[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
NATIVE 8(A) CONTRACTING: EMERGING ISSUES
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HEARING
BEFORE THE
SUBCOMMITTEE ON INVESTIGATIONS, OVERSIGHT, AND REGULATIONS
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
OCTOBER 22, 2019
__________
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 116-053
Available via the GPO Website: www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
38-060 WASHINGTON : 2020
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELAZQUEZ, New York, Chairwoman
ABBY FINKENAUER, Iowa
JARED GOLDEN, Maine
ANDY KIM, New Jersey
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
JUDY CHU, California
MARC VEASEY, Texas
DWIGHT EVANS, Pennsylvania
BRAD SCHNEIDER, Illinois
ADRIANO ESPAILLAT, New York
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANGIE CRAIG, Minnesota
STEVE CHABOT, Ohio, Ranking Member
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
TROY BALDERSON, Ohio
KEVIN HERN, Oklahoma
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
TIM BURCHETT, Tennessee
ROSS SPANO, Florida
JOHN JOYCE, Pennsylvania
DAN BISHOP, North Carolina
Melissa Jung, Majority Staff Director
Justin Pelletier, Majority Deputy Staff Director and Chief Counsel
Kevin Fitzpatrick, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Judy Chu.................................................... 1
Hon. Ross Spano.................................................. 3
WITNESSES
Mr. Seto Bagdoyan, Director, Forensic Audits and Investigative
Service, United States Government Accountability Office,
Washington, DC................................................. 5
Mr. Joe Valandra, Executive Director, Native American Contractors
Association, Washington, DC.................................... 17
Ms. Annette Hamilton, Chief Operating Officer, Ho-Chunk Inc.,
Winnebago, NE.................................................. 19
Mr. Edwin A. (Skip) Vincent, Chairman and Founder, The Hawaii
Pacific Foundation, Honolulu, HI, testifying in his role as
board member of the Native Hawaiian Organization Association
(NHOA)......................................................... 21
Ms. Jana Turvey, President and CEO, Leisnoi, Anchorage, AK,
testifying on behalf of the Alaska Native Village Corporation
Association.................................................... 23
Ms. Christine V. Williams, Managing Partner, Outlook Law LLC,
Anchorage, AK.................................................. 24
APPENDIX
Prepared Statements:
Mr. Seto Bagdoyan, Director, Forensic Audits and
Investigative Service, United States Government
Accountability Office, Washington, DC...................... 35
Mr. Joe Valandra, Executive Director, Native American
Contractors Association, Washington, DC.................... 52
Ms. Annette Hamilton, Chief Operating Officer, Ho-Chunk Inc.,
Winnebago, NE.............................................. 63
Mr. Edwin A. (Skip) Vincent, Chairman and Founder, The Hawaii
Pacific Foundation, Honolulu, HI, testifying in his role as
board member of the Native Hawaiian Organization
Association (NHOA)......................................... 72
Ms. Jana Turvey, President and CEO, Leisnoi, Anchorage, AK,
testifying on behalf of the Alaska Native Village
Corporation Association.................................... 86
Ms. Christine V. Williams, Managing Partner, Outlook Law LLC,
Anchorage, AK.............................................. 94
Questions and Answers for the Record:
Questions from Hon. Don Young to Mr. Joe Valandra and Answers
from Mr. Joe Valandra...................................... 106
Questions from Hon. Don Young to Ms. Annette Hamilton and
Answers from Ms. Annette Hamilton.......................... 122
Questions from Hon. Don Young to Mr. Edwin A. (Skip) Vincent
and Answers from Mr. Edwin A. (Skip) Vincent............... 126
Questions from Hon. Don Young to Ms. Jana Turvey and Answers
from Ms. Jana Turvey....................................... 169
Questions from Hon. Don Young to Ms. Christine V. Williams
and Answers from Ms. Christine V. Williams................. 187
Additional Material for the Record:
2018 Economic Impact Study of Ho-Chunk Incorporated.......... 193
2019 Economic Contributions of Ho-Chunk, Inc. to the
Winnebago Indian Reservation, Iowa, Nebraska, South Dakota
and the U.S................................................ 206
Statement of Katherine Carlton, President, Chugach Education
Services, Inc.............................................. 262
Statement of Tiffany Flowers, Assistant to the President,
Chugach Government Solutions, LLC.......................... 266
Statement of Carl H. Marrs, Chief Executive Officer, Old
Harbor Native Corporation.................................. 270
Statement of Kim Reitmeier, Executive Director of ANCSA
Regional Association....................................... 289
NATIVE 8(A) CONTRACTING: EMERGING ISSUES
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TUESDAY, OCTOBER 22, 2019
House of Representatives,
Committee on Small Business,
Subcommittee on Investigations,
Oversight, and Regulations,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:04 a.m., in
Room 2360, Rayburn House Office Building, Hon. Judy Chu
[chairwoman of the Subcommittee] presiding.
Present: Representatives Chu, Craig, Spano, and Burchett.
Also Present: Representatives Kim, Davids, Chabot, and
Young.
Chairwoman CHU. Good morning. The Committee will come to
order.
I am pleased to be chairing this hearing today to discuss
the 8(a) business development program as it applies to Native
8(a) contractors. And I would like to thank everyone for
joining us this morning, especially the witnesses.
In the 116th Congress, this Committee has been committed to
taking a closer look at the various SBA contracting programs.
Earlier this year, we held an oversight hearing on the women-
owned small business program, followed by a hearing where we
discussed the contracting programs that help veterans bridge
the gap between military service and entrepreneurship.
Most recently, we examined the 8(a) business development
program, which had not been the subject of a hearing for more
than a decade.
Today's hearing is a continuation of those efforts in which
we will be discussing the 8(a) business development program as
it applies to 8(a) Native contractors.
Last year alone, the Federal Government awarded more than
$550 billion in contracts for goods and services, with nearly
$18 billion going to firms participating in the 8(a) business
development program. The 8(a) program has helped to level the
playing field for small businesses owned by at least 51 percent
socially and economically disadvantaged individuals. Moreover,
it provides increased access to the Federal marketplace and
business development assistance to thousands of small firms
each year.
In the 1980s, the 8(a) program was expanded to include
small businesses owned by three disadvantaged groups: Indian
Tribes, Alaska Native Corporations, or ANCs, and Native
Hawaiian Organizations, or NHOs. By including these groups in
the 8(a) program, Congress sought to harness the purchasing
power of the Federal Government to address the disproportionate
levels of economic hardship experienced by indigenous
communities. In fact, one in four American Indians and Alaska
Natives were living in poverty in 2012.
By including Tribes, ANCs, and NHOs in the 8(a) program,
Congress helped to foster economic development and help Native
communities achieve self-sufficiency. Today, there are
approximately 1,000 firms owned by Indian Tribes, ANCs and NHOs
participating in the 8(a) program.
This hearing will focus on the 8(a) program as it relates
to group-owned Native contracting firms, which differs in some
ways to how individually owned firms interact with the program.
For example, while individual owners and their firms can only
participate once in the program, there is no limit as to the
number of times Indian Tribes, ANCs, and NHOs can participate.
Consequently, they can confer program eligibility to small
businesses for up to 9 years each. And unlike individually
owned businesses, group-owned 8(a) contractors that are Native
may receive sole source contracts in any dollar amount.
These differing requirements and additional benefits are a
reflection of the social responsibility borne by these groups.
Native 8(a) contractors, unlike individually owned firms, use
their profits to directly benefit entire communities or of
hundreds or thousands of disadvantaged individuals. The success
of group-owned Native 8(a) firms is directly connected to the
provision of much needed services to each and every member of
the community.
The important objectives and worthwhile purposes of the
Native 8(a) program is not in question. However, there are
longstanding problems with SBA's oversight and implementation
of the program which this Committee intends to address.
For instance, SBA revised its regulations regarding the
8(a) program in 2011, which included changes applicable to
Native contractors. Among them, SBA prohibited the award of
sole source contracts to Native 8(a) contractors if the
contract was previously and immediately performed by a sister
company. Additionally, it made technical updates to prevent
sister companies with same NAICS code, N-A-I-C-S code, from
participating in the 8(a) program simultaneously.
Following the issuance of these regulations, GAO conducted
two reports focused on Native 8(a) contracting, one in 2012 and
another in 2016. Troublingly, these reports found that SBA did
not have the adequate resources and lacked critical data to
enforce these regulations. Moreover, the 2016 GAO report found
that there are systemic issues that impede SBA's Alaska
district office from providing proper oversight, including
weaknesses in SBA's data collection, supervisory review,
staffing, and guidance that restrict the agency's ability to
determine whether the program is achieving its objectives.
In addition to the GAO's findings, this summer, the Los
Angeles Times published reports of business owners
misrepresenting themselves as Native American in order to
benefit from the program. SBA has stated that it did not
violate rules in certifying these contractors and attributes
their eligibility to the regulations that were in place prior
to 2011 when individual contractors were not required to be
enrolled members of a federally or State-recognized Indian
Tribe in order to participate.
We know from our recent hearing that certification of 8(a)
firms has been a longstanding issue for the SBA, but it is our
responsibility to conduct thorough oversight of these
allegations, and this hearing will help us follow the facts and
ensure that SBA is responding to these allegations adequately.
We owe all businesses in the 8(a) program, including those
from Native communities, the certainty that the program is
operating as Congress intended. It is also our job to ensure
that the successes of Native 8(a) contractors, which empower
and help communities become self-sufficient, are not
overshadowed by the inability of SBA to properly manage the
program.
Today's hearing will provide us with the opportunity to
hear about the oversight issues from GAO. We will also learn
from program participants about the importance of the 8(a)
program, its performance, and what it means for Native
communities. It is through this oversight that we will gain the
tools we need to strengthen the 8(a) program.
I had hoped to hear from all of you in person, but because
of a markup of the prescription drug bill in the Ways and Means
Committee, I will unfortunately need to depart early, but I
will stay as long as I possibly can.
And I want to thank all of our witnesses for their
attendance and insights into this important topic.
And I would now like to yield to the Ranking Member, Mr.
Spano, for his opening statements.
Mr. SPANO. Thank you, Madam Chairwoman, for holding this
important oversight hearing today that will examine the
specially recognized groups operating within the SBA's 8(a)
program.
I would like also to take a moment to thank Congressman Don
Young, the dean of our House here, for his attendance and
interest in our committee's exploration of the 8(a) program,
which is a program vital to his home State of Alaska. Since
this is the SBA's longest running and most well-established
business development program, it is critical that we take the
time to assess whether the program is operating efficiently and
effectively as Congress intended.
In the 1980s and in the 1990s, Congress determined that
certain disadvantaged groups should be given special
consideration within the 8(a) program. These groups include
Native American Tribes, Alaskan Native Corporations, Native
Hawaiian Corporations, and Community Development Corporations.
In addition, the 8(a) program requirements were modified or
relaxed to a certain degree for these groups in comparison to
the requirements for individuals participating in the 8(a)
program.
Given that there are significant differences in the way
that the 8(a) groups utilize the program compared to 8(a)
individuals, it is important for this Committee to understand
the distinction between them and the unique responsibilities
8(a) groups are required to undertake. For instance, the
relaxed rules allow federally recognized groups to form
multiple 8(a) small subsidiaries in multiple industries, while
8(a) individuals and respective firms may only participate in
the program once, as the Chair mentioned a moment ago.
Also, while 8(a) individuals are responsible for the growth
and development of their own business, 8(a) groups are
responsible for providing a wide variety of benefits to their
members, such as shareholder dividends, employment assistance
programs, scholarships and internship opportunities, cultural
preservation initiatives, and other benefits.
A number of shareholders belonging to an 8(a) group can
range from a hundred to over a thousand, and the benefits
provided to them may vary depending upon the specific needs of
the shareholders in those regions. Thus, contract awards made
to 8(a) groups may have a direct and compelling effect on the
broader communities in which these groups serve.
In addition to understanding the differences between 8(a)
groups and 8(a) individuals, it is also important for this
Committee to assess whether the SBA is conducting adequate
oversight to ensure taxpayer dollars are being spent wisely and
within the bounds that are established by law and regulation.
Utilization of the 8(a) program by these specially
recognized groups has risen exponentially over the last several
decades, prompting the Government Accountable Office to
undertake a series of reviews spanning from 2006 to 2016. The
GAO has historically found weaknesses limiting the SBA's
ability to monitor compliance with 8(a) program requirements,
which raises questions as to whether all program participants,
individually owned or group owned, are in full compliance with
all laws and regulations governing the program.
So while the SBA has taken some steps toward improving its
monitoring processes over the years, the GAO still found
deficiencies in SBA oversight in its 2016 report, which raises
questions as to whether some 8(a) groups may be operating
outside of regulation.
While there are certain complexities and details unique to
the 8(a) program's application to these federally recognized
special groups, it is crucial to keep in mind the original
congressional intent of the 8(a) program as a business
development program intended to provide full and fair
opportunity for full participation by socially and economically
disadvantaged persons in our free enterprise system. It is in
the best interest of our Nation's economy to ensure that this
program yields high quality, productive, and successful small
businesses and entrepreneurs.
I look forward to hearing the testimony of all our
witnesses today.
Thank you, Madam Chairwoman. I yield back.
Chairwoman CHU. Thank you, Mr. Spano.
The gentleman yields back.
And if Committee members have an opening statement
prepared, we would ask that they be submitted for the record.
I would like to just take a minute to explain the timing
rules. Each witness gets 5 minutes to testify and each member
gets 5 minutes for questioning. There is a lighting system to
assist you. The green light will be on when you begin, and the
yellow light will come on when you have 1 minute remaining. The
red light will come on when you are out of time, and we ask
that you stay within that timeframe to the best of your
ability.
Today, we will have two panels of witnesses. I would now
like to introduce the witness for our first panel, Mr. Seto
Bagdoyan. Mr. Bagdoyan is currently the director for audit
services in GAO's Forensic Audits and Investigative Service
mission team.
During his GAO career, Mr. Bagdoyan has served in a variety
of positions, including as legislative advisor in GAO's Office
of Congressional Relations and as assistant director for
Homeland Security and Justice. He has also served on
congressional details with the Senate Finance Committee and
House Committee on Homeland Security.
In his private sector career, Mr. Bagdoyan has held a
number of senior positions in consultancies. He earned a BA
degree in international relations and economics from Claremont
McKenna College, located in my district, and an MBA in strategy
from Pepperdine University.
Mr. Bagdoyan.
STATEMENT OF SETO BAGDOYAN, DIRECTOR, FORENSIC AUDITS AND
INVESTIGATIVE SERVICE, UNITED STATES GOVERNMENT ACCOUNTABILITY
OFFICE, WASHINGTON, DC
Mr. BAGDOYAN. Thank you, Chairwoman Chu, Ranking Member
Spano, Mr. Young, members of the Subcommittee. First, I am
grateful for some additional time, if I may, to deliver my full
remarks, and I will try to stay within 5 minutes as you
suggested.
I am pleased to appear before you today to discuss, at a
high level, three past GAO reports that address control
weaknesses and compliance risks involving SBA's monitoring and
oversight of its 8(a) program for certain disadvantaged firms
that you described earlier, such as those owned by Native
businesses, namely ANCs, NHOs, and Indian Tribes.
The 8(a) program is one of the Federal Government's primary
vehicles for helping develop socially and economically
disadvantaged small businesses. One of its key aspects is the
ability for Native firms to receive Federal contract awards
noncompetitively for any amount. As such, the 8(a) program
represents a substantial investment by the Federal Government
in the form of contract awards by procuring agencies. For
example, in fiscal year 2019, such investment entailed about
$10.9 billion in obligations for sole-source and competed
contracts awarded under SBA's business development program,
including about $4 billion for Native firms.
Over the years, the 8(a) program has incorporated many
complex rules, which, and I cannot emphasize this enough,
render effective oversight of regulatory compliance, a
significant long-term challenge for SBA. In essence, as I will
describe below, its controls are not tailored to deal with the
program's complexities.
With that in mind, I will now summarize four key control
weaknesses described in our three reports that, collectively,
undermine SBA's monitoring and oversight of the Native 8(a)
program and exacerbate a number of compliance risks.
First, incomplete, inconsistent, or missing documentation
and other evidence in relevant contract files, such as offer
and acceptance letters to gauge ANC-owned firms' adherence to
regulatory requirements. Second, limitations in the ability to
obtain and track and share across geographical locations key
program data needed to enforce its own important revenue and
other rules. Third, insufficient staffing and relatedly
atypical workloads in the Alaska District Office to carry out
necessary and critical monitoring and oversight tasks in timely
fashion. And, fourth, inadequate or vague program guidance and
procedures that otherwise would clearly articulate to staff how
to interpret new regulations and review complex financial
documentation.
As I mentioned, these weaknesses collectively pose
significant compliance risks, which are of particular interest
to this Subcommittee, such as, one, the award of sole-source
follow-on contracts to Native 8(a) firms, even though a
contract was performed immediately prior by other firms of the
same parent companies; and, two, sister subsidiary firms
generating the bulk of the revenue in the same primary line of
business using a secondary code. This practice circumvents the
intent of regulations that prohibit sister subsidiaries from
earning most of their revenue in the same industry.
In our three reports, we made 21 recommendations to SBA. To
date, the agency has implemented 15 recommendations, and 6 have
not been implemented, including those related to tracking or
sharing revenue NAICS code data.
For example, unimplemented recommendations include
establishing a fundamental control, i.e., collecting and
analyzing revenue and other important data from procuring
agencies and Native 8(a) firms to track and ensure that
subsidiaries are not generating the majority of their own
revenue in the same primary industry by using a secondary code.
Implementing this recommendation as intended could help
mitigate one of the program's principal compliance risks.
I would note that since we have not performed any new work
since our 2016 report, we don't know the extent to which, if
any, SBA's implementation of some of our recommendations has
helped mitigate the various oversight and monitoring weaknesses
we have identified. However, I would note that separate reports
since that time by other GAO teams and SBA's Office of
Inspector General suggest that the weaknesses persist. The
control weaknesses I have described today are systemic to the
program and longstanding and have appeared consistently across
multiple GAO reports, as SBA has struggled to articulate and
execute an effective oversight and monitoring strategy to
ensure compliance.
Accordingly, it is imperative that SBA devote full
attention to its oversight responsibilities and redouble its
efforts to address the control weaknesses we have identified by
expeditiously implementing our remaining recommendations as
intended, while taking into consideration the many complexities
of the program.
Chairwoman Chu, this concludes my remarks. I look forward
to the Subcommittee's questions.
Chairwoman CHU. Thank you.
We appreciate all that you have shared with us, and I will
begin by recognizing myself for 5 minutes.
On June 26, 2019, the Los Angeles Times published a report
saying that more than $300 million in Federal and State
contracts reserved for Native Americans had been awarded since
2000 to companies whose owners made unsubstantiated claims of
being Native American. These allegations concern individual
business owners who participated in the 8(a) program as opposed
to businesses owned by Native Tribes, ANCs, or NHOs.
Now, SBA has stated that it did not violate rules in
certifying contractors for the 8(a) program and attributed
their eligibility to the regulations that were in place prior
to 2011, when a contractor seeking minority status as Native
American was required to have held himself or herself out as
Native American and be recognized by others as a member of a
Native American community. The regulations did change in 2011,
and SBA now requires an individual to be an enrolled member of
a federally or State-recognized Indian Tribe in order to be
considered an American Indian for the purpose of being
determined socially disadvantaged.
So, Mr. Bagdoyan, has the GAO studied these concerns within
the context of the SBA's 8(a) program?
Mr. BAGDOYAN. Madam Chairwoman, we have not. In fact, the
last relevant work we performed was about 9 to 10 years ago. So
it is probably overdue that we take a look here. So I would be
happy to work with Committee staff to arrive at a request that
we can implement for you.
Chairwoman CHU. Yes, we would certainly like to put forth
that request for that to be studied.
Mr. BAGDOYAN. Sure. But I would note that it is,
obviously--certification determines eligibility into the
program and is a fundamental part of a control system to make
sure that only those who are intended to participate should
participate, so--and I am familiar with the LA Times stories.
Chairwoman CHU. Do you believe that there are deficiencies
with regard to SBA's determination as to whether a contractor
is indeed a member of a federally recognized Tribe?
Mr. BAGDOYAN. All I have to go by is what was referred to
in the LA Times articles, but I would note that the SBA
Inspector General has noted in recent reports that determining
eligibility is an ongoing concern for the agency, as well as
identifying those who have snuck through and removing those
entities. So it is a related issue, and it is basically a
fundamental controls issue from the front to the end.
Chairwoman CHU. Let me ask this. The regulations changed in
2011, and both of your GAO reports, the 2012 report and the
2016 report, both found that SBA did not have the adequate
resources and lacked critical data to enforce the regulations.
And, in fact, you found quite large systemic issues pertaining
to the Alaska office, where you found that there were problems
with everything from data collection and supervisory review,
staffing and guidance, and basically many problems.
This has been ongoing now. The changes occurred in 2011. So
now this is 8 years. Why has this not been remedied?
Mr. BAGDOYAN. Well, it is hard to say. As I mentioned, we
haven't done any work since 2016 to see whether the
recommendations have had any impact, but I would say that these
problems are not unique to SBA, and the fact that they are
longstanding shows that there is a fundamental issue with,
potentially, management priority and oversight of the
implementation of the recommendations. Again, I would say that
these are longstanding. They have been corroborated varyingly
by other GAO teams and the OIG.
And just a note on the 2011 regulation that you mentioned.
It is our understanding that the guidance to help SBA staff
implement that regulation was not available until sometime in
2016. So it basically took about 5 years to finalize the
guidance and make it available for their own staff. So that is
an issue as well.
Chairwoman CHU. The guidance to implement the regulations
took that long?
Mr. BAGDOYAN. That is correct. That is right.
Chairwoman CHU. Is this normal?
Mr. BAGDOYAN. I am not sure if it is normal, but it
certainly should not happen, certainly for that duration. I
realize that the program is complex, as I mentioned, and that
guidance might reflect that complexity, but, you know, the
expeditious implementation of guidance, which we recognized in
our reporting--that was lacking at the time. So there was much
confusion about what to do and how to do it.
And I would note, if I may, not just by SBA staff, but also
procuring agency staff, including contracting officers. So that
is an important tip-of-the-spear type of proposition that, if
the agency people who are letting the contracts don't know
exactly what they are supposed to do, is a problem.
Chairwoman CHU. Thank you. My time has now expired.
The Ranking Member, Mr. Spano, is now recognized for 5
minutes.
Mr. SPANO. Thank you, Madam Chairwoman.
Thank you, Mr. Bagdoyan. One recommendation that you note
is to significantly advance SBA's oversight in improving its
ability to track and share revenue information for ANC-owned
firms. And as of your 2016 report, you indicated that the SBA
still had not implemented such a system. There was no such
system in place to track that information.
Can you help the Committee understand the implication of
this lack of framework by describing in more detail the harm or
risk associated or that is imposed to the program due to the
lack of SBA's oversight as it relates to tracking that
information about revenue?
Mr. BAGDOYAN. Thank you for your question, Mr. Spano. Yes,
I would note that that information is vital. Again, it is
embedded in the control system. Everything revolves around
information and data. Especially in this case, tracking
revenues plays directly into the same industry participation by
multiple subsidiaries of one parent company, which is one of
the, I think, the compliance risks that is of principal
importance to this Subcommittee.
So at the time of our work, SBA had actually committed to
standing up such a system, but after some time elapsed, we
found that the system was--or the proposed system was--
incompatible with existing SBA systems. So, right now, it is my
understanding that SBA essentially has a spreadsheet system
that takes information from FPDS, Federal Procurement Data
System, and that is essentially a patchwork approach.
FPDS only has obligation data in its purview, and what we
are looking for is actual revenue data. Obligations can
understate or overstate the extent of the sales angle, if you
will. Actual revenue data would be important.
So I would leave it at that, and that the entire control
system would revolve around making sure that SBA has revenue
data to inform its decisionmaking.
Mr. SPANO. So just to summarize, the entire intent and
guidance with respect to the law that was passed with respect
to the ANCs is completely thwarted by SBA's inability to track
this information.
Mr. BAGDOYAN. Yes. I mean, revenue information is at the
heart of the matter.
Mr. SPANO. Got it.
Mr. BAGDOYAN. Without that, you can't really enforce the
regulation as intended.
Mr. SPANO. Yeah. It is concerning to me, I am sure as well
to the other Committee members, that the SBA doesn't have
accurate numbers on even basic information, such as the number
of ANC-owned firms in the 8(a) program. How can you not know
what that number is? It is a pretty basic number, I would
think.
Has the SBA, in its response to your 2016 report, indicated
that it would improve in this regard, and have you seen any
evidence of such improvement?
Mr. BAGDOYAN. Well, I would say that the agency at the time
agreed with five of our six recommendations. And, again, since
we haven't followed up with in-depth audit work, we don't know
what, beyond the paper trail that was provided to us from the
agency telling us what they intended to do, actually translated
into useful, sustainable action. That is the key. You have a
plan. You have got to execute it and then see if it is working.
Mr. SPANO. Sure. So they may have done something, but there
is no way to tell whether what they have done potentially has
had any positive impact?
Mr. BAGDOYAN. That is right. I mean, give them at least
some credit that things may have turned around in some areas,
but, lacking audit work, I just can't tell you definitively.
Mr. SPANO. Yeah. Thank you.
Mr. Chair, I yield.
Mr. KIM. [Presiding] Great. Thank you.
Good morning, Mr. Bagdoyan.
Mr. BAGDOYAN. Good morning, Mr. Kim.
Mr. KIM. I am Congressman Kim just taking over the chair
here.
I just wanted to ask a question or two before I hand it off
to my colleagues, and I may follow up at the end. But one of
the issues highlighted by both GAO reports was about the lack
of necessary resources and data to be able to enforce
regulations.
For example, there are regulations that prohibit the award
of follow-on sole source contracts, if that contract was
previously performed by a sister company. However, both reports
found instances where agencies were not providing the
information needed to enforce this regulations and that SBA was
not following up to obtain the information.
GAO made several recommendations to improve this process.
Could you please expand on your findings, and tell us why SBA
is having so much difficulty collecting this information?
Mr. BAGDOYAN. Sure. Thank you for your question, Mr.
Chairman. Yes, it is problematic. We did find, in our file
reviews, that key information such as the acquisition history,
for example, of certain contracts was either missing or
incomplete. The offer letters, acceptance letters that are also
part of the file, in some instances failed to shed information
in that regard.
I think what you mentioned about the follow-on, that is the
key. I think it is, at best, based on our experience, uneven.
At the time of our report, there was one individual business
opportunity specialist who had actually started to do this at
the Alaska District Office, but once more, I will invoke the
lack of follow-on work that we have done since 2016 to say that
we don't really know whether this setup was expanded within the
district office and other district offices. Mind you, there are
about five dozen or so--don't quote me on that--district
offices around the country.
So the key is follow-on. If you don't have information,
data, or the data are incomplete or silent on certain things,
you have got to go out there and follow on and follow up, and
put the onus on the agencies that are letting these contracts
to respond and respond completely.
Mr. KIM. I appreciate that.
Another issue that may very much require that type of
follow-on. In the 2012 GAO report, it describes practices such
as capitalizing on common corporate resources that allow sister
companies to effectively operate as large firms in the small
business program. This is something I just wanted to hear a
little bit more from you on. If you can just expand on this
concern, and help me understand, help us understand the
significance of that finding.
Mr. BAGDOYAN. Right. So, I'm trying to find the right
answer for you in my notes.
Let me get back to you on that one, if I may, rather than
give you an incomplete answer.
Mr. KIM. I would appreciate that.
Mr. BAGDOYAN. I have got a lot on my binder here, and it is
kind of tough to follow up.
Mr. KIM. Yeah, not a problem.
Mr. BAGDOYAN. My apologies.
Mr. KIM. What we will do is we will get back to that one.
We will go through some of my other findings.
Mr. BAGDOYAN. Sure.
Mr. KIM. And then at the end, if you feel like you can find
it, at that point----
Mr. BAGDOYAN. Absolutely.
Mr. KIM. One last thing before I hand it over. When it
comes to Native 8(a) contractors, affiliates are not considered
in size determinations unless it is determined that a small
business will or is likely to obtain a substantial unfair
competitive advantage. However, according to the 2012 report,
SBA did not have a process to make such determinations.
So I guess I want to understand is, does GAO know if SBA
has created this process, and what is the importance of
determining whether there is a substantial unfair competitive
advantage?
Mr. BAGDOYAN. Sure. Thank you for that question. Yes, we
are aware that SBA has an approach to deal with the unfair
competitive advantage process. I believe, again, based on the
information we have, which isn't much, it involves using NAICS
codes and FPDS in some sort of combination, but the agency has
not provided us with any detail as to how this system is put
together, how it is to function in its intended purpose. But,
again, I would note that relying on FPDS, which only deals with
obligation information, is probably an incomplete way to go in
this regard.
Mr. KIM. Okay. I appreciate that.
Well, my time has run out, so why don't we just keep going
forward. And we will try to return to that question if you have
it.
I am just going turn it over to my colleague,
Representative Burchett, for his questions.
Mr. BURCHETT. Thank you, Mr. Chairman.
Pronounce your name for me, Brother. I am sorry. Everyone
messes up my name, but----
Mr. BAGDOYAN. No worries, sir. Last name is pronounced
Bagdoyan.
Mr. BURCHETT. Bagdoyan. All right. I got it right, but I
won't ever say it again. I got it right that time.
Mr. BAGDOYAN. Quit while you are ahead, right?
Mr. BURCHETT. Yes, sir.
Your testimony, my question partially has been answered,
but I'd like to dig gown through it if I could. Your testimony
mentions 21 recommendations that the GAO has for the SBA. And
what would you think would be the most difficult thing in
implementing this? Of course, you pretty much answered that.
But do you think that Congress should be more assertive in
making sure those concur, and what are we doing to make sure
that you succeed?
Mr. BAGDOYAN. Well, that is a great question. I think a
hearing such as this is one of the better venues to certainly
frame the control weakness and compliance issues that we have
found. Again, this dates back to at least 2006. I would like to
point that out. These are persistent issues that do need
sustained congressional attention. I will be perfectly candid.
We can only take it so far with our audit work, as can the OIG,
but I think this type of hearing with the type of questions
that you are asking are absolutely imperative to keep the soft
pressure on the agency, any agency for that matter, to respond
to the many findings that we have, and our recommendations as
well.
Mr. BURCHETT. Do you feel like we are doing what we need to
do to bear the fruit, I guess, as we should say?
Mr. BAGDOYAN. I think--again, I will say that a hearing
like this one is very important, and I appreciate being here.
Certainly, everybody can do more and create a roadmap for
strong controls and oversight and compliance. That is what this
is all about; make sure that the program is functioning as
intended. I think that is our mutual goal.
Mr. BURCHETT. All right. Thank you, Mr. Chairman. I will
yield back the 2 minutes and 50 seconds of my questioning back
to you, if you would like to further--I know you had some more
questions.
Mr. KIM. Well, I will pass that forward just so that we can
give some of our colleagues the time.
Mr. BURCHETT. All right. Thank you, Brother.
Mr. KIM. I appreciate that.
I am going to turn it over to Congresswoman Davids for her
line of questioning.
You are recognized for 5 minutes.
Ms. DAVIDS. Thank you, Chairman.
And I just want to say thank you to Chairwoman Chu for
allowing me to sit on this panel today. I am not a member of
the Subcommittee on Investigations, Oversight, and Regulations.
So I appreciate my colleagues allowing me to be a guest here.
So you just said that one of the goals of the GAO report is
to help ensure that the 8(a) program is functioning as
intended. And I am curious, if you could talk a little bit
about--after reading through your testimony, I am wondering if
the lack of investment in human capital, which we have seen as
an issue at SBA--last week or the week before, there was an IG
report that we heard about in the hearing that noted the lack
of human--investment in human capital at SBA and it causing
management issues, in addition to the inability of SBA to track
the number of 8(a)-certified firms and the fact that we have
got clear indications that there are probably firms that are
claiming to be Native that are not.
I am curious if, in your examination, if you found or
determined that there were any risks of the Federal Government
violating its trust responsibility to Tribes. And when we think
about functioning as intended, surely the inclusion of Native
Hawaiian, Native American, and Alaska Native Corporations in
this is part of that trust responsibility. Can you talk a
little bit about that? Because I didn't see it in your report.
Mr. BAGDOYAN. Sure. Well, you didn't see it because it
wasn't really part of our scope of the audit. That is certainly
a policy and intent question. Our proxy is intent--work as
intended, and we build up from the controls, the processes and
procedures, to make sure that whatever Congress has directed
actually happens.
And if I may touch on the human-capital aspect of your
remarks. We did find various issues about the level of
staffing, the atypically heavy workloads that personnel in the
district office, especially in Alaska, encountered, but also
the fact that, as with most agencies, there would be people who
would be retiring and taking all that knowledge with them,
without that knowledge necessarily being institutionalized to
begin with and then being passed on to those who succeed them.
And then, of course, the expertise that is needed. Knowledge
and expertise are complementary, obviously, to ensure effective
compliance.
So as SBA tries to address that particular issue, I think
it will probably be challenging for them to find the right
people who know and do the right things and actually keep them.
So I will leave it at that.
Ms. DAVIDS. Thank you.
So I would just encourage you--the SBA, clearly, for this
specific program and many others, is responsible for the
federal trust responsibility, but I would encourage the GAO in
your reporting to also make sure that that is actually a part
of foundational findings that you should be looking for.
The second thing I wanted to ask about is just, in terms of
the oversight process, I know there have been multiple reports
that have come out. How do you--how--I guess, how would you say
the effort to address the oversight concerns has been, and what
do we need to do to make sure that SBA is addressing that and
progressing toward meeting those oversight recommendations?
Mr. BAGDOYAN. Sure. I will take the latter part of your
question first. I mean, again, I will refer to this
Subcommittee hearing as one great venue. I know SBA is not
involved in this hearing, but whenever they are up here, it
would be a good idea to resurface the issues that we have
discussed and get from them what they are doing.
I mean, we are dealing with--the program requirements are
up here. The controls, as we find them, are down here. The gap
between my two hands is the compliance risk, and the
recommendations are designed to bring that more in balance.
Now, we made 21 recommendations, as I mentioned, in the
three reports that I mentioned earlier, and SBA has implemented
15 of them. However, since we haven't performed any follow-on
work since then, it is difficult to know exactly how effective
those--the implementation of those--recommendations has been. I
just can't comment on that. But, again, you are trying to
narrow the gap of compliance, the risk of compliance by
adhering to the recommendations and implementing them as
intended.
Ms. DAVIDS. So really quickly, do you think that the SBA
has been consistent in trying to address oversight concerns?
Mr. BAGDOYAN. I would say, candidly, it is mixed, from my
experience. They have disagreed in the past with some
recommendations we have made or they have partially agreed, and
then they have turned around and probably thought better of it
and come back and said, look, we implemented your
recommendation, even though we didn't agree with it originally.
So something happens there, they may take another look and
decide that, hey, you know, GAO was right after all, so we will
do something about it.
Ms. DAVIDS. Thank you.
I yield back.
Mr. KIM. Thank you.
I am going to recognize my colleague from Alaska,
Congressman Young. Over to you for 5 minutes.
Mr. YOUNG. Thank you, Mr. Chairman.
And I want to thank you and the Chairman, although she is
not here, and the Ranking Member for letting me sit on the
Committee today. This is crucially important to the State of
Alaska and especially my Alaskan Natives.
I was involved in making Alaska Natives eligible for the
8(a) programs, and it is been a great success. And I think
every 8(a) participant in Alaska would actually cherish the
fact that they would like to make sure they are doing
everything right. They have actually set up a small unit of
their own, and any new 8(a) is reviewed by Alaska Natives.
This has been a successful program. And the Chairman
mentioned the effect of the 8(a) program in Alaska to the
Alaska Natives; it is for a large group of people, and each
organization applies for it.
I was very excited because I don't think there has been one
complaint--and we have to look at the end result--from any
agency that the 8(a)s did work with. That is something that the
people have to think about. There has been some complaints from
how it was set up but not from the work they did, and we have
to think about it. This program is to help Alaska Natives,
American Indians, Hawaiian Natives. That is what it is set up
for, and it has been a success.
The only thing about the witness today, I would like to
make sure the Committee thinks about SBA being on the panel.
And we talk about some of the problem they haven't done. You
have submitted why they haven't done it. If it is a lack of
personnel and money, then we as a Congress should supply it for
them. We can't expect an agency to do the work if they don't
have the whereforeall to do it. But I am very excited about
this. I am excited about the witnesses that will come up later.
And, Mr. Chairman, this is a very important issue, as I
said, to my State and my Alaska Natives, and I will be bird-
dogging this real close.
And I thank you for your work. You have done a pretty good
job. I won't agree with everything, but a pretty good job. We
will review the rest of it together.
With that, I yield back.
Mr. BAGDOYAN. Thank you, Mr. Young. I appreciate the
compliment.
Mr. KIM. Thank you, Congressman.
I am going to turn it over to Congresswoman Angie Craig.
Over to you for 5 minutes.
Ms. CRAIG. Thank you so much, Mr. Chairman.
I want to just dig into a little bit of the 2016 report
that found staffing challenges at the Alaska district office,
and maybe just a little broader, that limited that office's
ability to perform oversight.
You recommended that SBA develop a comprehensive approach
to staffing this office, and, of course, the SBA rejected,
stating it had already mitigated the potential for
reoccurrence. Can you tell me a little bit about that
recommendation and why the steps taken by SBA were
insufficient? And as a former head of HR for a major Fortune
500 company, I am just particularly interested in your
recommendation versus what was done.
Mr. BAGDOYAN. Sure. Thank you for your question. Well, you
know, the staffing issue at that particular DO has been
longstanding, and, as I mentioned before, there are some
atypical workload issues involved there. Heavy workload creates
a backlog, and backlog, for oversight purposes, is, you know,
not fatal but it is very significant.
So you are correct in that originally SBA mentioned that
they had a handle on the situation and essentially disagreed
with the recommendation, but then, again, as I mentioned
earlier, they went back and looked at it again and they ended
up hiring five additional business opportunity specialists. And
they had a plan at the time. Again, this is 3 years-plus, and
the audit work was actually done in 2015. So, unfortunately, we
are dealing with some dated information. And so they also
wanted to hire an attorney with ANC expertise to do some
mentoring and guidance for staff to oversee their oversight,
focusing on compliance.
So they have done a number of things, but as I have
mentioned before, it is all in the execution of the
recommendation and the plan that drives that from the agency,
in this case SBA, and actually sustaining any positive results
that you get.
I think staff turnover has been an issue. That is why the
longstanding problem has been having adequate people in place
with the right knowledge and expertise to perform these
oversight functions.
Ms. CRAIG. How often do you see this in the district
offices where there is--there are staffing and turnover issues
that lead to, you know, less than optimum performance?
Mr. BAGDOYAN. Sure. Again, our focus was, in this case, the
Alaska District Office. I am not sure. It may be as intense in
other district offices. I mean, they are dealing with quite a
bit of a workload. So--yes. So they are dealing with 400 or 500
ANCs, whereas other district offices, their workload is far
less. So we didn't look at it specifically. So I would--I
wouldn't really want to speculate.
Ms. CRAIG. Great.
Mr. Chairman, I have no further questions, and I yield
back.
Mr. KIM. Okay. Great. Thank you.
Well, look, I appreciate everyone's questions here. Mr.
Bagdoyan, thank you so much for your time here.
Oh, great. I was prepared to request as a QFR, but I am
happy----
Mr. BAGDOYAN. You are welcome to do so, but----
Mr. KIM. So why don't you, since we have you, just take a
minute----
Mr. BAGDOYAN. Yes, let me see what I can make of this for
you. You are right that SBA has repeatedly emphasized business
development, obviously, to make the businesses mature, self-
sustaining, and those kinds of things. We did find practices
that actually undermine this intent--the use of sister
subsidiaries for subcontracting purposes. Again, up here it is
the holding company. You have all the subsidiaries under here.
Collectively, the holding company assists the subsidiaries. You
put them all together, you basically have a large business
functioning in a small-business space. And also, past
performance is a key to show for future awards that, yes, we
have delivered before, so do consider us as well.
So that is how I would frame this answer for you.
Mr. KIM. Well, I appreciate that. And I think just from
across the board the different questions and your detailed
responses, it does seem like there is a lot of important
followup that needs to happen. So as the Chairwoman said before
she had to leave----
Mr. BAGDOYAN. Right.
Mr. KIM.--we will work as a Committee here to determine the
scope of that and the right way to move forward.
Mr. BAGDOYAN. Yes.
Mr. KIM. I am sure we will be in touch with that.
Mr. BAGDOYAN. Absolutely.
Mr. KIM. In the meantime, we do appreciate your time
today----
Mr. BAGDOYAN. Thank you.
Mr. KIM.--to be able to come on out and talk with us.
Mr. BAGDOYAN. Yes.
Mr. KIM. We will be transitioning to the second panel, so
why don't we just take a very quick break just to be able to
set that up and then jump right in.
Mr. BAGDOYAN. Thank you very much, Mr. Chairman. I
appreciate the time.
[Recess.]
Mr. KIM. Hi, everyone. We are going to get started again
here on the second panel.
Thank you so much for taking the time to join us here today
and to be able to talk through these issues.
I wanted to just first yield to my esteemed colleague from
Alaska, Congressman Young, to introduce one of our witnesses,
and then I will move into the rest.
Mr. YOUNG. Thank you, Mr. Chairman.
It is my honor today to introduce the Alaskan witness. It
is Ms. Christine Williams. She is a managing partner of Outlook
Law, LLC, a legal expert in government contracting law. Ms.
Williams has been recognized by a national peer review group as
being the top 5 percent of government contract attorneys in the
Nation. Ms. Williams represents clients participating in all
SBA various contracting programs, including the 8(a) program.
In addition to her responsibilities as attorney, she also
serves as an adjunct law professor teaching government
contracts law, and collaborations on her own time with the
Small Business Administration's General Counsel's Office,
training various groups on SBA regulations and operational
context. Ms. Williams is a lifetime resident of the State of
Alaska and has significant depth and breadth of experience with
8(a) Alaska Native Corporations.
I want to thank you for participating, Ms. Williams. I look
forward to hearing your testimony. I probably won't hear it
because I have to go to another meeting, but I will know what
it says; later on I will read it. So just thank you for being
here.
And the rest of the witnesses, thank you. I think it is
crucially important on this issue you can testify on how good
the 8(a) program is going.
Mr. Chairman.
Mr. KIM. Thank you. Thank you for joining us here today.
You are welcome back anytime. I appreciate it.
Mr. YOUNG. Don't tempt me.
Mr. KIM. I am going to just continue on with some of the
other witnesses here. Again, just grateful for your time.
Mr. Joe Valandra is the executive director of the Native
American Contractors Association. He is a member of the Rosebud
Sioux Tribe of South Dakota, and has over 30 years of business
experience. Mr. Valandra is the managing director of VAdvisors,
LLC, a specialty advisory firm in D.C. that provides consulting
services and advice in areas related to business and American
Indian policy.
Welcome.
Another witness we have is Ms. Annette Hamilton, who is the
vice president and chief operating officer of Ho-Chunk, Inc., a
corporation owned by the Winnebago Tribe of Alaska. In this
position, she overseas the daily operations of Ho-Chunk's
multiple subsidiary companies and is responsible for strategic
planning, budgeting, forecasting, and corporate business plans.
Welcome, Ms. Hamilton.
Ms. HAMILTON. You meant Nebraska.
Mr. KIM. I meant Nebraska, yeah. I was just testing you to
make sure that you were on top of it. Good. No, thank you for
that.
Mr. Vincent is the Chairman and founder of The Hawaii
Pacific Foundation, a Native Hawaiian organization foundation.
In 2010, he retired with the rank of brigadier general after 37
years of military service as an Active Duty member of the
Hawaii Air National Guard.
Thank you for your service, sir.
Served five combat tours and held various command and staff
positions at the Pentagon, Hawaii State headquarters, as well
as in the field. Today, he serves on the board of several
organizations, including the Asia-Pacific Economic Cooperations
Disaster Response Risk Reduction Subcommittee.
Welcome, Mr. Vincent. Appreciate it.
And our final witness to introduce is Ms. Jana Turvey. She
is the president and CEO of Leisnoi, Inc., an Alaska Native
Village Corporation with roots on Woody Island in the Kodiak
Island Archipelago. She has extensive experience in the private
sector, and served as the vice president of legal affairs and
general counsel at Ahtna, Inc., and as vice president of
corporate affairs at the Afognak--is that correct?
Ms. TURVEY. Afognak.
Mr. KIM.--Afognak Native Corporation.
Welcome. Thank you so much for coming out here.
So why don't we just start. We will just start from this
side and head on over.
So, Mr. Valandra, over to you. You are recognized for 5
minutes.
STATEMENTS OF JOE VALANDRA, EXECUTIVE DIRECTOR, NATIVE AMERICAN
CONTRACTORS ASSOCIATION, WASHINGTON, DC; ANNETTE HAMILTON,
CHIEF OPERATING OFFICER, HO-CHUNK INC., WINNEBAGO, NE; EDWIN A.
(SKIP) VINCENT, CHAIRMAN AND FOUNDER, THE HAWAII PACIFIC
FOUNDATION, HONOLULU, HI, TESTIFYING IN HIS ROLE AS BOARD
MEMBER OF THE NATIVE HAWAIIAN ORGANIZATION ASSOCIATION (NHOA);
JANA TURVEY, PRESIDENT AND CEO, LEISNOI, ANCHORAGE, AK,
TESTIFYING ON BEHALF OF THE ALASKA NATIVE VILLAGE CORPORATION
ASSOCIATION; AND CHRISTINE V. WILLIAMS, MANAGING PARTNER,
OUTLOOK LAW LLC, ANCHORAGE, AK
STATEMENT OF JOE VALANDRA
Mr. VALANDRA. Thank you, Mr. Chairman.
Good morning, members of the Committee. I want to express
our sincere appreciation from the Native American contractors
for giving us this opportunity to express our views and
concerns and recommendations related to the 8(a) program.
Please let me tell you just a little bit about myself,
although the introduction did well. Thank you, Mr. Chairman. I
have been the executive director for exactly 2 weeks of NACA,
and I am very pleased to be here. I am a member of the Rosebud
Sioux Tribe. I am a graduate of the University of South Dakota
Business School and the University of Minnesota Law School, and
I welcome the opportunity to champion the mission of NACA and
to continue to be a vigorous advocate for travel sovereignty
and economic justice in Indian Country.
NACA was established in 2003 as a 501(c)(6) trade
association with the purpose of advocating on behalf of Native
community-owned Alaska Native Corporations, Native Hawaiian
Organizations, and Tribal enterprises engaged in Federal
contracting. NACA's mission is to protect the rights of Native
American communities to create economic development through
government contracting. Our members consist only of companies
owned by their Native communities. NACA member enterprises
impact the lives of hundreds of thousands of Natives.
Effective, transformative, powerful. These are not
descriptions often associated with Federal Indian policy. NACA
is pleased to say that the 8(a) program has become one of the
most effective, transformative, and powerful economic tools for
Indian Country.
The 8(a) program works. It helps provide economic
opportunity for Native communities. No doubt much more needs to
be done, but the 8(a) program is helping our Native communities
in many significant ways. The 8(a) program also recognizes the
Federal Government's trust responsibilities to Native people
and the government-to-government relationship with Native
governments.
Native-owned 8(a) businesses invest heavily in their
communities. No other 8(a) participant exists solely for the
benefit of entire at-risk communities. Unlike other Federal
contractors, community-owned Native enterprises in the 8(a)
program are required to provide annual benefit reports. These
reports detail benefits provided to Native communities. The
following are a few examples of how NACA members benefit their
communities.
Community-owned Native enterprises are mandated to return,
invest part of their profits in their communities. As noted,
these benefits are vital to the stability and survival of
Native communities. While the 8(a) program is an economic
development program, not a jobs program, NACA members have
created thousands of jobs directly and indirectly. These jobs
provide significant career pathways for community members.
NACA members also provide resources to their Native
communities to invest in the youth, including Head Start and
early childhood education, education including Native language
revitalization and scholarships for post-secondary education,
vocational and job training programs, Native history and
cultural preservation, infrastructure, housing, elder care,
healthcare, and many other community priorities. None of this
investment would be possible without Native access to the 8(a)
program.
NACA strongly supports the Small Business Act and related
programs because of the hope and opportunity it brings to
historically disadvantaged Native communities. The 8(a) program
is functioning as Congress intended, by promoting the economic
well-being of Native Americans. However, we believe the
reauthorization of the Small Business Act provides an
opportunity to strengthen and reinforce Congress' intent to
empower Native communities to build strong, sustainable
communities.
In our written testimony, we make several recommendations
when considering the reauthorization of the Small Business Act.
NACA stresses that any legislation that may be considered must
strongly bear in mind the impacts to Indian Country. In all
cases, consultation with Indian Country must be pursued before
taking any action. It is imperative to consider how efforts to
modernize, streamline, and improve the SBA programs, however
well intended, may have unintended negative impacts on NACA
member entities and Native communities that depend upon them.
No other economically disadvantaged communities rely on the
SBA program the way Native communities do. I must repeat. Any
proposed changes to the 8(a) program must involve extensive,
meaningful consultation with impacted Native communities.
In conclusion, clearly when qualified entities participate
in the 8(a) program, economies improve, communities and
participants become more self-sufficient, and this is
especially true for Native communities. The focus and effort
afforded the Native enterprises participating in the 8(a)
program is a crucial step to ensure that the Federal Government
meets its unique obligations and interests in providing for the
self-determination of Native Americans.
Thank you for giving NACA the opportunity to provide this
testimony on this vitally important matter.
Mr. KIM. Appreciate that you took the time to come on out
here. Thank you so much, sir.
Mr. VALANDRA. You are welcome.
Mr. KIM. Ms. Hamilton, over to you for 5 minutes.
STATEMENT OF ANNETTE HAMILTON
Ms. HAMILTON. Good morning, Chairman Kim, Ranking Member
Spano, and members of the Subcommittee, and Congresswomen and -
men. I am Annette Hamilton, vice president and chief operating
officer of Ho-Chunk, Inc., a tribally owned corporation of the
Winnebago Tribe.
The Native 8(a) contracting program has become a critical
component of economic development for world tribes like the
Winnebago Tribe. Winnebago's history is similar to the history
of many Tribal nations. Originally a woodlands tribe, the
Winnebagos, traditionally known as Ho-Chunk, lived on lands in
what is present-day Kentucky. After a series of removals, the
surviving members of the Winnebago Tribe were required to
purchase a small reservation in northeast Nebraska.
By 1913, however, two-thirds of the reservation was lost
due to the Federal Dawes Act, which divided up parcels of land
that were taken out of Tribal jurisdiction and placed into
individual ownership for both Indians and non-Indians. It
wasn't until the 1970s, following more than 150 years of failed
Federal policies focused on assimilation and termination, that
the government realized the better policy towards Indians was
one of self-determination and self-governance.
The relationship between the Federal Government and Tribal
nations became more government to government, which meant that
Tribal governments became the entity responsible for developing
a local economy, providing for public safety, and promoting the
welfare of its citizens.
When Ho-Chunk, Inc., started in 1994 with one employee on
the Winnebago Indian reservation, there was no business
infrastructure or human resources in place. The Tribe had to
figure out how to start an economy from scratch, a difficult
task. In the early 2000s, Ho-Chunk, Inc., started successfully
participating in the 8(a) small business development program
with five employees. Today, Ho-Chunk, Inc., has over 1,200
employees with three Federal contracting divisions, serving a
wide variety of Federal agencies. These divisions have received
numerous awards, including just last week we received the
Secretary's Award for Excellence in Small Business Contracting
by the U.S. State Department.
Because of our participation in the SBA 8(a) contracting
program, Ho-Chunk, Inc., has grown into one of the region's
major economic drivers on the reservation and for the tristate
area of Nebraska, Iowa, and South Dakota. Unlike privately
owned businesses, Native 8(a) corporations exist to enhance the
conditions of Tribal nations who own the corporations, not just
the single owner or small number of owners.
My proudest accomplishments are derived from the impacts of
the Winnebago community that we have made in a short 25 years,
as referenced in my written testimony from our economic impact
study. These impacts include reducing poverty rates, increasing
household incomes and home ownership, and increasing Tribal
members earning a bachelor's degree. We are building pathways
for a positive future and allowing our Tribal community to
fulfill dreams.
My daughter is a perfect example of how this program
fulfilled dreams. My grandmother grew up poor, living on an
Indian reservation, with limited opportunities for education
and work. During the termination era of the 1950s, my mother
was forced off the reservations into schools in the city. She
was kicked out of school at a young age primarily because of
her race. I am the first in my family to receive a college
education, and my career has advanced because of the
opportunity to work for a tribally owned business.
My daughter, a member of the Winnebago Tribe, is now a
senior attending Harvard University, and she interned at Ho-
Chunk, Inc., last summer. This is just one example of why the
Native 8(a) program is vital to our Native communities and
consistent with Congress and the administration's unique
government-to-government relationship with Tribal governments.
There are several administrative and policy issues I would
like to raise with you today, all of which are outlined in
detail, with proposed recommendations, in my written testimony.
First, the SBA certify system was designed for individual
applicants, not entity-owned applicants such as Tribal 8(a)
corporations. Second, we have seen the devastating impacts of
category management. We believe its effects are contrary to the
purpose of the 8(a) program. Third, Ho-Chunk, Inc., is also
concerned with proposed legislation to level the playing field
for all 8(a) companies. And fourth, we have concerns that the
benefits and great work of small businesses were excluded from
the recommendations of the section 809 panel.
While Ho-Chunk, Inc., is doing well, I do want to caution
that 25 years of existence will need several more decades of
success in order to mitigate the harms that were inflicted upon
the Winnebago community through the previous generations of
failed Federal policy and actions to terminate the Tribe. The
Tribe, through Ho-Chunk, Inc., has started to reverse the 150
years of poverty on the reservation, but the work is not done.
The Native 8(a) program must be protected and encouraged to
grow in order to continue to build the capacity and
infrastructure that tribally owned entities now have so that
the gains of the corporation can return to the Tribal nation.
[Speaking Native language.]
Mr. KIM. Thank you for your testimony there, and very
powerful words there. It is a beautiful story hearing about
everything from your mother to now you being a proud mother of
a very successful daughter. So congratulations on that personal
side, and thank you for sharing that.
Ms. HAMILTON. And she is here today.
Mr. KIM. Oh, is she really? Where?
Nice to meet you. Congratulations.
Mr. Vincent, we are going to turn it over to you for 5
minutes now. Over to you.
STATEMENT OF EDWIN A. (SKIP) VINCENT
Mr. VINCENT. Good morning, Chairman Kim, Ranking Member
Spano. And I want to acknowledge Chairwoman Chu and the members
of the Subcommittee. I am here on behalf of the Native Hawaiian
Organization Association, where I served as a member of the
board of directors since 2012.
I am very excited to be here to talk about the SBA 8(a)'s
business development program and the positive effect the
resulting NHO program and your support has been to the Native
Hawaiian community.
Our NHOA is a trade association founded in 2007 to provide
a unified voice for our small but growing NHO community. We are
the new kids on the block. Our first NHO was started in 2004.
We now have 24 NHOs--or 24 members on our association, 10 of
which are newer and getting their certification, and many are
just developing their 8(a) firms now.
Small businesses owned by NHOs can participate in the NHO
8(a) program. Like individual owned businesses, to qualify, an
NHO-owned firm must be a small business that demonstrates
ethics and potential for success. Unlike individual owned NHOs,
NHO 8(a)s must be owned and controlled by a Native Hawaiian
organization defined as a nonprofit entity chartered in the
State of Hawaii, controlled by Native Hawaiians, whose
activities principally support and benefit Native Hawaiians in
the communities.
In addition to providing needed assistance and contracting
opportunities, NHO 8(a) firms are provided additional
attributes, as you know, designed to better support the NHO
community and beneficiaries rather than individual owners. NHO
firms can receive awards in excess of sole source thresholds
from the Department of Defense, and second, they are allowed to
have multiple firms in the 8(a) program, provided certain
criteria are met, as detailed in my written testimony.
NHO 8(a) program has enabled 14 active NHOA members to
support Federal agencies across the country while creating
jobs, economic ventures, and support the Native Hawaiian
community.
There is a saying: To fulfill a vision, you need to have a
vision. Each NHO comes in with a unique, nonprofit mission and
vision driven by their own passions, perspectives, and
abilities to serve and elevate the Native Hawaiian community.
In addition, accepted studies such as U.S. Census and so forth
define the Native Hawaiian community as economically
disadvantaged. These studies include historical and cultural
background information, socioeconomic data, and anecdotes, all
of which tell a more comprehensive story about the condition of
Native Hawaiians.
As NHOs, we fulfill our missions by developing community
programs, by gap funding-establish programs, funding other
Native Hawaiians serving organizations, and developing our own.
This includes financial literacy education and job training,
entrepreneurial programs, leadership, STEM and arts programs,
training, cultural engagement, post-secondary scholarships,
senior assistance, at-risk youth, health, so on and so on.
These programs and the jobs created contribute to self-
sufficiency and self-determination that may not have otherwise
been possible, and this is what fuels each NHOA mission and
their vision and their motivation.
Regarding the SBA, the NHOA does not have significant
issues with the administration of the 8(a) program. It is well
established with rigorous application and sees stringent
ongoing compliance processes. However, NHOA members would like
to see an increase in the training of SBA personnel with
respect to their knowledge of NHOs.
Regarding the adoption of category management, the NHOA
supports an exemption for all SBA small businesses contracting
programs from category management. Category management fails to
consider small business attributes and would be considered
harmful to small business by way of procurement opportunities.
We ask you consider to work with the small business community
regarding this matter.
Also, as Congress considers the reauthorization of the
Small Business Act, we encourage you to uphold Native 8(a)
program's ability of Tribes, ANCs, and NHOs to grow and support
communities and reject provisions that inhibit such abilities.
NHOA ardently supports the 8(a) program. NHO 8(a) program
provides progress toward economic growth, self-sufficiency, and
hope for Native Hawaiians.
You know, actions are definitely stronger than words, and
the actions of this Committee and Congress has been tremendous,
and it is telling our community that you haven't forgotten us.
We commend the Committee's commitment to small business and for
providing Native communities with the means to support and
promote enduring economic growth and self-determination.
So on behalf of the Native Hawaiian community, thank you
for your continued support, the opportunity to present and
speak before you, and remembering us. So aloha to you all.
Thank you.
Mr. KIM. Aloha to you too. Thank you so much for coming.
We are going to turn it over to Ms. Turvey. Over to you for
5 minutes now.
STATEMENT OF JANA TURVEY
Ms. TURVEY. Thank you, Chairman Kim, Ranking Member Spano,
other members of the Committee. Good morning and cama'i; hello.
It is my privilege, honor, and with humility that I testify
before you today discussing Native 8(a) contracting and the
impacts of this program to Alaska Native villages.
My name is Jana Turvey, and I am the president and CEO of
Leisnoi, Incorporated, an Alaska Native village corporation,
and I am a shareholder. I am an Alaska Native and Alutiiq. I am
also a board member of the Alaska Native Village Corporation
Association. ANVCA is primarily comprised of 177 Alaska Native
village corporations. Although we call them and you hear
corporations, this truly translates to communities, remote
communities throughout the vast State of Alaska, which many are
only accessible by boat or small aircraft.
Translating those communities into people, ANVCA represents
thousands, not hundreds, but thousands of Alaska Natives. These
are traditional, cultural, honorable people who love their
villages, respect their resources and their historical way of
life.
As Alaska Native people, we do not think about I or me. We
think us and our. We think community, which encompasses much
more than just geographical boundaries. Community is us as a
people. We think seven generations forward, having learned from
the generations of the past.
As I work in my capacity as CEO, the work is not for me and
not just for the 450 stakeholders I represent in my village
corporation. It is for future generations to come that have not
yet been born. Along with that mindset comes the
responsibilities written into the Alaska Native Claims
Settlement Act of 1971. ANCSA was passed with the goal of
providing a fair and just settlement of aboriginal land claims
by Native groups of Alaska. The intent of Congress was that the
Alaska Native corporations would be the economic foundation
that would build business and provide benefits. However, ANCSA
did not provide any sort of business development or economic
engine.
The SBA's 8(a) program is the missing piece that affords
this opportunity. Only 20 to 30 of the ANVCA members are
currently active in the 8(a) program. Of those participating,
12 were named in the 2018 Top 49ers of Alaska businesses
generating revenue, employing more than 12,000 people globally,
more than 600 of those in the State of Alaska. At least 85
percent of the net income from ANCs is donated back to the
community in the form of benefits.
As an example, recently, ANVCA was contacted by a
distraught Alaska Native individual who had lost a sibling in
the last 24 hours due to suicide. I cannot imagine the
unbearable pain this person was experiencing. ANVCA was able to
put them in contact with their village and regional
corporations. Both corporations provided immediate assistance,
not only with burial benefits, but also in the traditional way,
the Native way, supporting the shareholder and their family.
Recently, a national morning news program was in the
Village of Iliamna and provided visual footage of gas prices at
$4.99 a gallon and $13.49 for a half gallon of milk. The cost
of living remotely in Alaska can be grotesquely high, and the
Village of Iliamna is only 200 air miles from Anchorage. Today,
honey buckets and inadequate sewer systems remain throughout
remote Alaska. There are areas that do not have internet
access, or the access is so poor, it will be out for days and
weeks at a time. Costs of electricity are 12 times the national
average.
However, as a result of ANCs participating in the 8(a)
program, benefits are provided to well over 150,000
shareholders and their families. Homes are heated, lights are
on, meals are fed because dividends are being distributed.
Higher education opportunities and degrees have been achieved
as a result of thousands of dollars in educational
scholarships.
A personal side note. My daughter recently received her
undergraduate degree from Gonzaga University, graduating magna
cum laude, partially because of these types of scholarships.
Donations support sports teams and youth participation at
events like the AFN annual convention. To say that our
stakeholders are counting on the success of our Native
community-owned organizations would be an understatement.
There is room for growth within the Native 8(a) contracting
program, and I do have two thoughts to offer. First, the
regulations guiding and safeguarding the program are complex.
The reporting requirements are lengthy and often cumbersome.
More training and education entering into and working through
the program will help all contractors have faith and confidence
in their compliance.
Second, during the September 18 hearing of the House Small
Business Committee, comments were made about the 9-year
participation clock being too short. I support this comment and
feel the stress at Leisnoi as we have just completed our second
year. I don't expect the SBA to berain our firm with contracts.
It is our job to secure that work. I would offer that the 9-
year clock does not start until the first contract is awarded,
allowing participants to do the necessary groundwork that will
eventually secure those precious contracts.
Members of the Committee, thank you for giving me the
opportunity to speak with you today. I am happy to answer any
questions. [Speaking Native language.] Thank you very much.
Mr. KIM. Thank you very much for your insights as well as
your recommendations on that front. I am sure we will get into
those in some of the questioning.
But first, I would like to turn it over to Ms. Williams for
your comments here in the beginning. Over to you for 5 minutes.
STATEMENT OF CHRISTINE V. WILLIAMS
Ms. WILLIAMS. Thank you for inviting me to testify here
today. My written testimony contains studies, case studies,
statistics, as well as reference to the Constitution, treaties,
and applicable jurisprudence. I will not be able to cover all
of it today, of course, but I memorialized it for you, and this
goes directly to the trust responsibility due to the Alaska
Native people, the Native Americans, and the Native Hawaiians.
I am a woman-owned small law firm. Like most small
businesses, I hustle. I have to. I have worked extensively with
SBA program participants, including Tribal and ANC-owned firms
as well as individually owned firms. Every program participant
I have represented in the SBA.
In my experiences, small businesses often work together in
partnership to get the job and then get the job done. Native-
owned community benefiting firms are no exception in the
respective reach-out to other small businesses. The SBA
regulations also encourage and reward small businesses to work
together.
Firms owned by Native groups are different in that they
directly provide benefits to shareholders, members, or
citizens, and the communities in which they live. Federal law,
as we have seen in the Constitution, Article I, section 8,
clause 3 reserves the right to Congress to engage in commerce
with Native Americans.
Congress has a special and unique trust relationship with
Native Americans. This has been reinforced by treaties and
enunciated multiple times in jurisprudence. As such, economic
development programs participated in by Native Americans is
mandated by the trust responsibility the U.S. Government
established and as various courts have held, including the U.S.
Supreme Court.
Courts have examined and reaffirmed the right of Native
Americans to be in the 8(a) program in furtherance of the U.S.
trust obligations and to fulfill its commitment to Native
Americans' self-determination and economic benefits.
The relationship between Native Americans and the U.S. is,
quote, perhaps unlike that of any other two people in
existence, marked by peculiar and cardinal distinctions where
exist nowhere else. Cherokee Nation case 1831. Another case
simply stated, quote, by the 1870s, the government had
successfully placed Native Americans in a state of coerced
dependency.
This relationship of dependency between the U.S. and the
Indian people was forcibly established. This forced dependency
decimated Native Americans in ways too numerous to count. In
the history of the United States, only Native Americans had
their aboriginal and indigenous lands, cultures, economies,
rights, institution, and sovereignty appropriated, converted,
and/or extinguished.
Federal procurement and the right of Native Americans to
participate in the 8(a) program have long been recognized as a
bright light to fulfilling the U.S. trust responsibility and
furthering the economic interests of Native Americans. Numerous
hearings by Congress, including last year, have established
that this is one of the brightest lights for Native American
communities. As recently as last summer, the SBA reaffirmed
this very fact.
Native American and infrastructure. Most Native American
groups cannot afford and should not be forced further into
coerced dependency by heaving onto them a burden not rightfully
theirs. This includes a supply of clean drinking water, roads,
sewer systems so the honey bucket system is eliminated, and
basic infrastructure. Congress did not enunciate this as a
burden as it tries to fulfill its trust obligations of economic
self-determination of Native Americans. Had it been so, it
could have said so, and it did not.
Veterans and Native Americans. I have worked extensively
with veterans and service-disabled veterans. The VA has the
toughest set of regulations I have ever dealt with. And when
you marry SBA regulations with the VA regs, you have got a
problem. And when we speak about veterans, we are necessarily
and without exception speaking about Native Americans and
Alaska Natives. They have the single largest cohort and have
since the Veteran Administration has kept statistics as being
in the military.
My time here orally is limited, but my written testimony
contains history, facts, and modern circumstances demonstrating
the points I have made here today, as well as other points. I
would also note that I do go with the SBA to train on various
regulations. And on the questions on the contracting shops for
various offices, they are hungry for them. I would encourage--
that was the first time when the GAO testified today that I
actually heard that they were going to hire somebody, because I
have done it on my own time and dime. So pick me. I will help.
That is all I have, and then I am open for questions.
Mr. KIM. Well, I appreciate each of the five of you
bringing real important insights and perspectives to this, so
we will certainly have some questions for you, I am sure.
I wanted to just start by recognizing myself for a couple
minutes here, then I will turn it over to my colleagues.
Mr. Valandra, I wanted to start with you. First off, I
would like for you to just briefly explain how the individual
and group-owned rules differ within the 8(a) program and why it
exists. Just help us kind of start off with that framework.
Mr. VALANDRA. Sure. I think it is important to distinguish
between a group of Native Americans and a Tribe or an ANC or a
Native Hawaiian organization. The members of NACA are all
businesses owned by Tribes, by federally recognized or State-
recognized Tribes, which means that they are owned by a
government, a community of people as opposed to just a group of
individuals. I mean, I think that is a--it may seem obvious,
but I think that is a very important distinction to be made,
and that is the primary distinction within the SBA program.
The Native American program within 8(a) are tribally owned,
that is, community-owned entities, businesses, enterprises as
separate and distinct from an individual. An individual, there
are rules that I don't want to take up too much time with just
in terms of differences of the 9-year time horizon for
individuals. All of the entities have to qualify under the 8(a)
program with ethics, background, financial qualifications,
those things, but Natives have that distinction of being--go
ahead.
Mr. KIM. Well, one other aspect of this that I wanted your
thoughts on, as the Chairwoman mentioned beforehand about this
L.A. Times story, which mentioned--had reported that on
contractors who receive millions of dollars reserved for
minorities set aside by claiming to be Native American, one
other aspect to just help bring out here is can you please
explain the main differences between individually owned small
businesses that claim to be Native American and small firms
owned by Native American groups such as Indian Tribes?
Mr. VALANDRA. Well, since the adoption of the 2011 regs,
there really is not that much difference in terms of declaring.
Prior to 2011, you could self-declare that you were Native or
fit one of the categories to be an SBA participant, but since
the passage of that--or the adoption of that regulation, sorry,
you can't just self-declare. You have to provide documentation
that you are a member of a federally recognized Tribe or State-
recognized Tribe, and there is documentation to do that.
So the problem, as I understand it, or as reported by the
L.A. Times, really was a regulation issue and an SBA lack of
attention issue prior to 2011.
Mr. KIM. Building off that, then, you know, how can
Congress ensure that only small firms owned by individuals with
genuine claims of being Native American get certified into the
program?
Mr. VALANDRA. Well, again, I think the adoption of the
regulations in 2011 that did away with self-declaration, that
you have to--that individuals have to provide documentation
that they are, in fact, members of a disadvantaged group or a
Native American Tribe, federally recognized or State-recognized
Tribe, was an important step. And I think so long as Congress
is satisfied that the SBA are following their own regulations,
that you have taken that step.
Mr. KIM. Great.
Ms. Hamilton, I wanted to just kind of continue this thread
a little bit with you. Still regarding that L.A. Times story,
their investigation found $300 million in contracts were
awarded to small businesses making unsubstantiated claims of
being Native American. Could this situation potentially happen
within the context of group-owned Native American firms?
Ms. HAMILTON. So, first of all, I would like to address the
article was just a tad bit confusing because it confused State
contracting, local contracting, and Federal contracting all
mixed up, and it didn't clarify that. And they are all
different rules and different jurisdictions.
So addressing the Federal contracting, Native Americans can
participate in the 8(a) program as an individual. But if you
are a Native 8(a) and you are owned by a Tribe, an ANC, or an
NHO, then you have community responsibilities and a higher
level--you have a different application. You have an entity
application, which I kind of addressed in my testimony, but
also, from personal experience, when we submit our
applications, we are required to download the Federal Register
to prove that we are a federal-recognized Tribe. We also have
to prove that we are controlled by the Tribe and tribally
owned, and I don't think it applies to the ANCs and the NHOs,
but we have to prove as a Tribe that our management has Tribal
members and those Tribal members are from an economically
disadvantaged Tribe.
So to answer your question, I think that the SBA did. From
my experience in 2011, we also have to recertify that every
year in our annual review with the SBA. And I know that it
takes a while for them to verify that and the certification and
the review process. So I do--I have seen the impacts of the
2011 SBA implementation of that. So hopefully that answers your
question.
Mr. KIM. That is. No, it is helpful to just unpack this.
I have another question too, but I am going to reserve it
to the end here. But I wanted to turn it over to Ranking Member
Spano for his line of questions.
You are recognized for 5 minutes.
Mr. SPANO. Thank you, Mr. Chairman. You have to excuse me,
I am battling a cold here so my voice is a little bit out of
sorts.
But just a question for anyone who wants to respond on the
panel. One of the unique requirements for 8(a) groups is the
requirement they must submit information to the SBA showing how
the 8(a) program benefits their communities. You have got to
show it benefits your community. Is there any uniformity in the
way that the SBA captures this information, number one,
uniformity in the way the SBA captures that information? Number
two, what proportion of 8(a) dollars goes directly back into
your communities? Is that information captured and relayed to
the SBA? Anybody want to answer that, those questions?
So number one, any uniformity in the way SBA captures the
information. I guess three things. So that is number one.
Number two, what proportion of 8(a) dollars goes directly back
to your communities. And number three, is that information
about what goes back to the communities captured and relayed to
SBA.
Ms. Williams, you are aggressively shaking your head, so
I'm going to go to you.
Ms. WILLIAMS. So, yeah. There is some form of uniformity,
but it is also open for narrative because it varies on the
corporation. So such as Leisnoi, it has one 8(a) in the
company, and it has very few--well, I would imagine it has very
few things to report. You have other firms that have been in
the program longer that are going to have more to report, so
they report different.
The community is going to depend on what it needs
differently. So if you are an Arctic community, you may need
things very different than you are on the southeast coast of
Alaska. One region is the size of Oregon, for instance. It is
very different. So you have some uniformity. You also have a
narrative requirement. The SBA has allowed some flexibility,
because people need things differently. Their shareholders are
asking for things differently, and so they give reports
differently, but there is some uniformity there. There is a
required reporting form. The community owners are the only ones
that are required to do that. So there is some.
In terms of reporting directly back, so if you have a
subsidiary, it is actually an indirect reporting mechanism in
the first place, so they do sweeps of the subsidiary. So not
only do they give directly to the shareholders in the forms of
dividends, which is trackable, but they usually give it--and
you will see it. I submitted the testimony of one smaller Old
Harbor Native Corporation, and they gave a graphic of what they
give and how they give it, because they give it in different
forms. So as you can imagine, the poverty in Alaska is second
to none.
Mr. SPANO. Yeah.
Ms. WILLIAMS. Especially in rural Alaska. The social ills
that accompany that come with it. So not only do they give to
their shareholders themselves, but they give to programs that
benefit their shareholders, such as alcohol and addiction
recovery services, health services, things that if a
shareholder dies that is out of the village, they can't afford
to fly them back. They have to provide that benefit.
Mr. SPANO. Does anybody else want to answer those
questions? Ms. Hamilton?
Ms. HAMILTON. So there is a form in the annual reviews for
the SBA, and it has five categories. And I don't know if I am
going to recall them off the top of my head, so I would have to
get back to you on those categories. But they are general
categories and you can fill those in, and those are required of
the SBA annual review. And it is pretty open because you are
covering Alaska Natives, Tribes, and NHO, and it is self-
determination and self-governance. So each Tribe--so I will use
the Winnebago Tribe.
So the Tribe set up our Tribal corporation, and we have a
25 percent dividend back to the Tribe on an annual basis per
our audit. The Tribe then uses that for governmental services.
Sometimes, and in addition, we have taken it as our work hobby
to create Ho-Chunk Village, and it really was our passion. So
we earned the money, and outside of that, we have given
scholarships. Outside of the 25 percent dividend, we have given
scholarships. We are building a village, which is outlined in
our economic impact study. We have been able to help. So the
money going into this program directly impacts positively the
communities that it is meant to.
Mr. SPANO. So really quickly, I only have 15 seconds left,
you said 25 percent is paid back in dividends, in your specific
organization's instance. What is the dollar amount, if you can
share that with me, represented typically by that 25 percent
dividend?
Ms. HAMILTON. I will have to get back to you on that.
Mr. SPANO. Yeah, I would appreciate that, because for us,
you know, and Ranking Member--or, Mr. Chairman, I don't have
any more time, but I would love to--you know, I understand the
difficulties and the exigencies as it relates to the different
Tribes being treated differently and all that, but from an
oversight regulatory perspective, it is our responsibility to
make sure that the program is effective, and it has its
intended purpose, which is for the beneficiaries of the Tribes
and so forth, Native American groups to benefit.
And so with all due respect to every one of you, I am
absolutely certain you are doing your best to make sure that
your moneys--that these benefits are going back to the persons
intended. But to me, it is important that, to the extent
possible, we are able to quantify what those benefits are, and
that helps us as overseers to make sure that the intent of the
legislation is being effectuated.
I yield back.
Ms. HAMILTON. If I may, then, ask my economic impact study
be submitted to the record.
Mr. SPANO. Great.
Ms. HAMILTON. That helps quantify it.
Mr. SPANO. Thank you so much.
Ms. WILLIAMS. And if I may, just for--I am sorry if I am
out of order, but the ANCs have done a series of regional
associations, which is one of the only associations that can
afford to do such a study, and they quantify that 75 to 85
percent per annum goes directly back, net profits go directly
back into their communities.
Mr. KIM. Well, I appreciate that. And I share the sentiment
of the Ranking Member that, you know, we certainly want to make
sure that we understand the impact is being felt, that we
understand, you know, what is working, what is not, what can be
improved going forward, so we will continue to do that within
this Committee.
I want to recognize my colleague, Congresswoman Davids,
now, for 5 minutes. Over to you.
Ms. DAVIDS. Thank you, Chairman.
So, first, I want to thank all of the panelists and folks
who came here, and I know some of you traveled great distances
to come testify before this Committee today. And again, I want
to thank the Committee--the Subcommittee for allowing me to be
a guest in this hearing today because I don't sit on this
Subcommittee.
So I want to start off by following on some of the trust
responsibility questions that I had the chance to ask after we
heard from the GAO earlier and based on the report that they
provided. First, I would like to ask, Ms. Hamilton, you
mentioned that sometimes the annual certification review takes
a little while to come back. I am curious whether or not that
recertification process or the annual review process and the
lag that happens hinders at all your ability to continue to
function and operate, and I don't just mean in terms of
continuing to get contracts. I also mean the time and resources
that your organization puts into that certification process,
and whether or not, in your view, that cuts against the policy
of promoting self-sufficiency and the Federal Government's
trust responsibility.
And then if anyone, after Ms. Hamilton answers, has
something to add, I would like to hear that.
Ms. HAMILTON. Thank you, Congresswoman Davids. So the
certification process has taken over a year to get back with
many touch points with the SBA and our staff. We have two full-
time staff that just deal with working through the
certifications and the annual reviews with the SBA, so we have
many touch points with the SBA. And in my experience, the SBA
is diligent in our local SBA office of pushing back and making
sure we have all the information.
I am sorry, what was the second half of your question?
Ms. DAVIDS. Well, I was wondering about whether or not the
policy of promoting self-sufficiency and the Federal trust
responsibility, in your view, whether or not the way that the
SBA has been running this program as it relates to annual
review and certification, whether it seems as though they are
meeting that mark of the trust responsibility or not.
And I just want to note that you said you have two staff
dedicated to the certification process, and we have, from a GAO
report, that there is 1.5 full-time employees working in the
Alaska regional office.
Ms. WILLIAMS. No, not anymore.
Ms. TURVEY. The data that the GAO testified to was based
on--I think 2014 was the ending point, and so the Alaska
district office staff has increased a bit since that time and
has become more robust.
Ms. DAVIDS. Oh, okay. Okay. Well, that is good to hear.
So if you want to speak to the trust responsibility, and
then any others.
Ms. HAMILTON. So I find that the SBA, dealing with--so
there is an education component of the difference of the
individual 8(a) and the entity-owned 8(a)s and that trust
responsibility. Once we have been able to educate--and I know
that the SBA has done some education programs. I do think they
acknowledge that. I do think that they are limited in staffing,
and like I mentioned I think in my testimony, I know that a lot
of the processes are really geared to the individual 8(a)s and
not entity owned.
So the application and the certify system, the new SBA
system, is really individually owned. So we have to kind of
load up, let's say, our proof of our Federal recognition just
in places. There is not a set area for that in that system. So
helping with that definitely would help us with our self-
determination and self-governance.
Ms. TURVEY. Chairwoman, if I could--excuse me.
Congresswoman, if I could add to that. So I have one person
dedicated on my staff to compliance, and Ms. Williams said I
have one 8(a). I actually have two now, but one person for just
that small number dedicated to compliance, which includes the
certified process as well as all of the other processes
required when you participate in this program, as I mentioned
in my testimony, is cumbersome and can be exhausting and
extremely taxing on any staff member. And so as a Native group
representing here today, we are singled out in all of the
requirements of reporting that we are subject to. There is no
other group that participates in the small business program
that is required to report as extensively as we are, which
means that we have to pull resources in order to meet that
mandate.
So directly to your question, does it impact our self-
sufficiency? Absolutely.
Ms. DAVIDS. Thank you.
And again, I appreciate you all providing testimony and
being here today. And I yield back.
Mr. KIM. Great. Thank you.
We are just going to do a quick second round here, just a
couple lingering questions we just wanted to make sure we get
forward.
Mr. Vincent, I just wanted to direct a question to you. We
share your concerns. This Committee shares your concerns about
impact category management and, you know, it is something that
you raise in your written testimony, and you spoke very
powerfully about it in your oral testimony.
I would like for you to just expand on this for us, to be
able to help us get an understanding here. Can you please
expand on how the Native 8(a) contractor has been impacted by
category management? And what are some of the potential steps
this Committee should take regarding the matter?
Mr. VINCENT. Well, thank you for asking that question.
First of all, I can attest to how we think NHOs will be
impacted. Our large dollar contracts come from Department of
Defense, and moving the 8(a) program from--or 8(a) contracts
into category management would limit NHOs and NHO 8(a) firms
from competing and getting that foothold that we need in sole
source contracting.
One example that happened at one of the member firms is
that they were just about to finish an 8(a) contract that they
had competed for as a set aside, and the customer really wanted
them. However, that contract was moved into a vehicle, a
contract management vehicle, and eliminated them from being
able to compete for it. So what has happened was it eliminated
not only a competent individual, a competent firm that had good
CPARS, good ratings, and had the experience of working that,
moved it to a category to where only a few--even though it was
assured that an 8(a) would get it, but to a few 8(a)s that are
on that vehicle that may or may not have the experience and may
or may not be able to provide some of the capability like the
others did.
So what it does, in my mind, is it substantially reduces
the amount of 8(a) opportunities to the general community and
affords those 8(a) opportunities to small amounts of 8(a)s or
small businesses that happen to be on that particular contract.
Mr. KIM. Okay. Well, I appreciate that expanded explanation
there. It is helpful for me.
Ms. Turvey, I wanted to direct my final question to you.
This Committee has heard concerns from some sectors of Native
8(a) community regarding congressional efforts that seek to
increase the sole source thresholds in other small business
contracting programs. So I wanted to see if you could elaborate
on those concerns, you know, so we can have a better
understanding how to proceed here.
Ms. TURVEY. Thank you, Mr. Chairman, for that question. I
want to be real clear in answering this that I am wearing my
ANVCA hat, and there have been discussions within our
organization about those thresholds. We don't view this and the
opportunity to review the individual thresholds as competition.
We actually acknowledge that it is time that those thresholds
be reviewed. I think it has been a couple of decades. 1985 is
coming to mind as to the last time those thresholds were
evaluated.
But in doing that, it will be reasonable that they are
evaluated on parity, meaning those are individually owned firms
that are being looked at. And we, again, are representing
thousands of shareholders in our Native entity-owned firms. We
believe that a reasonable increase is favorable, and we don't
take any issue with the current proposal, I believe, of
doubling those limits. We would, however, pause and take a
moment of issue if we are looking at increasing those levels to
10 times or more. That is not on parity with what we believe
would be consistent with the intent of the small business
program.
Mr. KIM. Okay. Thank you. That is very helpful.
I am going to close my questions on that front, turn it
over to the Ranking Member if he has anything further he would
like to ask.
Mr. SPANO. Thank you, Mr. Chairman.
Just a couple questions, if I may, directed towards Ms.
Williams, if I can. On average, if you have a number or if you
just have a general idea, what is the percentage of sole source
contracts that is awarded to 8(a) groups annually? In other
words, of an 8(a) group's portfolio of business, what
percentage are typically sole source contracts?
Ms. WILLIAMS. I don't have that number. I know that less or
five were awarded during the years of 2012 to 2014 when the GAO
did its study and probably their most recent numbers. But to
Native-owned 8(a) firms, that is a hard distinction, and I
don't have those numbers.
Mr. SPANO. Okay.
Ms. WILLIAMS. But the sole source in and of itself and the
follow-on rule, if you would like to ask follow-up questions on
what the GAO testified to, I would be happy to answer those
questions as well.
Mr. SPANO. Ms. Turvey, as it relates to the ANC, your ANC
specifically, or other ANC groups, do you have that number,
what the typical percentage of your portfolio is that is
represented by sole source contracts?
Ms. TURVEY. I do not have the number in regards to the
Alaska Native Village Corporation Association. I can tell you
that Leisnoi has received one very small sole source contract.
Mr. SPANO. So not much?
Ms. TURVEY. Not much.
Mr. SPANO. Not many. It would just be interesting, as I
understand--if we are operating under that assumption, maybe my
next question is moot, okay.
Ms. TURVEY. Okay.
Mr. SPANO. But I am going to ask it anyway because I would
like to get a feel for your opinions on this. Should 8(a)
groups be shifting their focus or attempting to diversify their
portfolios to include other types of awards, including full
open contracts? I mean, is that the end game? Should it be the
end game? I understand it is required through the 8(a) program.
And I will just throw that open to anyone who wants to answer
it.
Mr. VINCENT. I would like to answer it. First, let me give
you a little insight of your original question, is that in the
beginning, companies normally are almost--at least my
experience at my organization, have been almost totally sole
source just to get established. And you are right, we are
driving toward being able to graduate and go on to competition.
So those first few years is a foundational establishment.
And how long does it take before revenue comes in? It
depends on a whole lot of things. The community, the type of
products, the skill of the management and so forth and so on.
Because it does take--on the average, it took about 3 to 5
years for any of our companies to start making a profit, which
kind of answers a little bit of your question in the beginning,
you know, how much goes back to the community.
So basically, yes, the end goal is to make it a
competitive, viable organization. And one of mine that
graduated, and it is already mentoring the other companies that
are still in the program.
Mr. SPANO. That is great.
Mr. VINCENT. So I would like to see--this is what we are
trying to achieve.
Mr. SPANO. Okay. Anyone else like to answer that?
Ms. Hamilton.
Ms. HAMILTON. So I think, like Mr. Vincent said in the
beginning, it is a lot of sole source. I also think we are
ignoring that there are 8(a) competitive contracts, and a lot
of contracts come out as 8(a) competitive. So just to count
contracts that are in the 8(a) program as completely sole
source is inaccurate.
Mr. SPANO. I guess that is why----
Ms. HAMILTON. We do a lot of 8(a) competitive contracts.
And then there is also a lot of IDIQs or GWAC contracts that
are in the 8(a) program that you win the overall contract and
then you bid for the task orders. So there is a lot of that, so
I wanted to clarify.
Mr. SPANO. Yeah. And I am glad you did. I did specify sole
source contracts, though, but I appreciate you making that
clarification.
And is one of the reasons why we have this 9-year period,
right, so that is kind of the launch. That is the on-ramp, so
to speak, right, to competitiveness, is that 9-year period?
That is what I understand, anyway. Can you confirm that for me?
Ms. WILLIAMS. That is true. And then by the--but you have
to start building a non-8(a) revenue. So you have your first
years that are--you can have all 8(a) revenue. I don't know
anybody that does. By the fifth year, you have to build in non-
8(a) revenue. You are out of compliance if you do not. Six
months, a year, and you are done. So it is an on-ramp, but for
me, I can be a woman-owned small business. I walked away from
international law firms to do that. I can be that forever. I
don't have to go full and open like that. 8(a) being a subset
of a small disadvantaged business, that would be considered to
me full and open.
Mr. SPANO. I see. Thank you so much.
I yield back, Mr. Chairman.
Mr. KIM. Great. Thank you.
Look, I just wanted to take a second again to thank all of
you for coming out here today and sharing your perspectives and
answering some of our questions.
I wanted to end with actually a line that comes to my mind
from what Mr. Vincent said. If I remember this correctly, he
said to fulfill a vision, you need to have a vision. Is that
right, sir?
Mr. VINCENT. Correct.
Mr. KIM. You know, I think that that is something that
really just guides a lot of what we are trying to do here. You
know, the 8(a) program has been the hallmark of contracting
programs managed by SBA, the vision of it to be able to help
develop the capabilities of individual businesses, but also as
we have seen today, to uplift and create opportunities for our
entire communities. And as we try to fulfill that vision, we
need to think about what is it that we need to be able to do to
be able to understand whether we are moving in the right
directions and really trying to stay true to what it is that
our predecessors thought to put forward to be able to help you
out.
Due to its importance, this Committee takes very seriously
any concerns or deficiencies, and will work to strengthen the
program as needed. On that note, we look forward to working
with GAO and the SBA OIG and Native 8(a) contractors alike to
make the necessary reforms.
I would like to just at this point ask unanimous consent
that members have 5 legislative days to submit statements and
supporting material for the record. And without objection, so
ordered.
And if there is no further business to come before the
Committee, we are adjourned. Thank you so much.
[Whereupon, at 12:00 p.m., the Subcommittee was adjourned.]
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