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WASHINGTON D.C.-Prompted by an investigative article done by the Washington Post last year, in which the paper pointed out problems with the SBA 8(a) programs pertaining to benefits to Alaskan Native shareholders, the Interior Department requested that the Inspector General's office conduct an audit review.
The Post’s investigation looked at the $29 Billion that had been awarded the Alaska Native Corporations in the past decade, the majority of which was no-bid contracts and found only a tiny fraction of those funds were making it to the native shareholders of the corporations. Instead, the Post found that most of the money found its way into the pockets of non-native executives and employees because of the practice of relying on established non-native firms to do the worked contracted by the corporations.
The Inspector General singled out the government contract with United Solutions and Services, or US2. US2 is a LLC partnership of which Cape Fox Corporation owns 51%. Cape Fox Corporation is the native corporation representing the community of Saxman, in Southeast Alaska.
US2 was hired by the U.S. Army in 2008 to perform tasks including having US2 set-up a campaign to prevent sexual assaults in the military ranks. It was awarded $250 million, this amount would be upped to $375 million. The contract was managed by an acquisition office of the Interior Department located in Sierra Vista, Arizona.
It was found that US2 had no native executives or employees and also had no operations in Alaska. It was also found that prior to the contract with the Army, US2 was basically a janitorial services provider with claimed revenue of just $73,000.
The contract with the Army was run out of the living room of the executive of US2 in Delaware. The Inspector General’s office pointed out that the Army and the Interior Department knew that the company was too small to carry out the contract themselves. The IG office said that the Army and Interior Department violated Federal Procurement Law when they awarded the contract and allowed US2 to pass the majority of the work to other companies.
The audit report noted that the Sierra Vista, Arizona office showed a pattern of poorly managed contracts and it stated, the office “does not adequately perform price reasonableness determinations when awarding contracts or effectively monitor subcontract limitations when warranted.” The report went on to say, “Despite receiving reports showing that US2 has been non-compliant with 8(a) subcontracting limitations for more than two and a half years, the contracting office did not take effective actions to either correct the problem or terminate the contract for non-compliance.”
Further, the report pointed out, “With the Army’s knowledge, the firm subcontracted the majority of the awarded contract to more established companies. As a result, the contract with US2 violated laws applicable to contracts awarded based on a firm’s status as an Alaska native corporation requiring the firm to agree to do at least 50 percent of the work itself.”
Although there was not an Army response, the Interior Department said, “consistent with the IG’s findings and recommendations, Interior has discontinued issuing task orders against this contract.”