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US: Indian Tribes Outsource Defense Contracts after Winning Them with Preferential Rules

Procurement rules allow native American-owned company, Alutiiq, to provide favored entree to government contracts and then outsource to British-owned multinational, Wackenhut. Other Alaska native companies' partner in these deals with defense giants Halliburton, Lockheed Martin and Fluor.

by Jay Price and Joseph Neff The News & Observer
November 28th, 2004

FORT BRAGG - After the 9/11 attacks, the U.S. military was in a hurry and not just to hunt terrorists. The order went out to increase security at Fort Bragg and other bases by whatever means could be found. 

That's how the safety of some of the country's most elite fighting forces became the responsibility of 650 Alutiiqs, natives of Alaska's rugged southern islands.

Fort Bragg and 15 other military bases across the country now have outsourced their security to Alutiiq Security and Technology, owned by members of the tribe.

As a native-owned company, Alutiiq (a-LOO-tik) was qualified to win special no-bid contracts because of rules crafted by Alaska's powerful U.S. Sen. Ted Stevens. But to fulfill the terms, Alutiiq needed a large subcontractor: Wackenhut, among the world's largest security companies.

With Alaskans providing the entree and the British-owned multinational providing the expertise, the Alutiiq-Wackenhut partnership won federal contracts worth up to $500 million to guard military complexes, including West Point and the U.S. Army War College.

"Alutiiq contacted us, we got together, and they said, 'We want to do this; we need you to come and help us with it,' " said Jim Long, chief executive of Wackenhut Services. "We split it up 51-49."

Critics call the no-bid contracts privatization run amok. They say they're filled with loopholes, some that make it impossible to tell whether the government is saving money or getting fleeced, and others that let giant defense contractors win back-door deals under rules designed for small, minority-owned companies.

Stevens defends the deals as vital help for an impoverished population, and some legal scholars say that Congress has no choice but to treat native Americans differently than other minorities.

Either way, such contracts are becoming common, and they aren't confined to guard duty. An official at one Alaskan company said last year that Alaska native companies had landed about $12 billion in federal contracts. Much of that was awarded in recent years and without competitive bids.

The Alaska native companies' partners in these deals include defense giants Halliburton, Lockheed Martin and Fluor, an international construction company.

A company called Chugach Alaska Corp., owned by 1,900 Alaska natives, was ranked ahead of IBM, Motorola, Goodrich, Goodyear and AT&T in total value of defense contracts in 2003.

Chugach also has a presence in North Carolina: It maintains heating and cooling systems at Camp Lejeune Marine Base near Jacksonville and has construction contracts at Seymour Johnson Air Force Base in Goldsboro.

Pushing to privatize 
The deals are part of a drive to shift government work to the private sector, a push that's especially strong in the Department of Defense. Pentagon officials hope to shift 320,000 jobs to private companies. As the wars in Iraq and Afghanistan strain the military, officials are particularly eager to free soldiers from mundane chores.

At Fort Bragg, home to the 82nd Airborne Division, the top-secret Delta Force and the Green Berets, Alutiiq-Wackenhut employs more than 250 guards. That frees at least that many soldiers to fight, Lt. Col. Susan Danielsen said.

The base, about 50 miles south of Raleigh, has been pleased with the company's performance, said Danielsen, who, as the base's provost marshal, is equivalent to police chief.

"They're performing wonderfully," she said. "We've gotten great feedback on them."

No Alutiiqs work on the Bragg contract, though one native was there briefly, said Steve Kressin, who manages the Bragg contract for Alutiiq-Wackenhut. Instead, workers are hired locally.

One reason things are going well might be that new hires know the turf: Many are former Bragg soldiers, Kressin said.

Alaska companies born 
In 1971, Congress created 13 Alaska native regional corporations and almost 200 village corporations as part of a settlement of land claims that were preventing construction of a trans-Alaska oil pipeline. In the settlement, the native companies divided nearly $1 billion and 44 million acres.

For years, these corporations tried to develop resources such as logging, fishing and mining, with mixed results.

Then Stevens and other lawmakers started tinkering.

By 2000, they had given Native American-owned companies several breaks. For one, the companies became eligible for no-bid contracts through the U.S. Small Business Administration's program for small minority-owned companies.

Then the native-owned companies gained the unique ability to win these contracts without the government first performing elaborate cost-benefit studies. This circumvented a mechanism that was supposed to help ensure that privatizing would save money.

Other SBA minority-owned companies are limited to $3 million for no-bid service contracts. Native-owned companies aren't.

And, unlike the other companies, they don't have to be run by members of their minority.

These preferences positioned the native-owned companies to benefit after the Sept. 11, 2001, terrorist attacks, when the Pentagon ordered more security at all bases. That duty fell to National Guard and Reserve troops. But as they neared the end of a one-year call-up, it became clear that the Army couldn't spare active-duty troops to replace them.

"The contracting process could have taken six to eight months, and we didn't have that luxury," said Jerome Kelly, a spokesman for the Army department that oversees bases. "It wasn't an issue of saving money or spending money, it was an object of getting a crucial job done."

So, in 2003, security contracts for 11 bases were awarded without bids. All went either to Alutiiq-Wackenhut or to a partnership between another Alaska native-owned company and a major security contractor, Vance International.

In a second phase, 11 more base contracts were competitively bid, Kelly said. These were won by traditional security companies.

This year, the Army awarded a third round of contracts, this time to guard 30 facilities, Kelly said. These were given without bids to the two Alaska native-owned companies and their big-league subcontractors.

Asked why there was time to bid the second round of contracts but not the third, Kelly said that Congress hadn't made the money for the third phase available in time to start the long bidding process.

Companies such as Wackenhut can guard the bases without help, critics say. But neither Wackenhut nor Alutiiq could get the no-bid contract without the other. Wackenhut isn't entitled to such no-bid deals. Alutiiq, meanwhile, had little experience in security work and probably couldn't have gained the Pentagon's confidence without an experienced partner, Wackenhut's Jim Long said.

He acknowledged that Alutiiq would have been unlikely to win the contract without Wackenhut.

"Any company starting up is going to have trouble convincing a customer that they can do the work," Long said. "They bring on a partner, and they use that partner's experience to convince the customer. ...

"There is obviously some reason for them to ask us to work for them, and the Defense Department has the expectation that they do that."

Alutiiq received $177 million in government receipts from 2001 to 2003, according to a News & Observer analysis of federal records. Virtually all 99 percent came from contracts that were not competitively bid. For Chugach, 94 percent of the $1.4 billion it took in from 1999 thru 2003 came from contracts that weren't competitively bid.

'It's not complicated' 
Unions of federal employees have been fighting privatization and view the no-bid contracts as troubling.

"It's not complicated what they're doing here," said Anne M. Wagner, a lawyer with the American Federation of Government Employees. "They hook up with a corporation like Wackenhut, which in turn runs the operation."

On many contracts, the companies hire federal employees who already had been doing the work only for less pay and benefits, Wagner said. The federation sued the government to block one of the no-bid contracts but lost last year when the U.S. Supreme Court refused to hear the case.

The native companies say the money that does flow to them is put to good use. The profit, said Sarah Lukin, a spokeswoman for Alutiiq, doesn't go just to the company's 650 shareholders but also to support a way of life in the remote and impoverished native villages. Some goes for social programs, community centers and scholarships for shareholders and their descendants.

Poverty rates in native communities are often more than 40 percent, and many residents must live off the land.

Some are able only to work seasonal jobs, Lukin said, and if they want to stay in the community, the annual dividend may be the only thing that makes that possible.

Advocates in Congress 
The no-bid deals are typical of the work of the Alaskan congressional delegation, said Ronald Utt, an expert on government privatization at the conservative Heritage Foundation in Washington.

For decades, senior Alaskan lawmakers such as Stevens, U.S. Rep. Don Young, who is chairman of the powerful House Transportation and Infrastructure Committee, and former Senate veteran Frank Murkowski, now Alaska's governor, have been forceful advocates.

"They've used their positions to essentially bend every federal program to be vastly more beneficial to Alaska than any other state in the union," Utt said.

Alaska now has the highest proportion of federal workers of any state and reaps the highest percentage of pork-barrel spending, Utt said. The state received $12,244 per resident in overall federal spending last year, the highest of any state and nearly double the average. North Carolina, at $6,157, ranked 41st.

A spokeswoman for Stevens said that the contracts with native Alaska companies save taxpayers money even when they're not bid and even when they don't require spending studies. That's partly because of the delays and cost of a typical contracting process, Courtney Boone said.

"By the time the contract is let, it may cost $19 million," she said, "when if you had just gone out and hired someone you know can do the work well, you could have gotten it done for $12 million."

Stevens makes no apologies for advocating on behalf of native companies, she said. "They're Alaskans, and we support Alaska," Boone said. "That's what we do."





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