The legislative history of ANSCA is focused on economic development for  the benefit of Alaska Natives. About 13 percent of total 8(a) dollars were  obligated to ANC firms in fiscal year 2004. Sole-Source Contracts Represent Majority of 8(a) ANC Obligations for Selected Agencies

For the six agencies included in our 8(a) trend analysis, sole-source  obligations to ANC firms increased from about $180 million in fiscal year  2000 to almost $876 million in fiscal year 2004. Over the five-year period,  sole-source obligations represented about 77 percent of these agencies’  total obligations to 8(a) ANC firms. Chugach Management Services,  Inc.
Chugach Management Services,  Inc.
ASRC Airfield & Range Services,  Inc.
Ahtna Technical Services, Inc.
Ahtna Technical Services, Inc.
Field Support Services, Inc.
KUK/KBRS Global, a joint venture  between Kuk Construction LLC  and Kellogg Brown & Root  Services, Inc.
Washington  D.C.
Bowhead Information Technology  Services, Inc.
Washington  D.C.
Bowhead Support Services, a  division of Bowhead  Transportation Company, Inc.

	Agency Officials View Contracting with ANC Firms as Quick and Easy, but Rules Not Always Followed

In general, acquisition officials at the agencies we reviewed told us that  the option of using ANC firms under the 8(a) program allows them to  quickly, easily, and legally award contracts for any value. They also  pointed out that awarding 8(a) contracts to ANC firms helps agencies meet  their small business goals. Our review of 16 large sole-source contracts  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 8(a) firms versus their subcontractors. ANCs Use the 8(a) Program to Increase Revenue and Provide Benefits

ANCs use the 8(a) program as one of many tools to generate revenue with  the goal of providing benefits to their shareholders. Key Practice Is Creation of Multiple 8(a) Subsidiaries

To generate revenue, many ANCs own multiple businesses in the 8(a)  program, taking advantage of their special ability to do so. SBA’s records,  however, showed the company as 100-percent owned by the parent ANC. Improvements Needed in Oversight of ANCs in the 8(a) Program

SBA has not tailored its policies and practices to account for ANCs’ unique  status in the 8(a) program and growth in federal contracting, even though  officials recognize that ANCs enter into more complex business  relationships than other 8(a) participants. They  told us that they are planning to revise their regulations and policies to  address ANCs’ unique status in the 8(a) program. SBA Oversight of ANCs in the 8(a) Program Is Not Adequate

SBA’s oversight has fallen short in that it does not  track the business industries in which ANC subsidiaries have 8(a)  contracts to ensure that more than one subsidiary of the same ANC is  not generating the majority of its revenue under the same primary  NAICS code;    consistently determine whether other small businesses are losing  contracting opportunities when large, sole-source contracts are  awarded to 8(a) ANC firms;    adhere to a legislative and regulatory requirement to ascertain whether  8(a) ANC firms, when entering the 8(a) program or for each contract  award, have, or are likely to have, a substantial unfair competitive  advantage within an industry;    ensure that partnerships between 8(a) ANC firms and large firms are  functioning in the way they were intended under the 8(a) program; and    maintain information on ANC 8(a) activity. Clearly, 6 of the 7 procuring agencies in our  review--which account for most of the government’s 8(a) dollars to  ANC firms--agree that there is a need for them to work with SBA to  develop guidance for contracting officers in light of the unique  procurement advantages Congress has provided 8(a) ANC firms. Energy’s written response is  included as appendix VII. We traveled to Alaska and met with  representatives of 30 Alaska Native corporations (ANC). Benefits for elder shareholders.
Why GAO Did This Study

Alaska Native corporations (ANC) were created to settle land claims with Alaska Natives and foster economic development. In 1986, legislation passed that allowed ANCs to participate in the Small Business Administration's (SBA) 8(a) program. Since then, Congress has extended special procurement advantages to 8(a) ANC firms, such as the ability to win sole-source contracts for any dollar amount. This report identifies (1) trends in the government's 8(a) 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. GAO also evaluated SBA's oversight of 8(a) ANC firms.

What GAO Found

While representing a small amount of total federal procurement spending,8(a) obligations to firms owned by ANCs increased from $265 million in fiscal year 2000 to $1.1 billion in 2004. In fiscal year 2004, obligations to ANC firms represented 13 percent of total 8(a) dollars. Sole-source awards represented about 77 percent of 8(a) ANC obligations for the six procuring agencies that accounted for the vast majority of total ANC obligations over the 5-year period. These sole-source contracts can represent a broad range of services, as illustrated in GAO's contract file sample, which included contracts for construction in Brazil, training of security guards in Iraq, and information technology services in Washington, D.C. In general, acquisition officials at the agencies reviewed told GAO that the option of using ANC firms under the 8(a) program allows them to quickly, easily, and legally award contracts for any value. They also noted that these contracts help them meet small business goals. In reviewing selected large, sole-source 8(a) contracts awarded to ANC firms, GAO found that contracting officials had not always complied with certain requirements, such as notifying SBA of contract modifications and monitoring the percent of work that is subcontracted. ANCs use the 8(a) program to generate revenue with the goal of providing benefits to their shareholders. These benefits take many forms, including dividend payments, scholarships, internships, and support for elder shareholders. A detailed discussion of the benefits provided by the ANCs is included as appendix X of the report. Some ANCs are heavily reliant on the 8(a) program for revenues, while others approach the program as one of many revenue-generating opportunities. GAO found that some ANCs have increasingly made use of the congressionally authorized advantages afforded to them. One of the key practices is the creation of multiple 8(a) subsidiaries, sometimes in highly diversified lines of business. From fiscal year 1988 to 2005, ANC 8(a) subsidiaries increased from one subsidiary owned by one ANC to 154 subsidiaries owned by 49 ANCs. SBA, which is responsible for implementing the 8(a) program, has not tailored its policies and practices to account for ANCs' unique status and growth in the 8(a) program, even though SBA officials recognize that ANCs enter into more complex business relationships than other 8(a) participants. Areas where SBA's oversight has fallen short include: determining whether more than one subsidiary of the same ANC is generating a majority of its revenue in the same primary industry, consistently determining whether awards to 8(a) ANC firms have resulted in other small businesses losing contract opportunities, and ensuring that the partnerships between 8(a) ANC firms and large firms are functioning in the way they were intended. During our review, SBA officials agreed that improvements are needed and said they are planning to revise their regulations and policies.