8(a) advantages: history in the making.

• Author: Bohi, Heidi
• Position: NATIVE BUSINESS: SPECIAL SECTION

It's like cooking a pot of crabs on the beach--when one crustacean tries to make a break and climb out of the pot of boiling water to safety, the others grab on and pull him back down to the demise of everyone.

Call it the Alaska Native version of "one bad apple spoils the whole bunch," authored by Carl Marrs, former president and CEO of CIRI, and incidentally, an Aleut from Kodiak Island who's cooked his share of crab on the beach. He uses this analogy to make a point about the Small Business Administration (SBA) 8(a) program--an area he also knows a lot about. As he and most business and Native leaders will tell you, it's the best thing to happen to Alaska Native corporations (ANCs) and their shareholders in contemporary history, though the program's existence continues to be slammed at every turn for reasons that range from outsiders not understanding how it works, to those who are simply narrow minded.

STEVENS LEGACY

Through legislation spearheaded by former Sen. Ted Stevens, ANCs can win sole-source contracts of unlimited value--the biggest complaint by non-Native competitors. Although for other 8(a) firms they are capped at $3.5 million for services, or $5.5 million for manufacturing, the advantage for these non-Native entities is that the entire sum goes to one person, while for ANCs, the contract profits must be spread among thousands of shareholders, depending on the size of the corporation. And while other small business owners can have only one 8(a) company at a time, ANCs are allowed to have multiple affiliate businesses in the program if they are all in different sectors. ANCs have made sound use of these competitive advantages, rotating new subsidiary firms into the 8(a) program after nine years, which is the maximum time companies can stay in the program.

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When the program first took off, certain companies abused the 8(a) structure, winning large contracts with the departments of Defense or Homeland Security, and sometimes creating complex business partnerships with firms that had no ties to the SBA program or Alaska. Although these past instances where a Native or other 8(a) firm entered into a business relationship with a non-8 (a) firm in good faith--only to learn that they intended to fraudulently manipulate it--in many of these cases there was not dishonest intent and the problems were caused by Outside firms, not the ANCs, Marrs says.

That's when the program first came under scrutiny, he says, and...