Sep 30, 2010

Investigative reporter Robert O'Harrow Jr., will be online Thursday at 11 a.m. ET to discuss 'Two Worlds,' an investigation into the billions of dollars in federal contracts awarded after Sept. 11, 2001 to Alaska Native corporations, and why most of the money never reached Alaska Native shareholders.

Do you see a need for the program? Is there a benefit to Alaska Native people?


   Thank you for joining us today. This is a fundamental question. 

    The answer to part one: There's no question that Alaska native peoples have long suffered. Their communities were dislocated hundreds of years ago. Over the years, they have see their tradition attached. They have suffered from many years of deprivation. The ANCs were created to help them help themselves, while also taking on the task of preserving native culture.

    The benefits: No question that many ANCs are striving to fulfill their mission. The open question is whether the native shareholders are getting their fair share. I think the evidence is clear that others are getting rich while they're individually getting little in the way of money. ANCs are playing a crucial, growing role in trying to preserve native culture.

There are 13 regional corporations and over 200 village corporations established as a result of the Alaska Native Caims Settlement Act. Your stories refer to a handful (maybe 7 or so) and you focus on the negative. Can you tell us some stories or give examples of those doing it right?



   We'll be writing more about ANCs this fall. Please note that the corporations are only part of the equation here. The government clearly has stumbled in its management and oversight of this system. Some non-native contractors clearly have taken advantage of the extraordinary contracting rules. A variety of people, agencies and companies share responsibility for how the program has developed.

Is executive compensation at ANCs different from executive compensation at other large government contractors like Boeing and Lockheed who receive the bulk of their work from sole source contracts?


   This is a good question. I can't say. It probably deserves a look. You make a good point by the way: The problems with the ANC program are similar to problems at the very core of the federal procurement system.

I am an Alaskan Native person. I know for a fact there are native corporations that pay substantial dividends to their shareholders (like over $20k per year) and I know that there are other corporations whose Boards have consciously decided not to distribute profits in the form of dividends but rather fund scholarship programs, cultural activities, land programs, spirit and other youth acitivites, etc. How do they fit into your story? Why are you judging how these Corporations choose to govern themselves?


   That's a very good point, and an accurate one. Like other kinds of businesses, ANCs differ substantially from one another in some cases in how they operate. I think the story makes that clear. Some have committed themselves to paying more in dividends now. Others believe that building up equity in the company and reinvesting is the right way to go. Others have chosen apparently to partner with big, established corporations and earn whatever they can in the short run, using their congressionally-authorized contracting exemptions.

    As for "judging" the corporations? Our stories look closely at the promises and the results. We're not judging. We're trying to reveal what evidence shows to be a flawed program that apparently does not serve native shareholders or taxpayers well. We're reporting our findings.

1. You talk a lot about the lack of taxpayer value in your story, but I did not see any examples of ANCs providing poor service or getting poor performance reviews. I take from that that they are good contractors, but perhaps expensive. Was that part of your research? Isn't the government focused now on overall value, not just price? 2. How should executive compensation be determined for a privately-held government contractor?


   There's no way to generalize whether ANC subsidiaries are all "good" contractors or "bad" contractors. They vary a lot. As the story notes, auditors have repeatedly questioned whether ANCs were doing their fair share of work. When that happens, that's not good performance. Charging high rates -- higher than might be had through competition -- also is not good performance. Embedded in your question is a paradox: Because the government's oversight has been so lax, there's no way to know for sure all the particulars of ANC contractor performance.

   As for executive compensation, that's really a tough nut to crack. Artificially low caps on compensation would drive away potentially talented managers who want to be paid what they're worth. On the other hand, there's a philosophical question about what's too much relative to what the shareholders receive and how their lives are improved by the program.


I'm really glad that you wrote this article because it exposes what I always thought was true... that these ANCs are a blatant abuse of the 8 (a) rules. How can any other 8 (a) corporations get any business if it is being monopolized by these ANCs? I've interviewed with Chenega corporation. It was offensive to go in there and experience a session where they invite 100 people to sit in a huge waiting room and get called in by three random people to interview for a commodity IT job so they can just pimp me out and keep a large portion of the money that the government is spending on me. Why would anyone want to work for a company like this?



   Interesting perspective. Others who have had similar or better experiences?

You mention the number of ANC's that are out there, and some of the negatives that have been brought on by greed. But did you spend any time looking for success stories? There surely must be something to the balance here. It can't be that ALL 300+ (or whatever) are exactly what you described.



    The stories include a variety of different successes. NANA, for one, was very open about the efforts they're making to improve life in the villages. One young woman clearly made her way out of one village and into both her career and adulthood with direct help from NANA. At the same time, they acknowledged that challenges remain. The CEO of Sealaska pointed out that their commitment to creating jobs for Alaska native shareholders through the 8(a) program -- no small task -- has been paying off. That's clearly a success story. Please don't overlook the harder to quantify but meaningful efforts they're making to preserve native culture.

I am glad that the author of these stories included a piece devoted solely to the many benefits provided by ANCs to their native communities here in Alaska. But this mountain of evidence contradicts a main theme of this series of articles -- that the ANC program has not benefited native shareholders. The ANC program was not designed to make natives RICH but rather to improve their standard of living while allowing them to maintain their native villages and culture. The author of the story never contrasts native shareholders benefiting from the ANC 8(a) program with natives whose ANC does not participate in the program. There is a difference, and you can see it in the villages. One should also bear in mind that many natives prefer living in their villages, speaking their native tongue, and do not wish to move to Anchorage or Washington, D.C., to work as an IT analyst on a DOD contract. The benefits they are receiving, and the growth of their corporations, suits many just fine.



   Thank you for those thoughts.

As a Native American (and federal) attorney, this is another example of the failures of Congressional policy dealing with Native Americans, Alaskan Natives and Native Hawaiians. These people are not "corporations" a legal fiction, they are tribes, clans and villages and should assert their sovereignty and reject Congressional plenary power and demand treaty negotiations with the federal government. We are not a post-racial nation as this, the repeated Republican blockages of the Akaka bill, and poverty conditions on reservations clearly show. The "domestic dependent" nature of American federal Indian jurisprudence is equally at fault, acquiescing to Congressional power when it suits the Supreme Court, exercising judicial review at it's whim. Tribes, and here specifically these Alaskan natives, need to put an end to their support of the Marshall model and start demanding nation to nation treatment.



   This is worth noting and giving thought to. In Alaska, a number of people brought up these matters. Challenging stuff that's worth considering.

Robert - Great article! Are you going to cover some of the things that must be done to get the ANC Program back on track in tomorrow's edition? This Program has been broken for a long time. (Great pictures from Alaska also!)


   Thank you. And thanks for mentioning the photos. All of this stuff takes on a different meaning when you consider what it's really about: helping some of America's neediest people. I believe Nikki Kahn's photograph's brilliantly captured the people, their need and their communities. Their humanity.

Did you interview non - tribal 8a owners/representatives to find out if they have been adversly impacted (i.e., loss of business opportunities) by the large amount of ANC contracts? If so, what did they say?



   I did not, for these stories. Audits have repeatedly raised questions about whether the big ANC contracts, and the ANCs with many subsidiaries, are crowding out actual small businesses.

If former Senator Ted Stevens was the driving force behind this program (and he's neither in the Senate, manipulating appropriations, nor, even among the living), and if the weight of the evidence - through audit and investigative reporting - suggests that this program results in, at best, inefficiency, and, at worst, government waste, and it doesn't achieve its objectives, why doesn't Congress just fix (or at least try to fix) the program? How hard can it be to take ANC's out of the 8(a) program, where they never belonged in the first place? Why not require that - like 8(a) firms - ANC's be managed by Alaska Natives? Why not create an ANC Inspector General program? (We have them for everything else - Iraq, Afghanistan, TARP, etc.?)


   All good questions.

    I'll add another one: How will the government find fixes that don't make matters worse for the people most in need: Alaska native shareholders.


How long have you been working on this story?


   All year. Throughout the spring, I conducted interviews and did research while also working on other stories. Since June, I have devoted much time to it, including time in Alaska.


What do you see as the solution to the issue?


   I don't know the solution.

   Generally speaking, I know that good government and good contracting works best with better transparency, better oversight and accountability for abuses.

Great article. Although the ANCs are an obvious get-rich scam for a few that takes business away from other legitimate small businesses and large government contractors, I think the ANCs continue to exist and have support because: 1. Other minority set-aside businesses (8a, veterans, women, etc) fear that a move against ANCs might precipitate a move against them. 2. Large government contractors like to partner with ANCs because they get 49 percent of huge contracts without having to go through the costly expense of bid and proposal. 3. No one wants to appear racist by opposing the ANC set-aside program. Would you agree? And now that Sen. Stevens, the anti-government pork king from Alaska is gone, do you see any move in the Senate to eliminate this program?


   Interesting observations. Anybody care to comment?

Had you begun working on this story before Ted Stevens died? Had you planned to interview him? Did his death affect the rest of your investigation, and if so, how?


   I had began working on the stories before the passing of Sen. Stevens. I was very disappointed I was not able to share my findings. I had the good fortune -- and captivating experience -- of talking to him about the program several years ago. He was an ardent supporter of ANCs and the program.


You have a couple of pieces up today and one of them explains some of the significant benefits that some ANCs are providing. Yet your headline piece has a lot of conclusions that the program is not working. How do you balance these two somewhat opposed conclusions? The negative piece is getting much more play than the positive.


   That was the balance of our findings. There's no question that ANCs are sending millions in money earned through federal contracting back to Alaska and the native communities. The evidence is clear that that money represents a relatively small proportion of the contracting dollars in play. The problems with the ANC program are well documented. 

You just responded to a question by stating, "one young woman clearly made her way out of one village." That is offensive and sounds judgmental. This is a lifestyle that native people have lived for hundreds of years and LOVE! My family comes from a village in Alaska and although I don't live there anymore, I can tell you my heart tugs at going home. Saying we "make our way out" clearly tells me you wrote this story with tainted glasses.



   I'm sorry you see it that way. No disrepect was intended. She was thrilled to make her way out of the village, into college and the professional world. I believe she stands clearly as a success story that takes nothing away from the timeless traditions of subsistence living that many people in Alaska pursue week-in, week-out.

Do you think the reason others are also being compensated in ANC world is because the Alaskan Natives are just not prepared to work in the world of federal contractIng?


   There's no question about the challenges that Alaska native communities have faced as they stepped into the Western corporate world. They come from a different, equally valid culture, with its own rich traditions, not least of which is, as I have come to understand it, to always think of the well being of the group, not simply the individual. Capitalism and bottom lines was not at the core of their culture. The best ANCs are working hard to meld the two culture. 

Your story mirrors several others in that it focuses on the high dollars coming into ANCs, but ignores the myriad of costs associated with performance of a government contract. Even in your last response you note, "The evidence is clear that that money represents a relatively small proportion of the contracting dollars in play." There is a small amount left over because the actual profit margin in government contracting is very small -- most industry experts say 2-5 percent. How did that factor into your conclusions?


   A very good point. The pie is not as large as it might appear at first glance.

   That doesn't diminish the fact that many non-native corporations and executives participating with ANC subsidiaries have done very well financially, while native shareholders as a group have received little for their pockets.


    Many thanks for joining me and sharing all your very interesting questions.

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