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

                                                         S. Hrg. 112-33




                               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

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


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


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 
    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



                        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.

                    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 
    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 
    Vice Chair Barrasso, would you like to comment?

                   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 
    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?

                    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 
    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 
    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 
    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?

                   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.

                    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 
    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 
    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 
    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.


    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 
    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 
    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 
    \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 
    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 
    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 
    Mr. McClintock, will you please proceed with your 


    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) 
    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 
    [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 
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) 
    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) 
    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.
    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 
    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 
    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 
    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 
    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 
    Mr. Jordan. No. ANCs are statutorily deemed economically 
    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 
    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 
    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 
    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 
    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.


    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 
    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
    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 
    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 
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 

    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 
    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 
    \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 
    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.


    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 
    [The prepared statement of Ms. Kitka follows:]

 Prepared Statement of Julie E. Kitka, President, Alaska Federation of 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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) 
    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) 
    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. 

    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?


    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 
    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 
    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 
    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.


    Mr. Morgan. Thank you for the opportunity, Chairman and 
    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.
    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 
    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 
    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.
    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 
    Mr. Hall, will you please proceed with your testimony?

                       ELECTRONICS, INC.

    Mr. Hall. Thank you, Chairman and other Members of the 
    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 
    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 
    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 
    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 
    [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 
    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 
    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 
    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 
    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 
    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 
    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 
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 
    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-
    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'' 
    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 
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 
    \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

    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 
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 
    \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 
    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 
    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 
    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 
    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 

   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 

   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 

    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 
    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 
    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 
    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 
    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.
    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)'' 
    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 
    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) 
    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 

    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 

   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 

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 
    If you have any questions at all, please feel free to call us. 
Thank you for the opportunity to provide this information.

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