ANCSA Alaska Native regional corporations holding strong: some losses, but gaining momentum.

• Author: Stricker, Julie
• Position: NATIVE BUSINESS: SPECIAL SECTION - Company overview

[ILLUSTRATION OMITTED]

[ILLUSTRATION OMITTED]

Uncertain times. Challenges. Opportunities. The title pages of annual reports from Alaska Native regional corporations attest to the difficulties of the recent economy and a rapidly changing world. Caught by the national financial crisis that began 2007, many corporations suffered steep losses, but today are emerging from the Great Recession stronger and more diversified than ever.

The 12 Alaska-based corporations have operations around the globe in such diverse fields as construction, government services, tourism, mining, oil field operations, hospitality, clean energy and technology. They are economic engines, creating thousands of jobs in Alaska alone and pouring millions of dollars into scholarships and cultural programs for shareholders. Based on annual revenue, 11 of the 15 largest private companies in Alaska are Native corporations and 21 of the top 40. In 2009, total revenues for the 12 Alaska-based regional corporations exceeded $7.2 billion.

They are a unique group, created by Congress under the 1971 Alaska Native Claims Settlement Act with dual financial and social mandates. Under ANCSA, Alaska's Natives ceded control of 320 million acres of land in return for title to 44 million acres and $962.5 million, which was divided between 12 regional and 200 village corporations. A 13th corporation was later created for Alaska Natives living outside the state.

Not only are the corporations expected to create profitable businesses to support shareholders, they are also tasked with supporting shareholders' cultural, educational and social needs.

After a rough start, Alaska's Native regional corporations and many village corporations have grown exponentially in the past decade, mainly due to government contracting. Under the Small Business Administration's 8(a) program, socially and economically disadvantaged groups receive preferences on government contracts.

Unlike others in the SBA 8(a) program, Alaska Native corporations are not limited on the number of subsidiaries they can have, are exempt from restrictions on size and minimum time in business, and have no ceilings on many sole-source contracts. Alaska Natives aren't the only group benefiting from the program, but their success has made them the most visible. Robin Kornfield, vice president of communications and marketing for NANA Development Corp., says, "the program is allowing Native entities across the United States and in Alaska and Hawaii to get a seat at the $500 billion federal-contracting table and get some parity for our businesses and our people."

According to the SBA, the corporations won $13 billion in contracts between 2000 and 2006. For some Alaska Native corporations, 8(a) businesses account for more than half of their annual revenues.

Congress, however, is proposing some regulation changes that could curtail contracting activity by Alaska Native corporations by removing some of advantages they currently enjoy. A 2006 General Accounting Office report recommended increased oversight to 8(a) contracts and a series of hearings was held in late 2009 by a committee headed by Missouri Sen. Claire McCaskill. Alaska Native groups and corporations are fighting the changes. A final version of the regulations and an implementation schedule is expected by the end of 2010, according to Kornfield.

"What I can tell you is that Native 8(a) is working and helps our communities, our state and our country," Kornfield says. "The attacks on the program are often misperceptions and misguided."

Barney Uhart, president of Chugach Alaska Corp., which has found tremendous success with government contracting, said a periodic review of any program is good. He supports some of the changes, but doesn't agree with all of them. Uhart doesn't think they will have a major impact on Chugach Alaska, which has broadly diversified its holdings and successfully competes for government contracts outside the 8(a) program.

There is still a cost, however: "The fight to protect our rights to participate in the SBA 8(a) program still continues and also takes valuable time away from our focus to build the company," Chugach Alaska management wrote in a letter to shareholders.

Another challenge is the Obama administration's increasing use of "in-sourcing," or having federal agencies provide government services instead of contracting with outside companies. That would likely increase competition for fewer available contracts.

AHTNA INC.

2009 was a struggle for Ahtna Inc., with some sectors holding their own while others floundered. Ahtna has 10 operating subsidiaries with primary lines of business in civil construction, environmental remediation, facility support services, government contracting, tourism and fuels management. Headquartered in Glennallen, its 1,500 shareholders live mostly within the Copper River Valley region of Alaska.

"What we saw in 2009 were increases in competition, delays in contract awards and negative trends in government spending in certain sectors," wrote president/CEO Ken Johns in a letter to shareholders. Ahtna implemented strict spending and hiring controls and tightened...