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Oversight lacking in base contract worth $82.5M

Set-aside program needs closer monitoring nationwide, report says.

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By Josh Sweigart, Staff Writer 1:49 AM Saturday, February 11, 2012

Contract watchdogs are falling short on required oversight of an $82.5 million contract at Wright-Patterson Air Force Base and similar federal contracts around the country, according to a report issued this week by the U.S. Government Accountability Office.

Locally, an $82.5 million contract for ongoing construction at Wright-Patt is among those criticized as receiving insufficient oversight. While most of the work is done by local firms, it is managed by an Alaskan native-owned company under a U.S. Small Business Administration program meant to benefit disadvantaged groups.

The complicated structure of Alaskan Native Corporations (ANCs) and loopholes granted to them in federal law have made them susceptible to fraud and given them advantages, the Dayton Daily News reported in November.

The GAO this week reported that local procurement agents weren’t confirming that the Alaskan firms do the amount of work required of them instead of subcontracting it out.

The rules are meant to prevent large contractors from using Alaskan front-firms to win business they would not otherwise be entitled to.

“Not monitoring the limits on subcontracting can pose a major risk that an improper amount of work is being done by large firms,” the report says.

The report studied 87 contracts including Wright-Patt’s. It said of the 41 contracts like Wright Patt’s, “we found no evidence that the subcontracting limits were being routinely monitored.”

The report says inspectors found construction projects at Air Force bases where it wasn’t clear whether the ANC could do its share of the work. Often, contracting officials didn’t even know this monitoring was their responsibility, the GAO report said.

The local contract was won by NICC JV, a joint venture consisting of the companies North Island Corp. and Centennial Contractors Enterprises. North Island is 51 percent owned by an Alaskan firm named NIMA, and 49 percent owned by its president, Thomas Kearney, a Virginia man.

Federal rules require NICC JV to do 15 percent of the cost of the contract. When asked in November by the Dayton Daily News who was monitoring this, the SBA said base contracting officials were responsible. Base officials said it was the SBA. Base officials this week referred questions to the Pentagon; officials there did not respond by press time.

An email sent to Kearney this week was not returned. In November, he responded to the Daily News saying that his company’s work was handled by a local staff of about 10 people.

“We try very hard to comply with all of the requirements of the SBA and as far as we know, we are in full compliance,” his earlier statement said.

Local contractors have lamented that the overall contract award went to an out-of-state firm.

The GAO report found federal dollars obligated to tribal firms under the SBA’s 8(a) program for economically and socially disadvantaged groups grew from $2.1 billion in 2005 to $5.5 billion in 2010. This is much faster than contracts grew to non-8(a) firms.

A majority of these contracts went to Alaskan Native companies, the report found, which have advantages over other companies in the amount of no-bid contracts they can receive, how big they can be and that their management doesn’t have to be Alaskan.

“This program has been deemed to be somewhat risky and prone to abuse and when you have a lack of government oversight, that makes it worse,” said Scott Amey, general counsel of the advocacy group Project on Government Oversight.

The report has led to calls for a congressional hearing to make sure the program is serving taxpayers. The Native American Contractors Association say that is unnecessary.

“The GAO report contains no ‘smoking gun’ to justify further legislative reform of the Native 8(a) program,” stated Sarah Lukin, Interim Executive Director of NACA. “The GAO correctly points out what NACA has long supported: that contracting officers need training to better understand rules and regulations, and that there must be greater coordination between agencies regarding monitoring and oversight of the entire 8(a) program,” Lukin said.

The WPAFB contract is called SABER — Simplified Acquisition of Base Engineering Requirements. It allows base officials to issue work orders for maintenance, repair, changes or new construction on the base’s more than 800 structures spread over 8,000 acres.

SBA rules allow Centennial, a much larger firm with a German parent company, to oversee much of the actual work. They also allow Kearney to profit more than the native shareholders, the Daily News reported.

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