EXCLUSIVE: Federal Contract Preferences - A Boon For Native Hawaiian-Owned Companies
BY JIM DOOLEY- A handful of Native Hawaiian-owned companies used federal contracting preferences authored by U.S. Sen. Daniel Inouye, D-HI, to land some $500 million in non-bid or reduced competition government work since 2005, according to federal purchasing records.
Officials, employees and partners of many of the same companies donated nearly $100,000 during the same period to the Inouye election campaign and $100,000 more to other members of Hawaii’s congressional delegation, files of the Federal Election Commission show.
Much of the contract work involved installation of computer and communications systems for the armed services. A wide range of other jobs have been performed, including security guard work, explosive ordinance disposal and even provision of mental health professionals for treatment of U.S. Marines at Camp Lejeune in North Carolina.
The contracting preferences are given to companies called Native Hawaiian Organizations (NHO’s) and are similar to federal procurement allowances used by Alaskan Native Corporations (ANC’s) to obtain nearly $30 billion in non-bid or reduced competition government work since 2000.
The ANC contracts came under critical fire recently in Congress. Native Hawaiian contractors are concerned that reform legislation authored by U.S. Sen. Claire McCaskill (D-Missouri) aimed at ANC’s could endanger the benefits now enjoyed by Native-Hawaiian owned firms.
In a written statement responding to Hawaii Reporter, Inouye supported contracting preferences for both ANCs and NHOs.
“Native Hawaiian Organizations, like their Alaskan counterparts, are vital economic engines and do much to improve the financial prospects of indigenous people,” Inouye said.
McCaskill’s office said her bill, introduced last month, “does not address Native Hawaiian Organizations” that now receive contracting preferences.
Despite McCaskill’s statement, Robin Danner, president of one Native Hawaiian company receiving federal contracts, sees the McCaskill measure as a threat to all Native American businesses, whether they’re owned by Alaskans, Hawaiians or Indian tribes.
“Her bill is about taking down the success (of) a group of American companies that aren’t supposed to be successful, better not be successful, Native Americans in particular,” said Danner, head of Native Hawaiian Economic Alliance, Inc.
Danner adds that for McCaskill, business success should “be reserved for a handful of corporate elite from Missouri or other states, but not for the Winnebago Indian reservation, an arctic village in Alaska, a Pueblo in New Mexico or a dot of an island in the Pacific.”
Danner may be particularly sensitive to McCaskill’s bill because her company here, Nuvuk Construction, LLC, is co-owned by an Alaskan Native Corporation and has received $11.9 million in federal contracts since 2005, according to federal records.
Danner's brother Scott is the former chief operating officer of the ANC. She and her relatives have donated $6,000 to Inouye, Sen. Daniel Akaka and Congresswoman-elect Colleen Hanabusa since 2006. She said business owners should be contacting Inouye and other senators “to share their views on how to strengthen and expand the (contracting) program, not weaken it,”
The NHO program, she said, is a “huge opportunity for our state to keep more of the military spending at home, in Hawaii.”
One of the most successful local companies to land federal contracts is Akimeka Technologies, LLC.
From 2005 to 2010, Akimeka received some $67 million in federal contracts, according to two U.S. government procurement websites.
The company that changed its name this year to Ke’aki Technologies (http://www.keakitech.com/) is now part of a joint business venture called Manu Kai.
Last year, Manu Kai received a $738 million, 10-year contract award from the U.S. Navy to support base operations at the Pacific Missile Range Facility on Kauai.
Ke’aki is a majority partner in the Manu Kai joint venture with a Mainland defense contractor ITT Corp., said Ke’aki Technologies President Philip Kahue.
Services provided under the contract range from “grounds keeping services to missile testing,” according to the Navy. Manu Kai employs some 550 workers and is one of the largest employers on the Garden Isle.
Manu Kai received $109 million from 2009 to 2010, according to federal data. Kahue said the $109 million figure is “close” to the funded value of the Manu Kai contract, but he cautioned that actual revenues may vary from contract values.
He added that the total of Ke’aki’s sole-source work is a fraction of all contracts it has received.
“The total direct award (sole source, non-competitive) contracts awarded to Ke`aki Technologies since 2005 is approximately 5% of all our contracts awarded to date (competitive and non-competitive),” Kahue said.
He believes that McCaskill’s bill “is specific to the ANC program” and his company has not contacted either McCaskill or Inouye about the measure.
Officers and employees of Akimeka/Ke’aki donated $57,500 since 2005 to the political campaigns of Inouye and other prominent Hawaii Democratic politicians, including former Congressman and now-Governor Neil Abercrombie and Congresswoman-elect Colleen Hanabusa.
CHANGES TO THE LAW
Inouye sponsored changes to federal law and regulations in 2003, broadening procurement preferences granted 20 years ago to Alaskan Native Corporations. The expanded law allowed federal agencies to award non-bid contracts directly to NHO’s or to restrict the pool of firms eligible to bid for the jobs.
Inouye noted that he and his longtime friend and Senate colleague, Sen. Ted Stevens of Alaska, jointly supported the special contracting allowances. Stevens, who served 40 years in Congress, died this past August in a plane crash.
“Ted Stevens and I long ago recognized the need to help indigenous businesses compete for contracts and government work as a means to provide for the unique needs of the communities they represent and serve,” Inouye said.
Other minority-owned small businesses qualify for special federal contracting “set-asides” under what is called the “8a” program operated by the U.S Small Business Administration. But the extra benefits written into procurement laws and regulations for native-owned businesses have earned them the designation “Super 8as.”
The Super 8a program allows for-profit subsidiaries of non-profit NHO’s to receive non-bid federal contracts and requires that profits be forwarded to the non-profit parents.
The contracting preferences are meant to bring economic growth and employment opportunities to impoverished Hawaiian, Native Alaskan and Native American communities. But measuring the effectiveness of the system is difficult, admit some government officials in charge of oversight.
The SBA Hawaii office oversees 14 NHOs and 18 subsidiary companies. An SBA official here, Michael Youth, said his office does not precisely know the value of NHO-related contracts and has no publicly available information on the economic benefits that the contracting preferences have generated for their target population.
In the past three years, NHOs have received $220.7 million in federal contract work, according to SBA data.
As for the economic benefits the contracts have brought to Native Hawaiians, Youth said, “You should speak to the companies themselves. We don’t have that information for you.”
None of the NHO subsidiaries operating here that have received federal contracts is willing to discuss in detail the amount of money they have dedicated to improving the lives of Native Hawaiians. Few even responded to requests for such information.
David Cooper, president of The Hana Group, Inc. http://www.thehanagroup.com and HBC Management Services, Inc., http://www.thehanagroup.com/ two NHO subsidiaries that have received some $53 million in federal contracts since 2005, said the companies provide financial support to their non-profit parent, Pacific American Foundation.
The foundation underwrites a variety of educational and cultural leadership programs, Cooper said, but he did not provide specific figures.
Cooper said his companies and others like them “struggle to delicately balance scarce assets” and face an “imperative to reinvest in their stability and growth.”
Cooper was the only NHO executive who disclosed how many Native Hawaiians are employed under his company’s federal contracts.
At The Hana Group, Cooper said, “we have been very fortunate to have hired 94 Native Hawaiians, and our current snapshot reflects 49 Native Hawaiians working on our contracts in Hawaii, which represents approximately 28% of our total project workforce in Hawaii,” Cooper said.
Ke’aki Technologies’ non-profit parent, Alaka’ina Foundation, http://www.alakainafoundation.org/ files federal tax returns, which are open to public viewing and detail its charitable activities.
The 2008 return – the most recent available – listed $325,850 in income from its for-profit subsidiary. The foundation spent some $122,000 on program services benefiting Native Hawaiian children, including a “Digital Bus” program providing mobile scientific educational programs on Maui, Molokai and Kauai.
Another NHO that files federal tax returns is Alu Like, Inc., http://www.alulike.org/ - a 35-year-old charity that provides a wealth of services to Native Hawaiians. Its 2008 tax return reported some $135,000 in income from for-profit subsidiary Alu Like Enterprises, but none of that money was generated by federal NHO work.
According to federal procurement data, Alu Like Enterprises and a joint venture partner, Environet, Inc., received $10.3 million in NHO-related work beginning in 2009.
Alu Like Enterprises president Derek Sakaguchi did not respond to requests for comment on this story.
Sakaguchi and Alu Like chief executive Mervina Cash-Kaeo donated $3,700 to Inouye’s re-election campaign since 2007.
Environet executives, including president Joseph Pickard, donated $29,000 to Inouye and other federal politicians from 2005 to 2010.
Pickard, who owns a consulting engineering firm that has received more than $20 million in state contracts in recent years, also is president of his own NHO, Native Hawaiian Community Development Corp. Its for-profit subsidiary, Greenwave Solutions, Inc., has received $3.5 million in federal contracts since 2008.
Greenwave president Kenneth Choate did not respond to telephone and email requests for comment.
Kuhana Associates, http://www.kuhana.com/ - an NHO-subsidiary that specializes in providing medical personnel to military bases around the country, said it provides financial support to its non-profit parent, the Native Hawaiian Legal Defense & Education Fund http://www.nhldef.org/
That organization “is a national non-profit organization dedicated to improving the lives of Native Hawaiians by advocating and promoting their civil rights through legal, political, and educational efforts,” said Kuhana chief executive Paul Komeiji.
Komeiji disputed the accuracy of data drawn by Hawaii Reporter from federal procurement reports. These reports indicate that Kuhana and a variety of its business partners have received more than $84 million in federal contract work since 2005.
“We do not believe it ($84 million) is a fair representation of the contract values,” Komeiji said in a written statement.
He did not say if the figure was too high or low and did not respond when asked for the accurate figure.
The contract numbers used in this story were developed from searches of the Federal Procurement Data System and USAspending websites, two federal portals - http://www.usaspending.gov/ and https://www.fpds.gov/fpdsng_cms/ - that track and detail government procurements.
Searches of the data are complicated by the fact that some federal contracts were awarded to NHOs on a non-bid basis, others were partially competed when the NHOs partnered with other firms in bidding for the work and others were awarded to the companies before they achieved NHO status from the SBA. Distinguishing pure NHO contracts from others is difficult.
The Native Hawaiian Organizations Association, a trade group that represents NHOs, doesn’t collect contract information, said executive director Rebecca Soon.
“We do require all of our members to be compliant with legislative authority, but we have no requirements for reporting any information about their business activities or about their NHO,” Soon said.
Christopher Dawson, president of one locally based NHO and board member of the Native Hawaiian Organizations Association, said the trade group has been trying to gather information about contract values and economic benefits generated by its member companies but has encountered resistance from member firms.
“Its been like pulling teeth,” said Dawson, head of Dawson Technical LLC, an SBA- approved NHO subsidiary http://www.dawsontechnical.com/ “It’s been hard getting people to cooperate.”
Federal records indicate that Dawson’s companies, which specialize in environmental cleanup and clearance of unexploded ordinance from military facilities, received $63.9 million in federal contracts since 2005.
Dawson would not confirm that number or state how much money flowed to his company’s non-profit parent, Hawaiian Native Corp http://www.hnchawaii.org/
Directors of Hawaiian Native Corp. include Dawson, his mother, Beatrice “Beadie” Dawson – a well-known local attorney -- and his sister, Donne Dawson, former head of the state film office.
The Dawsons have donated more than $19,000 to the political coffers of Inouye and other Democratic congressional figures since 2005.
ALASKAN NATIVE CORPORATIONS
Christopher Dawson and other NHO operators say they are very concerned about strong criticism leveled at ANC contract awards both this year and last year by Sen. McCaskill.
McCaskill’s bill also could impact Native Hawaiian Organizations, said Dawson and Ray Jardine, a local businessman who is trying to gain NHO recognition for his own company.
McCaskill’s bill “applies across the board,” said Jardine.
“Even though she says she’s not looking at the Hawaiians or the Indians, it’s one program, everybody falls under the same umbrella,” said Jardine, who has served as a director of a number of NHO’s.
“We’re concerned about all the criticisms and threats, but the biggest concern is what can we do?” said Dawson.
“This program may go away. It’s kind of teetering on which way it’s going to go. It’s pretty scary,” he said.
The threats come just as NHO’s are finding their feet in the federal contracting system, said Jardine.
Alaska Native Corporations “have learned how to play the game quite well. They’ve been doing it for 20 years,” said Jardine.
“NHO’s -- we just started this game in 2004 so we’re kinda new to it,” he said.
Jardine and officers of his company, Native Hawaiian Veterans, LLC, have donated some $23,000 to the federal political campaigns of Inouye, Abercrombie, Hanabusa and Rep. Mazie Hirono over the past six years.
Inouye said the super 8as “are heavily regulated and the federal government works hard to ensure that they are fulfilling their obligations to their communities.” He adds, “These companies do not receive government handouts simply by existing. They work hard for whatever they earn."
Senator McCaskill, a former Missouri prosecutor and state auditor, chairs the Senate Subcommittee on Contracting Oversight and has been taking a hard look at the ANC contracting system since last year.
“Alaska Native Corporations are multi-million or billion-dollar corporations that are now among the largest federal contractors,” McCaskill’s committee reported last year.
“Although ANCs provide some benefits to their shareholders, those benefits may not be in proportion to the potential for waste, fraud, and abuse created by the ANCs’ contracting preferences,” the report said.
ANC’s and their subsidiaries have been active federal contractors in Hawaii, federal records show.
The single largest ANC contract on record was worth $1.13 billion and was awarded in 2002 to FSS-Alutiiq, a joint venture of two different ANC’s, according to McCaskill’s committee.
In Hawaii, FSS-Alutiq was paid $53.4 million for work performed from 2005 to present for Navy logistical support work.
Various other ANC’s and their subsidiaries have provided some $275 million of federal work in Hawaii during the same period, including Chenega Corp., Chugach Alaska Corp., Nana Regional Corp. and Doyon Ltd., according to federal procurement records.
Robin Danner’s company, Nuvuk Construction LLC, http://www.pueogroup.com/ is a partnership of Native Alaskan and Native Hawaiian companies.
The majority partner of Nuvuk is Native Hawaiian Economic Alliance, http://www.nativealliance.com/a non-profit headed by Robin Danner.
The minority partner in Nuvuk is Harpoon Construction Group, a subsidiary of Ukpeagvik Inupiat Corp., an ANC headed by Scott Danner until last year.
Robin Danner said Ukpeagvik Inupiat Corp. is “a strategic minority partner which strengthens our business capacity, access to capital, lines of credit, bonding and so forth.”
Danner did not dispute federal procurement figures indicating that Nuvuk has received $11.9 million in federal work since 2005.
She said there are no individual owners of Nuvuk and the company’s net revenues are sent to its non-profit owner.
She did not specify what those net revenues have been.
An earlier version of this story incorrectly reported that Scott Danner is currently chief executive of Ukpeagvik Inupiat Corp.
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