    [Senate Hearing 112-33]
    [From the U.S. Government Publishing Office]

                                                             S. Hrg. 112-33

       PROMISE FULFILLED: THE ROLE OF THE SBA 8(A) PROGRAM IN ENHANCING
                                   ECONOMIC
                         DEVELOPMENT IN INDIAN COUNTRY

    =======================================================================

                                    HEARING

                                   before the

                          COMMITTEE ON INDIAN AFFAIRS
                              UNITED STATES SENATE

                          ONE HUNDRED TWELFTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 APRIL 7, 2011

                                   __________

             Printed for the use of the Committee on Indian Affairs

                                    _____

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                          COMMITTEE ON INDIAN AFFAIRS

                       DANIEL K. AKAKA, Hawaii, Chairman
                     JOHN BARRASSO, Wyoming, Vice Chairman
    DANIEL K. INOUYE, Hawaii             JOHN McCAIN, Arizona
    KENT CONRAD, North Dakota            LISA MURKOWSKI, Alaska
    TIM JOHNSON, South Dakota            JOHN HOEVEN, North Dakota
    MARIA CANTWELL, Washington           MIKE CRAPO, Idaho
    JON TESTER, Montana                  MIKE JOHANNS, Nebraska
    TOM UDALL, New Mexico
    AL FRANKEN, Minnesota
          Loretta A. Tuell, Majority Staff Director and Chief Counsel
         David A. Mullon Jr., Minority Staff Director and Chief Counsel

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on April 7, 2011....................................     1
    Statement of Senator Akaka.......................................     1
    Statement of Senator Barrasso....................................     2
    Statement of Senator Begich......................................     7
    Statement of Senator Crapo.......................................    57
        Prepared statement...........................................    57
    Statement of Senator Johanns.....................................     6
    Statement of Senator McCain......................................    21
    Statement of Senator Murkowski...................................     3
    Statement of Senator Tester......................................     3
    Statement of Senator Udall.......................................     5
        Prepared statement...........................................     6

                                   Witnesses

    Allan, Hon. Chief James, Chairman, Coeur d'Alene Tribe...........    58
        Prepared statement...........................................    59
    Hall, Larry, President/General Manager, S&K Electronics, Inc.....    83
        Prepared statement...........................................    85
    Johnson-Pata, Jackie, Executive Director, National Congress of
      American Indians...............................................    24
        Prepared statement...........................................    26
    Jordan, Joseph G., Associate Administrator for Government
      Contracting and Business Development, U.S. Small Business
      Administration.................................................     9
        Prepared statement...........................................    10
    Kitka, Julie E., President, Alaska Federation of Natives;
      Accompanied by Byron I. Mallott, Director, Sealaska Corporation    32
        Prepared statement...........................................    34
        Byron Mallot, prepared statement.............................    41
    McClintock, Peter L. Deputy Inspector General, Office of the
      Inspector General, U.S. Small Business Administration..........    13
        Prepared statement...........................................    14
    Morgan, Lance, Chairman, Native American Contractors Association;
      President/CEO, Ho-Chunk, Inc...................................    61
        Prepared statement...........................................    64

                                    Appendix

    Hall, Hon. Tex, Chairman, Mandan, Hidatsa and Arikara Nation,
      prepared statement.............................................    95
    Inouye, Hon. Daniel K., U.S. Senator from Hawaii, prepared
      statement......................................................    93
    Johns, Ken, President/CEO, Ahtna, Inc., prepared statement.......   107
    Klein, Christine E., A.A.E., Executive Vice President/Chief
      Operating Officer, Calista Corporation, prepared statement.....   126
    Parnell, Hon. Sean, Governor, State of Alaska, prepared statement   104
    Response to written questions submitted by Hon. Daniel K. Akaka
      to:
        Larry Hall...................................................   130
        Julie E. Kitka...............................................   136
        Peter McClintock.............................................   131
        Lance Morgan.................................................   134
    Response to written questions submitted by Hon. John Barrasso to:
        Larry Hall...................................................   130
        Julie E. Kitka...............................................   139
        Peter McClintock.............................................   132
        Lance Morgan.................................................   135
    Smith, Hon. Chad ``Corntassel'', Principal Chief, Cherokee
      Nation, prepared statement.....................................    94
    Trevan, Eric S., President/CEO, National Center for American
      Indian Enterprise Development, prepared statement..............   119
    Ward, Virginia, Chairwoman, Board of Directors, Afognak Native
      Corporation, prepared statement................................   105

       PROMISE FULFILLED: THE ROLE OF THE SBA 8(A) PROGRAM IN ENHANCING
                     ECONOMIC DEVELOPMENT IN INDIAN COUNTRY

                                  ----------

                            THURSDAY, APRIL 7, 2011

                                           U.S. Senate,
                                   Committee on Indian Affairs,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 2:28 p.m. in room
    628, Dirksen Senate Office Building, Hon. Daniel K. Akaka,
    Chairman of the Committee, presiding.

              OPENING STATEMENT OF HON. DANIEL K. AKAKA,
                        U.S. SENATOR FROM HAWAII

        The Chairman. I call this hearing of the Committee on
    Indian Affairs to order.
        Again, aloha and thank you for being with us today. Before
    we begin, I want to welcome Senator Begich who is joining my
    Indian Affairs colleagues on the dais. I want to thank all of
    my colleagues for taking time out of their schedules to be here
    with us as we discuss this very important topic.
        Today's hearing is called Promise Fulfilled: The Role of
    the SBA 8(a) Program in Enhancing Economic Development in
    Indian Country. We will examine the nexus between the Federal
    policy on self-determination and the trust responsibility to
    American Indians, Alaska Natives and Native Hawaiians and the
    role of SBA 8(a) Program in enhancing economic self-
    determination for these groups.
        For over 45 years, we have committed ourselves to the
    policy of self-determination and self-sufficiency for native
    communities. We have deliberately turned from the paternal
    policies of the past to ones that emphasize respect for native
    decision-making and partnerships between the American Indians,
    Alaska Natives, Native Hawaiians and the Federal Government.
        We have found that when we do business with the tribes and
    other native organizations, whether that be through 638
    contracting or procurement of other goods and services, the
    Federal Government achieves two goals. We enhance our ability
    to do the people's business, the business of good government
    and promises kept, and we strengthen the ability of native
    communities to be self-sufficient.
        The SBA 8(a) Program has become an integral part of the way
    we advance these two goals with one program. This 8(a) Program
    has had successes, and of course, some challenges. I look
    forward to the discussion on how to build upon this program's
    ability to advance self-determination and self-sufficiency for
    native communities, while meeting the needs of the government
    customer.
        I want to extend a special mahalo or thank you to all of
    those who have traveled far, from Hawaii and Alaska and other
    places, to join us today. I appreciate your presence at these
    proceedings.
        Vice Chair Barrasso, would you like to comment?

                   STATEMENT OF HON. JOHN BARRASSO,
                       U.S. SENATOR FROM WYOMING

        Senator Barrasso. Well, I would, Mr. Chairman.
        I want to thank you for holding this important hearing
    today, and I want to welcome all of those who are going to be
    sharing their thoughts and their ideas with us.
        The Committee is quite familiar, as you said, Mr. Chairman,
    with the challenges of high unemployment and poverty rates in
    many of our Country's Indian communities. For decades, the
    Congress and the Executive Branch have sought to create
    sustainable economies and employment opportunities in Indian
    Country.
        I am afraid that we have achieved, as you said, only
    limited success, too limited. The 8(a) Program for small
    businesses represents one of the Federal initiatives to create
    economic development in Indian Country, and it is fair to say
    that the SBA program has worked in many cases. Though, to be
    sure, certainly as you said, Mr. Chairman, not in all cases.
        The fundamental purpose of this program is to assist small
    businesses to become self-sufficient and capable of competing
    effectively in the marketplace. In theory, that purpose fits
    quite well with the needs of Indian Country.
        Now, I understand that some of our witnesses today will
    illustrate the benefits of the 8(a) Program, what it can
    accomplish when it is done right. However, according to the
    Government Accountability Office and the Inspector General
    reports, there have been some problems in the oversight and
    implementation of the program. So I am hoping to hear some
    specifics about what steps have been taken by the Small
    Business Administration and the 8(a) community to deal with
    these specific problems.
        The Indian 8(a) contracting is only a small fraction of all
    the small business contracting, and an even smaller fraction of
    all Federal contracting. However, the program must fulfill its
    basic purposes, not simply operate as a way that benefits firms
    or individuals that the program is not intended to help. And it
    must be transparent and accountable to taxpayers and tribal
    members that the businesses support.
        So I look forward to the testimony, Mr. Chairman. And I
    would say that Senator McCain, I visited with him a little
    earlier today, he is unavoidably detained. I know he does have
    some questions for Mr. Jordan and Mr. McClintock, so I am
    hoping that they could stay and remain available, and hopefully
    Senator McCain's delay will not be too long.
        Thank you, Mr. Chairman.
        The Chairman. Thank you, Senator Barrasso, my partner here.
        Would any of the other Members of the Committee like to
    make any opening statement?
        Senator Tester?

                     STATEMENT OF HON. JON TESTER,
                       U.S. SENATOR FROM MONTANA

        Senator Tester. Yes, thank you, Mr. Chairman.
        First of all, the Native Hawaiian Recognition bill,
    congratulations on moving it forward. I think it is a bill that
    we need to continue fighting for. The Carcieri fix, as the Vice
    Chairman pointed out, is an important bill. And to you also,
    Mr. Chairman, we need to move that forward. Its time has long
    passed and we need to move it.
        I would just say just very briefly, the 8(a) Program is a
    very, very critically important program. In Indian Country, I
    hear about it whenever I go around Montana. And I think reports
    that there are some unscrupulous folks that may be taking
    advantage of the program, we need to get cleaned up and cleaned
    up as soon as possible. And I look forward to hearing from the
    witnesses in looking for solutions to move it forward.
        Unemployment in our neck of the woods is pretty doggone
    high in Indian Country and this is one of the programs that
    helps offset that unemployment problem. It could be a better
    program. Let's make it a better program and move forward in
    that direction.
        Thank you.
        The Chairman. Thank you very much, Senator Tester.
        Senator Murkowski?

                   STATEMENT OF HON. LISA MURKOWSKI,
                        U.S. SENATOR FROM ALASKA

        Senator Murkowski. Thank you, Mr. Chairman.
        And if I may ask the Committee's indulgence, I typically do
    not like to make much more than a minute opening statement, but
    if I may have just a few minutes this afternoon to speak. I
    have a lot of Alaskans here and, of course, a great deal of
    interest in this. I will try to go as quickly as possible.
        First, I want to thank you. I want to thank you and Vice
    Chairman Barrasso for convening this hearing to explore the
    role of the Small Business Administration's 8(a) Program in
    promoting economic development in our native communities. It
    was about a year and a half ago that several on this dais
    participated in a hearing before Senator McCaskill's
    Subcommittee to examine what was referred to as the Alaska
    Native Corporation 8(a) Program.
        In my opening remarks before that hearing, I pointed out
    that there is no such thing as an Alaska Native Corporation
    8(a) Program. Rather, that there are specific contracting
    opportunities within the SBA's 8(a) Program that are available
    to Indian tribes, to Alaska Native corporations, and to Native
    Hawaiian organizations.
        And moreover, there are specific rules that apply to the
    participation of Indian-owned entities in the 8(a) Program, and
    these opportunities and rules are rooted in Federal Indian
    policy to address the unique challenges that face our Indian
    tribes, our Alaska Native corporations, and our Native Hawaiian
    organizations in developing viable businesses.
        So I welcome the decision of this Committee to examine the
    8(a) Program through the lens of Federal Indian policy because
    we are uniquely positioned to undertake that task, uniquely
    positioned to inform our colleagues on the significant and
    unique handicaps that have historically made it difficult or
    impossible for tribes, Alaska Native corporations, and Native
    Hawaiian organizations to engage in sustainable business
    practices.
        And this Committee is best positioned to evaluate how
    ending or substantially restricting these special contracting
    opportunities would affect the future of our tribes, our native
    corporations and our Native Hawaiian organizations.
        I would like to take just a moment to mention a few of the
    difficulties that have faced the native people of Alaska as
    they entered the world of business. Participation in the
    business world didn't come naturally to the native people of
    Alaska. Alaska Native people were hunters. They are fishers.
    They are whalers. They are living off the land and marine
    resources. And we are not just talking about ancient times,
    past times.
        This reliance on subsistence for sustenance remains true
    today in more than 200 native villages of bush Alaska, most of
    which lack road connections to the remainder of the American
    continent. These are isolated, remote communities which have
    some of the highest poverty rates in the Nation. In some of
    these communities, multiple grades of elementary school are
    still taught within a single classroom. There is no broadband
    Internet access, very few year-round employment opportunities.
        And so in 1971, Congress settled the aboriginal lands
    claims of the native people of Alaska, which gave Alaska's
    native people title to some 44 million acres of land. But it
    also directed them to form businesses to help succeeding
    generations of native people bridge the gap between the
    subsistence lifestyle which was customary and traditional, and
    the challenge of surviving and succeeding in modern America.
        The businesses that were formed at the direction of
    Congress are called Alaska Native Corporations. And this year,
    we observed the 40th anniversary of the formation of the ANCs.
    And as we will hear today, the ANCs have enjoyed some
    remarkable successes, and these successes have occurred in
    spite of the substantial handicaps that those businesses have
    to overcome. Nearly all of the first generation of Alaska
    Native Corporation leaders lacked a college education and most
    had no prior experience in business. But many have earned a
    place in Alaska history among our State's most respected
    individuals for the way that they have grown their native
    corporations.
        And today, we have legions of young Alaska Native people
    who are graduating from school. Some are getting advanced
    degrees thanks in part to the scholarships from their
    corporations. Some have gone to work for their corporations and
    are employed in 8(a) businesses today. Others like Kristi
    Williams on my staff, an Athabascan Indian, she is cutting her
    teeth here in Washington, D.C. Some are working in native
    health, education, social services. And some choose to return
    to their villages and continue the traditional. All of these
    roads are good and culturally appropriate.
        In addition to the scholarships, native corporations are
    using the fruits of their 8(a) involvement in culturally
    appropriate ways, like funding special benefits for the
    traditional elders or investing in cultural preservation
    programs or ensuring that their aboriginal land base remains
    intact. And on top of that, many native corporations pay annual
    cash dividends to the shareholders. Some are paying these
    dividends for the first time in 40 years, and only because of
    the 8(a) business opportunity.
        But it must also be noted that on the road to success, many
    have stumbled, and even 40 years after the passage of the land
    claims settlement, it is apparent that some are still
    stumbling, but few have failed. And what is remarkable is that
    Alaska's native people simply don't give up, not even when they
    are talked about, the spotlight is put on them by The
    Washington Post, USA Today, and ProPublica.
        When they discover that they have made mistakes in the
    selection of business partners, they correct those mistakes,
    and they remember the lessons that they have learned. And when
    they discover that they have been ripped off by business
    partners, they don't sweep things under the rug and hope that
    nobody is going to notice. They go to court. They recover what
    is rightfully theirs, and they regain control of their
    businesses.
        In my view, our objective today should be to celebrate the
    resilience of our Indian businesses. But we must also look to
    how we can improve the 8(a) Program. And to improve, we must
    identify the lessons of failure and find ways to help Indian
    8(a) businesses succeed going forward. If reforms are needed to
    ensure that the Indian 8(a) Program achieves its objectives,
    let's get them out on the table.
        And I want to commend the Small Business Administration for
    taking a stab at doing just that in the comprehensive
    regulations that they have recently released. If the SBA needs
    to be doing more as part of its educational and coaching
    mission to ensure that Indian 8(a) businesses don't fall into a
    trap, let's identify those resources needed to accomplish that.
        I thank you, Mr. Chairman, for the indulgence of some
    additional time, and again I so appreciate that you have
    brought this hearing forward.
        The Chairman. Thank you very much, Senator Murkowski.
        Senator Udall?

                     STATEMENT OF HON. TOM UDALL,
                      U.S. SENATOR FROM NEW MEXICO

        Senator Udall. Mr. Chairman, I would just ask unanimous
    consent to put my opening statement in the record and look
    forward to the hearing.
        The Chairman. It will be included in the record.
        [The prepared statement of Senator Udall follows:]

       Prepared Statement of Hon. Tom Udall, U.S. Senator from New Mexico
        As my colleagues before me, I'd like to thank you all for being
    here. We appreciate your taking the time to be with us here today and
    your perspectives on the impact and significance of the 8(a) program.
        New Mexico tribes and pueblos have contacted me expressing their
    support for the 8(a) program and for the participation of ANCs. And
    especially for how these preferences help fulfill our trust
    responsibilities to foster economic development opportunities.
        My interest in this issue then, is in how ANCs are working with
    other tribal and native entities across the country; in the
    partnerships and relationships they have built to promote economic
    development in Indian Country across the country.
        I believe that ANCs have worked to help other native and tribal
    entities develop their own economic development capacity and look for
    that to continue.
        I look forward to hearing your testimony.

        The Chairman. Senator Johanns?

                    STATEMENT OF HON. MIKE JOHANNS,
                       U.S. SENATOR FROM NEBRASKA

        Senator Johanns. Thank you, Mr. Chairman. I will be
    extremely brief.
        Let me also say to the SBA thank you. I think we are all
    convinced that there were some needed changes to bring some
    sunshine and better regulation to what was happening here, and
    you grabbed a hold of it and I applaud you for that. And I am
    anxious to hear your testimony as to how you feel that is going
    to improve the situation.
        But I do want to take just a brief moment to talk about a
    success story in this program. I am guessing each of our first
    witnesses will be familiar with this success story.
        Let me roll the clock back to the 1990s. One of our tribes
    in Nebraska, the Winnebago Tribe, literally was experiencing
    unemployment at a 70 percent rate. Everybody was unemployed. It
    was that difficult.
        But they decided they didn't want the world to be that way,
    and so they went to work. They rolled up their sleeves. They
    took advantage of the opportunities that were presented. And
    today, I am able to tell you that the unemployment rate on the
    reservation has fallen to less than 10 percent. That is because
    of an entity called Ho-Chunk, which now employs 1,400 people.
        Ho-Chunk provides a diverse range of industries,
    information technology, construction, professional services,
    office products, just to name a few. Ho-Chunk's profits have
    been used to provide scholarships, to expand the tribal
    college, and to develop a native workforce.
        The leader of Ho-Chunk was recently recognized as the
    regional Small Business Association minority small business
    person of the year, and he is sitting at the end here. Lance
    and I have known each other for a long time and worked together
    dating back to my time as Governor.
        It is just a remarkable success story. Now, just in the
    last few years, this kicked off during my time as Governor, he
    led efforts to develop a 40-acre Ho-Chunk village in Winnebago,
    Nebraska. I have driven through Winnebago many times on my way
    to other places. I have spent time on the reservation. To
    describe this as a miraculous turnaround just simply doesn't do
    it justice.
        This is truly a case where I think we have a model here for
    others to look at and ask the question: How did they do it? And
    can we learn from what they have done? Certainly, in any
    program, there is going to be some fits and some starts and
    some ebbs and some flows.
        And that is why I will end my comments where I started, and
    just say thank you to the SBA for not giving up on this
    program, for realizing how important it is, for recognizing
    that there are success stories out there like Ho-Chunk, and
    also recognizing that we just need to do things a bit better.
    And I think everybody is willing to do that.
        Mr. Chairman, thank you.
        The Chairman. Thank you very much, Senator Johanns.
        Senator Begich?
        Following Senator Begich, I will call on Senator Tester to
    make an introduction.

                    STATEMENT OF HON. MARK BEGICH,
                        U.S. SENATOR FROM ALASKA

        Senator Begich. Thank you, Mr. Chairman, and thank you for
    the ability to be here on the dais with you and the Members.
        I want to echo the comments of Senator Murkowski and
    Senator Johanns. These are great examples of why the program
    and the many members that I know within the 8(a) corporations
    are incredibly successful.
        In Alaska, as Senator Murkowski laid out, there were great
    challenges in the early days and we have come a long ways since
    the early days of Alaska Land Claims Settlement Act to what is
    now companies engaged in incredible opportunities for the
    Alaska Native people.
        Just to say a couple of things just to put it in
    perspective, when you think of Alaska and when you think of the
    situations that we deal with, especially in our Indian Country,
    and you think of gas prices at $10 a gallon; 46 communities
    still using the honey bucket; one-third of the rural
    communities haul water from a community source; 20 percent of
    Alaska Natives living in poverty, this is actually an
    improvement from what it was 40 years ago and where we are
    today.
        A big and sizable piece of that was 8(a) corporations and
    the establishment of them. There is no question that there have
    been challenges in years past on making sure the 8(a)
    corporations are successful. The SBA has stepped to the plate,
    as Senator Johanns, you have mentioned, and that is they have
    seen this program to be a success and want to make sure it is
    modified and make sure it works well.
        The rules and regulations they put forward, the 8(a)
    corporations have been asking for for more than 10 years--
    asking for assistance to make sure they have the right
    oversight, the right accountability, so they can become even
    more successful and be a successful program for SBA.
        So in a lot of ways, the work that SBA has done with the
    tribal consultation has brought forward some rules and
    regulations that will not only enhance the efforts already, but
    really grow the opportunities not just in the few that have
    already done the SBA 8(a) program, but all across this country.
        And I think it is clearly one of the programs that when you
    think about it, is not one of these Federal programs that is a
    hand-out to anybody. It is really a step to help create
    opportunity, of self-sufficiency. And what I find always
    interesting when I hear about the SBA program and some of the
    critics on the 8(a) Program complaining it's an entitlement,
    well, to be very frank with you, it is not. It is an
    opportunity for people to create their own successes in their
    small and large communities. And many of these corporations pay
    taxes, lots of taxes to the Federal Government. I am not sure I
    know an entitlement program that pays taxes.
        This is clearly a program that has great success. As
    Senator Murkowski has said, there have been challenges, but we
    have achieved a great deal in Alaska, especially with the 8(a)
    corporations. So as we have seen in newspapers over the last
    year, taking information that I consider somewhat old and
    making them sound fresh, I think has been somewhat
    irresponsible.
        So today is maybe a chance to shed the full light on the
    success of 8(a) corporations. So I thank the Chairman and the
    Ranking Member for holding this hearing because I think it will
    really, clearly from Alaska's perspective, from the first
    people of the Country, for Native Hawaiians, this is an
    incredible program to advance not only this generation, but
    multiple generations in employment and self-sufficiency.
        So again, thank you, Mr. Chairman, for holding this and I
    look forward to the testimony. And my view is probably when we
    are done here, we will have more positive light on a great
    program that needed some tweaking, which has been done, and now
    we will see some additional success in the future.
        Thank you, Mr. Chairman.
        The Chairman. Thank you, Senator Begich.
        I want to thank the Members of the Committee for your
    statements which will be included in the record.
        We only have limited time to conduct the hearing and
    therefore had to limit the number of witnesses we invited. But
    as Chairman, it is my goal to ensure that we hear all who want
    to contribute to the discussion. So the hearing record is open
    for two weeks from today, and I encourage everyone to submit
    your comments through written testimony.
        I want to remind the witnesses to please limit your oral
    testimony to five minutes today.
        Before we begin with the witnesses, I would like to call on
    Senator Tester.
        Senator Tester. Thank you, Mr. Chairman. I appreciate the
    latitude.
        On the third panel, which I am not going to be able to be
    here for, I apologize for that ahead of time, a gentleman from
    Polson, Montana by the name of Larry Hall, who is sitting in
    the front row, will be testifying. Larry has just done an
    incredible job creating jobs and creating an economy in western
    Montana, particularly on the Salish-Kootenai Indian
    Reservation. And he has developed a company that is a jewel in
    western Montana and really benefits not only the folks in
    Indian Country, but the economy impacts people outside that
    reservation, too.
        Thank you for being here, Larry.
        The Chairman. Thank you.
        I want to welcome Joseph Jordan, the Associate
    Administrator for Government Contracting and Business
    Development with the SBA. And also from the SBA, we have Mr.
    Peter McClintock, Deputy Inspector General from the Office of
    the Inspector General.
        Welcome to both of you.
        Mr. Jordan, please proceed with your testimony.

               STATEMENT OF JOSEPH G. JORDAN, ASSOCIATE
         ADMINISTRATOR FOR GOVERNMENT CONTRACTING AND BUSINESS
                   DEVELOPMENT, U.S. SMALL BUSINESS
                             ADMINISTRATION

        Mr. Jordan. Thank you, Mr. Chairman.
        Chairman Akaka, Vice Chairman Barrasso and Members of the
    Committee, thank you for inviting the U.S. Small Business
    Administration to testify regarding the utilization of the SBA
    8(a) Business Development Program in Indian Country.
        My name is Joseph Jordan and I am the Associate
    Administrator for SBA's Office of Government Contracting and
    Business Development. My office has primary responsibility for
    the 8(a) Program from both the policy and programmatic
    execution perspective.
        As you know, in response to Congressional findings that
    disadvantaged individuals did not play an integral role in
    America's free enterprise system, and did not share in the
    community redevelopment process, the 8(a) Business Development
    Program was created during the 1960s. Beginning in 1986,
    significant changes were made to the 8(a) Program when Congress
    enacted legislation that allowed Alaska Native corporations,
    Native Hawaiian organizations, community development
    corporations and tribally owned funds to participate in the
    8(a) Program.
        This was intended to allow these organizations to benefit
    from the community development opportunities available through
    the 8(a) Program. The utilization of the program by these
    entities to improve community and economic development is
    consistent with tribal self-determination policies and
    strategies supported by the Administration.
        SBA's primary responsibility in regards to the 8(a) Program
    is to oversee and execute the program as intended by Congress.
    As it is currently operating, the 8(a) Program is
    simultaneously intended to provide business development
    opportunities to disadvantaged individuals, while also
    fostering regional or community economic development for firms
    owned by ANCs, tribes, and NHOs. In addition, the SBA has been
    working diligently to ensure that oversight of these programs
    is strong and that SBA programs are operating free of fraud,
    waste or abuse.
        Over the course of the last two years, the Administration
    has done extensive reviews on the program and has implemented
    comprehensive regulatory reforms. This regulatory overhaul is
    the first of its kind in the 8(a) Program in more than 10
    years. The regulatory package has addressed many of the issues
    raised in previous years' Government Accountability Office and
    SBA Inspector General audits.
        During the formulation of the SBA regulatory package, we
    worked closely with the tribal community. SBA held six tribal
    consultations during the formulation and drafting of the new
    8(a) regulations. Additionally, SBA has been proactive by
    engaging with the tribal community outside of formal
    consultations, including participating in the White House
    Tribal Nations Summit.
        Many of the SBA's recent regulatory changes were made to
    ensure that the program benefits flow to the intended
    recipients, and to help reduce the potential for fraud, waste
    and abuse. SBA works closely with the GAO and Inspector General
    to ensure that their recommendations are properly addressed.
    For example, in response to the I.G.'s July, 2009 report, SBA
    published these revised 8(a) regulations, is in the process of
    conducting a program review to evaluate the impact of the
    growth in ANC 8(a) obligations, and has updated the business
    development management information system to allow native
    subsidiaries to apply for the program and undergo portions of
    their annual review electronically.
        While we have been responsive to many of the points raised
    in various audits, we would also like to note the following.
    The I.G. report correctly points out that 8(a) contracting
    dollars to ANCs have increased, but neglects to also note that
    8(a) dollars have increased to all program participants over
    that same period.
        Further, many of the concerns identified in these reports
    were not due to any wrongdoing by the 8(a) Program
    participants, but were in fact permitted under previous
    regulations.
        As I noted, SBA has attempted to eliminate any of these
    perceived loopholes in our new regulations. As with any
    program, there are bad actors who will attempt to gain entry.
    The agency takes seriously any actions that negatively affect
    the integrity of the 8(a) Business Development Program. We
    appreciate the I.G.'s recommendations to curb abuses and we
    welcome the opportunity to work further with them to fully
    ensure that the benefits of the program flow only to its
    intended beneficiaries.
        Despite the actions of a small number of program
    participants, the agency has seen the benefits of the 8(a)
    Program to many entity-owned participants in the development of
    both their businesses and their respective communities in the
    forms of dividends, jobs, scholarships and community pride,
    just to name a few.
        These benefits have been fully authorized by the current
    statutory provisions and provide economic and community
    development opportunities for some of the most under-
    represented populations in the United States.
        Thank you for allowing me to share SBA's views with you
    today and I will be happy to answer any questions you may have.
        [The prepared statement of Mr. Jordan follows:]

      Prepared Statement of Joseph G. Jordan, Associate Administrator for
     Government Contracting and Business Development, U.S. Small Business
                                 Administration
        Chairman Akaka, Vice Chairman Barrasso, and Members of the
    Committee, thank you for inviting the U.S. Small Business
    Administration (SBA) to testify regarding the utilization of the SBA
    8(a) Business Development (BD) Program in Indian Country. My name is
    Joseph Jordan, and I am the Associate Administrator for the SBA's
    Office of Government Contracting and Business Development. My office
    has primary responsibility for the 8(a) BD program from both a policy
    and programmatic execution perspective.
        In response to Congressional findings that disadvantaged
    individuals did not play an integral role in America's free enterprise
    system and did not share in the community redevelopment process, the
    8(a) BD program was created administratively during the 1960s to help
    eligible small businesses compete in the American economy. Congress
    provided statutory authority for the program in 1978, and shifted the
    program's focus to business development. The Small Business Act
    authorized the SBA to develop business ownership among underserved
    groups that own and control little productive capital.
        Beginning in 1986, significant changes were made to the 8(a)
    program when Congress enacted legislation that allowed Alaska Native
    Corporations (ANCs), Native Hawaiian Organizations (NHOs), Community
    Development Corporations (CDCs), and tribally-owned firms to
    participate in the 8(a) BD program. \1\ Participating in the 8(a) BD
    program would allow these organizations to benefit from the community
    economic development opportunities available through the 8(a) BD
    program.
    ---------------------------------------------------------------------------
        \1\ P.L. 99-272, Sec. 18015 added ANCs and tribes; P.L. 100-656,
    Sec. 207 added NHOs; and P.L. 97-35, Sec. 626(a)(2) added CDCs.
    ---------------------------------------------------------------------------
        A primary difference between ``entity-owned'' participants and
    traditional 8(a) participants owned by one or more disadvantaged
    individuals is the motive for participation. On one hand, individual
    socially and economically disadvantaged small business owners
    participate in the program to receive individual business development
    assistance and to increase their firm's success for themselves and
    their dependents. On the other hand, it is assumed that entity-owned
    participants utilize the business development opportunities for
    economic and community development purposes. In other words, entities
    are beholden not to one or two business owners and their families, but
    to their entire shareholder base, tribal base, and community. The
    utilization of the 8(a) BD program by entities to improve community and
    economic development is consistent with tribal self determination
    policies and strategies supported by the Administration.
        As a result of this distinction, firms participating in the 8(a) BD
    program that are owned by tribes, ANCs, and NHOs are not subject to the
    same rules as individually-owned companies participating in the
    program. First, a firm applying to, or participating in, the 8(a) BD
    program that is owned by a tribe, ANC or NHO may qualify as a small
    business without being considered affiliated with the tribe, ANC, NHO
    or any other business owned by the tribe, ANC or NHO. In other words,
    in determining size, the Agency qualifies each xcxentity-owned
    applicant or 8(a) participant individually, without aggregating the
    employees or revenues of that firm with the employees or revenues of
    any other firm owned by the tribe, ANC or NHO. For individually-owned
    firms applying to, or participating in, the 8(a) BD program, the size
    of a firm would include the revenues or employees of all entities with
    common ownership.
        Second, a tribe, ANC or NHO may own and control more than one firm
    that participates in the 8(a) BD program at the same time. In contrast,
    an individual who qualifies one firm to participate in the 8(a) BD
    program may not participate again in the program as a disadvantaged
    individual. Thus, such an individual may not own more than one firm
    that participates in the 8(a) BD program.
        Third, firms owned by tribes, ANCs or NHOs that participate in the
    8(a) BD program generally are not subject to the sole source contract
    limitations as those 8(a) firms owned by individuals. Under the Small
    Business Act, an individually-owned 8(a) participant cannot receive a
    sole source 8(a) contract in an amount exceeding $6,500,000 for
    contracts assigned manufacturing NAICS codes and $4,000,000 for all
    other contracts. As a result of legislation enacted in 1988, there is
    no cap on the value of an 8(a) contract that may be awarded to an 8(a)
    participant owned by a tribe or ANC. This means that these companies
    are able to receive an 8(a) contract in any amount without competition.
    Similarly, in 2003, Congress authorized NHOs to receive 8(a) contracts
    above the competitive threshold amounts for Department of Defense
    procurements.
        Lastly, companies owned by tribes, ANCs, NHOs and CDCs do not have
    the same requirements pertaining to control by non-disadvantaged
    individuals as do firms owned by one or more disadvantaged individuals.
    For individually-owned 8(a) firms, one or more individuals claiming
    social and economic disadvantage must control both the long term
    strategic policy setting and the day-to-day management and
    administration of the company. In contrast, firms owned by ANCs and
    NHOs need not have any disadvantaged managers in order to be eligible
    to participate in the 8(a) BD program. Although a firm owned by a tribe
    must generally be managed by one or more members of a tribe, non-
    disadvantaged individuals may manage such a firm, provided a written
    management development plan exist. This plan must show how tribal
    members will develop managerial skills sufficient to manage the concern
    or similar tribally-owned concerns in the future.
        SBA's primary responsibility in regards to the 8(a) program is to
    oversee and execute the program as intended by Congress. As it is
    currently operating, the 8(a) BD program is simultaneously intended to
    provide business development opportunities to disadvantaged individuals
    while also fostering regional or community economic development for
    firms owned by ANCs, tribes and NHOs. In addition, the SBA has been
    working diligently to ensure that oversight of these programs is strong
    and that SBA programs are operating free of waste, fraud and abuse,
    within their statutory designs.
        Over the course of the last two years, the Administration has done
    extensive reviews on the program and has implemented comprehensive
    regulatory reforms. This regulatory overhaul is the first of its kind
    in the 8(a) BD program in over 10 years. The regulatory package has
    addressed many of the issues raised in previous years' Government
    Accountability Office (GAO) and SBA Inspector General (IG) audits.
    During the formulation of the SBA regulatory package, we worked closely
    with the tribal community. Under President Obama's directive to engage
    in regular and meaningful consultation with tribal governments whenever
    the Federal Government intends to implement policies that have tribal
    implications, the SBA held 6 tribal consultations during the
    formulation and drafting of the 8(a) BD regulations. Additionally, SBA
    has been proactive by engaging with the tribal community outside of
    formal consultations, including participating in the White House Tribal
    Nations Summit at which Deputy Administrator Johns heard concerns
    voiced by tribal leaders on topics related to economic and community
    development and the role of small business in Indian Country.
        Many of SBA's recent regulatory changes were made to ensure that
    the program benefits flow to the intended recipients and to help reduce
    potential fraud, waste and abuse. For example, SBA's regulations
    previously allowed a large, non-disadvantaged mentor to unduly benefit
    from the 8(a) program by allowing such a firm to perform the majority
    of work on an 8(a) contract through a joint venture with a small 8(a)
    protege firm. The new regulations require an 8(a) firm to perform at
    least 40 percent of all work done by a joint venture and generally
    prohibit the joint venture from subcontracting additional work back to
    any non-8(a) joint venture partner.
        Additional changes were also made to the provisions affecting firms
    owned by tribes, ANCs and NHOs. Specifically, SBA amended the rules
    pertaining to tribal, ANC-owned, and NHO firms to add a provision that
    a firm owned by a tribe, ANC or NHO may not receive a sole source 8(a)
    contract that is a follow-on contract to an 8(a) contract performed
    immediately previously by another participant (or former participant)
    owned by the same tribe, ANC or NHO. In response to audits of the 8(a)
    BD program conducted by GAO and SBA's OIG, SBA added a provision to the
    regulations requiring each participant owned by a tribe, ANC, NHO or
    CDC to submit information demonstrating how 8(a) participation has
    benefited the tribal or native members and/or the tribal, native or
    other community as part of its annual review submission. The regulation
    requires that each firm submit information relating to how the tribe,
    ANC or NHO has provided funding for cultural programs, employment
    assistance, jobs, scholarships, internships, subsistence activities,
    and other services to the affected community.
        After receiving extensive public comment on this provision, SBA has
    delayed the implementation of this reporting requirement for six
    months. SBA seeks to strike a balance between its responsibility to
    monitor and oversee the 8(a) program and the concerns raised by entity-
    owned 8(a) participants regarding their ability to generate meaningful
    information. This delay will allow further discussions with the tribal/
    ANC/NHO community through consultation and dialogue to determine how
    best to implement this rule.
        SBA works closely with the GAO and IG to ensure that their
    recommendations are properly addressed. For example, in response to the
    IG's July 2009 report, SBA published the revised 8(a) BD regulations,
    is in the process of conducting a program review to evaluate the impact
    of the growth in ANC 8(a) obligations, and has updated BDMIS to allow
    ANC subsidiaries to apply for the 8(a) BD program and undergo annual
    review electronically.
        While we have been responsive to many of the points raised in
    various audits, we would also like to note the following. The IG report
    correctly points out that 8(a) contracting dollars to ANCs have
    increased, but neglects to note that total 8(a) dollars have also
    increased to all participants. Further, many of the concerns identified
    in the reports were not due to any wrong-doing by 8(a) program
    participants, but were permitted under the previous regulations.
        As previously noted, SBA has attempted to eliminate many of the
    perceived loopholes in its new regulations. As with any program there
    is the potential for bad actors to gain entry. The Agency takes
    seriously any actions that negatively affect the integrity of the 8(a)
    BD program. We appreciate the IG's recommendations to curb abuses and
    welcome the opportunity to work further with the IG to more fully
    ensure that the benefits of the 8(a) BD program flow to its intended
    beneficiaries.
        Despite the actions of a very small number of program participants,
    the Agency has seen the benefits of the 8(a) program to entity-owned
    participants in the form of increased business development of these
    firms, and to their respective communities in the forms of dividends,
    jobs, scholarships, and community pride, just to name a few. These
    benefits have been fully authorized by current statutory provisions,
    and provide economic and community development opportunities for some
    of the most underrepresented populations in the United States.
        Thank you for allowing me to share the SBA's views with you today,
    and I will be happy to answer any questions you may have.

        The Chairman. Thank you very much, Mr. Jordan, for your
    testimony.
        Mr. McClintock, will you please proceed with your
    testimony?

      STATEMENT OF PETER L. MCCLINTOCK, DEPUTY INSPECTOR GENERAL,
         OFFICE OF THE INSPECTOR GENERAL, U.S. SMALL BUSINESS
                             ADMINISTRATION

        Mr. McClintock. Chairman Akaka, Vice Chairman Barrasso and
    distinguished Members of the Committee, thank you for this
    opportunity to testify.
        I was asked to discuss two audit reports my office issued
    several years ago concerning Alaska Native Corporations and the
    8(a) Program. One report concerned non-native managers securing
    millions of dollars from ANC 8(a) firms through unapproved
    agreements. And the other report identified ANC contracting
    trends related to economic benefits for Alaska Natives and
    SBA's limited monitoring of ANC compliance with program rules.
        We reported that ANC participation in the 8(a) Program
    resulted in a number of benefits, to include paying dividends
    to ANC's shareholders, funding cultural programs, employment
    assistance, jobs, scholarships, internships and other services.
    However, dollar for dollar, these benefits were not directly
    traceable to participation in the 8(a) Program.
        In audit report 8-14, we found that non-native managers of
    several ANC firms obtained millions of dollars through
    management and other agreements that had not been adequately
    disclosed to or approved by SBA, raising questions, among other
    things, over who else was benefitting from the program.
        We are therefore encouraged that SBA recently published a
    regulation requiring ANCs, tribes and NHOs to report annually
    to SBA on how 8(a) participation is benefitting tribal members.
    We are concerned, however, that SBA delayed its implementation
    for at least six months and we urge SBA to implement this
    requirement as soon as possible.
        In report 9-15, we found that 8(a) contract obligations
    awarded to ANCs more than tripled from $1.1 billion in fiscal
    year 2004, or about 13 percent of the total 8(a) contract
    dollars that year, to $3.9 billion in fiscal year 2008, or
    about 26 percent of 8(a) dollars.
        Also in fiscal year 2008, ANC firms which had received this
    26 percent of the total 8(a) obligations, constituted just 2
    percent of 8(a) companies. Further, in 2007, just 11 ANC firms
    received half of the contract obligations to all ANC
    participants. Of note, one of these firms had only 750
    shareholders or less than 1 percent of all Alaska Natives, but
    accounted for nearly 20 percent of the 8(a) obligations made to
    active ANC firms. Also, the top four ANC firms accounted for
    less than 4 percent of the more than 100,000 ANC shareholders.
        We also reported that most ANC 8(a) contracts were obtained
    on a sole-source basis. These top 11 ANC-owned firms received
    82 percent of their 8(a) obligations through sole-source
    awards, which do not always provide the government with the
    best value. Three firms had received sole-source contracts in
    excess of $100 million over a two-year period and one firm
    received about $422 million in sole-source awards.
        The Small Business Act limits sole-source manufacturing
    contracts to $6.5 million and other sole-source contracts to $4
    million. However, ANCs and tribes are not subject to these
    limitations. They are also exempt from a $100 million cap on
    cumulative sole-source awards that apply to other 8(a)
    participants.
        ANC firms have other advantages as well. Because ANC firms
    are conditionally exempt from size affiliation rules, they
    often enjoy access to capital resources and management
    expertise not available to other 8(a) firms. In reality, ANC
    firms are large businesses with significant competitive
    advantages over other 8(a) firms.
        Despite this growth, SBA had not determined whether it had
    adversely affected other 8(a) participants. Under the Small
    Business Act, the exemption from the size affiliation rule is
    allowed unless SBA determines that it results in a substantial
    unfair competitive advantage. SBA had not done much analysis of
    this issue.
        Lastly, SBA had not dedicated sufficient resources to
    oversee the often complex ANC corporate and ownership
    structures, and ANC partnerships with other firms to include
    mentor protege and joint venture arrangements. SBA has taken
    some recent steps to improve oversight, but it is too soon to
    assess their effectiveness.
        This concludes my statement. I am happy to answer any
    questions.
        [The prepared statement of Mr. McClintock follows:]

     Prepared Statement of Peter L. McClintock, Deputy Inspector General,
      Office of the Inspector General, U.S. Small Business Administration
        Chairman Akaka, Vice Chairman Barrasso, and distinguished members
    of the Committee, thank you for this opportunity to testify.
        As the Deputy Inspector General for the Small Business
    Administration (SBA), I oversee an independent office that was
    established to deter and detect waste, fraud, abuse and inefficiencies
    in SBA programs and operations. My testimony today focuses on several
    audits the SBA Office of Inspector General (OIG) conducted regarding on
    the issue of Alaska Native Corporation (ANC) participation in the SBA
    8(a) Business Development Program (the ``8(a) Program'').
        The 8(a) Program is designed to help small, minority-owned
    businesses gain access to Federal contracts and to obtain other
    business development assistance so that they can successfully compete
    in the economy. Under the program, 8(a) firms owned by ANCs, American
    Indian Tribes, and Native Hawaiian Organizations (NHOs) enjoy special
    procurement advantages beyond those afforded most 8(a) businesses.
    These advantages were intended to provide economic development
    opportunities for Alaska natives and other tribal members. Our audits
    were initiated based on complaints about ANC-owned firms and issues
    identified by a prior Government Accountability Office (GAO) audit
    related to SBA's oversight of ANC 8(a) activity.
        As an initial matter, I want to emphasize that the OIG is not
    taking a position on the issue of whether ANCs, Tribes or NHOs should
    be able to participate in the 8(a) Program. That is a policy
    determination for Congress to make. There is also no question, as
    stated in our audit report, that Alaskan natives have benefitted from
    ANC participation in the 8(a) Program. However, our audit report
    numbered 9-15, Participation in the 8(a) Program by Firms Owned by
    Alaska Native Corporations, did raise several questions about ANC
    participation in the 8(a) Program:

       Is the large percentage of 8(a) contracts obtained by a
            relatively small number of ANC-owned firms consistent with
            Congress' objectives for the program?

       Are the revenues from ANC participation in the 8(a) Program
            going to a broad array of ANC firms or concentrated among only
            a few ANC-owned companies?

       Are non-disadvantaged individuals inappropriately
            benefitting from ANC participation in the program and to what
            extent are benefits from program participation effectively
            reaching tribal populations?

    8(A) Advantages for Firms Owned by ANCS, Tribes and NHOS
        ANCs, Tribes, and NHOs enjoy special procurement advantages over
    most other 8(a) Program participants. Arguably, the most significant of
    these advantages is their ability to obtain unlimited sole-source
    awards. Under SBA's recent revisions to the program regulations, 8(a)
    firms are not entitled to obtain contracts on a sole source basis if
    the contract exceeds $6.5 million for manufacturing contracts or $4
    million for other contracts. However, companies owned by ANCs or Tribes
    are exempt from this requirement, and firms owned by NHOs are exempt
    for contracts awarded by the Department of Defense. Additionally, 8(a)
    firms that receive $100 million in 8(a) awards (awarded on a sole
    source and/or competitive basis) are not eligible for additional 8(a)
    sole source awards under SBA regulations. Participants owned by ANCs,
    Tribes and NHOs, however, are not subject to this cap. These exemptions
    have allowed certain ANC-owned firms to obtain hundreds of millions of
    dollars of non-competitive awards.
        Another advantage enjoyed by firms owned by ANCs, Tribes and NHOs
    is that the determination of whether they are considered to be small
    under SBA regulations is made without regard to the size of their
    parent company or any other firm owned by the parent company. These
    entities can own multiple 8(a) companies as long as each business is in
    a different primary industry, and SBA has determined that the firm does
    not have or is not likely to have a substantive unfair competitive
    advantage within an industry. Our 2009 audit confirmed that this
    advantage has allowed ANC firms that are really large businesses
    through affiliation with their parent corporations, and which have
    access to the capital and credit of their parents, to compete against
    truly small disadvantaged firms. Thus, Congress may want to consider
    whether the goal of the 8(a) Program--to help small-disadvantaged firms
    compete in the American economy--is impeded by allowing larger ANC
    companies participate in order to provide benefits to native
    populations.
    Benefits ANCS Derive From These Advantages
        Although ANC firms enjoy substantial advantages over other 8(a)
    firms, such advantages were intended to help ANCs fulfill a mission
    that is broader than the bottom line of the corporations; namely to
    help Alaska Natives achieve economic self-sufficiency. Understandably,
    ANC firms have attempted to maximize the opportunities afforded them
    under the 8(a) Program. We visited eleven ANC parent corporations,
    eight of which told us that they derived at least 50 percent or more of
    their revenues from the 8(a) Program. Two of the eight relied on the
    program for 90 percent or more of their revenues.
        Unlike other 8(a) businesses whose profits generally go to one or
    more socially and economically disadvantaged persons, profits from ANC-
    owned firms go to hundreds, and sometimes thousands, of Native
    shareholders. ANCs have used profits to pay shareholder dividends, fund
    cultural programs, and provide employment assistance, jobs,
    scholarships, internships, subsistence activities, and numerous other
    services to native communities.
        Dollar for dollar, however, there has been no way to trace exactly
    how much ANC participation in the 8(a) Program has benefited their
    members. In audit report 8-14, we found that non-native managers of
    several ANCs were able to obtain millions of dollars through management
    and other agreements that had not been disclosed to, or approved by,
    SBA. A similar arrangement was highlighted in the articles that
    appeared in the Washington Post last Fall. This raises a question as to
    whether more of the money that is derived from 8(a) participation could
    be going back to the native members. In the past, ANCs have not been
    required to report to SBA--or to any other government agency as far as
    we could tell--how they use the 8(a) share of their profits to support
    Alaska Natives.
        We are encouraged that SBA has included in its new regulations for
    the 8(a) Program a requirement that ANCs, Tribes and NHOs must submit
    annual reports to SBA discussing how their program participation has
    benefitted the tribal members. This requirement will shed light on the
    benefits going to tribal members and help SBA--and Congress--make more
    informed decisions about ANC, Tribal and NHO participation in the 8(a)
    Program.
        The SBA OIG believes that this transparency in the 8(a) Program is
    long overdue. We are troubled, therefore, that SBA has decided to delay
    implementation of this reporting requirement for six months, and that
    the Agency has stated in its regulatory preamble that there is a
    possibility that it will delay implementation even further if ``delay
    is necessary.'' We recommend that SBA not extend this implementation
    date any further.
    Growth of ANC Activity Within the 8(A) Program
        Long-term 8(a) contracting trends show a continued and significant
    increase in obligations to ANC-owned participants, both in value and as
    a percentage of total obligations to 8(a) firms. Our audit found that
    from FY 2000 to FY 2008 obligations to ANC-owned participants increased
    by 1,386 percent, and more than tripled from $1.1 billion in FY 2004 to
    $3.9 billion in FY 2008.
        Although the amount of Federal contracting as a whole increased
    significantly during this time, what stood out from our review was the
    growth in the percentage of 8(a) contracting dollars going to ANC-owned
    companies as compared to other participants in the program. Between FYs
    2004 and 2008, the percentage of 8(a) obligations to ANC firms doubled.
    In FY 2008, ANC firms received approximately 26 percent of total 8(a)
    obligations--even though they constituted just 2 percent of companies
    performing these 8(a) contracts. These trends suggest that ANC-owned
    firms may be receiving a disproportionate share of obligations to 8(a)
    firms.
        An additional noteworthy finding from our audit was that a
    significant portion of the 8(a) obligations made to ANC-owned firms
    went to a small percentage of the ANC participants. In fact, 50 percent
    of 8(a) obligations to current ANC participants in FY 2007 went to just
    11 (or 6 percent) of the ANC firms reported by SBA to Congress that
    year. One of these firms accounted for nearly 20 percent of the 8(a)
    obligations made to active ANC firms, but had only 750 shareholders, or
    less than 1 percent of the total population of ANC shareholders. The
    top four firms, which received collectively about $600 million in FY
    2007, accounted for less than 4 percent of the 105,344 Alaska native
    shareholders represented by all of the ANC participant firms. Thus,
    revenues earned from ANC participation in the 8(a) Program may not be
    evenly distributed to the ANC population.
        Finally, of note is that sole-source contracts were the major
    contracting mechanism used by procuring agencies when obligating 8(a)
    funds to ANC participants. We found that in FY 2007 the top 11 firms
    received 82 percent of their 8(a) obligations through solesource
    awards. As I have mentioned, ANC participants, like other tribally-
    owned firms, are exempt from SBA's cap on total sole-source awards.
    Generally, 8(a) firms that receive $100 million in total 8(a) awards
    are ineligible for additional sole-source contracts. Of the top 11
    firms, 3 had received contracts in excess of $100 million over just a
    2-year period. One firm received approximately $527 million, $422
    million of which was sole sourced.
        As reported by GAO and others, Federal agencies often made sole-
    source awards to ANC participants because it is a quick, easy, and
    legal method of meeting their small business goals. While sole-sourcing
    contracts to ANC firms may provide an expedient means of meeting small
    business goals, due to the lack of competitive bidding, such awards
    often do not result in the best value for the government. Reports by
    OIGs and GAO have shown that noncompetitive contracts have been
    misused, resulting in wasted taxpayer resources, poor contractor
    performance, and inadequate accountability for results. In March 2009,
    the President issued a memorandum discouraging the use of sole source
    awards unless their use can be fully justified and safeguards put in
    place to protect taxpayers. Recently, the Federal Acquisition
    Regulations were amended to put into place special rules for contracts
    awarded on a sole source basis that exceed $20 million. It is unclear
    what effect the President's memorandum or this $20 million threshold
    will have on the scope of sole source awards obtained by ANC
    participants in the 8(a) Program.
    SBA'S Management and Oversight of ANC Participant Activity
        Despite the growth in ANC participation in the 8(a) Program, SBA
    has not performed a review to determine whether such growth is
    adversely affecting other 8(a) participants. For example, in FY 2008,
    ANC-owned participants received 66 percent of the 8(a) obligations made
    under the ``facilities support services'' industry code, which was the
    second largest industry code for 8(a) purchasing that year. However,
    SBA has not assessed the impact this has had on non-ANC-owned program
    participants. Neither has it determined whether procuring agencies are
    meeting their small-disadvantaged business procurement goals primarily
    through sole-source awards to ANC firms that essentially are large
    through affiliation with their parent and other affiliated companies.
        Further, although SBA officials recognize that ANCs typically enter
    into more complex business relationships than other 8(a) participants,
    it has not tailored its policies and oversight practices to account for
    ANCs' unique status and growth in the program. Audits issued by GAO in
    2006 and by our office in 2008 and 2009 identified shortcomings in
    SBA's oversight of ANC 8(a) activity. These involve monitoring the
    issues discussed below.
        Secondary lines of business for multiple 8(a) participants owned by
    a single ANC. GAO reported that SBA did not track the business
    industries in which ANC subsidiaries had 8(a) contracts to ensure that
    ANCs did not have more than one subsidiary obtaining its primary
    revenue under the same industry code. GAO recommended that SBA collect
    information on ANC-owned participants as part of its 8(a) monitoring,
    to include tracking the primary sources of revenue. In July 2008, SBA
    began development of a system to collect primary revenue generators for
    ANC participants, and, in February of this year, we were advised that
    this system became operational. Neither GAO nor my office has yet had a
    chance to evaluate this system.
        Changes in ownership of ANC participants and review of financial
    statements for firms owned by ANCs. SBA regulations require that ANC
    participants be majority-owned or wholly owned by an ANC, and that ANCs
    must seek SBA's approval before making ownership changes. However, SBA
    has had difficulty managing the large volume of ownership change
    requests requiring approval. Our audit report 8-14 identified an
    instance where an ANC was in violation of SBA's ownership rules and had
    not reported the ownership change to SBA. Our audit report 9-15
    disclosed that approving ownership change requests had dominated the
    workload of the Alaska District Office, leaving little time for
    monitoring other aspects of ANC compliance with 8(a) rules or for
    identifying where ANC-owned firms had not reported ownership changes.
        In Report 8-14, we also reported weaknesses in SBA's review of
    financial information reported annually by ANC participants. Because of
    these weaknesses, SBA had failed to identify that non-native managers
    of two 8(a) ANC-owned firms had secured millions of dollars of 8(a)
    revenue for companies they owned through management agreements that SBA
    had not approved, as discussed above.
        These reports questioned whether SBA's Alaska District Office,
    which oversees the majority of the ANC participants, was adequately
    staffed. At the time, the office had only two full-time and one-part
    time employees to oversee 166 ANC participants. Since then, SBA has
    advised that it has hired two more employees for this office. We have
    not had an opportunity to determine whether the additional staff is
    sufficient to manage the current ANC participant level.
        Whether ANC-owned firms have a substantial unfair competitive
    advantage within an industry. The Small Business Act provides that the
    size of a tribally owned firm will be determined without regard to its
    affiliation with the tribe or any other businesses owned by the tribe
    unless the SBA Administrator determines that one or more of the
    tribally-owned businesses may have or may obtain a substantial unfair
    competitive advantage within an industry. GAO reported that SBA was not
    making these determinations and had no policy or procedures in place to
    make them. It recommended that SBA clearly articulate in regulation how
    it would comply with existing law. SBA reported that it had adopted a
    different approach involving training of its Business Development
    Specialists and Federal agencies to ensure that a previous procurement
    history is provided to facilitate such determinations, which did not
    appear to adequately address GAO's recommendation. Recently, SBA
    advised the OIG that it was undertaking a study, with a target
    completion date of December 31, 2012.
        Whether partnerships between ANC participants and large firms are
    functioning as intended. GAO reported that SBA's oversight of ANC
    partnerships with other firms and mentor-protege arrangements was not
    adequate. When entering into joint ventures, ANC firms must manage the
    joint venture and receive at least 51 percent of venture profits.
    However, GAO identified instances either where mentors abandoned ANC
    participants after the contracts were not won or where mentor firms
    exploited the ANC partner for its 8(a) status. SBA has acknowledged
    that 8(a) joint ventures between mentors and their ANC proteges may be
    inappropriate for sole-source contracts above competitive thresholds.
        In response to our 2009 audit, we were advised that SBA
    headquarters was collecting information to identify the number of joint
    ventures involving ANC firms. We are currently conducting an audit to
    determine whether SBA's information collection and monitoring efforts
    are adequate.
        We also are pleased that SBA's new 8(a) regulations contain
    strengthened requirements for mentor protege and joint venture
    agreements and limit certain subcontracting by joint ventures in an
    effort to limit abuse in the program. However, it is too early to tell
    whether these provisions will effectively address problems arising from
    some joint venture arrangements in the 8(a) Program.
    Conclusion
        In conclusion, ANC participation in the 8(a) Program has undeniably
    benefitted Alaska natives. However, long-term 8(a) contracting trends
    showed a continued and significant increase in obligations to ANC-owned
    participants, which may be limiting the ability of firms that are not
    owned by ANCs, Tribes or NHOs to obtain 8(a) contracts. Further, our
    audit found that a very small number of ANC participants received a
    disproportionate share of the 8(a) obligations, and the procurement
    advantages that ANCowned firms enjoy, including the relationship
    between these firms and their parent and other affiliated companies,
    may be working to the disadvantage of other 8(a) participants.
        Our audit report presented several matters for congressional
    consideration and a number of recommendations to SBA, many of which
    have now been implemented. SBA has not, however, taken effective action
    in response to the audit recommendation that the Agency determine
    whether ANCs have obtained a substantially unfair competitive advantage
    over other 8(a) participants in particular industry codes.
        This concludes my prepared statement. I would be happy to answer
    any questions you may have.

        The Chairman. Thank you very much, Mr. McClintock.
        I would like to ask for any questions that we may have for
    our witnesses.
        Senator Murkowski?
        Senator Murkowski. Thank you, Mr. Chairman.
        And gentlemen, thank you for your testimony here this
    afternoon.
        Mr. Jordan, I want to start with you. Thank you for all
    your activity within the SBA. Included in the final 8(a)
    program regulations that were published in February, it is
    stated that, ``The tribal and Alaska Native Corporation
    component of the program serves a valuable economic and
    community development purpose, in addition to its business
    development purpose.''
        Now, as you know, Senator McCaskill has introduced some
    legislation which would eliminate the opportunity for ANCs to
    participate in the 8(a) Business Development Program. So I
    guess a two-fold question to you.
        First of all, you have this language within the report that
    SBA clearly has identified that there is valuable economic and
    community development purpose. Is it justifiable, in your mind,
    to single out ANC corporations that represent a single group of
    America's first people to say that you are no longer eligible.
    You are no longer eligible to participate in this program,
    while Lower 48 tribes would be able to continue to participate
    under the current rules.
        Given the statement that has come out of the SBA regs, do
    you think that this proposed legislation is reasonable that
    specifically singles out the ANCs?
        Mr. Jordan. Well, I can't comment on the proposed
    legislation. But what I will say is, two things. One, we do
    view the 8(a) Program as having two distinct groups: one, the
    individual owners who are in the program for the nine-year
    period to develop their own skills and their business; and then
    the community development component in which we look at ANCs,
    Native Hawaiian organizations, community development
    corporations and tribes in much the same way. They have many
    shareholders. They have a different set of goals and outcomes
    and definitions of success. And we want to be cognizant that we
    need to serve both of those communities and have them both be
    successful.
        To your point about us recognizing the benefits that this
    program has delivered to many of the folks on the community
    development side of the house, that is why we added in the
    regulatory requirement that those groups report to us on some
    of those benefits.
        Now, the Inspector General referred to the six-month period
    between when the regulations went final and when that one
    component of them becomes or is implemented. The reason for
    that is because we need to work collaboratively with the
    community to figure out how to do that. We have clearly
    articulated that we need to do that reporting, but we want to
    make sure that, one, the government gets the best data, that we
    get the most pertinent, highest-quality data from these firms.
    But we also don't want to over-burden these firms, which are by
    definition socially and economically disadvantaged, by just
    going forward without their input and consultation.
        So that is the conversation that we are entering into now
    and we are excited for the results.
        One other point is that we are not looking at SBA to make
    any pejorative judgments on what is a positive benefit or not.
    We are not going to say scholarships and burial services are in
    one category and language preservation and health care is in
    another. We just want to have a fact-based conversation and
    that is why we put that in there.
        Senator Murkowski. Then recognizing the comments that came
    from the I.G.'s report, do you think that what you have laid
    out with the new regulations there, do you think that these
    adequately address the criticisms that have been expressed by
    not only the Inspector General, but the media as well? We have
    all read these reports that are out there.
        And then a further question to that is if you feel that we
    have addressed that, shouldn't we allow these regulations an
    opportunity to work, to go into effect, to play out?
        Mr. Jordan. We are very proud of the regulations from both
    a fraud, waste and abuse prevention standpoint and ensuring
    that the program's benefits are maximized for the intended
    recipients. We are doing an analysis at the I.G.'s
    recommendation of what the growth in ANC 8(a) awards means for
    other participants. But as yet, we have seen no data that would
    say it disadvantages other program participants.
        From 2007 to 2010, for example, every single category of
    8(a) participant saw their 8(a) awards increase by at least 50
    percent. So at this point, it is a very tricky analysis both
    because of data quality and because of the nuance that we are
    looking at. So we are doing the analysis, but as yet we have
    seen no evidence of that.
        Senator Murkowski. Mr. McClintock, let me ask you a
    question. Do you believe that or does your office believe that
    the Indian 8(a) Program as it is currently structured should be
    eliminated or changed legislatively? And I will ask you the
    same question that I asked Mr. Jordan, which was do you see any
    justification for singling out all of the Alaska Native
    corporations for effective elimination within the program?
        Mr. McClintock. Like Mr. Jordan, I am not that familiar
    with the legislation, and I really don't have a----
        Senator Murkowski. I am not asking you to comment about the
    legislation specifically, but do you see that there would be
    any reason that you would specifically and purposely exclude
    ANCs from within the Indian 8(a) Program?
        Mr. McClintock. No.
        Senator Murkowski. And you don't think that it should be
    eliminated, then, or legislatively changed?
        Mr. McClintock. Our report did have some considerations for
    Congress to amend the program. So again, perhaps there is room
    for changes. I guess the question is--certainly I am not
    familiar with anybody trying to exclude ANCs 100 percent from
    the program. I am just not aware of that as being ever on the
    table. Our office has never taken a position that ANCs should
    not participate.
        Senator Murkowski. Let me ask you one final question, then.
    In your testimony, written and what you have stated here, you
    have identified that there have been certain difficulties that
    your office encountered in determining how the 8(a) Program
    actually benefits the native people.
        The query for you today is in reaching this conclusion that
    this has been a tough job, I am wondering what level of
    expertise your office has in assessing a question like this? Do
    you have staff that are experienced in Federal Indian policy?
    Have you worked extensively within reservations or within
    Alaska Native villages? Did you travel to some of these
    significant meetings like NCAI--we have Jackie Johnson will be
    testifying later--or AFN?
        I am just trying to understand exactly how you reached the
    conclusions that you did.
        Mr. McClintock. We reached the conclusions by trying to
    track the money flow. In other words, some ANC corporations
    have significant numbers of 8(a) participants who are owned by
    holding companies. And as we were trying to trace the money
    flow and the profits that came out of 8(a) contracts through
    that extremely complex set of organizations, it loses its
    identity. Cash is fungible.
        So I think in order to actually be able to demonstrate the
    benefits, there is going to be a need to actually separately
    account for the money, the profits from 8(a), and show how it
    directly is either included in dividends or used to fund some
    of these other programs.
        Senator Murkowski. So I take it from your answer, then, you
    stayed back here in Washington. You didn't have the
    consultation with either AFN or NCAI?
        Mr. McClintock. We didn't consult, but we did have our
    auditors go to Alaska and they did meet with people in some of
    the corporations.
        Senator Murkowski. We will follow up on this later. I have
    extended my time, Mr. Chairman. Thank you.
        The Chairman. Thank you very much, Senator Murkowski.
        Because it eliminates time, I will send my questions in for
    the record.
        Senator Begich, do you have a question?
        Senator Begich. I just want to follow up on what Senator
    Murkowski just asked. I like the way you did that, Mr.
    Chairman. I will have other questions for the record.
        But let me understand this. So you want to track the
    profits of the 8(a) Alaska Native corporations and how they
    utilize those profits. Do you think we should be doing the same
    thing with the individual 8(a) companies that are owned by
    individuals, too? Do you follow my question here?
        Mr. McClintock. Well, there are rules for the individual
    8(a) companies that limit how much money they can use
    personally. There are limits on how much money they can take
    out of their company. There are limits on their salaries. There
    are limits on their net worth, personal net worth and their
    total assets.
        So they actually may argue that they have stricter limits
    than the tribal 8(a) companies.
        Senator Begich. If I can just say one more half of a
    question to the question, do you recognize there is a clear
    difference between the individual 8(a)'s and these larger
    organizations like the ANC 8(a)'s that ensure that the
    distribution of their profits, which may end up in a larger
    corporation, which then benefits through scholarships, burials,
    many other things? Do you recognize there is a huge difference
    there?
        Mr. McClintock. Yes.
        Senator Begich. Okay. I will end there, Mr. Chairman. I
    will have questions for the record.
        Senator Akaka. Thank you very much, Senator Begich.
        Senator Johanns?
        Senator Johanns. I thank both of you.
        Mr. McClintock, in a previous life, as you probably know, I
    worked with an Inspector General, and sometimes we would agree,
    sometimes I guess we wouldn't agree, but I have a good respect
    to the services of the Inspector General.
        The impression I get as I look at what you have done is
    that very definitely this was a program that needed some
    review, digging in to seeing what was going on here, and you
    folks did that; made some recommendations.
        But it is equally my impression that no one is testifying
    today, either you or Mr. Jordan, that the program should be
    thrown out. Because I think we all agree that the goals of the
    program have a lot of merit. And if we can clean up the abuse,
    we are headed in the right direction. Is that fair to say?
        Mr. McClintock. Yes.
        Senator Johanns. Great. That is all I have. Thanks.
        The Chairman. Thank you.
        Senator McCain?

                    STATEMENT OF HON. JOHN McCAIN,
                       U.S. SENATOR FROM ARIZONA

        Senator McCain. Thank you, Mr. Chairman.
        Mr. Jordan, is it true that in fiscal year 2009, the
    Federal Government spent about $18 billion on contracts with
    8(a) firms and ANCs received about $3.9 billion? Is that pretty
    accurate?
        Mr. Jordan. Total contracting to all 8(a) firms in 2009 was
    about $26 billion or $27 billion. Of that, ANCs received about
    $3.8 billion.
        Senator McCain. And ANCs represent 100,000 Alaska Natives
    and there are 300 million people.
        Does SBA have any discretion in establishing whether an ANC
    is in fact ``economically disadvantaged'' compared to
    establishing that an Indian tribe or NHO is economically
    disadvantaged?
        Mr. Jordan. No. ANCs are statutorily deemed economically
    disadvantaged.
        Senator McCain. No matter where they are or what their
    composition are, they are economically disadvantaged?
        Mr. Jordan. Yes, sir.
        Senator McCain. Do you believe that some ANCs are more
    economically disadvantaged than an Indian tribe in all cases?
        Mr. Jordan. I will leave the presumption of economic
    disadvantage to Congress.
        Senator McCain. Under the new SBA regulations, ANCs will
    have to report how native shareholders are benefitting from the
    contract. The deadline was extended by six months. Why did you
    need to extend the deadline? It seems to me it is pretty
    straightforward.
        Mr. Jordan. The issue in extending is we wanted to work out
    collaboratively with the tribal communities how to implement
    this. We wanted to ensure that SBA gets the highest quality and
    most pertinent data without overburdening these socially and
    economically disadvantaged firms.
        Senator McCain. Do you have a firm date now?
        Mr. Jordan. Yes, we said that we will implement this part
    of the regulation in September of this year. We went to 10
    different cities to hold a listening tour; held two tribal
    consultations; received 2,500 public comments which we read and
    responded to every single one.
        And the issue around the benefits reporting that we heard
    when I personally led tribal consultations in Seattle, in New
    Mexico and rural Alaska, was that it wasn't a complaint with
    instituting this. It was how we do it. And we wanted to work,
    make it a workable regulation.
        Senator McCain. But you expect to finalize those
    regulations soon?
        Mr. Jordan. Yes, sir, in September of this year.
        Senator McCain. September.
        Mr. McClintock, dollar for dollar, how does the SBA trace
    how much ANC or tribal participation benefits its members?
        Mr. McClintock. Dollar for dollar, as I said, we are not
    able to. We did visit with organizations. They gave us
    examples. We were able to trace money from 8(a) participants
    into other subsidiaries or to the parent organization, but at
    that point its loses its identity.
        Senator McCain. Mr. Jordan, does it concern you that only
    about 5 percent of ANC contract jobs actually went to Alaska
    Natives?
        Mr. Jordan. That is not something that we track. No other
    8(a) participant or government contractor, as far as I am
    aware, has a restriction on what geography they can pull their
    employees from.
        Senator McCain. I wasn't talking about restriction. I
    thought the intent of SBA loans was to go to the recipients
    that needed it. Apparently, only 5 percent of the contract jobs
    actually went to Alaska Natives. Do you dispute that number?
        Mr. Jordan. I would have to look and get back to you. I am
    not aware of that number.
        Senator McCain. You absolutely should be, Mr. Jordan, and I
    am astonished you don't. This is not a new issue.
        In 2009, Eyak ANC joined with a large government contract
    GTSI and secured a $409 million in Federal contracts. Of that
    amount, Eyak received only $18 million for its operations and
    their native shareholders got direct dividend payments totaling
    about $109,000. I am sure you are aware of all of these things.
    If you are not, you should be. A non-native ANC consulted in
    Washington, D.C. and made $500,000 a year helping secure $500
    million in defense contractor with large foreign-owned
    corporate partners. Less than 1 percent of that returned to
    Alaska Native shareholders.
        Now, if you dispute these figures, facts, I would very much
    like to hear the rebuttal. If you don't dispute these facts,
    then there is something obviously fundamentally wrong. That is
    not the intent of SBA for a lobbyist to get $500,000 a year.
    That certainly didn't benefit any Alaska Native that I know of.
        Mr. Jordan. I agree, Senator, that there have been abuses
    of this program. That is why we are very proud of the
    regulatory changes that we made. We are also proud of the
    enforcement actions that we have taken.
        Senator McCain. Are you proud of what has happened?
        Mr. Jordan. I am proud of where the program is headed.
        Senator McCain. Are you proud of what has happened was my
    question.
        Mr. Jordan. More specifically, which part of what----
        Senator McCain. That a lobbyist would get $500,000 a year,
    a non-native. Are you proud of that?
        Mr. Jordan. No. And that is why in the regulations that
    finalized on March 14th, we clearly articulate that agents and
    representatives cannot get a gross of any contracts; that that
    is going forward a prohibited practice.
        Senator McCain. In its series, The Washington Post reported
    that even some ANC executives agree the system is flawed: ``We
    have seen things that show some organizations have broken the
    law,'' said Aaron Schutt, Chief Operating Officer of Doyan,
    Limited, a native-owned company that is the largest landowner
    in Alaska with more than 12 million acres in the heart of the
    State.
        Well, I could go on and on here, but I guess, Mr.
    McClintock, I am sure you realize that part of your obligation
    is to track this, and somebody in your shop hasn't been. So I
    hope you will start doing your job a little more assiduously
    because what has been going on is obviously an unacceptable use
    of my taxpayers' dollars in the State of Arizona. I would be
    glad to hear your response to that.
        Mr. McClintock. Well, I do think that we were responsible
    for uncovering some of the issues that you just referred to,
    and while I can't go into any details, we are looking at some
    of these issues.
        Senator McCain. I hope so, and I will look forward to
    hearing your report. This is fundamentally at the end of the
    day most unfair to the people who were supposed to be the
    recipients of this. This is most unfair, wouldn't you agree, to
    Native Alaskans who instead of getting the $500,000 a year that
    was given to a non-native consultant, they should have gotten
    the money. Would you agree that the most unfair aspect of this
    is to the people that it was most intended to help?
        Mr. McClintock. I would agree.
        Senator McCain. Thank you, Mr. Chairman.
        Senator Akaka. Thank you very much, Senator McCain.
        I want to thank our witnesses. There may be other questions
    that we will submit and move on here to our other witnesses.
    Thank you very much for your responses.
        I would like to invite the second panel to the witness
    table. Today, we have Jackie Johnson-Pata, the Executive
    Director of the National Congress of American Indians, and
    Julie Kitka, President of the Alaska Federation of Natives.
        Welcome to both of you to this Committee hearing.
        Ms. Johnson-Pata, will you please proceed with your
    testimony? Welcome.

    STATEMENT OF JACKIE JOHNSON-PATA, EXECUTIVE DIRECTOR, NATIONAL
                      CONGRESS OF AMERICAN INDIANS

        Ms. Johnson-Pata. Thank you, Chairman Akaka and Members of
    the Committee on Indian Affairs. I want to thank you for this
    opportunity to be able to testify today.
        Before I get started, I also want to thank you for the
    actions that you took earlier in your business meeting. The
    Carcieri bill, of course, is Indian Country's number one
    priority, and we look forward to your continued support in
    getting that to passage.
        NCAI has a long history of supporting the Native Hawaiian
    bill and we look forward to continuing to supporting you in
    those efforts.
        As you know, my testimony is quite detailed and so I am
    going to do something quite different from that and just talk a
    little bit about the benefits of the program. This is a
    Committee that I don't need to spend any time talking about the
    social and economic demographics of Indian Country. You are all
    really well aware of that.
        And so I want to call upon the Committee to consider today
    the context of the Small Business Administration's native 8(a)
    Program as it operates as an important tool in fostering
    economic development and growth within our tribal and native
    communities across the Nation.
        Many Members of this Committee can recall past Federal
    policies that sought to attract businesses and industries to
    our remote rural areas, and most of those were where most of
    our native communities are located. And many of those
    initiatives failed in Indian Country.
        And during that same time, Congress began to turn away from
    the Indian reservation template that had long been the
    foundation of Federal Indian policy towards a new business
    model when it enacted and authorized the native corporations to
    manage the native lands and resources on behalf of native
    people in Alaska. And I know that Julie's testimony, Alaska
    Federation of Natives, provides more background on the
    formidable conditions under which this new policy experiment
    had to take root before it could grow.
        We all know that in order to attract businesses and
    industry to remote rural areas, we need to have a climate that
    is conducive to business development: modern infrastructure,
    access to transportation, and commercial corridors. Just as
    important are those community-based resources including
    business acumen, managerial strength, tight fiscal controls, a
    skilled workforce, and a stable government and corporate
    institutional capacities.
        In fact, building these community-based assets were the
    focus of an Alaska Native Claims Settlement Act and the Alaska
    Natives Corporations Act.
        Indian Self-Determination Act helped tribes to develop the
    fiscal management and the accounting systems, but it wasn't
    based upon the business model. And it wasn't until tribal
    governments were able to participate in the Native Small
    Business 8(a) Program that tribes were able to come into
    contact with experienced business mentors and joint venture
    partners who could assist them in developing the necessary core
    competencies or community-based assets to succeed in the world
    of commerce and Federal contracting systems which serve the
    needs of a global economy.
        So it is with that context that our member tribes and
    native organizations firmly believe that the Native 8(a)
    Program is working. They see the evidence on a daily basis on
    just how the Native 8(a) Program is building capacities within
    their communities among their people. And that is why long
    after revenues have been realized and expended for greater
    good, the sustained legacy of the Native 8(a) Program is the
    creation of a workforce of native professionals, highly skilled
    native-trained managers, business development specialists,
    creative entrepreneurs, skilled laborers, accountants and
    fiscal managers.
        The perception that the Native 8(a) Program is working is
    reflected in every single report issued by the Federal agencies
    and instrumentalities. It works because 8(a) firms are turning
    in quality work and transparency, accountability and executing
    government contracts with cost-effective and timely
    performance.
        No contracting officer would be expected to be retained in
    this Federal government if each and every one of those
    thresholds were not met by the native 8(a) firms.
        As our testimony suggests, the Federal procurement
    marketplace is global and in the marketplace, although
    traditionally dominated by large corporate concerns, there is
    plenty of room for tribal, Alaska Native, and Native Hawaiians
    and all minority businesses to make meaningful contributions.
        Fostering the development of successful small business
    contractors advances the government's interest in broadening
    and diversifying our industrial base of service providers and
    suppliers. More competition in that marketplace will increase
    the value of the products and services and drive prices down.
        While the new rules promise greater accountability and
    transparency, Congress in its oversight role should ensure that
    the regulations are implemented and enforced in a manner that
    sets new standards for program participants without distracting
    from the program's intent or detering contractors from using
    the program.
        We want to thank you for giving us the opportunity to
    address the importance of the 8(a) Business Development Program
    to tribal communities. We look forward to your continued
    support and your efforts to be able to help us use this
    effective economic development tool to make a difference in our
    tribal communities.
        [The prepared statement of Ms. Johnson-Pata follows:]

    Prepared Statement of Jackie Johnson-Pata, Executive Director, National
                          Congress of American Indians
    Introduction
        The National Congress of American Indians (NCAI) is the
    intergovernmental body representing American Indian and Alaska Native
    tribal governments. For more than 60 years, tribal governments have
    come together as a representative congress through NCAI to deliberate
    issues of critical importance to tribal governments and endorse
    consensus policy positions. NCAI is honored to participate in the
    Senate Committee on Indian Affairs hearing to discuss the history,
    structure, and benefits of the Native 8(a) Business Development program
    that our membership has deemed critical to growing tribal economies and
    creating career paths for Native people where few existed before.
        The Native 8(a) program demonstrates Congress' commitment to
    promoting tribal selfdetermination and self-sufficiency. This business
    development program reflects the unique character of Native communities
    and their responsibility to provide governmental services and other
    benefits to their members.
        To promote economic development for American Indian tribes and
    Alaska Native Regional and Village Corporations (ANCs), Congress
    authorized their participation in the Small Business Act's Section 8(a)
    Business Development program. When certified as an eligible 8(a)
    participant, American Indian tribes or ANCs may contract with the
    Federal Government under unique terms, which permit a federal agency to
    award a contract not subject to the competitive threshold that applies
    to individually-owned 8(a) companies and allows tribes and ANCs to
    operate multiple 8(a) firms. Congress purposefully created these
    distinctions to further its federal trust obligation to American Indian
    and Alaska Native tribes, and to provide tools to combat escalating
    poverty in tribal communities and to remedy the low level of American
    Indian and Alaska Native participation in the government contracting
    industry.
        Due to the recent public and Congressional attention on sole-source
    contracting, a number of investigations and press coverage
    unfortunately have cast an unfair and harsh light on tribal and ANC
    sole source contracting. The U.S. Government Accountability Office's
    (GAO) 2006 report of Alaska Native Corporation's (GAO-06-399)
    participation in the 8(a) Program recommended that the Small Business
    Administration (SBA) and contracting agencies exert greater oversight
    and monitoring of ANC sole source contracting. It did not recommend
    legislative changes that would effectively disband the program and
    reverse all of its positive contributions to advancing American Indian
    and Alaska Native policy. American Indian tribes and Alaska Native
    Corporations unique 8(a) provisions are consistent with other
    Congressional policies that advance Indian self-determination and
    economic development. The 8(a) Business Development program has
    demonstrated that it brings revenue growth, employment, profits, and
    social investment to tribal communities.
        Indian Country is a world of economic extremes. There are a few
    high profile examples of tribes and ANCs who have prospered
    economically. These examples of tribes and ANCs with some wealth
    receive public attention. However, there are several hundreds more who
    remain nearly invisible, who are struggling economically to preserve
    their lands and community. The social and economic conditions in many
    Native communities are comparable to those in developing nations around
    the world.
        Generational poverty among American Indians and Alaska Natives
    remains a serious challenge. American Indians and Alaska Natives are
    among the most economically distressed populations in the United
    States. Nationwide, this population experiences a poverty rate of 25.7
    percent, exceeding that of all other racial categories and more than
    double the national average of 12.4 percent. Indians living on
    reservations face poverty rates more than three times the national
    average. \1\ Reservation poverty is so pronounced it can be clearly
    seen on national maps, with hot spots of poverty in the northern
    plains, eastern Arizona, southeastern Utah, and western New Mexico,
    which overlap directly with Indian reservations. Real per-capita income
    of American Indians living on reservations is still less than half of
    the national average. In 2000, American Indian and Alaska Native
    unemployment stood at twice the national average and was more than
    three times as high on Indian reservations.
    ---------------------------------------------------------------------------
        \1\ Jonathan Taylor, ``Native American Section 8(a) Contracting,''
    p. 6 (October 2007).
    ---------------------------------------------------------------------------
        In addition, tribal governments have a severely limited tax base.
    Tribes cannot impose property taxes on trust land, and an income tax on
    impoverished people is not feasible. Recent U.S. Supreme Court cases
    have compounded this problem by permitting state taxation on Indian
    land while at the same time limiting the ability of tribes to tax non-
    members. In addition, tribes are hamstrung in their ability to access
    other traditional governmental revenue streams, such as tax exempt bond
    financing, in order to raise revenue for governmental services and are
    limited to what can be developed from tribal businesses. \2\ In sum,
    tribal citizens often have greater service needs than their non-Native
    counterparts, and at the same time, tribal governments have fewer
    resources with which to fulfill their governmental responsibilities to
    their citizens. Meaningful economic development is sorely needed.
    ---------------------------------------------------------------------------
        \2\ Matthew Fletcher, ``In Pursuit of Tribal Economic Development
    as a Substitute for Reservation Tax Revenue,'' 80 North Dakota Law
    Review 759 (2004).
    ---------------------------------------------------------------------------
        Economic growth in our nation's tribal communities remains a
    substantial challenge, and until this improves significantly, the
    unique 8(a) contracting benefits extended to tribes and ANCs should be
    part of the Federal Government's arsenal of policies, promoting
    economic development and working to alleviate dire poverty. The 8(a)
    program provides tribes and ANCs with critical tools needed to compete
    in the federal marketplace and enhances market-based competitive
    capabilities.
    Federal Indian Policy
        The U.S. Constitution and many statutes establish rights for
    American Indian and Alaska Native tribes based on their trust
    relationship with the Federal Government. In exchange for Native
    peoples ceding over 500 million acres of land, the United States
    entered into a trust relationship with American Indians and Alaska
    Natives. Treaties, the supreme law of our land, were originally the
    primary way that this trust relationship was expressed. Today, the
    trust relationship is carried out through the U.S. Constitution and the
    many statutes enacted by Congress, including the Alaska Native Claims
    Settlement Act (ANCSA) and the Native 8(a) business development
    provisions. The Federal Government's unique relationship with American
    Indian and Alaska Native tribal governments derives from the U.S.
    Constitution's grant of power to Congress ``to regulate Commerce. with
    the Indian Tribes.'' \3\ This Constitutional provision, and its
    interpretation in landmark Supreme Court decisions, gave rise to the
    Federal Government's special political relationship and trust
    responsibilities to American Indians and Alaska Natives.
    ---------------------------------------------------------------------------
        \3\ Article I, Sec. 8,  3.
    ---------------------------------------------------------------------------
        The Federal Government has enacted numerous policies that are aimed
    at reducing poverty and creating economic opportunities for Indian
    tribes and Alaska Natives. Congress was even more specific about
    strategies to realize these goals when articulating, in the Alaska
    Native Claims Settlement Act (ANCSA), the Federal Government's
    relationship with Alaska Natives. \4\ This law required compensation to
    settle land claims, and Congress mandated that for-profit corporations
    be used to implement the settlement. In ANCSA, Congress declared:
    ---------------------------------------------------------------------------
        \4\ See 43 U.S.C Sec. 1601, et seq.

            (a) there is an immediate need for a fair and just settlement
            of all claims. . . based on aboriginal land claims; and (b) the
            settlement should be accomplished rapidly, with certainty, in
            conformity with the real economic and social needs of Natives,
            without litigation, with maximum participation by Natives in
            decisions affecting their rights and property . . . \5\
    ---------------------------------------------------------------------------
        \5\ See Id. at Sec. 1601.

        Furthermore, in ANCSA, Congress confirmed that federal procurement
    programs for tribes and Alaska Native Corporations are enacted under
    the authority of the Commerce Clause, Article I, Section 8 of the U.S.
    Constitution. \6\ Among the most successful of these laws are the
    special provisions implementing Section 8(a) of the Small Business Act.
    These rules have helped tribal and ANC businesses overcome economic
    barriers. Competitive businesses have been created in both the private
    and federal markets. New business opportunities and career paths have
    been created in remote rural communities that are far removed from
    major markets, and profits, when earned, are invested to ensure future
    sustainability or returned as benefits to their communities.
    ---------------------------------------------------------------------------
        \6\ 43 U.S.C. Sec. 1629(e)(4)(A).
    ---------------------------------------------------------------------------
    Community Benefits
        Because of the high unemployment rates in tribal communities,
    capacity building for Native people is often the key goal of tribal
    governments and ANCs. In its 2006 Report, the GAO found that one-third
    of the ANCs interviewed had management training programs in place that
    encourage the recruitment, training, and development of Native
    employees. \7\ Tribes and ANCs use internships, scholarships, on the
    job training, and subcontracting opportunities to build their own
    talent. This process can be slow and arduous as multi-generational
    poverty has taken its toll on worker preparedness, but success can be
    significant when it is achieved.
    ---------------------------------------------------------------------------
        \7\ US GAO, (GAO-06-09) 2006, 81.
    ---------------------------------------------------------------------------
        For example, the General Manager of Sealaska Environmental Services
    and a shareholder of Sealaska Corporation earned a bachelor and
    graduate degree with Sealaska Corporation. He interned at the company
    and eventually started a new 8(a) subsidiary of Sealaska, which is a
    certified environmental remediation firm, providing a number of support
    services to federal facilities. Former scholarship recipients also have
    earned positions at Sealaska as: Vice President and Financial Officer;
    Vice President, Corporate Secretary, and Human Resources; Vice
    President and Chief Investment Officer; and Vice President and General
    Counsel. Sealaska Corporation has provided scholarships to 3,000 tribal
    shareholder recipients since the inception of its scholarship program,
    and from 2000-2008, it provided $5.7 million in scholarships. Since the
    inception of its internship program in 1981, Sealaska has provided 200
    internships, with 23 of these interns currently employed by Sealaska.
        Benefits derived from the government contracting program go beyond
    developing local Native capacity through scholarships, internships, and
    employment. Other benefits, which are just as important, have begun to
    take hold and advance self-determination, ensure cultural preservation,
    and ameliorate dire social conditions. For example:

       One Alaska Native Corporation has aligned its cultural
            values with its dividend payments. A special dividend program
            has been developed to provide additional support for elders,
            who hold a highly respected position in Native communities.
            When elder shareholders reach age 65, they are offered a
            special dividend along with additional shares,that provide a
            larger dividend payment in the future.

       Community-based non-profit organizations, supported through
            8(a) business revenues, are carrying forward cultural values
            through such wide-ranging activities as youth camps, leadership
            trainings, curriculum development, and language preservation.

       Cultural values and practices are reinforced through social
            and community programs funded by tribal and ANC 8(a)
            businesses, such as learning a traditional dance or language.
            These practices focus on preserving cultural values and
            traditions for Native communities, with an emphasis on
            providing youth with positive environments and influences.

       Native people serve as role models for fellow tribal members
            and are valued for their contribution to community. Tribal and
            ANC 8(a)s provide an opportunity for American Indians and
            Alaska Natives to see one of their own go to college, get a
            job, or work toward a career. These positive role models can
            increase community and individuals' hope for the future as well
            as provide inspiration.

       Business capacity is developed in the local community when
            tribal members and shareholders gain transferable business
            skills, such as financial literacy, strategic planning, and
            management. These skills are necessary for all aspects of
            economic and community development. Native community members
            may choose to utilize their skills in variety of ways: to start
            a local business as a supplier or provide a service that has
            been lacking in the community.

       Leadership capacity is developed when Native boards and
            tribal councils gain experience in making decisions that will
            directly affect the lives of their family, neighbors, and
            communities. Important investment and sustainability decisions
            are made in each tribal community: hiring, budgeting, dividend
            allocation, meeting community needs, and business and cultural
            sustainability.

        This needed business development program has enabled tribal
    communities to participate in the mainstream economy as intended, and
    the capacity building component has reaped real rewards as
    infrastructure and human capital have been built in local communities.
        As Congress monitors measures, both legislative and administrative,
    to bring more transparency and accountability to the 8(a) Business
    Development program, it also needs consider the legal, policy, and
    economic context for the special 8(a) provisions while gauging their
    effectiveness as regulatory policies are implemented.
    Native 8(a) Contracting History
        Since World War II, the Federal Government has adopted policies to
    increase the diversity of suppliers to the Federal Government. The
    intention is to assist businesses that have substantial barriers to
    capital formation and allow them to effectively compete in a highly
    concentrated market. The Small Business Act's Section 8(a) Business
    Development program directs the government to purchase from small
    businesses. In 1987 and 1988, the Senate Indian Affairs Committee held
    hearings to determine why so few Native American-owned firms
    participated in government contracting and why a Presidential
    Commission on Indian Reservation Economies found that existing
    procurement policies created substantial obstacles to Indian
    reservation economic development. As a result of these Congressional
    inquiries, changes to federal laws were made to ensure that American
    Indian and Alaska Native tribes could more effectively compete in the
    federal market place in a manner that reflects the unique federal
    obligations and different legal frameworks that apply in Indian
    Country.
        Except in a few important ways, the rules and regulations that are
    applicable to all 8(a) companies owned by individuals, women, and
    minorities apply to American Indian tribal enterprises and to Alaska
    Native Corporations. Congress altered this legal framework to take into
    account the unique ownership structures of enterprises owned by tribal
    governments and by Alaska Native Corporations created under the Alaska
    Native Claims Settlement Act. These ownership structures distinguish
    them from all minority-owned businesses and other types of private
    sector firms. Thus, tribal and ANC contracting differs from private
    8(a) contracting.
        Tribal enterprises are owned by tribal governments. Tribal citizens
    determine who governs them and ultimately how their government will
    carry out economic activities through a tribally-owned business. The
    authority to create a tribal enterprise is typically governed by a
    tribe's constitution or governing authorities. A tribal governing
    council usually determines the officers of a tribal enterprise and
    hires a manager to oversee the day-to-day operations of the business.
    Usually, the tribal governing body will retain overall strategic
    direction of the enterprise, have the authority to acquire or
    distribute assets, and reinvest or distribute profits for the benefit
    of its tribal membership. Often, the sole shareholder of tribal
    enterprise is the tribal governing body itself.
        The corporate structures created under ANCSA represented a new
    approach to settling land claims between the United States and Alaska
    Natives. ANCSA established a framework in which village and regional
    corporations would manage the assets, land, and natural resources that
    Alaska Natives received under the settlement.
        Under ANCSA, shareholders may not sell their shares to non-Natives.
    Congress explicitly intended the use of corporate structures to give
    Alaska Natives greater control of their economic destiny--to achieve
    self-sufficiency as well as self-governance. In fact, in furtherance of
    this economic settlement, the opportunity to participate in federal
    procurement programs, including the 8(a) program, was embedded in ANCSA
    by amendments passed by Congress making it clear that ANC participation
    in these programs business development opportunities would be an
    integral part of the ANCSA settlement and contribute to the development
    a sustainable economy. \8\
    ---------------------------------------------------------------------------
        \8\ In 1988, Congress passed amendments to the Alaska Native Claims
    Settlement Act, P.L. 100-241, which granted presumptive minority status
    to ANCs, as defined in 43 U.S.C. Sec. 1626(e)(2). The intent was to
    grant qualifying ANCSA corporations or ANCSA corporation-owned firms
    the status of ``a minority owned and controlled corporation for
    purposes of federal law.'' In 1992, the Alaska Land Status Technical
    Corrections Act, Public Law 102-415, amended Sec. Sec. 1626(e)(1) and
    (2) by granting ANCSA corporations or ANCSA corporation-owned firms
    ``economically disadvantaged'' status.
    ---------------------------------------------------------------------------
        The ownership structures of both tribally-owned enterprises and
    ANCs create a much broader mandate to address a wider range of
    interests than other minority-owned 8(a)s; tribal and ANC firms must
    operate and provide benefits that go far beyond the bottom-line of
    profitability. The special provisions which apply to tribal and ANC
    8(a) contracting were tailored to take into account these differences
    and to take into account the federal Indian policy of promoting
    selfdetermination and economic self-sufficiency.
        The special provisions include different criteria which govern the
    admission of tribal and ANCs into the 8(a) program, and they exempt
    tribal and ANCs from lower \9\ competitive threshold that applies to
    individually-owned firms \10\ and also establish different affiliation
    rules, which permits tribal governments and ANCs to have multiple 8(a)
    companies. However, many of the other rules that apply to all 8(a)
    firms apply equally to tribes and ANCs. For example, all 8(a) firms
    have a maximum 9-year participation term in the 8(a) Program. Likewise,
    all 8(a) firms must be small to receive an 8(a) contract. When an ANC
    8(a) firm grows out of its applicable size standard, it graduates out
    of the program, just like other 8(a) firms. Tribes and ANCs are
    permitted to form new 8(a) firms in different industries because of
    their responsibility to improve the livelihood of hundreds or thousands
    of community members. Accordingly, tribes and ANCs can operate multiple
    8(a) firms and do not have a limit on the size of contract that can be
    awarded to them on a sole source basis. These provisions were intended
    to prepare tribal enterprises and ANCs to compete with others in their
    industry, particularly large contractors who have established
    relationships with government customers and possess capital and
    proposal capability sufficient to dominate the federal procurement
    market.
    ---------------------------------------------------------------------------
        \9\ Justification and Authorization needed for all contracts over
    $20 million as passed in the National Defense Authorization Act of
    2010, Section 811, P.L. 111-84 [H.R. 2647]
        \10\ Section 602 of the Business Opportunity Development Reform Act
    of 1988, P.L. 100-656 [H.R. 1807], November 15, 1988.
    ---------------------------------------------------------------------------
        In order to compete effectively, Congress provided tribes and ANCs
    flexibility to hire experienced staff and management and the ability to
    use partnerships and subcontracting tools that are available to other
    contractors. Tribes must present a plan for Native managers to assume
    operations, while Alaska Native participants have the flexibility of
    hiring both Native and non- Native managers. However, the direction of
    the company and the management of assets and distribution of profits
    are ultimately determined by a tribal governing council or Alaska
    Native Board of Directors. The governing council or board of directors
    is elected by tribal members or by Alaska Native shareholders. Top
    managers are tasked with the responsibility of improving the assets and
    profitability of the company, while at the same time carrying out
    cultural and broader social goals of the Native community.
        Additionally, tribes and ANCs, like other individually-owned 8(a)
    companies, have the ability to form partnerships or subcontract in
    order to complete jobs and make profits. SBA regulations permit all
    8(a) contractors to subcontract a portion of the work under certain
    conditions. This can create benefits for local businesses where a
    contract is awarded by permitting tribes and ANCs to work with local
    companies while still fulfilling its own goals of self-sufficiency.
        Similarly, tribes and ANCs can form joint ventures with large
    companies in the same manner available to all 8(a) firms. All 8(a)
    firms can form joint ventures under SBA's Mentor-Protege Program. The
    use of teams and joint ventures are encouraged by the Federal
    Government as a means to stimulate growth, forge new business
    relationships, and develop expertise.
        For example, Mandaree Enterprise Corporation faced bankruptcy in
    1994. The tribal government owners, the Mandan, Hidatsa, and Arikara
    Nations of the Ft. Berthold Reservation in North Dakota, hired a CEO to
    develop a turn-around strategy. Mandaree Enterprise became certified in
    the 8(a) Business development program and grew rapidly as it expanded
    into government contracting. Part of its success was due to its
    participation in U.S. Department of Defense's Mentor-Protege Program,
    which encourages major defense prime contractors to work in tandem with
    small disadvantaged businesses to develop their business and enhance
    their technical capabilities. The ultimate goal is to enhance the
    potential contributions of proteges, like Mandaree Enterprise
    Corporation, thus allowing them to more effectively compete for
    defenserelated work. Through this program, Mandaree Enterprise
    Corporation developed a relationship with Northrop Grumman, which
    contributed to their capabilities in manufacturing cables, wire
    harnesses, and circuit boards. During two separate occasions, the
    Mandaree Enterprise Corporation and Northrop Grumman received special
    recognition from the U.S. Department of Defense by winning the Nunn-
    Perry award.
        The criticism about tribal and ANC contracting success from some in
    the small business community is misplaced and misguided. It distracts
    from the many issues that all small contractors have in common. While
    the federal contracting market has increased substantially, many small
    businesses believe they have been shut out of the market. The size of
    the market has increased; however, the Federal Government's statutory
    goals, which are intended to ensure small business participation, have
    remained stagnant, not keeping pace with the potential for greater
    small business participation. Additionally, the overall small business
    share has declined due to a number of reasons, such as bundling, the
    consolidation of contracts beyond the reach of many small business
    capabilities. The federal procurement market is huge, and there is
    plenty of room for tribal and ANC and all minority businesses to
    participate. NCAI has worked with other small business organizations,
    such as the Minority Business Roundtable and Women Impacting Public
    Policy, to urge Congress to increase opportunities for all small
    businesses by increasing agency contracting goals and size standards,
    as well as increasing the thresholds for individually owned 8(a)
    companies. The Administration has acted to increase size standards for
    some industries and is undertaking an effort to unbundle contracts,
    last least in the information technology arena. All are positive steps
    for all 8(a) participants.
        Fostering the development of successful small business contractors
    advances the government's interests by broadening and diversifying its
    industrial base of service providers and suppliers. More competition
    can result by combating the consolidation of the government contracting
    industry into a few dominant large businesses. By providing different
    contracting provisions to qualified tribal enterprises and ANCs,
    Congress increased the likelihood of sustaining business opportunities,
    ownership, and revenues for American Indians and Alaska Natives. These
    provisions are helping to alleviate poverty, provide economic growth,
    and increase the business capacity of tribes and ANCs.
    Recommendations for Program Improvement
        We feel it is important for this Committee and Congress to know
    that these tools created to promote economic self-sufficiency in Native
    communities are working as the Federal Government intended. The 8(a)
    program is still a long way from universally building local tribal
    economies and offering hope to tribal citizens. However, even its
    infancy, it has already proved to be an effective tool for those tribes
    and ANCs who have the ability and tenacity to compete and profit in the
    federal market place.
        Our member tribes, ANCs, and Native communities have all given us
    input on this issue, and their message has been simple and clear: Keep
    the program in place. It is working. While a handful of tribes and ANCs
    have achieved significant success in government contracting, the vast
    majority of tribes and ANCs remain in desperate need of meaningful,
    diversified economic development opportunities. Tribal communities face
    many obstacles to economic development, including lack of access to
    capital, inadequate infrastructure, remote locations, complicated legal
    and regulatory status, and insufficient access to training and
    technical assistance, among others. In fact, given its proven success
    in a limited number of communities, we should all be working towards
    ways to strengthen the 8(a) program so more communities can benefit
    from the purchasing power of the Federal Government.
        With this directive from our member tribes, ANCs, and Native
    communities, NCAI set out to evaluate the program, listen to those who
    had concerns, and try to correct misperceptions. During a national
    summit held jointly with the U.S. Department of the Interior, NCAI
    heard from tribal leaders about these economic challenges and
    opportunities. In addition, a joint working group was formed with NCAI,
    the Native American Contractors Association, and the National Center
    for American Indian Enterprise Development to ensure that we were
    speaking with a unified voice and representing the issues and concerns
    of all American Indian and Alaska Native entities.
        NCAI evaluated concerns about the program by carefully reviewing
    the April 2006 GAO report on Alaska Native Corporation 8(a) contracting
    (GAO-06-399). The GAO recommendations centered on the need for greater
    oversight activities by the Small Business Administration (SBA) and
    federal agencies. In response, we held a series of government-
    togovernment tribal consultations with the SBA Administrator to discuss
    the GAO and other SBA Inspector General (IG) recommendations and to
    identify potential solutions to address these concerns.
        Through this process, we developed two comprehensive sets of
    administrative recommendations to improve oversight in response to the
    recommendations made in the GAO report (GAO-06-399) and other 8(a) SBA
    IG reports. We submitted these reports as part of the administrative
    record for the tribal consultation process that the SBA undertook as
    part of its 8(a) rulemaking on the SBA mentor/protege program.
    Additionally, we have urged Congress to increase funding for the SBA to
    provide additional staff resources and to conduct an SBA assessment on
    re-engineering the Native 8(a) program with the goal of providing more
    transparency, accountability, and training. This effort was undertaken
    to ensure that this program remains one of the critical tools available
    more broadly in Indian Country as a way to generate revenue and build
    business capacity. These recommendations were developed to strengthen
    reporting systems and provide improved transparency and accountability
    for many of the concerns that have been raised.
        Since these recommendations were developed, both Congress and the
    Administration acted to address a number of concerns regarding how
    Native and all other firms participate in the SBA 8(a) program.
    Congress, through the National Defense Authorization Act for Fiscal
    Year 2010, enacted legislation that directly and disproportionately
    impacts Native 8(a) firms. The Act requires all federal agencies to
    justify and approve all contract awards over $20 million.
        The Office of Management and Budget, through the Federal
    Acquisitions Regulatory (FAR) Council hosted consultations before
    releasing the regulations that will guide the level of justification
    and approval. The Far Council should be commended for hosting its first
    tribal government consultation and for drafting regulations that adhere
    to those specifically included in the legislation. These regulations
    are not intended to cap sole source contracting to a $20 million limit,
    but should add a layer of tax payer protection for all large contracts.
        The Administration, through the SBA, released regulations earlier
    in 2011 that will add additional oversight and accountability. The SBA
    held a number of consultations with tribal governments before the
    regulations were drafted and is promising to conduct further
    consultations to give guidance on the new rules and discuss a delayed
    regulation governing benefits reporting. The regulations answer
    concerns raised over the years by NCAI and our partner organizations,
    participants, administrative officials, and Congress. Among other
    things, the new rules add accountability by clarifying mentor-protege,
    joint venture, and sub-contracting relationships. The rules also
    provide new guidelines for NAICS codes and size standards and provide
    greater transparency for excessive or executive compensation.
        While all of these new rules promise greater accountability and
    transparency, Congress, in its oversight role, should ensure the
    regulations are implemented and enforced in a manner that sets new
    standards for program participants without detracting from the
    programs' intent or deter contractors from using the program.
        Additionally, Congress should ensure that the benefits reporting
    regulations being developed are done so in a way that reflects current
    federal Indian policy. Tribes and ANC's, by nature of their governing
    systems, are already responsive their respective citizen and
    shareholder interests and for the well-being of their communities and
    culture. The reporting mechanisms should not favor certain expenditures
    or limit the use of revenues to what may be acceptable to external
    interests.
        We want to thank you for giving us the opportunity to address the
    importance of the 8(a) Business Development program to tribal
    communities. We look forward to your continued support of tribal self-
    determination efforts and our use of effective economic tools.

        The Chairman. Thank you very much, Ms. Johnson-Pata.
        Ms. Kitka, please proceed with your testimony.

            STATEMENT OF JULIE E. KITKA, PRESIDENT, ALASKA
        FEDERATION OF NATIVES; ACCOMPANIED BY BYRON I. MALLOTT,
                     DIRECTOR, SEALASKA CORPORATION

        Ms. Kitka. Thank you, Mr. Chairman and Members of the
    Committee. It is wonderful to be here. On my right is one of
    our most respected native leaders, Byron Mallott, who was
    Founder of the Alaska Federation of Natives, as well as a
    President of one of our native corporations, a former CEO with
    a lot of experience. I have asked him to join me to share my
    opening remarks time and also to be available for questions as
    far as early background or any questions that you have on that.
    We will try to keep our comments very short.
        Thank you for taking my written statement into the record.
    We are more than happy to respond to any and all questions that
    the Committee may have.
        The 8(a) Program from our experience is one of the most
    successful programs we have ever seen this Congress enact. It
    allows us to build capacity. It is not an entitlement program
    and a handout. It builds capacity for the long term. I cannot
    underestimate what that means to us.
        If you are required to have tight financial and accounting
    systems, if you are required to deliver services on time, under
    budget, whatever, the skills that that develops with your
    people and your managers are transferrable to every type of
    business that you are involved in.
        So you should be very proud of the program and the success.
    And we want to build on that. We see aspects that could be
    surrounded around the program that wouldn't necessarily be in
    the 8(a) Program, but other areas that could support the
    capacity-building of native people, support the reduction of
    poverty and elimination of marginalization of our people, and
    that includes such areas as the investment climate in our home
    communities and reservations.
        Unless our investment climate is favorable to business
    development, many of the business opportunities will be outside
    of our communities, so we have to pay attention to investment
    climate. We have to pay attention to tax policy and tax
    incentives and tax credits. That will directly influence and
    encourage more opportunities on our reservation and in our
    villages, and is just essential.
        The idea of patient capital, some of our communities are
    land-rich, but cash-poor. If they are to succeed in business
    enterprises, if you are to see local results on that, we need
    patient capital that people can use to build up their capacity,
    especially in the smaller areas. Again, they don't really fit
    into the 8(a) thing, but in the big picture, they will have
    just as important a benefit for our people. And again, they are
    not hand-outs. They are not entitlements. They are investing in
    the native community building their enterprises and improving
    the standard of living.
        I also wanted to share one critically important result of
    the experience in Alaska with our native corporations and our
    land claims. I bring this to your attention because I think it
    has application for many of your considerations you deal with
    in the Congress. One of the most important aspects of our
    experience with corporations is the ability to organize
    separately for political purposes and separately for business
    and economics. It is that ability to organize economically to
    engage in economic activities with other businesses which is
    critically important. And I think our participation in the 8(a)
    proves that that separation of organization and purpose on that
    is just a keystone of our success and our participation.
        And I bring that to your attention because I do think that
    that has application to decisions you make in nation-building
    in countries like Afghanistan, Iraq, even the Middle East and
    things like this.
        Taking a look at building communities and building
    stability and the capacity of people who are in poverty and
    they are marginalized, that ability to organize separately
    economically versus just political organization is an important
    lesson that we contribute, that the Congress and the United
    States should be very proud of. And we would be glad to work
    with you on being able to showcase that. But I can't
    underestimate how timely and relevant our experience in the
    8(a) government contract has in these other arenas that you
    deal with.
        With that, I would like to ask Byron Mallott to share some
    comments.
        [The prepared statement of Ms. Kitka follows:]

     Prepared Statement of Julie E. Kitka, President, Alaska Federation of
                                    Natives
        Mr. Chairman, and distinguished Members of this Committee, I
    appreciate the opportunity to present testimony on behalf of the Alaska
    Federation of Natives (AFN) regarding SBA's 8(a) program, an important
    legal tool which is intended to help us escape poverty and
    marginalization, and empower our people to compete in the federal
    marketplace, deliver value to our federal partners and learn during the
    whole process.
        On behalf of AFN Co-Chairs State Senator Albert Kookesh and Ralph
    Andersen, and our 37-Member Board of Directors--we want to express our
    appreciation for these hearings, and your support of programs that
    provide economic opportunities to Native Americans. I offer this
    testimony to speak to the legal and equitable basis and importance of
    the Small Business Administration's 8(a) program to the Native people
    of Alaska and to offer several recommendations.
        I submit this testimony in my capacity as President of the Alaska
    Federation of Natives (AFN). By way of background, AFN is the largest
    statewide Native organization in Alaska representing more than 125,000
    Alaska Natives residing in Alaska, and more than 120,000 Alaska Natives
    scattered over the rest of the 49 states. Alaska Native leadership
    organized AFN in 1966 to facilitate bringing the various regional and
    village associations together, to advocate with one voice for a fair
    settlement of our aboriginal land claims. Congress approved the Alaska
    Native Claims Settlement Act (ANCSA) in 1971, and for the last 40 years
    we have been involved in implementation and adapting both the
    settlement and our relationships to meet the real needs of our people.
        As President of AFN, I have seen where AFN is both an organization
    and a movement of Native people who are striving for self-
    determination. Our decision making process is shared with a 37 member
    Board and an annual convention of elected Native representatives of
    approximately one delegate for each 25 members of our villages,
    communities and Native institutions. It is a formalized process, which
    has served us well, and continues to adapt. The AFN convention is the
    largest annual gathering of Native people in the United States and
    generally numbers about 5,000 people. The AFN convention is a
    representative and inclusive Native gathering for Alaska Native people.
        At our annual convention we work hard to maintain unity of purpose,
    recognizing we have a great diversity within the state, different
    ethnic and cultural experiences. We focus on statewide priorities, and
    debate and decide our positions on critical issues. The AFN convention
    has repeatedly voted to support the SBA 8(a) program as a viable
    economic tool for Native Americans and have urged us to do everything
    in our power to protect the opportunities for participation, and to
    ensure that Alaska Natives are at the table for any discussions that
    affect our people.
        I would like to make clear that the AFN has zero tolerance for
    abuses of this program, or for media hype, which is not grounded in
    fact. AFN and I candidly recognize that there have been isolated
    instances of abuse or lapses in judgment by some involved in the 8(a)
    program. We do not condone such abuses or lapses and are committed to
    helping ensure that they are not repeated. We believe that the
    implementation of the new SBA regulations will go a long way toward
    making sure that they are not. We are committed to ensure the long-term
    benefits of this program are shared between the federal agencies for
    whom we do work, and for our young growing population, which is
    continually building their experience and expertise. By the same token,
    we urge this Committee and others in Congress to not let a few such
    instances be misused to destroy this highly meritorious and effective
    program for others in need of the opportunity it affords Native
    Americans.
        I would like to note that we appreciate your leadership of this
    distinguished Committee in the administration of laws designed to
    benefit Alaska Natives and Native Americans. This Committee serves a
    very important role in the lives of our people, protecting commerce
    with, and among, Native American tribes, corporations and other
    organizations, while recognizing our unique role and relationship with
    the U.S. government. We welcome and appreciate your leadership in
    reviewing the 8(a) programs. We also appreciate the efforts of our
    elected representatives, Senators Murkowski and Begich, and Congressman
    Young, who have stood with us to see that the truth is told about 8(a)
    contracting, and about its great importance to our people.
        The work you and your Colleagues have done over the years have
    improved the lives of Native Americans--our people live longer, we have
    greater access to health care and educational opportunities, poverty is
    being reduced, and we are hopeful for the future and our place in
    society as contributing members. Thank you for all you have done and
    the sacrifices you have made in your lives to take on public service.
    It really matters and we appreciate it more than you will ever realize.
        Now, I will focus on the 8(a) program. First and foremost, it is
    important to recognize that the 8(a) amendments, as they relate to
    Alaska Natives, are the result of congressional amendments to ANCSA,
    and to further understand that ANCSA is a fundamental federal law that
    was intended to establish a fair and equitable relationship between the
    Federal Government and Alaska Native people. ANCSA is the foundation of
    much of our economic and legal relationships with the Federal
    Government, but it is much more than that. ANCSA embodies most of our
    economic and relational agreements with the Federal Government,
    agreements approved by the United States Congress for which our people
    relinquished valid legal claims to lands and resources in Alaska, our
    homeland. Our leaders took a tough stand. We accepted a settlement that
    freed the State of Alaska \1\ to receive its lands and the Federal
    Government to manage its lands.
    ---------------------------------------------------------------------------
        \1\ In 1971 when the Alaska Native Claims Settlement Act (ANCSA)
    was enacted by the Congress, Alaska was a fledgling state, not even 15
    years old.
    ---------------------------------------------------------------------------
        And we should recognized that the citizens of the United States,
    and the Federal Government, received a bargain: by settling Alaska
    Native land claims, title to lands in northern Alaska was cleared,
    paving the way for the Trans-Alaska oil pipeline to be built, which
    this summer will deliver the 18th billion barrel of oil to domestic
    consumers, from U.S. fields. These 18 billion barrels of domestic oil
    are directly attributable to the agreements that were made possible by
    ANCSA. The fields of Prudhoe Bay alone have delivered several hundred
    billions of dollars of goods, services and taxes to the Federal
    Government. ANCSA made this possible by addressing the status and
    claims of Alaska Natives.
        ANCSA remains one of the largest and most complex land settlements
    in U.S. history. In December 1971, after years of effort by Members of
    the U.S. Congress and Alaska Native leadership, the Alaska Native
    Claims Settlement Act (P.L. 92-203) was signed into law by President
    Richard Nixon. In return for extinguishing their aboriginal claims to
    Alaska's 360 million acres, Alaska Natives were allowed to retain fee
    simple title to 44 million acres of land and received $962.5 million
    for lands transferred to the State, federal and private interests. The
    Act created 13 regional for-profit corporations and more than 200
    village corporations to receive and oversee the land and monetary
    entitlements. It took decades to get the promises of ANCSA implemented.
        The structure of ANCSA, and the creation of corporations to be
    owned and operated by Alaska Natives, was--and remains--of lesser
    importance to Alaska Native people than protecting our land and our
    traditional way of life, and surviving in the modern world.
        The basis of the treatment of Alaska Native corporations under the
    Small Business Act stems from amendments to ANCSA and to the Small
    Business Act--it is, today, a critical component of the Alaska Native
    Claims Settlement Act. In 1986 and 1987, I was working on behalf of AFN
    in Washington D.C. on a package of amendments to ANCSA called the
    ``1991 Amendments'' when the 8(a) amendment was debated and enacted.
        For those unfamiliar with ANCSA, the ``1991 Amendments'' were a
    result of five years of internal discussion and debate within the
    Alaska Native community, and with Members of Congress. This legislative
    effort modified ANCSA and addressed fundamental land protections, the
    ability to provide special benefits to our Elders and to our younger
    generations, and the legal structure of Alaska Native Corporations. For
    example, one major provision would have allowed Native corporation
    stocks to be sold on the public market.
        We knew at the time of the debates regarding the 1991 amendments
    that, if ANCSA was allowed to remain as it originally was enacted, the
    Alaska Native people were in danger of losing their corporations, those
    legal entities created by Congress to manage Alaska Native lands and
    resources.
        Amendments to the SBA 8(a) program were included as part of the
    ``1991 Amendments'' because the program was viewed as necessary to the
    ability of Native Corporations--based in remote, rural areas of
    Alaska--to transition into the U.S. business world. And, as has been
    the experience of many minority peoples in our nation's history, we saw
    that Natives corporations were sometimes excluded or ignored as
    potentially viable business entities.
        The ``1991 Amendments'' were fully considered by Congress in 1987,
    passed without opposition, and were signed into law. The 8(a)
    amendments also were passed by Congress without opposition and signed
    by the President. As you well know, the 8(a) amendments provided
    contracting authority that applies equally to all Native American
    tribes as well as Alaska Native corporations. The contracting
    opportunity available under 8(a) is not unique to Alaska Native
    corporations.
        Also, it is worth considering the basis for the distinction between
    laws differentiating between Native American relationships and others.
    In a great many cases, Native Americans entered into agreements with
    the Federal Government relinquishing ownership and use and occupancy of
    lands for treaties and statutes. In our case, Alaska Natives
    relinquished claims to approximately 320 million acres of land in
    Alaska with the passage of ANCSA. The agreements embedded in these
    treaties and statutes across the United States properly provide a basis
    for differential treatment under the law. Congress can properly
    distinguish between Native American and non-Native American contracting
    opportunities. Congress' authority to do so comes from the unique
    status of Indian tribes under federal law and the plenary power of
    Congress to legislate on behalf of federally recognized tribes and
    Alaska Native corporations. This principle is well established in
    federal law and was recognized by the United State Supreme Court in a
    leading case, Morton v. Mancari, 417U.S. 535, 551-52 (U.S. 1974). The
    Supreme Court has upheld legislation that provides for unique
    application of laws to Native Americans due to the unique history and
    role of dealings with Indians and has stated that as long as the
    special treatment can be tied rationally to the fulfillment of
    Congress' unique obligation toward Indians, legislation regulating
    commerce with Indian tribes will not be disturbed. Mancari, 417 U.S. at
    555. That is the correct and constitutional basis for the Indian and
    Alaska Native treatment under the 8(a) program.
        To look back now and seek to separate the economic treatment of
    Alaska Natives, or any other Native American tribe or group, from the
    settlement of aboriginal claims would not be just or fair. As you meet
    here today, in this hearing, not all the lands that were promised to
    Alaska Natives have been conveyed to our people and our corporations 40
    years after ANCSA was enacted. What is the net present value of the
    lost use of our lands, delayed in some cases by decades?
        To Alaska Native people, ANCSA is as important as the fundamental
    human rights statutes of the Civil Rights Act and Voting Rights Act.
    ANCSA is based on recognition of the validity of the claims of Alaska
    Natives to lands and waters in Alaska, where our people resided for
    thousands of years. To pull out pieces of the Act now and examine them
    out of context would be wrong. ANCSA corporations are not merely for-
    profit corporations; they are stewards of the Native homeland, sponsors
    of education and training opportunities, employers of ``first resort''
    for our aboriginal people. There is so much more tied into these
    corporations than some people understand. Most of our entire land
    base--our land is key to our heritage, culture and future--is held by
    the corporations, just as Congress intended in passing ANCSA. The
    corporations have broader responsibilities than many other
    corporations, for in their hands are our settlement lands, lands which
    we can not afford to lose. Alaska Native corporations were not started
    as ordinary corporations, and were not intended to function as ordinary
    corporations.
        These corporations were required to be formed by federal law,
    ANCSA, a requirement not applied elsewhere in other aboriginal land
    settlements, or to many, if any, other corporations in America. The
    corporations were a foreign-type entity to our people, but we worked
    hard, and did what the law instructed us to do with the corporations.
    Our people struggled in many cases to overcome social and economic
    disadvantages of operating new corporations in what to the business
    world is remote Alaska, and to run the corporations as intended. Our
    people persevered to seek the success Congress intended. Contracting
    under section 8(a) is, and has been an important aspect of the success
    of some of our ANCSA corporations, and through them, we have seen
    important socioeconomic benefits to thousands of our people, as
    intended. Again, our corporations hold the keys to our heritage, our
    lands, and economic base, which are essential to our well-being.
        As these corporations began to succeed, many of the indicators of a
    healthy society began to improve. For example: Alaska Native life
    expectancy for both men and women has increased, infant mortality has
    decreased, poverty has been reduced from over 60 percent to 20
    percent--a major accomplishment. Key findings in a report commissioned
    by AFN shows dramatic improvements in positive indicators; dramatic
    decreases in negative indicators; and a continuing thread of disparity
    between the Alaska Native population and non-Alaska Native population,
    both in Alaska and in the U.S. in all indicators. \2\ Overcoming this
    disparity must be a targeted focus of all our efforts.
    ---------------------------------------------------------------------------
        \2\ In 2004, AFN commissioned a 30-year trend analysis on all major
    socio-economic and health indicators of the Alaska Native population.
    The University of Alaska, Institute of Social and Economic Research
    prepared the report. Key findings show that Alaska Natives have more
    jobs, higher incomes, and better living conditions, health care and
    education than ever. But they remain several times more likely than
    other Alaskans to be poor and out of work. All the economic problems
    Alaska Natives face are worst in remote areas, where living costs are
    highest. AFN has made the request available to Members of the
    Committee.
    ---------------------------------------------------------------------------
        Of course, AFN does not assert that ANCSA and our Native
    corporations are the source of all the improvements in the last thirty
    years. Other significant impacts on well-being have been federal and
    state appropriations in health, education and social services; and the
    Alaska Permanent Fund dividend. However the impacts of ANCSA are very
    substantial.
        I believe that it may be tempting to look at some of the greatest
    success of Alaska Native Corporations and see only success. From where
    we started, with small, new start-up corporations, beginning with a
    people that had not operated corporations before, our corporations have
    come a long way. We have asked other members of Congress and other
    committees not to skip over what we started with, living and working in
    what is to most businesspeople the most remote corner of America, in
    one of the harshest climates in the world: A history of extreme
    prejudice toward, and lack of understanding of, our people. A history
    of wariness toward a people who, in a great many cases, literally spoke
    a different language than most businesspeople in America. A history of
    exclusion from genuine business opportunity. And a history of no
    business history with ``mainstream'' large economies in America. This
    is clearly a case study of an economically disadvantaged minority
    business. That is why ANCSA and the Small Business Act were amended to
    provide for economic opportunity for our corporations. These amendments
    are the basis of the 8(a) program as it applies to Alaska Native
    Corporations.
        SBA 8(a) contracting has created the benefits that it was intended
    to create. Our corporations have built up a capacity that did not exist
    before. Methodically, efficiently and responsibly, these corporations
    have built up a capacity to provide employment to Native shareholders,
    provide training to young people, and develop and offer scholarship
    opportunities. Our corporations have built up a capacity to provide
    jobs and help young people see what it takes to succeed in modern
    America. They have built, as intended, a managerial and business
    expertise that can carry forward. They have helped create an economic
    stability where none existed before. Our people take pride in this
    work, and feel strongly that this is our work, not the work of others.
    It is an accomplishment to behold, one which is worth understanding in
    full for its roots, path and basis in law, including Native American
    law.
        We believe that the laws governing the 8(a) program provide the
    correct balance of interests and provide for an effective small
    business program. Native American participation in the 8(a) program
    represents less than 2 percent of the total contracting undertaken by
    the U.S. government. When the regulations need updating, the SBA and
    federal agencies have shown that they have the authority and ability to
    modify the program where needed. New regulations for the 8(a) program
    were published in a Final Rule in February of this year and took effect
    last month. These regulations provide for changes in the joint venture
    requirements, require more assistance from mentors in the mentor-
    protege relationship, and require greater reporting on the benefits to
    Native members and communities resulting from 8(a) contracts, including
    the reporting of dividends, funding of cultural programs, employment
    and other programs. We should give the changes of this new regulation a
    chance to work and then assess what else needs to be done.
        As I testified last year to the Subcommittee on Contracting chaired
    by Senator McCaskill, what happens with Alaska Natives has an impact
    everywhere: our homeland, our traditional way of life, our economic
    future--so much depends upon our relationship with the U.S. Government,
    and the development of our Native people and our corporations. If they
    fail, we could lose everything.
        I look at our Native corporations' participation in government
    contracting as a repudiation of federal termination and assimilation
    policies of previous decades. With our participation in the SBA 8(a)
    program, our Native corporations become integrated in the economy. At
    the same time, we retain our culture and identity; we create jobs; and
    control the amount of involvement or non-involvement. I view the
    greatest benefit of our participation in the SBA 8(a) program is the
    capacity building, which is occurring and continues. We are both
    contributing to the U.S. economic recovery and building our capacity to
    help more. We are involved in nation-building work, which benefits all
    Americans. We work hard, we do quality work within budget and on time,
    or we do not receive contracts. We build tight financial and accounting
    systems because we want to work responsibly and according to the law.
    We are developing our people to be responsible U.S. citizens capable of
    solving any problems or crisis and working to build our country.
        I believe strongly that the success of the program is so good that
    it could be considered a national model for integrating ethnic
    minorities into the modern global economy. Several areas around the
    world, which I am sure you monitor, could greatly benefit from the
    experiences we are gaining in building a better base in our economy for
    our indigenous people. The upheavals in places like Tibet, while very
    complex and historical in root causes, reveal the long-standing ethnic
    tensions and weakness in China's social and economic structure. Unlike
    the Soviets, who dealt with potentially problematic ethnic minorities
    in part by moving them en masse from their homelands, China left its
    ethnic minorities largely within their traditional lands. Ethnic
    tensions arise and are exacerbated by disparities in social status and
    economic situations in these two provinces, as well as elsewhere in the
    world. The experience of Alaska Natives, our separation of economic and
    political organization, our working relationships with the state and
    Federal Governments, are all models, which could have application in
    other parts of the world.
        In my view, together we have done many things right in the United
    States and Alaska. The ultimate benefit of the SBA 8(a) government
    contracts is the capacity building and the nation building work. It is
    the integration into the larger economy and the opportunity to
    contribute which is the genius of the U.S. approach. It hasn't been
    easy, and it is a lot of continuous work by our people, with continual
    adjustment, but we are on the right path.
        As we look at 2011 with a slow recovery and serious federal budget
    issues, we know we are looking at a new reality. The federal fiscal
    environment has changed. We are in the midst of a global economic
    realignment and recovery. There is a critical need for the U.S.
    Congress and Administration's recovery act investment and further
    action taken and planned. The SBA 8(a) program is a proven way to move
    resources quickly and to get things done and employ people. With
    national unemployment figures remaining stubbornly high--we all must be
    concerned.
        As we look towards a post-crisis recovery and how Native Americans,
    including Alaska Natives are helping and can help in the recovery, we
    request an opportunity for a dialogue with the appropriate
    Congressional committees on strategic, opportunity expanding ideas. We
    want to keep developing economic tools, infrastructure, expanding
    education and training for our people, and developing our institutions
    and organizations to be effective in the post-crisis economy and world.
    It will be a changed world, and we want to be ready for it.
        We want to maintain our Native identity, our cultures and
    homelands. We want life opportunities and choices. We want to continue
    to build capacity within all our Native corporations, and tribes and to
    be known for our good governance and leadership.
        The continuation of the SBA 8(a) program helps us accomplish our
    aspirations and goals, and helps our country. We would be pleased to
    continue a dialogue on this and other matters of concern to this
    Committee. Mr. Chairman, and Members of the Indian Committee, we
    sincerely request and invite you to see what a difference contracting
    has made for our people in Alaska. Please come to Alaska and witness
    for yourselves and for the United States Senate what a difference the
    success of these corporations has made.
        Thank you.

        The Chairman. Welcome, Mr. Mallott.
        Mr. Mallott. Thank you, Mr. Chairman. It is so good to see
    you.
        Members of the Committee, I thought that I would share with
    you a little bit of history. I was involved with the passage of
    the Alaska Natives Claims Settlement Act. I was very young.
        The involvement took me here to the United States Senate as
    an aide to one of our U.S. Senators, specifically focused on
    land claims. I went back and helped found the Alaska Federation
    of Natives. I was on the first board of directors of Sealaska
    Corporation, the Alaska Natives Claims Settlement Act
    corporation for Southeastern Alaska. I was CEO of Sealaska for
    10 years. I left the corporation for seven years, came back as
    a member of the board of directors.
        And I give you that background just to say this. The ANCSA
    Corporations are incredibly unique institutions. They have the
    obligations that any for-profit corporation have. We were
    created out of whole cloth to be for-profit corporations,
    having all of those tremendous obligations and
    responsibilities, not the least of which is a legal fiduciary
    obligation to our shareholders who are our tribal members, who
    are able to sue us, bring action against us at any time if we
    do not meet strict legal definitions of meeting our
    obligations.
        And almost all of those obligations tend to be financial
    and business-oriented. We have tried to make the institutions
    different in the sense that we can accomplish what we must in
    the competitive marketplace, in the free enterprise system. And
    in that marketplace, we are virtually naked. We have to live by
    all of the laws, all of the precedents, every aspect of all of
    both the richness and the complexity that drives our free
    enterprise system.
        We cannot rest for a single day for fear that competitive
    or other factors could overwhelm us. We had to learn that very,
    very quickly.
        At the same time, we have tried to make corporations
    responsible institutions for our shareholders as native people.
    And we have done it, as has been explained to you, in many,
    many ways. I just mentioned, Mr. Chairman, that this struck
    home to me in 1990 when I received a call from Herb Kane from
    Hawaii and he said, Byron, I have been asked to call you
    because I understand that your corporation has very large
    trees. And to make a long story short, we are trying to build a
    replica of a traditional Polynesian voyaging canoe and we would
    like to purchase trees from you.
        And as we chatted, he said the reason we want to do this is
    to strengthen who we are, to build our traditions, to re-
    inspire our own culture so that our children can meet the
    future in a way that allows them to have all of the tools
    necessary, but build fundamentally on who they are as Native
    Hawaiian people.
        And I said to Mr. Kane, that is exactly what we are
    wrestling with in these corporations. We are in our own canoe
    and we are trying to sail it in the same direction as Native
    Hawaiians seem to be seeking.
        And so we made a gift of those logs to Native Hawaiians and
    it changed our lives in some very powerful ways. We have had to
    survive in an incredibly competitive world, while trying to
    maximize the financial benefits to our shareholders, but not
    just financial benefits; again, the other things: scholarships
    and education and culture and trying to maintain our
    communities on our homeland. We are the last American first
    peoples still living in our own homelands, literally still
    living on our own homelands.
        And so the passion for our future is carried by these
    institutions, but in some powerful ways the institutions are
    but a tool, but a tool that we take very, very responsibly and
    we view our obligations with great significance.
        When Senator McCain was asking the questions he was asking,
    the thought struck me that, for example, Sealaska, and we have
    had many success stories. We are a multi-$100 million
    corporation. We have done this we have done that. But we have
    had our share of difficulty for sure, as any competitive
    business does over time. But we have survived and we make every
    attempt to prosper.
        But we were among the first business corporations in the
    Country to bring with the United States Government a recall
    action successfully against several of our own employees who
    were seeking to derive private benefit from their role with our
    corporation. And we put them in prison.
        We have always been very, very sensitive to others taking
    advantage of us. In some ways, it is in the DNA because for so
    many generations, that was a reality. But a program like 8(a),
    all of the other range of opportunity for ANCSA Corporations,
    most of which exist in the private marketplace, not in
    governmental programs, are important ultimately to our
    existence not as corporations, but as native peoples who want
    the same kinds of opportunity, who seek the same life that
    every other American can seek.
        And I just want to say finally, Mr. Chairman, that it sears
    my soul when I hear about and know of abuse within our own
    institutions. And I know that it affects every native person
    involved in 8(a) in anything we do in the very same way. And
    for the program, for the regulatory structure to work, for the
    statutory structure to work properly, we want to be right there
    at the table with you.
        Thank you, Mr. Chairman.
        [The prepared statement of Mr. Mallott follows:]

    Prepared Statement of Byron I. Mallott, Director, Sealaska Corporation

        The Chairman. Thank you so much for your statement. This is
    part of the reason also we are moving quickly on 8(a), and we
    certainly want to improve the system, and this is one way of
    beginning to do that.
        Thank you very much. We really appreciate your statements.
        Because of limited time, I will forego my questions and
    submit it in the record. By the way, your full statements will
    be included in the record.
        Senator Murkowski?
        Senator Murkowski. Thank you, Mr. Chairman.
        My questions will be limited here today.
        Jackie, I wanted to ask you to respond to an issue that
    Senator McCain raised. And this was about the economic
    disadvantage as a condition to participating within the 8(a)
    Program. If you can just speak to this issue. Why do you think
    Alaska Natives are not required to demonstrate an economic
    disadvantage as a condition? And then a subsequent question
    would be: Should all tribes be included in the designation of
    economically disadvantaged, rather than requiring that each
    tribes proves it?
        I would like to clear up the air on that a little bit.
        Ms. Johnson-Pata. Thank you, and thanks for that question.
        I am going to start by saying yes, I think all the tribes
    should have the same Congressional designation that Alaska
    Native corporations have, being economically disadvantaged. And
    the reason being, first of all, just look at the history of our
    communities and where our communities are placed. The majority
    of them are in rural remote areas.
        Now, if you want to measure economic disadvantage, what is
    that measurement? Is it a measurement about the level of
    community poverty? Is it the level of income that comes in? How
    do you take into account the access to proper health care? How
    do you deal with the fact that we have the highest number in
    the Nation of high school dropouts; that we still have the
    infant mortality rates and the low life expectancy rates; that
    we still have the health issues and concerns? Our
    transportation systems are still considered the most unsafe
    transportation system.
        I can go on and on, but you would have to account for all
    those things because they are all components of being
    economically disadvantaged. It is not a poverty rate. It is not
    an income level. It is a historic problem in our communities
    and it is going to take generations to be able to change that
    dynamic.
        And that is why I think that trying to do that in Alaska
    where you may have maybe a corporation that might have one
    community that is one of our three more urban centers, but the
    rest of them are in our remote villages. And how can you make
    that measurement for a region? It is not any different than the
    challenge you have of how you make that measurement for a
    tribe.
        Senator Murkowski. When you think about how you measure,
    how you account for, we have a system, and the IG, the
    gentleman, I have forgotten his name, I am drawing a blank, but
    suggested this is all about following the money.
        I think we recognize in Alaska just measuring things by
    dollars oftentimes is not a sufficient or an adequate
    measurement. Certainly, when we think to the benefits that are
    conferred to Alaska Natives through this program, how do you
    put a benefit on preservation of a culture, preservation of a
    language, that education opportunity?
        Julie and Byron, I truly appreciate both of you being here.
    Thank you for traveling so far. Thank you for your words and
    for your leadership. You have been a leader within the State,
    Julie, for decades now, as we try to build out our Alaska
    Native corporations,
        Byron, your history that you have recounted here, and truly
    the beginning of so much governance within the State of Alaska
    and what you have helped to build out. And I think it is
    important to keep this all in perspective and in context.
        One of the things that I think is often overlooked is when
    we talk about an ANC, an Alaska Native Corporation. Well, we
    all have an understanding of what a corporation is. A
    corporation is like GE. An Alaska Native Corporation and the
    structure and how it works is different.
        And with the Land Claims Settlement Act basically you are
    told, okay, go into business, without any real assistance there
    to provide for those opportunities. And so when I mentioned in
    my opening statement, there were some stumbles. I think we
    recognized that we were pushing a lot of growing into a very
    short time period there.
        But how difficult has it been to really find viable
    business opportunities? Julie, you have mentioned that without
    the 8(a) Program, we would simply not see the level of success
    that we have within our native corporations. But again, how do
    you build out a successful business opportunity in a small
    remote village like Scammon Bay or Chevak or Quinhagak or down
    there in Southeast, Yakutat.
        If you can just very briefly speak to that, and I know my
    time is limited here.
        Mr. Mallott. Well, number one, all shareholders are
    disadvantaged in using the kind of definition that Jackie used
    for sure. We without question utilized 8(a) as another tool to
    help deal with that disadvantaged circumstance. It is among a
    number, and to create our corporations and give them the kind
    of ability to be successful in the marketplace, such diversity
    is important.
        We began in Alaska. We will never leave Alaska. The first
    efforts of ANCSA Corporations for more than a generation was to
    create opportunity in our own communities and within our own
    State. We felt a tremendous obligation.
        We found it necessary both for competitive and business
    survival reasons to move out into the corporate world and to
    seek enterprise wherever it might take us, but always for the
    purpose of creating opportunity for our shareholders.
        And I don't know how else to answer it other than to say we
    I believe always feel like we are on the razor's edge. We have
    to be extremely competitive in all aspects of our business. At
    the same time, we have this tremendous obligation to our
    shareholders as native peoples, as people.
        And I think it is important to note in looking at ANCSA
    that we took that obligation upon ourselves. ANCSA is very
    clear in saying that this is a legal essentially settlement of
    land claims; that the Federal Government and other institutions
    in their roles and their obligations to native peoples both as
    Indian peoples and as citizens of the United States is not
    diminished one iota by the passage of the Alaska Native Claims
    Settlement Act.
        But being who we are and knowing what our circumstance was
    and what our potential is, the ANCSA Corporations live that
    obligation. I don't know how else to articulate it.
        Senator Murkowski. I thank you.
        Mr. Chairman, I know that we have a third panel and I want
    to give deference to them, but Julie, if you have something you
    want to wrap up with?
        Ms. Kitka. Yes, I just have a couple of things. One, on the
    disadvantaged, recently we had done a tracking study by decades
    of the socioeconomic well being of Alaska Natives. And you can
    see clearly from the data the whole thread of disparity on
    every major indicator. And I would suggest that it doesn't even
    make any sense to carry on with whether or not you are included
    as disadvantaged or not disadvantaged until you see that
    disparity gap closed on all those major indicators.
        Clearly, there has been substantial improvement in the
    living conditions and socioeconomics of Alaska Native people.
    You can see the poverty rate going from in the 60 percentile
    down to 20 percentile. You see infant mortality dropping down.
    You see our elders living longer. Every major thing, you are
    seeing huge improvements in the last 30 years, and we are so
    grateful for the Federal presence and the role that it had
    helped us do. It has totally made a difference.
        But to say you are not disadvantaged, I would wait until
    you see that disparity gap by statistics, by numbers,
    disappear, and then revisit that.
        As far as the results of 8(a) government contracts, I will
    use one regional corporation as an example. A small regional
    corporation, small population, when they got started right on
    our land claims, one of their first businesses was fishing
    because most of the board members were fishermen and they knew
    how to fish.
        Well, they didn't know how to market fish. They didn't know
    how to deal with international pricing. And so they bought a
    cannery and all the stuff, and then they lost money. They hired
    the wrong people. Then they got into timber and they did every
    major area that they were familiar with as people. And they
    would hire people and it would be the wrong people. They would
    rip them off.
        If it hadn't been for 8(a) for this regional corporation
    and for them getting into it and having to have the tight
    financial systems, the accounting systems, the top security
    clearances their managers need to have, everything in that,
    this corporation, in my judgment, would have had to sell its
    land back to the Federal Government and would have been buried
    under debt where the shareholders would have nothing of value.
        But instead, the 8(a) Program was available for them to
    build the capacity with a dedicated managerial team that put
    their resumes on the line, that built partnerships, and began
    to build a track record. And they are a stunning success now.
        And like I said, that is one that I am familiar with, and
    they clearly know they need to diversify beyond just government
    contracting on that, but clearly the program is outstanding and
    there needs to be more support of the program. And we need to
    make sure in this round of budget cuts in the Congress that you
    don't diminish the money going to SBA to continue their role of
    oversight because we don't want to go backwards on that.
        But there is no doubt in my mind that this is one of the
    most successful programs we have ever seen.
        Senator Murkowski. I thank you all.
        Thank you, Mr. Chairman.
        The Chairman. Thank you very much, Senator Murkowski.
        Senator Begich?
        Senator Begich. Thank you, Mr. Chairman. In light of the
    time, I just first want to say to Jackie, Julie and Byron,
    thank you for being here. I think the questions and the back
    and forth that you had with Senator Murkowski really put out on
    the table a lot of the reasons why 8(a)'s exist.
        To be very frank with you, I wish Senator McCain would have
    stayed because it is nice to talk to the regulators, but it is
    more important to talk to the people who actually do the
    business and how these resources are expended, and what you do
    with an 8(a) corporation.
        Maybe we will able to take some of this testimony you have
    given and deliver it to his office because I think it would be
    very important because I think there is a misunderstanding
    between tribes and ANCs and how it all operates and the work
    and where the resources go.
        So I will have some questions that I will send to you folks
    for the record, but I just wish that he was here to hear this
    because I think this is the piece of the equation that never
    gets the full story, and you have done a good job today.
        So thank you all very much.
        Ms. Johnson-Pata. Thank you. And we will follow back up
    with his office.
        Senator Begich. I knew you would, Jackie.
        The Chairman. Thank you.
        Senator Crapo?

                     STATEMENT OF HON. MIKE CRAPO,
                        U.S. SENATOR FROM IDAHO

        Senator Crapo. Thank you, Senator Akaka.
        I will forego asking any questions of this panel, but I
    would ask the indulgence of the Chairman if I might use a few
    minutes of my questioning time to introduce one of the
    witnesses on the next panel who is from Idaho.
        The Chairman. Thank you so much for being here.
        I want to thank this witness panel very much for your
    responses and your testimonies. Thank you so much for being
    with us.
        Now, I would like to invite the third panel to the witness
    table. Let me call on Senator Crapo for his introduction of the
    Chief.
        Senator Crapo. Thank you, Mr. Chairman.
        As I just indicated, one of our witnesses today on the
    third panel is the Honorable Chief James Allan. Chief Allan is
    a very good personal friend of mine. I have worked with him on
    many issues over the years, and it is an honor for me to
    introduce him here to you.
        Before delving into the specifics of this hearing on the
    8(a) Program, I want to commend Chief Allan for his strong
    leadership on issues of importance to both Idahoans and the
    American people.
        With a name like Chief, he has had a lot to live up to and
    has literally been Chairman of the Coeur d'Alene Tribal Council
    and heavily involved in leadership in Idaho and in tribal
    matters for a long time, and I expect will be for a long time
    to come.
        I will just submit for the record the rest of my
    introductory statement. I was going to go through something
    which I think Chief will do during his testimony, the
    experience of the tribe in Idaho with the 8(a) Program and how
    critical the 8(a) Program is to them. But I will wait again for
    my opportunity during questions and answers to get into that in
    a little further detail, but welcome, Chief.
        [The prepared statement of Senator Crapo follows:]

         Prepared Statement of Hon. Mike Crapo, U.S. Senator from Idaho
        Thank you, Mr. Chairman and Vice Chairman Barrasso for holding this
    important hearing on the role of the SBA 8(a) program in enhancing
    economic development in Indian Country. I appreciate the opportunity to
    introduce Coeur d'Alene Tribal Chairman, Chief James Allan, who is
    appearing for this committee today as a witness. It's good to see you,
    Chairman Allan, and I am glad that the Committee will have the
    opportunity to hear your testimony.
        Before delving into the specifics of this hearing and the 8(a)
    program, I want to commend Chairman Allan for his strong leadership on
    issues of importance to both Idahoans and all Native people. With a
    first name like ``Chief'', he has dedicated his professional career to
    the high expectations bestowed upon him at birth.
        In his tenure as Chairman of the Coeur d'Alene Tribal Council,
    Chief's responsibilities include leadership decisions that guide the
    direction the Tribe takes regarding cultural, historical and natural
    resources, among other things.
        Today, Chairman Allan will be testifying to the tremendous success
    that the Coeur d'Alene Tribe in Idaho has had under the SBA Native 8(a)
    program.
        Specifically, the Committee will hear the story of how in just the
    first year with the 8(a) designation, Coeur d'Alene's tribally-owned
    company, Echelon LLC, received a contract worth almost 40 million
    dollars and put over one hundred people to work in an area with the
    highest unemployment and poverty levels in the state. I had the
    tremendous opportunity to tour the plant last year and saw firsthand
    the benefits the program has had on the Tribe's economy and throughout
    north Idaho.
        However, you will also hear the story of how in this past year,
    Echelon LLC was forced to lay off 70 of those Native American employees
    after recent disparagement caused government contractors to pull out of
    the program, forcing the Tribe to lose out on a multi-million dollar
    contract. The basis for these attacks is the premise that Native 8(a)
    is abusing sole source contracting, despite the fact that only one
    percent of all federal contracting dollars are awarded to Native 8(a)
    businesses.
        As you will hear, the intent of Native 8(a) is to allow minority-
    owned businesses a chance to compete against the large corporations in
    the federal contracting market, effectively helping them develop into
    robust and successful businesses. This has been the case in my state,
    and I would urge you to listen closely to Chairman Allan and the Coeur
    d'Alene Tribe's personal successes with this program. Thank you, Mr.
    Chairman.

        The Chairman. Thank you, Senator Crapo. Your opening
    remarks will be included in the record.
        I would like to welcome Chief Allan, who is the Tribal
    Chairman of the Coeur d'Alene Tribe; also Lance Morgan,
    Chairman of the Native American Contractors Association and
    President and CEO of Ho-Chunk, Incorporated; and finally, Larry
    Hall, President of S&K Electronics.
        Welcome to all of you.
        Mr. Allan would you please proceed with your statement?

     STATEMENT OF HON. CHIEF JAMES ALLAN, CHAIRMAN, COEUR D'ALENE
                                 TRIBE

        Mr. Allan. Mr. Chairman, thank you so much for inviting me
    to this important Committee, thank you Members of the
    Committee. And thank you, Senator Crapo, for that kind
    introduction.
        I wanted to start off just by saying why we are here. Why
    we are here is again perceptions, miscommunication, the
    bogeyman, a lot of the same issues I have faced my whole life
    growing up as a native man, with Main Street America always
    looking to paint a big target on Native America's back saying
    we are the problem, why everything exists.
        Being the tribal leader for the last six years of the Coeur
    d'Alene Tribe, I have seen it all: the arguments against
    gaming, 8(a), whatever it may be. There is always something or
    somebody out there, some bogeyman in the corner waiting to
    spread the misconceptions of welfare, hand-outs, everything
    under the sun.
        And quite frankly, it is disheartening because native
    peoples, the Coeur d'Alene Tribes, my job is to look out for
    not only my people, but also the people of the community. I
    come from North Idaho, a heavy logging industry area. A lot of
    the logging jobs have been wiped out. We have been hit hard.
        And so the tribe took it upon itself to look out for
    everybody, Indian and non-Indian alike. Why? Because if we
    succeed as a whole, everybody succeeds. And that is what we
    have always done.
        Five years ago, we had high hopes. We opened up Echelon. We
    started building the big fuel bladders for the Army, a big
    contract. In one year's time, we went from four employees to
    over 100. But sadly, about two years ago, we started hearing
    all the bogeyman stories again that 8(a) was somehow bad,
    somehow needed to be fixed. So it really had a devastating
    effect on some of the contracts we went after.
        We spent two years on research and development; spent a lot
    of money to get a pump contract. We thought we had it. At the
    last minute, the Army pulled out. We got a memorandum saying to
    overlook 8(a) companies, and quite frankly it ticked us off. We
    spent all that money. We spent two years doing that. We invited
    them to come down and take a look at what we are doing. But
    they just said they bypassed it.
        I wanted to really point out the facts. There are a lot of
    comments here today. I know some of your colleagues brought up
    some numbers, but let's put that in perspective. The numbers
    really are, while 37 percent of Federal contracting is sole-
    sourced, only 1 percent of all Federal contracting goes to
    8(a). And I ask you to do the math, and those are the facts. I
    mean, we didn't make that number up. Those numbers are real.
    And 25 percent of all contracts still go to five of the biggest
    companies in the United States, and not 8(a), not native
    companies.
        So with that, I just wanted to again thank you so much for
    having me here today. I don't want to take up too much of your
    time. I know your time is really busy. My comments have been
    submitted for the record. I stand for any questions that you
    may have and I thank you so much for having me here again.
        [The prepared statement of Mr. Allan follows:]

     Prepared Statement of Hon. Chief James Allan, Chairman, Coeur d'Alene
                                     Tribe
        Dear Chairman Akaka,
        On behalf of the Coeur d'Alene Tribe, I would like to thank you for
    the opportunity to present testimony today regarding the role that the
    Small Business Administration's 8(a) Business Development Program plays
    in enhancing economic opportunities in Indian Country through tribal
    government-owned and Alaska Native Corporation-owned firms
    participating in this crucial SBA program (hereinafter referred to
    collectively as ``Native 8(a)'').
        I would also like to commend you and this Committee for the efforts
    you have undertaken to improve the lives of Native people in this great
    nation. We appreciate your dedication to fighting the good fight for
    all of Indian Country.
        The title of today's hearing is ``Promises Fulfilled.'' Sometimes
    it is easy for people to forget about the ``promises'' US Presidents
    and members of this body have made to Indian people. It is also easy to
    lose sight of the calculated public policy goals of programs like
    Native 8(a) that were carefully created in furtherance of fulfilling
    those promises. My testimony today will hopefully provide a useful
    perspective for this Committee about such promises and how recent
    unwarranted attacks on Native 8(a) have ignored and broken those
    promises, with detrimental economic effects.
        As Chairman of the Coeur d'Alene Tribe, one of my goals has been to
    educate members of the community, the media and elected officials
    regarding the facts about Indian Country. All my life I have had to
    deal with these misperceptions and misinformation. One of the biggest
    challenges we face as Indian people today is overcoming the
    misconceptions of mainstream America, often perpetuated by the national
    media. It is these misconceptions and the ignorance of facts that
    provide the impetus behind the recent attacks on Native 8(a).
        The Coeur d'Alene Tribe started a manufacturing company about 5
    years ago called Echelon LLC. The company was certified as a Tribally-
    owned firm in the SBA 8(a) program in 2007. In just over a year, our
    8(a) company grew from 4 employees to over 100 employees primarily due
    to the award of a multi-million dollar 8(a) manufacturing contract. The
    company expanded into three facilities on the reservation with over 40
    percent of our employees being Native American. The Coeur d'Alene
    reservation also happens to be an area historically with the highest
    unemployment and poverty levels in the state. The 8(a) program helped
    our company to breathe a new life and hope into a struggling
    reservation community.
        In 2008-2009, we started hearing about scrutiny this program was
    receiving from members of Congress, primarily Senator Claire McCaskill.
    Multiple hearings and investigations of the Native 8(a) program ordered
    by Sen. McCaskill have been conducted in an attempt to expose some
    ``loophole'' being abused by Native 8(a) in federal contracting. Press
    releases vowing to bring accountability to government contracting by
    doing away with the benefits of Native 8(a) have consistently been
    issued by her office, even taking credit for the quiet inclusion of
    Section 811 to the National Defense Authorization Act of 2010. It is my
    understanding that another piece of legislation sponsored by Sen.
    McCaskill aimed at gutting Native 8(a) has been introduced.
        The basis for these attacks is the erroneous premise that Native
    8(a) is abusing sole source contracting. Interestingly, the facts show
    that roughly 32 percent of all federal contracting dollars are awarded
    non-competitively (sole source). Yet, only about 1 percent of all
    federal contracting dollars, competitive and non-competitive combined,
    are awarded to Native 8(a) businesses. This means that Native 8(a) is
    being unfairly and wrongly singled out.
        While some of these ill-conceived and misguided attacks on Native
    8(a) have been unsuccessful, others have had devastating effects on
    tribal economies. Government contracting officials are shying away from
    using Native 8(a) because of the scrutiny and negative attention
    surrounding around it.
        The Department of Defense has unfortunately bought into this
    rhetoric, issuing memorandums effectively urging their government
    contracting officials to use the Native 8(a) sparingly. These
    contracting officers have several procurement options available when
    they put federal contracts out for bid. They do not have to use Native
    8(a) businesses or any small businesses for that matter and a resultant
    chilling effect has caused Native 8(a) businesses to lose millions of
    dollars in government contracts. Select members of this Committee sent
    a letter after Section 811 was passed warning that its new requirements
    could make contracting officials reluctant to award contracts to Native
    8(a) firms. Sadly, this has come to fruition.
        While I do not expect that many contracting officers would go on
    the record to confirm this reluctance or admit to receiving a directive
    against using Native 8(a) firms, the evidence already exists. Our
    company has seen multiple sizeable contracting opportunities pulled out
    of the 8(a) program to be awarded through other contracting vehicles,
    some of which cancelled after years of R&D and thousands of dollars
    invested in receiving the award. In the last year, we have been forced
    to lay off almost 70 percent of our workforce.
        The ability of our tribally-owned 8(a) company and other similarly
    situated firms to secure federal contract and compete in the federal
    marketplace is being diminished. Native 8(a) has been under a
    systematic attack that has reduced the amount of jobs and revenue for
    native economies, most of which located in the most poverty-stricken
    areas of the nation.
        I ask members of this Committee to implore your fellow members of
    Congress to preserve and expand the SBA 8(a) program. This program is
    one of the few government programs providing the results for which it
    was intended. We ask the Committee to join us in our fight to protect
    Native 8(a).
        The Coeur d'Alene Tribe is honored to provide our testimony today.
    If you have any questions, please contact our Legislative Director,
    Helo Hancock. Thank you and we look forward to working with you and the
    Committee on these important matters in the future.

        The Chairman. Thank you very much, Chief, for being here.
    We welcome your testimony.
        All of your full statements will be included in the record.
        Mr. Morgan, please proceed with your testimony.

              STATEMENT OF LANCE MORGAN, CHAIRMAN, NATIVE
    AMERICAN CONTRACTORS ASSOCIATION; PRESIDENT/CEO, HO-CHUNK, INC.

        Mr. Morgan. Thank you for the opportunity, Chairman and
    Senators.
        I am the Chairman of the Native American Contractors
    Association. I also represent 4,800 Winnebago tribal members as
    the CEO of Ho-Chunk, Inc. I am thinking about this regulatory
    reform and I don't fear it at all. I am much more afraid of
    embarrassing the Winnebago people and the people I have to
    answer to back home are much scarier to me.
        And I think in terms of the rules and that sort of stuff,
    it doesn't bother me at all. We are not going to have any
    problem with it. It is nothing compared to the problems I have
    to deal with. I live in a world where the entire economic and
    legal system seems to be stacked against us at every level. The
    legal system seems slanted against us. No Indian tribe in their
    right mind wants to go to the U.S. Supreme Court.
        Our government systems were imposed upon us. In the 1930s,
    someone could sign on the dotted line to extract our resources
    during the Depression. All of our assets, or most of our assets
    anyway, are held in trust and they are not in our name. We
    don't control them. We can't collateralize. We can't get a home
    loan. We can't borrow against it. It has killed farming. It has
    done all these bad things for us.
        Our governments can't have taxes. We can't issue bonds. It
    makes us dependent upon the Bureau of Indian Affairs for things
    like schools, roads. We have no local control over anything.
    The only entity with any sort of capital are the tribal
    governments themselves because of these restrictions, which
    really impacts entrepreneurism.
        So we have this sort of socialism going. I mean, you could
    not have designed a worse economic system for us: bad legal,
    bad government, no control of your assets, and socialism. That
    is the world that we have to somehow provide for our people for
    and it makes it very, very difficult.
        Now, I run this corporation that started with one employee.
    I was the only one. I believe in starting at the top so I made
    myself CEO.
        [Laughter.]
        Mr. Morgan. We have 1,400 employees now in five different
    countries. You would have to come to rural Nebraska to even
    believe how strange that is. And we have been able to do it
    largely because of things like the 8(a) Program. In the first
    year, we had revenues of $400,000, and I remember thinking we
    had $12,000 this week and that is pretty good. Well, we did
    $193 million last year, and it changes the whole world for us
    and our environment.
        But what is interesting, when I brought up the idea of
    starting a corporation, everybody basically was against the
    idea because we had failed at every business we had ever tried
    before in the past; not one out of two, for our modern history
    in economics. But the tribe went forward because we have to go
    forward. We don't have any choice. We have to try.
        When we started as a corporation, we were doing things that
    are very typical. The tribe did gaming and it's mildly
    successful there, but we also really focused in on things where
    we could create an advantage: gasoline cigarettes, the kind of
    stereotype stuff, but that's nothing to build an economy on,
    not for the long term in the future.
        And we were looking for alternatives. And the Federal
    Government came to us and said you should get into 8(a)
    contracting. And because the cigarettes and the gas are so
    controversial on taxation issues, we jumped at it, ironically
    because it was less controversial. We had no idea that this
    could possibly end up, our success would be held against us on
    some level.
        To be honest, we were terrible at government contracting.
    Our attitude was sort of anti-government as a young company and
    we came around largely with the help of the Salish and Kootenai
    Tribe who partnered with us on a contract and taught us how to
    do that, and we have been able to take off from there.
        In 2004, after losing $700,000 in the first four years of
    our attempt to be a government contractor, we partnered with
    them and our revenues have grown to $70-some million as of 2010
    on the government contracting side, changing everything for us.
    It has done a couple of things. It has made us smarter and it
    has given us pride. The pride is hard to measure because it is
    a very intangible thing. But the smart is there. It is hard to
    take it away. Once you learn something, you can't reverse that.
        And government contracting is something that I really
    stayed away from in the beginning because in the 1970s,
    government contracting was a back room sort of thing. You would
    do some sort of low-end subcontract. It was minimum wage. It
    was a dark room. And I didn't think that that was what I wanted
    for our future.
        But something happened. The 8(a) Program isn't a
    subcontracting program. It is a prime contracting program and
    it allowed us to get smarter. It allowed us to move up the
    economic food chain in these contracts. And the people who used
    to treat us as subs to kind of deal with, to check the box so
    that they can get the contract, so to speak, have to deal with
    us on equal terms. And to be honest, I think all Indians are
    mild conspiracy theorists, I think that our competitors are now
    having trouble dealing with us as equals. And that is just the
    reality of what we face.
        Now, I know there is a lot of controversy going on related
    to 8(a), and I think a lot of people have repeated over and
    over again that there are regulations in place that are going
    to deal with that. And we think those regulations need to play
    out. I think some of the stuff is misguided to go further than
    that.
        The reason I took the time to talk about the economic
    environment we live in, because that economic environment still
    exists. Government contracting and gaming have kind of overlaid
    on top of this shaky foundation. But if you were to take these
    sort of things away, we would fall right back into poverty. We
    would revert almost immediately back into very desperate
    situations and we would become the subcontractor again, and we
    would move back down the train to the low-cost labor. And that
    is really not what we have in mind for ourselves and our
    future.
        The other thing that I think is important to mention, and
    this is my last major point, is that if we were to go
    backwards, it wouldn't save the government a penny. They are
    going to spend that money anyway. What would happen is we would
    go back on welfare. We would go back on food stamps. We would
    cost the government a fortune. Taking thousands of people,
    maybe tens of thousands of people off government assistance and
    giving them hope is the way to go. There is no doubt about it
    in my mind. And I think that anything else would be cruel after
    us getting a little taste of what it is like to be successful
    and self-determined.
        In conclusion, I want to tell a mini-story. When I was a
    kid, I spent my summers on the reservation at my grandparents'
    house. At my grandparents' house, we raised hogs to eat, not to
    sell. We had to eat them. We raised food. We grew our food on a
    three-acre plot behind the house. That is how we survived. When
    we wanted water, we had a hose that came from a pump in through
    the kitchen window. That was a big deal because you didn't have
    to go outside.
        That was the nature of it. My grandmother now lives in a
    new modern house. We are building a town on our reservation
    that Senator Johanns referred to. We have our own homes. The
    homes are built by our construction company. They are built in
    our housing factory. Our employees move into them with loans
    from our bank.
        The Winnebago Tribe recently just committed $1 million of
    the dividends from Ho-Chunk, Inc. The next 20 people who buy a
    home get $50,000 in down payment assistance. We had people who
    had jobs, but because of our economic environment we had zero
    savings. And so nobody would loan us money on our reservation
    because we didn't have down payments and the rural valuations
    weren't there.
        So the Winnebago Tribe took the money from the corporation
    and are helping our tribal members achieve the American dream.
    And that is a major step in a positive direction.
        Senator Johanns from Nebraska, who was kind enough to give
    us introductions, paid a visit to us when he was Governor at
    the groundbreaking of this town. And he said, what can I do for
    you to help? And I said, frankly, Mr. Governor, you can do more
    harm than good. We are on to something here. We are providing
    for ourselves. We are learning to do it ourselves. Just leave
    us alone and we will be okay.
        This was before I knew he was going to become a Senator.
        [Laughter.]
        Mr. Morgan. I now have a list of demands I will be
    submitting in writing.
        But I think that is the point. Let us control our destiny.
    Give us a chance. In the end, all we are asking for is to work
    for you.
        Thank you very much.
        [The prepared statement of Mr. Morgan follows:]

         Prepared Statement of Lance Morgan, Chairman, Native American
             Contractors Association; President/CEO, Ho-Chunk, Inc.

        The Chairman. Thank you very much, Mr. Morgan, for your
    testimony.
        Mr. Hall, will you please proceed with your testimony?

        STATEMENT OF LARRY HALL, PRESIDENT/GENERAL MANAGER, S&K
                           ELECTRONICS, INC.

        Mr. Hall. Thank you, Chairman and other Members of the
    Committee.
        My name is Larry Hall. I was introduced by our Senator
    Tester from Montana who is a good friend of mine. We have been
    on various groups there in Montana over the years.
        I am a tribal member of the Confederated Salish and
    Kootenai Tribes of the Flathead Reservation and President and
    General Manager of S&K Electronics, Inc., a successful graduate
    of the SBA 8(a) Program.
        I appreciate the opportunity to tell the S&K Electronics
    story and how the SBA program has helped to enhance the
    economic development of the Flathead Reservation. I can sum it
    up in three words: the program works.
        When my father came home to the reservation after World War
    II, he couldn't find any work. So he moved our family to
    Seattle where he could find work. He went to work for Boeing.
    But as children growing up in the Seattle area, we always
    wanted to come to the reservation for our summer vacations and
    time with our cousins and my aunts and uncles.
        My heart was always on the reservation. I always wanted to
    live there. I was able to come back to the reservation as an
    intern in college. After graduating from college, I got my
    first job as economic planner for the tribes, focused on
    creating jobs on the reservation.
        First, I tried to create government jobs using various
    grant programs that the Federal Government had, HUD, CDBG, you
    name it. And did very well at that, but then those jobs are
    just transfer-fund type of jobs. I knew that eventually we
    needed to have businesses, businesses that could have ways of
    generating their own capital.
        One of those businesses was S&K Electronics. S&K
    Electronics, a tribally-owned company, started in 1984 as a way
    to diversify our reservation economy which was just pretty much
    related to timber and cattle ranching. We became certified in
    the 8(a) Program in 1990, after there were significant changes
    in the 8(a) Program in the late 1980s.
        We used the program to grow both our capacity and
    capability to do business. We grew from 35 employees as we
    started in the program to over 100 when we graduated. We
    graduated from the program in 1999. That was the nine-year
    program. We continue to be a highly competitive successful
    contract manufacturer in electronic and electro-mechanical
    assemblies for both the U.S. Government, as well as private
    industry.
        Some of our largest customers currently are BAE, Northrop,
    Raytheon, Lockheed. S&K's facilities are on the Flathead
    Reservation. This is our only place of our business, although
    in early times we were able to get into some other contract
    opportunities off the reservation in the I.T. business.
        The jobs are on the Flathead Reservation. It is over 100
    jobs for our people that did not exist before 8(a). S&K has
    continued to grow and provide dividends to the Confederated
    Salish & Kootenai tribes through their social and economic
    programs and initiatives. That amounts to $1.75 million date.
    It does not include the millions that were invested to grow our
    business and to maintain our competitiveness in our industry,
    and the wages of our workers that are then spent in our local
    communities.
        One of the economic initiatives that we invested in was to
    start up another 8(a) company, and that was S&K Technologies.
    S&K Technologies, which is the company that Lance was
    mentioning that helped them. It graduated from the 8(a) Program
    also and continues to return dividends back to the tribes for
    their social and economic programs and initiatives, as well as
    grow additional companies. To date, S&K Technologies has
    returned over $10.6 million to the tribes in dividends.
        What is different about tribally owned 8(a) companies and
    other 8(a) businesses? The profits go to the tribe as a whole,
    not to individuals. What does the money do? Well, it is
    reinvested in other companies, internships, native language
    programs, various social programs, job training, economic
    development initiatives, and even fractionated heirship land
    consolidation.
        My father would be proud to know that his children and
    grandchildren and the children and grandchildren of his peers
    now have a choice of job opportunities that did not exist when
    he was young. As I said before, the program works.
        Thank you for the opportunity to speak and tell the S&K
    story.
        [The prepared statement of Mr. Hall follows:]

       Prepared Statement of Larry Hall, President/General Manager, S&K
                               Electronics, Inc.

        The Chairman. Thank you very much, Mr. Hall, for your
    testimony. I am going to submit my questions for the record and
    call on Senator Murkowski for any questions she may have.
        Senator Murkowski. Thank you, Mr. Chairman.
        And I want to thank each of you for your testimony here
    today, for coming to Washington, for speaking up on this. What
    I heard from the three of you coming from different tribes,
    different experiences, was that not only does this program
    work, as you have stated, Mr. Hall, but what it has delivered
    are a series of intangibles that are perhaps difficult for an
    IG, difficult for Mr. McClintock as he tries to itemize what
    the benefits of this 8(a) Program, this Indian 8(a) Program
    are.
        He says he has to follow the money and that was why it was
    important to ask the question about whether or not he has any
    experience in Federal Indian law; any experience in dealing
    with reservation communities or Alaska Native villages; whether
    or not he has been a participant in this. I didn't really hear
    that.
        But what I heard you articulate very clearly, Mr. Morgan,
    was that with success comes a level of smartness, and okay, we
    might be able to identify gains in education. But what is very
    difficult to quantify is the pride that comes with being self-
    sufficient; that comes with being self-sufficient after decades
    and centuries of a system where basically you have described
    the system quite well in terms of how things have been provided
    on the government's terms, with the opportunity to really try
    to do anything on your own stifled or limited. And the efforts
    that have been made have resulted in failure.
        And when you have subsequent failures, that leads to kind
    of an attitude or a mind set that we can't do this; that
    perhaps we are not capable of this. What I am seeing coming out
    of the 8(a) Program is a challenge that, yes, in fact we can
    compete and we can compete well. And we can provide for our
    people in a way that lifts everyone. And that sense of pride
    and that sense of self-sufficiency unfortunately doesn't kind
    of fall into this matrix when we measure government
    accountability.
        So I think we need to all be working with people like Mr.
    McClintock and the I.G.'s, the auditors, those that are looking
    this; people like Senator McCain who clearly have some
    questions.
        But I will ask a question, and it may be a bit of a
    rhetorical question, but I will leave it at this. Do you think
    that it is perhaps blowing things out of proportion or
    sensationalizing things for the media to focus just on the
    revenue numbers? Just on the revenue numbers?
        You have mentioned, Mr. Morgan, that you have done well;
    that the tribe is receiving considerable return in terms of
    revenues. And I don't believe you told me how many tribal
    members you have, but when you do the math, it probably looks
    pretty impressive, pretty good.
        Do you think this is the wrong way to be measuring things?
    And if so, how can we change this dynamic? Because I think it
    is critical to the success of the Indian 8(a) Program.
        Mr. Morgan. I appreciate the question. A couple of things.
    I have a rule that I never put my accountant in charge of the
    business. They are good at what they do, but they are not the
    people you want making the decisions for the future of our
    people. And I am sure the IG, Mr. McClintock, is great at his
    job, but he didn't seem to have any clue about the kind of
    challenges that are out there in Indian Country. And to make it
    a numbers game only is a mistake, especially when you keep out
    all the other numbers that might in some way impact us. So I
    think that is unfair.
        As far as some of the revenue numbers, we faced this
    problem in our own community. We will get a contract for $20
    million. That might be over five years. The government is
    pretty careful about what your profit percentage is, so you are
    not making a lot of money off of that.
        Senator Murkowski. It sure sounds good, though.
        Mr. Morgan. Yes, it sounds wonderful. I have gotten to the
    point, though, where I won't even say the number in our own
    community because they are thinking, all right, how much do we
    get. And so you really have to work hard to perform to get
    those contracts.
        First, to be in the stage to get them, then to keep them,
    and to keep them going. But the profit margins aren't that
    good, but we are not saying no. It is still the best things we
    have in terms of diversifying our business. Ho-Chunk, Inc.
    would not be an international entity were it not for those kind
    of opportunities.
        No one is going to come out of their way and come to the
    Winnebago Reservation in rural Nebraska to give us some sort of
    sophisticated contract. Without these programs, it just simply
    would not happen. We would never have gotten to the point where
    we were able to evolve; where we could make a meaningful impact
    in our communities.
        Senator Murkowski. But on the other hand, you have to
    perform and you have clearly performed or they wouldn't be
    coming back to you.
        Mr. Morgan. We were the State Department's small business
    of the year a few years ago, so obviously we have been doing
    our part, but it is an incredibly difficult environment, as
    other people have said.
        And we don't just answer to the government. We answer to
    our own people and our own tribal government. And so there are
    a lot of people looking over our shoulders in our world. And
    there are a lot of people who are depending on us to make the
    right decisions and do the right things so that we can impact
    people's lives in our community.
        It is an incredible responsibility, but it is not something
    you are just going to put down on a piece of paper and put it
    on a flow chart or spread sheet.
        Senator Murkowski. I appreciate that.
        Chief Allan, did you want to make a comment?
        Mr. Allan. Yes, I just wanted to put that in perspective. I
    think what people do forget to look at, or they look at the
    numbers, is what impact it has as a whole. For example, we are
    the largest employer in Benewah County. We are the second-
    largest in Bonner and Kootenai County. And we have every tribal
    member that wants to work put to work. And so we have to get
    the workforce from the community and we employ almost 2,000
    people, people as a whole, for the good of Idaho, for the good
    of everybody. So when you hear a number out there, it is
    misleading and it is almost damaging because it is not the
    whole picture. The whole picture is how many people you put in
    a job; how much taxes are going back to the State of Idaho for
    the betterment.
        We did a study in the State of Idaho for the five tribes in
    Idaho, and we were one of the top 10 employers because of all
    of our separate businesses and everything that we are doing.
        So I think when a government agency fills a number out
    there, it is wrong and it is harmful. Thank you.
        Senator Murkowski. Again, gentlemen, thank you so much for
    your testimony.
        Thank you, Mr. Chairman.
        The Chairman. Thank you very much, Senator Murkowski.
        Senator Crapo?
        Senator Crapo. Thank you, Mr. Chairman.
        I know that the time is getting late and we are kind of
    getting jammed up up here. So I am going to focus my questions
    on you, Chief, and frankly you just did make most of the points
    I was going to ask you about. But I wanted to get a little bit
    specifically into the experience that you had with Echelon
    plant.
        As you know, I was there to tour this plant with you, and I
    know of the big success that it was. But could you explain just
    in a little more detail just what happened? My understanding is
    that because of the criticisms and the attack on the 8(a)
    Program and the allegations about the program that have been
    made that basically you have had to lay off about 70 percent of
    your employees at that plant. Is that not correct?
        Mr. Allan. That is true, Senator. We did have to lay off 70
    percent of our employees so we can sit back and now we have to
    reevaluate our game plan and figure out which direction we are
    going to move our 8(a) Program.
        We were with the Army and with our fuel bladders, and we
    thought we had the pump contract, but everybody kind of got
    spooked at the last minute. And so we are kind of backtracking
    a little bit and we will live to fight another day, though.
        Senator Crapo. Well, I am very confident of that because I
    have seen how efficient and how effective you are able to be in
    the operations of these businesses. But I just wanted to add my
    support and concern to that which has already been expressed
    here at the hearing about not only the importance of
    maintaining the 8(a) Program, but also about the importance of
    making it clear that the allegations that have been made about
    the 8(a) Program are themselves having negative impacts on our
    Native Americans. And that simply has to be addressed and
    addressed quickly.
        And so Mr. Chairman, I again appreciate you holding this
    hearing and look forward to working with you as we seek to
    address and resolve the issue.
        The Chairman. Thank you very much, Senator Crapo. It has
    been a great hearing. I would tell you that I personally look
    at the 8(a) Program as a great opportunity, big or small, as
    was mentioned by Mr. Morgan. You can do something with it and
    it is something that can grow into bigger things.
        I hope that native people of our Country will look upon
    that as something that is workable. And the reason I use
    workable is that it is not perfect. You can get into trouble
    with it, too, if you make wrong decisions. But it can help you
    come about to grow so that you can get into bigger things.
        And this is what I am hoping will come about with the 8(a)
    Program as we proceed here. Our intent is to try to look at the
    challenges that we are facing with this program and to try to
    turn it around so that it will be able to help us better than
    it did in the past.
        There are problems, no question about that, and the thing
    is, we just have to be aware of that and continue to proceed. I
    like to think of this program that would be supported by
    education, meaning to get all the facts about these things so
    you can use it to your advantage. And also to be able to
    protect you and the tribes in case that is needed. Then of
    course, the resources to help to empower you to build and to
    help your communities as has happened in many cases that you
    mentioned.
        There are challenges, but we must work together to try to
    limit those and take advantage of the opportunities. I thank
    you so much. It was good to hear from you and what you have
    been through already. We will look forward to continuing to
    work with you.
        I want to thank our witnesses for coming all these miles to
    Washington to testify. And to remind you that the record is
    open for written testimony for two weeks. We will permit the
    members, of course, to add anything they want, whether it is
    questions or other things.
        So I want to thank you again, mahalo nui loa, for making
    this a success. Thank you very much. This hearing is adjourned.
        [Whereupon, at 4:30 p.m., the Committee was adjourned.]
                                A P P E N D I X

     Prepared Statement of Hon. Daniel K. Inouye, U.S. Senator from Hawaii
        Mr. Chairman, thank you for holding this oversight hearing on the
    Small Business Administration's Native 8(a) program. Senator Begich and
    I originally requested this hearing to provide an opportunity for the
    Tribes, Native Hawaiian Organizations, and Alaska Native Corporations
    to tell their stories, the real stories and not those sensationalized
    in the media. We wanted those stories to be placed into the record
    which actually helped Native people and provided opportunities for
    future generations all across Native America.
        When the Native 8(a) program was first started, the goal was to
    provide an economic development tool to provide economic self-
    sufficiency for Native communities. The intent was a ``helping hand''
    and not a ``handout'' via social welfare programs. This program has
    demonstrated success, and as a result, it has become a target. I look
    forward to hearing from the witnesses in hopes of establishing a
    balanced record.
        In Hawaii, we have established Native Hawaiian Organizations (NHO).
    Native Hawaiian Organizations are non-profit organizations, managed by
    Native Hawaiian individuals and principally serving Native Hawaiians,
    which have majority ownership by an 8(a) designated for-profit firm.
    What makes NHO's most unique is their ultimate mission to serve their
    communities. Profits generated by the 8(a) firms are dispersed for the
    benefit of the Native Hawaiian community.
        Each NHO has a different priority. They provide different services
    and programs into the Native Hawaiian community. For example, these
    services include educational scholarships, mentorship and job training,
    culturally-based leadership development for at-risk youth, extra-
    curricular science technology engineering and mathematics (STEM)
    education programs, and financial literacy educational programs.
        NHO's are the youngest among the Native 8(a) businesses. However,
    they are making their mark in the Native Hawaiian community in a
    positive way. They are becoming more competitive in government
    contracting. As they become profitable, social programs and Native
    Hawaiians benefit. I truly hope it continues.
        I commend the Small Business Administration for proposing
    reasonable regulations which will help to strengthen this program.
    These regulations will bring more oversight, as well as transparency to
    the Native 8(a) program. This will help dispel the misinformation, and
    allow the successes to be highlighted.
        I look forward to continuing this discussion and working with my
    colleagues to strengthen the Native 8(a) program such that more Native
    Americans can move toward economic self-sufficiency. A rising tide
    raises all ships.
                                     ______

    Prepared Statement of Hon. Chad ``Corntassel'' Smith, Principal Chief,
                                Cherokee Nation

                                     ______

      Prepared Statement of Hon. Tex Hall, Chairman, Mandan, Hidatsa and
                                 Arikara Nation

                                     ______

       Prepared Statement of Hon. Sean Parnell, Governor, State of Alaska

                                     ______

     Prepared Statement of Virginia Ward, Chairwoman, Board of Directors,
                           Afognak Native Corporation
        Chairman Akaka, Vice Chairman Barrasso and honorable members of the
    Senate Committee on Indian Affairs, cama'i (hello). My name is Virginia
    Ward and I am the Chairwoman for the Board of Directors of Afognak
    Native Corporation. Thank you for the opportunity to provide written
    testimony for the hearing record about Afognak Native Corporation and
    the benefits we provide to our Alaska Native shareholders.
        I am a shareholder of Afognak Native Corporation and I am
    originally from the Old Afognak Village, which is located on Afognak
    Island in the Kodiak Archipelago in Alaska. The Old Afognak Village was
    heavily damaged as a result of the great 1964 earthquake and tsunami
    that struck much of south-central Alaska. Following the destruction of
    my home, I, along with most people of Old Afognak Village, relocated to
    the Village of Port Lions on Kodiak Island. Even though we no longer
    live in the Old Afognak Village, we, as a people, still identify
    ourselves as Afognak People. We are Aq'wanermuit (People of Afognak).
    This is our identity and our community spans cities, oceans, and
    countries. But no matter where we go, our foundation is set by the
    Alutiiq core values of harmony, appreciation, respect, efficiency,
    communication, and trust. These values guided the Alutiiq people for
    generations before us, and they have provided the framework around
    which we structure our Corporation, as they are embedded in our Code of
    Conduct.
    History of Afognak Native Corporation
        Afognak Native Corporation (Afognak) is a village corporation
    organized under the Alaska Native Claims Settlement Act of 1971.
    Afognak was formed in 1977 through the merger of two Native
    Corporations, Port Lions Native Corporation and Natives of Afognak Inc.
    Afognak is governed by a nine-member Native Board of Directors, all of
    whom are shareholders of the Corporation. Board members are elected by
    their fellow Native shareholders and serve three-year staggered terms.
    As an Alaska Native Corporation, Afognak is responsible for meeting the
    economic, social and cultural obligations of our 812 shareholders. This
    is a congressional mandate we take very seriously. We are fulfilling
    this mandate by providing benefits to individual shareholders and by
    strengthening Aq'wanermuit (our community). By providing benefits to
    our shareholders and by strengthening our community, we develop a
    collective strength; we empower every shareholder as well as their
    families and their descendants.
        Afognak owns 160,000 acres of land in the Kodiak Archipelago,
    primarily on Afognak Island. In addition we are the managing partner of
    the Afognak Joint Venture (AJV) which owns 130,000 acres of land also
    primarily on Afognak Island. The AJV is a partnership between Afognak
    and Koniag Inc., which is an Alaska Native Regional Corporation. As
    managing partner, we are responsible for the use and care of these
    additional acres. Our lands represent our most valuable asset. Our
    corporation and our shareholders use our lands for cultural,
    subsistence, and recreational activities as well as some limited
    opportunities for economic development. Prior to our involvement with
    the SBA 8(a) program, Afognak relied heavily on natural resource
    development, mainly the harvesting of timber on Afognak land. Over
    time, our Board of Directors recognized that the volatility of the
    international timber market, as well as the finite timber resources
    owned by Afognak, made timber harvesting an unsuitable long-term
    economic development strategy for the Corporation. As we attempted to
    fulfill the mandate of the Alaska Native Claims Settlement Act (ANCSA);
    we repeatedly struggled with geographical isolation, the steep learning
    curve required to master the Western corporate model, and the intense
    needs of our shareholder population. Despite being tasked under ANCSA
    to operate as a business, we found that a profitable entry into the
    marketplace was easier said than done.
    History of ANCSA and the Link to the 8(a) Program
        The legislative history of ANCSA clearly shows that the goal of the
    act was to provide a mechanism with which Alaska Natives could
    participate in the capitalist economy. Under ANCSA, the federal
    government has a statutory duty to encourage participation by Alaska
    Natives through Native corporations in America's capitalistic economy.
        As the ANCSA evolved and the Alaska Native Corporation structure
    was established, it became increasingly evident that Alaska Natives
    were not receiving all the benefits intended by Congress and to which
    Alaska Natives were entitled under the Act. Alaska Native Corporations
    (ANCs) were inefficient as the geographic and economic barriers of our
    rural settlements proved difficult to overcome. It became apparent that
    ANCs would not be able to fulfill social responsibilities to their
    shareholders and achieve economic potential without some adjustments.
        Congress amended ANCSA in 1988 and again in 1992 establishing ANCs
    as minority and economically disadvantaged businesses for purposes of
    government procurement programs. By these amendments, Congress made
    clear that favoring ANCs for government contracts was an integral and
    intentional part of ANCSA's economic settlement. These 1988 and 1992
    ANSCA amendments provide ANCs' eligibility for government contracting
    preferences as bargained for consideration in exchange for the
    extinguishment and settlement of Alaska Native aboriginal claims in
    Alaska. The Board of Afognak decided to enter the government
    contracting marketplace based on the well-established legislative
    history of the ANCSA.
    The Development of the Alutiiq Family of Companies
        In 1998 and 1999 we began the due diligence process on government
    contracting and the opportunities for business development through the
    SBA 8(a) program. The Board was aware of a few other ANCs that were
    using the program to grow their businesses, and we believed we could
    emulate that success over time with the development of the Alutiiq
    family of companies.
        As with many new business ventures, the creation of the Alutiiq
    companies has had many challenges. Not all of our contracts have been
    profitable, and some of the lines of businesses we explored were not a
    good fit. Now, eleven years after the first Alutiiq company was formed,
    we are both grateful and accountable for the blessings and
    responsibilities our success has bestowed on Afognak. We believe our
    unwavering commitment and a laser-like focus on measurable results and
    accountability has allowed our participation in the 8(a) program to
    provide a myriad of benefits to our shareholders, their descendants,
    and the Native community at-large.
    The Benefits Provided by Afognak to its Shareholders
        We understand that the Committee's focus is on the successes of the
    Native 8(a) program and the benefits it has provided to Native
    Communities. Afognak has been blessed in that we have enjoyed business
    success in the program, which has allowed for a wide range of benefits
    to be distributed to our shareholders in a variety of forms. Benefits
    we provide include a Shareholder Hunting & Subsistence Program; Lands
    Management Programs; donations, community contributions, and
    sponsorships; a Shareholder Death Benefit; Elder Benefit; Small
    Business Growth Program and Shareholder Development Programs. However,
    the most notable and tangible benefit provided to our shareholders
    during this time period came in the form of substantial semi-annual
    dividends.
        In the last 10 years Afognak has paid out almost $95 million in
    dividends to our shareholders. The decision to benefit our shareholders
    in the form of dividends, rather than other services or programs, came
    after much research and deliberation by our Board of Directors. A 2005
    survey of Afognak Shareholders, which was commissioned by our Board,
    revealed that the average household income of our shareholders was
    approximately $45,000 per year. This is only $17,430 above the 2010
    U.S. poverty guideline of $27,570 for a family of four in Alaska. This
    data strongly suggests that the dividends paid to Afognak shareholders
    over the last several years have had a significant, measurable effect
    on moving our shareholders out of poverty. Clearly Afognak's success in
    building our businesses has allowed us to make a dramatic effect on our
    shareholders' lives and particularly the lives of those living in our
    rural communities. Many of our shareholders live in a village with no
    grocery store; and where an airplane ticket to travel to Kodiak or
    Anchorage costs $100 and $700, respectively. The cash dividends Afognak
    provides meet critical needs of our shareholders on basic human
    necessities--housing, food, childcare, education, and energy costs.
        Also noteworthy is the increase in Afognak Shareholder equity as a
    result of our participation in 8(a). Afognak's Shareholders' equity,
    which is the total assets of the corporation less the total liabilities
    of the corporation, has grown $87,350,000 over the last eleven years.
    However, our shareholders' equity, like that of all other ANCs, is
    substantially different from that of other business owners,
    particularly other individual 8(a) participants. As mandated by ANCSA,
    shares in Afognak Native Corporation cannot be bought or sold. Shares
    are not a liquid asset for our shareholders, and they cannot be used as
    capital for private investment. Nevertheless, this growth in
    shareholder equity strengthens the foundation of our corporation and
    sustains the benefits we currently provide, while also supplying
    resources to support and enhance our culture and traditions that may
    have otherwise been lost for future generations.
        One final benefit I would like to touch upon is Afognak's
    scholarship programs. Our corporation is committed to developing future
    generations of Alaska Native leaders. As such, Afognak offers two
    scholarship programs for shareholders and their descendants who want to
    attend traditional universities, vocational education, or other
    training programs: the Higher Education Program (HEP) and the Career
    Enhancement Opportunities (CEO) Program.
        The Higher Education Program provides financial support to
    shareholders and their descendants who are pursuing higher education
    through traditional university or vocational education. From 2000 to
    2010, Afognak awarded $1,368,144 in 334 scholarships to our
    shareholders and their descendants under the HEP.
        The Career Enhancement Opportunities Program provides financial
    support to shareholders and their descendants who are seeking
    additional education to enhance career opportunities through means
    other than full-time traditional college or university attendance. From
    2000 to 2010, Afognak awarded $210,771 in 171 scholarships to our
    shareholders and their descendants under the CEO Program.
        These programs provide the means and opportunities to further our
    shareholders' educations in a manner which otherwise might not have
    been available. We are beginning to see the fruits of our efforts. Many
    recipients are graduating or completing their chosen program and
    putting their new skills to work for Afognak, their communities, and/or
    their families. We are slowly working towards the generational shift
    that will allow our shareholders to hold the senior management
    positions in our Corporation--but we are not there yet.
        Afognak is proud of the collective benefits we are able to provide
    our shareholders, their families, their descendants and the Native
    community at large as a result of participating in the 8(a) program. We
    believe it is exclusively the role and responsibility of our Board of
    Directors to evaluate the needs of our shareholders and to implement
    the appropriate methods to best meet those needs. This practice is
    consistent with the overarching federal Indian policy of economic self-
    determination.
    Conclusion
        In closing, I would like to reiterate my overall message--the 8(a)
    program is working as intended and working quite well. This program has
    enabled Afognak to provide the financial support and economic
    opportunities to many who previously had little hope of gaining an
    education, starting a business, or joining the professional workforce.
    The 8(a) program enables ANCs like Afognak to deliver critical support
    in the form of shareholder dividends and community services to
    revitalize economically-challenged Alaska Native communities as well as
    provide great value and service to the Federal Government.
        In 1971, the U.S. Government made a commitment to honor and support
    the Alaska Native people. This promise came through the Alaska Native
    Claims Settlement Act when the U.S. Government seized millions of acres
    of oil-rich Native land worth hundreds of billions of dollars in
    exchange for the formation of ANCs and subsequent participation in the
    SBA 8(a) program. Today, we expect the U.S. Government to keep its
    promise by sustaining ANC participation in this program.
        Quyanaasinaq--(thank you very much) for the opportunity to tell the
    Afognak story.
                                     ______

          Prepared Statement of Ken Johns, President/CEO, Ahtna, Inc.
        Chairman Akaka, Vice-Chairman Barrasso, and honorable members of
    the Senate Committee on Indian Affairs, Nts'e dit'ae (a formal
    Athabascan greeting). My name is Ken Johns and I currently serve as the
    President & CEO of Ahtna, Inc., one of the 13 regional corporations
    established under the Alaska Native Claims Settlement Act (ANCSA) of
    1971. By way of introduction, I am a shareholder of Ahtna, Inc., and am
    originally from Copper Center, which is located in the Copper River
    Valley. Thank you for the opportunity to provide written testimony for
    the record pertaining to the hearing held on April 7, 2011, titled,
    ``Promise Fulfilled: The Role of the SBA 8(a) Program in Enhancing
    Economic Development in Indian Country.'' The title of the hearing
    could not be more appropriate. As this testimony will demonstrate by
    providing background on Ahtna, Inc., its business operations, and its
    participation in the Small Business Administration's 8(a) program, the
    SBA 8(a) program has provided Ahtna with knowledge, tools and skill
    sets to bring our Corporation from near bankruptcy to a solid
    foundation and the ability to provide many needed benefits to our
    shareholders. This is one program that is working for Native peoples.
    Background of the Ahtna People
        Historically, the Ahtna People are Athabascan Indians, who settled
    the Copper River Basin region over 7000 years ago. The Athabascan
    people traditionally lived in Interior Alaska, an expansive region that
    begins south of the Brooks Mountain Range and continues down to the
    Kenai Peninsula. We lived in small groups of 20 to 40 people that moved
    systematically through the resource territories. Annual summer fish
    camps for the entire family and winter villages served as base camps.
    Depending on the season and regional resources, several traditional
    types of houses were used.
        Our aboriginal lands included the area of Alaska which houses the
    Kennecott Copper Mine, the richest concentration of copper in the
    world. When the area was ``discovered'' by explorers, it was Chief
    Nicolai, an Athabascan Tyone who other chiefs recognized as their
    leader that greeted the famous first explorer of the whole of Interior
    Alaska. In 1885, US Army Lt. Henry Allen was given the mission to
    explore and chart all of the rivers in the Alaskan interior, record the
    indigenous tribes, and assess their numbers. \1\
    ---------------------------------------------------------------------------
        \1\ Legacy of the Chief, Ronald Simpson 2001.
    ---------------------------------------------------------------------------
        Allen's small group began at the mouth of the Copper River and
    headed up the rugged valley. As he struggled up the rapids and cliffs
    about the river he was observed by the Ahtna people. Chief Nicolai,
    whose village of Taral was far up river near the present town of
    Chitina, was kept informed of Allen's progress. Eventually Chief
    Nicolai came face to face with the Allen party. Convinced that the
    Americans were no threat, he let them proceed; however, Chief Nicolai
    had great perception. When Allen revealed his keen interest in the
    copper found along the valley, Chief Nicolai knew it was only a matter
    of time before others would come. A few years later, Chief Nicolai's
    foresight became a reality when surveyors and engineers began to
    arrive. Soon after, the railroad was built and the Ahtna people's way
    of life was changed forever. \2\
    ---------------------------------------------------------------------------
        \2\ Id.
    ---------------------------------------------------------------------------
        The Kennecott Mine was the largest Alaskan operation of its type
    from that time until long after World War II ended. With the exception
    of the Juneau gold district, Kennecott's gross revenues in copper
    exceeded that of every gold mining operation in Alaska and the Yukon.
    On April 8, 1911, the first ore train hauled $250,000 of 70 percent
    copper ore. In 1916, the peak year for production, the mines produced
    copper ore valued at $32.4 million. \3\ The Ahtna people never realized
    any profits or other forms of payment for the resources of their lands
    being taken.
    ---------------------------------------------------------------------------
        \3\ http://en.wikipeida.org/wiki/Kennecott,Alaska
    ---------------------------------------------------------------------------
        In the 27 years of operation, except for 2\1/2\ years of shutdown,
    Kennecott produced 4.625 million tons of ore averaging 13 per cent
    copper valued at roughly $207,000,000 with an estimated profit of
    $100,000,000. In addition, the silver by-product from this operation
    brought in another 4\1/2\ to 9 million dollars in revenues. The mine
    closed up shop in 1938. \4\
    ---------------------------------------------------------------------------
        \4\ Id.
    ---------------------------------------------------------------------------
        In the 1980s, Kennecott became a popular tourist destination, as
    people came to see the old mines and buildings; however, the town of
    Kennecott was never repopulated. Residents involved in the tourism
    industry often lived in nearby McCarthy or on private land in the
    surrounding area. The area was designated a National Historic Landmark
    in 1986 and the National Park Service acquired much of the land within
    the Kennecott Mill Town in 1998. \5\ The land of the Ahtna people had
    been formally taken from them forever.
    ---------------------------------------------------------------------------
        \5\ Id.
    ---------------------------------------------------------------------------
        When Alaska became part of the United States in 1867, there was no
    provision in the law for private ownership in the new territory, except
    for the private individual property holders who had obtained written
    title to the land when it was under Russian rule. ``Uncivilized''
    tribes (which included all but the acculturated Natives who had
    accepted the Russian Orthodox religion) were to be treated like Indians
    in the continental United States, which meant they had claim to their
    ancestral lands but no citizenship rights. ``Civilized'' tribes were to
    be given the rights and citizenship of other Americans; in practice,
    however, the United States government and new residents to the newly
    acquired territory treated all Alaska Natives as ``uncivilized''
    tribes.
        In 1906, John Billum, Sr., (Nasghilniie) an Ahtna Athabascan from
    Chitina drafted a document that claimed aboriginal rights to
    traditional lands. He was able to develop a map that included all
    headwaters and indicated what lands to which the Ahtna people had
    aboriginal claim. The document was delivered to Washington, D.C. by Mr.
    Charles O'Brien, a Bureau of Indian Affairs (BIA) teacher. This vital
    document would later become the foundation for the Ahtna region within
    the Alaska Native Claims Settlement Act.
        By the time of statehood in 1959, most of the land in Alaska was
    already claimed by the federal government, with small amounts centered
    around the cities being owned by individuals, almost all of whom were
    non-Natives. Yet, the rights of Alaska Natives to their ancestral lands
    had been acknowledged in a number of legal documents from the time of
    the purchase by the United States. The message in all the documents was
    that Alaska Natives own their own land, but that it was up to future
    generations to decide how they would get title to it. The issue of
    exactly which lands were ancestral did not begin to be addressed until
    the 1900's when, bit by bit, Natives began to lay claim to portions of
    the land in the state.
        The discovery of oil in Prudhoe Bay by Atlantic Richfield Company
    (ARCO) on March 12, 1968, created a sense of urgency as the need to
    pave the way for construction of an oil pipeline became evident. The
    first formal discussions by the Ahtna people on the proposed oil
    pipeline began in March, 1969. Our Ahtna leadership worked with members
    of Congress to help settle our land claims and clear the title on the
    land where the pipeline would be built.
        On December 18, 1971, Congress passed landmark legislation known as
    the Alaska Native Claims Settlement Act (ANCSA). This Act completely
    changed the traditional role historically played by the federal
    government and its relationship to Native people. Rather than
    perpetuate the reservation system, the Act established corporate
    ownership of assets to ensure long-term profitability and financial
    independence for Alaska Natives. ANCSA provided the foundation of
    Alaska Native peoples' economic and legal relationships with the
    federal government. For these relationships and the approval of
    agreements by Congress, the Ahtna People and all other Alaska Native
    groups relinquished valid legal claims to lands and resources in
    Alaska.
    History of Ahtna, Inc.
        ANCSA established thirteen Alaska Native Corporations (ANCs)
    including Ahtna, Inc. and over 200 individual village corporations.
    Eventually the US Government ceded 44 million acres of land and paid
    $962.5 million to ANC corporations. To date a total of 1,528,000 acres
    of land has been conveyed to Ahtna, Inc. from an entitlement of
    1,770,000 under the Act.
        Seven of the eight village corporations within the Ahtna region
    created as a result of ANCSA, merged with Ahtna, Inc. in 1980 and their
    lands are now the responsibility of Ahtna, Inc. With this merger came a
    strong unity and vision of the future for Ahtna's original 1179
    shareholders. Chitina Native Corporation is the only village
    corporation that did not merge with Ahtna and the only other ANC in the
    Ahtna Region.
        Ahtna is governed by a 13-member Native Board of Directors, all of
    whom are shareholders of the Corporation. Board members are elected by
    their fellow native shareholders and serve three-year staggering terms.
    As an Alaska Native Corporation, Ahtna is responsible for meeting the
    economic, social and cultural obligations of our now 1,651 \6\
    shareholders. This is a Congressional mandate taken very seriously by
    the Corporation and is reflected by our vision statement and expressed
    values.
    ---------------------------------------------------------------------------
        \6\ As of April 15, 2011, there are 1630 active shareholders for
    207,318 shares. There are an additional 21 inactive shareholders for
    shares totaling 2932 for a total of 210,250 shares. This includes Class
    L stock who are shareholders; the Ahtna Board and shareholders approved
    to opening enrollment to individuals born after December 18, 1971. As a
    result, the number of shareholders continues to increase.
    ---------------------------------------------------------------------------
        Ahtna's vision reads:

        Ahtna, Inc., with a strong sense of cultural pride and identity,
    will enhance the overall well-being of our shareholders through the
    wise stewardship of our natural resources, and sustained growth and
    economic development for future generations.

        In addition, Ahtna's values are comprised of the following:

       Cultural and Traditional Principles
       Integrity
       Professionalism
       Dedication
       Respect
       Sharing
       Ethics
       Perseverance
       Courtesy

        Ahtna is committed to providing a broad range of opportunities for
    our shareholders and preserving our Native culture; the Small Business
    Administration's 8(a) Program has provided a means to help achieve that
    end.
    Link Between ANCSA and Government Contracting
        ANCSA established ANCs in part to resolve long-standing issues
    around aboriginal land claims and to facilitate economic growth in
    Alaska by introducing Native companies into the Western economic
    system. ANCSA was and continues to be an extraordinary national
    experiment in federal relations with Native Americans. The formation of
    corporations to deliver benefits to the Alaska Native people differs
    substantially from most government programs. ANCSA's main goal was to
    have a fair and just settlement of all claims by Alaskan Natives
    through self-determination, but it was also a development tool for one
    of America's poorest minority groups to escape from poverty through
    direct participation in a U.S. market economy.
        As Ahtna, Inc. and other ANC's emerged from ANCSA, there was
    substantial evidence that Ahtna, Inc. and its shareholders were not
    receiving all of the benefits from the Act, including lands promised
    under ANCSA. As referenced earlier, Ahtna, Inc. still has 242,000 acres
    to be conveyed as part of the settlement. Due to the vast area and
    rural nature of Alaska, the lack of economic development opportunities
    in Native villages and the lack of basic infrastructure in rural
    Alaska, it was virtually impossible for ANCs to generate economic
    progress without significant assistance. Alaska's vast size and
    isolation created insurmountable obstacles to sustain economic
    development. In addition, the conventional corporate structure
    conflicted with our traditional Native values, hindering our ability to
    enter into a free enterprise society.
        By the mid 1980s, many of the regional and village corporations
    were experiencing financial hardships and unable to break out of the
    geographic constraints in rural Alaska. Congress recognized the need
    for ANCs to be able to diversify in their economic opportunities and as
    a result, legislation was passed in 1986, amending ANCSA and allowing
    ANCs to participate in SBA's 8(a) program: ``Congress confirms that
    Federal procurement programs for tribes and Alaska Native Corporations
    are enacted pursuant to its authority under Article I, section 8 of the
    United States Constitution.'' 43 U.S.C.1626 (e)(4)(A). Recognizing the
    unique structure and purpose of ANCs, Congress stated that for all
    purposes ANCs and subsidiaries controlled by ANCs would be considered
    owned and controlled by Natives as a minority business enterprise. 43
    U.S.C. 1626(e)(1)&(2).
        In 1992, Congress further amended ANCSA clarifying that ANCs and
    the businesses controlled by them are deemed ``economically
    disadvantaged.'' 43 U.S.C. 1626(e)(1)&(2). This amendment eliminated
    the need for ANCs or our subsidiaries to prove ``economically
    disadvantaged'' status as part of the 8(a) application process,
    therefore, streamlining the acceptance process into the 8(a) program.
    However, even with this issue being resolved, it was still a two year
    process before Ahtna was successful in having a subsidiary enter into
    the program in 1994.
        While Congress has enacted many laws to nurture self-determination
    and economic development in Alaskan Native communities, our ability to
    participate in SBA's 8(a) program has been the most successful program
    enacted to meet the federal government's Trust Responsibility towards
    the Native people of this land. \7\ A primary goal of federal policy
    toward Native people in Alaska is that ANCs will help alleviate poverty
    and economic and social disadvantages among Alaskan Natives. Not
    surprisingly, as Alaskan Natives, we continue to experience many of the
    social ills associated with high rates of poverty: low per capita
    incomes, lower levels of educations, high rates of alcohol and drug
    abuse, higher than normal rates of diabetes, heart disease and obesity,
    and many social problems such as shockingly high rates of suicides
    (three times the rate of other Alaskans), high rates of crime, and
    incarceration.
    ---------------------------------------------------------------------------
        \7\ See AFGE v. United States, 95 F. Supp.2d4, 36 (D.D.C. 2002),
    aff'd 330 F.3d 513 (D.C.Cir. 2003). Federal Government argued in court
    that Native participation in the 8(a) program ``furthers the federal
    policy of Indian self-determination, the United States' trust
    responsibility, and the promotion of economic self-sufficiency among
    Native American communities.'' See also, Morton v. Mancari, 417 U.S.
    535, 555 (U.S 1974). U.S. Supreme Court upheld legislation that
    provides for unique application of laws to Native Americans due to the
    unique history and role of dealings with Indians and has stated that as
    long as the special treatment can be tied rationally to the fulfillment
    of Congress' unique obligation toward Indians, legislation regulating
    commerce with Indian tribes will not be disturbed.
    ---------------------------------------------------------------------------
    ANCs and the SBA's 8(A) Program
        In 1968, the SBA 8(a) Business Development Program was established
    to assist firms owned and controlled by economically and socially
    disadvantaged individuals to enter the economic mainstream. Assistance
    is rendered to eligible firms in a structured developmental process
    over a nine year program participation term. Services include provision
    of: developmental analysis, counseling, and progress monitoring;
    management and technical assistance authorized under 7(j) of the Small
    Business Act; and access to business development opportunities under
    section 8(a) of the Act. Alaska Native Corporations, lower 48 Tribal
    Governments, and Native Hawaiian Organizations (NHOs) have been granted
    unique rights under this program to help foster economic development.
        The establishment of the unique aspect of the SBA 8(a) specifically
    for what has been termed as ``Tribal 8(a)s,'' ``ANC 8(a)s,'' or
    ``Native 8(a)s'' (collectively ``Native 8(a)s'') is a recognition by
    Congress and our federal government that these Native organizations
    have a larger obligation and responsibility in doing business as
    government contractors--Native 8(a)s must utilize business approaches
    and models to perpetuate the indigenous cultures whose only home lands
    are within the United States while at the same time fostering economic
    independence through participation in the mainstream economy. Unlike
    investor owned 8(a) firms that benefit one or two people, Native 8(a)s
    are owned by Native enterprises that have a direct responsibility to
    the Native communities they serve, communities which are comprised of
    hundreds and often times, thousands of native individuals.
        As a matter of law, ANCs' deservedly qualify as ``economically
    disadvantaged,'' which is a fundamental part of governmental efforts to
    encourage Native American participation in federal contracting. Tribes
    and ANCs are exempt from a federal cap on no-bid service and
    construction contracts that applies to 8(a)'s owned by individuals.
    Congress created this distinction because as explained above, tribes
    and ANCs serve large communities and groups of shareholders, while
    other minority small businesses generally provide benefits to sole
    proprietors or small groups of owners. Like all 8(a)'s, an ANC 8(a)
    company must perform at least 50 percent of the work on 8(a) contracts
    with their own employees for federal service and manufacturing
    contracts and 15 to 25 percent of the work for federal construction
    contracts. Those requirements set the minimum amount of work 8(a)'s
    must perform. In reality, the vast majority of ANCs, including Ahtna,
    surpass those amounts and provide employment for thousands of Alaskans,
    along with people residing in the Lower 48.
        The primary goals of ANCs are economic self-sufficiency, community
    and cultural development and continuity of Alaska Native tribes and
    villages. In recent years, there has been substantial interest
    regarding monitoring and oversight of Native 8(a) contracting. As a
    result, the National Defense Authorization Act (NDAA) for FY 2010
    included a provision now known as Section 811. This section requires
    any sole-source contract to Native Enterprises valued at $20 million or
    more to go through a formal written Justification and Approval (J&A)
    process. Tribal consultations were held on Section 811, in accordance
    with Executive Order 13175, prior to drafting the implementing
    regulations. These consultations were finalized in October, 2010 and
    the FAR Council published an interim final rule on March 15, 2011.
        In addition, on February 11, 2011, the SBA issued final regulations
    that provide significant reform to the 8(a) program, addressing
    concerns that have been raised by some members of Congress and certain
    factions of the media, about the program. These regulations were the
    result of years of work including numerous Tribal consultations held
    over the course of three years. The regulations went into effect on
    March 14, 2011, and will increase oversight of Native 8(a) firms,
    significantly change how ANCs, Tribes and Native Hawaiian Organizations
    participate in the program, and increase reporting and transparency.
        ANC companies and leaders have embraced more oversight by SBA in
    order to verify that ANC enterprise in the 8(a) program are good
    stewards of taxpayer funds, consistent with the intent of Congress. The
    fostering of competitive and self-sufficient ANCs is in the interests
    of the United States, and Alaska Native communities. Competitive and
    self-sufficient ANCs will help alleviate economic and social
    disadvantages of Alaska Native communities, increase tax revenues, and
    reduce the costs of government support programs to Alaska Natives.
    Continued support and guidance from SBA programs will incubate market
    competitiveness among ANCs and allow Alaska Native and Congressional
    goals of economic self-sufficiency and greater local self-government
    and cultural recovery more quickly and efficiently.
    Ahtna, Inc. and SBA's 8(a) Program
        Prior to entering into government contracting, Ahtna's primary
    source of revenue was contracting with oil companies to perform work on
    the Trans Alaskan Pipeline. Construction on the pipeline began in 1973
    and Ahtna, Inc. formed its first subsidiary, Ahtna Construction &
    Primary Products Corporation, to pursue this line of work. Ahtna has a
    unique relationship with the oil companies as the Trans Alaska Pipeline
    travels through 55 miles of Ahtna land and bisects the region along the
    Copper River. By the mid 1980's the contracts on the pipeline began to
    decline and by the end of the 1980's our operational profits from
    pipeline ventures were at a breakeven point. Like many other ANCs,
    Ahtna learned the hard way that the lack of diversity of economic
    opportunity in our region left us chronically at risk. As we had no
    other sources of regional economic development, we knew that we had to
    venture into new markets to secure additional revenue streams and
    ensure a more stable economic platform. The 8(a) program offered the
    ability to diversify and secure additional revenue streams.
        In November 1994, Ahtna Development Corporation (ADC) became the
    first of Ahtna, Inc.'s subsidiaries to receive certification as a
    Tribal 8(a) company from the Small Business Administration. ADC's lead
    core business has been Operations and Maintenance (O&M) with
    specialization in Department of Defense sites worldwide. The
    Information Technology and Records Management core businesses were
    added in 1997 forming the new growth aspect of the company. ADC
    graduated from the 8(a) program on October 31, 2002 and continues to
    perform numerous contracts and business operations to provide
    opportunities and benefits to our shareholders.
        By the late 1990s, Ahtna, Inc. made a business decision to increase
    our capabilities, expertise and ability to go after larger sources of
    contract revenue. In this process, Ahtna decided to purchase ownership
    in 3 separate companies to pursue government contracts. The Clearwater
    Group, Wire Communications Inc. and Ahtna Government Services
    Corporation were all companies in which Ahtna acquired 51 percent
    ownership. We were new to a complex organizational structure and were
    growing quickly, and did not yet have the business expertise to manage
    these changes. As a result, the Corporation experienced management
    challenges and difficulties in dealing with business partners. It was
    at this point that the board and shareholders embraced a change in
    management and direction.
        After learning some hard lessons from business losses, Ahtna
    decided to take greater control of its subsidiaries and acted on
    retaining companies with 100 percent ownership or selling our ownership
    interest if 100 percent ownership could not be attained. We took 100
    percent ownership and control of Ahtna Government Services Corporation
    and The Clearwater Group and in 2004 sold our ownership in Wire
    Communications Inc. Since making those changes, all of our subsidiaries
    are now 100 percent owned by Ahtna, Inc. and their boards are all
    comprised of Ahtna shareholders. This structure provides transparency
    throughout the family of companies, which is the key to our future
    success.
        This transformation was vital because at the beginning of 2004,
    Ahtna was reeling from a string of unprofitable years and facing a
    growing amount of debt. Our financial institution was squeezing the
    corporation with restrictions and made no bones about the fact that
    they did not want our business anymore. On top of that there was a
    growing list of pending litigation that threatened to topple our
    company. One case in particular involved a previous decision to back a
    third party construction company bond that had a $14 million liability.
    Ahtna was in dire straits and the light at the end of the tunnel was
    getting dimmer and dimmer.
        In the fall of 2004, Ahtna Government Services Corporation entered
    into the Department of Energy's Mentor/Protege program with Tetra Tech
    and won a large DOE contract ($80 million--3 year) to provide contract
    oversight and design build of overseas nuclear detection devices at key
    points of cargo transit. This contract was competitively re-bid in 2007
    and awarded to Ahtna Government Services Corporation. The growth and
    experience Ahtna gained through this contract is a testament to the
    intent of the 8(a) program and ANCSA. It was a huge success and helped
    to breathe life back into Ahtna, Inc, as our banking institutions were
    now willing to provide financial support to our company.
        Throughout the course of this contract, Ahtna Government Services
    Corporation self-performed only the contractual minimum percentage of
    the work, and by the end we had acquired the knowledge and skill set to
    meet and surpass our SBA required percentage of self-performance. This
    helped us capture profit which we used to pay down other obligations in
    a timely manner. This contract, the capabilities we developed through
    it, and our unique rights in the SBA 8(a) program saved our corporation
    from having to declare bankruptcy. Although we were unable to pay
    shareholder dividends during this time, we maintained a strong
    financial effort to provide benefits to our shareholders in the form of
    land protection, subsistence advocacy, scholarships, employment, burial
    assistance benefits and self-determination (benefits are more
    thoroughly address later in this testimony).
        Since 2006, Ahtna has turned the corner on our past problems and we
    have begun to see the light at the end of the tunnel. Our efforts to
    keep this company focused on shareholder leadership and development has
    not only met the intent of ANCSA and the 8(a) program but it also meets
    the aspirations of our people. Our people know that as a corporation we
    have come a long way, but there are still many struggles in our
    communities we have yet to overcome. The 8(a) program has played an
    enormous role in our ability to provide benefits to our shareholders.
    We still need continued assistance and support to ensure that all our
    shareholders have the opportunity to fulfill the promises of both our
    land settlement and as citizens of the United States the ability to
    have self determination.
        Ahtna now has twelve \8\ operating subsidiaries involved in a wide
    variety of business, including government contracting, civil and
    vertical construction, pipeline maintenance, environmental remediation,
    surveying, facilities maintenance, administrative and janitorial
    services, food service contractors, tourism, forestry and gravel sales.
    Of our twelve operating subsidiaries, five have successfully graduated
    from the SBA's 8(a) Program, and four are currently in the Program.
    Each of these companies are budgeted to show profits for Ahtna in 2011
    and beyond. Each has created name recognition within their fields of
    industry and all are highly competitive in going after new contracts.
    This economic diversity would not have been possible without the 8(a)
    program and the ability to go outside Alaska to find opportunities.
    ---------------------------------------------------------------------------
        \8\ As of March 31, 2011.
    ---------------------------------------------------------------------------
    Ahtna's Vision Regarding Shareholder Benefits
        Ahtna is a shareholder run company at all levels which is the
    driving force behind Ahtna's ability to provide meaningful
    opportunities and culturally significant benefits to our 1,651
    shareholders.
        Our thirteen-member board directs operations, and all board members
    are Ahtna shareholders. Ahtna has several active board committees which
    also provide direction to Ahtna's management in all aspects of the
    Corporation, including the Customary and Traditional Committee
    (subsistence); Land Committee; Shareholder Committee; Investment
    Committee; and Policy Committee. In addition, each subsidiary has a
    three or five-member board selected from the Ahtna, Inc. Board of
    Directors, resulting in all subsidiary board members also being Ahtna
    shareholders.
        Ahtna's management team consists of nine members, five of which are
    Ahtna shareholders, including the President/Chief Executive Officer,
    Chief Operating Officer, Vice President of Land and Resources, Vice
    President of Human Resources and Vice President of Corporate Affairs.
    In addition, the Vice President of Legal Affairs & General Council
    (another management team member) is an Alaskan Native, making a total
    of six of the nine members being native individuals. Five of the seven
    subsidiaries that have Presidents are shareholders.
        These numbers reflect that Ahtna shareholders are leading our
    companies into the future with a strong desire to enhance the overall
    well-being and education of all shareholders so our future generations
    can step into their roles and lead our companies with a sense of
    cultural pride.
        Ahtna and its family of subsidiary companies understand that the
    ultimate purpose of all operations is to benefit our shareholders and
    future generations. The question asked by leadership regarding any
    endeavor is ``What is the long-term benefit for our shareholders?'' A
    majority of Ahtna's 1,651 shareholders (and their descendents) reside
    in rural Alaska in isolated and economically disadvantaged areas. For
    example, in 2000, Gulkana (74 percent Alaska Native) was 41 percent
    below poverty and 39 percent unemployed. In comparison, Glennallen (12
    percent Alaska Native), a town 14 miles south of Gulkana, was only 8
    percent below poverty and 5 percent unemployed. See http://
    www.commerce.state.ak.us/dca/commdb/CF_BLOCK.htm. Therefore, providing
    certain services to shareholders, such as advocacy for subsistence
    rights and assistance with burial costs for family members, is a
    priority.
        Land is one of the most important shareholder assets. In exchange
    for giving up its aboriginal claims, Ahtna has thus far received 1.5
    million acres out of its 1.77 million entitlement under ANCSA, which
    was small in comparison to the original 44 million acres set aside for
    all ANCSA corporations. Under the Alaska National Interest Lands
    Conservation Act (ANILCA), 603,000 acres of Ahtna's entitlement was
    locked up in the formation of the Wrangell Saint-Elias National Park
    and Preserve and the Denali National Park Preserve. Development of this
    land for shareholders' benefit has been difficult, if not impossible.
    Additionally, Ahtna's land is accessible by road and on the pipeline
    corridor, causing trespass and unauthorized to be a long standing
    problem. It is easy to understand why protecting and preserving our
    land for resource development, shareholder use and subsistence is a top
    priority to our People.
        Of the $962 million dollars distributed from ANCSA, Ahtna's share
    was only $13.3 million dollars paid over a number of years in small
    installments. Balancing our shareholders' interests over the years,
    Ahtna has needed to carefully spend these funds to protect shareholder
    land and provide basic shareholder services. As a result, over the past
    decade, Ahtna has invested over $15 million in protecting, preserving,
    maintaining and being good stewards of our lands. All resources used to
    protect our most valuable asset will always be money well spent.
        Although stated earlier in this testimony, it is important to
    remember Ahtna's vision when discussing benefits. The company's vision
    focuses not only on profitability, but also on providing vital
    shareholder services and cultural preservation, land protection and
    preservation, and economic opportunities for our People. Ahtna strives
    to promote these priorities for our shareholders.
    Benefits to Ahtna Shareholders
        Ahtna exists to improve the lives of the Athabascan People that
    have inhabited the Ahtna Region for over seventy centuries. Ahtna also
    exists to protect and preserve the Athabascan culture and values, by
    providing financially for individual shareholders and their
    communities, by protecting and preserving our lands, by promoting
    cultural gatherings and supporting the preservation of cultural
    resources, by bringing shareholders together to discuss issues of
    importance to the Ahtna People such as lands and subsistence, and by
    supporting organizations and endeavors that benefit Native people
    across Alaska. From 2000-2010, Ahtna has spent in excess of $20.2
    million to provide a great myriad of benefits to our shareholders and
    their families.
        As Ahtna finds its way through financial recovery, the Ahtna Board
    has been able to focus more on investment strategies that will ensure
    the sustained funding for future generations of shareholders, as well
    as increasing shareholder benefits and services for the generation that
    made ANCSA and Ahtna, Inc. a reality. Ahtna maintains shareholder
    relations staff in each of its offices, to answer questions and provide
    services to shareholders. Ahtna provides quarterly shareholder
    publications to report on business, announce opportunities, provide
    subsistence and land information, and make announcements about special
    events in shareholders' lives. The following provides an overview, but
    not comprehensive explanation, of the benefits Ahtna is now able to
    offer its shareholders, largely in part of the Corporation's
    participation in the SBA 8(a) program.
    A. Shareholder Relations and Cultural Preservation
        The Ahtna Heritage Foundation. The Ahtna Heritage Foundation (TAHF)
    is a regional non-profit that administers Ahtna's cultural and
    educational programs. TAHF was established in 1986 to perpetuate the
    Ahtna heritage and enhance the socio-economic status of the Ahtna
    people. To accomplish its mission, TAHF uses the traditional culture to
    enhance the education, the life skills, the pride and self esteem of
    the Ahtna people. TAHF focuses on remembering and retaining the
    positive aspects of the Ahtna history and culture.
        Ahtna supports TAHF by funding its operating costs ($186,865 in
    2010), as well as providing in kind support through other professional
    services and office space. TAHF is able to use its funds to run the
    Ahtna Cultural Center, document oral traditions, maintain cultural
    artifacts, assist with the Ahtna Culture Camp, facilitate the Ahtna
    dance group, and support many other projects that focus on Ahtna
    history and culture. Since 2000, Ahtna has contributed approximately $2
    million towards TAHF, either in scholarship monies, operating costs, or
    other in-kind donations.
        Scholarship Program. In addition, TAHF administers the Walter
    Charley Memorial Scholarship Program, named after our prominent
    Athabascan Elder and Chief who spoke to youth and elders about heritage
    and wisdom. The Scholarship Program uses funds set aside by Ahtna, Inc.
    for this purpose. Scholarships are available to full-time and part-time
    students in good standing. In recent years Ahtna has been able to
    substantially increase the amount budgeted for this Program. For
    example, in 2001 Ahtna spent $30,000 in scholarship awards, while in
    2010 Ahtna spent $187,000. The budget for 2011 is $200,000.
        Ahtna also encourages our shareholder students by providing them
    graduation financial awards at every stage of their process. Ahtna
    provides these gifts for students receiving a GED, a certificate, or an
    undergraduate or a graduate degree.
        Cultural Preservation. Apart from TAHF, Ahtna supports other
    projects and activities that perpetuate the Ahtna culture and history.
    Ahtna purchases traditional artwork and jewelry, including the beadwork
    that is so much a part of Ahtna's history and ceremonial dress. Ahtna
    has supported the Ahtna Culture Camp, where elders share precious time
    and knowledge with youth and others in the Copper River Region. These
    are opportunities to share historical stories, traditional ways of
    subsistence and the Athabascan language. Learning these traditional
    skills helps youth develop a closer connection to their culture. In
    recent years, Ahtna has also hosted an annual Youth and Elders
    Conference, providing another opportunity for Elders to share their
    wisdom and traditions with the younger generation. Ahtna has
    commissioned consultants to digitalize tape recordings, and recently
    commissioned an anthropologist to identify historic trails within the
    Ahtna Region and document their names in the Ahtna language. Investing
    in our culture is an intangible asset that is priceless but since 2007,
    Ahtna has contributed approximately $700,000 into our cultural
    preservation activities.
        Burial Assistance Fund and Memorial Support. For many years, Ahtna
    has maintained a Burial Assistance Fund, providing shareholders with
    much needed funds following the death of a close family member. This
    Program has seen significant increases in funding in recent years,
    currently providing $3000 to help a family suffering a loss to cover
    the funeral expenses and over the last decade, Ahtna has offered
    approximately $465,000 in burial assistance to our shareholders. In
    addition, Ahtna often provides shareholders other support during the
    traditional potlatch to celebrate a loss.
        Elders Benefits Program. Ahtna considers one of its most valuable
    and honored resources to be its Elders, and the health and welfare of
    its Elders to be of utmost importance. Ahtna's Elders provided the
    guidance to establish Ahtna, Inc. and to lead it to becoming a very
    successful company for all shareholders. We have long provided our
    Elders resources they may need, such as salmon, game and chopped wood,
    as well as food gift baskets during the holidays. In recent years, the
    Ahtna Board of Directors established an Elders Benefit Program to
    further foster our Elders' health and welfare. The Board declared the
    first Elders' benefit in the amount of $300 per Elder in December, 2009
    and declared the same Elders' benefit in December, 2010. Although the
    dividend may seem small, it was a huge step for Ahtna and helping to
    provide for our Elders.
        Dividends. Recognizing that the majority of our shareholders do not
    have much financial wealth or the ability to find employment in the
    Region, Ahtna strives to responsibly issue dividends to shareholders.
    As discussed above, Ahtna has been through some tough times in the
    early 2000s and was unable to issue a dividend in those years. With the
    economic successes in recent years, Ahtna provided dividends in 2007,
    2008 and 2009 of $2.79 per share and $4.00 per share in 2010. This is a
    total of $2,377,923 being paid out in dividends to our shareholders
    over the past four years!
        Regional Community Support. We understand the importance of
    community and the role that other entities have in supporting our
    shareholders. Every year the Board provides an annual contribution of
    $10,000 to each Village in the Region, and often helps fund their
    annual meetings. Our donation helps with administrative costs
    associated with running tribal programs that are chronically
    underfunded by the BIA and other agencies. Ahtna also supports the
    Copper River Native Association (CRNA), the Regional non-profit entity
    providing health and social services to the Native people living in the
    Ahtna Region. CRNA is also significantly underfunded by the Indian
    Health Service (IHS), which routinely does not pay tribal entities the
    indirect costs associated with running IHS programs. We support other
    community activities in the Region, such as an annual basketball
    tournament, community carnivals and parades, dances, shareholder open
    houses and holiday receptions.
        Other Organizations. Ahtna also recognizes that collectively many
    ANCs and Alaska Native organizations face the same opportunities and
    challenges as we do, as well as the drive to provide for our People in
    culturally appropriate avenues. Therefore, Ahtna donates to some of
    these organizations, such as the Alaska Federation of Natives (AFN),
    the Native American Rights Fund (NARF), and the ANCSA Regional
    Association. The existence of these other organizations, their pursuit
    of like causes, and the ability to tackle issues as a collective
    benefit to our shareholders.
    B. Shareholder Development--Training, Education and Employment
        Ahtna's shareholder development vision is to ``encourage
    shareholders to reach their highest employment potential and to provide
    them employment opportunities within Ahtna for all future
    generations.'' As such, Ahtna focuses on helping shareholders obtain
    employment, training and education, and by getting shareholder
    employees into management training tracks within our company to ensure
    Ahtna is shareholder run and managed.
        In recent years, with additional funding from profitable
    subsidiaries and with additional job opportunities, Ahtna has been able
    to institute a more aggressive program to recruit, hire, train and
    retain shareholders. In 2008, Ahtna hired a Shareholder Development
    Coordinator to run the Shareholder Development Program. Over the course
    of 2008, Ahtna and each subsidiary company prepared a 2009 Shareholder
    Development Plan, outlining their Board and Management Team's
    shareholder development initiatives. Over the past two years,
    Shareholder Development has made tremendous strides in reaching our
    shareholders and assisting them with their employment goals. For 2011,
    the focus areas of the Shareholder Development Department are:

       Strengthening subsidiaries relations and reporting
            mechanisms

       Strengthening shareholder employee relations and use of
            shareholder development plans

       Expanding shareholder outreach efforts and communications

       Redesigning Talent Bank to be a more comprehensive
            recruitment/employment assistance tool

       Establish P&Ps for On-call and Workforce Development
            programs

       Further development of Internship Program

       Release a Shareholder Demographics Survey

       Expand employment support services and educational
            assistance resource library

        To provide a better understanding, we highlight a few specific
    Shareholder Development programs below.
        Shareholder Hire. First and foremost, Ahtna has always promoted
    shareholder hire through a ``shareholder hiring preference,'' which
    also includes a preference for hiring shareholder descendants and
    spouses. This preference has translated into hundreds of employment
    positions within Alaska and particularly through Ahtna's construction
    and pipeline projects. In our 2005 report to the U.S. Government
    Accountability Office, we reported 760 employees across the Ahtna
    family, of which 86 were shareholders. As of December 31, 2010, Ahtna
    has 2,188 employees, of which 96 are shareholders. \9\ Although we
    recognize that our shareholder hire percentage would appear small due
    to increased work outside Alaska, we have been able to maintain about a
    1 in 4 shareholder hire ratio for our Alaska positions. (Ahtna
    generally maintains the existing workforce when taking on new work in
    the lower 48.) Ahtna had approximately 401 Alaska-based employees in
    December 2010, of which 96 were shareholders, shareholder descendants
    or shareholder spouses.
    ---------------------------------------------------------------------------
        \9\ For the purposes of these numbers, ``shareholders'' includes
    shareholder descendants and spouses of shareholders.
    ---------------------------------------------------------------------------
        Ahtna also partners with companies outside the Ahtna family to
    provide employment and training opportunities in the Region. For
    instance, Ahtna has an agreement with Princess Lodge, which is has a
    resort in the Ahtna Region, whereby Princess will train qualified
    shareholders in management positions at the resort. Additionally,
    Alyeska Pipeline Service Company provides Ahtna funding to support
    individual shareholder interns in fields that are relevant to the
    pipeline work.
        Internship Program. Ahtna began its internship program informally
    and started the Shareholder Internship Pilot Program in Fall 2006. This
    Program is now permanent and has three internship opportunities within
    the Ahtna Family of Companies in 2011. This Internship Program assists
    Ahtna shareholders and descendants in pursuing higher education by
    funding school costs, providing work experience, and helping them
    achieve successful employment within the Ahtna family of companies.
    Along similar lines, in 2008 Ahtna also started the Youth Summer Intern
    Program, providing recent high school graduates the opportunity to work
    at Ahtna for the summer.
        Ahtna has many success stories over the short course of this
    Program. Specifically, five of the six interns that participated
    between Fall 2006 and Spring 2008 have been hired within the Ahtna
    family. For example, Eva Olhausen participated in the Pilot Program
    between 2006 and 2007. After she received her B.A. in Business
    Administration in 2007, Eva was hired on full time as a Human Resources
    Specialist at Ahtna Technical Services, Inc. Eva has since transferred
    over to Ahtna, Inc., as the Benefits Specialist and has received her
    Benefits certification.
        Temporary Employee Program. Ahtna maintains a list of on-call
    shareholders interested in working within the Ahtna family of
    companies. Ahtna fills all temporary clerical and laborer-type
    positions through this on-call list. These ``temp'' placements give
    shareholders an inside view of working for an Ahtna company and also
    give them an opportunity to display their skills and qualifications.
        Individual Shareholder Development Plans. Ahtna helps employee
    shareholders identify their career goals through Individual Shareholder
    Development Plans (ISDP). An ISDP outlines the shareholder's strengths
    and goals, and identifies professional/education development
    opportunities that help the shareholder reach their career goals.
        Management Trainee Program. Shareholder management is not new to
    Ahtna, as is demonstrated by the current Ahtna leadership. Ahtna
    shareholders are leading the companies and ensuring future generations
    can step into their roles and lead our companies with a sense of
    cultural pride. Ahtna recognizes the need to identify and promote
    ``emerging executives'' and the need for ``executive management
    training'' to ensure Ahtna stays a shareholder managed company. In past
    years, Ahtna has funded significant continuing education and training
    expenses for our shareholder executives and managers.
        Through this program, we identify shareholders with the potential
    and interest to manage within the Ahtna family and develop an ISDP to
    get them there over an appropriate timeframe. Many other Ahtna, Inc.
    manager positions are currently held by shareholders, including:

            Shareholder Records Manager (maintains all shareholder records
            and stock transfers)

            Land and Administrative Supervisor (oversees 8 employees in the
            Glennallen office)

            Information Technology Technician (manages Alaska-based IT
            needs)

        Management Trainees and other managers can receive assistance with
    a college degree or other training, and may work across several
    different departments and companies within the Ahtna family. The
    ultimate goal to maintain a manager or executive leadership position
    with the Ahtna family of companies.
        Workforce Development Fund. In past years, Ahtna has funded
    training opportunities that promote employability in the trades. For
    instance, in 2006 Ahtna sent 13 shareholders to training in Texas for
    ``rough neck'' training. In recent years, Ahtna has budgeted $30,000 in
    a Workforce Development Fund to (1) provide individual shareholders
    funding for training opportunities, including enrollment and travel
    costs; and (2) to sponsor trainings in the Region impacting the
    employability of a large number of shareholders. With regard to the
    latter, Ahtna Contractors, LLC has been sponsoring skills trainings in
    the Region where there is an identified skill set needed to perform
    current construction projects.
        Outreach. Ahtna is committed to providing shareholders access to
    information, support services, training and employment through
    effective outreach and marketing of Ahtna occupations and careers. We
    continuously update our job openings and advertise career opportunities
    to shareholders, through the Shareholder Development News (e-
    newsletter), the Kanas (quarterly shareholder publication), the
    Ahtnajobs.com website, and other shareholder contact tools (such as
    advertising at local high schools and other job fairs).
    C. Land and Resource Management
        Ahtna, Inc. owns in fee title, approximately 1,528,000 acres
    conveyed in December 1998 from an entitlement of 1,770,000 acres. This
    includes 714,240 acres of land surrounding the eight villages, and
    close to 45,000 acres in bonus selections to be distributed to the
    villages based on historic use and subsistence needs. Ahtna's Land
    Department is guided by the strategic direction of the Ahtna, Inc.
    Board of Directors and the Board's Land Committee and the Customary and
    Traditional Committee. Unlike ``traditional'' for-profit corporations
    managing buildings or property, the priority of Ahtna's shareholders is
    to manage these lands and resources for future generations of the Ahtna
    People in accordance with cultural and traditional uses and values,
    conservative development strategies, and principles of culturally
    appropriate stewardship.
        The Land Department has four primary functions: (1) identify and
    preserve Ahtna's land interests and allocate appropriate interests to
    others; (2) protect Ahtna's customary and traditional uses; (3) protect
    the land from unauthorized uses; and (4) manage and develop commercial
    land uses. Crossing over these broad categories, Ahtna maintains strong
    communications with shareholders and villages on land-related issues;
    works closely with State and Federal agencies on land and natural
    resource matters; and provides for geographic information system (GIS)
    mapping to provide support and research land status and development
    issues. Our land programs are a direct benefit to our shareholders, and
    several specific programs are discussed below.
        Merged Village Programs. In 1980, seven of the eight Village
    Corporations merged with Ahtna, Inc. Under the terms of the Merger
    Agreement, Ahtna assumed management of all former Village Corporation
    lands. Ahtna is required to coordinate use of these lands with village-
    based shareholder committees known as Successor Village Organizations
    (SVO). The SVO reserves the right to withhold consent to any type of
    new development within the former village lands. The Land Department
    also obtains permission from an SVO before issuing any commercial use
    permit within those lands. Ahtna respects these rights and expends
    considerable funds ensuring Land Committee and SVO participation in
    land decisions.
        The Merger Agreement also provides for the transfer of former
    Village Corporation lands to individual shareholders from the merged
    Village Corporations. This Merger Land Use Program provides
    shareholders to a long-term lease of 5 acres per 100 former Village
    Corporation shares. Ahtna manages this program as well.
        Homesite Program. Under ANILCA, individuals are entitled to 1.5
    acres of land in fee title if they can prove traditional use of the
    land. Ahtna administers a Homesite Program that assists shareholders
    with identifying their property interests, completing the appropriate
    paperwork, and documenting their traditional uses for submission to the
    BLM.
        Resource Development. Ahtna's lands include areas that are either
    known resources or have high probability for resources for gravel,
    timber, minerals, oil and gas. The Land Department manages development
    of Ahtna's resources considering potential revenue to Ahtna and
    shareholder dividends and minimizing negative impacts on traditional
    shareholder activities such as fishing and hunting. For instance, in
    2010 Ahtna's gravel sales brought in $81,412 in revenue.
        Commercial Land Use Program (Lease, Permit, Easement). The Land
    Department issues leases, easements and permits for commercial uses.
    These arrangements generate funding through a $1000 proposal fee, which
    supports administration of the Land Department's research and review.
    Additionally, if Ahtna accepts the proposal, as part of the agreement,
    the lessee donates 10 percent of the contract or $1,000 (whichever is
    greater) to the Walter Charley Memorial Scholarship Fund.
        Individual Use Permit Program. Ahtna's lands are open to entry by
    permit only. Ahtna's Permit Program allows individual use in a variety
    of manners. A land crossing permit can be purchased to cross Ahtna
    lands to reach public hunting or fishing areas. Permits are issued for
    small amounts of gravel, for individual use such as a driveway. Permits
    are issued for camping and berry picking. Ahtna does not allow hunting
    on its lands except for a special Bison permit and for Predator Control
    Hunting (i.e., wolves). In 2010, Ahtna issued 451 individual use
    permits.
        Shareholder Resource Program. Ahtna provides shareholders access to
    free gravel for personal use such as for a driveway, and allows
    villages access to free gravel for village projects. Shareholders are
    also entitled to 100 free house logs per year and 25 cords of fire
    wood.
        Shareholder Assistance Program. Ahtna assists shareholders with
    land status research at no cost. Ahtna provides maps, GPS services,
    property legal descriptions, surveys, title research, and assistance
    with BIA Native Allotments. Ahtna waives all the fees associated with
    shareholders submitting requests under the Commercial Land Use Program,
    as well as the Scholarship donation for accepted proposals.
        Subsistence Preservation. Like most ANCs, Ahtna's People have a
    traditional subsistence lifestyle, hunting moose and caribou and
    fishing in Ahtna's many rivers like the Copper River. We help protect
    these customary and traditional practices through subsistence advocacy.
    The Land Department and Ahtna management review proposed regulations,
    attend meetings, and submit proposals and comments regarding both State
    and Federal laws and regulations. Ahtna representatives sit on boards
    and committees that provide venues to protect Native subsistence
    rights. Ahtna has also been at the forefront of litigation against the
    State of Alaska to protect subsistence rights. Ahtna supports other
    entities, like NARF, which also seek to protect Native subsistence
    rights.
        Land Protection. Ahtna land is on the road system in an area
    accessible to Alaska's major population hubs (Fairbanks and Anchorage).
    Trespass is frequent and land protection is a major component of
    Ahtna's land management program. Land Protection Officers are stationed
    in each village and deal with all complaints of trespass, hunting
    disputes, trap line disputes, theft, wood cutting disputes, vandalism,
    criminal mischief, littering, hazardous material dumping and clean up
    issues. Officers educate shareholders and the general public on private
    land laws, patrol via ATVs and boats, post private property signs, and
    issue permits in the field to individuals on Ahtna property.
    D. Reinvestment in Our Companies
        Ahtna's ability to provide benefits to our shareholders can only
    come as a result of successful business opportunities and growth of our
    companies. In order to have successful and growing companies, it is
    imperative that we reinvest back into our companies, empowering them to
    build stronger infrastructure, powerful leadership, and the
    capabilities to bid and win larger and more competitive work. As the
    companies build, the benefits expand which is the ultimate goal and
    empowers our shareholders.
    Conclusion
        We as Alaska Natives ceded large parts of Alaska to the United
    States and trillions of dollars of natural gas and oil reserves. The
    Alyeska-Pipeline Service Company reported on its website that as of
    through 2010, over 16.2 billion barrels of oil have run through the
    Trans Alaska Pipeline System and although only rough estimates can be
    calculated, using the average price range of $80-$100 per barrel of
    oil, the equates very roughly to somewhere between over $1.28 trillion
    and $1.6 trillion being generated in revenue. That is an amazing amount
    in natural resources that Alaska Natives ceded to the United States and
    the number only continues to rise! In return, we retained some land and
    less than a billion dollars as assets to develop for-profit and non-
    profit regional corporations and associations. ANC access to the SBA's
    8(a) program helps fulfill Congressional mandates for government
    contracting aimed at providing training and market opportunities for
    minority and disadvantaged businesses. Our Native shareholders are in
    control of our Corporations and are the primary beneficiaries of
    dividends, equity, and philanthropy generated by ANCs.
        Our business is shareholder driven in every aspect. Our leaders,
    whether as Ahtna Shareholders in management, Village spokespersons, or
    directors on the board, have all played a meaningful role in shaping
    Ahtna as it stands today and the direction for the future generations
    of the Ahtna People. Through special contracting opportunities, we have
    been able to realize economic development opportunities that benefit
    entire communities of people that have historically and continue to
    this day to be economically depressed. Benefits cannot be measured by
    dividends alone, but rather employment opportunities, preservation of
    the traditional culture, opportunities for higher education and
    training, protection of our lands and resources, and enhancement of the
    pride and self esteem of the Ahtna People. Federal contracting through
    the SBA 8(a) Program is one of the vehicles that has given Ahtna the
    means necessary to provide these benefits.
        I would like to close my testimony with one message--the 8(a)
    program is working and it is working well! To date, Alaska Natives
    still remain among the most impoverished populations in America but
    through utilizing programs such as these, we will continue addressing
    the needs of our people.
        Thank you very much for the opportunity to provide this testimony.
                                     ______

     Prepared Statement of Eric S. Trevan, President/CEO, National Center
                   for American Indian Enterprise Development
    I. Introduction
        Chairman Akaka and Ranking Member Barasso, the National Center for
    American Indian Enterprise Development (the ``National Center'' or
    ``NCAIED'') commends the Senate Committee on Indian Affairs for
    convening this important hearing, appropriately titled ``Promise
    Fulfilled: The Role of the SBA 8(a) Program in Enhancing Economic
    Development in Indian Country.'' The National Center is pleased to
    present this testimony on how this program is furthering Native
    business development and fulfilling the overarching Federal Indian
    Policy goals of Indian self-determination and self-sufficiency.
        The Small Business Administration (SBA) operates several small
    business contracting programs to achieve two important goals: (1)
    enable the Federal Government to diversify the supplier base for the
    Federal procurement market, and (2) strengthen small, minority and
    Native contractors seeking to penetrate that enormous market. Of all
    the SBA's programs, its Business Development Program authorized by
    Section 8(a) of the Small Business Act (the ``8(a) Program'') has been
    the most successful in helping Indian tribes, Alaskan Native regional
    and village corporations (ANCs), and Native Hawaiian Organizations
    (NHOs) diversify, grow their enterprises, and generate revenues and
    jobs for their Native communities. As enterprises of each of these
    indigenous aboriginal groups are eligible to apply for certification as
    8(a) Program participants, our testimony refers to them collectively as
    ``Native 8(a) enterprises'' participating in the ``Native 8(a)''
    program.
        The National Center has long played a pivotal role in spurring
    Congress and Federal agencies to support Native and minority business
    development. NCAIED leaders have testified repeatedly before Congress,
    and worked closely with other national Native organizations to improve
    the Native 8(a) program and advance other Native business and economic
    development initiatives. We also collaborated in the first-ever
    consultations that the SBA and the Office of Management and Budget
    (OMB) and Federal Acquisition Regulatory Council (FAR Council)
    conducted with Indian tribes to discuss 8(a) regulatory proposals, and
    submitted comments and recommendations for the SBA and FAR Council
    consultations record.
    II. Background on the National Center
        The National Center, organized over 42 years ago, is the longest
    serving Native American business development assistance provider in the
    United States with the mission to develop the American Indian private
    sector as a means to help Native communities become self-sufficient.
    The National Center operates a national network of non-profit centers
    across the country that provide procurement technical assistance,
    business development and management consulting services to Indian
    tribes, ANCs, NHOs, and businesses owned by these entities, as well as
    individual Native Americans, Alaskan Natives and Native Hawaiians. Our
    business centers assist a broad range of first generation Native
    entrepreneurs to sophisticated tribal enterprises in developing
    business feasibility studies, business plans, banking relationships and
    lines of credit, marketing and growth strategies. We are supported by,
    and also help, Federal agencies by: coaching contractors on completing
    applications for certifications and registrations; finding capable
    Native companies to fulfill Federal requirements; and providing
    contractors guidance on contracting programs administered by the SBA,
    various other Federal and state agency requirements, and various
    agencies' Mentor-Protege programs and other teaming arrangements.
        The National Center also produces various national and regional
    events that train, promote and market Native enterprises to the public
    and private sectors. Our premier annual national event is the
    phenomenally successful Reservation Economic Summit & American Indian
    Business Trade Fair (RES). At RES 2011, nearly 3,000 individuals and
    400 exhibiters attended, including tribes, ANCs, Native enterprises,
    Fortune 500 and other major corporate representatives as well as
    Federal, state, local and tribal political and procurement officials.
    Trade delegations from Canada, Turkey and China also attended.
        Over the years, the National Center estimates that its operations
    have assisted approximately 80 percent of the Tribes in the lower 48
    states and more than 25,000 Native enterprises, and have trained over
    10,000 tribal members. Furthermore, due to its centers' bid matching,
    other business assistance and networking opportunities produced at its
    RES and other conferences, the National Center has helped companies
    generate over $4.5 billion in contract awards.
        The comments below are based on countless hours of assisting Native
    8(a) enterprises as they struggle to grow, diversify, thrive and return
    economic benefits to their Native communities and other areas where
    their companies generate tax revenues and jobs. We have learned that
    our conferences and training sessions must provide opportunities for
    Native 8(a) enterprises to learn from fellow contractors, federal
    procurement officials, and other contracting experts their valuable
    guidance on best practices to ensure compliance with the spirit and
    letter of the 8(a) rules. We also have found that the Native 8(a)
    program works best when the Native community's political and business
    leaders recognize their fiduciary duties to their tribal members to do
    their due diligence to understand the intricacies and responsibilities
    of operating government contracting enterprises. Key to this process is
    to vet carefully and hire experienced managers (whether Native or non-
    Native) who know or can quickly learn how to navigate procurement rules
    and market effectively. Some tribes may decide contracting is too
    difficult and risky for profit margins that they consider too low.
    Other tribes find that contracting presents new and different types of
    job opportunities for their tribal members, offers a chance to
    diversify the tribe's economy, and expands their horizons to operate
    both on and off their remote reservations and even in the global
    marketplace. In short, the Native 8(a) program is proving to be an
    effective procurement tool and economic development program, fulfilling
    its promise just as Congress intended.
    III. Legal Framework of the Native 8(a) Program
        Very compelling reasons prompted Congress to authorize the Native
    8(a) Program's provisions. Their enactment were grounded on the
    confluence of Federal Indian Policy, Federal Small Business Policy and
    Federal procurement policy considerations, and were and still are fully
    justified by sobering socio-economic indicators that have improved very
    little over time.
    A. Foundations of the Political ``Trust Relationship''
        The governments of indigenous American Indians, Alaskan Native and
    Native Hawaiians were considered sovereign nations from their first
    interactions with European settlers. The U.S. Constitution's grant to
    Congress of the power to ``regulate Commerce . . . with the Indian
    tribes'' in Article I, Sec. 8, ] 3, and its interpretation in
    subsequent landmark Supreme Court decisions, gave rise to the Federal
    Government's special political ``trust relationship'' with and
    responsibility to the Tribes. See Cherokee Nation v. Georgia, 30 U.S. 1
    (1831); Worcester v. Georgia, 31 U.S. 515 (1832). These cases arose
    from violations of constitutional and treaty protections. Tribes across
    the country entered into treaties, giving up lands in exchange for
    promises of Federal protection and support for education and community
    development, only to suffer more treaty violations. The General
    Allotment Act of 1887 forced conversion of more than 90 million acres
    (two-thirds of reservation lands) from tribal ownership--often without
    compensation--to non-Indian settlers as ``surplus'' lands. The 1867
    Treaty of Cession promised Alaska Natives peaceful possession of their
    lands and the Alaska Statehood Act confirmed these rights. Then
    discovery of rich oil fields led to enactment of the Alaska Native
    Claim Settlement Act and relinquishment of 89 percent of Alaska
    Natives' lands. That Act created regional and village corporations to
    administer the settlement funds and generate revenues for the benefit
    of their many thousands of Alaska Native shareholders. This
    constitutional and statutory foundation underpins subsequent
    Congressional action to assist these Native communities in their
    struggle for economic business and community development, self
    determination and self sufficiency.
    B. History of the 8(a) Program and Specific Native 8(a) Provisions
        Beginning in 1942, Congress authorized Federal contracting with
    small businesses and in 1977 created the Small Business Act's Section
    8(a) program for Federal agencies to award contracts through the SBA to
    small, minority-owned businesses. Congress also set a goal of at least
    10 percent of all federal contract awards to minority-owned businesses,
    including those owned by American Indians, Alaska Natives and Native
    Hawaiians. About 15 years later, the Senate Committee on Indian Affairs
    held its first hearings to determine whether Indian preferences in
    government contracting were effective, why so few Native-owned
    enterprises were participating in government contracting, and why a
    ``President's Commission on Indian Reservation Economies'' report had
    found that government contracting and procurement policies,
    regulations, and procedures were significant obstacles to Indian
    reservation economic development. \1\ The National Center presented
    testimony at both hearings.
    ---------------------------------------------------------------------------
        \1\ See Hearing on ``Indian Finance Act and Buy Indian Act,''
    Senate Select Committee on Indian Affairs, 100th Cong. 1st Sess. 21
    (1987); Oversight Hearing on ``Barriers to Indian Participation in
    Government Procurement Contracting,'' Senate Select Committee on Indian
    Affairs, 100th Cong. 2d Sess. 80 (1988).
    ---------------------------------------------------------------------------
        In 1987, our then President, Steven Stallings, testified on Indian
    economic development and government contracting. He recommended
    expansion of the Buy Indian Act's application to more Federal agencies,
    and proposed a Buy Indian Act certification that all Federal
    contracting agencies could accept, including the SBA's contracting
    programs. He urged that more contracts be issued as Buy Indian because
    the ``unchecked discretionary authority'' of the Bureau of Indian
    Affairs (BIA) to award substantial and valuable procurement
    opportunities to non-Native contractors. Despite Buy Indian Act
    requirements and implementing policy directives that ``all purchases or
    contracts are to be made or entered into with qualified Indian
    contractors to the maximum extent practicable,'' Mr. Stallings stated
    that BIA procurements using Buy Indian Act procedures totaled only $10
    million in FY 1971 and grew only to $60 million in FY 1983.
    Unfortunately, lack of Buy Indian Act usage and enforcement persist to
    this day.
        The National Center testimony focused on the difficulties that
    Indian-owned contractors often encountered in seeking certification for
    the SBA's 8(a) program. Of the few firms that had achieved
    certification by 1987, most had received no 8(a) contract awards.
    Stallings noted that the two largest contracts (representing the
    majority of 8(a) award dollars to Indian-owned companies) were awarded
    to tribal-owned companies on the Devil's Lake Sioux and Fort Peck
    Reservations under special arrangements. At that time, most of the 8(a)
    certifications resulted from a Memorandum of Understanding signed by
    SBA and the Department of Defense (DOD) in September 1983. The
    Memorandum committed SBA to ``receive'' 150 fully completed
    applications for 8(a) status and ``target'' 75 of them for
    certification. Stallings reported that SBA did its part, but DOD had
    not provided the contract support promised. He recommended improvements
    to the 8(a) program, more business and procurement technical assistance
    to Indian-owned businesses and tribal governments, and more effective
    training programs.
        At the Senate Committee's later hearing in 1988 on ``Barriers to
    Indian Participation in Government Procurement Contracting,'' Mr.
    Stallings again testified in support of 8(a) program reforms,
    especially to assist tribal-owned companies. He reported slow growth of
    contracting companies owned by Indian tribes and American Indian and
    Alaska Native individuals, lagging far behind other groups: only 14,843
    companies, generating gross receipts of just $646.7 million,
    representing only 1.8 percent of the total number of small businesses,
    and a mere l.4 percent in gross receipts of all minority-owned
    businesses, combined. Comparative figures showed: 248,141 Hispanic-
    owned companies with gross receipts of nearly $15 billion; 339,239
    African American-owned firms with gross receipts of $12.4 billion; and
    240,799 firms owned by Asian American and other minorities with gross
    receipts of nearly $17.3 billion. To reach parity with these other
    groups on a per capita basis, a 4,000 percent increase in Native
    business ownership would be needed.
        Also testifying at this hearing was Ronald Solimon, the National
    Center's immediate past Board Chairman. He then served as CEO of Laguna
    Industries, Inc. and described how his collaboration with Raytheon
    Corporation, SBA and DOD had led to a joint venture between Laguna
    Industries with Raytheon that was awarded a DOD contract. Mr. Solimon
    recommended that the Congress amend Section 8(a) to authorize 8(a)
    companies owned by Tribes or ANCs to joint venture with companies that
    could mentor them along the way.
        The low level of Federal (particularly defense) contract awards to
    Native-owned firms greatly concerned then Committee Chairman Daniel K.
    Inouye. He emphasized that ``directing [the] purchasing power [of the
    Federal Government] to accomplish social goals such as assisting
    disadvantaged members of society is well established'' and acknowledged
    that ``unfortunately, . this public policy goal has not been achieved
    with respect to the participation of businesses owned by [N]ative
    Americans.'' \2\ In keeping with Federal Indian policies, he
    acknowledged that it is Native groups' ``common trust relationship with
    the United States'' that ``allow[s] the Congress to legislate unique
    benefits and treatment for the Native Americans.''
    ---------------------------------------------------------------------------
        \2\ Oversight Hearing on ``Barriers to Indian Participation in
    Government Procurement Contracting,'' Senate Select Committee on Indian
    Affairs, 100th Cong. 2d Sess. 2 (1988). The public policy referenced in
    Chairman Inouye's 1988 statement derives from the U.S. Constitution's
    grant to Congress of the power ``to regulate Commerce . . . with the
    Indian Tribes.'' Article I, Sec. 8, ] 3. This Constitutional provision,
    and its interpretation in subsequent landmark Supreme Court decisions,
    gave rise to the federal government's special political relationship
    with and trust responsibilities to the tribes. See Cherokee Nation v.
    Georgia, 30 U.S. 1 (1831); Worcester v. Georgia, 31 U.S. 515 (1832).
    Thus Congressional enactments bestowing special rights to tribes and
    ANCs are based on this political relationship and trust obligation, not
    on a racial classification designed to remedy past racial
    discrimination.
    ---------------------------------------------------------------------------
        Responding to these recommendations, the Congress passed the
    Business Opportunity Development Reform Act in late 1988 (as well as
    amendments authored by Congressman Rhodes in 1990) that added the
    special 8(a) provisions applicable to companies owned by tribes and
    ANCs. Congress included these special 8(a) provisions recognizing that
    tribes and ANCs, as representative organizations, are responsible for
    generating continuing income and jobs for, and improving the livelihood
    of, hundreds or thousands of tribal members and Native shareholders.
        In parallel action in 1988, the Congress also amended the
    Procurement Technical Assistance Center (PTAC) Program to target
    assistance to Indian Country. It authorized creation of American Indian
    PTACs, or AIPTACs, designed to serve multiple Bureau of Indian Affairs
    areas. A number of these AIPTAC offices now operate within the National
    Center's network of business assistance centers, and help Native-owned
    companies learn how to navigate the complex Federal procurement
    marketplace using the 8(a) program and other procurement and business
    development tools available to them.
    C. Native 8(a) Fulfills Federal Small Business and Indian Policies
        Part of the National Center's function as a procurement technical
    assistance provider is to assist Native American contractor clients to
    be capable bidders, awardees, and performers of Federal contracts. In
    order to meet these objectives, these contractors must be prepared to
    serve the best interests of the Federal agency that will award the
    contract. We believe that a competitive or sole source award to a
    Native 8(a) enterprise will allow the agency to meet its small business
    goals and further Federal Small Business Policy objectives, including:

       Congress' declaration that the development and growth of
            small businesses is a national priority, 15 U.S.C. Sec. 631(a);

       Congress' articulation of the federal government's policy to
            ``aid, counsel, and assist small businesses to ensure that a
            fair proportion'' of federal contracts for goods and services
            are placed with small business, 15 U.S.C. Sec. 631(a);

       The FAR's articulation of such policies by requiring
            executive agencies to provide ``maximum practicable
            opportunities'' to small businesses, including small
            disadvantaged businesses, such as 8(a) contractors, in federal
            acquisitions of goods and services, 48 C.F.R. Sec. 19.201(a),
            see also 15 U.S.C. Sec. 637(d)(1); and

       Congress' establishment of goals for award of federal
            contracts to small businesses and small disadvantaged
            businesses, 15 U.S.C. Sec. 644(d)(1).

        Equally important are the numerous articulations of Federal Indian
    Policy that underpin the Native 8(a) provisions, including:

       Congressional recognition of ``the obligation of the United
            States to respond to the strong expression of the Indian people
            for self-determination by assuring maximum Indian participation
            in the direction of educational as well as other federal
            services to Indian communities so as to render such services
            more responsive to the needs and desires of those
            communities.'' 25 U.S.C. Sec. 450a(a);

       Congress' declaration of its ``commitment to the maintenance
            of the Federal Government's unique and continued relationship,
            and responsibility to, individual Indian tribes and to the
            Indian people as a whole through the establishment of a
            meaningful Indian self-determination policy . . . . In
            accordance with this policy, the United States is committed to
            supporting and assisting Indian tribes in the development of
            strong and stable tribal governments, capable of administering
            quality programs and developing economies of their respective
            communities.'' 25 U.S.C. Sec. 450a(b); and

       Congress' declaration of its policy ``to help develop and
            utilize Indian resources, both physical and human, to a point
            where the Indians will fully exercise responsibility for the
            utilization and management of their own resources and where
            they will enjoy a standard of living from their own productive
            efforts comparable to that enjoyed by non-Indians in
            neighboring communities.'' 25 U.S.C. Sec. 1451.

        As each Federal agency is a component of the Federal Government,
    and therefore is obligated to honor the Federal trust relationship with
    Indian tribes, the determination to award a contract on a sole source
    basis to a Native 8(a) enterprise is in the best interest of the agency
    as part of its trust obligation to promote Indian self-determination.
    IV. Reports Confirm Native 8(a) Enterprise Success
        The results of these Congressional enactments demonstrate real
    progress. The U.S. Census Bureau reported in 1997 that its data (though
    incomplete) showed 197,300 Native American-owned businesses in the
    United States, up 84 percent from 1992, employing 298,700 people and
    generating $34.3 billion in revenues. See 1997 Economic Census: Survey
    of Minority Owned Business Enterprises: Company Statistics Series
    (2001). By 2002, Census estimates were 206,125 Native-owned firms, up 4
    percent from the 1997, but total revenues down 23 percent to $26.3
    billion. See 2002 Survey of Business Owners, U.S. Census Bureau.
        In 2007, the National Center estimated that, of the roughly 360
    tribes in the lower 48 states, several dozen had launched government
    contracting operations and applied for 8(a) program certification. Some
    were very successful, while others struggled to break into the
    difficult federal market. The SBA's list of the top 8(a) firms included
    several owned by ANCs and Tribes, and some had appeared on the Top 25
    8(a) list of information technology firms. See Wakeman, 8(a)s Still a
    hit with ANCs, tribally owned companies, 20 Washington Technology
    (Sept. 26, 2005).
        Numerous other reports, even those that critique elements of the
    Native 8(a) program, confirm that the above-recited Congressional
    initiatives to spur Native economic development have been remarkably
    successful. The first major report issued in April 2006 from the
    Government Accountability Office (GAO) entitled ``Increased Use of
    Alaska Native Corporations' Special 8(a) Provisions Calls for Tailored
    Oversight'' (GAO-06-399). This GAO report provided helpful, balanced
    information on ANC 8(a) contracting as activities undertaken in
    response to the ANCSA that directed ANCs to pursue economic development
    to benefit their Alaska Native shareholders. GAO's report also
    explained how ANCs' participation in the 8(a) program has helped them
    generate revenues to return benefits to their Alaska Native
    shareholders, and how the SBA and federal agencies need to improve
    their oversight of ANC and other 8(a) contracting. The GAO report also
    made some recommendations for improvements, virtually all of which have
    been accomplished with SBA administrative actions and recent
    promulgation of revised 8(a) regulations.
        Also very helpful in presenting a clearer picture of economic
    development progress in Indian Country is the September 2007 report,
    entitled ``Native American Contracting Under Section 8(a) of the Small
    Business Act--Economic, Social and Cultural Impacts,'' by Jonathan B.
    Taylor of Taylor Policy Group, Inc., who is associated with the Harvard
    Project. His analysis confirms what the National Center's network of
    offices has learned anecdotally from working with Native-owned
    businesses across the country: the Native 8(a) provisions have
    succeeded, as Congress intended, in facilitating Native communities'
    diversification, self-determination and economic self-sufficiency. The
    Mentor-Protege programs of the SBA, DOD and other federal agencies also
    have helped in strengthening tribal- and ANC-owned companies.
        These reports, and many other studies, economic impact analyses,
    and other documentation submitted for this Committee's hearing record
    contain substantial additional information on the success of the Native
    8(a) provisions, how they fulfill Congress' intent in enacting them in
    the first instance, and why they should continue.
    V. Remedial Actions Should Improve, Not Cripple, the Native 8(a)
            Program
        It is hard to think of a more worthy contracting program that has
    been more maligned than the Native 8(a) program. Nonetheless, the
    current and past Administrations certainly have recognized the
    program's worth, especially the SBA which directed its limited staff to
    take significant administrative, enforcement and rulemaking actions to
    improve its operation and oversight of the Native 8(a) program. The SBA
    addressed problems it identified, issues raised in GAO and SBA
    Inspector General (IG) reports, Congressional critiques, and concerns
    voiced by tribes, ANCs and their 8(a) program participants about the
    behavior of a few errant 8(a) companies and their non-Native managers
    that unfairly placed the whole Native 8(a) program in a bad light.
    Other SBA actions have focused on enhancements, such as efforts to
    clarify (and thereby improve) the process for tribal enterprises and
    other applicants seeking 8(a) certification. We applaud SBA's
    willingness to conduct many consultations with Indian tribes,
    businesses, and national organizations, such as the National Center,
    the National Congress of American Indians (NCAI), Native American
    Contractors Association (NACA), Alaska Federation of Natives, and
    National 8(a) Association to hear proposals to address the various
    issues raised.
        In addition to Federal consultations and other activities, many
    private sector initiatives have been undertaken to develop proposals,
    implement trainings to build capabilities and broaden procurement
    knowledge, adopt best practices and compliance manuals, institute
    compliance reviews and more trainings. The National Center is proud of
    the role it has played in conducting training sessions, advocating best
    practices and compliance, and fostering mentoring and partnering for
    Native 8(a) enterprises to enhance their capabilities. We have
    conducted special 8(a) panel discussions at our business development
    and procurement assistance conferences focusing on the special Native
    8(a) provisions, the fiduciary responsibilities of the enterprise
    management and the Native board (e.g., tribal councils, tribal business
    development boards, and other Native boards) to their tribal members
    and Native shareholders to operate their 8(a) enterprises in full
    compliance with both the letter and spirit of the laws. The National
    Center also has entered into partnering arrangements with various other
    national organizations to encourage greater collaboration among Native
    and other contractors in bid matching, joint venturing, teaming and
    performing federal contracts.
        The National Center continues to work with NCAI, NACA and the
    National 8(a) Association to develop joint statements and reach out to
    other organizations representing 8(a) and other small contractors to
    work jointly toward the day that all Federal agencies increase, meet
    and even exceed their 23 percent small business contracting goals.
    VI. Specific Recommendations for Additional Improvements
        The National Center recommends the following additional actions,
    many of which this Committee can and should take, to strengthen Native
    American entrepreneurial and economic development outreach, program
    support and oversight:
    A. Enact Native American Business Development Provisions
        After careful deliberations, last year the Senate Committee on
    Indian Affairs developed several very signification proposals to
    enhance business and economic development in Indian Country. Chairman
    Byron Dorgan circulated a comprehensive Discussion Draft, received
    comments, and proffered many of the legislation's provisions as floor
    amendments while the full Senate was considering the Small Business
    Jobs bill. Below are the provisions that the National Center urges the
    Committee to take up again and promptly move forward:
        1. Native American Business Development Program: After several
    years, there is now consensus on provisions (most recently contained in
    last year's S. 3534) to authorize the SBA's Office of Native American
    Affairs (ONAA), headed by an Associate Administrator, and grants for
    Native American Business Centers so that more business management,
    financial and procurement technical assistance can be made available in
    more locations throughout Indian Country. SBA's ONAA must have more
    authority to be able to compete for a fair share of the funds already
    appropriated for SBA's entrepreneurial development program overall.
    Without specific authorization to access those entrepreneurial
    development program funds, the ONAA will continue to be substantially
    disadvantaged in trying to provide adequate outreach and assistance
    across the country with its grossly inadequate budget of only
    $1,250,000 (down from $5,000,000 annually during the Clinton
    Administration).

        2. Surety Bonding: Expansion of existing, but unutilized, surety
    bond guarantee authority for the Secretary of the Interior to issue
    surety bond guarantees either independently or supplemental to a surety
    bond guarantee issued by SBA, up to 100 percent of amounts covered by a
    surety bond issued for eligible construction, renovation, or demolition
    work performed or to be performed by an Indian individual or Indian
    economic enterprise. Often tribal and individual Indian-owned
    construction companies engaging in construction contracting (whether
    under federal, state, local or tribal government contracts, or
    commercial contracts) face significant barriers to securing any surety
    bonding at all. Many insurance/surety companies choose not to work with
    tribal contractors, because they do not understand tribal sovereignty
    and do not want to work with tribal courts. Technical assistance and
    training for contractors seeking surety bonding also would help them
    mitigate risk, build capacity, improve performance, grow and create
    more jobs. The National Center's business assistance centers provide
    this type of guidance now, but more targeted assistance related to
    surety bonding is needed.
        3. Indian Loan Guarantee Program Enhancement: The Indian Finance
    Act authorized the Secretary of the Interior to provide guaranteed
    loans to businesses that are majority-owned by tribes or Indians.
    Implementing regulations require tribal businesses to provide
    collateral worth at least 20 percent of the loan principal. Too
    frequently, this equity requirement inhibits the launch of on-
    reservation enterprises or development projects that employ reservation
    residents. The Dorgan proposal would amend the loan guarantee
    provisions to require the Department of the Interior to establish a
    tiered system, based on the number of on-reservation jobs created, that
    would provide more favorable equity terms and authorize an increase in
    the amount guaranteed up to 100 percent for energy and manufacturing
    businesses. This change would make the Indian loan guarantee program
    far more helpful to the establishment of tribally-owned energy or
    manufacturing businesses, and potential employment of more local
    reservation residents.
        4. Buy Indian Act Amendments: Enacted in 1910, the Buy Indian Act
    obliquely states simply that ``so far as may be practicable Indian
    labor shall be employed, and purchases of the products of Indian
    industry may be made in open market in the discretion of the Secretary
    of the Interior.'' (25 U.S.C. 47). The Dorgan Discussion Draft included
    provisions to clarify and strengthen Buy Indian procurement procedures
    to apply when fulfilling agency requirements will make use of funds
    appropriated for the benefit of Indians. Such procedures would foster
    increased award of contracts to Indian economic enterprises by
    procurement personnel of the Department of the Interior, Indian Health
    Service, and other agencies receiving funds appropriated for the
    benefit of Indians. Also proposed was creation of a Data Center for the
    collection of information on the experience, capabilities and
    eligibility of Indian economic enterprises, and reporting requirements
    on agency use of the Buy Indian Act and information collected by the
    Data Center.
    B. Other Actions the Committee Can Take
        We urge the Committee members to share what they have learned with
    their colleagues on other committees, and explain why Congress enacted
    the special Native 8(a) contracting provisions. Equally important is
    stressing how the Native 8(a) provisions are fulfilling their promise
    and purpose by: (1) upholding the Federal trust responsibility; and (2)
    serving the Federal agencies' best interests by meeting requirements at
    costs that are fair and reasonable.
        This Committee also can play a major role in urging the various
    Federal contracting agencies over which it has direct jurisdiction to
    meet and exceed their individual agency's small and minority business
    contracting and subcontracting goals, using Buy Indian Act contracting
    authority to the fullest extent possible. Just as witnesses at the
    Committee's 1987 and 1988 hearings emphasized, the Federal departments
    and agencies that disburse funds ``for the benefit of Indians'' (e.g.,
    Bureau of Indian Affairs, other Interior agencies, the Indian Health
    Service, the Army Corps of Engineers, the Departments of
    Transportation, Housing, Agriculture, etc.) should be using the Buy
    Indian Act authority to contract with Native-owned businesses, small or
    large. To ensure that more ``teeth'' are put into Buy Indian Act
    implementation, the Committee should request briefings by the agencies
    and conduct oversight hearings to receive status reports from these
    contracting agencies on their past performance in contracting with
    Native contractors of all types, and their plans for increasing that
    contracting support. Witnesses from Indian country also should be
    invited to report on their efforts, successful and unsuccessful, to
    convince these agencies to award contracts and other arrangements (such
    as park concessions) qualified Native contractors.
    C. Ensure Federal Agencies Meet Small Business Contracting Goals
        Tribes, ANCs, NHOs, their Native 8(a) enterprises, and all the
    national organizations representing 8(a) and other contractors must
    rally together to focus much more attention on the question of what can
    be done to improve the record of all Federal agencies in meeting both
    their prime and subcontracting goals for awards to small and minority
    businesses. With the significant growth in the Federal market, there is
    no excuse for the continual decline in the percentage of contract
    awards to small businesses. The following joint policy positions best
    summarize actions that should be taken:

       Fulfill Congressional intent to further the Indian Self-
            Determination policy set forth in 25 U.S.C. 450a by preserving
            the provisions that promote the competitive viability of 8(a)
            companies owned by Indian tribes, Alaska Native regional or
            village corporations, and Native Hawaiian Organizations that
            help support their Native communities by developing more self-
            sufficient Native economies;

       Support limits on bundling and consolidation of contracts,
            break up such contracts for award to small businesses, or
            employ procurement procedures to enable teams of Native-owned
            and other small businesses to pursue bundled or consolidated
            contracts;

       Spur the SBA on in its efforts to negotiate with individual
            contracting agencies to set and meet small and minority
            business contracting goals higher than their current levels,
            and to be more accountable for their past performance and
            future plans to make more awards in each subcategory of small
            business contracting;

       Increase the Government-wide contracting goals for awards to
            small and minority businesses (previous bills have proposed not
            less than 30 percent of total contract awards to small
            business, and not less than 8 percent of total contract and
            subcontract awards to small disadvantaged business and 8(a)
            concerns); and

       Encourage small businesses with larger contracts to
            implement subcontracting plans to develop stronger business
            alliances among all types of small business contractors,
            including 8(a) and other small disadvantaged concerns, HUBZone,
            service disabled veteran-owned, women-owned and other small
            businesses.

    V. Conclusion
        The National Center thanks the Committee in advance for considering
    our comments and recommendations.
                                     ______

       Prepared Statement of Christine E. Klein, A.A.E., Executive Vice
             President/Chief Operating Officer, Calista Corporation
        Please see the below bullets and attached fact sheet on a few of
    the benefits that the 8a program has helped enable Calista corporation
    to provide to its Alaska native shareholders through some of the
    contracts received:

       Shareholders: Calista had 13,300 original Shareholders
            enroll in 1971; their Descendants number over 20,000, making
            Calista one of the largest Alaska Native Corporations (ANCs)
            based on population. The Calista area of Alaska is larger than
            the state of New York, has little if any infrastructure, and is
            remote and now surrounded by federal lands, wilderness,
            preserves, and parklands which isolates the region and makes it
            very difficult to access and develop economically.

       Dividends: the Board of Directors established an
            ``Akilista'' Fund to generate a dividend income stream for
            Shareholders in perpetuity. Calista has provided dividends to
            Shareholders for the past three years after it recouped its
            capitalized losses and became profitable through business
            revenues, and the Akilista Fund met its criteria for making
            distributions. Over $12.3 million in dividends and
            distributions have been made since 2008.

       Elders: Original Shareholders who reach the age of 65 have
            received special Shareholder benefit check distribution for the
            past three years to help them with the high cost of heating
            fuel and living expenses.

       Education: A Scholarship Fund has been providing assistance
            for 16 years providing post secondary, graduate, certification,
            and vocational education opportunities through scholarships.
            Since 1994 over $2.2 million has been awarded to over 1,300
            Shareholders and Descendants.

       Internships: Calista provides paid summer internships to
            college students in good standing, helping them acquire hands
            on critical job skills. Students receive work experience, pay,
            and a living stipend, totaling more than $78,000 in 2010 alone.

       Employment: Calista maintains an active Shareholder and
            Descendant resume and talent bank database for job recruiting
            and its companies all have and utilize Shareholder hire
            preference policies for employment opportunities.

       Infrastructure Studies, Assessments, and Plans: Energy
            assessments of hydroelectric, geothermal, oil/natural gas and
            diesel, as well as transportation infrastructure have been
            conducted or led by Calista. These efforts are to try solving
            difficulties associated with the extremely high living costs
            due to lack of any basic infrastructure in the region.

       Apprenticeships and Training: A highly successful certified
            drillers training program was established by Calista with the
            State of Alaska through apprenticeships, with their employment
            hours going towards shareholder journeymen certifications.

       Jobs: Calista has consistently had high Shareholder hire
            rates for over 10 years. More than 30 percent of Calista and
            subsidiary employees in Alaska are Alaska Native. Subsidiary
            company Chiulista Services has a 92 percent Shareholder hire
            and retention on its Donlin Creek mine exploration contracts
            within the Region and is a model program of success. The Brice
            Incorporated construction company owned by Calista is also
            known for its highly successful local hire numbers and training
            on remote civil construction projects and long history of
            building airports and roads throughout the Calista Region.

        Calista supports the SBA 8a program and ability to do sole source
    contracting with qualified Alaska Native Corporations' (ANC's). The
    ANC's are unlike other companies in that they are owned by whole
    communities of disadvantaged native peoples unlike other companies
    owned by a few members who benefit from the profits. Limiting the ANC
    8a program contract caps to the same limits of individual small
    business cap limits would be devastating to the steady positive
    progress finally being made in some of the poorest areas of the
    country.
        If you have any questions at all, please feel free to call us.
    Thank you for the opportunity to provide this information.
        Attachment

      Response to Written Questions Submitted by Hon. Daniel K. Akaka to
                                 Julie E. Kitka