
by the BIA or the Interior Department and the Congress. And with the
Committee's support of the ITEA's efforts and federal programs that
actually do work, together we can start jump-start a period of
unprecedented economic growth.
That growth is the point of having Diversified Native Economies. We
ought to have federal policies and programs that do not measure our
tribal enterprises against individually-owned businesses or
stockholder-owned corporations. Doing so entirely misses the tremendous
gifts our communities have to offer the marketplace--an untapped and
unified resource of labor in some of the most remote and rural
communities in the country. Our Tribal governments and business
enterprises are located in 35 of 50 states, with 56 million acres of
trust lands and a million plus man and woman work force, a large
portion of which is either underemployed or unemployed.
While Native peoples and our federal government share a tragic
history together, we have the power to change the course of that
relationship. But it will require the federal government to support
policies that have worked and embrace economic strategies that
guarantee the growth of our native communal businesses into the larger
marketplace.
Small Business Administration
The Small Business Administration now runs a solid program to
diversify our Native economies. The SBA 8(a) program, specifically the
provision for Native 8(a) firms that consist of Tribal and community
owned firms is in its infancy, yet from a policy approach and
understanding of the communal nature of our enterprises, this program
got it exactly right. The Native 8(a) program embraces our communal
approach to commerce, encouraging our Tribal and Native corporations
that are owned by entire communities to enter the federal government
contracting industry.
The ITEA strongly believes that the Native 8(a) program works. The
program recognizes that Native 8(a) firms are not investor-owned like
other conventional businesses. Instead, it recognizes that Native firms
are community-owned, and that they use revenues to address the social,
economic and cultural well-being of communities--truly a double bottom
line. And the 8(a) program does not require a single appropriation of
federal funds, but rather the inclusion of the unique enterprises of
Native communities in providing quality product to our federal
government, while serving the social good.
The ITEA is been troubled by the statements of some that would
frame the tiny 0.2% awarding of all federal contracts to Native 8(a)
firms, and in particular, Alaska Native Corporations, as a threat
rather than a success that should be nurtured. Some members in this
Congress have even gone so far as to criticize Alaska Native
enterprises for doing government work outside of the state of Alaska.
The Committee should make it unacceptable to carry the failed policies
of the early part of the last century into the present and into our
future. Our tribal enterprises must be encouraged to grow beyond our
reservation and village boundaries and be allowed to participate
nationally, and indeed, globally.
IITC--A Tribal 8(a)
At ITEA, one of our first initiatives to diversify our Native
economy based on the communal commerce approach is the Intertribal
Information Technology Company (IITC). It is the first Tribal 8(a)
government contractor owned by the three indigenous groups of our great
country, consisting of nine federally recognized Indian Tribes; two
federally recognized Alaska Native Corporations and one Native Hawaiian
nonprofit. There are no individual investors, ensuring that the profits
of this Tribal 8(a) are returned to the social, economic and cultural
mission of our respective communities.
IITC owner firms are located in eight states: Montana, Wyoming,
Hawaii, North Dakota, Alaska, Oklahoma, New Mexico and South Dakota.
Under the SBA Native 8(a) program, we have forged ahead to make a
national impact and also serve our nation's men and women that are
serving our country in the military. IITC is providing the Department
of Defense with digitized versions of maintenance manuals for aircraft,
ships, vehicles and a variety of equipment used every day on the ground
by our troops. We have digitized hundreds of thousands of pages,
including maintenance manuals for the Apache Helicopter, Armored
Utility Trucks, Landing Crafts and Fire Fighting Vehicles. We are proud
to be working on a project that we know helps to keep our troops safe.
Tapping into our national labor pool, IITC created over 300 jobs
directly inside rural Native American communities, from as far north
above the arctic circle in Barrow, Alaska to as far west as Anahola,
Hawaii, as far east as Parshall, North Dakota on the Fort Berthold
Indian Reservation and as far south as the Zuni Indian Reservation in
New Mexico. IITC, like every Tribal or ANC 8(a), has become a part of
our national economy and is creating jobs in eight states in the
country. It is one small example of the good the Native 8(a) program
has done and is an example of what can be accomplished when a federal
program embraces our communal approach to business.
Non-Gaming Business that In-Sources to Rural America
There is no question that Indian Gaming has had an unprecedented
economic impact in Indian Country. Yet, as we all know, the vast
majority of tribes do not benefit from gaming. So, while we know that
gaming tribes have generously shared their wealth with the non-Native
communities around them, and with many other tribes, the fact is that
gaming cannot, and will not, be the end-all to the socio-economic
problems of Indian Country.
In other words, we must diversify and strengthen the foundation of
commerce across Indian Country, by embracing our best business tools of
Tribal and community enterprises. We can then produce opportunities to
in-source jobs and impact local and rural economies inside our country
versus overseas. But, we have learned that if we want it done, we are
going to have to do it ourselves. And that is what the ITEA brings to
the table--initiative.
The ITEA has taken a new step to build even further on the IITC
technology company ability to tap into a national labor pool for data
conversion. The ITEA is now finalizing a business plan to add call
centers in partnership with various Tribes and Tribal firms. Call
centers have the potential of employing thousands, and establishing our
rural communities as hubs for national and international commerce. And
what we are doing is truly patriotic. Instead of outsourcing jobs to
third world countries, we are keeping those jobs, benefits, and
spending money in the United States. We believe in-sourcing to American
Indians works not just for Indian Country, but for America.
Another ITEA project is the first-ever national tribally-run
private equity fund. As you know, the world of private equity brings
significant investment opportunities for tribes. The ITEA is taking
advantage of this opportunity by partnering with major Wall Street
firms and advisors to open a private equity fund that will invest large
sums of money in Native start up businesses, energy projects, real
estate as well as traditional securities and bonds. With the support of
major gaming tribes, we are positioning ourselves to make sure that
wealth from gaming reaches all of Indian Country.
Another sector worthy of our attention for diversification and
expansion is in energy resources, and making good use of our Tribal
lands and locations around the country. Whether oil and gas, or solar
and wind development, Indian Country must be part of the conversation
and policy making decisions to encourage investments and partnerships
that include our Tribal and Native corporations in the development of
cleaner and alternative energy sources.
The ITEA is also partnering with the National Indian Gaming
Association to create a Native Business Process Outsourcing company
that matches Native suppliers and services with Indian gaming
enterprises so that the good and services of Indian gaming are supplied
by Indian businesses.
The ITEA is also working with Native cattle and buffalo ranchers to
identify and overcome the barriers to bringing the hundreds of
thousands of grass fed cattle to market. There are 1.5 million head of
cattle raised naturally on 40 million acres of tribal lands across the
country. We are bringing the unique all-natural, all-American,
reservation-bred product of Native ranchers to the national
marketplace.
Summary
In closing, first urge the Committee to enact and support policies
that strengthen our communal tribal and Alaska Native corporate status
and that eliminate barriers and obstacles. For instance, we ask the
Committee to strengthen, and fight against legislation that would
restrict, the Native 8(a) program which has allowed Native 8(a) firms
to succeed in government contracting. Native 8(a) contractors deliver a
valuable product for the Nation, and use their revenues on the social,
economic and educational needs of entire Native communities. Native
8(a) businesses are community enterprises and cannot be judged by the
same standards as individually-owned businesses.
Second, we ask the Committee to focus its economic development
efforts on those industry sectors that yield the greatest
diversification and impact in our communities. We suggest the
following: energy and access to the electrical grid, information
technology and manufacturing, call centers, tourism, fine arts,
ranching and farming, and, most importantly, the support of government
contracting.
Third, we ask the Committee to invest in the economic
infrastructure of Indian Country and Alaska by investing in workforce
development and job training that matches the jobs we are seeking to
create, and by investing in telecommunication and internet
connectivity. The Committee should also ensure that Natives have the
access to capital in order to build that infrastructure and thus we ask
the Committee to double the ceilings of the guaranteed loan programs of
the BIA and USDA.
There is no question that America is stronger when its citizens
actively participate in our local, national and global economies. At
ITEA, we believe that Native Americans for too long have been prevented
from fully participating by a lack of understanding of the strengths,
talent, and value in our communities. Chairman Rahall, Diversifying
Native Economies is the right discussion and mirrors the conversations
and work taking place all over Indian Country.
We can forge a new future by continuing this dialogue and working
together. Our past tells a story of what has been good for America has
not always been good for Indian Country. This need not be the case--
what is good for Indian Country, is good for America. In closing, the
ITEA would like to offer to partner with the Committee and assist the
Committee in developing a report on Native American economic
development that includes goals and timelines.
Thank You.
______
The Chairman. Thank you very much, Tex. Joe?
STATEMENT OF THE HONORABLE JOE GARCIA, PRESIDENT,
NATIONAL CONGRESS OF AMERICAN INDIANS, WASHINGTON, D.C.
Mr. Garcia. Singatama. Good morning, everyone. Greetings
from New Mexico. Good morning, Chairman Hall, and Members of
the Committee. I am honored to be here today on behalf of the
National Congress of American Indians, the nation's oldest and
largest national organization of Tribal governments.
We hope this is just the first in a series of important
conversations on economic development, and diversification of
economic development in the Indian Country, and we are looking
forward to concrete recommendations and actions as a result.
Although there are examples of Tribes around the country
who have prospered, hundreds more are struggling to preserve
their reservations, their culture, their language, and their
sovereignty, and economic development is one of those ways that
these preservations and security can happen, so I am glad that
the hearings are being held.
To address these economic challenges, NCAI has held a
series of meetings with Tribal leaders, including at the recent
National Economic Policy Summit held in Phoenix, and this was
in partnership with the DOI to explore the best ideas to move
Indian economic development forward.
During these meetings, it has become clear that Tribes have
recommended in four key areas:
Number one, the need to improve and strengthen Tribal
government institutions, the codes and basically capacity of
those governments; number two, the need to give Tribal
governments access to traditional governmental tools, like tax-
exempt financing and tax credits; number three, the improvement
of tribal fiscal and human infrastructure, things like roads
and telecommunications; number four, capacity building means
the skills to conduct comprehensive planning to integrate all
of these components.
True economic development, it must be said that it is not
just one area of work. 8[a] is one of those areas. 8[a] is one
of those tools. When you talk about economic development, it
transpires all--it is a big umbrella, and a comprehensive
approach is the best approach that we can implement and we can
plan for.
These are examples of things that are not working, the
things that I just mentioned, so we have included more
information on them in our written testimony. But an example of
something that does work is the 8[a] program.
During these meetings, one thing that Tribal leaders made
clear was that the government contracting program was one of
the few things that is actually working in Indian Country.
Because the Tribal governments do not have the same
abilities to raise traditional tax revenue, they must turn to
Tribal government enterprises to provide the revenue to support
services to their citizens. The government contracting program
is considered one of the most effective means for generating
revenue and creating local economy for Tribal governments
regardless of their geographic location or size.
Over the past two years, NCAI, NACA, and NCAIED have hosted
numerous forums throughout Indian Country to develop joint
recommendations for improvement to this program. These draft
recommendations were recently refined and we are continuing to
work on the refinement process.
Our draft recommendations include the following small
business government contracting improvements: one, expand small
business participation for all participants; two, increase the
oversight; three, provide assistance to small businesses as
prime contractors, subcontractors or joint venture partners.
In reauthorizing the Small Business Act's contracting
programs, Congress should include stronger provisions to ensure
that small business actually receive the Federal contract
support that has been required by law for many decades. While
the Federal contracting market has doubled in size since 2000,
small business percentage of that market has declined
significantly.
To enable small businesses, particularly 8[a] firms, to
compete for a larger share of government contracts, these
things need to happen: expand the pie; modernize the program;
include increased net worth thresholds; increase caps on
individual 8[a]; find a way to unbundle contracts; increase
small business goals to 30 percent; and also maybe
demonstration projects; set aside larger contracts to a team of
small business contracts.
Increased oversight enforcement by SBA and other Federal
contracting agencies of exiting requirements would verify that
Native enterprises and other 8[a] and small business concerns
are good stewards of taxpayer funds. In order to promote better
SBA administration oversight the Federal government should
provide support and resources to train SBA staff and authorize
an assistant administrator for Native American affairs to
oversee and support the program.
While Tribes represent a small percentage of the nation's
population, and receive an even smaller percentage of Federal
contracts, this program makes a big impact to our local
communities. Tribal leaders have told us time and time again
over numerous years that this is one of the few economic
development tools that actually works in Indian Country.
We want to thank you for giving us the opportunity to speak
today. We look forward to continued support of our self-
determination efforts and our use of effective economic tools.
Thank you so much and blessings be with you and the Committee.
[The prepared statement of Mr. Garcia follows:]
Statement of Joe Garcia, President,
National Congress of American Indians
Introduction
Good morning Chairman Rahall and members of the Committee. My name
is Joe Garcia, and I am Governor of Ohkay Owingeh, formerly known as
San Juan Pueblo, in the State of New Mexico, and President of the
National Congress of American Indians (NCAI).
On behalf of the National Congress of American Indians, the
nation's oldest and largest organization of American Indian and Alaska
Native tribal governments, thank you for giving me the opportunity to
testify before you today on the important and timely topic of
diversifying our Native economies. I would also like to take this
opportunity to thank you for your ongoing commitment to building
healthy and sustainable local economies in Indian Country. It is our
pleasure to be here today to continue what has been an ongoing
discussion about how the federal government can best support tribes in
our efforts to achieve self-reliance, prosperity, and economic parity
through economic development.
NCAI is fully committed to working with our federal partners in
supporting existing federal economic development programs that have led
to greater tribal and village sovereignty and self sufficiency. We
welcome the opportunity today to discuss the current successful
components of economic development, suggested improvements, and the
need for continued support for the programs that have led to greater
local economic diversity and individual opportunity.
We are well positioned to address the challenges and barriers
tribal governments encounter when trying to develop their local
economies and more important understanding opportunities for positive
change. NCAI partnered with the Department of Interior to host the
National Native American Policy Summit (Summit) this past may to sort
through he challenges and solutions needed to create healthy and
vibrant local economies. Vested participants from tribal governments,
the federal government, academic community, and the private sector
gathered over 3 days to discuss challenges and offer solutions.
In addition to the 300 plus recommendations received from
participants for improving access to capital, business development and
infrastructure, the Summit identified the overall need for tribal
governments to strengthen governing institutions and create effective
legal codes for business development. It also revealed the need for
comprehensive tribal community planning and the need to improve inter-
governmental relationships as key components for proactive economic
growth.
Today we will be addressing some of the successful components of
tribal government economic development, however, there has been a real
and compelling need established at the Summit and in other NCAI venues
to continue this discussion to address other challenges and
opportunities.
Native Economies--Success
The vast majority of tribes remain in desperate need of meaningful,
diversified economic development opportunities. There are a few high-
profile examples of tribes around the country who have prospered
economically. However, there are hundreds more who remain nearly
invisible, who are struggling to preserve their reservations, their
culture, and their sovereignty. The social and economic conditions in
many Indian communities are comparable to those in developing nations
around the world. According to recent federal reports 1, an
astounding 9 of the 11 poorest counties in the nation, based on per
capita income, are home to Indian reservations.
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\1\ Statistics derived from U.S. Census Bureau data; U.S.
Department of Commerce, Bureau of Economic Analysis, Survey of Current
Business; and DataQuick Information Systems, a public records database
company located in La Jolla, San Diego, CA.
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Conventional thought has often dismissed the feasibility of
American Indian economic development. Too often we hear that there is
little incentive for investment, either public or private, on Indian
lands; that many tribal institutions are too unstable or too weak to
sustain development; that the location of many Indian lands are too
remote for many types of business; or that the lack of infrastructure
prohibits the establishment of businesses on tribal lands. These lines
of thinking leads to the conclusion that the only option for Indian
nations is continued dependence on the federal government.
Over the past few decades, many tribes and villages, by exercising
sovereignty and self determination, utilizing natural resources and
taking advantage of existing federal incentives, have begun building
successful government enterprises and are participating in the American
economy.
It is imperative to note this accomplishment has coincided with the
rise of self determination. As the Harvard Project on American Indian
Economic Development 2 has confirmed, across a number of
indicators, socio-economic conditions are improving in Indian country
and tribal economies are becoming more robust. From 1990 to 2000,
family poverty rates decreased, real median income went up, housing
overcrowding dropped, and more Indians were living in homes with
adequate plumbing. Significantly, the Harvard Project discovered that
these improvements are found in both non-gaming and gaming communities
alike and credits self-determination policies for the progress.
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\2\ Joe Kalt & Jonathan Taylor, Harvard Project on American Indian
Economic Development, ``American Indians on Reservations: A Databook of
Socioeconomic Change Between the 1990 and 2000 Censuses,'' (2005).
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Tribes have been able to produce improvements in their local
communities and generate sustainable tribal government enterprises, in
large part, by taking greater control of decision making, utilizing
available tools, and strengthening governing institutions.
Success for tribal government enterprises differs from traditional
corporations that are only responsible for creating a profit for
shareholders or from other governments that provide services largely
based on tax revenue. Since tribes have limited ability to raise tax
revenue and, as responsible governments, they look to create tribal
enterprises to produce revenue that is either reinvested to ensure
sustainability or used to develop or supplement much-needed programs
and services for their citizens'. Congress, in recognition of this
unique tribal responsibility and in an effort to fulfill its federal
trust responsibilities, has created various tools over the years that
have allowed tribes to better serve their citizens' needs and become
more self-sufficient.
Not surprisingly, the tools that have proven most effective over
the years are those provide an incentive for tribes to pursue self
determination. Providing tools and incentives has historically been
proven a successful means of positively effecting decisions in the
general population. This is apparent when Congress continues to support
tax incentives for citizens to own homes and for businesses that
provide health insurance for employees. There has also been success
when Congress, in honoring our government-to-government relationship,
establishes and supports the development of Native economies and
fosters government stability through various incentives. As we have
learned over the years creating a healthy economy and a stable
government are not exclusive but inter-dependent.
Tribes, villages and communities have been successful in three
primary government enterprise areas--natural resource management,
gaming and hospitality, and government contracting.
Natural Resource Management
Tribes have always utilized the management and development of
territorial natural resources to serve their populations. Longstanding
subsistence activities like fishing and farming, once taken for granted
by tribes, were diminished with encroachment and resettlement. The
federal government, through the ratification and enforcement of
treaties and various acts, have severely limited a tribal government's
ability to remain self sufficient by redefining tribal territories and
tribal structures--most recently with the Alaska Native Claims
Settlement Act of 1971(ANCSA) 3.
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\3\ Alaska Native Claims Settlement Act, 43 USC Sec. 1601 et seq.
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With these treaties and acts, the federal government has
dramatically reduced tribes' ability to utilize their natural
resources, including their land base, to serve their populations'
needs. More recently, however, the federal government has supported
tribal self determination and a tribal government's right to serve
their members needs by supporting those treaties and acts and providing
tools and incentives for tribes to continue to utilize the remaining
natural resources for the benefit of their members. For example;
Water rights in the southwest enable Native farmers to
continue to use agriculture to support tribal programs and individual
self sufficiency.
Treaty rights, reaffirmed by federal courts as recently
as last month 4, allow northwest tribes the ability to
continue traditional fishing and ensure the natural resource will be
available for the next generation.
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\4\ United States District Court, Western District of Washington at
Seattle, US, et al., v. State of Washington, et al., C70-9213, August
22, 2007
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Self determination policies in the form of land
management, rights-of-way and market-based land valuation have
permitted tribes to go from passive participants to effective
competitors in America's natural resource industries with energy being
the most notable enterprise.
As this Committee is aware, 10% of the nation's energy natural
resources are on Indian lands; and, Indian tribes are willing partners
in natural resource development. Tribes have made decisions to manage
and oversee their energy resources such as coal and natural gas found
within their lands. And today, with tribes exercising self
determination by securing the right to manage their own lands and
resources, natural resource management serves as an effective industry
and economic tool for tribes and villages. Harvesting timber, mining
coal, farming, and turning limestone into cement have all been
effective means for tribal governments to meet the program and service
needs of its citizens.
Success, however, in the form of natural resource management, can
be found in a relatively small number of tribes who have managed to
hold on to large land bases or have managed to remain in areas with
resources to manage. The vast majority of tribes do not benefit from
this economic tool and remain in desperate need of economic stimulus.
Gaming and Hospitality
Indian gaming has grown over the past two decades from an uncertain
start-up industry for tribal governments to an established, mature
hospitality industry with tribes creating competitive destination
resorts. Tribes, when given the support to exercise their sovereignty
as governments, have managed to build an industry that has allowed them
to not only serve their members' program and service needs, but become
revenue generators for other governments--all in one generation.
Gaming and hospitality has been an effective tool and a successful
industry for those tribes that are located near large population
centers and have partner states in the same industry. Although the
media focuses on gaming as the face of Native government enterprises,
the gaming and hospitality industry has not been a successful economic
alternative for most tribes and villages. Just as natural resources as
a government enterprise only is successful to a small number of tribes,
over half of all recognized tribes have no gaming whatsoever
5, and of those that do, some are not highly profitable and
many serve to create local jobs for tribal citizens--especially for
those tribes located in rural and remote areas.
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\5\ NIGA, Indian Gaming Facts, 2006 (www.indiangaming.org)
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Government Contracting
Government contracting has gradually begun to emerge as viable
industry for successful tribal enterprise development. Successful
contracting proves that, with the proper incentives, tribal enterprises
can generate revenues to help achieve greater self determination and
offers the potential of allowing all tribes to participate in the
American economy regardless of a tribe's geographic proximity near a
population center or its land-based resources.
Economic self-sufficiency is the goal of tribal government entities
using existing economic tools or when exerting rights of sovereignty
and self determination. This goal can be achieved only through active
participation in the U.S. and world economy. In fulfilling the United
States' trust responsibility and in promoting self sufficiency among
Native American governments, the federal government has provided an
economic tool for tribes and villages (through federally mandated
Alaska Native Corporations (ANCs 6)) to access the largest
purchaser of goods and services in the world--the federal government.
---------------------------------------------------------------------------
\6\ Federal Contracting Support for Alaska Natives' Integration
into the Market Economy, Professor Duane Champagne (Sociology),
Professor Carole Goldberg (Law) Native Nations Law & Policy Center,
UCLA School of Law, Los Angeles, CA--``Alaska Native Claims Settlement
Act of 1971(ANCSA) has been modified numerous times by Congress,
including an amendment in 1988 designating ANCs as minority business
enterprises and Congressional language in 1992 designating ANCs as
``economically disadvantaged'' enterprises. Through this legislation,
ANCs and their qualifying subsidiaries have been enabled to qualify for
federal contracting and subcontracting, including SBA 8(a) and
Department of Defense Small and Disadvantaged Business programs. The
purpose of ANC status from the Alaska Native point of view is to assist
ANCs in gaining competitive access and capabilities to successfully
generate economic growth within the market economy.''
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The federal government spent $377 billion on goods and services in
2005. 7 American Indian tribes and Alaska Native
Corporations access the federal market through participation in the
Small Business Administration's 8(a) program with the added incentive
of allowing tribal and ANCs to utilize negotiated sole source
contracting. The Department of Defense accurately justified the
incentive by confirming it as ``...further[ing] the federal policy of
Indian self-determination, the United States' trust responsibility, and
the promotion of economic self-sufficiency among Native American
communities.'' 8
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\7\ Source: Eagle Eye, Inc
\8\ See AFGE v. United States, 95 F. Supp. 2d 4, 36 (D.D.C. 2002),
aff'd 330 F.3d 513 (D.C. Cir. 2003) Federal Contracting Support for
Alaska Natives' Integration into the Market Economy, Professor Duane
Champagne (Sociology), Professor Carole Goldberg (Law) Native Nations
Law & Policy Center, UCLA School of Law, Los Angeles, CA
[GRAPHIC] [TIFF OMITTED] T7848.003
Although Native contractors only received less than 1% (.8%) of
all Federal contract awards, 9 the program has had notable
success for participating tribal governments. The tribal government
contracting program has given tribes and villages the ability to create
local diverse economies which in turn allow tribes to support and
create tribal citizen programs and offer real and substantial career
opportunities for members where only limited or no job opportunities
existed prior.
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\9\ Source: Eagle Eye, Inc
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Tribes and ANCs, in the spirit of self determination, are offered a
choice of business opportunities, and today, are providing everything
from logistic support for our troops abroad to environmental services
here at home. Tribes and ANCs that are not able to utilize the tribal
government tool of gaming or leverage their land-based resources, now
can enter business tracks that were previously the mainstay of
mainstream corporate America.
Individuals, who had little opportunity a generation ago, now have
options. Not just options for jobs, but options for diverse and
challenging careers. Rural tribal and village members are now choosing
to enter the engineering field or business administration. Members have
been able to move up a career path to manage contracts or in some
cases, entire companies.
More important for tribal governments and U.S. taxpayers is that
the program allows tribal governments to build an economy, educate its
citizens and create tax revenues that are returned to the federal
coffers. The program has been a proven success in giving tribal
governments a hand up and not a hand out; meaning our taxpayers are
receiving far more value. For example,
A remote village in Alaska, only accessible by car when
the river freezes, now has a small local economy created from a Native
Alaskan firm's entry into the highly competitive government contracting
space. A recent profit was earned by its shareholders, many of whom
used it to purchase higher-priced diesel fuel needed for the long,
harsh winters.
In Montana, Salish & Kootenai represent their values to
the rest of the world through their successful government contracting
program at S&K Technologies--a firm initially mentored by another
tribal enterprise. The Tribe provides information technology and
network solutions to the federal government that allows the 4,500
Tribal members residing on the Flathead Indian Reservation the
opportunity to compete for jobs in software development and technical
training. The Reservation has struggled with an unemployment rate as
high as 41% 10 proving the federal government contracting
program can work in the most economically challenging tribal
environments.
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\10\ DPHHS Survey--February 2002
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And, in Maine, a small tribe close to the Canadian border
manages a border security contract that generates enough revenue for
the tribe to be able to purchase school clothing for its Tribal youth.
While this program is just beginning to realize success, it has not
been an easy path. Most tribal businesses struggle for years with
losses or marginal revenue. The government contracting businesses, even
with the ability to utilize negotiated sole-source contracts, is an
industry noted for its complexity and thin margins. The net revenues
that are generated are often routed back into the business to ensure
on-going success and the net revenue that is realized as profit is
returned to the tribal members and village corporation shareholders in
the form of citizen programs. Some tribal governments have been able to
use funds for various programs including;
Scholarship funds established to give tribal members the
chance at higher education and fulfilling careers.
Cultural centers built as a tribute to each tribe or
village contribution to their local community and history, and
Elder programs established to honor and care for those
who paved the way.
Tribes realize that economic development, while serving as a key
component toward self determination, is a part of their responsibly as
a government and a key component to being able to serve the interests
of their citizens.
We feel it is important for this Committee and Congress to know
that these tools, created to promote self sufficiency in Native
communities, are working as the federal government intended. The
government contracting program is still a long way from universally
building local tribal economies and offering hope to tribal citizens,
but in its infancy it already has proved to be an effective tool for
those tribes and ANCs who have had the tenacity to compete and profit
in the federal marketplace.
Our member tribes, ANCs, villages and Native communities have all
given us input on this issue and the message has been simple and
clear--keep this program in place, it is working [See Resolution
Attached].
With a directive from our members, NCAI set out to evaluate the
program, listen to those who have had concerns, and try to understand
misperceptions. We heard from our members about economic challenges and
opportunities during a national summit help jointly with the Department
of Interior. In addition, a joint working group was formed consisting
of NCAI, Native American Contractors Association (NACA) and National
Center for American Indian Enterprise Development (NCAIED) to ensure we
were representing the vested American Indian entities and speaking with
a unified voice. In March of this year at the 2007 Reservation Economic
Summit hosted by NCAIED, our three organizations developed a joint
statement on contracting issues [see Joint Statement attached].
Evaluating concerns meant meeting with and carefully reviewing the
report and recommendations contained in the April 2006 Government
Accountability Office (GAO) report on ANC 8(a) contracting.
11 The GAO recommendations centered on the need for greater
oversight activities by the Small Business Administration (SBA) and
federal agencies. To evaluate potential program improvements, we also
met with the SBA to discuss and jointly develop proposals to address
the GAO's recommendations as well as its own.
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\11\ United States Government Accountability Office, Increased Use
of Alaska Native Corporations' Special 8(a) Provisions Calls for
Tailored Oversight, April 2006 Report to Congressional Requesters--GAO
06-399.
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We listened to other SBA 8(a) participants and worked with various
organizations like the Minority Business Roundtable. We have been
trying to dispel program misperceptions that often arose from the
statements or actions of a single entity striving to promote a
universal viewpoint without giving voice to alternative perspectives.
As a result of the joint efforts of NCAI, NACA and NCAIED, we
respectfully submit that Congress should consider the following small
business government contracting improvements that would expand small
business participation for all participants, increase oversight and
provide assistance to small businesses as prime contractors,
subcontractors or joint venture partners.
A. Expand Small Business Contracting Opportunities
In reauthorizing the Small Business Act's contracting programs,
Congress should include stronger provisions to ensure that small
businesses actually receive the federal contract support that has been
required by law for many decades. While the federal contracting market
has doubled in size since 2000, small businesses' percentage share of
that market has declined significantly. This is a result of a limited
procurement workforce in the federal government, an increase in
overseas contracts, lax compliance with subcontracting plans, and
barriers that would allow small businesses to compete for larger
contracts.
To enable small businesses, particularly 8(a) firms, to compete for
a larger share of government contracts, the federal government should
take immediate actions to reverse these trends, including enhancing
incentives for contracting officers to increase awards to 8(a) and
other small businesses. In considering small business contracting
legislation, Congress should adopt provisions to:
Support tighter limits on bundling and consolidation of
contracts, break up such contracts for award to small businesses, or
employ procurement procedures to enable teams of Native enterprises and
other small businesses to pursue larger contracts, such as contracting
agencies issuing a Request For Information (RFI) to small businesses so
they have a chance to form teams to pursue these larger contracting
opportunities;
Increase the Government-wide contracting goals for awards
to small business of up to 30% of total contract awards to small
business, and not less than 8% of total contract and subcontract awards
to small disadvantaged business concerns;
Include overseas contracts within the Government-wide
contracting goals and require reporting of awards to small businesses
as prime or subcontractors performing contracts overseas;
Ease or increase the thresholds on individual net worth
and on competition, including annual inflationary adjustments, for
individuals seeking to qualify and retain eligibility for 8(a) program
participation;
Encourage small businesses with larger contracts to
implement subcontracting plans to develop stronger business alliances
among all types of small business contractors, including 8(a) and other
small disadvantaged concerns, HUBZone, service disabled veteran-owned,
women-owned and other small businesses; and
Revisit size standards, including indexing them for inflation.
B. Improve Administrative Oversight and Enforcement
Increased oversight and enforcement by SBA and other federal
contracting agencies of existing requirements would verify that Native
enterprises and other 8(a) and small business concerns are good
stewards of taxpayer funds. To foster better SBA administrative
oversight:
Improve SBA's implementation of the 8(a) provisions
applicable to Native enterprises by authorizing an Assistant
Administrator for Native American Affairs to access all the SBA
programs to improve the support provided to Native enterprises through
contractual, financial and technical assistance;
Strengthen SBA's authority to negotiate higher goals with
individual contracting agencies, and require them to be more
accountable for their past performance and future plans for making more
small business awards so as to meet their goals in each subcategory of
small business contracting;
Support provisions to reinforce SBA's and other
contracting agencies' efforts to track, monitor and enforce anti-
bundling requirements, and set aside and other procedures (including
subcontracting plan compliance) to ensure that small business and small
disadvantaged business contracting goals are met or exceeded; and
Afford SBA sufficient resources to rebuild and train its
staff to improve implementation of the 8(a) and other programs to
assist all small business contractors in accessing the tools necessary
to compete successfully and receive a fair share of federal contracting
opportunities.
Conclusion
A few in Congress have suggested fixes to the government
contracting program that would disproportionately affect tribal
governments and ANC enterprises by limiting or removing incentives. The
program, while in need of some improvements, is not broken and major
fixes are unnecessary. This same conclusion was confirmed by the GAO in
their recommending only administrative, not legislative, proposals for
improvement.
Limiting tribal government enterprises' access to the federal
market place will have distressing effects to Native communities.
Tribal governments will need to look to Congress to establish a
additional tools to deal with the critical need to strengthen local
tribal and village economies so that tribal governments will have
more--not fewer--resources and opportunities to provide programs and
services for their citizens.
With high rates of poverty, low per capita incomes, lower levels of
education, many health problems, many social problems including high
suicide rates, high rates of crime and incarceration 12, we
all should be looking to improve programs that work like the tribal
government contracting
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\12\ Federal Contracting Support for Alaska Natives' Integration
into the Market Economy, Professor Duane Champagne (Sociology),
Professor Carole Goldberg (Law) Native Nations Law & Policy Center,
UCLA School of Law, Los Angeles, CA Sourced as: Scott Goldsmith, Jane
Angvik, Lance Howe, Alexandra Hill, and Linda Leask Status of Alaska
Natives 2004 (Anchorage, AK: Institute for Social and Economic
Research, University of Alaska, Anchorage, 2004), pp. 2-14, 3-2 to 3-
39, 4-2 to 4-14, 5-2, 6-2 to 6-6; Alaska Native Policy Center, Our
Choices, Our Future: Analysis of the Status of Alaska Natives Report
2004 (Anchorage, AK: Alaska Native Policy Center, 2004); The Harvard
Project on American Indian Economic Development, Native Nations, pp.
326- 329.
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We want to thank you for giving us the opportunity to speak today
on diversifying our economies. We look forward to your continued
support of our self determination efforts and our use of effective
economic tools.
______
The Chairman. Thank you, President Garcia.
Mr. DuMontier.
STATEMENT OF GREG DUMONTIER, CHAIRMAN, NATIVE AMERICAN
CONTRACTORS ASSOCIATION, WASHINGTON, D.C.
Mr. DuMontier. Thank you, Chairman Rahall and Ranking
Member Young. Thank you for this opportunity to testify before
the House Natural Resources Committee to create a strong native
economies.
My name is Greg DuMontier. I am the Chief Executive officer
of S&K Technologies. We are an information technology firm
owned by the Confederated Salish and Kootenai Tribes in western
Montana, of which I am a member. I am also the Chairman of the
Native American Contractors Association, NACA, and I am here to
speak on behalf of NACA.
As you know, Congress has focused on a lot of Federal
procurement reform and oversight of government contracting
practices and sole source awards. These reform initiatives have
had already a significant and disproportionate impact on Native
communities. We are but a sliver of Federal contracting, as we
have discussed. Yet we face proposals to eliminate or diminish
our contracting preferences.
The record simply doesn't support these types of proposals.
The GAO, as you have heard, studied ANC participation in the
8[a], and didn't recommend any legislative change to the
program. They did recommend administrative actions to improve
oversight.
We are just now getting a foothold in the marketplace after
being left out, locked out, or elbowed out for decades. With
some modest success, we now represent that very small slice of
the pie, the less than 1 percent that we have talked about.
However small that that might be, it is beginning to have a
huge impact in Native communities.
The benefits and services that Native communities receive
result directly from the profits that our Native enterprises
realize from government contracts. It is a win/win for the
Federal/tribal relationship.
Many of the witnesses today have provided different
examples of our success, but I would like to focus on one of
the biggest misconceptions or misperceptions that has been out
there, and that is that Native enterprises somehow are awarded
contracts and then simply subcontract all of the work to
subcontractors in violation of SBA's limitations on
subcontracting regulations. This criticism is flat wrong. The
SBA's regulations require 50 percent of personnel costs to be
borne by any 8[a] performing a service contract, and we support
this regulation and comply with it. To improve the transparency
and compliance with this requirement, NACA developed a best
practices guide which recommends that Native enterprises
develop a mechanism for tracking compliance of this
requirement.
My company, S&K Technologies, has already created a senior-
level management office whose responsibility it is to monitor
and track compliance with all SBA 8[a] regulatory requirements,
including the performance of work requirement in each contract.
Also, through the SBA Tribal consultation process, NACA
will recommend how reporting on this requirement can be
improved. Moreover, the Federal procuring agencies are
responsible for overseeing compliance of this requirement as
has already been discussed today. The GAO in its report noted
that procuring agencies are often not aware of this
responsibility.
The NACA recommends that the SBA revise its partnership
agreements so procuring agencies are aware that they are
responsible for monitoring 8[a] compliance with this
requirement.
Let me be clear. Native enterprises do not simply pass
through work to subcontractors. That would be self-defeating
because it wouldn't provide long-term revenue streams which
Native communities need to provide basic services and Native
enterprises would miss the opportunity to develop new
capabilities. It just doesn't happen.
In conclusion, there is still tremendous work that needs to
be done to effect positive and sustainable benefits in Native
community participation in the 8[a] program. Remarkably, this
is already being done by providing access to the private sector
market, building technical expertise to the Mentor-Protege and
teaming arrangements, and providing access to a market with
relatively low capital costs. The continued economic success
and well being of Native communities depends on the combined
and sustained efforts of Indian Tribes and the ANCs, the
Federal government, and the private sector. We are counting on
you to help continuing this progress.
The Native 8[a] program offers the Federal government great
returns and great value with little Federal investment. NACA
would like to offer the following recommendations:
First, this committee should play a proactive role in any
future attempts to restrict or eliminate the Native 8[a]
program. We need your help in educating others in the
importance of this program.
The second recommendation is that this committee should
support and facilitate the efforts of NACA, the National
Congress of American Indians, and the National Center for
American Indian Enterprise Development in taking actions to
enhance contracting opportunities for all small business
contractors as well as our ability to work together.
This could involve facilitating meetings and discussions
with other committee, such as the House Small Business
Committee, or the House leadership, and certainly with the
administration.
I thank the Chairman for the opportunity to speak before
the Committee today, and I certainly look forward to your
questions. I would much rather talk with you than to you. Thank
you.
[The prepared statement of Mr. DuMontier follows:]
Statement of Greg DuMontier,
Native American Contractors Association
Good Afternoon Chairman Rahall and Ranking Member Young. Thank you
for this opportunity to testify before the House Natural Resources
Committee about the growing success of the Small Business Act's 8(a)
program in advancing the economic self sufficiency of Native Americans.
My name is Greg DuMontier, and I am the President and Chief Executive
Officer of S & K Technologies, Inc., a tribally-owned Information
Technology firm. I am also a member of the Confederated Salish and
Kootenai Tribes (CSKT) of the Flathead Reservation in Western Montana,
and the Chairman of the Native American Contractors Association, NACA.
I am here before your committee speaking on behalf of NACA.
NACA was formed in 2003 as a voice for Alaskan Native Corporations,
Indian Tribes and Native Hawaiian Organizations (``Native
Enterprises''). Our mission is to enhance self-determination through
preservation and enhancement of government contracting participation
based on the unique relationship between Native Americans and the
federal government. NACA represents 19 ANC, Tribal, and NHO
Enterprises.
Introduction
In the 110th Congress there has been a significant focus on federal
procurement reform largely in response to contracts awarded for the
Iraq war, Afghanistan and Katrina resulting in intense scrutiny on
investigations and oversight of government contracting practices and
non-competitive awards. These reform initiatives could have a
significant and disproportionate impact on Native communities.
Notwithstanding the fact that we are but a sliver of federal
contracting, we face several proposals to eliminate or diminish the
Native 8(a) contracting preferences.
The record does not support these proposals:
The GAO studied ANC participation in the 8(a) program and
did not recommend any legislation change to the program. Rather, the
GAO recommended that the SBA and procuring agencies take a number of
administrative actions to improve oversight.
The SBA has initiated a tribal consultation to address
these GAO recommendations.
The Native American Contractors Association (NACA), the
National Congress of American Indians (NCAI), and the National Center
for American Indian Enterprise Development (NCAIED) are working
together to provide recommendations on how 8(a) regulatory compliance
can be improved to increase transparency and accountability and to
provide legislative recommendations to enhance the ability of all small
businesses to have a larger share of contract awards.
Over the past 500 years, Native Americans have suffered from the
loss of their land, economic assets and culture. These changes have
resulted in the breakdown of many tribal systems, families and
communities. By most social and economic indicators, Native Americans
are at the lowest rung, struggling with the legacy of rural isolation
and stagnant local economies. Nationwide, American Indian and Alaska
Natives have suffered from decades of poverty and neglect. The 25.7%
poverty rate in Indian Country exceeds that of all other race
categories, and exceeded twice the national average of 12.4%, this
contributes to the 40% unemployment rate and exceeded eight times the
national average. Native communities experience many of the social ills
associated with poverty: Inadequate health care resulting in a rate of
suicide double the national average, and suffering from other disorders
such as alcohol and drug abuse, diabetes, and obesity. Heart disease is
the number one cause of death among American Indians with a 71% rate
higher than the U.S. average. To top it off, American Indians have a
life expectancy of 5 years less than the rest of the U.S. population.
Bottom line: too many Native Americans are without the resources and
tools to build their communities.
Remarkably, amid the widespread poverty and social distress found
in Indian Country, there are increasingly signs of hope and examples of
Tribes and Alaska Natives making strides in building strong communities
and economies. For example, there are many stories of struggle, such
as, the village of Chenega Bay that survived an earthquake and tsunami
and rebuilt twenty years later only to be devastated by the Exxon
Valdez oil spill. A village member, said that her generation ``had even
forgotten the word in their native language for hope.''
But there is hope now, as Chenega Corporation has a big hand in
revitalizing this economically and physically distressed community. You
will hear today of many examples of this success through participation
in the 8(a) Business Development program.
Small Business Administration Programs
Recognizing that small businesses are critical to our economy, the
Small Business Administration (SBA) is charged with assisting and
protecting their interests. Congress found that by providing access to
the federal procurement market, the business development of small
business concerns owned by those who were disadvantaged could be
achieved. The SBA has created numerous government procurement programs
for businesses owned by disadvantaged individuals and groups. These
programs include the 8(a) Business Development program (including
Community Development Corporations), the Small and Disadvantaged
Business (``SDB'') program, the Historically Underutilized Business
Zone (``HUBZone'') program, and the Service-Disabled Veteran-Owned
(``SDVOB'') program which promote minority and disadvantaged small
business owners to do business with the federal government.
To ensure that small businesses have access to the procurement
market, statutory goals have been established for the federal
government to contract with small businesses, SDBs, women-owned small
businesses, HUBZone businesses and SDVOBs. The federal government has a
23% mandated small business contracting goal and the SBA negotiates
with procuring federal agencies to establish agency goals to ensure
that the federal government meets these goals.
The statutory goals for the federal government are as follows:
23% of prime contracts for small businesses;
5% of prime and subcontracts for SDBs;
5% of prime and subcontracts for women-owned small
businesses;
3% of prime contracts for HUBZone small businesses; and
3% of prime and subcontracts for SDVOBs.
America has a long history of using its purchasing power as a means
to further the business development and economic development of various
individuals and groups who would otherwise be excluded from the huge
government contracting market. This furthers social goals but more
importantly it increases competition and expands and diversifies the
sources of supplies and products for the government. Native Enterprises
are starting to use these procurement programs just as the government
intended, to use business approaches and models to further self
reliance and build strong Native communities. Thereby partially
fulfilling the federal government's obligations to Native Americans.
Native 8(a) Program
By creating unique Native 8(a) provisions, Congress recognized the
special needs and its obligations to Indian Tribes and Alaska Natives.
Similar to the legitimate policy goals that support business
development efforts for other 8(a) program participants (as well as
other small business set-asides for woman-owned businesses and service-
disabled veteran-owned businesses, and small and disadvantaged
businesses), the Native 8(a) provisions also embody the unique
relationship between Native Americans and the federal government.
In fact, hearings held by the Senate Indian Affairs Committee in
1987 and 1988, found a need to include Indian tribes and Alaska Native-
owned firms in government contracting because President Reagan's
``Commission on Indian Reservation Economies'' had documented that the
government's procurement policies were significant obstacles to
economic development and the committee found that tribally-owned
companies had a difficult time qualifying for 8(a) program
certification. The Chairman of the Senate Indian Affairs Committee
believed that remedial action was necessary to address the low
participation of American Indian and Alaska Native-owned firms in
government contracting. During the 1988 hearing, Chairman Inouye stated
that ``directing the purchasing power of the federal government to
accomplish social goals such as assisting disadvantaged members of
society is well established'' and he noted that unfortunately, ``this
public policy goal has not been achieved with respect to the
participation of businesses owned by Native Americans.''
As this committee well knows, the federal government's unique
obligations to Native Americans are recognized in the Constitution,
federal laws, and by the Supreme Court, and those obligations empower
Congress to enact legislation that recognizes the status of First
Americans. Indeed, in terms of economic development, this special
relationship is embodied in the Indian Commerce Clause of the United
States Constitution. In furtherance of this relationship, Congress
enacted legislation to encourage the participation of Tribally-owned
and Alaska Native corporations to participate in the 8(a) program in a
manner that advances the federal government's interest in promoting
self-sufficiency and economic development in Indian Country.
The Native 8(a) program was designed to empower Native communities
to provide for their people, to sustain and expand their economies, and
to combat the historic economic and social ills these communities face.
It is also a way for Indian Tribes and ANCs to engage outside
communities, outside investors, and other expertise in economic
activities that benefit Native communities. We are just now getting a
foothold in the federal marketplace after being left out, locked out,
and elbowed out for decades. With some modest success, we now represent
a small slice of the total procurement dollars ($1.9 billion). However
small, it is beginning to have a big impact in Native communities.
The 8(a) program has fostered a culture of ownership and self-
sufficiency and a path for diversifying and expanding Native economies.
The benefits and services that Native communities receive result
directly from the profits that Native Enterprises realize from
government contracts. It is a hand up--not a hand out. Native
Enterprises provide benefits in the form of dividends to shareholders,
scholarships, job training opportunities, and economic stimulus to the
local community. A 2005 NACA survey of its ANC members shows that ten
regional and two village corporations paid $33 million in dividends
attributable to government contracting--these corporations had 86,516
shareholders among them; $9 million was awarded in scholarships; $12
million in other shareholder programs and over 31,000 jobs created
nationwide. These figures show that Native American participation in
the 8(a) program is enabling them to compete in the American
marketplace and to become successful and self-reliant, and to act as
engines of growth in their communities.
Like other 8(a) firms, Native Enterprises can only participate in
the 8(a) program through small businesses which are subject to
stringent program entry eligibility requirements. Native Enterprises
have two key unique 8(a) provisions:
1) The competitive thresholds which limit the amount of sole-
source contract awards do not apply; and
2) Native Enterprises can participate in the 8(a) program through
more than one company.
This was the intent of Congress, and makes sense in light of the
economic and social disadvantages with which Native communities must
contend and the numbers of Native Americans in need. The disadvantages
suffered by Native Americans encompass entire communities and villages,
as opposed to individuals who are socially or economically
disadvantaged. The ability to operate more than one company allows
Native Enterprises to provide for hundreds or thousands of their
people.
Similarly, Native Enterprises are not subject to low caps for a
reason. Unlike the typical structure of a small business, with one or a
few owners, Native Enterprises are responsible for combating historical
disadvantage, rural isolation, and the depressed economies that have
resulted from a multi-generational dearth of opportunity. The program
rules were purposely drafted, and Congressionally-mandated, to reflect
the social and economic obligations Native Enterprises have to their
communities, the size of these communities, and the immensity of the
problems we face. The Native 8(a) program is exactly what Congress
intended: an economic development program to help disadvantaged Native
American communities, that lifts our people with a hand up--not a hand
out.
Native Enterprises provide quality services and cost-effective
products to the Federal government. It is no secret that the government
contracting marketplace is highly concentrated and dominated by a few
very large companies. In 2005, the five largest contractors received
20% of the total contract dollars awarded. By providing additional
sources of products and suppliers within the market, Native Enterprises
give the government alternative procurement vehicles, provide
competition to the big companies, and give the taxpayers' more value
for their dollars.
For example, Integrated Concepts and Research Corporation (ICRC)
(at the time, a subsidiary of Koniag Development Corporation, an Alaska
Native Corporation) partnered with Qualis, a woman-owned small
business, located in Alabama to bid on a NASA contract to provide
aerospace materials testing. Over the life of the $12.3 million five-
year contract, the ICRC/Qualis team earned 100 percent of its
performance and cost incentive fees. The ICRC/Qualis team has a
reputation for consistently running 10 percent under target incentive
budgets and through other initiatives has saved NASA close to $1
million in contract costs. Simply put, with more sources of supply and
services for federal agencies, competition is increased and best value
is provided.
Issues Raised
In recent years, there has been a tremendous amount of focus on the
Native Enterprises that contract with the federal government. This
increased scrutiny suggests that there is something wrong with the way
Native Enterprises are doing business. I would like to address these
issues one by one.
First Issue: The numbers--Where are contracting dollars going?
Native Americans represent 4% of the American population. Our
enterprises today receive less than 1% of the federal procurement
dollars (but some days it seems that we get 100% of criticism). Again,
looking at the most recent data available, in 2005 the federal
government spent a total of $377.5 billion on all contracts. Native
American contract awards of all types comprised only $3.19 billion,
less than one percent of (0.8%) of all federal contracting dollars. In
addition, in 2005, the Federal government awarded $11 billion in
contracts to 8(a) firms. Of that amount, approximately $1.9 billion, or
17.2%, was awarded to Native Enterprises through sole source awards.
Other 8(a) firms received 82.8% of the 8(a) awards. Native Enterprises
represent approximately 1% of all non-competitive awards government-
wide. We get a very, very small share of all federal contracting
dollars, and just a fraction of the 8(a) awards.
Second Issue: Native Enterprises somehow are awarded contracts and
then subcontract all of the work to subcontractors in violation of the
SBA's limitations on subcontracting regulations. This criticism is flat
wrong for several reasons. The SBA's regulations require 50% of
personnel costs to be borne by any 8(a) firm performing a service
contract. This performance of work requirement must be met by all 8(a)
firms, including Native Enterprises. 8(a) firms and Native Enterprises
can subcontract a portion of work on federal contracts--this practice
is not exclusive to Native Enterprises. In fact, most federal
contractors, large and small, do just that for good reasons, most
likely benefiting local businesses and workers in each one of the
states represented by members of this committee.
To improve transparency and compliance with this requirement, NACA
has developed a Best Practices Guide for its members, ``Guide to
Industry Best Practices: Ethics and Compliance Programs and
Establishing Best Business Practices.'' The guide recommends that
Native Enterprises develop a mechanism for tracking compliance with
this requirement. For example, SKT has created a senior-level
management office whose responsibility it is to monitor and track
compliance with all the SBA 8(a) regulatory requirements including the
performance of work requirement on each contract. Additionally, NACA
through the SBA tribal consultation process will make recommendations
on how reporting on this requirement can be improved to provide more
transparency and accountability. Moreover, federal procuring agencies
are responsible for overseeing compliance with this requirement. The
GAO in its report noted that procuring agency officials are often not
aware of this responsibility. NACA recommends that the SBA revise its
partnership agreements so procuring agencies are aware that they are
responsible for monitoring 8(a) compliance with this requirement.
Let me be clear: Native Enterprises do not ``pass through'' work to
subcontractors, as a few erroneously allege. That would be self
defeating because, it would not provide long-term revenue streams which
Native Communities need to provide basic services. In fact, teaming
arrangements enable Native Enterprises to realize profits that are then
reinvested in their communities. Teaming arrangements also give Native
Enterprises the added benefit of learning new core competencies and new
lines of business, giving us more leverage to compete with large
businesses, benefiting the taxpayer and Indian Country.
Third Issue: Native Enterprises can form joint ventures with large,
non-Native companies, and therefore the implication is that Native
Enterprises are somehow not qualified to do the work or that the large
companies benefit from the 8(a) program. Again, all 8(a) firms, not
just Native Enterprises, can form joint ventures with non-small
business owners. All 8(a) firms can venture with large businesses if
they are operating under the SBA's Mentor-Protege program. The use of
teams and joint ventures are encouraged by the federal government as a
means to stimulate growth, to forge new business relationships, and to
develop expertise. The SBA's Mentor-Protege program is central to
business diversification and expansion. The mentor can provide valuable
technical/management assistance, financial assistance, and sub-contract
opportunities which enhance the capabilities of the Protege firm.
For example, Sealaska Environmental Services (SES) is a wholly
owned 8(a) subsidiary of Sealaska that was started in 2003. In its
short history, SES has partnered with Tetra Tech, a leader in the
environmental services industry providing environmental remediation,
and engineering services. This partnership combines Sealaska's natural
resource management experience with the proven systems, controls and
highly trained people of Tetra Tech. SES and Tetra Tech formed a
Mentor-Protege agreement and a joint venture and have negotiated
agreements with the Navy to provide environmental remediation services
at several Navy facilities on the west coast. Through its relationships
with Tetra Tech, SES continues to build both its environmental
remediation capacity and capability to help transition SES from a
start-up 8(a) to a stand-alone company in a highly complex and
competitive industry.
Partnering through teaming or joint ventures is also important once
a Native 8(a) graduates out of the program and must compete with giants
such as Lockheed Martin, Raytheon and Boeing. The giants of the
government contracting market have had 60 plus years to create their
competitive advantages which include the substantial capital needed bid
on major contracts. Responding to major contract solicitations takes
expertise and months of manpower costing up to 3 percent of the
contract award--a $100 million dollar contract may cost upwards of $3
million dollars to prepare a bid.
How does a government contractor like Chugach Development
Corporation (CDC), fresh out of the 8(a) program in 1998, succeed in a
market dominated by powerful and capital rich companies? In CDC's case,
the management team made the strategic decision to not go it alone.
They networked with their competitors convincing government contracting
giants that CDC could deliver quality, timely, and cost effective work
in facility maintenance and logistics. Teaming with Bechtel and
Lockheed Martin, CDC won their first major full and open competitive
bid contract, and they have never looked back. CDC has the reputation
of being ``the little company that could!''
The Mentor-Protege program also is an important way for Native
8(a)'s to work with and partner with other small businesses. SpecPro,
Inc., an ANC 8(a), formed a Mentor-Protege relationship with
TerraHealth, Inc., an 8(a) veteran and minority-owned business and were
awarded the Department of Defense Nunn-Perry Award for reducing costs
for DoD and for developing technical capabilities and increasing
opportunities for another small business. SpecPro and TerraHealth's
relationship furthers both of their growth, and continues to develop
and mature as a model for new small businesses to follow.
Native Enterprises are treated no differently and operate no
differently than other 8(a) firms in respect to Mentor-Protege
relationships. Through the tribal consultation process initiated by the
SBA, NACA will make recommendations on how reporting requirements on
Mentor-Protege agreements and joint ventures can be made more
transparent to better demonstrate compliance with the regulatory
requirements and to demonstrate that mentors are indeed providing
technical and/or management assistance that increases the contracting
capabilities of Native 8(a)'s.
Fourth Issue: executive compensation. To attract the type of talent
needed to successfully run a business, all businesses must pay what the
market dictates for experienced executives. The salaries paid to our
managers are on par with other businesses because we must recruit those
who have the talent and expertise to manage and oversee companies in a
complex and competitive procurement market. We are under the gun to
produce quality services and provide a good return back to the
taxpayer. Unlike other industries, profit margins in government
contracting are small and the competition is great, it takes an
experienced manager to be successful in this industry. Further, unlike
family-owned or closely-held small businesses, Native Enterprises have
a fiduciary duty to their communities and shareholders. Native
Enterprises seek out the best talent we can get to help maximize
revenues for our owners--Native Americans. These business managers
oversee the day-to-day operations of the companies and they are subject
to the control of their Tribal Councils or their Native board of
directors and shareholders. They are held accountable for the work they
do and are expected to produce and improve the bottom line.
Fifth Issue: small business community criticism of the recent
successes of Native Enterprises. This criticism is misplaced. It
distracts from the many issues all small business contractors have in
common. When you get down to it, we are being criticized for finally
realizing some of the benefits that Congress intended--diversifying our
economies. While the federal contracting market has doubled in size
since 2000, many small businesses believe they are locked out of the
market. While the size of the market has grown, the federal government
statutory goals which ensure small business participation have remained
the same. Additionally, the overall small business share has declined
due to a number of reasons, such as bundling/consolidating contracts
beyond the reach of many small business capabilities and barriers to
growth that make it more difficult for small businesses to compete for
larger contracts. The federal procurement market is huge, there is
plenty of room for Native Enterprises and other small businesses to
participate. From a policy standpoint, all small businesses stand to
gain by advocating with a unified voice on issues like increasing
agency contracting goals and size standards for small businesses, as
well as increasing the thresholds for individually owned 8(a) firms.
We are working hard to strengthen the relationships between Native
Enterprises and other small business. NACA has formed strategic
alliances with other small business trade associations, these alliances
serve to facilitate relationships with groups that may not have worked
with Native Enterprises in the past. These alliances also broaden
contractor access and create productive networks among various small
business contractors.
In recent years, Native Enterprises have been able to diversify and
expand into new markets. Last summer, the DOD office of Small Business
hosted a small business roundtable with NACA and other small business
trade associations. This has resulted in several productive working
relationships. For example, NACA and WIPP (Women Impacting Public
Policy) held a workshop on how to form small business teams and
provided opportunity for Native contractors and women-owned businesses
to meet and exchange information on their capabilities. This has
resulted in productive teaming arrangements among a number of the
companies that participated. By teaming and partnering with Native
Enterprises, other small business owners can also expand the services
they offer and enter into new markets. Since some Native Enterprises
have performed numerous federal contracts, they have an impressive past
performance record which they can contribute to contracting teams.
Native Enterprises welcome partnering with those in other small
business communities who have similar goals and common interests.
The non-native communities in which Native Enterprises are working
and operating also see the benefits of increased opportunities. We know
there are concentrations of Native 8(a)'s working in Alaska, New
Mexico, Washington, Oklahoma, Alabama, Florida, Virginia and Maryland;
some of these are states with predominate Native American populations
other are not. With the expansion of Native Enterprises comes increased
employment in the local communities.
The small business community as a whole can benefit from focusing
on the areas of government contracting that can be improved for
everyone, and Native Enterprises in particular are advocating ways to
ameliorate some of the adverse effects of the current procurement
market. For example, speaking on behalf of its members, NACA supports
initiatives that would increase awards to small businesses and decrease
the amount of bundled contracts. Also, NACA supports increases in
agency goals for contracting with small businesses and set-asides for
small businesses. In addition, to partnering with other small
businesses, NACA through an agreement with NCAIED, and through other
efforts, is working to develop inter-tribal business opportunities by
providing training workshops and networking opportunities among Native-
owned enterprises.
Conclusion
In sum, the communities which Native Enterprises serve remain some
of the poorest and most under-employed groups in America. There is
still tremendous work to be done in effecting positive and sustainable
benefits for these communities. The less than 1% of the federal
contracting that Native communities now receive is enabling Native
8(a)s to create jobs and opportunities desperately needed by their
communities. Through our self-reliance and business ingenuity, Native
peoples are starting to provide for the sufficiencies of our
communities thanks to the business development opportunities provided
by Congress. Native participation in the 8(a) program has helped
Congress further two important goals: economic self-sufficiency and
self-determination. Remarkably, this is being done by providing access
to the private sector market, building technical expertise through
Mentor-Protege and teaming arrangements, and providing access to a
market with relatively low capital costs. The continued economic
success and well being of Native communities depends on the combined
and sustained efforts of Indian tribes and ANC's, the federal
government, and the private sector.
Great Returns and Great Value with Little Federal Investment
To build upon this progress, NACA offers the following points and
recommendations:
1. The Native 8(a) program has resulted in just what Congress
intended--building stronger Native communities that have been
devastated by economic distress. The Native 8(a) program is a rare
federal program that works by providing incentives that stimulate
economic development in Native communities, diversifying Native
economies, and providing revenue for scholarships, training and
encourages entrepreneurship in Native communities.
Recommendation: The House Resource Committee, as the
committee with jurisdiction over federal Indian policy issues,
should play a proactive role in future Congressional processes
involving the Native 8(a) program and help educate others of
the importance of the Native 8(a) program and the federal
government's unique relationship with Native Americans. This
hearing is a great beginning.
2. While the federal contracting market has increased
significantly, the small business share of that market has declined
significantly due to bundling/consolidation of contracts beyond the
capabilities of most small businesses and current barriers to growth
that make it difficult for small contractors to compete for larger
contracts.
Recommendation: The House Resource Committee should support
and facilitate the efforts of NACA, NCAI, and NCAIED and other
disadvantaged groups in taking actions to enhance contracting
opportunities for all small business contractors, and our
ability to work together. This could involve facilitating
meetings and discussions with other committees and with the
administration.
I thank the Chairman for the opportunity to speak before the
Committee today, and welcome any questions your Committee may have.
______
NOTE: The ``Guide to Industry Best Practices: Ethics and
Compliance Programs and Establishing Best Business Practices''
and ``Policy Statement on Small Business Contracting''
submitted for the record have been retained in the Committee's
official files.
[GRAPHIC] [TIFF OMITTED] T7848.004
[GRAPHIC] [TIFF OMITTED] T7848.005
------
POLICY STATEMENT ON SMALL BUSINESS CONTRACTING
March 2007
To ensure that small businesses can access its fair share
of the over $370 billion federal procurement market, the
Federal Government set a goal of awarding 23% of all federal
contract dollars to small businesses and 5% to small
disadvantaged businesses. Prominent among the several federal
programs designed to stimulate small business contracting is
the Small Business Administration (SBA) Section 8(a) Business
Development Program to enhance the competitive viability of
firms owned by socially and economically disadvantaged
individuals through the provision of contractual, financial and
technical assistance. The purpose of these federal goals and
programs has always been to ensure the maximum practicable
utilization of these underrepresented firms, and to expand the
base of suppliers to the federal government.
Congress originally based eligibility for the 8(a) program,
in part, on whether the applicant is an individual of certain
racial or ethnic heritage, or is a member of a group indigenous
to this country. In later reforms of the 8(a) program. Congress
extended eligibility to Indian Tribes, Alaska Native
Corporations (ANCs) and Native Hawaiian Organizations (NHOs)
representing those indigenous peoples who have a time-honored
special trust relationship with the federal government that
obligates the government to implement policies to facilitate
self-determination and self-sufficiency within Native
communities.
For many individual entrepreneurs, the 8(a) program has
helped them grow their business successfully and benefit
personally from that growth. For Indian Country, the 8(a)
provisions applicable to Tribes, ANCs and NHOs have enabled the
Native enterprises they own to generate revenues and create
jobs that benefit their entire Native communities. Despite the
success of many 8(a) companies, many more still struggle to
break into the highly concentrated federal procurement market
that is dominated by much larger companies, including the five
largest contractors that alone hold 20% of all federal contract
award dollars.
To expand the contracting opportunities for all small
business contractors, our organizations pledge to work together
to broaden the base of 8(a) and other small business suppliers
and service providers available to the federal government by:
1) developing innovative incentives for agencies to award more
and larger contracts to 8(a) and other small business
contractors; and 2) advocating for the use these incentives and
other procedures that will ensure that the SBA and other
federal contracting agencies ramp up their award of contracts
so as to meet and exceed their small and minority business
contracting goals every year.
Policy Positions
For the foregoing reasons, our organizations pledge our
support for the initiatives outlined in the attached document..
A. Expand Small Business Contracting Opportunities.
The SBA's regulations and policies have not kept pace with
changes in the federal contracting market, such as increases in
the average size of contracts often exceeding the capacity of
small firms, the prevalence of teaming arrangements and joint
ventures, the bundling and consolidation of contracts, and the
consolidation of government contractors to perform larger
contracts. These changes have made it harder for small
businesses, particularly 8(a) firms, to compete for government
contracts. Consequently, there have been steep declines in the
total value of contracts awarded to 8(a) companies in
particular and to all small businesses in general. The federal
government must take immediate actions to reverse these trends,
including retaining some incentives and enhancing other
incentives for contracting officers to award to 8(a) and other
small businesses, such as:
1. Fulfill Congressional intent to provide important
incentives for agencies to contract with underrepresented
Native community-based enterprises without diminishing or
eliminating the 8(a) provisions applicable to these enterprises
owned by Tribes, ANCs or NHOs that help build stronger, more
self-sufficient Native economies.
2. Enhance the ability of individuals to qualify for
certification as 8(a) program participants and to pursue larger
contracts on a competitive or non-competitive basis.
3. Support agency efforts to track and monitor federal
agencies' achievement of their 23% small business and 5%
minority business contracting goals, and advocate for approval
of increases in these two goals, and/or a new goal for 8(a)
contract awards.
4. Identify new ways to participate in the concentrated
federal procurement market, including innovative teaming
arrangements for Native enterprises and other small businesses
to pursue larger contracts in teams, such bundled contracts set
aside for competition among teams of small businesses.
5. Encourage small businesses with larger contracts to
implement subcontracting plans to develop stronger business
alliances among all types of small business contractors.
Currently subcontracting plan requirements apply only to large
prime contractors and describe how they will subcontract a
portion of the prime contract work to 8(a), small
disadvantaged, service disabled veteran-owned, HubZone, women-
owned and other small businesses.
B. Administrative Oversight and Monitoring.
Scrutiny of government contractors, whether excessive or
not, will continue. Even permissible relationships, such as a
mentor-protege agreement with a large business, can be cast as
improper, and suspicion thrives on the scarcity of accurate
data. Increased SBA and other agencies' oversight of existing
requirements would verify that Native enterprises and other
8(a) companies are good stewards of taxpayer funds. The
following steps can foster better administrative oversight:
1. Improve SBA's implementation of the 8(a) provisions
applicable to Tribes, ANCs and NHOs by: a) enhancing existing
policies and procedures to improve outreach and assistance to,
and oversight of, Native enterprises; b) redesigning and
improving the Tribal 8(a) certification process to reflect the
unique nature of Tribal enterprises; and c) authorizing an
Assistant Administrator for Native American Affairs to access
the various programs of the SBA to improve the support provided
to Native enterprises through contractual, financial and
technical assistance.
2. Afford the SBA with sufficient resources to rebuild and
train its staff to improve implementation of the 8(a) and other
programs to assist all small business contractors in accessing
the tools necessary to compete successfully and receive a fair
share of federal contracting opportunities.
3. Design a method to identify and track contract awards
to Native enterprises owned by Tribes in federal procurement
data systems.
4. Establish a small business 8(a) training program to
provide annual training sessions for both 8(a) contractors and
contracting officers.
------
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[GRAPHIC] [TIFF OMITTED] T7848.016
The Chairman. Thank you. In order to give our final
witness appropriate time, the Chair is going to recess for
approximately a half-hour so we can answer roll call votes on
the Floor of the House at this time, and we shall return.
[Recess.]
The Chairman. The Committee on Natural Resources will
resume its sitting, and for purposes of introducing the next
panelist, the Chair will yield to the Ranking Member from
Alaska, Mr. Young.
Mr. Young. Thank you, Mr. Chairman, and again it is my
privilege and honor to introduce our next witness, Julie Kitka,
who has been President of the Alaska Federation of Natives for
how many years, Julie?
Ms. Kitka. Seventeen years.
Mr. Young. Seventeen years, and watch it grow from a
fledgling operation to a very viable unit within the State of
Alaska, conveying the thoughts and beliefs of the Alaska
Natives, and I believe one of the greatest supporters of the
8[a] contracting program that we have.
So with that, I would like to yield this time to Ms. Kitka
for her testimony.
STATEMENT OF JULIE KITKA, PRESIDENT,
ALASKA FEDERATION OF NATIVES, ANCHORAGE, ALASKA
Ms. Kitka. Thank you, Mr. Chairman, and thank you Vice
Chairman Young.
First of all, I wanted to thank you personally as well as
members of the Committee for the important role your committee
has had over the years for the Native people of Alaska and
other Native Americans, and I want you to understand that the
work that you do and that the decisions you make have real
impacts on the ground, and we are very grateful for you and
your staff's dedicated work over the years. Because of your
work, I can say our people have greater opportunities, our
elders are living longer, healthier lives, our children are
receiving better educations, and our people are living in safer
homes. The improvements are real and immeasurable, and we are
very grateful, and I just have to say that right from the start
because it is important that you understand that.
Again, I am the President of the Alaska Federation of
Natives, which is the largest statewide Native organization in
Alaska, representing more than 130,000 Alaska Natives.
I wanted to also mention we recently over the last year and
a half had the chance to meet and have serious conversations
with the renowned Peruvian economist by the name of Hernando De
Soto, who wrote the international best seller on the mystery of
capital, and I wanted to share a comment with you that he made
in regard to the Native people in Alaska to give you an idea of
what is going on in our state.
Mr. De Soto said that what he sees going on in Alaska with
Alaska Natives is ``living proof that life is not a roll of the
dice, harsh and brutal; that government can work with people to
set up systems where people can make a difference and improve
their lives.''
I think that is an absolutely powerful statement that life
is not a roll of the dice, harsh and brutal, and so it is not
just by chance that things are happening, and I just wanted to
convey to you the partnership that we have had over the years
with this committee and with the committees that have taken
jurisdiction over Native issues on that have really made a
difference, and our Native people in Alaska are living proof of
what can be done if we have the appropriate tools and
structures, and we are very proud of the accomplishments that
we have had since our land claim settlement, and growing our
Native corporations, growing our Native entities, and making a
difference in the lives of our people and other citizens in our
state.
One of the points I made in our testimony is the great
diversity among our people in the state. We have Yupik, Cupik,
Inupiat Eskimos, Athabascan, Tlingit, Haida and Tsimshian
Indian peoples, so we are not all the same in the state. There
is great diversity across generations, across geographies, and
across gender among our people, and because of these
differences and diversities we feel very strongly that there is
no one solution that fits all. There is no one economic tool
that meets the needs of all the people, and we really encourage
you to take a look at economic development and initiatives as a
whole cluster of economic health and educational initiatives as
opposed to just one initiative.
Basically, the current situation, we believe, is, and as
has been told out by the Secretary of Treasury and other very
distinguished branches of the government, is that the U.S.
economy is strong and growing stronger, and it is expanding,
and what we feel that, and other people have said that as the
United States economy grows and expands, that there is still
pockets in our country which are not sharing in the tremendous
economic growth that is going on, and Native American
communities are among those pockets that still aren't getting
the full measure of the strong U.S. economy and the growth.
We feel strongly that what needs to happen in order for us
to share more fully in the economy is that we need additional
targeted assistance to, one, keep up with changing technology,
there is a lot of rapid change in technology, and to ensure
that the economic pie continues to expand, and that the
committees don't look at ways to constrict and limit
participation in economic opportunities, but how can we make
the pie bigger and grow participation in many ways.
Like I said, that said the remainder of my testimony is
going to cover two things. One is the 8[a] government
contracting in which we feel unequivocally has been a success,
and it is something that our regional and village corporations
and Tribes in Alaska have participated and they have worked
very hard providing value and quality work for the government.
This is not a hand out. This is delivering work for the
government that the government wants and needs and doing it at
a value.
In our testimony, we have given specific examples of our
participation in the 8[a] program and how the work that has
been provided by our people that are contracting meets and
exceeds government standards in so many ways. There is just
stacks and stacks of commendations that our companies have
gotten from the Federal agencies on that, commending our people
for the quality work that has been done.
I really want to encourage this committee to stay engaged
in the 8[a] contracting issue as it surfaces in the various
committees, and please assert your jurisdiction to the fullest
extent to protect our interests as Native Americans. It is just
vitally important that people understand the trust
responsibility between the government and Native Americans that
understand our history and background to be able to judge the
issues all around the 8[a] program, and it is very important
that this committee stays engaged.
I want to also bring up quickly another economic
initiative, H.R. 3351, which is sponsored by you, Vice Chairman
Young, a demonstration project of a domestic version of
Millennium Challenge Account. That I will just bring briefly
because, as I mentioned, not all solutions fit all groups of
people in all circumstances, and we have 87 villages in our
state that want to be part of this demonstration project, a
pilot if you will, with representatives in Hawaii and
reservation states, and we are very excited about the potential
of what this demonstration project can do, and it is basically
a domestic version of the Millennium Challenge Corporation,
which the United States set up, and Members of Congress
supported, creating a Federally chartered corporation to
provide the assistance.
We are not asking for a Federally chartered corporation. We
are just asking for the models of results-based management and
accountability, and that whole unique compacting model to be
tested within our communities to see if that model which is
just being used internationally can have some measures of
success with some of the real intractable areas of poverty in
our communities.
I am very proud to say that has been introduced, and we
anxiously await consideration by this committee, and hopefully
passage of that and that demonstration pilot to go forward.
In our testimony, we have also included quite a number of
other recommendations in the economic arena. We feel very
strongly that there has been a lot of rapid change happening in
the economy and the economies that our businesses participate
in, and we feel very strongly that the U.S. Congress and the
government needs to protect U.S. businesses, including Native
businesses, so that we can be competitive in the global
economy, and as this rapid change in globalization occurs we
really think there is new tools that need to be added to the
toolbox for companies to depend on, and that it is vitally
important that American companies are able to be competitive
and that Native companies and our business enterprise can be
among the best in the country and protect jobs and
opportunities for our people.
I include nine recommendations in there, and I won't cover
them because of the time restraints on that, but I urge your
consideration of them, and want to firmly put our organization
on record in support of the wonderful work that is being done
by Native contractors under the 8[a] program and urge your
continued support of that program.
Thank you.
[The prepared statement of Ms. Kitka follows:]
Statement of Julie E. Kitka, President,
Alaska Federation of Natives
Chairman Rahall, Ranking member Young and distinguished members of
the committee, thank you for the opportunity to appear before you today
on behalf of the Alaska Federation of Natives (AFN) to talk about the
importance of diversifying Native economies, the Small Business
Administration's 8(a) program to the Native people of Alaska and other
important considerations.
My name is Julie Kitka. I am testifying today in my capacity as
President of the Alaska Federation of Natives (AFN), a position I have
held for seventeen years.
First, on behalf of the Native people of Alaska, thank you for your
many years of service in the Congress, in the House of Representatives,
and on this Committee. We are grateful for you and your dedicated
staff's hard work over the years. On the ground, at home, your work has
made a difference. Our people have greater opportunities. Our Elders
live longer, healthier lives. Our children receive better education.
Our people live in safer homes. The improvements in our lives are real
and measurable. We are grateful.
By way of background, AFN is the largest statewide Native
organization in Alaska representing more than 130,000 Alaska Natives.
We are a young, growing population--projected to double in size every
23 years and so our need for a solid economic base is absolutely
essential.
The Alaska Native population, although united in AFN, are a very
diverse group. We have Yupik, Cupik, and Inupiat Eskimo peoples;
Athabascan, Tlingit, Haida and Tsimshian Indian peoples; and Aleuts.
Our Native cultures are land-based, and our occupation and use of our
land predates Plymouth Rock and the pyramids. And within each cultural
group, there is diversity--across generations, across geography, and
across gender. Because of this great diversity, there is no ``one
solution fits all''. We need a cluster of economic, health and
educational initiatives which empowers our Native people to be able to
maintain our unique land-based cultures and participate fully in the
larger society.
Background:
AFN was organized in 1966 to facilitate bringing the various
regional and village associations together, to advocate with one voice
for a fair settlement of our aboriginal land claims.
With the discovery of oil in Prudhoe Bay-and the need for clear
title in order to build a pipeline to bring that world-class discovery
on line in order to provide for the energy needs of our country--a
sense of urgency created an historic opportunity for the settlement of
our land claims. In December 1971, after years of effort by Members of
the U.S. Congress and Alaska's Native leadership, the Alaska Native
Claims Settlement Act, (ANCSA), P.L. 92-203 was signed into law by
President Richard Nixon. In extinguishing aboriginal claims, Alaska
Natives were compensated with fee simple title to 44 million acres of
land and $962.5 million for lands lost to state, federal and private
interests. The Act created 13 regional for-profit corporations and more
than 200 village corporations to receive and oversee the land and
monetary entitlements.
Native Corporations--Value-based Entities
We have now had thirty-six years working in corporate structures,
modifying them over time with your help, to better meet the aspirations
of our people. Our corporations continue to be value-driven entities--
let me share one small example: NANA Regional Corporation, representing
the Inupiat people in Northwest Alaska has as its corporate values the
following statements:
Honesty and integrity will govern all activities
All individuals treated with respect
Commitments made will be fulfilled.
This is what the NANA leaders say and believe. This is what they
instill in all their employees and strive to be. Other Native
corporations have similar statements of values, and they are not just
on paper. We are deeply influenced by our cultural values as we go
about the hard work of building sustainable economies. It makes for
high standards, but in respect for our Elders, we can do nothing less
than our very best.
Current Situation: The U.S. Economy is Strong and Expanding, but
pockets in the U.S. are still excluded from the economic growth
As Americans, we are fortunate in the last few years to be living
within a strong U.S. economy, which continues to expand. But we know
this strong U.S. economy is not shared throughout the country and there
are pockets of communities still struggling. We in Alaska, live in a
homeland full of potential. We need your continued attention and
support to ensure that all our Native people have the opportunity to
fulfill the promises of both our land settlement and as citizens of the
United States, living in the strongest, most powerful country in the
world.
The rapid pace of change with technology and globalization requires
the United States to look closely at the regional economies in our
country. The Congress must provide targeted assistance, as necessary,
so we may have access to, and keep up with changing technology, and
ensure that the ``economic pie'' continues to expand, rather than
constrict. We need a level playing field and a hand up, to allow Native
entities to participate fully and keep the United States competitive in
the world economy.
The remainder of my testimony will cover the following areas:
1. 8a Government Contracting and the Special Trust Relationship
2. Alaska Native Participation in the 8a Program--Part of the
Solution
3. Other Economic Initiatives--Applying Fifty Years of U.S.
Development Experience--A New Demonstration Project (H.R.3351)
4. Recommendations and conclusion.
8(a) Government Contracting and the Special Trust Relationship
Over the years since ANCSA was passed, Congress has enacted many
laws to foster self-sufficiency and economic development in Native
communities. Among the most successful of these laws are the special
provisions implementing Section 8(a) of the Small Business Act. The
contracting status offered by the 8(a) program is based on the trust
and statutory relationship between Native Americans and the federal
government. As you are well aware, there is a special legal and
political relationship between the United States and Indian and Alaska
Native Tribes, and that special legal and political relationship is
grounded in treaties, the United States Constitution, federal statutes,
court decisions and a history of negotiations. We also note that this
special legal and political relationship between the United States and
Native American tribes includes Alaska Natives. Although the legal
status of Alaska Native corporations is different than that of Tribes,
it has long been recognized that a special legal and political
relationship exists between the United States and Alaska Natives.
The federal government has an obligation to foster self-sufficiency
and economic development in Native communities. Congress amended ANCSA
to help Alaska Natives overcome barriers to economic development in
rural Alaska by allowing them to be eligible to participate in the 8(a)
program. We consider this an integral part of the original ANCSA
economic settlement.
The ANCSA regional and village corporations and tribes in Alaska
that have participated in the 8(a) SBA program have achieved success by
providing real value and quality work for the government at a fair
price. By paying attention to detail, and by being careful stewards of
the responsibility entrusted to us by the government, we have delivered
a needed service to the government while at the same time providing job
opportunities and economic upward mobility opportunities for our Native
people.
Since our land base and resources are held by our Native
corporations, and are not trust lands held by tribes with reservation
status, the financial health of our Native corporations is extremely
important to our continued existence as distinct, land-based cultures
and peoples living in the United States. Contracting opportunities have
allowed us to contribute to our country, gain experience, continue to
build capacity, and reinvest profits back into our corporations and
people for the future.
As First Americans who have used and occupied our homelands in
Alaska for over 10,000 years, and who continue to live in the farthest
Northern corner of the United States, we are here to stay. We have a
land base, are building our capacity in the use of corporations, and
are modifying the corporate structure with the help of the Congress to
better meet the needs of our people. Every Congress since 1971 has had
a package of technical amendments to fine-tune various aspects of the
original settlement.
As I said, we have 36 plus years enmeshed in capitalism as a result
of our 1971 land claims settlement in which you--the Congress--chose
the corporate form of governance for our people. We have had a steep
learning curve.
Participation in the 8(a) program has enabled our Native-owned
businesses to develop the experience, skill and expertise necessary to
succeed in the competitive business market. The 8(a) program has helped
Alaska Native entities overcome significant economic barriers, create
and expand competitive businesses in the private and federal markets,
create new business opportunities in remote rural areas of our state
and return profits to our communities.
Alaska Native Participation in the 8(a) Program--Part of the Solution
One of the reasons we are here today, with a united voice, is to
tell you that we need this program for our people. It is an exceedingly
rare example of federal Indian policy that successfully promotes
economic development and self-sustainability without large direct
federal appropriations.
There have been many examples stated earlier in this hearing from
Native participation in the SBA 8a program. Others at this hearing will
place into the record statistics and concrete examples. I would like to
highlight several areas: capacity building, improving productivity,
learning from mistakes and shared best practices.
In my view, participation in the 8a program builds capacity in our
people to contribute to U.S. competitiveness in the global economy.
This is not a hand-out. We are helping the government by providing
quality services which the government wants and needs. It is not all
about us and what we want. It is about what the government wants and
how we can help.
Participation in the SBA 8a program forces us to be as productive
with our resources and manpower as possible. We make improvements
continually and this makes for tighter operations and less waste. This
makes the government more productive and it builds work practices which
are superior and strives to be nothing short of excellence.
Participation in the SBA 8a program and government contracting in
general will never be free of errors or mistakes. When we identify
areas of improvement, or errors we have systems for self-correcting.
This is an important capacity and bodes well for the future. You can
look at stacks and stacks of letters of commendation that Native
contractors have received for improving services on specific jobs for
the government. We are very proud of this.
Participation in the SBA 8a program allows us to learn. We have
opportunities to identify and share best practices--basically the
unlimited opportunity to marry best practices learned to other
endeavors within our Native communities. Incentives must be put in
place to drive this experience to other sectors within our communities.
For example: our experiences in logistics in contracting should carry
over to our housing and health systems; our experience in growing
Native managers and professionals--carry over to governance and not-
for-profit sectors; and accountability--applies to all we do. For
example, one of the best things I have felt personally about the SBA 8a
experience, especially with Department of Defense contracts, is the
need for Native leadership and managers to go through the government
security process and obtain top security clearances. Nothing tells a
Native leader or manager more about the importance of the contracting
work than to know your federal government depends on you. You rise to
the challenge.
Lastly, the program is the cornerstone of our future and we need to
strengthen it for the benefit of all Alaska Natives and American
Indians. As less and less funding is available for Indian concerns
including health and social benefits, Congress should look more closely
at programs like this one that benefit both Alaska Natives and American
Indians by helping them attain economic independence.
Other Economic Initiatives: Applying 50 Years of U.S. Development
Experience, A Demonstration Project (H.R. 3351)
Earlier in my testimony, I spoke of the diversity within the Native
people of Alaska. I also mentioned that no one solution fits all. An
exciting new initiative, outlined in H.R. 3351 speaks to testing out
another model of building Native economies. H.R. 3351, the ``Native
American Challenge Demonstration Project Act'' has been introduced by
Congressman Young and is pending in this Congress. The Alaska
Federation of Natives is very supportive of this bill, which we believe
represents a welcome paradigm shift in the way the federal government
promotes economic development in Native America. It also represents the
fruition of several years of intense discussion within parts of the
Alaska Native community on how we can meet the challenge of reducing
poverty and promoting sustainable economic growth in our rural
villages.
Briefly, the underlying concept of the bill is to apply the lessons
learned from decades of American experience in providing foreign aid in
the developing world, and applying those lessons domestically in remote
parts of Native America. The bill builds heavily on the approach used
by the Millennium Challenge Corporation, in that it uses a compacting
model to channel a significant amount of development funds for
implementing locally designed economic development strategies. As
introduced, the bill would authorize $100 million over five years, for
disbursement in five pilot projects nationally, one in Alaska, one in
Hawaii, and three in the Lower 48 States.
For the Alaska component, AFN has worked closely with two Native
regional organizations in southwest Alaska, the Association of Village
Council Presidents and the Bristol Bay Native Association. Together
these adjacent Native regions span 96,000 square miles, and contain 87
Native villages and one-quarter of the Native population of Alaska.
These regions have a rich cultural heritage, and truly incredible
natural resources, yet paradoxically have among the highest poverty and
unemployment rates in the state, and in the country.
We believe that these regions are ripe for this demonstration
project. Both regional organizations are experienced with operating
federal programs under Indian Self-Determination Act compacts, have a
history of collaboration, and have done much of the planning legwork
for undertaking economic development using this model.
The experience of the AFN, BBNA and AVCP and others, is that many
federal programs that should foster economic development are
splintered, suffer from lack of coordination between federal agencies,
are often poorly timed, and are complex and poorly understood by their
intended beneficiaries. They thus remain under-utilized, as was borne
out by the 2001 General Accounting Office report, GAO-12-193, which
reviewed the effectiveness of some 100 federal programs that serve
Native Americans.
The Alaska Federation of Natives urges Congress to take self-
determination to the next level, and to foster--and adequately fund--
locally created strategies for reducing poverty and fostering economic
growth. H.R. 3351 will do this.
Recommendations and Conclusion:
The following recommendations are offered in the spirit of positive
dialogue on the role of the federal government to constantly seek to
expand the ``economic pie,'' and to share the prosperity of our growing
economy to the pockets of people within the United States that are
often left out, and left behind.
1. We ask the Committee to closely follow the SBA Administration's
8a consultation process and support administrative recommendations to
strengthen the program. There is no need to enact legislation now.
Let's let the administrative process proceed. AFN, together with the
National Congress of American Indians and others are assisting in the
consultation process. In fact, the first Alaska meeting is on October
24th in Fairbanks, prior to our Annual AFN Convention. AFN would be
pleased to provide the Committee a detailed report and our
recommendations following all the consultation meetings.
2. Congress should support and enact this year, H.R. 3351, a
demonstration project applying fifty years of U.S. development
experience to Native American communities. Give our project a chance
for success.
3. Recognizing that U.S. businesses, including Alaska Native
corporations, are not just competing with other states for jobs, but
are also competing with China, India, Korea and other countries for the
capital to build businesses, and recognizing that the jobs go where the
businesses go, Congress should make high-speed telecommunications a
national priority to help drive up our country's productivity and
potential for economic growth. We need fast, accurate communication
networks to stay competitive in the global economy. Given the
geographic breadth of Alaska, and its strategic location in the growing
East-West sphere, we need the most advanced telecommunications services
in order to continue to build our capacity and to compete for jobs and
capital.
4. Congress should enact legislation to change the investment
climate in rural Alaska and within reservation economies across the
country. The Congress should support economic development by creating
investment guarantees by expanding current U.S. economic policy to
offer domestically the same incentives that are offered to investors in
China, India and Brazil.
5. Congress should authorize a feasibility study of a
demonstration project in Alaska to be the first outsource free trade
zone in the United States. Similar feasibility studies should be
authorized for other Native American communities, if there is interest.
In order for the U.S. to compete worldwide for jobs and capital, we
must offer business advantages that can compete with other major out-
source suppliers in China, India, and now Dubai in the United Arab
Emirates. Recent reports indicate that Dubai is looking at a targeted
share of 5 percent of the global outsourcing industry in five years.
Dubai has set up a trade zone that offers advantages such as
streamlined bureaucratic processes, zero corporate income tax, and zero
personal and sales taxes. The country is also funneling a large amount
of funds into construction and diversification plans. A feasibility
study of a demonstration project in Alaska, and within other Native
American communities, would examine the pros and cons of such an
approach in the United States, and tell us whether or not it makes
sense. If Congress decided to authorize such a feasibility study, the
AFN would like to be a part of it.
6. Congress can enact legislation to create ``knowledge economy
ecosystems'' designed to support the business and government needs of
information and communications technology and include other sectors.
Congress is aware that knowledge is the most valuable commodity in the
economy of the post-industrial world. Congress can ensure that Alaska
Natives are able to participate in the global economy, even among
business giants that have tremendous wealth and the ability to innovate
beyond what we can now imagine. Congress should note that Dubai is
setting up what is called the Dubai Knowledge Village--described as a
vibrant, connected learning community that will develop the region's
talent pool and accelerate its move into the knowledge economy.
Congress must not allow U.S. businesses to fall behind or be hobbled in
their drives to be competitive entities in the global economy.
7. Congress can support multiple demonstration projects on
workforce development for the knowledge economy, including one in
Alaska. A multi-department initiative including the U.S. Departments of
Labor, Education and Commerce is needed immediately.
8. Congress should authorize and fund a knowledge-management/
financial entity to capture best practices in government contracting.
This entity would foster innovation in developing the capacity of
Alaska Native peoples and their organizations. It would identify
strategic drivers, forecast various economic scenarios and trends, and
review developing models for promising practices in the delivery of
services for both the government and private sector. Most importantly,
it would help facilitate expanding mentorship opportunities and breathe
fresh air into technical assistance efforts. A focus on improved
productivity and best practices would equal savings to the government
and improved services. Again, a similar entity to focus on reservation
specific contexts should be considered if there is interest.
9. Congress should establish two different financial funds, a
Native American Economies Diagnostic Studies Fund and a Native American
Incubation Center Fund. The first fund--the Native American Economies
Diagnostic Studies Fund--would be designed to provide comprehensive
economic analyses of Native economies and, in turn, offer
recommendations to remove or ameliorate inhibitors to greater
investment and job creation. AFN has recently created an Economic
Diagnostic Fund, which is a public-private partnership to begin this
needed effort. The support of this Committee, and action by the
Congress to ramp up this effort would be very helpful. The second
development fund--the Native American Incubation Center Fund--would be
designed to encourage the design and implementation of pro-growth
economic policies to help stimulate Native economies. AFN strongly
supports the underlying rationale behind the establishment of funds
designated for these purposes and believes they would assist economic
development throughout Alaska, and within other Native American
communities, if they were enacted into law.
In closing, I would like to commend the committee for their
commitment to the issue of economic development and for looking at
strategies for building healthy Native economies and stronger Native
communities. I ask you on behalf of the Alaska Native people to
consider the enormous benefits the 8(a) program has provided to Alaska
Natives and the role it plays in fulfilling the federal government's
obligation to foster self-sufficiency and economic development for our
people. The continuation of the program is essential in helping Native
people gain control over our future, over our lives, and over our
destinies. It is also equally important to support a cluster of new
economic initiatives which fosters innovation, economic growth and
shared prosperity.
Thank you for the invitation to testify, and I welcome any
questions you might have.
Attachments:
1. Matrix of Alaska Native Organizations and State and Local
Governments
2. Matrix on Native Peoples and Languages of Alaska
3. Several maps of Alaska for comparison purposes
______
Native Peoples and Languages of Alaska
The aboriginal affiliation of Alaska Natives is derived from
ancestral linguistic groups. The two major Alaska Native language
families are the Eska-Aleutian and Na-Dene. Eska-Aleutian languages are
further divided into Aleut and Eskimo--the two major languages in
Eskimo are Yupik and Inupiaq. The Na-Dene family language includes the
Athabaskan languages, Eyak and Tlingit. Other language families in
Alaska are Tsimshian and Haida.
[GRAPHIC] [TIFF OMITTED] T7848.006
Geographic Divisions: The Inupiat live in North Alaska, along
the Beaufort and Chukchi Sea coasts (and inland), along the Kotzebue
Sound, and down to Unalakleet in the Norton Sound. The Siberian Yupik
(Eskimos) live on St. Lawrence Island, while the Central Yupik can be
found along the coast (and inland) of Norton Sound from Unalakleet to
Egegik in Bristol Bay. The Alutiiq (Eskimos) are found primarily on the
Alaska Peninsula, Kodiak Island, and along the coast into Prince
William Sound up to Eyak. The Aleuts live primarily on the Aleutian
Islands. Athabaskans (Tanaina, Ahtna, Ingalik, Upper Kuskokwim,
Holikachuk, Koyukon, Tanacross, Upper Tanana, Han, and Gwich'in) are
found in Interior Alaska. The Eyak, Tlingit, Haida and Tsimshian live
primarily in southeast Alaska.
[GRAPHIC] [TIFF OMITTED] T7848.007
[GRAPHIC] [TIFF OMITTED] T7848.008
Background: To gain perspective, it is helpful to realize that
the United States is about half the size of Russia, about 3/10th the
size of Africa, about 1/2 the size of South America, or slightly larger
than Brazil, slightly larger than China and about 2 1/2 times the size
of Western Europe. Within the United States, Alaska is the largest
state, about 2.3 times the size of Texas and about 1/5th the size of
the lower 48 states.
[GRAPHIC] [TIFF OMITTED] T7848.009
Alaska has one of the largest Native populations in the United
States. Our people make up about 22 percent of the total population in
Alaska and our people are scattered across the entire breadth of the
state. Our Native cultures are land-based, and our occupation and use
of our land predates Plymouth Rock and the pyramids.
For comparison purposes, the next map is created by overlaying the
boundaries of the State of Alaska over Europe. As you study the
overlay, you will see how many countries of Europe are totally
engulfed, or touched within the boundaries. They include Portugal,
Spain, Germany, France, Switzerland, Italy, Austria, Slovenia,
Macedonia, Bulgaria, Romania, Ukraine, Hungary, Belarus, Slovakia, and
the Czech Republic. If you stop and think about this for a minute, you
will understand how large Alaska is as a land mass and how great the
logistics and infrastructure needs are in terms of building sustainable
economies. To survive and prosper in such an environment requires
tremendous effort and supportive government policies.
[GRAPHIC] [TIFF OMITTED] T7848.010
The Chairman. The Chair thanks the panel for their
testimony, and travel sacrifices to be with us today.
The Chair will recognize first the Ranking Member from
Alaska, Mr. Young.
Mr. Young. Thank you, Mr. Chairman. Sorry. I hit the
jackpot.
The Chairman. Yes, and you didn't know it.
Mr. Young. Before I ask a couple of questions, thanks to
the panel for your presentation. I would like to see everybody
involved in this activity, and your recognition of how good the
8[a] contracts have worked.
But it hasn't been brought up, Mr. Chairman, I want to make
it clear because this whole interest in the other committee has
been on our 8[a]s in Alaska, Alaska Native Corporations, and
for some reason they are saying that only they can have
multiple contracts, and large contracts, that is not true. All
Tribes are eligible for that, and that is why I would like to
see you gentlemen at the table specifically because this is a
nation issue. It is not just Alaska. Alaska is sort of in the
forefront because they have been attacked, and I hope you
encourage your tribes and your reservations, everybody to get
involved because it is a great program. The government has been
very successful.
Along those lines, Ms. Kitka, the Alaskan 8[a] programs
have or are eligible for unlimited negotiated direct award or
sole source contracts from the Federal government when
individuals have dollar thresholds or capped amounts. The
criticism I mentioned about this perceived disparity has
plagued Alaska Native contractors.
Why do you think the structure is fair?
Ms. Kitka. Why do I think that the structure is fair?
Mr. Young. As it is done today.
Ms. Kitka. Well, I think that the structure is fair because
of the nature of our business enterprises and our corporations.
In our land claim settlement in 1971, our land and resources
were put into corporate structures, not the reservation
economy. So our Native people are shareholders in these
corporations, and so it is not one person that is benefitting
in the 8[a]. Many of our corporations have thousands of
shareholders, and so the beneficiaries of the work and the
small return from the work on that is shared among a very large
group of people.
Mr. Young. That is what I wanted you to say because there
has been some perception that because it is a Native
corporation, or Alaska corporation or any other Native
corporation, that those dollars are going to an individual when
it is really being spread out in shareholder payments, and it
is not one contractor which under the 8[a] program it goes
directly to the benefit of that one person. But in reality, as
we will hear from another witness today, the corporation, small
village, Afognak, for instance, has 240 people. Any monies that
is generated by a contract is dispersed between the 240 people,
not just one person.
Ms. Kitka. Yes, Congressman Young, and in fact many of our
corporations are expanding their shareholder roles, including
the younger generation. Sealaska Corporation just voted to open
up their rolls to expand to increase their shareholders, Arctic
Slope, Nana, Inc., Doyon Limited, and others. So our
corporations are growing in membership as our population
increases. So the number of beneficiaries on that actually
increases the Alaska Natives as more people are born.
Mr. Young. Good. Again, though, Tex, I liked your comment
too about there is a different culture. There is a sharing
concept, and this program has been very successful in sharing
any gains that were gotten, and it is again a classic example
of a success story, and I just hope more people participate in
it.
You mentioned, you know, added value products. The Alaskan
and American Indian lands, native lands have huge possibilities
of wealth of all types, and it should be used to create
entrepreneurship by those shareholders and not just farmed out.
I am talking about natural resources of all types, renewable
and new. I just think it is a good program.
Anyone want to comment on that, and then I am through with
my comments.
Mr. Hall. Congressman, just a brief comment. I appreciate
your questions and your advocacy, but I guess my point is, to
follow what you are saying, ITEA is multi-tribally owned by 15
Tribes that have an 8[a] contract with the SBA and the Marine
Corps. So that is an example of more than one Tribe. And we
started a beef and buffalo and foods, so we are going to need
salmon. You know, we are going to need buffalo. We are going to
need beef to enter into a DOD contract. I mean, one Tribe
cannot supply. You need a multitude of Tribes and Native
Alaskans, and we also have Native Hawaiians as part of our
consortium. They might have some good fish there too.
So the bottom line is we can fulfill a contract if we have
a consortium, so you are absolutely right, and that is the
direction we are going.
Mr. Young. One thing you have to keep in mind, we don't say
``might'' in Alaska. We have good fish in Alaska.
[Laughter.]
Mr. Hall. Got it.
Mr. Young. Thank you, Mr. Chairman.
The Chairman. Thank you, Mr. Young.
Tex, let me ask you my first question. Do the different
regulatory criteria for ANCs and Tribal 8[a] and Native
Hawaiian organization affect the operation of ITEA? You know,
ITEA is a component of each.
Mr. Hall. Not at all, Mr. Chairman. Not at all. And ITEA is
multi-tribally chartered. We have a for-profit--well, ITEA is a
nonprofit, but has six for-profit companies, and with the 8[a]
my understanding in talking with the SBA, and I think I
mentioned it to Bill Largent as well when they hosted a
meeting, ITEA is the only multi-tribally owned 8[a] contractor
that has an 8[a] contract, but it just goes to show that if it
is Tribal, lower 48 Tribes, Alaska Natives, or Native
Hawaiians, the way the government is treating us is that we are
a Tribal 8[a], and we have the same access that a Tribe in
Sisseton, South Dakota, has as an 8[a] company. So there is no
difference in the way that we are being treated by the SBA.
The Chairman. So as a holding company then, ITEA is not
subject to the same nonFederal contracting requirements as
other 8[a] companies?
Mr. Hall. Yes, that is correct.
The Chairman. OK. President Garcia, let me ask you. At the
end of your testimony NCAI makes several recommendations on how
to improve the 8[a] program. Do Alaskan Native and Native
Hawaiians agree with your recommendations, and have you shared
these recommendations with the SBA? If so, what are their
responses to all above?
Mr. Garcia. Yes. I think, Mr. Chairman, the most important
thing to acknowledge is the fact that we have not worked in a
bubble ourselves as NCAI or NACA or any of the other alliances.
We have shared and we have held summits. There has been a lot
of discussions about what factors might be the most feasible to
push forward, and all of the recommendations that we made have
been shared with the entities that you ask of, and so the
recommendations have been put forth with that light, and with
that in mind, so that we have more flexibility, we have strong
partnerships, and that if we work together we solve the right
problems. If Mr. Kildee was here, I think he would appreciate
that we are solving the right problems, and so there are two
partnerships in the discussions and the effort that we have put
forth.
The Chairman. What can this committee do to help preserve
these programs and expand the opportunities for those that are
not participating therein?
Mr. Garcia. One of the most important things I think that
would be helpful is for this committee to use their judicial
strength or their jurisdiction strength for also working with
other entities within Congress or within other funding sources,
funding mechanisms, projects, and grants that are available,
and help promote that and support the efforts that we put
forth, but as well, I think, to help the other agencies in the
Federal government to understand from this level perspective,
from a congressional and a committee perspective that there are
these good solutions, and Indian Country is a good risk for
economic development.
To give you one prime example is that energy is a big issue
in this country, and part of the solutions that this country
ought to have is to go and work with the Native American
community because the energy resides naturally in those regions
and areas. And so if we partner up, then we have found partial
solutions, not completely solution, but partial solution for
the energy in this case, but there are numerous other areas
that we can continue to work on like education, like housing,
like infrastructure development, and those kind of things.
So I think that it would be very, very, very beneficial to
all of us in terms of the country and what we can provide doing
partnerships.
The Chairman. Great. Thank you.
Chairman DuMontier, how do you respond to those that claim
that the Native 8[a] provisions give Native contractors an
unfair advantage over other minority contractors?
Mr. DuMontier. I have a difficult time with the term
``unfair'' as a Tribal person, especially when it comes to
economic development. I am certainly not going to lecture to
this committee about the history of the Federal Tribal
relationship or the fact that the United States Constitution
has in it the Indian commerce clause that some 200 years later
we are just getting around to doing something about.
What I do want to say is it is not unfair what Tribal
people and Tribal businesses are doing. What is unfair is how
we are being judged. The lack of information that goes with
that judgment, the concerns that are being raised by opposing
parties are not founded in fact. They are not founded with an
understanding of what is happening in Indian Country, and that
is the unfairness or the injustice that we are dealing with
here, not the 8[a] program.
The Chairman. Beautiful response. Thank you.
My time is up. Let me yield to the gentlelady from
California, Ms. Napolitano.
Ms. Napolitano. You have heard some of the questions that I
have had to the prior panel in regard to the funding that has
been put in for assistance to minorities, especially Native
Americans. Do you have any comments or any assistance that we
can begin to focus on to be able to expand that assistance for
economic development for training and education of the Tribe
youngsters for a whole host of things?
I would like your comments, sir, Mr. DuMontier, in regard
to it has been in the act for many years and we are just now
moving forward. How can we not only accelerate it but put the
emphasis on without having legislative mandate, which is
ignored half the time?
Mr. DuMontier. I thank you, Congresswoman, for that
question. I began my Tribal career over 30 years ago in Tribal
education. So dealing with youth is near and dear to my heart.
What I do want to say is this. If we want to build Tribal
entrepreneurs out of this current generation for the future,
then what we have to do is support the Tribal entrepreneurs
that we have in this generation. And if we want to support the
Tribal entrepreneurs that we have in this generation, then we
also need to take a look at the Tribal entrepreneurs that have
succeeded over the last 20 some years, and I am referring to
our friends to the North, the Alaska Native Corporations.
We talk in terms of the ANC problem or we talk in terms of
the 8[a] problem, but the reality here is what we are talking
about is Tribal business success. If we are going to build a
good future, we have to not penalize those who are
demonstrating the success and give our children something to
look forward to, something that we can encourage them with.
Ms. Napolitano. Explain penalize.
Mr. DuMontier. To date, even though there have been no
regulatory nor legislative changes to the 8[a], it has been
referred to at one point in time about five years ago by the
Department of Defense as ``bullet proof acquisition strategy
for the war fighter.'' Today, it is referred to as a ``loophole
gone wild.'' There is a great deal of fear about using the 8[a]
contracting tool because of all of the chatter and the noise
that has been created around the very marginal successes the
Tribal people are just beginning to demonstrate in this area.
So if a little bit of success is going to be met with
opposition and fear, then what are our children going to learn
from that, and what type of economy are the going to have to
work and to build upon in the years to come?
We need to solve this problem now and embrace what is
happening instead of fearing it.
Ms. Napolitano. Could part of the solution to being able to
develop strategy to help those economies be part of teaching,
and I am talking in terms of teaching then health issue, how to
address the alcohol issue, how to address all those issues, and
have that be part of something that we can begin to not
legislatively but through the administration, the agencies
themselves be able to infuse more attention and funding toward
that?
Mr. Garcia. I would like to answer that if I may. The first
thing is that when we talk about economic development there are
assumptions in the country about infrastructure already exists,
and when you talk about Indian Country that is so far from the
truth. So I think it is important to realize that. If we are
going to start projects, if we are going to start programs and
grants, that is just a step in the right direction, but we have
to realize that the infrastructure needs to be in place. That
is the prerequisite of any business.
So if you talk about an infrastructure, infrastructure, I
am a strong believer that the human infrastructure has to be in
place because if you don't have the human infrastructure, then
we are looking for people coming onto the businesses that we
have to hire from elsewhere, and so what better protocol,
should we have our own protocol about building and growing our
own, and that means talking about all of the opportunities that
our children could have, but they have to be educated and we
have to continue to promote that.
So in the bigger picture as I always say, we have to look
at the educational process and build our own and grow our own
so that they have opportunities, but also promote that if you
have economic development, if you have diversity in your
economic development, then our children can come back and they
can help, and they will then build their own, and that is part
of self-determination.
So I am proposing that that is where the partnerships
within the other entities, Federal agencies, and any other
program, that there ought to be a lot more flexibility when we
develop grants and funding sources and other things, that the
flexibility ought to be there so that we can integrate, and
that is going to be the primary solution, otherwise it is a
piecemeal approach which is the piece that we have been doing
and it hasn't worked. Thank you.
Ms. Napolitano. I believe Mr. Hall can answer that, please.
Mr. Hall. Madam Congresswoman, we, at ITEA, made an
assumption that if we are going to create a couple hundred
thousand jobs that there would have to be training dollars to
go along with it. You just can't create that many jobs or
25,000 businesses with 100 employees each equals that, you just
can't do that without training dollars.
So I just don't think that there are set aside that kind of
dollars for the initiative that we at ITEA are talking about,
but you are totally on point. When I was principal back in
1995, I don't even know if it still exists, it was called
School to Work Program in Education, I got talked out of
education because we would get them into grade 9 or grade 10,
and then they would have to do job shadowing. Well, there were
no jobs on the reservation, so that program kind of went to the
side.
But now that jobs are really being focused on and being
created in Indian Country, I think the training and those
dollars have not come with it. So I really think there needs to
be a special initiative that is discussed about the amount of
dollars that are needed to create these amount of businesses
and these amount of jobs. It is just not there.
Ms. Napolitano. Thank you. Thank you, Mr. Chair.
The Chairman. The gentleman from American Samoa, Mr.
Faleomavaega.
Mr. Faleomavaega. Thank you, Mr. Chairman. It is always a
pleasure to see our dear and close friends, Tex Hall and Mr.
Garcia, to testify, and Mr. DuMontier, I didn't have a chance
to get to know you, and as the gentleman from Alaska had
indicated earlier, always a real pleasure to welcome Julie
Kitka to testify this morning.
I would be remiss if I did not also recognize the presence
of a dear friend, a former member of the staff of this
committee, say a fond ``ya'ah'teeh'` (hello) to Chris Sterns.
Chris, are you there? I thought it was you. You picked up a
little weight, but don't hide from us, Chris. Good to see you.
I am really torn by so much information and also for
something that--I am torn by the fact of what can we do. Now, I
know it sounds like a dreamy idea on my part to suggest that
the very bill that the gentleman from Alaska introduced
earlier, a domestic version of the Millennium Account. I think
it is an excellent idea, and my question is why can't we have a
domestic version of the Marshall Plan? Why can't we have a
domestic version of the free trade agreements that we have with
all other countries of the world? I mean, why can't we do that,
Mr. Chairman?
The Chairman. Why can't we do here what we are doing in
Iraq?
[Laughter.]
Mr. Faleomavaega. Only $3 billion a week, we have already
expended $600 billion. Anyway, I sit on the House Foreign
Affairs Committee, and there is a program that I want to bring
to the attention of our good leaders here and put it out in
Indian Country. It is called the Overseas Private Investment
Corporation. They sit on a $6.2 billion pot to allow American
companies or to encourage American companies and businesses to
set up shop in a foreign country, and in return you provide
jobs for those, especially Third World countries, jobs,
employment, business opportunities, and I just wanted to share
that with our friends here. It is out there, and please, if I
could be of any help, why can't we do that? There is a pot in
that little program that we have there.
I wanted to ask Mr. DuMontier, you noted quite well the
fact that our friend from GAO really didn't have any more than
just to suggest that we do more oversight of the 8[a] program.
Could we put a little more teeth or maybe even more substance
by way of amending the current law to satisfy some of the
concerns that you raised here?
Mr. DuMontier. To satisfy the concerns that I have, all
that needs to be done is for the program as it currently exists
be given an opportunity or given the time to work. We don't
need any regulatory or legislative changes to the existing
tools that are in place. The successes that you have heard
about today are a direct result of the tool that is in our
place.
Our problem here is that there are those who now want to
remove that tool or diminish that tool. All we are arguing for
is an opportunity to continue the track that we have
demonstrated some success on.
Mr. Faleomavaega. Can you share with us who are those who
are trying to destroy the program? Is that a better term,
destroy the program?
Mr. DuMontier. There are political leaders in the Congress
that have gone on the record as indicating that the sole source
provisions of the 8[a] program, combined with the inadequate
oversight of the SBA, is a very dangerous tool to have in
place.
We are Tribal people. We are first Americans. We understand
working with the Federal government better than most people do.
We would not do anything to harm it. We would not do anything
to hurt the future of our children or what it is that we are
trying to achieve with today's businesses. We are first
American. We are putting America first, and those people who
don't understand that need to learn about what we are here for.
Mr. Faleomavaega. Mr. DuMontier, I could not say more than
what you have suggested here after 250 years, unfortunately,
because every two years we have new members who have no
concept, no understanding, no appreciation of the problems with
our first Americans. It is sad but that is the reality of the--
--
Mr. Young. Would the gentleman yield?
Mr. Faleomavaega. I would gladly yield.
Mr. Young. Would you please go back to my state and tell
them that they need somebody with knowledge, and that type of
thing. I would really appreciate it.
[Laughter.]
Mr. Faleomavaega. And taking my time back, I want to say to
the gentleman from Alaska, and I really mean, sincerely mean
what I say, I am not trying to comb his hair or whatever is
left of his hair.
[Laughter.]
Mr. Faleomavaega. This is our saying in my culture. When
you are trying to pat someone on the back don't comb his hair.
OK. And I am not combing his hair. I really truly, truly of the
years that this gentleman has served, and the 20 years that I
have served on this committee, I cannot think of a person who
is more committed to the needs of the Native Alaskan people,
and Alaska, and should be because that is the people he
represents, and by all means. So I won't say a White man. I am
saying a human being, and I say this sincerely because, you
know, when I saw the movie ``Dances with Wolves'' and the dream
of the medicine man as he is taking Costner somewhere along the
river, and you know what it seemed, the highest tribute of a
Native American to live as a true human being, and I think that
is something that we here in America should learn a lot more,
and unfortunately, like you said, Mr. DuMontier, it is just
really sad that not many of our fellow Americans know enough
about the plight, the sufferings and the problems that our
Native American community have had to endure.
Now, our African American brothers say ``We shall
overcome.'' You know what I say about our Native Americans?
``We shall endure.'' This is after 500 years, and you are still
enduring.
Julie, I am sorry, I didn't mean to put you out. I just
wanted to say thank you, this proposed bill and what you are
trying to do, and my good friend from Alaska is trying to do. I
hope that every member of this committee should co-sponsor this
legislation because it is an excellent pilot project of being
more self-sufficient economically, and I want to say to the
members of the panel, I always say this to my own people,
education is the salvation to our Native American people. That
is the bottom line. I don't care how you cut it. We have to
focus on the fact that we need education for our Native
American community. That is my humble opinion.
I am sorry, Mr. Chairman, I have taken too much of the
time, but again I want to commend an excellent panel for
bringing all of this, and my good friend from Alaska.
Mr. DuMontier. Sir, if I may address a portion of the
question----
Mr. Faleomavaega. Sure.
Mr. DuMontier.--about what can you do. We talked about
oversight, and part of the oversight issues have been raised
because there is no real office or person designated at SBA to
provide that oversight, and the questions you asked earlier
about data. You know, there is no data that is categorically
the Native American side or 8[a], if you will, and I think that
if the office was in place there would be plenty of opportunity
to decipher and look at that data, gather the data, number one,
and then to use the data to then further enhance all of the
things that are happening in Indian Country relative to not
just 8[a], but how it then helps economic development overall.
Mr. Faleomavaega. And if we do that, then they will say,
well, this is race preference. I mean, I get hit with that all
the time too. Every time we try to help our Native Americans,
they say, oh, it is race preference. It is unconstitutional.
Mr. DuMontier. But there are other offices established in
other entities like the Department of Energy. We just heard a
confirmation about a person appointed to the Indian Office at
the Department of Energy, and there are other agencies that
have that same level of leadership, if you will. So it would be
just a--I don't know if it requires legislation, but if it
does, maybe that would be one thing, but if it can be done
administratively, so be it. That would be more power to us.
Thank you.
Mr. Faleomavaega. Thank you. Thank you, Mr. Chairman.
The Chairman. Thank you, Eni. And I would say the words you
had to say about our Ranking Member where appropriate, and most
of them true only because of the strong women that has always
stood behind him.
[Laughter.]
The Chairman. In this case, sitting behind him, and that is
his wife, Lou.
Mr. Faleomavaega. Mr. Chairman, I second that.
[Laughter.]
[Applause.]
The Chairman. The gentlelady from South Dakota, Ms.
Herseth-Sandlin is recognized.
Ms. Herseth-Sandlin. Thank you, Mr. Chairman and the
Ranking Member. It is a pleasure to see our guests here today.
I do want to commend all of the folks on the panel here, and
say to the Chairman how much I appreciate the priorities he is
giving these issues, and the importance of economic
development, and the diversity of our economies in Indian
Country to give our young people hope because, as you know and
as Mr. Hall states in his testimony, as we all know, the vast
majority of Tribes do not benefit from gaming. I would agree
that we all know that sitting in this room, but I don't know
that some of our colleagues and some of the other folks
throughout the Executive Branch of government know that.
When I have my constituents come back from Washington and
tell me that it seems like they think we can solve all of these
problems without the obligations and commitment to the treaties
because they think that the gaming facility we have in a remote
part of south-central South Dakota is as lucrative as gaming
facilities elsewhere in the country, and that is what leads to
epidemics of teen suicide throughout Indian Country for young
people who feel they have no hope.
So I think we have to tear down these barriers and these
walls. We have to work more effectively to help inform and
educate our colleagues and others across the country who are
spinning and spreading misinformation about the 8[a] program
and how it has been used, spreading misinformation about the
relative wealth of Native Americans in different parts of the
country, and the culture, and the importance of community, and
the misunderstanding that has been with us since the country
began, of the culture and the sense of community and how you
structured Tribal enterprises, and the importance of what that
gives to individual members of a certain Tribe or, as Mr. Hall
was telling us, all of the different Tribes that are
participating in the Inter-Tribal Economic Alliance.
I just have a couple of questions on energy. Mr. Hall,
could you explain further to the Committee the issues and the
challenges that we are having in access to the electrical grid,
especially as it relates to the Western Area Power Association?
Mr. Hall. Thank you, Congresswoman. Good to see you. I
really appreciate that question.
At ITEA, we formed MTEC, Multi-Tribal Energy Consortium, a
for-profit consortium, to follow what ICU, Bob Goff and Pat
Speers have done with ICU on doing all of the feasibilities and
the wind studies, now they are ready for development, but the
number one problem is not having access to that grid in
addition to the turbines.
Turbines, you know, that is another issue, but you can
always find or manufacture or create a manufacturing company on
a reservation to manufacture turbines, but getting access to
the grid, when it runs through many reservations, it is really
disheartening.
And so working through these initiatives through the
Western Area Power Administration, I mean, I wish I could say
it was better, but a lot of lip service, and I have wrote a
letter to Senator Dorgan, who is the Chair on the Senate side
on the energy, water and power, to look at legislation, and I
would ask the Committee to consider that as well, that says
that Native wind power will have preferential access to the
transmission to the WAPA grid. Then we can truly help with
other--Congresswoman Napolitano was talking about blackouts in
California. We can't take the wind power from South Dakota or
North Dakota or Montana, Wyoming, wherever in Indian Country
because that is what MTEC was created for, to get to the
development side, and then be able to wheel that power out to
help those states and who are in a drought as well. Then, of
course, we are in that. So we can't depend on the same types of
energy sources.
But in order to really take advantage of this wind, and I
think it is going to be--if not bigger than gaming, just as
big, and gaming is a $25 billion industry--we are not going to
get there unless we have access to that grid. In my opinion,
Congresswoman Herseth, is to have legislation, to have priority
and preference to that grid.
Ms. Herseth-Sandlin. Thank you, Mr. Hall, and I would just
ask my colleagues. You know, there is access, or excuse me,
there is room on the grid. Oftentimes when you talk about the
wind resource in the Great Plains there is the issue of
transmission that comes up, and the lack of transmission
capacity to get it to the West coast or the East coast. There
is room on grid. It is just that we have these barriers, and
the focus on hydropower, which we in no way want to neglect,
but we have to develop further this tremendous wind resource
that can be beneficial not only to those who live in the Great
Plains, but those in every part of the country if we break down
this barrier.
Again, I appreciate, and would just suggest, in light of
the comments that were made earlier about working with other
committees of jurisdiction, other agencies, that clearly there
is, given the number of veterans, Native American veterans, the
highest number per capita of any minority group in the country
that serves in the Armed Services, that there clearly are
opportunities as well through programs that benefit veterans in
particular to continue to find partnership where they are
actively involved across Tribes, building on the model that ITA
has used.
So thank you, Mr. Chairman. Again, I appreciate the
hearing.
The Chairman. Thank you.
Mr. Garcia. Mr. Chairman, if I may add just a note.
The Chairman. Yes.
Mr. Garcia. I think there is already Federal law that
exists that says that if you generate energy or power within
whatever location, that it is law that the power companies have
to buy that power from you. First you serve your community
initial lower power needs. But any left over if you generate a
lot of power, you can sell that back to the power company and
the power companies are obligated to buy that power. It is
just, I think, a more technical issue about interfacing where
that power comes into the grid.
And if interface is a problem, that is something that can
be solved technically. I mean, its capabilities is already
there. It is just a matter of forking up the dollars to make
that interface happen.
The Chairman. Thank you. The gentleman from Arizona, Mr.
Grijalva.
Mr. Grijalva. Thank you, Mr. Chairman. Just brief comments
and one question/example.
I appreciate the comments, Mr. Garcia's comments about
there has to be human infrastructure along with the capital
infrastructure. That is the whole strategic way to deal with
it.
I am a member of the Small Business Administration, and the
8[a] provision that we are talking about, sole source, I
believe very strongly is a necessary mechanism to assure
fairness and opportunity for all peoples, and I continue to
believe that.
I think also, as pointed out by one of the witnesses, that
we have had--in my four years there we have had no oversight
hearings at SBA relative to things that are going on within the
agency, let alone this provision. So nevertheless, I really
feel that the oversight hearings that need to happen there on
this issue can be of great benefit in strengthening it,
strengthening the office that is responsible for this, and
doing away with a lot of misconceptions and misunderstandings
that are occurring about that. Then I think the Small Business
Administration Committee needs to pursue that as well.
I want to use an example. I think, as we talk about a
comprehensive approach to economic development in Indian
Country, which is vital, that involves the human and the
capital infrastructure, one of the things, Mr. Chairman, that I
think this committee needs to look at as well, and we have
tried to correct it in some of the appropriations process, is
the issue of our tax code and what it does and doesn't do for
Indian Country in terms of providing opportunity.
On the issue of renewable energy, alternative energy, one
foot outside the reservation that is 100 percent credit, tax
credit. Inside the reservation, it is 50 percent tax credit. I
think those are the kinds of adjustments that I think go a long
ways to making Indian Country competitive in joint ventures
with a private entity. If the private entity can go to a
municipality and get 100 percent tax credit, they are going to
go there. It is their pocketbook.
So those are the kinds of adjustments and a comprehensive
look at economic development, which is the tax code as well, I
think could be beneficial.
With that, Mr. Chairman, I really don't have any questions
unless any of the witnesses would like to comment.
Mr. Garcia. I have a simple comment. Thank you for the
suggestions, and I think that was one of the other things that
asking what can this committee do is to use your influence to
hold the SBA oversight hearings or other hearings, if you will,
and so thank you for that.
In terms of renewable energy or tax credit, there is a
gasoline tax credit in place in the State of New Mexico, and it
has to do with the fuel tax. Now, if a Tribe owns a gas
station, it used to be that the 17 cents tax that was collected
used to be paid to the state. Well, we have mustered up enough
political clout, I guess, and wherewithal to say that it can be
a joint powers agreement that the 17 cents tax on Tribal lands
goes to the Tribe. It doesn't go to the state, and it is not
even channeled to the state and then get reimbursed. It goes
directly to the Tribal entities, and I think it would be the
same thing in terms of energy if that becomes law. I don't know
that there needs to be a Federal law. If it could be part of a
state, then that would be just as well, but I think those
credits are workable, and I don't really remember what the
Federal law says about tax credit, but it ought to be offered.
Mr. Grijalva. Thank you.
Ms. Kitka. Mr. Chairman, could I respond to that?
I think that the issue of the investment climate in our
country needs to be revisited regularly because of all the
overseas competition and what other countries are doing to
incentivize business going to their area. I would be happy if
the United States provided to Native Americans the incentives
that we as a country provide to China, India, and Brazil.
I think that one of the biggest things that we can do to
increase economic development to benefit Native Americans is to
change the investment climate and incentivize business creation
and opportunities. In our testimony, we have outlined a number
of things that could be done, and we would be pleased to
provide legislative language for consideration of ideas and
work with the Committee further on that, but we feel very
strongly that the economic climate in the world changes so
rapidly that in order to keep Native American businesses
competitive with all the other global competition, we have just
got to keep paying attention to that and focus, and create
those opportunities and support our businesses. Like I said, we
would be delighted to provide any backup or further work on
that.
The Chairman. Thank you. Yes, Tex.
Mr. Hall. Mr. Chairman, I just have one final thought and
recommendation, and it kind of goes back to what everybody was
talking about, more of a bigger, broader report, but this is
the language that Congressman Kildee was talking about with the
small business bill I passed, and it is talking about a report
on the 8[a], and it is due December 31, 2007.
But I think my recommendation is that the Committee should
consider a report on what we talked about. I mean, I learned
from the lady at GAO that no legislation is needed, and I think
that is why Congressman Kildee said what he said, and then with
the tax codes that the Congressman from Arizona was talking
about, the tax codes, he is absolutely right. There is a
difference, and so that is why there is part of the problem
there is a lack of development from the renewable side of it
because you don't get the same equal tax credit, and lack of
training and more education.
We also talked about there is misunderstandings from other
Americans, I will just say that, that not all Tribes are rich
from gaming, and that Tribes and the Federal contracts are less
than 1 percent. So I think a report would go a long ways toward
really helping in that matter, Mr. Chairman, so I would
encourage. And I know that I and our staff, and I am sure
everybody else that testified here today and their staffs would
be happy to help, and then you have the SBA, the BIA would help
the Committee to put forward such a report about the real
status of the economy in Indian Country. So I would encourage
that, Mr. Chairman.
The Chairman. Thank you very much.
Lady and gentlemen, we thank you very much for your
testimony today. Very interesting. Very helpful to us.
Our third panel compose the following individuals: First,
Ms. Sarah Lukin, Director of External Relations, Afognak Native
Corporation and Alutiiq, LLC, from Anchorage, Alaska; Mr. Neal
McCaleb, McCaleb, sorry.
Mr. McCaleb. McCaleb.
The Chairman. McCaleb, thank you. Chairman of the Board of
Directors, Chickasaw Nation Industries, Incorporated, Ada,
Oklahoma; and Mr. Jonathan Taylor, Research Associate, The
Harvard Project on American Indian Economic Development,
Harvard University, Cambridge, Massachusetts, and Senior Policy
Associate, Native Nations Institute, University of Arizona,
Tucson, Arizona, and President of The Taylor Policy Group,
Incorporated, Cambridge, Massachusetts. Wow, speaking of
wearing several different hats.
The Chair will recognize the Ranking Member to introduce
our first panelist.
Mr. Young. Thank you, Mr. Chairman, and it is my pleasure
again to introduce a lovely lady that is a classic example of
how successful 8[a] programs have been in Alaska from a small
village, and the results, and I think her testimony will be
very telling of how important this is to this area, and it is
Ms. Sarah Lukin, who is a little bit nervous now, but she is
doing a great job. She didn't expect to be first, but we
decided to put the lady first this time and the gentlemen
second.
So Sarah, you are on.
STATEMENT OF SARAH LUKIN, DIRECTOR OF EXTERNAL RELATIONS,
AFOGNAK NATIVE CORPORATION, AND ALUTIIQ, LLC, ANCHORAGE, ALASKA
Ms. Lukin. Cama'i. Hello, Chairman Rahall, Ranking Member
Young, and Distinguished Members on the Committee of Natural
Resources.
My name is Sarah Lukin. Quyanaa. Thank you for allowing me
the opportunity to provide a village perspective in this
hearing, and to discuss how the 8[a] program has impacted my
life, my family, and my community. I have a short statement to
read and would like to submit my longer written testimony with
appendix for the record.
The Chairman. Without objection, all testimonies will be
made part of the record.
Ms. Lukin. Thank you. Under the SBA 8[a] program, Alaska
Native Corporations and Tribes perform government contracts and
perform them well. The earnings from these contracts are, in
turn, distributed to provide benefits for entire Native
communities. My family is living proof of the positive impact
and Alaska Native Corporations success in the 8[a] program has
had on my village. It isn't a hand out, it is a hand up. I
worked hard for everything that I have. 8[a] gave me the
fortitude to fight my way out of poverty to achieve my dreams.
It unlocked my potential and my family, my community, and the
local Alaskan economy have all benefitted as a result.
I am Alutiiq from the Native village of Port Lions on
Kodiak Island, a remote community of 250 people in the Gulf of
Alaska. I am a shareholder of the Afognak Native Corporation,
my village corporation, and Kodiak, Incorporated, my regional
corporation. I serve on the Native Village of Afognak Tribal
Council. There are no roads connecting my village to other
communities. It is only accessible by small boat, small
airplane, or a seasonal ferry from the mainland.
This remoteness, so common among our rural Alaska Native
villages and many Tribes in the lower 48 states means there are
few economic development opportunities for our community. Like
so many of our Native children, I was a statistic. I come from
a broken family that faced substance abuse and poverty. I
remember how ashamed I would feel when I had to buy groceries
with food stamps and wear secondhand clothes. No one in our
family had ever earned a degree before, but my two sisters and
I had been given an opportunity our parents never had, one that
has empowered us to overcome enormous odds and experience our
own American dream.
Scholarships from my Native corporations helped me to
attend college. I earned a bachelor's degree from the
University of Alaska, Anchorage, in 2001. I worked hard,
excelled in my classes while employed as an intern at my
regional corporation, getting on-the-job skills. I graduated
with a master's degree in rural development from the University
of Alaska, Fairbanks, in 2005.
Today, I am the Director of External Relations for Afognak
Native Corporation in our government contracting subsidiary,
Alutiiq, LLC. I am a Native shareholder in a leadership
position, working directly in support of our business, serving
our 700 shareholders and their families.
Both of my sisters have earned master's degrees as well,
and have worked for various Native organizations to improve the
quality of life for our Native people.
My dad had been a carpenter and a fisherman his entire
life. A couple of years ago at age 53, after Afognak had begun
to experience success in the 8[a] program, he decided to build
his own sports fishing charter business in our village. He
received Native Corporation scholarships to cover the costs for
the required Coast Guard training and certification, and he
utilized his Native dividends to help purchase a boat and other
needed equipment.
Today, he is focusing on expanding his business and
employing young students, directly impacting the local village
economy.
Alaska Native Corporations and Tribes, unlike individually
owned 8[a] companies, are responsible for providing benefits to
entire communities. In addition to dividends, jobs, and
scholarships, my Native corporations support a variety of
programs to help sustain our culture and values. One of my
favorite programs is the Dig Afognak Cultural Camps run by the
Native Village of Afognak. At these camps are children, like my
son, Kadin, are learning Alutiiq history, culture, language and
traditional ways from our elders. But my village is only one of
many Native communities benefitting from Alaska Native
Corporation and travel participation in the 8[a] program.
Other Alaska Native Corporations and Tribes are building
community infrastructure and capacity, developing drug abuse
prevention programs and management trainee programs, just to
name a few.
Through the contracts we successfully perform, 8[a]
empowers our Native corporations and tries to improve the
quality of life of our people and strengthen our communities by
providing job opportunities, scholarships, dividends, social
and cultural program support. 8[a] must continue so that
younger generations of Alaska Natives and Natives Americans may
have the same opportunity to improve their lives.
I am one person representing many more young Alaska Native
and Native American professionals. We are the future of our
communities. We will continue to stand on the shoulders of the
Native leaders before us, and overcome enormous odds to help
shape the future for the next generation. We will continue to
focus on economic self-determination.
Quyanaasinaq, thank you very much for your time, and I
would be happy to answer any questions you may have.
[The prepared statement of Ms. Lukin follows:]
Statement of Sarah L. Lukin, Director of External Relations,
Afognak Native Corporation and Alutiiq, LLC
Cama'i (hello) Chairman Rahall, Ranking Member Young, and
distinguished Members of the Committee on Natural Resources. My name is
Sarah Lukin. Quyanaa (thank you) for allowing me the opportunity to
provide a village perspective in this Hearing, and to discuss how the
8(a) program has impacted my life, my family and my community. I have a
short statement to read and would like to submit my longer, written
testimony for the record.
I am Alutiiq from the Native Village of Port Lions on Kodiak
Island, a remote community of 250 people in the Gulf of Alaska. I am a
shareholder of Afognak Native Corporation, my village Corporation, and
Koniag Incorporated, my regional Corporation, each of which were
created and mandated by the Congress through passage of the Alaska
Native Claims Settlement Act (ANCSA) in 1971. I serve on the Native
Village of Afognak Tribal Council and the National Congress of American
Indians Executive Council.
There are no roads connecting my Village to other communities. It
is only accessible by small boat, small airplane or a seasonal ferry
from the mainland. This remoteness, so common among our rural Alaska
Native villages and many lower 48 Tribes, means there are few economic
development opportunities for our community. Alaska Natives cannot
pursue gaming, leaving 8(a) as one of the only other viable economic
engines available for our remote communities. The Alaska Native
Corporations 2005 Economic Data Wooch Yaayi: Woven Together elaborates,
``In the early years, the successful [Alaska Native] corporations were
those blessed with an abundance of various natural resources. Now,
under 8(a), the playing field is more level. Smaller corporations, or
those with few natural resources, can compete in non-resource based
industries and grow their businesses for their shareholders' (ANCSA
Regional Corporations Presidents & CEOs, Inc., 2007).
Like so many of our Native children, I was a statistic. I come from
a broken family that faced substance abuse and poverty. I remember how
ashamed I'd feel when I had to buy groceries with food stamps and wear
second hand clothes. No one in our family had ever earned a degree, but
my two sisters and I have been given an opportunity our parents never
had--one that has empowered us to overcome enormous odds and experience
our own American Dream.
Scholarships from my Native corporations helped me attend college.
I earned a Bachelors Degree from the University of Alaska Anchorage in
2001. I worked hard, and excelled in my classes while employed as an
intern at my regional corporation gaining on-the-job skills. I
graduated with a Master's Degree in Rural Development from the
University of Alaska Fairbanks in 2005. Today, I am the Director of
External Relations for Afognak Native Corporation and our government
contracting subsidiary Alutiiq, LLC. I am a Native shareholder, in a
leadership position, working directly in support of our business.
Both of my sisters have earned Master's Degrees and have worked for
various Native organizations to improve the quality of life of our
Native people.
My dad had been a carpenter and fisherman his entire life. A couple
of years ago, at age 53, and after Afognak had begun experiencing
success in the 8(a) program; he decided to build his own sports fishing
charter business in our village. He received Native corporation
scholarships to cover the costs for the required Coast Guard trainings
and certification, and he utilized his Native dividends to help
purchase a boat and other needed equipment. Today, he's focusing on
expanding his business and employing young students, directly impacting
the local village economy. His story clearly illustrates the spirit of
intent for Alaska Native Corporation and Tribal participation in the
8(a) program--to provide the tools necessary for people like my dad to
give back to our communities, in more ways than just employment with
the corporation.
My family is living proof of the positive impact an Alaska Native
corporation's participation in the 8(a) program has had on our village.
It isn't a hand out, it's a hand up. I worked hard for everything I
have. 8(a) gave me the fortitude to fight my way out of poverty--to
achieve my dreams. It unlocked my potential: my family, my community
and the local Alaskan economy have all benefited as a result. A paper,
published last week by the Native Nations Law & Policy Center of the
UCLA School of Law, titled Federal Contracting Support for Alaska
Natives' Integration into the Market Economy, states, ``Competitive and
self-sufficient ANCs will help alleviate economic and social
disadvantages of Alaska Native communities, increase tax revenues, and
reduce the costs of government support programs to Alaska Natives.'' My
company, Afognak Native Corporation, works hard, providing much needed
services to the federal government at good value and, as a result, it
is able to help shareholders like me and other members of my family
achieve a better future. I am no longer a statistic.
Alaska Native corporations and Tribes, unlike individually owned
8(a) companies, are responsible for providing benefits to entire
communities of Native people. Afognak Native Corporation, like most of
the Alaska Native corporations, has staff dedicated to assisting
shareholders find employment within our family of companies, and with
other organizations. The staff also helps shareholders obtain the
training and educational opportunities necessary to improve their
skills and job prospects. Afognak recently started a formal Internship
Program to provide shareholders and descendants with valuable work
experience which in turn, will provide them with marketable skills.
(``Descendant'' is the term used in ANCSA for shareholders children.
Descendants often qualify for the same benefits in a Native Corporation
as their parent[s] and may hold a different class of stock.) Interns
will receive competitive pay and a full benefits package, including
insurance and a retirement plan.
To increase the quality of life for our over 700 shareholders,
Afognak has been able to provide a substantial annual dividend, as a
direct result of our participation and success in the 8(a) program. In
2005 Afognak paid $10.8 million in dividends, providing the average
shareholder (holding 100 shares) with $21,000. In 2006 Afognak paid
$11.1 million in dividends, providing the average shareholder with
$21,688. In addition, Afognak has a Shareholder Permanent Fund and a
Trust so that future generations will also benefit from today's
business success. These dividends mean a tremendous amount to our
members--young families just starting out, elders, and families who
live a subsistence lifestyle in our traditional village.
Scholarships are a vital component for our future to ensure we have
educated, experienced shareholders to lead our corporations. Karl
McLaughlin, a shareholder of Afognak Native Corporation, is an
excellent example of this. Karl began his career over 14 years ago as
an intern at Afognak and later became a network technician. He climbed
the ranks of the company as he finished his formal education with
financial assistance from Afognak's scholarship program. Karl graduated
with a Bachelor's degree from the University of Alaska and later earned
additional information technology related certifications. Today Karl is
a leader in our company. As the Senior Vice President of Information
Technology for Afognak Native Corporation he is part of our executive
team, and oversees all IT related operations for a company with 4,700
employees nationwide.
In addition to dividends, jobs and scholarships, my Native
corporations support a variety of programs run by local organizations
to help sustain our culture and values. One of my favorite programs is
the Dig Afognak Culture Camps, operated by the Native Village of
Afognak. At these camps our children, like my son Kadin, are learning
Alutiiq history, culture, language, and traditional ways from elders.
Perpetuating Alutiiq traditions is a core value of our people, and
keeps our youth grounded in their identity as they move forward in
corporate America, strengthening our community.
Supporting the Alutiiq Museum & Archeological Repository through
financial and in-kind contributions is a top priority for Afognak
Native Corporation. The Museum has implemented several programs to save
and revitalize Alutiiq language, culture, and traditional ways. For
example, the Alutiiq Museum, working closely with our Native
corporations, has conducted numerous archeological digs to save 10,000
years of Alutiiq history from vandalism and erosion. To date the Museum
has gathered tens of thousands of artifacts. These fragile
irreplaceable treasures, gathered for our people by our people, are
truly a library. They contain incredible information on our ancestor's
lives. They hold the stories of our people that are available from no
other source. Thousands of our artifacts are currently housed at the
Alutiiq Museum in Kodiak and at Afognak Native Corporation's recently
constructed 1,200 square foot museum facility in Anchorage.
But my village is only one, of many Native communities, impacted by
Alaska Native corporation and Tribal participation in the 8(a) program.
The Native American Contractors Association (NACA) compiled data from
12 Alaska Native corporations in 2005 on the benefits they provide to
their shareholders. NACA reports that Alaska Native shareholders
received $33.6 million in dividends while $5.5 million was donated to
various cultural and social programs and $9.5 million was awarded in
scholarships to Native students (NACA Briefing Packet, http://
www.alutiiq.com/pdf.8a-Program-Data.pdf, last visited September 13,
2007). There are many examples of the unique ways in which Alaska
Native Corporations fulfill their responsibilities to their
shareholders.
For example, Chenega Native Corporation provides essential health
and insurance components for its shareholders, in an effort to meet the
ongoing, everyday needs of its villagers.
The Aleut Corporation last year provided free homes to 52
shareholder families on Adak Island and will be providing additional
affordable housing in the near future. This new Adak community will be
an excellent employee base for a local Sea-Based X Band Radar Project
under its Missile Defense Agency Contract.
Ahtna Incorporated, has donated significant time, materials, and
labor to the construction of a community recreation and learning center
project in the Native Village of Kluti-Kaah. The recreation and
learning center, once complete, will promote healthy living, cultural
pride, and positive alternatives to substance abuse. Ahtna has been
working with the local community to train and employ local shareholders
to construct the center, building workforce skills and boosting the
local economy.
Although Alaska is remote, it is not isolated from the
methamphetamine abuse epidemic sweeping the country, especially Indian
Country. Arctic Slope Regional Corporation has taken a leadership role
within their region to fight the war against substance and alcohol
abuse. In partnership with local organizations, Arctic Slope Regional
Corporation has a full-time position dedicated to fighting the War on
Drugs.
Chugach Alaska Corporation has an entire department committed to
Shareholder Development. The Shareholder Development Department
recently created a Succession Plan/Program that provides training,
education and other skills to Shareholders and Descendants
demonstrating ``high potential'' for becoming a leader within the
Corporation. Programs like this are designed to incubate our own Native
executives to lead our companies in the complex global market. As
Alaska Natives continue to learn the skills to provide the executive
leadership necessary to carry our companies into the 22nd century, we
need to have the ability to hire experienced capable staff:
In order to be competitive and enhance Alaska Native
Shareholder and corporate self sufficiency, ANCs must have the
flexibility to hire talented staff and executive leadership--
This means that many employees and top managers will not always
be Alaska Natives. Innovative executives with the social and
cultural skills to navigate and serve the interests of Alaska
Native corporate boards are rare and should be praised and
compensated accordingly, if they are improving assets,
profitability and the missions of serving and upholding Alaska
Native cultural, self-determination, and economic goals.
(Champagne & Goldberg, 2007, attached.)
Not every shareholder or descendant desires employment with their
Alaska Native corporation, nor should they be expected. Native
corporations recognize this and embrace the opportunity to provide
tools to help shareholders succeed in various walks of life. For
example, Chugach Alaska Corporation's Shareholder Development
Department administers a Shareholder Business Assistance Program
(SBAP). Under the annual SBAP, shareholders and descendants who have an
existing business, or an innovative concept, can apply for a grant to
further their plans. The shareholder must submit an application and a
summary business plan. The applications are scored by an independent
third party for merit and chance for success. This is an excellent way
the corporation can assist shareholder owned businesses to encourage
economic self-determination in their rural villages. Some of their
recent awards went to a Fur Sewing Business, expansion of a hair salon,
a construction company, a mortgage business, an equipment rental
operation, a sports lodge, an ice cream shop, a jewelry business and a
feed and grain store.
Oolognik has, for the last few years, had a summer work program in
the Village of Wainwright. This local program is funded from the
profits generated by Oolognik's participation in the 8(a) program.
Through the summer work program Oolognik is able to employ 10 to 20
shareholders to perform various improvements to the corporation's
hotel, store, offices and other assets in the village. This program has
been a great success; providing jobs, training, and payroll while
improving the infrastructure of the local community.
NANA Regional Corporation represents the remote northwest arctic
region of Alaska. Their villages face extraordinarily harsh winters.
Each year shareholders are swept away in icy waters or lost on the
tundra in white-out conditions when hunting, fishing or traveling
between villages. In an effort to save lives, the NANA family of
companies began researching several technologies available to help with
search and rescue operations. The three-year project was spearheaded by
NANA's Alaska Native interns. As a result of the interns' work, NANA
has purchased several Personal Locator Beacons (PLBs) for their 11
northwest villages. The PLB is a small hand-held device that villagers
can check out free of charge and, when activated, transmits a signal to
the Alaska Rescue Coordination Center so a rescue operation can be
coordinated immediately between local, state and federal authorities,
decreasing the chance of a fatality.
8(a) empowers our Native corporations and Tribes to improve the
quality of life of our people and strengthen our communities by
providing job opportunities, scholarships, dividends, social and
cultural program support. 8(a) must continue so that younger
generations of Alaska Natives and Native Americans may have the same
opportunity to improve their lives. ``Continued support and guidance
from SBA programs will incubate market competitiveness among ANCs
allow[ing] Alaska Native and Congressional goals of economic self-
sufficiency and greater local self-government and cultural recovery [to
be achieved] more quickly and efficiently'' (Champagne & Goldberg,
2007, attached). 8(a) is the shining light that completes the ANCSA
story.
I am one person representing many more young Alaska Native and
Native American professionals. We are the future of our communities. We
will continue to stand on the shoulders of the Native leaders before us
and overcome enormous odds to shape the future for the next
generation--our children. We will continue to focus on economic self-
determination.
Quyanaasinaq (thank you very much) for your time.
______
Federal Contracting Support for Alaska Natives' Integration
into the Market Economy
Professor Duane Champagne (Sociology)
Professor Carole Goldberg (Law)
Native Nations Law & Policy Center
UCLA School of Law
Los Angeles, CA
September 13, 2007
Introduction
The SBA (Small Business Administration), according to current law,
supports Alaska Native Corporations (ANCs) and American Indian tribal
businesses in 8(a) contracts, as minority and economically
disadvantaged businesses. 1 In compliance with statutory and
administrative guidelines, 8(a) government contracts can be awarded to
minority and economically disadvantaged businesses on a sole-source
basis without requiring multiple competitive bids. In addition, federal
legislation allows American Indian and ANC firms to bid on larger
contracts than other 8(a) contractors, and also allows tribes and ANCs
to operate multiple 8(a) firms.
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\1\ The law that grants contracting benefits to minority and
economically disadvantaged businesses, popularly known as Section 8(a)
of the Small Business Act is codified at 15 U.S.C. Sec. 637(a). In 1988
and 1992, Congress enacted laws specifying that ANCs shall qualify as
minority and economically disadvantaged businesses so long as the
corporations remained majority owned and controlled by Alaska Natives.
Likewise, subsidiaries and joint ventures involving ANCs qualify, so
long as a majority of ownership and control remain with Alaska Natives.
Pub. L. 100-241, Sec. 15, Feb. 3, 1988, 101 Stat. 1788; Pub. L. 102-
415, Sec. 10, Oct. 14, 1992, 106 Stat. 2115. A similar provision
affords a preference in defense contracting to ANCs. Section 8014(3) of
the Fiscal Year 2000 Defense Appropriations Act, Pub. L. No. 106-79,
enacted October 25, 1999, 113 Stat. 1212, 1234.
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A recent GAO (Government Accountability Office) report on ANCs and
8(a) 2 does not challenge the legislation or the eligibility
of ANCs for 8(a) contracts, so long as they qualify as an ANC or non-
profit and are more than 50% tribally owned. 3 And some
personnel in government agencies find working with ANC's in non-
competitive contracts is often more efficient and effective than
competitive contracting processes. 4 Furthermore, government
vendors often understand the government's purpose and intent of
providing ANCs with contract opportunities that will encourage long
term market enterprise and self-sufficiency within tribal communities.
5 The Native American Contractor's Association encourages
the SBA to give more attention to the market enterprise goals of tribal
communities, 6 and the SBA has discussed the issue in
reports over the last several years. 7
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\2\ David E. Cooper, Alaska Native Corporations: Increased Use of
Special 8(a) Provisions Calls for Tailored Oversight. Testimony Before
the Committees on Government Reform and Small Business, House of
Representatives (Washington, DC: U.S. GAO, 2006),
\3\ http://ezcertify.com/certificationfacts/8afact12.asp. Federal
courts have upheld the constitutionality of preferences for ANCs in
government contracting, finding that the preferences do not constitute
discrimination on the basis of race, but rather the expression of
Congress's constitutional power over Indian affairs. See AFGE v. United
States, 95 F. Supp. 2d 4 (D.D.C. 2002), aff'd 330 F.3d 513 (D.C. Cir.
2003). For an extended analysis of this issue, see Carole Goldberg,
American Indians and ``Preferential'' Treatment, 49 UCLA L. Rev. 943
(2002).
\4\ See Jerry Reynolds, ``Native 8a Program: The Other Economic
Initiative Success Story,'' Indian Country Today, June 6, 2007, p. 2
(pointing out that because of increased procurement demands post -9/11,
``Federal procurement contracts became bigger, and personnel cutbacks
at the SBA, charged with overseeing the Native 8a program, meant
procurement officers could put a premium on the quick, large and legal
contracts Native 8a firms alone were eligible to execute.'').
\5\ See AFGE v. United States, 95 F. Supp. 2d 4, 36 (D.D.C. 2002),
aff'd 330 F.3d 513 (D.C. Cir. 2003), in which the Department of Defense
argued that a contracting preference similar to 8(a) is justified
because it ``furthers the federal policy of Indian self-determination,
the United States's trust responsibility, and the promotion of economic
self-sufficiency among Native American communities.''
\6\ GAO, Contract Management: Increased Use of Alaska Native
Corporations' Special 8(a) Provisions Calls for Tailored Oversight,
GAO-06-399 (Washington, DC: April 2006), pp. 67-77.
\7\ GAO, Federal Procurement: Spending and Workforce Trends, GAO-
03-443 (Washington, D.C.: April 30, 2003); GAO, Contract Management:
Impact of Strategy to Mitigate Effects of Contract Bundling on Small
Business is Uncertain, GAO-04-454 (Washington, D.C.: May 27, 2004);
GAO, Small Business Contracting: Concerns About the Administration's
Plan to Address Contract Bundling Issues, GAO-03-559T (Washington,
D.C.: March 18, 2003); GAO, Reporting of Small Business Contract Awards
Does Not Reflect Current Business Size, GAO-03-776R (Washington, D.C.:
May 7, 2003); and GAO, Interagency Contracting: Problems with DOD's and
Interior's Orders to Support Military Operations, GAO-05-201
(Washington, D.C.: April 29, 2005).
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Very recently, however, the House of Representatives Committee on
Government Oversight and Reform has been questioning the desirability
of ANCs' participation in 8(a) contracts. 8 As part of a
larger challenge to Administration use of no-bid contracts in the Iraq
war and elsewhere, Congress has been considering measures that would
curtail ANCs' share of 8(a) contracts. 9 Whether ANCs'
current 8(a) status is warranted, and should continue, is the subject
of this paper.
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\8\ Prepared Remarks of Rep. Henry A. Waxman, Chairman, House
Committee on Oversight and Government Reform, The Center for American
Progress, Forum on a Return to Competitive Contracting, May 14, 2007,
available at http://oversight.house.gov/documents/20070515121402.pdf
(describing ANCs' participation as ``a major procurement loophole'').
\9\ Small Business Fairness in Contracting Act, H.R. 1873, 110th
Cong. This bill, which passed the House on May 10, 2007, would lower
the limit on 8(a) contracts as a whole, cap the contract amount on
noncompetitive contracts, and prohibit ``bundling'' of multiple
contracts in order to facilitate execution by larger firms.
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Nature and Purpose of Alaska Native Corporations (ANCs)
ANCs were created by the Alaska Native Claims Settlement Act of
1971(ANCSA) and have been modified numerous times by Congress,
10 including an amendment in 1988 designating ANCs as
minority business enterprises and Congressional language in 1992
designating ANCs as ``economically disadvantaged'' enterprises.
11 Through this legislation, ANCs and their qualifying
subsidiaries have been enabled to qualify for federal contracting and
subcontracting, including SBA 8(a) and Department of Defense Small and
Disadvantaged Business programs.
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\10\ Alaska Native Claims Settlement Act, 43 USC Sec. 1601 et seq.
\11\ See note 1, above.
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The purpose of ANC status from the Alaska Native point of view is
to assist ANCs in gaining competitive access and capabilities to
successfully generate economic growth within the market economy. ANCSA
created the ANCs as part of the land claim settlement for most of the
present state of Alaska. 12 Alaska Natives gave up
aboriginal title claims (surface and subsurface, as well as hunting and
fishing rights) to most of the land of Alaska, constituting nearly 375
million acres. In exchange, the Natives received approximately 40
million acres (about 12% of the area of the state) and $962.5 million,
divided among over 200 village corporations and 12 (later 13) regional
corporations. Each village was given an option to form a village for-
profit corporation and most shareholders hold shares in both their
local village and regional corporations. Village corporations received
surface title to another 27.6 million acres, while the regional
corporations got the subsurface rights to that same territory. Finally,
regional corporations received full title to an additional 16 million
acres. 13 While the amount of the settlement may at first
seem large, it looks less bountiful when considered in light of the per
acre payment ($3.00) and when compared with recent forms of Alaska
assistance financed by oil revenues from state lands. 14
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\12\ For a history of the Act, see Robert D. Arnold, Alaska Native
Land Claims (Anchorage: Alaska Native Foundation, 1978); Donald Craig
Mitchell, Take My Land, Take My Life: The Story of Congress's Historic
Settlement of Alaska's Native Land Claims, 1960-1971 (Fairbanks:
University of Alaska Press, 2001).
\13\ Gigi Berardi, Natural Resource Policy, Unforgiving
Geographies, and Persistent Poverty in Alaska Native Villages, 38 Nat.
Resources J. 85, 93 (1998).
\14\ Id. at 96. Berardi points out that ``consumers served by the
Four Dam Pool hydroelectricity projects in Alaska have benefited from
$485 million in state grants and loans, equivalent to about $16,000 per
beneficiary.''
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The corporate entities established to receive settlement lands and
funds were an experiment, intended as an alternative to putting the
settlement in federal trust for tribes on reservations. 15
Corporations were supposed to free Alaska Natives from oppressive and
inefficient federal control, and ease their adjustment to a market
economy. The corporate shares were to be alienable to non-Natives after
20 years, in 1991. Soon, however, Alaska Natives realized that the
corporations would not achieve Congress's goal of establishing
economically viable and protective corporate entities by 1991.
Furthermore, Alaska Natives came to view the provisions for
transferability of corporate shares as termination in disguise, and
they began to work with Congress to restrict that possibility.
16 The very same amendments to ANCSA that made ANCs eligible
for 8(a) contracts are the amendments that protected settlement lands
and funds from falling into non-Native hands.
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\15\ See Thomas R. Berger, Village Journey: The Report of the
Alaska Native Review Commission (New York: Hill & Wang 1985); Arthur
Lazarus, Jr. & W. Richard West, Jr.,The Alaska Native Claims Settlement
Act: A Flawed Victory, 40 Law and Contemporary Problems 132 (1976).
\16\ Charles Wilkinson, Blood Struggle: The Rise of Modern Indian
Nations (New York, NY: W. W. Norton and Company, 2005), p. 239.
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Alaska Natives have lived on the land, and the loss of land
seriously constrained access to land and subsistence life-style. The
rights of Alaska Natives to use the land for their economy and
subsistence has been in contention almost since passage of ANCSA, and
federal authorities have had to reassume management of Alaska Native
hunting and subsistence rights, since they were not protected under
state law. 17 In effect, most Alaska Natives have lost the
right and access to make a living in the traditional subsistence
economy of hunting and gathering. The forty million acres left to
Alaska Natives by ANCSA are not enough, or appropriately positioned, to
fully support a subsistence economy. 18
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\17\ In 1980, Congress passed the Alaska National Interest Lands
Conservation Act (ANILCA), which affords Alaska Natives some protection
for subsistence uses on public lands, this protection appearing in the
form of a preference for ``rural Alaska residents.'' 16 U.S.C.
Sec. 3101 et seq. ANILCA allowed the state to regulate such uses if it
could do so consistent with the federal preference; but the Alaska
courts have invalidated every state effort to introduce a rural
preference. Accordingly, since 1989, the United States has been
regulating subsistence hunting and fishing on public lands in Alaska.
See Nell Jessup Newton et al., Cohen's Handbook of Federal Indian Law
354-360 (Newark, NJ: LexisNexis, 2005).
\18\ Wolfe, Robert J. Subsistence in Alaska: A Year 2000 Update
(Juneau, AK: Alaska Department of Fish and Game, March 2000), p. 2.;
Gigi Berardi, Natural Resource Policy, Unforgiving Geographies, and
Persistent Poverty in Alaska Native Villages, 38 Nat. Resources J. 85,
96-100 (1998); The Harvard Project on American Indian Economic
Development, The State of the Native Nations: Conditions Under U.S.
Policies of Self-Determination (New York, NY: Oxford University Press,
2007), pp. 327.
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Both Congress and Alaska Native leaders created the ANCs as a means
by which Alaska Natives could control settlement funds and land in for-
profit corporations that would enable direct participation in the
market economy. Alaska Native leaders agreed to the corporations since
they wanted to avoid the paternalism and control exerted by the Bureau
of Indians Affairs (BIA). Both Congress and Alaska Native leaders
believed that the bureaucratic administration of Indian land assets in
the lower forty-eight states did not create conditions conducive to
active market participation in the economy and constrained management
and initiative. Recent court cases affirm that Congress did not intend
to put remaining Alaska Native settlement lands in trust with the U.S.
government, 19 and in principle, the land is fee simple,
most under management of the ANCs. ANCSA invites Alaska Natives to
enter the market economy, and to support Alaska villages and
individuals through increasing integration into the U.S. national
market economy.
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\19\ Alaska v. Native Village of Venetie, 522 U.S. 520 (1998).
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ANCs are organized along similar principles as most U.S.
corporations, with an elected board of directors and individual
shareholders. However, Congress, in ANCSA and subsequent amendments,
recognizes that ANCs are organized to promote the economic interests of
Alaska Native villages and individuals. Most ANCs, through their
boards, shareholders, and tribal leaders, work to engage the market
system with the goal of maximizing the benefits to their shareholders,
many of whom live in traditional villages and who share common
traditional indigenous cultures, values, communities, and identities.
Alaska Native villages retain many rights and obligations to self-
government as they exercised from time immemorial. For most Alaska
Natives, the ANCs are institutions for ensuring the economic,
political, and cultural well-being of their communities. In this
regard, the ownership of ANCs and their purposes are different from
most private corporations in the U.S. market place. The for-profit ANCs
are designed to enable Alaska Natives to participate in the market
economy, and follow shareholder interests, which for ANCs requires
efforts to enhance community well being, support self-government,
uphold language, and assist shareholders preserve their subsistence
economy while opening new opportunities for market participation.
20 ANCs are like municipal utility corporations, that are
serving the collective interests of the shareholder community, not only
their individual finances. The ANCs administer land, assets, and moneys
for the benefit of Alaska Native shareholders, who value their
communities, lands, languages, and continued community organization.
21 Alaska Natives are relatively new to competitive market-
based economies, and have locations and limited resources that do not
position them well for advantageous participation in markets.
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\20\ As Berardi notes, ``three of the regional corporations--stress
the ability of their shareholders to keep their cultural identity and
subsistence lifestyle while participating in the wage economy on their
own terms as Native corporation employees.'' Gigi Berardi, Natural
Resource Policy, Unforgiving Geographies, and Persistent Poverty in
Alaska Native Villages, 38 Nat. Resources J. 85, 102(1998).
\21\ For a discussion of contemporary form of American Indian
economic organization see: Champagne, Duane ``Tribal Capitalism and
Native Capitalists: Multiple Pathways of Native Economy'' Social Change
and Cultural Continuity Among Native Nations (Lanham, MD: AltaMira
Press, 2007), pp. 45-65; See also Hosmer, Brian and Colleen O'Neill
Native Pathways: American Indian Culture and Economic Development in
the Twentieth Century (Boulder, CO; University Press of Colorado,
2004); Smith, Dean Howard Modern Tribal Development: Paths to Self-
Sufficiency and Cultural Integrity in Indian Country (Walnut Creek, CA:
AltaMira Press, 2000).
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ANCs, 8(a) Contracting, and the Road to Market Participation
A primary goal of U.S. policy is that ANCs will help alleviate
poverty and economic and social disadvantage among Alaska Natives.
22 Alaska Natives continue to endure high rates of poverty,
low per capita incomes, lower levels of education, many health
problems, and many social problems such as high suicides (three times
the rate of other Alaskans), high rates of crime, and incarceration.
23 These conditions are exacerbated by the decline of local
subsistence economies, and loss of access to land and resources.
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\22\ ``Wooch Yaayi'' Woven Together Alaska Native Corporations,
2005 Economic Data. A Look at Thirteen Regional Corporations and Three
Village Corporations (Anchorage, AK: ANCA Regional Corporation
Presidents and CEOs, Inc., 2007), p.4.
\23\ Scott Goldsmith, Jane Angvik, Lance Howe, Alexandra Hill, and
Linda Leask Status of Alaska Natives 2004 (Anchorage, AK: Institute for
Social and Economic Research, University of Alaska, Anchorage, 2004),
pp. 2-14, 3-2 to 3-39, 4-2 to 4-14, 5-2, 6-2 to 6-6; Alaska Native
Policy Center, Our Choices, Our Future: Analysis of the Status of
Alaska Natives Report 2004 (Anchorage, AK: Alaska Native Policy Center,
2004); The Harvard Project on American Indian Economic Development,
Native Nations, pp. 326-329.
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The path to participation in the market economy is not easy for any
culture or community. Alaska Natives seek greater ability to manage
their for-profit corporations in order to provide employment,
management skills, experience with business partnerships and business
opportunities for their shareholder-community members. Economic self-
sufficiency is the goal of the ANCs and their shareholders.
24 This goal can be achieved only through active
participation in the U.S. and world economy. Most likely ANCs will need
to be full participants and competitive players in the market place.
Most ANCs may not have local advantages that will not enable them to
succeed easily. Rights to the most lucrative oil and natural gas
reserves in Alaska were not retained by Alaska Natives under the ANCSA.
The main economic advantage of the Alaska region is not directly in the
control of the Alaska Native communities, and therefore, ANCs must use
other means and less advantageous resources to achieve a permanent
foothold in the market economy.
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\24\ See Letter from Sheri Buretta, President, Association of ANCSA
Regional Corporation Presidents/CEOs, in MALRUGNI YUULUNI: Walking In
Two Worlds With One Spirit: Alaska Native Corporations Annual Economic
Report Based on 2003 Financial Data (Association of ANCSA Regional
Corporation Presidents/CEOs, 2005), available at http://www.chugach-
ak.com/pdf/7136ANCSA2005report.pdf: ``ANCs have become the main vessel
for our people to compete in the marketplace. They are the economic
engines charged with creating economic value and opportunities in our
homelands, employing our people, and supporting social and cultural
programs important to our people. ANCs also are engaged in the larger
economic arena to capture new technologies, build greater capacities in
management and labor, and transform the way we do business.''
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How do ANCs benefit shareholders? As mentioned already, some
primary concerns for ANCs are supporting village life and community,
helping preserve language and culture, assisting in the transition to
the market economy, protecting and sustaining the remnants of their
subsistence economy, and promoting education, health, and the well
being of shareholder-community members. Most U.S. corporations are not
so socially and culturally responsible or have shareholders who require
their corporation to invest in the community and future of their
shareholders. Most U.S. corporate shareholders are individuals and are
seeking to maximize their incomes. Although it is not a foreign concept
for investors and beneficiaries of large funds, such as retirement
funds or endowments, to insist that investments only go to enterprises
that are ecologically sound, or tobacco free, or that are showing
responsibility as corporate citizens, most corporations are not as
thoroughly responsible for the well-being of their shareholders as are
ANCs.
In the annual report for the 13 major ANCs and three village
corporations for 2005, the corporations collectively had revenues of
$5.85 billion and assets of $3.83 billion. The major ANCs paid $88.7
million in dividends to shareholders. The corporations employed 3,380
Alaska Natives and employed 13,604 individuals in the state of Alaska.
A total of $8.97 million was given in charitable donations, most
benefiting community organizations related to shareholders, and $4.4
million was distributed in scholarships benefiting 3,228 students,
mostly shareholders. 25 In 2005, shareholder equity for the
13 major ANCs grew 19.3 % to $2.15 billion for a growth total of about
a third of the original ANCSA payment of $962.5 million. Revenues for
ANCs have shown steady growth over the 1995-2005 period. The 13 major
ANCs had total revenues of about $1 billion in 1995, about $2.8 billion
in 2001, and $4.4 billion in 2005. From 1995 to 2005, the total assets
of the 13 major ANCs grew from about $1.6 billion in 1995 to $3.24
billion in 2005. Net income has been variable from year to year among
the 13 major ANCS, but collectively positive from 1995 to 2005, ranging
on average in the $120 million range, with a high of about $460 million
in 2001 and a low of about $25 million in 2001. Net income for the
major ANCs was $361 in 2005, an increase over $125 million in 2004. In
2005, 18 ANC regional and village corporations were among the top 49
businesses in the state of Alaska. ANCs claimed seven of the top ten
spots, and Arctic Slope Regional Corporation and Chugach Alaska
Corporation were numbers one and two. The 18 largest ANCs accounted for
11,000 jobs in Alaska and for 34,000 jobs worldwide. 26
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\25\ ``Wooch Yaayi'' Woven Together, p.8; ``ABMs Top 49s: Alaska's
New Gold Standard for Business'' Alaska Business Monthly (October
2006): 82-109; Alexandria J. McClanahan, Cindy Alfred, Jason Evans, and
Michael Orr ``Ch'elbuja-We Share It. 2005 Alaska Native Corporation
Report; ``The Trends 100 - Alaska's Largest Private Employers in 2006''
Alaska Economic Trends (August 2006): 6-7.
\26\ McClanahan, ``Ch'elbuja-We Share It.: 6-7; GAO Report
Highlights Successes & Challenges of Tribal Business Development
Program. Press Release Native American Contractors Association, April
27, 2006.
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In 2005, ten regional ANCs and two villages ANCs, Alutiiq and
Chenega, were the most significant participants in government
contracting. The twelve leading ANC government contractors provided
dividend income to shareholders totaling $33,663,803. Furthermore, the
same twelve ANCs provided nearly $5.5 million for cultural and social
support to Native communities, and $889,835 for non-Native social
programs. 27 School programs, Elders Trust Funds, Potlatches
and intern programs were supported with over $7 million from the twelve
ANCs, and Native Permanent Fund programs had funds valued at $88.2
million in 2005. Government contracting through ANCs paid business
payrolls in the State of Alaska totaling over $413.5 million, and
employed 9,750 in Alaska, of which 3,170 were Native employees. In
2005, Government contracting ANCs were operating in 49 states, 2 U.S.
Territories, and the District of Columbia. In the same year, 2005, the
twelve ANCs engaged in 871 government contracts, and retained 31,717
employees in the United States. 28 ANCs are responsible
corporate citizens, both Native and non-Natives are benefiting from
employment opportunities, business growth, and charitable contributions
generated by the Alaska Native Corporations.
---------------------------------------------------------------------------
\27\ In the interest of full disclosure, several ANCs recently
donated a total of $25,000 to UCLA School of Law for scholarships
directed toward students working on Native law and policy issues.
\28\ The figures presented in this paragraph are based on self-
disclosures by the ten regional ANCS and two village corporations that
engages in most government contracts. All figures are from the year
2005. See Native American Contractors Association website on page 3:
http://www.nativeamericancontractors.org/pdf/NACA-Pkt_040607.pdf Last
visited on 8/29/07.
---------------------------------------------------------------------------
The thirteen original ANSCA regional corporations serve
approximately 109,000 shareholders, and more generally the entire
current population of 140,000 Alaska Natives, as well employing many
non-Natives. 29 ANCs serve a significant number of
disadvantaged shareholders, and both policy goals of promoting
competitive market entry and generating self-sufficiency among minority
and disadvantaged communities can be achieved through fostering the
market opportunities for ANCs. The SBA's promotion of development of
small businesses, including American Indian and minority small business
enterprises should remain a primary policy goal. Nevertheless, the long
term advantages of competitive and profitable ANCs and other tribal
businesses promise to fulfill not only business development goals for
disadvantaged minority firms, but also helps fulfill the goals and
intent of ANCSA as well as many agreements, policies, and legislative
acts aimed at the well-being of Alaska Natives and American Indians.
---------------------------------------------------------------------------
\29\ ``Alaska Native Regional Corporations'' Wikipedia, [http://
en.wikipedia.org/wiki/Alaska--Native--Regional--Corporations]
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In order to be competitive and enhance Alaska Native shareholder
and corporate self sufficiency, ANCs must have the flexibility to hire
talented staff and executive leadership, as well as have the ability to
use partnerships and subcontracting tools any competitor business might
use. This means that many employees and top managers will not always be
Alaska Natives. Innovative executives with the social and cultural
skills to navigate and serve the interests of Alaska Native corporate
boards are rare and should be prized and compensated accordingly, if
they are improving assets, profitability and the missions of serving
and upholding Alaska Native cultural, self-determination, and economic
goals. Similarly, ANCs must have the capability to form partnerships
and subcontracts, in order to complete jobs and make profits. Most
corporations resort to similar tools to complete tasks that are not
within their current organizational capabilities. Recent criticisms
about non-Alaska Native CEO hired by some ANCs and the practice of
partnering up to 49% of certain 8(a) contracts will constrain ANCs in
ways that will make them less competitive, and therefore less able to
achieve their self-sufficiency economic, political, and cultural goals.
All Small Business Administration and government contractors have the
right to subcontract minority portions of government contracts, and
ANCs should have the same opportunities. 30
---------------------------------------------------------------------------
\30\ Kimberly Palmer, ``Congressmen Probe Contracts with Alaska
Native Firms'' Government Executive.Com, March 8, 2005 [http://
www.govexec.com/dailyfed/0305/030805k1.htm].
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While partnerships and non-Alaska Native managers may seem to
constrain the benefits to shareholder-community members, ANCs are
managed by boards and shareholders, who are elected to office to carry
out the interests and values of the shareholder community. Unlike most
U.S. corporations, the ANCs are understood by their shareholders as
instruments of economic development, asset management, and community
preservation and cultural continuity. The ANCs are more than profit-
making engines, but are the economic means to support preservation of
land, equity, and entree into the market economy. The ANC shareholders
are in control of their corporations, and see them as protectors of
their heritages, as well as the means to engage in the globalized
market economy of the 21st century and future. 31 Without
the capability to compete in markets, Alaska Native assets certainly
would be lost, communities impoverished, and communities and cultures
destroyed.
---------------------------------------------------------------------------
\31\ Berger, Thomas Village Journey: The Report of the Alaska
Native Review Commission (New York, NY: Hill and Wang, 1985).
---------------------------------------------------------------------------
ANCs are a primary economic hope for Alaska Natives to gain self-
sufficiency and economic stability that will enable their communities
and cultures to flourish well into the future. ANC communities and
shareholders have strong commitments to achieving their goals, and will
not allow corporate managers to deter them from their goals.
32 ANC boards nowadays are filled with community leaders,
many with decades of experience with the market and cultural issues
facing their corporations. Many ANC boards chose the path of not
delegating their corporations and assets to managers unknown to them,
and decided to learn how to navigate the corporate and market world by
first hand experience. This was a risky path, and profit margins were
sacrificed for many years to ensure Alaska Native control and to
provide time for community leadership to gain valuable first hand
experience. Now many board members have decades of experience, Alaska
Natives act as CEOs and corporate managers, and many ANC boards are
elected with Alaska Native business persons, lawyers, and individuals
with business degrees. The ANC boards are entrusted with
responsibilities to ensure community assets and long term economic
goals are preserved. Alaska Natives are in control of their
corporations, and they see them as more than profit-making engines, but
as a critical institution for ensuring the future of their cultures and
communities. 33 As one report by an association of ANC
Presidents and CEOs has pointed out, ``Many Alaska Native Corporation
leaders have become sophisticated business managers, but they all
retain their respect for the cultures and many of them continue to
participate in subsistence activities. Jake Adams of Barrow serves as
president and CEO of Arctic Slope Regional Corporation, and he is also
a whaling captain.'' 34
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\32\ See Gigi Berardi, Natural Resource Policy, Unforgiving
Geographies, and Persistent Poverty in Alaska Native Villages, 38 Nat.
Resources J. 85, 101-102 (1998).
\33\ : For the importance of control over economic assets and
management see: Stephen Cornell and Joseph P. Kalt ``Sovereignty and
Nation Building: The Development Challenge in Indian Country Today''
American Indian Culture and Research Journal 22(Summer 1998): 187-214.
For the role of culture in Native economic development, see Ron Trosper
``Mind Sets and Economic Development on Indian Reservations'' What Can
Tribes Do? Strategies and Institutions in American Indian Economic
Development ed. Stephen Cornell and Joseph P. Kalt (Los Angeles, CA:
UCLA American Indian Studies Center, 1992), pp 303-333.
\34\ Jake Adams is now retired as CEO of Arctic Slope Region
Corporation. For the citation see: MALRUGNI YUULUNI: Walking In Two
Worlds With One Spirit: Alaska Native Corporations Annual Economic
Report Based on 2003 Financial Data (Association of ANCSA Regional
Corporation Presidents/CEOs, 2005), available at http://www.chugach-
ak.com/pdf/7136ANCSA2005report.pdf
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A recent GAO report suggests that the SBA should exert greater
oversight on 8(a) contracting to ANCs. 35 The report did not
find any wrong doing by ANCs, but rather suggests that stronger
oversight be created to avoid possible future abuses. 36
Comments by the SBA were less agreeable about the report's findings,
but were agreeable about possibilities of increased monitoring of non-
competitive contracts and expanding competitive contracting.
37
---------------------------------------------------------------------------
\35\ David E. Cooper, Alaska Native Corporations: Increased Use of
Special 8(a) Provisions Calls for Tailored Oversight. Testimony Before
the Committees on Government Reform and Small Business, House of
Representatives (Washington, DC: U.S. GAO, 2006), pp. 2-11; Peter
Homer, ``Congressional Probe of Alaska Native Corporations an Attack on
Indian Country's Economic Future'' Indian Country Today March 19, 2005;
Jerry Mandel, ``House Committees Probe Alaska Native Contracting
Program'' Government Executive June 21, 2006
(www.GovernmentExecutive.com).
\36\ GAO, Contract Security Guards: Army's Guard Program Requires
Greater Oversight and Reassessment of Acquisition Approach. Report to
Congressional Requesters, April 2006, page 93.
\37\ Havemann, Joel ``Rise in Spending Tied to Contracts'' Los
Angeles Times Thursday June 28, 2007, p. A 20.
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The SBA emphasizes that the ANC program helps fulfill Congressional
intent to allocate 23% of government contracts to small businesses and
five percent to minority and disadvantaged businesses. In recent years,
ANCs incrementally have gained management capabilities that enable them
to start competing and negotiating for government and 8(a) contracts.
In 2000, ANCs were contracting about $265 million through 8(a) programs
and in 2004 contracting increased to $1.1 billion. Non-competitive
contracting with agencies of the U.S. government totaled $207 billion
in 2006, and $145 billion in 2005. 38 In 2005, all federal
contracts awarded to ANCs and American Indian tribal businesses
collectively totaled $3.197 billion, which represented less than one
percent (0.847%) of all government contracts. 39 Total small
business procurement in 2005 totaled $65 billion or 17.2% of total
government contracts. In the same year, $11 billion in government
contracts were awarded to 8(a) firms, and $1.9 billion or 17.2% was
awarded to ANCs and tribal businesses. ANCs received $1.5 billion in
8(a) contracts in 2005. 40 The gain to ANCs is not coming at
great expense to other government contractors, especially when one
considers that 8(a) contracts with ANCs benefit thousands of Alaska
Native shareholders, not a single small business owner.
---------------------------------------------------------------------------
\38\ ``Wooch Yaayi'' Woven Together, p. 10.
\39\ Native American Contractor's Association (NACA) Annual Meeting
2006, Seattle, Washington. See [http://www.alutiiq.com/pdf/8a-Program-
Data.pdf], last visited September 10, 2007.
\40\ Native American Contractor's Association (NACA) Annual Meeting
2006, Seattle, Washington. See [http://www.alutiiq.com/pdf/8a-Program-
Data.pdf], last visited September 10, 2007. Source: Eagle Eye.
---------------------------------------------------------------------------
Conclusion
Alaska Natives ceded large parts of Alaska to the United States and
possibly trillions of dollars of natural gas and oil reserves. In
return, Alaska Natives retained some land and less than a billion
dollars as assets to develop for-profit and non-profit regional
corporations and associations. Market entry and eventual economic self-
sufficiency of ANCs are primary goals of ANCSA and several subsequent
Congressional amendments. ANC access to federal contracts helps fulfill
Congressional mandates for government contracting aimed at providing
training and market opportunities for minority and disadvantaged
businesses. Alaska Native communities are in shareholder and board
control of ANCs and are the primary beneficiaries of dividends, equity,
and philanthropy generated by ANCs. The primary goals of ANCs are
economic self-sufficiency, and community and cultural development and
continuity of Alaska Native tribes and villages. 41 In
recent years, ANCs have made strides toward greater participation in
the market and are in a better position to take advantage of federal
government contracts and 8(a) programs. Collectively ANC and tribal
contracts represent less than one percent of all government contracts.
While a GAO report suggests greater SBA oversight and management of
contracts granted to ANCs, the report does not find any wrong doing on
the part of ANCs. Alaska Native communities and leadership most likely
will welcome SBA oversight and guidance as long as it fosters corporate
learning and enhancement of market-based competitive capabilities and
the efficient use of taxpayer funds, as is the intent of Congress. The
fostering of competitive and self-sufficient ANCs is in the interests
of the United States, and Alaska Native communities. Competitive and
self-sufficient ANCs will help alleviate economic and social
disadvantages of Alaska Native communities, increase tax revenues, and
reduce the costs of government support programs to Alaska Natives.
Continued support and guidance from SBA programs will incubate market
competitiveness among ANCs allow Alaska Native and Congressional goals
of economic self-sufficiency and greater local self-government and
cultural recovery more quickly and efficiently.
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\41\ Charles Wilkinson, Blood Struggle: The Rise of Modern Indian
Nations (New York, NY: W. W. Norton and Company, 2005), pp. 231-240.
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______
The Chairman. The Chair recognizes the gentleman from
Oklahoma, Mr. Cole, for the purposes of introducing our next
panel member.
Mr. Cole. Thank you very much, Mr. Chairman. Very kind of
you.
I don't know that Secretary McCaleb particularly needs an
introduction to this panel as he has been here in other
capacities before, but I do want to note for the record some
things you may not know about him. He was very distinguished
and is a very distinguished business person in Oklahoma; was
elected to the Oklahoma Legislature, if I recall, in 1974, and
rose to the position of the Republican Leader in the House of
Representatives; was a candidate for Governor; and along the
way he persuaded my mother to run for office.
[Laughter.]
Mr. Cole. And she persuaded me to be her campaign manager,
and she was very successful. She was in the State House and the
State Senate. So I certainly would not be here today, because
politics was the last thing I had in mind, if he hadn't talked
my mother into this stuff, and she didn't talk me into it, she
just told me what I was going to do.
[Laughter.]
The Chairman. Did that include being a Republican.
Mr. Cole. It absolutely did.
[Laughter.]
Mr. Cole. It absolutely did, and if you knew her, you
wouldn't have argued with her either.
[Laughter.]
Mr. Cole. But Mr. McCaleb is just a tremendous family
friend, and more than that, he has been an extraordinarily
leader for the State of Oklahoma, and certainly for the
Chickasaw Nation in what he has been able to accomplish with
them and working with them. It is quite remarkable. So he is
somebody in Oklahoma that we are extraordinarily proud of, and
I think in Indian Country, all of us are proud of and
appreciate his efforts over the years.
Thank you, Mr. Chairman.
The Chairman. Mr. Secretary.
STATEMENT OF NEAL McCALEB, CHAIRMAN OF THE BOARD OF DIRECTORS,
CHICKASAW NATION INDUSTRIES, INC., ADA, OKLAHOMA
Mr. McCaleb. Chairman Rahall, Ranking Member Young, and
Distinguished Members of the Committee, and especially to my
fellow Tribesman of the Chickasaw Nation, Congressman Cole. I
am very, very pleased to have the opportunity to be here and
make a few remarks this morning as a preamble to the written
statement that I have submitted.
I am privileged to serve as the Chairman of the Board of
the Chickasaw Nation Industries, and as the Chairman of the
Chickasaw Nation Economic Development Council, and we also own
a bank, Bank II. It is wholly owned by the Chickasaw Nation
that I am privileged to serve on the board.
I am here this morning to talk about the Tribal SBA 8[a]s
and the need to provide continuity for this program as it is
operated today and its effectiveness for tribally owned
business and its impact on emerging economies in Indian
Country. I will speak from my personal experience of over more
than 40 years in efforts to develop self-sustaining economies
in Indian Country, most of the time without a great deal of
success, I am afraid.
During my service to the Oklahoma Indian Affairs
Commission, the National Council on Indian Opportunity, the
President's Commission on Indian Reservation Economies, as
Assistant Secretary of Interior for Indian Affairs, and my
current role with the Chickasaw Nation. I have had a unique
opportunity to see what works and what doesn't work.
I am a civil engineer, and my early involvement beginning
in 1966 and through the seventies with Tribal governments were
directed to Federally funded programs, largely for
infrastructure improvement. I don't want to demean it in any
way, but for many years we kind of had a--the program de jour
of that year for developing economies in Indian lands, related
largely to infrastructure improvement, and it was intended to
attract outside investment and to create jobs on Indian lands.
While these expenditures were very valuable to architects
and engineers like myself that worked for Tribes on those
projects, unfortunately, they were ineffective in creating
sustaining economies on Indian lands, and have not resulted in
significant residual employment on reservations.
I was privileged to serve on the President's Commission on
Indian Reservation Economies in 1983, and the findings of the
commission after a year-long investigation and visiting most
reservations, or many reservations through Indian Country led
us to the conclusion that there essentially was no sustaining
economy or financial infrastructure in the vast majority of
Indian Country.
Now, to the successes that I have observed. I have had the
personal experience with the success in the Tribal 8[a] program
as a board member of the Chickasaw Nation Industries, and its
positive economic influence for prosperity not only for
Chickasaws but also for non-Indians benefitting directly from
employment and collateral economic growth. It is my considered
opinion that the Tribal 8[a] program as it is operated today
offers a great potential for self-sustaining economies in
Indian Country, maybe the greatest potential in the long pull
of any program that is advocated, principally because it
doesn't have to be near population centers like gaming does. It
can be in the remote, most remote areas. The Tribal 8[a]
program offers not only marketing advantages necessary to
stimulate sustained effort in developing marketing skills and
to compete in the larger marketplace, but also the continuity,
and I want to emphasize that, the continuity to encourage
Tribal investment and to recruit the highly skilled managers
and technicians hired for long-term success.
The profits of these successful enterprises has been
eloquently said before go back to Tribal purposes, to either
expand the business or they go for help or education or housing
or public safety. So the profits are for the people.
The SBA 8[a] program has been said very clearly before is
not a hand out, it is hand up program, and it doesn't cost a
dime in extra Federal money. All the monies that go into this
contracting have already been appropriated and determined by
Congress to be for good public purposes.
The written testimony that I am presenting deals with the
GAO report and our recommendations for the mechanisms and how
to comply with that GAO report. That is Appendix 1. Appendix 2
deals with some recommendations that we have to the SBA on how
to improve their delivery of the service. We have 38 Federally
recognized Tribes in Oklahoma, less than a third of those are
participants in the 8[a] program, the Tribal 8[a] program right
now, and we have many that are in the queue to have
applications in, so that needs to be--that barrier to entry
needs to be removed.
The opportunities for emergency of Tribal economies in
today's environment are excellent because of two converging
economic vectors. The first is technology in communication. We
can be in remote locations and be competitive, and that has
only happened in the last 15 years. The second is the expanded
government contracting program to out-source all kinds of
services, and these vectors are converging, but the pivotal
ingredient necessary to make this happen for Tribes is the
Tribal 8[a] program, and I hope that we won't do anything to do
harm to that program as it exists, and we will focus on
administratively improving its operation.
Thank you for the great privilege of being here with you
today, and I will be happy to answer any questions at the
appropriate time.
[The prepared statement of Mr. McCaleb follows:]
Statement of Neal McCaleb, Chairman of the Board of Directors,
Chickasaw Nation Industries, Inc.
Good Morning Chairman Rahall, Ranking Member Young, and Members of
the Committee, my name is Neal McCaleb and I am honored to bring you
greetings on behalf of the Unconquered and Unconquerable Chickasaw
Nation and to represent Chickasaw Nation Industries, Inc. at today's
important hearing on Diversifying Native Economies. I am an enrolled
member of the Chickasaw Nation, a federally recognized Tribe of
approximately 38,000 members located in south central Oklahoma, and I
serve as the Chairman of the Board of Chickasaw Nation Industries, Inc.
I bring today the perspective of a career spent in private sector
business, service to the great State of Oklahoma, federal service to
our great Nation, and now service to the Chickasaw Nation.
I am also honored because the subjects we are discussing today are
so critical to the future well being of Native peoples, their
governments and economies. Indian Country and its Tribal Nations are
now experiencing some of the benefits of the modern era of Self-
Determination in Federal Indian Policy. While so many discussions in
this modern era have focused on economic development, our focus today
and for moving forward needs to be on developing economies. That is,
rather than focusing on what federal, Tribal, and private sector
policies and program mechanisms can provide for a single, or even a
series, of good businesses, we should focus instead on the elements of
those policies and programs that create an entire atmosphere in Native
communities for empowering entrepreneurialism and sustaining economic
opportunities. While increased opportunities for Tribal jobs are an
important and valuable byproduct, the focus of the Chickasaw Nation's
businesses is on the bottom line, with the ultimate goal of creating
market leading companies that have their own strong capabilities, with
sustainable acumen and corporate infrastructures.
Tribal Nations and the Federal Government must work together as
partners to ensure that opportunities for economic success grow, and
the prosperity experienced by Tribes now are not diminished. Tribal
lands are not easy places to grow an economy. Not every Native Nation
is well positioned. Basic elements of economic opportunity that exist
outside of Indian Country often are not available to those within it.
Tribes cannot tax their citizenship to create investment revenue, and
lands held in trust, or that are trust restricted, cannot effectively
be used to collateralize a business loan the way I could use my own
home.
It is also important to recognize that successes of Native people
and their governments come only after they have endured the residual
effects of the eras of removal, reservation, assimilation and
termination. One should also note that certain of these historic eras,
and the actions taken in them, were responses to the then increasing
economic strength of Tribal nations as land owners and market
participants. While in the past our presence served to threaten others,
today we represent an important opportunity for partnership and shared
success across America, especially in rural and remote America. As
Tribes work toward modern prosperity and enjoy varying degrees of
economic success in our times, we remember well what happened in those
eras. Working together with the federal government, the private sector
and our neighbors, will ensure that the experiences of those eras never
return. In that vein, our charge today is to discuss those elements
that will help Native economies grow and prosper.
Over the past two decades under the leadership of Governor Bill
Anoatubby, the economy of the Chickasaw Nation has experienced
unprecedented levels of success in the history of the Chickasaw people.
I believe, however, that every Chickasaw would agree we have much more
to do in strengthening our economy. The Chickasaw Nation has built
businesses, acquired firms and their expertise, and expanded its
strategic alliances. These successful economic development and business
diversification efforts provide a number of benefits which help the
Tribe accomplish its sovereign mission to enhance the quality of life
of Chickasaw people. Governor Anoatubby has often stated, ``A nation
cannot be truly sovereign until it is economically independent.''
Creating a robust Chickasaw economy is part of the Chickasaw
Nation's overall plan to promote a better way of life. Chickasaw Nation
business interests include Chickasaw Nation Division of Commerce;
Chickasaw Nation Industries, Inc.; Solara Healthcare; and, Bank2, a
full service bank. Chickasaw Nation Division of Commerce employs 6,488
workers and operates more than 57 businesses including motels,
restaurants, travel plazas, gaming centers, recreation centers,
convenience stores, two commercial radio stations, a golf course, a
newspaper, and a chocolate factory. Chickasaw Nation Division of
Commerce operates its business enterprises largely within the
historical boundaries of the Chickasaw Nation in south central
Oklahoma. Its successful gaming enterprises and business operations
have enabled the Chickasaw Nation to invest in a number of new
businesses. Investment in Solara Healthcare, which operates health care
facilities in Oklahoma, Texas and Louisiana, is an example of business
diversification efforts aimed at providing the best opportunity for
stable long-term returns. Successful gaming enterprises have also
enabled the Chickasaw Nation to develop other business interests,
including Bank2, which has enjoyed rapid expansion and consistent
profits since it was established in 2001.
Chickasaw Nation Industries, Inc. is a family of companies that
provides a variety of products and services that include professional
services, construction management, manufacturing, property management,
information and communications technologies, aviation technology
services, records management, environmental, logistics, and medical and
dental staffing. Currently, Chickasaw Nation Industries, or CNI,
manages business enterprises that collectively employ more than 2,200
people, providing services to a wide variety of government entities in
over twenty five federal agencies and a number of private firms.
Currently, CNI is made up of twelve different companies that include
seven federally designated Small Business Administration Tribal 8(a)
companies and five non-8(a) or graduated 8(a) companies all working
under the CNI umbrella.
CNI was created in 1996 by a vote of the Chickasaw people. We are a
federally chartered corporation with our charter granted to us by the
Department of Interior. Our Board of Directors is appointed by the
Governor and confirmed by our Legislators to serve a three year term
and may be reappointed. All of our board members are Chickasaw. The
long-term strategy of CNI is to continue to grow our market share in
the federal and private sectors by delivering exceptional products and
services at competitive prices. With the mission of creating commercial
strength in new geographic and subject matter markets, CNI has offices
located in Ada, OK; Albuquerque, NM; Atlanta, GA; Chicago, IL;
Huntsville, AL; Marietta, OK; Norman, OK; Oklahoma City, OK; Purcell,
OK; Ridgeland, MS; San Antonio, TX; Cape Canaveral, FL; and Washington
DC.
Business entities of both Chickasaw Nation Division of Commerce and
Chickasaw Nation Industries have received national and state wide
awards and acclaim, however, perhaps the most important benefit of
economic development is providing more opportunities for individual
Chickasaws to succeed. Because the Tribe is focused on increasing the
number and quality of opportunities available, its success is measured
by the number of people who seize those opportunities. By that measure,
tribal economic development has been very successful, as the Chickasaw
Nation now employs more than 10,400 workers.
Another measure of success is the ultimate use of business
revenues, which directly enable the Tribe to develop programs in
addition to those supported by federal government programs, and to
supplement federal funding of federal services that have seen steady
reduction in several past budgets. Recently implemented health,
education, housing and aging services developed for Chickasaws living
beyond the tribal service area are one example of these augmented
services. Funding specifically for our youth workers is another. Other
examples include our elders' prescription program and our medication
assistance program. The Chickasaw Nation also operates several
Community Centers and Wellness Centers and will soon open one of the
first Sick Child Care Centers in the State of Oklahoma.
Because it is so important to the vitality of a Tribal nation to
support its people through the profits of its economic efforts, allow
me to highlight some of the ways in which the Chickasaw Nation utilizes
its business revenues at home. Last year alone the Tribe awarded $3.1
million in grants and scholarships to 4,273 students pursuing a higher
education. This is nearly three times the amount of total Tribal assets
in 1988 when Governor Anoatubby took office, before gaming became a
significant source of income and before the Tribe stimulated its
diversification efforts.
In the areas of healthcare and wellness, according to 2006 records,
the Chickasaw Nation Health System had more than 336,000 patient visits
at the Carl Albert Indian Health Facility in Ada, the seat of Chickasaw
Government, and the five health clinics located throughout the 13-
county area of the Chickasaw Nation. Last year, more than 800,000
prescriptions were filled through six pharmacy sites. The Chickasaw
Nation operates two wellness centers, and has a third center currently
under construction. Through an interactive cooking show called the
``Get Fresh!'' program, the Chickasaw Nation Health System offers free
demonstrations and healthy and nutritious cooking to everyone in the
community. Nutrition sites and food distribution grocery stores ensure
adequate access for all citizens in need of healthy food options. The
Chickasaw Nation also operates partnerships with other programs such as
the Oklahoma University Medical Center, Oklahoma Blood Institute,
Juvenile Diabetes research Foundation, Dean McGee Eye Institute,
Oklahoma State Health Department, and the National Diabetes Education
Program.
Several efforts are made to care for our elders. Healthy,
nutritious lunches are provided free of charge for those 60 and over at
10 senior nutrition centers throughout the Chickasaw Nation. An
eleventh location is also currently under construction. Health
screenings, home health care services, transportation to medical
appointments, home maintenance, an over-the-counter medication program
and wellness education are also available to seniors. Continuing
education opportunities are available through language and computer
classes provided at all senior nutrition center locations. This
exposure to technology has opened doors for seniors to learn new
computer programs and hundreds have received free computers through the
Tribe's computer distribution program.
The Tribe is also dedicated to its youth. More than 650 Native
American youth, aged 14-21, participated in the Chickasaw Nation Summer
Youth program, which is aimed at recognizing, identifying, and
promoting the talents of young workers. The program offers paid
employment in many fields for various employers. The Chickasaw Nation
is devoted to year-long learning and 15 camps, offered free of charge
to Chickasaw youth, keep the children's skills sharp. Whether
participating in our premier sports camps like basketball and baseball,
our paramount trade camps like arts, aviation and space, or our
entrepreneur academies, youth have the opportunity to perfect a skill
or just learn something new. Nearly 900 students participated in the
camps last year.
In ensuring the vitality of our families, the Chickasaw Nation
knows that children raised in strong families are much more likely to
be happy, healthy and successful. In its second year, the Governor's
Family Initiative offers several methods to help families grow
stronger, including relationship enhancement programs, fatherhood
accountability groups, abstinence education, and single parent support
groups. 7,000 area residents and employees have participated in the
classes. Our nationally recognized child support services program has
collected more than $5.1 million dollars to ensure the financial
stability of our families. The office also administers the tribal
employment placement program that assists and monitors the progress of
non-custodial parents in obtaining and maintaining employment. In
support of continuing education, last year, numerous grants and
scholarships were awarded totaling more than one half of a million
dollars toward continuing education.
The Chickasaw Child Care Development program provided child care
services to 587 children ages six weeks through 6th grade, focusing on
physical, intellectual, emotional and social development. Chickasaw
Nation Child Care incorporates programs like the Reading is Fundamental
program where more than 750 books were distributed to 256 Head Start
students. In addition, computer-driven SmartBoards were installed in
several of our Head Start classrooms, to provide first-hand innovative
technology to pre-school children. In addition, a newly added program
providing $200 yearly clothing grants ensure that all school age
children from 3-18 are dressed for success. 5,500 students participated
in the program this past year.
In the area of housing, the Tribe's Division of Housing provides a
variety of programs and services to assist families including home
ownership, homeowner education, rental assistance, storm shelter
installation and driveway repair. Since the program began in 2003,
nearly 900 storm shelters have been installed for Chickasaw families.
The innovative and national award winning ``Chuka Chukmasi'' program
has assisted nearly 500 families in more than a dozen states by
providing low down payment and flexible home loans to Chickasaw
citizens and Chickasaw Nation employees. Since the Tribe assumed
control of housing programs in 1997, more than 440 new homes have been
constructed for Native American families, compared to far fewer prior
to 1997.
The Tribe is also working to multiply these opportunities by
striving to work with individual Chickasaw business owners in a number
of ways. A directory of tribal businesses was created, giving
individual Chickasaw business owners the opportunity to become
preferred providers for tribal businesses. Chickasaws considering
starting a business now have access to a number of important resources
through the Chickasaw Nation Small Business Development Center
(CNSBDC), which offers a number of services to aspiring entrepreneurs.
These include help in developing a business plan, management
counseling, marketing assistance, technical assistance and assistance
in locating financing. Every individual who comes to the center
receives individual attention, but that process goes beyond assistance
in developing a business plan and completing loan applications. Staff
at the center also discuss the advantages of the different types of
businesses and provide direction in registering the business with the
state. There are a number of grants, loans and loan guarantees
available through the CNSBDC and other entities. For that reason, the
CNSBDC works with a number of other government entities and financial
institutions to make the best use of all available resources.
These diverse business interests will enable the Chickasaw Nation
to continue to provide a level of service that not only benefits
Chickasaw citizens, but has a significant positive impact on the
greater community. Dozens of businesses created by the Chickasaw Nation
have a powerful impact on Oklahoma's economy. Thousands of Oklahomans,
both Indian and non-Indian are directly employed by the Chickasaw
Nation. These jobs and businesses not only increase the Oklahoma tax
base, they also provide additional funding for the many programs and
services provided by the Tribe. At the current annual payroll of almost
$200 million in Oklahoma, it is estimated those employees pay more than
$7.5 million in Oklahoma withholding taxes. The nation-wide operations
of Chickasaw Nation Industries and Solara Healthcare provide similar
benefits to those states.
Chickasaws and many other Oklahomans receive higher quality health
care, education, housing and family services because of efficient,
effective local administration of federal programs. Programs such as
the Women, Infants and Children (WIC) nutrition program, Head Start
early childhood education program and others serve all Oklahomans,
enhancing the level of education, health care, family and nutrition
services for the entire state. In FY 2005, the Tribe donated more than
$1.5 million to fire departments, schools, churches, civic, and
charitable organizations. In addition, millions of dollars are invested
in Oklahoma roads and bridges through tribal nations. The Chickasaw
Nation Roads program joined efforts with various counties throughout
the year to complete many projects. Examples of this partnership
include replacement of a dilapidated bridge and road repairs in many
counties. Thus, the Chickasaw Nation and its economic enterprises are
committed to being a good neighbor.
With these experiences, and our commitment to our sole owner, the
Chickasaw people, I now wish to address recommendations to you on
behalf of Chickasaw Nation Industries that will enhance the ability of
Tribal Nations to diversify sustainable economies.
To set the context of our first set of recommendations, I wish to
provide our prospective on the importance of the Tribal 8(a) program.
CNI is created as a federal government contracting entity to utilize
the Tribal 8(a) program of the Small Business Administration (SBA) as
its primary tool of economic diversification. The Tribal 8(a) program
is one of the best examples of enlightened legislation in the history
of federal tribal policy. It recognizes the right to act and grow as
entrepreneurs, without sacrificing or limiting the Native government's
authority to exercise their sovereign powers in fulfilling their
responsibility to care for their people. Some entities outside the
program claim that it is federal charity. We know that it is economic
self-determination. We know that it is based on the sound premise that
the federal dollar returns two fold--it buys a quality product or
service on time at a good price--and it circulates in Native
communities to help sustain Native economies.
It is important to recognize that while this legislation gave our
businesses significant contracting rights, it did not simultaneously
confer instant capabilities. As we have demonstrated, we are committed
to creating our own capabilities. We also know that with our rights
come responsibilities. Native communities have assumed greater
responsibilities to protect the integrity of the program by creating
effective means of entering the marketplace and by creating strong
internal corporate infrastructures, controls, and capabilities.
At CNI, we have also assumed an unprecedented responsibility to
others through our Native American Minority Empowerment Program (NAMEP)
to engage in team relationships that share concepts and business
strategies and to coordinate the communication of those concepts to
federal partners, with Congress, and the non-Native, minority, and
small business worlds. The NAMEP program is our own diversity program,
and its most important mission is to respectfully encourage and assist
other small and developing business entities as teammates and
subcontractors by sharing economic opportunities, experiences and hard
lessons learned. NAMEP is a business development and empowerment
program, not philanthropy, and includes engaging teaming opportunities
with Tribal and Native-owned businesses, African-American, Hispanic,
Women-owned, Veteran-owned businesses and minority individuals.
Thus, over the past several months CNI has engaged with a number of
other Native business entities and national Tribal policy organizations
to address the concerns that have been raised on Capitol Hill and
elsewhere about the participation of Native entities in the 8(a)
program. While these issues and recommendations are highlighted here,
they are also discussed in further depth in the appendices to this
testimony.
Appendix 1 includes a series of three CNI whitepapers shared with
other Native contracting entities in the ad hoc working group convened
by the National Congress of American Indians, Native American
Contractor's Association, and the National Center for American Indian
Enterprise Development, focusing on 8(a) issues over the past year and
a half. CNI was invited by the SBA and Native entities to take part in
these discussions and share its policy recommendations from our own
experiences in that forum. This working group has also endeavored to
address the concerns expressed in the April 2006 Government
Accountability Office (GAO) Report entitled ``Contract Management;
Increased Use of Alaska Native Corporation's Special 8(a) Provisions
Calls for Increased Oversight.'' (GAO-06-399). While the 2006 GAO
report focused solely on certain Alaska Native Corporations, which are
different in legal composition from Tribally-owned businesses, the
implications of the report concern the same provisions in the 8(a)
program which cover Tribal 8(a) businesses. As a Tribal 8(a) entity,
CNI has advocated in this forum, with virtually unanimous agreement
from its peers, that there be recommendations shared with the SBA for
policy changes in the areas of subcontracting, mentor-protege
arrangements, and reporting--all with the goal of strengthening and
honoring the goals of the 8(a) program.
Regarding subcontracting requirements, it is important to note that
the 8(a) business entities of Native Hawaiian Organizations (NHOs),
Alaska Native Corporations (ANCs) and Tribes, collectively referred to
here as Native Concerns, are significantly different from traditional
small businesses. Tribal business entities exist for the economic
development of their Tribal governments, as opposed to individual small
business owners, who operate for individual wealth. NHOs exist for the
benefit of their members, and ANC business entities exist for the
benefit of their shareholders. In spite of the importance of the
success of Native Concerns to the public, it is also important to
assure traditional small businesses that their access to procurement
opportunities is not negatively impacted by the special provisions
applicable to Native Concerns.
The resulting recommendation embodied in Appendix 1 involves a new
requirement that Native 8(a) business entities receiving a sole-source
contract in excess of Twenty Million Dollars ($20,000,000) over the
life of the contract, including option years, would be required to
submit and negotiate a subcontracting plan that separately addresses
subcontracting with small business, veteran-owned small business,
service-disabled veteran owned small business, HUBZone small business
concerns, small disadvantaged business, and women-owned small business
concerns. CNI believes that an appropriate response to the issue raised
by traditional small businesses--that the lack of a cap on Native
Concerns negatively impacts their contracting opportunities--is to
exclude Native Concerns from the small business exemption in
circumstances where the sole-source contract is of a size normally only
available to other than small businesses.
It is important to note that while CNI's original recommendation
reflected in Appendix 1 was at a $10 million requirement level, the
collective working group agreed that a $20 million requirement level
would be more appropriate for those Native business entities that may
not have as much experience in the program or with developing
subcontracting and teaming relationships, while simultaneously charged
with developing their own capabilities and corporate infrastructures.
While Native Concerns acting on behalf of hundreds of thousands of
Tribal members have only just begun to penetrate a previously
unreachable federal marketplace, this proposal will effectively respond
to these perceived issues, while balancing the interests of all of
SBA's constituents.
Regarding the role of Native Concerns in mentor-protege
arrangements, CNI recommends an approach that recognizes the SBA
Mentor-Protege program is designed to encourage large business Mentors
to provide various forms of assistance to small businesses. These
include the provision of technical assistance, management assistance,
financial assistance in the form of equity investments and loans,
subcontracts awarded to the Protege by the Mentor, or assistance in
performing prime contracts with the Government in the form of joint
venture arrangements. Whether the Protege is a traditional small
business or an Alaska Native Corporation, a Tribally owned entity, or a
Native Hawaiian Organization, the goal of the Mentor-Protege program is
to enhance the capabilities of the Protege and to improve their ability
to successfully compete for and perform government contracts.
Past experience, however, shows that Mentors (especially very large
Mentors) approach traditional small businesses differently than they
approach Native Concerns. This difference is due to the ability of
Native Concerns to obtain larger contracts. Consequently, some Mentor
firms primarily seek a relationship with Native Concerns contemplating
the ability of participating in and performing large sole source
contracting opportunities. This creates an environment wherein the
Protege is at risk to be a mere vehicle for the Mentor to obtain a
contract that it would not otherwise have been entitled to receive.
Without Protege performance requirements under the program, the Mentor
is not motivated to grow the Protege's participation, and therefore not
motivated to provide mentoring assistance.
In response to these concerns, CNI recommends that a Protege in a
Joint Venture should be required to increase their level of performance
annually over the term of the contract, including option years. Thus,
at each anniversary of the contract, the Protege would be required to
increase its performance in increments of 10%, until the Protege's
percentage of work is no less than 60%. This proposal would meet the
objectives of ensuring that sole source contracts awarded to 8(a)
Mentor-Protege joint ventures are not abused as mere pass-through
contracts for large businesses. And by limiting the required percentage
of work to be performed by the Protege, the Mentor firms will still see
incentives to participate in the program.
The final policy recommendation embodied in Appendix 1 involves
reporting by Native Concerns. The 2006 GAO Report asserted that SBA is
not providing adequate oversight to assure that Alaska Native
Corporation Proteges and other firms are performing an appropriate
amount of work, are overly subcontracting work, and not tracking
contract modifications, change orders, and changes in scope. The report
indicates that failure in oversight of the SBA is in part due to a lack
of information from government agencies, and that the agencies didn't
provide the appropriate information despite Memorandums of
Understanding between the SBA and the agencies, and due to the fact
that some data are simply not tracked at this time.
CNI's recommendation is that Native Concerns should be required to
supply reports to the SBA to demonstrate compliance with the spirit and
letter of the 8(a) program. This would ensure that Native Concerns are
performing at the appropriate level or making progress to the
appropriate level, thus benefiting the 8(a) participant as the Program
intended. Annual reports provided pursuant to existing regulatory
requirement regarding the level of attainment of the Mentor-Protege
program performance and direct award contracts, and semi-annual reports
to SBA upon modifications, change orders, and changes in scope, would
achieve this and demonstrate compliance.
In addition to the above recommendations pertaining to broader 8(a)
policy issues addressed in national forums and Native working groups, I
also wish to highlight recommendations CNI recently addressed directly
to the SBA pertaining to current operations of our own businesses and
our specific experiences under the agency's administration of the
program. These involve issues that we have experienced to be
inconsistently administered with the SBA from office to office or, in
some instances, within the same office. We believe the inconsistency
arises primarily from a lack of clear standard operating procedures or
a lack of defined rules, leaving personnel with apparent discretion,
hazarding arbitrary actions. Without stated rules, standard operating
procedures, or a willingness to follow established SOPs, it becomes
more difficult for a Tribal participant to operate within the program.
It is important to note at the outset of these concerns that
earlier this month CNI's General Counsel met with the SBA's General
Counsel on these matters and significant agreement was had upon the
perspectives and positions of CNI. CNI is encouraged by the receptivity
and agreeable, solution-oriented approach of the SBA General Counsel
and offers these only to be illustrative of issues and reveal a need to
give SBA personnel clarity and direction as they attempt to oversee and
administer this important program.
Attached as Appendix 2 is a memorandum addressed to Mr. Bill
Largent, the National Director of SBA's Office of Native American
Affairs, that outlines specific actions of the SBA that amount to
barriers to entry and growth in four areas. These include significant
delays in actions regarding the approval of change of managers, an
unnecessarily repeated requirements of proof of Tribal status as
``economically disadvantaged,'' reluctance or onerous requirements for
approval of secondary North American Industry Classification System
(NAICS) codes requested for the diversification of our 8(a) business
entities, and a specious requirement not contemplated by the 8(a)
certification application rules requesting submission of tax returns by
all directors and the Chief Executive Officer (CEO) of the Tribally
owned holding entity, CNI, which owns the applicant company.
With respect to the economically disadvantaged status of the Tribe,
in CNI's last three applications for 8(a) certification, we have been
required to provide the Chickasaw Nation's financial statements. Upon
inquiry, we were informed that SBA had a right to look at them ``to
determine if the tribe needed the 8(a) program.'' As a Tribe that
recognizes the potentially limited nature of gaming as its future
principal source of revenue, the Chickasaw Nation has aggressively
pursued business development outside of gaming. The 8(a) program has
proven a very effective diversification tool, as stated above. It is
unsettling to think that gaming revenue, the very activity the Tribe is
trying to replace, could cause the loss of a valuable economic
development tool in that effort. Tribal economies should not be
punished for their own successes. Markets vary and conditions change.
Lasting corporate capabilities created through the 8(a) program will
ensure a sustainable economy.
Regarding the approval of change of managers, we have experienced
significant delays in the approval of managers named to replace
departed managers of participant concerns. With respect to the need for
secondary NAICS codes, only some but not all SBA regional offices are
supportive of the participant's business development opportunities and
recognize that products and services offered by a business may change
during its life in the program due to market forces, strategic
decisions, or economic conditions. In recent applications filed by
companies wholly owned by CNI, the SBA has required that the last three
years tax returns of the Directors of CNI and the CEO of CNI be
submitted, along with proof of payment of taxes. Historically, only the
manager of the LLC applicant was required to submit returns. This
requirement is burdensome, time consuming, and for no apparent purpose.
Again, CNI is encouraged by its recent interaction with SBA on
these issues. As these concerns relate directly to the ability of our
businesses to continue their development and diversification through
the use of the program, we look forward to continued coordination with
SBA and ultimate solutions on these matters. CNI is committed to
working directly with the SBA to ensure that the goals and prerogatives
of the 8(a) program receive compliance and are honored.
In addition to providing perspectives and recommendations on the
important 8(a) program, I want to highlight another important piece of
proposed legislation that would support the diversification efforts of
Tribes.
H.R. 1954 was introduced earlier this year in this Committee and is
designed to allow Tribal governments to transfer the credit for
electricity produced from renewable resources to their development
partners. This ability would seize upon the significant developments in
Public Law 109-58, the 2005 Energy Policy Act, and especially Title V
of that act, entitled Indian Energy. The 2005 Energy Policy Act shifted
the paradigm of Indian energy from that of royalties to ownership and
operation. Currently, because of the tax exempt status of Tribal
governments, if a Tribal entity seeks to enter into an outside
partnership on any renewable energy project occurring on Tribal lands
the effort cannot benefit from the production tax credit for renewable
resources as a private landowner would. The Tribe also cannot transfer
its portion of the credit to its taxable partners. A disincentive to
locate such projects on Tribal lands thereby results, as a non-Tribal
partner may receive half of the credit it would receive if locating on
private lands.
H.R. 1954 would simply amend the Internal Revenue Code of 1986 to
allow Tribal governments and their subdivisions to transfer their share
of the production tax credit to their taxable partners in joint
venture, renewable energy projects on tribal lands. This would be a
significant opportunity for Tribal economic enterprise, and the sharing
of knowledge and strategic growth between Tribal and private sector
entities. While the Chickasaw Nation is not a significant energy
resource Tribe, it does have significant corporate capabilities that
could bring strategic value to many parts of the chain of operations
and services required for successful renewable energy projects. Like so
many other Tribes and Tribal businesses nationwide, CNI has considered
many renewable energy projects that have varying degrees of potential
success, but all share one common challenge: funding. The ability to
transfer tax credits could significantly increase the value proposition
for many of these opportunities for Tribes on a national scale. As
concerns for the environment and the need for fossil fuel alternatives
mount, the importance of such renewable energy projects continues to
increase nationwide. Congress and this Committee should recognize that
Indian Energy can play a prominent role in this process, and that
passage of H.R. 1954 would also support the continued diversification
of Tribal economies.
In closing, Chairman Rahall, Ranking Member Young and Members of
the Committee, I want to reiterate that as this Committee moves forward
to further strengthen opportunities for economic development in Indian
County and stimulate the diversification of Tribal economies, it should
focus on the programs and conditions that create an entire environment
of entrepreneurialism and opportunity in Native communities, rather
than simply what elements can make a single success or provide for a
particular motivation. While Tribal jobs and increased opportunity for
advancement are valuable and important goals, and indeed exist among
the core missions of Tribes, they should be viewed as a beneficial
byproduct of healthy commerce and part of a overall sustainable Tribal
economic system. Certain federal programs, such as the 8(a) program,
are stalwart programs in this effort, assisting Tribal businesses in
achieving actual capabilities and contract performance experience. This
program must be honored and refined.
As the Chickasaw Nation continues to work towards an ever more
robust economy it is motivated by the need to move forward on several
different fronts at once. Caring for its citizens, providing a future
for its youth, working with the small businesses of its people and
those of similarly disadvantage communities, and endeavoring to ensure
that national policies keep its important capabilities and
opportunities strong and viable--these will continue to be the
motivations of the Chickasaw Nation.
Thank you.
[NOTE: Attachments to Mr. McCaleb's statement have been retained in
the Committee's official files.]
______
The Chairman. Thank you. Mr. Taylor.
STATEMENT OF JONATHAN TAYLOR, RESEARCH ASSOCIATE, THE HARVARD
PROJECT ON AMERICAN INDIAN ECONOMIC DEVELOPMENT, HARVARD
UNIVERSITY; AND SENIOR POLICY ASSOCIATE, NATIVE NATIONS
INSTITUTE, UNIVERSITY OF ARIZONA
Mr. Taylor. Thank you, Mr. Chairman and Ranking Member
Young. It is my privilege to speak to you today about
diversifying American Indian economies and Alaska Native
economies.
As you mentioned in the introduction, I wear several
different hats, and your staff has asked me to appear here to
deliver testimony as an economic researcher working for the
Native American Contractors Association, and also as a
researcher with The Harvard Project on American Indian Economic
Development, and with the Native Nations Institute. Those are
two distinct roles, and I need to keep them distinct, and I
have submitted to separate pieces of testimony.
One thing I cannot do is try and squeeze both of those into
five minutes. I am not an auctioneer and I cannot talk as fast
as an auctioneer. So let me begin, and if we run out of time,
we will go to questions about either piece of testimony.
I think it is important to recognize that the outset that
there are distinguishing features of Tribal and 8[a] companies
that distinguish them from the other 8[a] companies.
First of all, their ownership structure is unique. They are
owned by whole communities. All Alaska Natives of a certain age
in 1971 participate in Alaska Native Corporations and Tribal
enterprises. In order to qualify for the exemptions under the
8[a] program, they have to be owned by the Tribe. It cannot be
owned by an individual entrepreneur in the Tribe.
These entities, the ANCs and the Tribal corporations face
unique social and structural burdens. First, the social
burdens.
Next slide, please.
In Figure 3 of my report, which you can find on page 11, I
give you the Census data that you are familiar with showing
that Native Americans as a group in the U.S. Census are the
poorest identifiable group, and that the poverty rates that
Native Americans experience are twice the U.S. average, on the
reservation they are more than three times the U.S., and in
Alaska they are twice the Alaska State poverty rate.
These enterprises also face unique structural burdens. The
corporate governance of tribally owned enterprises is
complicated. We all know that corporate governance is
complicated, just as the shareholders of Enron or the people
coping with Sarbanes-Oxley. It is even more complicated when a
government owns the business. And the arrangement under the
Alaska Claims Settlement Act is a shareholder arrangement, but
it is not exactly the same as the corporate governance of
publicly traded or even privately held shareholder
corporations.
There are structural impediments to performance in those
companies as well, and Congress has seen fit to make
corresponding exemptions, exemptions from the affiliation and
from the sole source requirements because of these unique
social burdens and structural burdens.
Next slide, please.
We have talked a lot about the size of this program. The
$1.9 billion in Tribal and ANC 8[a] contracting is a half a
percent of all procurement. It is 1.3 percent of all sole
source contracting. It is 2.9 percent of all small business
contracting, and it is 17 percent of all Section 8[a]
contracting.
Next slide, please.
We have also heard a lot about the trend, and here we have
all American Indian and Alaska Native contracts, that is, 8[a]
and non-8[a] contracts to all Native entities over the Fiscal
Years 2000 to 2005, and you can see this expansion that the GAO
witness talked about. Notice though that the proportions of
business available for competition and not available for
competition have not changed.
Next slide, please.
Those dollars, all of them together, all of those different
colors represented as a red region on this graph are a small
fraction of the total. Procurement generally has been growing
rapidly.
Next slide, please.
And when we put 8[a] contracting in context with all small
business, woman-owned business, small disadvantaged business,
disabled veteran, and all [a] business, we can see that it is a
relatively small piece of the pie.
Now, let me stop here and say there is one thing that is
not on this graph, and that is the gap between what I
understand to be the legally required amount of small business
procurement, that is, 23 percent of the total $378 billion,
that would imply that this small business bar should be an
additional $21.8 billion higher. If my understanding is right,
that is 34 percent more procurement should be going to small
business than already does. There, it seems to me, is the
opportunity for greater small business development.
Next slide, please.
Regionally, the 8[a] business concentrates--excuse me--all
Native procurement concentrates in Alaska, it also concentrates
in Virginia and Maryland as you would expect, but it also
concentrates in states like Oklahoma, New Mexico, and
Washington where there are large numbers of Tribes and large
number of Indians proportionally.
Sarah Lukin has done a very eloquent job of demonstrating
what this means to Native communities. This is evidence of
irreversible change in Indian Country, and I won't belabor the
point because she has made it so eloquently, but this happens
many times over, thousands upon thousands of Indians are owners
as shareholders or owners as citizens of Tribes, millions of
dollars go to payroll, to shareholder distributions, to social
and cultural and economic investment.
I would conclude my remarks with a quick observation that
this program is exemplary in my mind in traveling around Indian
Country for the way it rapidly defuses the techniques and the
professional skills of running businesses.
So Mr. DuMontier, when they were getting going, it learned
a great deal from Arctic Slope Regional Corporation. He went on
to teach corporations in North Dakota how he had been
successful, and that is in my mind exemplary for Federal
programs. There is a long litany of Federal programs that have
not worked.
Thank you. I will entertain any more questions.
[The prepared statement of Mr. Taylor follows:]
Statement of Jonathan B. Taylor, Research Associate, Harvard Project on
American Indian Economic Development, Harvard University, and Senior
Policy Associate, Native Nations Institute, University of Arizona
Thank you, Chairman Rahall and Ranking Member Young, for the
invitation to appear before you. My name is Jonathan Taylor and I am a
Research Associate of The Harvard Project on American Indian Economic
Development and a Senior Policy Associate with the Native Nations
Institute for Leadership, Management and Policy, part of the Morris K.
Udall Center for Studies in Public Policy at the University of Arizona.
The Challenge
As you are aware, American Indian and Alaska Native economic
fortunes have lagged substantially behind those of other Americans. On
reservations and in remote rural Alaska, especially, unemployment is
high, poverty is high and incomes are low. Declining federal funding,
remote markets, challenges attracting educated members, barriers to
capital investment, and a host of other problems frustrate Native
economic growth.
Nonetheless, bright spots are visible in and around Indian Country.
There are places where natural resource companies support education
programs. There are places where tourism attracts customers to on- and
off-reservation businesses. There are places where tribes manage,
regulate, and adjudicate commerce on-reservation better than other
governments do. Such was the case before the advent of widespread
casino development at the Colorado River Indian Tribes' Farms, at White
Mountain Apache's Sunrise Ski Resort, at NANA's Red Dog Mine, and at
Mississippi Choctaw's Chahta Enterprise. Such has also been the case
after casinos gave tribes additional sources of funds and lowered their
costs of capital.
By tribal design, these economic endeavors aim to loose the bonds
of federal spending on reservation economies. In the 1970s federal
Indian spending rose with the Great Society and other programs, and in
the 1980s it fell with the Reagan budget cuts (dotted red line in
Error! Reference source not found.). At the time, much of reservation
economic life depended upon federal grants and contracts, and in synch,
Indian incomes rose by 49% in the 1970s, but then dropped by 8% as
federal funds retreated in the 1980s (shaded bars in Error! Reference
source not found.). In the 1990s, by contrast, federal Indian spending
stagnated and fell behind U.S. spending per capita (solid line in
Error! Reference source not found.), yet Indian incomes grew by a
third--three times faster than the U.S. income growth rate.
Interestingly, Indian incomes grew on reservations that did and did not
witness the development of casino gambling.
[GRAPHIC] [TIFF OMITTED] T7848.011
As welcome as these gains were for Indian Country, Indians on
reservations still faced a very large income gap. The gray bars of
Error! Reference source not found. juxtaposed in Error! Reference
source not found. against U.S. averages show Indian incomes barely
reached past one-third the national average in 1999. Even at the
hopeful pace of growth witnessed in the 1990s, it would take fifty-five
years for the gap to close, and sustaining that relatively rapid rate
of growth for the next half century will be a challenge.
[GRAPHIC] [TIFF OMITTED] T7848.012
Indians confront these income gaps with weak federal support.
Notwithstanding federal treaty obligations and trust responsibilities
to advance tribal well-being, the U.S. Commission on Civil Rights finds
federal funding to be inadequate and below what is available to non-
Indians. \1\ The Commission examines a range of domains of Indian life
including education, crime, and health, among other things, and finds
funding gaps across the range. A particularly stark comparison of
health care expenditures is reproduced in Figure 1 and shows Indian
Health Service medical funding to be about half of what federal
prisoners receive. Given that in Indian Country many social and
economic problems have accumulated over time and reinforced each other,
one might reasonably expect that reaching social and economic parity
with the rest of the U.S. would require greater than average federal
funding, not less.
[GRAPHIC] [TIFF OMITTED] T7848.013
Thus, the steep challenge ahead for reservation economies
entails accelerating the pace of growth so that the income gap closes
in fewer than fifty-five years, all while contending with lower-than-
average federal support. The task will require spreading the nascent
economic success in Indian Country across industries and across
geography. To drive growth, Native economies have relied upon natural
resource endowments, upon powers of regulation and taxation, and
recently, upon procurement advantages. There is still some room for
growth under each of these strategies, but in many reservations, there
is not enough to accommodate the number of high-school age workers
entering the work force each year. Further growth will have to come
from competing head-to-head in value-adding industries and from freeing
private sector initiative, especially on large reservations. Success
will need to spread geographically, too. Just as mineral resource
wealth is concentrated at Crow or in the NANA region of Alaska, so too
is success in gaming, gasoline retailing, and cigarette manufacturing
concentrated at Ft. McDowell, Winnebago, and Seneca. Economic growth
needs to spread over the map as well as through industry sectors.
So how do we deepen and extend the economic success that has been
achieved? My colleagues and I at the Harvard Project on American Indian
Economic Development and the Native Nations Institute have been
learning from Indian Country that there are three essential keys that
distinguish tribes in takeoff from tribes that struggle with economic
development. First, successful tribes assert, defend, and use their
sovereignty. If tribes make the key decisions about development, those
decisions tend to better reflect local conditions, preferences, and
opportunities; consequently, those decisions yield better tangible
results. Second, successful tribes have strong institutions that: a)
resolve disputes fairly; b) manage the boundary between business and
politics effectively, and c) administer the day-to-day life of the
tribal government efficiently. Without working institutions, economic
development can only last a cycle or two of investment, at which point
the costs of doing business on the reservation exceed the value and
capital flees elsewhere. Third, these institutions of governance must
match local norms of what is and is not appropriate government. Without
a match between indigenous culture and institutions, the life of
government becomes riven with questions of legitimacy and progress
halts. Successful Indian nations have in common that they turned away
from federally sanctioned, project-based, and grant-funded approaches
and instead built governing systems that foster development. I will not
belabor the full spectrum of these points because my colleagues have
covered them in detail before Congress. \2\ Instead, I want to narrow
the focus to one issue in particular: managing the boundary between
business and politics.
Managing Business & Politics 1
---------------------------------------------------------------------------
\1\ This section draws heavily from work that Kenneth Grant and I
wrote in (Grant & Taylor, 2007).
---------------------------------------------------------------------------
Imagine the government owns a business that provides politically
popular services that don't make money. Or imagine the government owns
a business where a powerful constituency uses the levers of political
representation to strengthen its hand against management in a labor
dispute. Or imagine the government owns a business that makes money,
but a dispute erupts about whether the profits should be reinvested in
the business, used to subsidize popular services, turned over to the
government treasury, or issued as dividends to citizens. Such questions
pitting corporate success against community values are not idle
speculation to the owners and managers of AMTRAK, I'm sure. Likewise,
these questions feature prominently in the daily lives of myriad
tribally owned corporations. Worse, the political bouts that arise from
these questions degrade corporate performance if they are not properly
addressed. \3\
Why not privatize? Countries around the world are driving down the
government-owned proportion of GDP to around 5%. When they do so, they
reap higher profits, lower prices, better service, and better returns
on investment. As appealing as these gains might be, tribal governments
nonetheless cannot nor, in many instances, should not privatize their
tribal enterprises. U.S. tax, procurement, and regulatory policy
encourage and even mandate tribal ownership of enterprise. Section 17
of the Indian Reorganization Act of 1934 encourages economic
development via federal charters for nation-owned enterprises. \4\ IRS
rules shield nation-owned enterprise profits from federal corporate
income tax. \5\ Section 8(a) of the Small Business Act offers
advantages to tribally owned corporations. \6\ The Indian Gaming
Regulatory Act mandates tribal ownership in all but the rarest cases.
\7\
Even in the absence of these federal inducements and requirements,
government ownership of enterprises would be a sound choice for Native
nations to make. Tribal enterprises often depend upon an Indian
nation's patrimony--a forest, lake, river, or plain--whose development
must take place within tribal cultural and environmental constraints.
Private development of such resources often fails utterly, if only
because of the outcry against inappropriate development institutions.
In addition, trust land title, Native concerns about property
alienation, geographic isolation, relative economies of scale, and a
host of other market idiosyncrasies may favor tribal over individual
ownership. And finally, it is often the case that the economic unit is
and ought to be the whole community. This is particularly evident in
shareholder tribes such as under the Osage headright system (or
analogously the Alaska Native corporations), but it can also hold true
for whole tribes owning all of a fishery, irrigation system, or hotel.
Thus, while private enterprise takes hold on many Indian reservations
and deserves more support and encouragement, especially considering the
large income gap that remains to be closed, \8\ government ownership of
enterprise is properly a feature of Indian economic development and
will be for some time. The question is: How can tribes create value as
efficiently as the private sector while operating within the
constraints of government ownership.
The answer hinges on getting corporate governance right. Enron and
the Sarbanes-Oxley response illustrate the challenges of corporate
governance without government ownership. Corporate governance under
Indian nation ownership requires another level of care entirely. The
problem arises because two competing sets of relationships become mixed
and generate role confusion. On the one hand, we generally like our
constituents and representatives to be closely connected through
elections, correspondence, constituent service, and the like. On the
other hand, we like it when the people we put in charge of our hard-
earned assets tighten the ship if standards of customer service are
slipping or margins are lagging the industry.
When constituents are employees and representatives are directors,
all in the same institution--the tribal corporation--roles and
relationships become unclear. Say I'm fired from the tribal company and
I have a powerful uncle on the tribal council. Should I play
``employee'' and go through the due process of the corporate personnel
grievance system or should I play ``constituent'' and go through my
uncle? Or say I'm a council representative with many constituents on
the tribal housing waiting list and the corporation announces a new
investment initiative. Should I to play ``representative'' and expand
the housing budget at the expense of the investment or act as
``director,'' focusing on the long-term prospects of the business?
Tribal leaders around Indian Country have encountered problems like
these in tribal enterprises repeatedly. The questions do not get
resolved easily, and if they fester, profitability decays and even
collapses. 2
---------------------------------------------------------------------------
\2\ While the trappings of the foregoing questions are those of
tribal councils and tribal housing programs, the underlying dynamic is
not Indian per se. The imaginings that opened this section apply
equally well to tribal enterprises as to AMTRAK, or British Airways
before Margaret Thatcher privatized it.
---------------------------------------------------------------------------
Successful tribal governments formally divide business affairs from
elected leadership, usually via a chartered board of directors, but it
does not simply serve to adopt a charter. I have seen one tribe copy
the charter of a very successful company for its own company only to
witness utter collapse. Tribal corporate governance requires: a) a firm
governing foundation in the constitution of the tribe and related
practice; b) a charter and corporate purpose that represent the Indian
nation's priorities and commitments; and c) ongoing reinforcement of a
new organizational culture supporting the elements of corporate
governance.
Stable Civic Governance
Without robust tribal governing institutions, a tribal charter may
be a moot point. If, for example, corporate contracts are adjudicated
by the tribal council, the enterprise may never attract investors. Or
if the tribal council turns over every couple years, the corporate
governance system will be perennially at risk of manipulation, if not
dismantlement. Corporate governance systems benefit from a civic
governance system that provides:
Staggered council terms or other mechanisms of stability
that permit the system of corporate governance to become enshrined in
political institutional memory;
Independent dispute resolution mechanisms that operate
fairly and expeditiously to adjudicate contracts, personnel disputes,
property rights, and disputes over the corporate charter;
Well-defined checks and balances so that policy debates
come to an end, reflecting accommodation across the branches of
government;
Clear and predictable rules that do not change with the
whims of newly elected leaders or narrow majorities; and
Civil service professionalism that helps create
supportive economic policies such as uniform commercial codes or zoning
codes and helps guide infrastructure development.
Corporate Charter and Purpose
To have worth beyond the paper on which it is printed, a corporate
charter must make clear the overarching purpose of the corporation and
faithfully represent community compromises regarding the distribution
of authority between the corporation and the government. All
organizations benefit from clear purposes, of course, but tribal
experience demonstrates that when tribal corporations exist to advance
a deeply held or widely held community aim (aside from profitability,
which is understood), their chances of success improve because
constituents, representatives, directors, and employees do not choose
roles as opportunistically. The charter must also pre-allocate
decision-making authorities in a manner supportable by the citizens of
the nation. Generally speaking, the more powers that can be allocated
to the board of directors, the better; however, the allocation of
authority also entails political questions whose answers are shades of
gray rather than black and white. At a minimum, the charter must
specify who will perform the following tasks:
Recruit, nominate, hire, pay, and remove directors of the
board;
Set dividends and retained earnings;
Set, apply, and adjudicate corporate personnel policy;
Approve limited corporate waivers of sovereign immunity;
Develop and use trust lands;
Approve or reject investment decisions; and
Reports corporate performance data.
The Practice of Corporate Governance
And of course, paper documents do not necessarily govern behavior.
For it to work, the charter must become a new way of ordering
relationships. That takes leadership, behavioral change, and
organizational culture. Once the charter is written, tribal political
and corporate leaders need to alter the incentives actors face within
the corporate governance system. If not, the centripetal forces
confounding government ownership will work to drag performance down.
Among other things, successful tribal enterprises:
Maintain the engagement of their directors;
Provide regular reporting from the corporation to the
owners;
Enforce conflict of interest rules;
Limit the day-to-day interference of elected leaders in
corporate decisions;
Train newly elected leaders and newly appointed directors
in the system of corporate governance; and
Evaluate performance throughout the corporate governance
system regularly.
Conclusion
Closing the income gap in Indian Country and diversifying Native
economies will entail tribes working on a variety of strategies
simultaneously, including private sector development, individual
financial literacy, social program support for workers, and more.
Troubleshooting existing systems of corporate governance and developing
new ones for tribally owned enterprises will be critical to the
portfolio of strategies. Tribal ownership of business shows no signs of
waning, yet it poses inherent challenges that must be faced.
The characteristics listed above are shared by the Winnebago
Tribe's Ho Chunk, Inc., the Louden Tribal Council's Yukaana Development
Corporation, and other successful tribal companies around Indian
Country. Adopting these characteristics does not guarantee the success
these companies have had. Business is risky. One does not automatically
arrive at good corporate governance via a lock-step process, nor is
balancing political prerogatives against corporate requirements
orderly. Nonetheless the challenges of tribally-owned corporate
governance should not lead to despair. Tribes have succeeded precisely
because they faced the challenges posed by government ownership
directly. They took steps to reduce uncertainty and ambiguity in tribal
business by managing the boundaries between government and business
well. Continuing to diversify and expand Native economies will hinge on
more tribes doing so.
[NOTE: ``Native American Contracting Under Section 8(a) of the
Small Business Act: Economic, Social and Cultural Impacts'' submitted
for the record by Mr. Taylor has been retained in the Committee's
official files.]
[GRAPHIC] [TIFF OMITTED] T7848.014
The Chairman. Thank you. The Chair will yield to the
Ranking Member, Mr. Young.
Mr. Young. Good testimony. Sarah did a great job. I really
don't want to ask anymore questions other than the fact that,
Mr. Taylor, I had the privilege of reading your report before
you put it up there. That is good information, and it is
simple, and believe me, we need simple information in Congress
before we digest it.
[Laughter.]
Mr. Young. And if we can, Mr. Chairman, I am going to
suggest as time goes by, if there is someone that raises their
heads in another committee about changing this program, that
that information is available for them, everything we are doing
here, and I think the suggestion of Tex of a report from this
committee is very well taken.
So good job, appreciate it, and it has been a long day. I
just thank you. Thank you.
The Chairman. Gentleman from Oklahoma, Mr. Cole.
Mr. Cole. Thank you, Mr. Chairman. I don't know if we are
in a committee meeting or a revival meeting because I feel like
saying Amen so much.
[Laughter.]
Mr. Cole. But I have enjoyed this, and I want to begin by
just frankly thanking you and thanking the staff. I think it
has been excellent presentations and an excellent group here. I
do have a couple of points I want to make and then a couple
quick questions, and they will be quick.
But as I listened to all three panels, it is just so
abundantly clear that we actually have a program that works,
that actually did what it was designed to do, much like IGRA
worked, and every time we see this I think in Indian Country
when we have something that works people get worried about it.
You know, they get jealous, I guess. I think gaming is what oil
was to the Osages a century ago. I guess all of them are rich
and they don't need any help, or any opportunities, but these
program, and particularly this, as Mr. McCaleb eloquently
pointed out, give Tribes that don't have an opportunity to game
real ability to go into the marketplace and compete, and to
develop the skills that they need to be successful, and as all
these panelists have pointed out, or several of them, this is
money that is made privately in a sense, but it flows into
public purposes. I see it in my district all over where I see
health care clinics, and I see senior citizen centers, and I
see job opportunities, and I see kids with scholarships and an
opportunity to get an education that their parents and
grandparents never had.
So why in the world we would worry about changing a program
that does that, and leaves lasting skills and infrastructure
for business success in place, I will never ever know.
But just let me ask you if I may, Neal. You made the point
in your testimony very eloquently, or your written testimony,
that no Indian Nation could be truly sovereign if it wasn't
truly independent economically, and you have watched this for a
long time and a lot of different ways, and I would like you to
just expound on that theme a little bit if you would.
Mr. McCaleb. Well, I think it is patently clear that if you
are financially independent on someone else or another
government, you don't have any true sovereignty, and to acquire
that sovereignty, you have to develop an economic base. To
acquire individual independent, you have to develop an economic
base. You have to have a marketable skill or something, and
that is what the SBA program is inculcating in the Tribes that
are using it.
The Chickasaw Nation has seen really meteoric growth
economically over the last 20 years of Governor Anoatubby's
leadership, and it is because he has been focused on economic
sovereignty as well as political sovereignty that that has been
so successful.
Mr. Cole. I always like to point out, Mr. Chairman, that is
a corporate headquarters from our standpoint that never goes to
Dallas, and jobs that never go to China, and we have a very
vested interest as a state in Tribes being successful. Goodness
knows, and when I talk to Tribes I make this point all the
time, we of all people ought to know don't trust the Federal
government to keep their commitments. So you better get in a
position where you can take care of yourself, and policies, and
this is one of them that pushes in that direction are the
things that we ought to be worried about. I am as fierce as
anybody in making sure the Federal government keeps its
obligations and its commitments, and does the things it says it
is going to do financially, but again, 200 years plus of
American history would tell you it doesn't do that very well.
At the end of the day you have to depend on yourself more than
anything else, and we have a unique opportunity to do that.
This program has helped us, and I just again really want to
thank you personally and professionally and politically for
holding this and giving us an opportunity because there are
other people in Congress that clearly need to be informed about
this, and hopefully with the best of intentions are trying to
do the wrong thing, but I think you have laid out a very
convincing case at this hearing as to why it would be an
enormous mistake as well as an injustice to lose the ability to
do what we have been able to accomplish through Section 8[a]
contract, and I appreciate it very much. Thank you.
Mr. McCaleb. Thank you, Tom. Let me just ask, if I might,
ask you, sir, one of the criticisms--following up on the
gentleman from Oklahoma's suggestions of others in Congress
having the wrong perceptions--some have criticized the Alaska
Native participation in the 8[a] programs because of the high
amounts of executive compensation. They argue that this causes
an unfair advantage over the individually owned 8[a]s because
they must manage their companies and show economic
disadvantage.
Why do you believe this is not an unfair disadvantage?
Ms. Lukin. Thank you, Mr. Chairman.
A couple of things. One, all ANCs are run and managed by a
Native Board of Directors that is elected by the Native
shareholders, and they, of course, in turn higher the most
talented CEOs to operate our companies to the highest degree to
provide benefits back to all of our shareholders.
So do I think the CEOs are overcompensated? Absolutely not.
Our boards are sophisticated. They go through extensive review
processes of what other corporations and companies across the
United States are paying to make sure that we are paying fair
market value for the talent that we need to operate our
companies appropriately.
The Chairman. So you don't advocate any caps on executive
compensation?
Ms. Lukin. No, I do not.
The Chairman. Mr. Secretary, let me ask you, Tribal and
Alaska Native Corporation 8[a] companies operate under similar
yet different rules as you are acutely aware. Should Congress
require that the same rules apply to both tribally owned and
ANC corporations?
Mr. McCaleb. Well, that is the way the program is operated,
largely as it relates to graduation from the program and caps
on the program which are essential for the continuity, and that
needs to be preserved. The differences that exist currently in
the operation of the program between Tribes and Tribal
governments and ANCs I think are fairly small differences in
comparison to this idea that there is not any caps on the
contract, and that they can have long-term continuity.
The Chairman. OK. Mr. Taylor, your report shows that Native
8[a] companies represent only a small share of the procurement
dollars, yet other minority contractors claim this is unfair.
What is your response to those who make this claim?
Mr. Taylor. Well, I think that it goes back to the point I
made earlier about there being a correspondence between the
exemptions that exist for Tribal and ANC 8[a]s and the
circumstances that have been set up by Federal Indian law, the
Alaska Native Claim Settlement Act, and the Indian
Reorganization Act and so on to set up these corporations as
community-owned entities; that the benefits are flowing not to
a family of shareholders, not to an entrepreneur, but really to
an entire community, and I think that is the distinction that
needs to be focused on, if you will. That is the distinction
that makes the difference between the treatment under the
Section 8[a] rules.
I would comment to Mrs. Lukin's excellent remarks about
directors and compensation of executives. It is a very
difficult decision to choose how much an executive should be
compensated and whether or not that executive should be Native
or non-Native, and there is nobody better situated to make the
decision and bear the consequences than a Native director.
In countless cases around Indian Country, both corporate
cases but also in the administration of government programs,
our research finds that when outsiders make the decisions they
don't make them nearly as well as when the Native people who
bear the consequences directly make them themselves.
The Chairman. Very good point.
Gentlemen, lady, thank you very much for your testimony and
the time and travel you have taken to be with us today. We
appreciate it. And was suggested earlier, this will be a good
report that our committee will make to ensure that those who
perhaps question some of these programs will have fully at
their disposal. Thank you.
No further business, the Committee stands adjourned.
[Whereupon, at 1:45 p.m., the Committee was adjourned.]
[Additional material submitted for the record follows:]
[A statement submitted for the record by Beasley Denson,
Tribal Miko (Chief), Mississippi Band of Choctaw Indians,
follows:]
Statement of Beasley Denson, Tribal Miko (Chief),
Mississippi Band of Choctaw Indians
On behalf of the approximately 9600 enrolled members of the
Mississippi Band of Choctaw Indians, I would like to thank and commend
Chairman Rahall, Ranking Member Young and the Members of the House
Committee on Natural Resources for holding this hearing on Diversifying
Native Economies. My name is Beasley Denson, and I am Miko (Chief in
our Choctaw language) of the Mississippi Band of Choctaw Indians.
Mr. Chairman, I hope my testimony, in addition to those provided by
many other Tribal leaders throughout Indian Country, will help you and
your colleagues in Congress understand why economic development
initiatives such as the 8(a) program are so important to every Tribe's
goal of self-determination and self-sufficiency, and why Congress
should not adopt misguided proposals that would endanger the proven
success and positive results of these programs.
For decades, the Mississippi Choctaw have taken an innovative and
forward-thinking approach to business. From wire harness production and
assembly, to entrepreneurial business ventures, the Tribe's business
model has proven to be successful. However, the realities of the global
marketplace forced us, just like many other entities throughout the
United States, to change with the times. With the implementation of the
North American Free Trade Agreement (NAFTA) and the loss of hundreds of
manufacturing jobs to Mexico, the Tribe recognized that that we had to
embark upon a path of economic diversification through the creation of
other employment opportunities on the reservation
The new economic mix includes gaming, hospitality, and
entertainment resulting in a major family destination resort that
attracts visitors from throughout the Southeastern United States and
beyond. We are fortunate to have two casino properties that anchor our
economic development plans. However, Mr. Chairman, I agree with you
that Tribes also need to explore various, innovative non-gaming
economic development opportunities, which is why it is so important
that you are holding this hearing. It's even more important given that
some Members of Congress have unfortunately proposed placing new
restrictions and/or limits on the very same federal programs that have
allowed Tribes like ours to pursue such non-gaming economic development
initiatives.
Our Tribe's new approach to industry involves the creation of
partnerships that will lead the Mississippi Band of Choctaw Indians
into the next generation of employment opportunities. Over six years
ago, the Tribe made its move away from traditional manufacturing into
more advanced, technical, and highly sophisticated work with the
founding of Applied Geo Technologies, Inc. (AGT). AGT is a 100%
Tribally-owned, 8(a), chartered corporation of the Mississippi
Choctaws. We are very proud AGT has become one of the premier,
Tribally-owned providers of advanced manufacturing and operational
services solutions in the nation.
Mr. Chairman, here a few examples of why we feel that way:
In 2001, Lockheed Martin, the world's largest defense
contractor, agreed to provide resources to augment AGT's management,
technical, and new business development capabilities to stimulate its
growth in the federal contracting market. At Lockheed Martin's Kelly
Aviation Center in San Antonio, Texas, AGT supports the calibration and
repair of assembly equipment for the U.S. Air Force's TF39, T56, F110,
F118, and CF6-50 jet engines.
At the John C. Stennis Space Center in Southern
Mississippi, AGT provides precise calibration, metrology, and
environmental laboratory services in support of the space shuttle's
main engine, among other rocket engine testing services.
In 2004, AGT entered into a mentor-protege relationship
with AgustaWestland, one of the world's leading helicopter
manufacturers. This association has already landed AGT a seat on TEAM
US101, which will manufacture the next fleet of helicopters for the
President of the United States. AGT is planning to manufacture a
majority of the wiring harnesses for the US101 in the Choctaw Tech
Parc.
Also in 2004, AGT entered into an agreement with AAI
Corporation to jointly build advanced hydraulic, pneumatic, and
mechanical test equipment in the Choctaw Tech Parc. This program is
currently serving our military forces with leading-edge manufacturing
and engineering solutions to produce equipment that meets the needs of
our troops.
In 2006, the U.S. Army looked to AGT for Operational
Services support of the Mississippi Army Ammunition Plant. Under this
contract, AGT is responsible for the maintenance and management of
industrial property, safety and quality, and environmental regulations.
In 2007, AGT was awarded its largest contract to date, a
5-year Indefinite Delivery Indefinite Quantity contract with a ceiling
price of $69.9 million to support the U.S. Army's Program Executive
Office for Simulation, Training and Instrumentation (PEO STRI) Project
Manager for Instrumentation, Targets, and Threat Simulators (PM ITTS),
Targets Management Office (TMO). Work to be performed by AGT will
include field engineering, research and development, light
manufacturing, and operational support of applicable target systems.
With the changing manufacturing environment on the reservation, AGT
has retained and created many new high-tech employment positions from
former Tribal enterprises which resulted in an average wage increase of
16% for the transferred employees. AGT now has 11 locations in five
states and employs over 275 professionals. In a short time period, AGT
has grown from revenues of $600,000 in its first year to an anticipated
$46,500,000 in its sixth year. With growth comes the opportunity to
reinvest in the local community--both on and off the reservation--in
order to prepare a workforce that can deliver the quality products that
are demanded by AGT's high-profile aerospace and defense clientele.
Through a partnership with East Central Community College, AGT can
now offer customized training programs through Mississippi's workforce
development initiative, thus creating a strong, skilled Mississippi
workforce allowing high-tech industries such as AGT ample opportunities
for growth. AGT also offers 100% tuition reimbursement for our
employees.
As countless witnesses before this Committee have attested to,
economic development, including our Tribe's vision of high-tech
industry, reaches beyond job creation. It strengthens an entire
economy, encompassing all aspects of our quality of life in Choctaw and
in Mississippi. Successful economic development projects allow the
Tribe to provide those essential government services that any city or
State government provides to its citizens. The Tribe's ability to
provide affordable housing, health care, law enforcement, education and
so many other basic services is greatly enhanced by a strong,
diversified economy.
Every time one of our Choctaw youth see pictures of the Space
Shuttle heading upwards away from the Earth, or when we see the
President arrive at, or depart from, the South Lawn of the White House
on the Marine One helicopter, he or she will know that the Mississippi
Band of Choctaw Indians played an integral part in allowing these feats
of American technological prowess to occur. And maybe, some of them
will aspire to one day do the same. Because of companies like AGT, not
only will they have that opportunity, but it will be right there on our
reservation in east central Mississippi.
When I learned that the Committee would be holding this hearing, I
spoke with several employees who work at AGT and IKBI, Inc.,
Mississippi Choctaw's other 100% Tribally-owned 8(a) company, in order
to get their perspective on what economic diversification has meant to
them. Allow me to share the story of Ms. Sylvia Graves. Sylvia is an
enrolled member of the Tribe who is the Human Resource Manager at AGT.
Before AGT, Sylvia worked for an off-reservation out-of-state
corporation with operations in the nearby city of Philadelphia,
Mississippi. Sylvia told me that her insurance costs kept increasing
while her benefits decreased. She said that she was unhappy because
morale was low and her fellow employees were unhappy as well. According
to Sylvia, AGT changed all of that for her. She says that she enjoys
the atmosphere and knows that the benefits she currently receives are
very good compared to other manufacturing companies in the area. Since
she arrived at AGT, she has seen employment increase by more than 150
workers, the majority of whom work on the reservation in Choctaw. She
also told me about some of the employees of a manufacturing company in
Carthage, Mississippi that AGT recently acquired. Workers there hadn't
received a raise in more than five years and, as you can imagine,
morale was low and turnover was high. When AGT took over, a sense of
tribal pride was restored as wages and benefits have increased by
approximately 16%.
I know this is a simple account from one of our many tribal
members, but it is a genuine testimonial of someone who is happy, and
enjoys a dramatically improved quality of life, because of the
opportunities that AGT and IKBI have created.
Mr. Chairman, I sincerely hope that I do not have to tell our
employees, including enrolled Members such as Sylvia, and the thousands
of non-Tribal employees that make us the third largest employer in the
State of Mississippi, that Congress has enacted proposals that would
make it more difficult for, or even prevent, Native businesses like AGT
and IKBI to create these much-needed economic development
opportunities.
Again, on behalf of the Mississippi Band of Choctaw Indians, I
thank you for the opportunity to share our views on the importance of
diversifying native economies, and we look forward to working with you
and your colleagues in Congress to strengthen--not weaken--the various
federal initiatives such as the 8(a) program that have done so much to
benefit Native Americans throughout the United States.
______
[The Native American Contractors Association Joint
Legislative Proposal on Small Business Contracting submitted
for the record follows:]
JOINT LEGISLATIVE PROPOSAL
ON SMALL BUSINESS CONTRACTING
SEPTEMBER 25, 2007
Expand Small Business Contracting Opportunities
In reauthorizing the Small Business Act's contracting programs,
Congress must include stronger provisions to ensure small businesses
actually receive the federal contract support required by law for
decades. While the federal contracting market has doubled in size since
2000, small businesses' percentage share of that market has declined
significantly due to:
Bundling/consolidation of contracts into sizes beyond
most small contractors' capabilities;
Huge growth in emergency/overseas contracts not subject
to small business contracting requirements or goals;
Barriers to growth that make it difficult for small
contractors to compete for larger contracts;
Lax compliance with subcontracting plan requirements and
limited enforcement; and
Downsizing of the federal procurement workforce,
compounding the above problems, as overworked contracting personnel
must deal with higher volumes of contracting actions, pressures to meet
deadlines and small business goals, and little or no time to monitor
compliance with existing rules designed to prevent/reduce contract
bundling/consolidation, enforce subcontracting plan requirements and
other limits on subcontracting.
To enable small businesses, particularly 8(a) firms, to compete for
a larger share of government contracts, the federal government must
take immediate actions to reverse these trends, including enhancing
incentives for contracting officers to increase awards to 8(a) and
other small businesses. In considering small business contracting
legislation, Congress should adopt provisions to:
1. Fulfill Congressional intent to further the Indian Self-
Determination policy set forth in 25 U.S.C. 450a by preserving the
provisions that promote the competitive viability of ``Native
enterprises'' small business concerns certified by SBA as owned by
Indian Tribes, Alaska Native regional or village corporations, or
Native Hawaiian Organizations that help support their Native
communities by developing more self-sufficient Native economies;
2. Support provisions that tighten limits on bundling and
consolidation of contracts, break up such contracts for award to small
businesses or employ procurement procedures to enable teams of Native
enterprises and other small businesses to pursue larger contracts.
Require contracting agencies to issue a Request For Information (RFI)
to small businesses so they have a chance to form teams to pursue these
larger contracting opportunities (sections 1001 and 1002 of S. 3778 of
the 109th Congress proposed such teaming approaches);
3. Increase the Government-wide contracting goals for awards to
small business (along the lines of section 201 of H.R. 1873) of not
less than 30% of total contract awards to small business, and not less
than 8% of total contract and subcontract awards to small disadvantaged
business concerns;
4. Include overseas contracts within the Government-wide
contracting goals (like section 202 of H.R. 1873), and require
reporting of awards to small businesses as prime or subcontractors
performing contracts overseas (as proposed in section 1306 of S. 3778);
5. Enhance the ability of individuals to qualify for
certification as 8(a) program participants and to pursue larger
contracts on a competitive or non-competitive basis (as proposed in
sections 202 of H.R. 2532);
6. Increase the net worth thresholds, including annual
inflationary adjustments, for individuals seeking to qualify and retain
eligibility for certification as 8(a) program participants (along the
lines of section 1242 of S. 3778, or section 202 of H.R. 2532);
7. Double each competitive thresholds specified in 15 U.S.C.
637(d)(1)(D)(ii), (as proposed in section 202 of H.R. 2532);
8. Encourage small businesses with larger contracts to implement
subcontracting plans to develop stronger business alliances among all
types of small business contractors, including 8(a) and other small
disadvantaged concerns, HUBZone, service disabled veteran-owned, women-
owned and other small businesses;
9. Revisit size standards (as both the Senate and House Small
Business Committees have proposed), but leave in place the new
requirements for small business recertification that just became
applicable on June 30, 2007; and
10. Support legislative or administrative directives for SBA to
accept certifications by other federal, state and local governments,
under such criteria as SBA may prescribe by regulation or order, in
certifying small disadvantaged businesses, and other subcategories of
small businesses for which certifications are required (sections 1221,
1232 and 1241 of S. 3778).
______
[A statement submitted for the record by the National
Center for American Indian Enterprise Development follows:]
Statement of the National Center for
American Indian Enterprise Development
Chairman Rahall and Ranking Member Young, the National Center for
American Indian Enterprise Development (NCAIED) commends the House
Committee on Natural Resources for convening this oversight hearing on
``Diversifying Native Economies'' as a key goal. The NCAIED presents
this testimony on the roles that Native business development and
government contracting activities play in both diversifying and
strengthening our Native economies.
The National Center or NCAIED is the longest serving Native
business development assistance provider in the United States. Our
mission is to develop the American Indian private sector as a means to
help our Native communities become self-sufficient. Formed in 1969 as
the non-profit Urban Indian Development Association, we have evolved
over the last 38 years from one office with an urban Indian focus into
a national organization with supporting non-profit centers across the
country. We provide technical assistance and business development and
management consulting services nationwide to Indian tribes, Alaska
regional and village corporations (``ANCs''), Native Hawaiian
Organizations, and businesses owned by tribes, ANCs, and individual
Native Americans, Alaska Natives, and Native Hawaiians.
The NCAIED headquarters and supporting centers are staffed
primarily by Native American business and procurement consultants with
experience in dealing with such issues as tribal sovereign immunity,
tribal trust lands and restricted allotments that are inalienable and
therefore cannot be used as collateral for business loans, remoteness
and lack of physical and technological infrastructure to support
business development. The Minority Business Development Agency (MBDA)
of the Department of Commerce began supporting our program many years
ago because, unlike other small business service centers, NCAIED
designs its centers and trains our staff to devote extra time and
attention to help individual entrepreneurs and Indian tribes learn how
to conduct business feasibility studies, develop business plans,
establish banking relationships and lines of credit, begin marketing,
expand operations, and even enter the challenging federal procurement
market.
The NCAIED's leaders have always played pivotal roles in spurring
small business startups in the commercial and government marketplaces,
and in breaking down barriers that impede economic development and
diversification activities in our Native communities across the United
States. We offer the following comments on such barriers, and also make
several recommendations for future action.
Earlier Oversight Hearings on Indian Business Development
In 1987, our then President, Steven Stallings, testified at the
first of several important hearings of the Senate Indian Affairs
Committee on Indian economic development. At the time, we operated five
offices in the West assisting almost 600 companies, most owned by
individual Native Americans and some by tribes. Mr. Stallings
recommended expansion of the Buy Indian Act's application to more
federal agencies, and adoption of a Buy Indian Act certification that
could be accepted by all federal contracting agencies, and satisfy
eligibility for the Small Business Administration (SBA) contracting
programs. He urged that more contracts be issued as Buy Indian because
what he called ``unchecked discretionary authority'' of the Bureau of
Indian Affairs (BIA) was resulting in many valuable procurement
opportunities being lost. Unfortunately, lack of Buy Indian Act usage
and enforcement persist to this day.
Mr. Stallings reported that Indian-owned firms were encountering
great difficulty in getting certified in the SBA's section 8(a)
Business Development Program. Of the few who achieved certification,
most of them received no 8(a) contracts. The two largest contracts
(representing the majority of 8(a) award dollars to Indian-owned
companies) had been awarded to tribal-owned companies on the Devil's
Lake Sioux and Fort Peck Reservations under special arrangements. Most
of the 8(a) certifications resulted from a Memorandum of Understanding
signed by SBA and the Department of Defense (DOD) in September 1983.
The MOU committed SBA to ``receive'' 150 fully completed applications
for 8(a) status and ``target'' 75 of them for certification. Mr.
Stallings testified that while SBA did its part, DOD had not provided
the contract support it had promised. He recommended improvements to
the Buy Indian Act, the 8(a) program, and establishment of a National
Center for Economic Development to provide assistance to Indian-owned
businesses and tribal governments in Indian economic development,
assessing needs for training, creating effective training models,
implementing training programs, and operating technical assistance
centers and a clearing house.
When the Senate Committee held a later oversight hearing in 1988 on
``Barriers to Indian Participation in Government Procurement
Contracting,'' Mr. Stallings again testified in support of reform of
the 8(a) program, especially for tribal-owned companies. He reported
that the growth of contracting companies owned by Tribes and American
Indian and Alaska Native individuals lagged far behind that of other
groups (only 14,843 and generating gross receipts of just $646.7
million). See Oversight Hearing on ``Barriers to Indian Participation
in Government Procurement Contracting,'' Senate Select Committee on
Indian Affairs, 100th Cong. 2d Sess. 80 (1988). These numbers
represented only 1.8% of the total number of small businesses, and with
a mere l.4% in gross receipts of all minority-owned businesses,
combined. Comparative figures showed: 248,141 Hispanic-owned companies
with gross receipts of nearly $15 billion; 339,239 African American-
owned firms with gross receipts of $12.4 billion; and 240,799 firms
owned by Asian American and other minorities with gross receipts of
nearly $17.3 billion. Id. To reach parity with these other groups on a
per capita basis, he estimated that a 4,000% increase in Native
business ownership would be needed. Id.
Ronald Solimon, now Chairman of NCAIED's Board of Directors, also
testified at the 1988 hearing as then CEO of Laguna Industries, Inc. He
explained how his collaboration with Raytheon Corporation, SBA and DOD
had led to a joint venture between Laguna Industries with Raytheon that
was awarded a DOD contract. Mr. Solimon recommended that the Congress
amend Section 8(a) to authorize 8(a) companies owned by Tribes or ANCs
to joint venture with companies that could mentor them along the way.
The low level of federal (particularly defense) contract awards to
Native-owned firms greatly concerned then Committee Chairman Daniel K.
Inouye. He emphasized that ``directing [the] purchasing power [of the
U.S. Government] to accomplish social goals such as assisting
disadvantaged members of society is well established'' and acknowledged
that ``unfortunately, ...this public policy goal has not been achieved
with respect to the participation of businesses owned by [N]ative
Americans.'' Id. at 2. 1 In keeping with federal Indian
policies, he acknowledged that it is Native groups' ``common trust
relationship with the United States'' that ``allow[s] the Congress to
legislate unique benefits and treatment for the Native Americans.'' Id.
---------------------------------------------------------------------------
\1\ The public policy referenced in Chairman Inouye's 1988
statement derives from the U.S. Constitution's grant to Congress of the
power ``to regulate Commerce...with the Indian Tribes.'' Article I,
Sec. 8, ] 3. This Constitutional provision, and its interpretation in
subsequent landmark Supreme Court decisions, gave rise to the federal
government's special political relationship with and trust
responsibilities to the tribes. See Cherokee Nation v. Georgia, 30 U.S.
1 (1831); Worcester v. Georgia, 31 U.S. 515 (1832). Thus Congressional
enactments bestowing special rights to tribes and ANCs are based on
this political relationship and trust obligation, not on a racial
classification designed to remedy past racial discrimination.
---------------------------------------------------------------------------
Responding to these recommendations, the Congress passed the
Business Opportunity Development Reform Act in late 1988 (as well as
amendments authored by Congressman Rhodes in 1990) that added the
special provisions in Section 8(a) now applicable to companies owned by
tribes and ANCs. Congress included these special 8(a) provisions
recognizing that tribes and ANCs, as representative organizations, are
responsible for generating continuing income and jobs for, and
improving the livelihood of, hundreds or thousands of tribal members
and Native shareholders.
In parallel action in 1988, the Congress also amended the
Procurement Technical Assistance Center (PTAC) Program to target
assistance to Indian Country. It authorized creation of American Indian
PTACs, or AIPTACs, designed to serve multiple Bureau of Indian Affairs
areas. Many of these AIPTACs now operate within the network of the
NCAIED's centers, and help Native-owned companies learn how to navigate
the complex federal procurement marketplace using the 8(a) program and
other procurement and business development tools available to them.
NCAIED and Indian Business Development Today
For over 38 years, the NCAIED has been assisting tribes and
individual Native American entrepreneurs seeking to form, or expand
existing, business ventures. Under the leadership of current President/
CEO Kenneth Robbins, the NCAIED has expanded AIPTAC services funded by
the DOD's Defense Logistics Agency and expanded Native American
Business Enterprise Center (NABEC) services funded by the MBDA. These
centers operate in the following locations: Mesa, Arizona, and El Monte
and El Segundo, California, serving the West and Southwest; Seattle and
Lynwood, Washington assisting the Pacific Northwest area and part of
Alaska; Polson, Montana, and a satellite office in Bismarck, North
Dakota, serving the Northern Plains area; Denver, Colorado, serving
states south of the Plains area; and serving the East Coast and parts
of the Midwest are three centers, in Marietta, Georgia, Reston,
Virginia and a new center in Pembroke, North Carolina.
These centers help the DOD, MBDA, SBA, the General Services
Administration, and other federal agencies in implementing many
programs, including the Mentor Protege programs, the HUB Zone Program,
Electronic Commerce/Electronic Data Interchange, subcontract plan
fulfillment and myriad other defense requirements. The centers also
provide training on how to register electronically with the Federal
Government, how to identify marketing opportunities and market goods
and services, and how to navigate various procurement requirements
(including the acquisition of commercial products). More general
business services include helping companies develop business plans,
secure financing, find business partners, learn the federal procurement
ropes, apply for SBA program certifications, market their capabilities,
identify contracting opportunities, prepare proposals, and win
contracts.
In addition to their existing responsibilities, the NCAIED's
centers are implementing new procurement assistance projects. The most
exciting is our new Native American Indian Business Development web
portal called NativeEDGE (www.nativeedge.org), with a call center to be
implemented, a publications clearinghouse of federal and private sector
information on economic development and procurement opportunities and a
wealth of other important and helpful information for tribes, ANCs, and
individuals who are American Indians, Alaska Natives, and Native
Hawaiians. The procurement information on NativeEDGE will make more
accessible the contract opportunities available in the defense,
homeland security and other federal sectors. To meet the corresponding
increase in demands for procurement technical assistance from AIPTACs,
the NCAIED and its supporting centers are playing vital roles in
promoting greater use of contracting companies owned by tribes, ANCs,
and other Native entities and entrepreneurs.
As the above-mentioned cooperative agreements each require the
federal dollars to be matched by a significant amount (as high as 25
percent) of private funding, the NCAIED generally raises more than 50
percent of its own funds. In addition to client work under these
cooperative agreements, the NCAIED produces various events that train,
promote and market Indian enterprises to the public and private
sectors. One such event is the phenomenally successful Reservation
Economic Summit & American Indian Business Trade Fair. At RES 2007,
over 3,000 individuals and 300 exhibitors attended, including tribes,
ANCs, federal and other government procurement officials, and corporate
and Native business representatives.
The NCAIED estimates that its operations have assisted
approximately 80% of the tribes in the lower 48 states and more than
25,000 Native enterprises, and have trained over 10,000 tribal members
trained. Furthermore, due to its centers' bid matching and other
business assistance efforts, as well as the networking opportunities
produced at the RES and other similar conferences, NCAIED clients have
received well over $3 billion in contract awards (translating to over
60,000 jobs) in the last 4 years alone.
The results of all these efforts demonstrate real progress. The
U.S. Census Bureau reported in 1997 that its data (thought incomplete)
showed 197,300 Native American-owned businesses in the United States,
up 84% from 1992, employing 298,700 people and generating $34.3 billion
in revenues. See 1997 Economic Census: Survey of Minority Owned
Business Enterprises: Company Statistics Series (2001). By 2002, Census
estimates were 206,125 Native-owned firms, up 4% from the 1997, but
total revenues down 23% to $26.3 billion. See 2002 Survey of Business
Owners, U.S. Census Bureau.
Of the roughly 360 tribes in the lower 48 states, about several
dozen have launched government contracting operations and applied for
8(a) program certification. Some are very successful, while others are
still struggling to break into the difficult federal market. The SBA's
list of the top 8(a) firms include many owned by ANCs and Tribes, and
many have appeared on the Top 25 8(a) list of information technology
firms. See Wakeman, 8(a)s Still a hit with ANCs, tribally owned
companies, 20 Washington Technology (Sept. 26, 2005).
In short, after years of being encouraged by Congress to do so, and
after seeing the success of other Native contractors, more tribes as
well as ANCs are pursuing government sector opportunities.
Reports Confirm Native Business Successes
Numerous reports, including the studies discussed in this
Committee's hearing, confirm that the above-recited Congressional
initiatives to spur Native economic development have been remarkably
successful. One such report was issued in April 2006 by the Government
Accountability Office entitled ``Increased Use of Alaska Native
Corporations' Special 8(a) Provisions Calls for Tailored Oversight''
(GAO-06-399) (the ``GAO Report''). This GAO report provided helpful,
balanced information on ANC 8(a) contracting as activities undertaken
in response to the Alaska Native Claims Settlement Act that directed
Alaska Native regional and village corporations to pursue economic
development for the benefit of their Alaska Native shareholders. GAO's
report also explained how ANCs' participation in the 8(a) program has
helped them generate revenues to return benefits to their Alaska Native
shareholders, and how the SBA and federal agencies need to improve
their oversight of ANC and other 8(a) contracting.
Also very helpful in presenting a clearer picture of economic
development progress in Indian Country is the September 2007 report,
entitled ``Native American Contracting Under Section 8(a) of the Small
Business Act--Economic, Social and Cultural Impacts,'' by Jonathan B.
Taylor of Taylor Policy Group, Inc., who is associated with the Harvard
Project. His analysis confirms what NCAIED's network of centers has
learned anecdotally from working with Native-owned businesses across
the country. That is: the special 8(a) provisions have succeeded, as
Congress intended, in facilitating Native communities' diversification,
self-determination and economic self-sufficiency. The Mentor-Protege
Programs of the various federal agencies (e.g., SBA, DOD) also have
helped in strengthening tribal- and ANC-owned companies.
The NCAIED is proud of the role it has played in fostering informal
types of mentoring and partnering by helping tribes and ANCs find
teaming partners and subcontractors. A good example is the support that
the NANA Development Corporation and its subsidiaries have provided to
several of our centers in fulfilling contract requirements by
subcontracting with a variety of client firms. To help expand such
partnering, not only among Native contractors but also with other small
business partners, the NCAIED has been conducting special 8(a) panel
discussions at the various Indian business development and procurement
technical assistance conferences hosted or co-hosted by its centers
over the last two years. These sessions have focused on the special
8(a) provisions, their history, purpose, and results. The CEOs of many
8(a) companies owned by tribes or ANCs have described their 8(a)
experiences as part of procurement training workshops. And, to
memorialize the importance of partnering results, the NCAIED negotiated
and executed a Memorandum of Understanding (MOU) with the Native
American Contractors Association (NACA) last year, and just renewed the
MOU for another year. This joint effort has launched a partnering and
subcontracting demonstration program to encourage greater collaboration
among Native and other contractors in bid matching, joint venturing,
teaming and performing federal contracts.
The NCAIED has been working with NACA and the National Congress of
the American Indians (NCAI) to develop joint statements, and to reach
out to other organizations representing 8(a) and other small
contractors to find common ground. We believe it is imperative to
discuss, work together and agree on joint efforts that will succeed in
persuading the federal agencies to meet (and possibly even exceed)
their 23% small business contracting goals.
Recommendations for Additional Improvements
The NCAIED recommends appropriate corrective actions by SBA and
federal procurement agencies to strengthen their oversight of
contracting activities under the 8(a) program as well as SBA's other
small business programs. All of the recommended actions will require
more Native American and other personnel to determine, for example, how
to collect better, more complete data on 8(a) companies' revenues in
their primary and secondary industry codes, or how to monitor
compliance with subcontracting limitations, and so on. The NCAIED,
NACA, NCAI and other organizations representing small business
contractors can and should work with SBA to improve oversight.
Below are NCAIED's specific recommendations:
1. Create an SBA Office of Native American Affairs:
The NCAIED recommends the creation of an SBA Office of Native
American Affairs. Of the legislative proposals offered, the NCAIED
supports the approach in S. 1671, the Entrepreneurship Development Act
of 2007. This bill, ordered reported to the Senate in late July,
contains Senator Tim Johnson's proposal to create an Office of Native
American Affairs and new Native American Business Centers. This Office
would provide the additional administrative and procurement support and
oversight that are becoming increasingly important as contracting
companies owned by tribes, ANCs and other Native entities expand in
number. The Office would enable the SBA to implement the GAO's
recommendation that SBA tailor its policies and practices to deal more
effectively with the complexities of ANCs' and tribes' business
structures, joint ventures and other partnering arrangements. This
Office also could coordinate the provision of business development
assistance to Native entities. The NCAIED recommends involvement of
tribes, ANCs, AIPTACs, NABECs, SBDCs, Native Community Development
Financial Institutions (NCDFI's) and tribal colleges to expand the
delivery of business development services to Native communities most
efficiently, and without duplication of efforts and costs. NCAIED is
already contributing its experience with its network of AIPTACs and
NABECs in joint working group discussions with NCAI, NACA and the SBA
to develop better ways to assist small businesses of all types enhance
data collection, and improve oversight of small business contracting.
2. Improve Implementation of the 8(a) Program:
The NCAIED recommends, and is partnering with NCAI and NACA, in
working group discussions with SBA on better implementation of the
special 8(a), SDB and other small business contracting issues by:
a) advising on needed improvements to the 8(a) certification
process for Tribes, ANCs and other eligible applicants; and
b) increasing and improving data collection for better monitoring
of contracting activities by 8(a) firms within their primary and
secondary industry categories and in their mix of federal contracting
versus commercial business activities.
3. Ensure that Government Agencies Meet (or Exceed) Small Business
Contracting Goals:
Tribes, ANCs, NCAI, NCAIED, NACA and the other national
organizations representing 8(a) and other contractors must rally
together to focus much more attention on the question of what can be
done effectively to improve the record of all federal agencies in
meeting both their prime and subcontracting goals for awards to small
and minority businesses. With the significant growth in the federal
market, there is no good excuse for the continual decline in the
percentage of contract awards to small businesses. The NCAIED
recommends that all the key players in the small business community
come together, meet, discuss openly their different perspectives, and
reach a consensus on how best to ensure that all the federal
procurement agencies develop, publish and implement more aggressive
policies and procedures to meet, and possibly even exceed, their goals
for contract awards to small and minority businesses. The NCAIED, NACA
and NCAI have developed the following joint policy positions that we
are still vetting but wish to share with the House Resources Committee:
Fulfill Congressional intent to further the Indian Self-
Determination policy set forth in 25 U.S.C. 450a by preserving the
provisions that promote the competitive viability of 8(a) companies
owned by Indian tribes, Alaska Native regional or village corporations,
and Native Hawaiian Organizations that help support their Native
communities by developing more self-sufficient Native economies;
Support limits on bundling and consolidation of
contracts, break up such contracts for award to small businesses, or
employ procurement procedures to enable teams of Native-owned and other
small businesses to pursue bundled or consolidated contracts;
Increase the Government-wide contracting goals for awards
to small business (to not less than 30% of total contract awards to
small business, and not less than 8% of total contract and subcontract
awards to small disadvantaged business and 8(a) concerns), and
strengthen SBA's authority to negotiate with individual contracting
agencies to establish goals higher than their current levels, and to
require the agencies to be more accountable for their past performance
and future plans for making more small business awards in each
subcategory of small business contracting;
Increase the net worth thresholds above $250,000 for
individuals seeking to qualify for 8(a) certification, and above
$750,000 for continued eligibility for the 8(a) and SDB programs, and
include annual inflationary adjustments to any new thresholds
established;
Increase the competitive thresholds to enable individual
owned 8(a) companies to pursue larger contracts;
Encourage small businesses with larger contracts to
implement subcontracting plans to develop stronger business alliances
among all types of small business contractors, including 8(a) and other
small disadvantaged concerns, HUBZone, service disabled veteran-owned,
women-owned and other small businesses;
Increase size standards with adjustments at least for
inflation, if not also to take into account the capital requirements
for each industry;
Establish a reporting and monitoring mechanism for
compliance with the prime contractor performance requirements, for all
direct award 8(a) contracts and for task order and delivery order
contracts.
Establish milestones and reporting for all direct award
joint venture contracts approved by SBA; and
Strengthen the mentor-protege program requirements so
that more emphasis is placed on mentoring and providing benefits to
proteges other than just contract support.
4. Actions by the House Resources Committee:
The NCAIED commends the Committee for holding this important
hearing on the importance of helping tribes and ANCs diversify their
native economies. In addition to making the hearing record available to
the Congress and the public, we urge the Committee members to share
what they have learned with their colleagues on other committees.
Committee members should explain why Congress enacted the special
economic incentive and contracting provisions for enterprises owned by
tribes and ANCs, and how these programs are fulfilling their purpose,
and the federal government's trust responsibility.
This Committee also can play a major role in urging the SBA and
other departments and agencies to increase contracting opportunities
for Native and other small businesses, and continue to work
collaboratively with NCAIED, NACA and NCAI to develop more effective
reporting and monitoring mechanisms. The Committee certainly should
urge the various federal contracting agencies over which it has direct
jurisdiction (e.g., the Departments of the Interior, Energy, etc.) to
meet and exceed their individual agency's small and minority business
contracting and subcontracting goals, using Buy Indian Act contracting
authority to the fullest extent possible. Just as the 1987 and 1988
hearings witnesses emphasized, the federal departments and agencies
that disburse funds ``for the benefit of Indians'' (e.g., Bureau of
Indian Affairs, other Interior agencies, the Indian Health Service, the
Army Corps of Engineers, the Departments of Transportation, Housing,
Agriculture, etc.) should be using the Buy Indian Act authority to
contract with Native-owned businesses, small or large.
To ensure that more ``teeth'' are put into Buy Indian Act
implementation, the Committee should request briefings by the agencies
and conduct oversight hearings to receive status reports from these
contracting agencies on their past performance in contracting with
Native contractors of all types, and their plans for increasing that
contracting support. Witnesses from Indian country also should be
invited to report on their efforts, successful and unsuccessful, to
convince these agencies to award contracts and other arrangements (such
as park concessions) qualified Native contractors.
The NCAIED thanks the House Resources Committee for the opportunity
to present these remarks and recommendations.
Headquarters:
953 East Juanita Avenue--Mesa, AZ 85204--800-4NCAIED--www.ncaied.org
Regional Offices:
Atlanta, GA--Los Angeles, CA--Polson, MT--Seattle, WA--Washington, DC