Drawing the Line – Native Firms’ Sole-Source Contract Faces Challenges

By Paula Dobbyn, Anchorage Daily News
July 29, 2001

(Chenega Corp. and Arctic Slope Regional Corp. are preparing to take over the largest government contract ever awarded to an Alaska Native corporation.

In mid-September, the National Imagery and Mapping Agency is expected to sign a $2 billion sole-source contract with a joint venture of the Anchorage and Barrow-based companies. The agency provides photographic intelligence to the U.S. military.

While the Native firms consider the contract a financial touchdown, organized labor and some congressional Democrats have criticized the deal as race-based and unconstitutional. A challenge of the federal law that allows sole-source contracting with Native companies is working its way through the courts. Federal officials, including Sen. Ted Stevens, R-Alaska, stand by the no-bid process as legal and appropriate. Stevens has said it corrects an imbalance and helps a minority group that has had few job opportunities.

“It levels the playing field,” said Charlie Brower, Arctic Slope’s vice president for marketing. “We have eight communities on the North Slope that don’t have roads in or out. We have very little economy in these places.”

Chuck Totemoff, Chenega’s chief executive, agrees.

“Congress has a responsibility to Alaska Natives. These contracts, the way they’re negotiated and awarded, have their roots based in the Indian Commerce Clause of the U.S. Constitution. It’s not race-based. It’s treaty-based,” he said.

The American Federation of Government Employees is orchestrating labor’s attacks on the deal, saying the absence of competitive bidding cheats taxpayers and hurts federal workers. While Congress must look out for Natives based on history and law, defense contracting falls beyond the scope, the union contends.

“There’s a trust responsibility to provide services that are required through treaties. But other than that, there’s no requirement for government to build Native-owned businesses or give them a special break,” said Steven Clapp, an Anchorage-based national representative for the federation. With 600,000 members, it’s the largest union for government workers, and it is concerned the contract will shift federal jobs to the private sector.

The mapping agency can award the contract directly to Chenega and Arctic Slope, and bypass competitive bidding, based on a clause in the Defense Department’s budget that allows sole-sourcing to companies with 51 percent Native ownership.

“It may be legal but it’s not right,” said David Owens, president of AFGE Local 1101, which represents more than 70 federal employees at Elmendorf Air Force Base in Anchorage.

Government downsizing accelerated during the Clinton presidency but has really taken off under Bush, Owens said, without enough evidence that it actually saves money or produces better goods and services.

“The American public is being told that by contracting out is saving them money, but the truth is, it’s not,” Owens said, adding he has the paperwork to prove it. “Bush wants to contract out 50 percent of federal employees in four years. That’s 5,000 jobs in Alaska. I support Alaska issues but not when it’s based on lies.”

The union estimates 600 government workers will lose their jobs at NIMA when the Native joint venture takes over. Totemoff denies that, saying everyone will be kept on and that savings will come from attrition, early retirement, lower overhead and sharper management.

“We’re going to retain the people that are working there,” he said.

It makes sense to keep people who know how to perform the highly specialized work of the mapping agency and who already have high-level security clearances, Brower said. As far as salary and benefits, Brower doesn’t expect there will be much difference between what the joint venture will offer and what the federal employees receive now.

The union is lobbying for passage of legislation that would require federal agencies to track the costs and savings from contracting out government work. The bill before Congress would also require public-private competition before government jobs could be outsourced. It’s also waging a court fight against the government over defense contracts it awarded Chugach Alaska Corp. to maintain two military bases. A hearing is set for December.

Under the 15-year defense contract, the Alaska Native joint venture, called NJVC, would manage the mapping agency’s information technology and provide library and other services. The work would take place in Bethesda, Md., and Arnold, Mo., near St. Louis.

The acronym NJVC originally stood for NIMA Joint Venture Corp., Totemoff said. The firm later learned it couldn’t use NIMA in its title for legal reasons so now NJVC doesn’t mean anything other than NJVC, said Dave Burpee, a spokesman for the mapping agency.

The agency, headquartered in Bethesda near Washington, decided to pursue a deal with Chenega and Arctic Slope because of the companies’ track records with other government contracts, said Bert Beaulieu, senior program manager.

“We got nothing but excellent feedback from other agencies and military units that already had contracts with them,” Beaulieu said.

After more than a decade in the timber business, Chenega branched out into oil spill response, tourism and government contracting, starting in 1994, a company chronology indicates. Its subsidiary, Chenega Technology Services, maintains more than 30 contracts with government agencies including the Federal Aviation Administration, the Internal Revenue Service, the military, and the National Science Foundation. The subsidiary had revenue of $8 million last year and projects $18 million this year.

Arctic Slope has three subsidiaries focused on government contracts, its annual report says. It has handled government contracts since the mid-1980s and last year was awarded a $600 million job by the Environmental Protection Agency to provide computer network support, Brower said. ASRC Communications, a subsidiary, has 100 employees and averaged revenue of $10.6 million for each of the past three years, according to information provided by the joint venture with Chenega.

Several other Native corporations including Ahtna and Chugach Alaska are heavily invested with government projects as well, particularly in military base management.

Some members of Congress have questioned whether sole-sourcing a $2 billion government contract is appropriate. The Defense Department responded with a letter last month indicating that the process complied with the law.

The mapping agency decided last November that it would sole-source the contract to an Alaska Native corporation. Agency officials discussed their plans with Stevens on Dec. 11 and within a week $2 million appeared in an omnibus funding bill, said agency officials Beaulieu and Gene Smalling, director of procurement and contracts. The Native joint venture has been using the money to prepare a contract proposal, they said.

The proposal is expected to be submitted in August, and the contract should be awarded a few weeks later.

Chenega shareholder and board member Paul T. Selanoff said if the corporation ends up with the $2 billion contract, it’ll be an enormous win for the company and its 119 shareholders.

“Words can’t describe it,” Selanoff said from his home in Valdez, where he works as an oil spill response foreman. “It’s a chance to prove to the bigger corporations that we can do the job.”

Brower said the profits and dividends the work would bring to Arctic Slope’s 8,000 shareholders would be substantial. The corporation has a duty to serve its people, most of whom live in one of the world’s harshest and most isolated environments.

“The best way to do it is through dividends,” he said.

The government’s ability to steer no-bid contracts to Native companies is a matter of justice, others say.

“These rights were bestowed on us,” said Michael Vigil, tribal administrator for the Chenega IRA Council. “We’re just going after what was rightfully given to us years and years ago.”

Senator Ted Stevens will urge the U.S. Supreme Court to hear Alaska’s “Indian country” appeal. The senator calls it one of the key legal issues facing Alaska since statehood. The senator and state officials contend that “Indian country” does not exist in Alaska, and was never contemplated by Alaskans. He helped craft the Alaska Statehood Act and was a senator when the Alaska Native Claims Settlement Act of 1971 was passed. According to Stevens, the ANCSA explicitly rejected Indian country status. He says ANCSA “was a break with old, failed Indian policies of the past.” Native groups signed away self-government authority when they accepted ANSCA, which extinguished Native claims in exchange for almost $1 billion and 44 million acres of land. The case being appealed stems from a decision involving the village of Venetie, which successfully sued to exercise local game management and taxing authority. Alaska Native leaders say the state’s position on the issue undercuts sovereignty efforts. Tribal leaders in other states have also cited the case as key to their status as “sovereign nations”.

On February 25, 1998, the United States Supreme Court issued a unanimous decision which held that land purchased by the Native Village of Venetie is no longer “Indian country” and the tribe cannot impose taxes on contractors doing business in the Village. (See the November 1997 issue of “CERA NEWS”.) Tribal leaders reacted to the decision with concerns that tribal sovereignty is being further eroded. Gov. Tony Knowles, in an effort to heal divisiveness caused by the lawsuit, announced the formation of a commission to examine Native self-government issues in Alaska.