	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,  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. ANCs use their ability to own multiple businesses in the 8(a) program, as  allowed by law, in different ways. 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. 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. 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’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;     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    maintain information on ANC 8(a) activity. Equally important, we stated, significant improvements  were needed in SBA’s oversight of the program. We recommended that the Administrator of SBA:  1. 2. 3. 8. SBA response: SBA has implemented this recommendation by  revising the partnership agreements with the procuring agencies. 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. The Department also provided  training on the 8(a) program, to include contracting with ANC firms.
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 receive sole-source contracts for any dollar amount and to own multiple subsidiaries in the 8(a) program. We were asked to testify on an earlier report where we identified (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. GAO made recommendations aimed at improving SBA's oversight of 8(a) ANC contracting activity and ensuring that procuring agencies properly oversee 8(a) contracts they award to ANC firms. SBA has either taken action or plans to take action on the recommendations. The procuring agencies generally agreed with our recommendation to them. We believe implementation of our recommendations will provide better oversight of 8(a) ANC contracting activity and provide decision makers with information to know whether the program is operating as intended.

What GAO Found

While representing a small amount of total federal procurement spending, obligations for 8(a) contracts to ANC firms increased from $265 million in fiscal year 2000 to $1.1 billion in 2004. Over the 5-year period, agencies 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 the National Aeronautics and Space Administration--accounted for over 85 percent of 8(a) contracting activity. 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 providing benefits to 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. 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. 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 percentage of work that is subcontracted. SBA, which is primarily responsible for implementing the 8(a) program, had not tailored its policies and practices to account for ANCs' unique status and growth in the 8(a) program, even though SBA officials recognized that ANCs enter into more complex business relationships than other 8(a) participants. Areas where SBA's oversight fell short included determining whether more than one subsidiary of the same ANC was generating a majority of its revenue in the same primary industry, consistently determining whether awards to 8(a) ANC firms had resulted in other small businesses losing contract opportunities, and ensuring that the partnerships between 8(a) ANC firms and large firms were functioning in the way they were intended.