Alaska Native Corporations tackle criticism: An interview with Aaron Schutt, chief operations officer of Doyon, Limited

Published in Indian Country Today in December 2010. 

Three of the 13 regional Alaska Native Corporations got together two years ago to propose improvements to ANC participation in the Small Business Administration’s 8(a) federal sole-source contracting program, said Aaron M. Schutt, Athabaskan, senior vice president and chief operating officer of one of the firms, Doyon, Limited. Joining Doyon were Cook Inlet Region, Inc., and Arctic Slope Regional Corporation. The contracting program has now come under fire, with Senator Claire McCaskill (D.-Missouri) submitting legislation that would limit the size of contracts ANCs receive to those allowed individual small businesses.

The reform coalition had suggested the changes to prevent just such attacks, said Schutt, who is an attorney. “We believe improvements in three areas — increased competition, greater accountability and enforcement of existing rules — will strengthen ANCs’ participation in the program. Had these reforms occurred earlier, they might have kept Alaska Native Corporations out of newspapers and Congressional hearings.”

           Collectively, the three firms have about 35,000 shareholders. Each company works in some combination of oil-field, information-technology and utilities services; petroleum refining; engineering; construction; real estate; financial investment; and other sectors.

Indian Country Today: Do the three coalition corporations use 8(a) contracting?
Aaron M. Schutt: We’ve all used sole-source 8(a) contracting — Arctic Slope for 10 years, Doyon since 2005, and Cook Inlet beginning most recently — and want to continue to do so. We’ve also utilized competitive 8(a) contracts and full and open competition in the federal market. In addition, we each have business that is outside the federal arena. If Senator McCaskill succeeds in removing the provision that presumes Alaska Native Corporations’ subsidiaries to be small disadvantaged corporations, almost all of the regional ANCs, including our three companies, and most of the 200-plus village ANCs would be too large to participate. It would devastate our companies and Native communities overnight.

ICT: Senator McCaskill’s latest press release says ANCs have failed to employ Alaska Native people. Is she correct?
AMS: Doyon currently employs about 500 shareholders and other Native people; doing so is a mission, particularly for projects in our homeland. Our board of directors and shareholders hold us accountable for this. They are proud of our success and continually push us to do more. Seeing our drum logo around town and knowing community members work for us is important to them.
That said, the 8(a) program does not require any business do this. For example, women-owned firms are not required to hire only women, or other minority-owned firms only minorities. This criticism is unfair because it is not a program requirement.

ICT: What about the $615 the senator says is all ANC shareholders receive annually?
AMS: Our coalition calls for more transparency in reporting benefits. However, that number appears to be meaningless, and I don’t know how Senator McCaskill computed it. The data she requested from 19 ANCs in 2009 included our revenue and profits without regard to their source. The real issue is whether shareholders believe ANCs are providing adequate benefits for them; this is a question for them.
Turning to Senator McCaskill’s calculations: her figures appear to aggregate corporations at different stages of business maturity, including startups that are still reinvesting and won’t distribute dividends for a few years. In these cases, she ignores the value to shareholders of building a new company. She also seems to have combined revenue streams that include not just sole-source 8(a) contracts, but also competitive 8(a) contracts, federal contracts awarded through full and open competition and non-government-related business. For instance, half of Doyon’s business is unrelated to government contracting. Finally, ANC shareholder employment and training programs, such as Doyon’s, are valuable, but don’t appear in the $615 data point.

ICT: What about ANCs being used as pass-throughs to other firms — another accusation?
AMS: Unfortunately, this debate has been reduced to sound bites. Yes, cases of fraud, waste and abuse have occurred, but they’re few and far between, and some very old cases are cited repeatedly — as though they’d just happened. We all know the 8(a) program has rules about matters such as the amount of a project a prime contractor must execute, and that’s why we believe the rules should be enforced properly, so that those of us who obey them are not subjected to the wrath of a Senator McCaskill.
Perception of this situation may have been exacerbated after 9/11, when the war on terror, then the war in Iraq, meant the government used ANCs to get many projects underway more speedily than the more slow-moving competitive process allowed. Billions of dollars in contracts were written quickly, which brings up the other half of the puzzle. Are federal officials being smart when procuring contracts? We all need to be partners and work well together.

ICT: Senator McCaskill told the Washington Post Native people should receive “direct payments” as a substitute for having their own businesses. Is that idea acceptable?
AMS: I think I share the overwhelming disgust in Alaska and Indian country for that comment. Handouts don’t work. Congress created ANCs in 1971 to provide self-determination to Alaska Native People. Our goal is to be economic engines for our people. The SBA lifted the ceiling on Native businesses’ contract amounts because our benefits flow to large numbers of disadvantaged people, not just one or a few entrepreneurs, as in the case of an individually owned small company. As a result, Native enterprises nationwide have used this program to serve those who depend on them, while delivering value to the government and the taxpayers. That’s why we feel the program should be improved, rather than destroyed.

ICT: The proposed legislation restricts Alaskan and Hawaiian firms’ participation. Are the continental-48 tribes next?
AMS: Senator McCaskill hasn’t engaged in meaningful dialogue with ANCs, so we don’t fully understand why she’s targeting Native companies or the eventual scope of her efforts. If I were advising tribes and tribal organizations, as I used to do, I’d tell them this legislation could spill over into their businesses. We at Doyon, Arctic Slope, and Cook Inlet share goals with Indian country and Native Hawaiian Organizations. We want this program to be more widely available, and we want dialogue with our cousins across the country. 

c. Stephanie Woodard.