Joaqlin Estus
ICT
ANCHORAGE, Alaska — Alaska Native corporations are worried as the U.S. Small Business Administration is talking about changes to a program that has brought billions in revenues to disadvantaged companies, which make up just over 10 percent of all small business contracts.
Under SBA’s 8(a) program, socially and economically disadvantaged companies are given an edge in getting federal contracts over other small businesses.
The program has been a boon to many Alaska Native corporations, tribes, and Native Hawaiian organizations, as well as Black, Hispanic, and Asian companies. Under the Biden administration, contracts with small disadvantaged businesses rose from 10.3 percent in 2018 to 11.4 percent of small business deals in fiscal year 2022.
Now, mentor-protégé joint ventures, which are designed to help smaller, newer businesses get better at what they do, are being scrutinized.
Director Sam Le of the SBA’s Office of Policy Planning and Liaison Office of Government Contracting and Business Development, told an audience of about three dozen people at a tribal consultation in Anchorage on Aug. 27, that the number of federal contracts that went to mentor-protégé joint ventures more than doubled in recent years.
“We found for the last full fiscal year, 2.73 percent of total contracting dollars went to joint ventures. It’s about $17 billion. That’s, in my view, not a huge amount, but it is up substantially from about five years before, which was 1.3 percent. So it is growing substantially,” Le said.
In a July 22 announcement about a schedule for tribal consultations, SBA said, “SBA is requesting comments on the perception that mentor-protégé joint ventures are winning an inordinate number of orders issued under small business multiple award contracts and seeks suggestions on how to incentivize a more equitable marketplace for individual small businesses who compete” for those contracts.
SBA Associate General Counsel for Procurement Law John W. Klein asked at the consultation, “Does it make sense to allow a joint venture to perform a contract for 10 or 15 years in that context? Is it really a joint venture or is it really an ongoing business entity?”
He said SBA is considering whether to propose changing the rules so that mentor-protégé contracts are not eligible for multiple awards, and can qualify for the program only for five years.
Harder to bid?
Several Alaska Native corporations shared preliminary comments saying don’t make it harder for us to bid on these federal contracts. SBA 8(a) revenues are improving economic and social conditions for their shareholders, they said.
Corina Ewan, who is Ahtna Athabascan, is office manager for the Ahtna Alaska Native regional corporation. She told SBA officials, “The successful mentor protégé joint venture has one of the highest potentials for helping Ahtna produce larger dividends to shareholders like me and in the long term builds a stronger company for future dividends.
“(You’re) making it harder to participate in bids and giving mentors less incentive to give us the assistance we currently enjoy being a shareholder in Ahtna. Our moose are scarce and our salmon numbers are lowering and grocery prices and gas prices are not affordable. Living in the Bush of Alaska is a hard way of life, but that is who we are.”
Ewan continued, “it is hard to describe in words what your programs truly mean to us and for our children’s future. Because of the program SBA supports and manages, I have hope that hard work will make a difference for future generations in my region.”
Amber Henderson, who is Tlingit, is strategic initiatives director for HunaTek, an SBA 8(a) subsidiary of a village corporation. She said mentors are essential to the success of the partnerships. “(The changes being discussed) would be removing the carrots so to speak from these partners who play a crucial role in mentoring and providing valuable resources to smaller ANC (Alaska Native corporation) firms.”
‘Please don’t throw the baby out with the bathwater’
Jana Turvey, of the Sun’aq Tribe of Kodiak, is the president and CEO of Leisnoi, Incorporated. She explained that the village corporation was created under the 1971 Alaska Native Claims Settlement Act but then was subject to litigation for 33 years. Well into the 1990s, ”Leisnoi was in boxes in a director’s garage because we had no resources to even communicate with our shareholders.” She said Leisnoi entered the arena of federal contracting just as COVID-19 hit, another setback for the village corporation.
Still, through hard work and persistence she said, “I’m very, very proud to report that at the end of 2024… we’re projected to hit just north of 40 million in revenue at the end of this year. I’m super proud of that.”
She gives a lot of credit to the mentor company in the partnership. She said if SBA were to create a dictionary, “one of my partners would be your definition (of a mentor). They’ve been that great and they continue to fulfill that role as a member of the joint venture program.”
She said thanks to the mentor-protégé partnership, ”Leisnoi is now able to pay dividends to its shareholders. And, “just this year we started an education program where we’re giving scholarships to our shareholders. Just this year we’ve paid out our first death benefits. …But this is the program that has helped Leisnoi get to where it is,” Turvey said.
“I want you to understand the importance of it as you are evaluating whether or not this program works and how to make it better and make changes to it.” The audience applauded after Turvey said, “please don’t throw the baby out with the bathwater.”
Connie Downey, who is Dena’ina Athabascan, is the chief administrative officer for Tyonek Native Corporation (TNC). She said the mentor-protege program has “allowed the corporation to provide significant benefits back to the TNC shareholders as well as the Native community in Tyonek. During fiscal year 2023 Tyonek Native Corporation provided over $14.2 million in benefits back to its shareholders and the Native community.”
She said the Tyonek village corporation formed the Tahbone Foundation to manage the dispensation of its community and cultural donations. The foundation’s programs range from language revival, to medical expense reimbursements, and travel expenses for elders, Downey said. They distribute scholarships for higher education and provide direct funding to the local school, she said. “The corporation also directly funds shareholder health and social outreach initiatives, including the shareholder life insurance and bereavement programs,” Downey said.
The village corporation has also joined with the tribe and the U.S. Department of Agriculture to form a conservation district. “Since formation, TTCD has gained attention at the state and national level for work in the Tyonek area to support assistance and sustainability through conservation of natural resources.” TNC also, Downey said, provides the non-federal match essential to federal grants.
Its other projects range from a basketball court and ice rink to heavy equipment training. Elder housing and alternative energy are on the horizon for the corporation. “TNCs participation in the SBA 8(a) and mentor-protégé programs have resulted in tangible, meaningful benefits to the shareholders. The corporation’s ability to continue to improve the lives of its shareholders depends on the success of these programs,” Downey said.
What’s next?
SBA is only considering making changes to the 8(a) program. If it takes that direction, the next steps would be to develop proposed rules, which would be sent out for public review and comment.
The SBA 8(a) program came under a more fundamental challenge last year in a court case by a White woman who said her business lost out on federal contracts because preference was given to disadvantaged groups. The court ruled in her favor, following the precedent set by the U.S. Supreme Court when it ruled it is unconstitutional to give preference based on race. The U.S. Justice Department has not appealed the case. Instead of assuming disadvantage based on one being part of a disadvantaged group, the SBA now requires applicants to submit essays proving their disadvantage.
As the Washington Post reports, “during the Biden administration, conservative legal groups have filed more than a dozen lawsuits challenging racial preferences in federal programs. Many of the challenges from conservatives have succeeded, while the outcomes of others are pending.”
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