Small Business Set-asides to Alaska Native Firms

“Alaska native status gave tiny, inexperienced firm a $250 million Army contract

By Robert O'Harrow Jr.

Washington Post Staff Writer 
Friday, November 26, 2010; 12:01 AM

In summer 2008, the U.S. military had a major problem. More than 2,400 service members had reported being sexually assaulted the previous year, and the number was rising. Congress wanted immediate action.

The Army responded by reaching out to a tiny firm in Delaware.

It was an unlikely choice for such a sensitive task. The year before, United Solutions and Services, known as US2, had just three employees and several small contracts for janitorial services and other work. It was based in a four-bedroom colonial, where the founder worked out of his living room.

But the firm had one quality the Army prized: It was co-owned by an Alaska native corporation (ANC) and therefore could receive federal contracts of any size without competition, under special set-aside exemptions granted by Congress to help impoverished Alaska natives.

On Sept. 2, 2008, US2 was granted a deal worth as much as $250 million - 3,000 times the $73,000 in revenue the firm claimed the year before. The contract enabled the Army to quickly fund a wide array of projects, including a global campaign to prevent sexual assault and harassment, without seeking outside bids.

US2 could not do the work by itself, though. With the Army's knowledge, the firm subcontracted the majority of it to more established companies, a Washington Post investigation has found.

Federal rules generally require prime contractors on set-aside deals to perform at least half of the work, something US2 did not do on more than $100 million worth of jobs, according to interviews with Army officials and an analysis of federal procurement data.

In response to The Post's findings, officials at the Department of the Interior, which managed the contract for the Army, said proper procedures were followed in the contract award. But they said in a statement that they have asked the department's inspector general to investigate.

Alaska native corporations were created in 1971 to settle land claims and help improve life for tens of thousands of impoverished native people. Almost 300 subsidiaries have been created to pursue federal work, and they have received more than $29 billion over the past decade, most of it through contracts awarded without competition.

A Post investigation published in September and October found that those contracts often enriched nonnative executives and employees but sent relatively little money back to Alaska. The Post also found that small firms were passing on work to established contractors. Three of the firms highlighted in the serieshave been suspended from federal contracting work, and legislation curtailing Alaska native privileges has been introduced in the House of Representatives and Senate.

No competition

The US2 deal shows one way federal agencies have increasingly avoided contracting competitions, which specialists say generally get the best deals for taxpayers. And it underscores how small ANC subsidiaries run by nonnatives have benefitted from an unprecedented surge of outsourcing by the military at a time of war.

Army officials acknowledged using the firm to avoid competition, saying they did not have enough time or contracting workers to seek other bids.”