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Army won't renew Alaska Native firms' military security contracts Print
By SAM BISHOP News-Miner Washington Bureau

Friday, April 21, 2006 - WASHINGTON--The Army has decided not to renew two $100 million contracts with Alaska Native corporations that provide security guards to numerous military bases, including Fort Wainwright, Fort Greely and Fort Richardson in Alaska.

Chenega Integrated Solutions serves the three Alaska bases and 24 others around the nation. Alutiiq Security and Technology serves no Alaska bases but 17 elsewhere. Both companies have sole-source contracts worth up to $100 million annually, although neither company is being paid that much, according to the Army.
The Army announced its decision not to extend the companies' contracts earlier this month in a brief, one-sentence response to a Government Accountability Office report.

The GAO report, dated April 3, said the military should stop issuing sole-source contracts to Native corporations and open the work to competitive bidding instead.

"Concur," the Army said in its response. "The Army is in the process of re-soliciting all contracts for the 54 installations using full and open competition."

Comparable, competitively bid private security contracts have cost about 25 percent less, according to the GAO, which is an investigative arm of Congress.

The GAO also listed several performance problems with private security contractors, but it didn't identify which contractors were responsible for which specific incidents.

Jeff Hueners, Chenega's chief operating officer in Anchorage, said the report, as a result, mischaracterizes the performance of Alaska Native corporations.

"I've got a lot of problems with that report," he said. "We kind of got painted with a broad brush there."

In fact, almost all the problems mentioned by the GAO occurred at the private companies that won contracts through open bidding, not at the Native corporations hired through sole-source contracts, he said.

"Typically you get what you pay for," he said. "The results speak for themselves."

The two other companies that hold private security guard contracts with the Army--Akal Security and Coastal International Security--recently merged. They are not Alaska Native corporations.

Daya Khalsa, senior vice president at Akal in New Mexico, said Hueners' assertion about his companies performance "is not accurate." He declined to elaborate.

In an e-mail response to questions, the Army public affairs office at the Pentagon on Thursday said the Army would honor the current Chenega and Alutiiq contracts through October of this year.

Both companies obtained the original one-year contracts in July 2003. The contracts allowed for four one-year extension options, two years of which have been exercised. Because the Army will now solicit competitive bids for the work, no more extensions will be available, the Army said.

"The re-solicitation would mean that the last two remaining option periods on the Chenega and Alutiiq contracts would not be exercised," according to the Army statement Thursday.

The Army said it won't be obligated to pay Chenega and Alutiiq anything as compensation for ditching the contracts.

"There is no cancellation fee, as the Army is under no obligation to exercise options," the statement said.

Alutiiq spokeswoman Sarah Lukin said her company has asked the Army to reconsider its decision but has not heard back. Lukin said Alutiiq would likely bid on the contracts if the Army persists with its plan.

Jeff Hueners, Chenega's chief operating officer, said his company would, too. "You bet we'll bid it," he said.

Hueners said his companies employ about 1,000 guards at bases around the country. Ninety-three work in Alaska, including 48 at Fort Wainwright, 34 at Fort Richardson near Anchorage and 11 at Fort Greely, 100 miles southeast of Fairbanks.

Lukin was traveling and didn't have specific employee figures for Alutiiq.

Congress allowed the military to contract for private guards at bases starting in 2003 because of increased demands for security following the Sept. 11, 2001, terrorist attacks.

The Army hired Chenega and Alutiiq under contracting rules that allowed it to bypass competitive bidding, since both companies qualified as small, disadvantaged businesses under the Small Business Administration's 8(a) program. Sole-source contracts with most 8(a) companies are limited by law to no more than $5 million, but sole-source contracts with Alaska Native corporations are unlimited, under rules secured by Alaska's congressional delegation.

The delegation and the companies have said the cap exemption for Native corporations is justified.

Lukin said the lack of a cap on sole-source contracting with Native corporations is good policy.

"Certainly it is because of the large number of shareholders that we have to service," she said. "An individually owned 8(a) has one owner, one shareholder, whereas an Alaska Native corporation serves hundreds or thousands of shareholders.

"All of this is rooted in federal Indian policy," she added. "We gave up the vast majority of our traditional lands in order for us to be able to pursue economic development opportunities."

Critics have said the Native companies are acting as fronts for larger, established companies, don't pass much benefit to their shareholders and take business from other minority-owned companies.

The GAO report had more specific critiques of the Army's private contracting.

The GAO found 89 guards with "records relating to criminal offenses." It also said the Army could not confirm whether guards had been trained properly.

"At three installations, guards were certified by the contractor before training had been completed," the report said. At another, a contractor falsified training records and the Army paid the contractor $7,000 to requalify the guards.

For security reasons, the GAO declined to identify the contractors or bases, said Michele Mackin, assistant director of the acquisition and sourcing management division within GAO.

Representatives from Chenega and Alutiiq said the GAO found no employees with criminal records and no violations of training procedures at the bases served by their companies.

"The only findings were minor administrative matters and those were corrected immediately," said Kristina Williams, spokeswoman for Chenega in Anchorage.

However, Lukin, Alutiiq's spokeswoman, confirmed that one incident mentioned by the GAO report involved an employee of her company.

The incident occurred when an Alutiiq employee was "arrested off-post with 100 pre-stamped passes to the base in his possession," the GAO said.

"We learned of this immediately and of course terminated the individual," Lukin said. "There was nothing that showed up in the background check that indicated that this behavior would occur."

GAO raised the pre-stamped passes incident in its critique of yet another aspect of the private security contracting--award fees.

"The Army has paid out more than $18 million in award fees, but the fees are based only on compliance with basic contractual requirements, not for above-and-beyond performance," the GAO said. In fact, the Army has spent almost 98 percent of the money it has had available for award fees.

After the Alutiiq employee was discovered with the passes, the Army cut 10 points during its review of the company's award fee because the incident failed to contribute "to a positive Army image."

"The contractor protested its rating, arguing that the incident occurred off-post and involved no negative publicity," GAO noted. "(The Army's Installation Management Agency) added back 2 points, awarding the contractor almost $97,000."

The GAO report reported on another incident in which five private security guards shot at a vehicle exiting a base, violating Army regulations. Williams and Lukin said their employees were not involved.

Alutiiq is a subsidiary of Afognak Native Corp., a company formed by the merger of several village corporations originally based on the island north of Kodiak. Chenega is the corporation for the village of the same name in Prince William Sound.

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