Local firms lose out on $82M contract

Wright-Patt work goes to Alaska firm  despite questions about fairness, fraud

Subcontractor company Kessler-Hines' ironworker repairs a WPAFB power plant coal silo at the intersection of Kauffman and National Roads.

Staff photo by Jim Witmer Subcontractor company Kessler-Hines' ironworker repairs a WPAFB power plant coal silo at the intersection of Kauffman and National Roads.

A Kessler-Hines ironworker repairs a power plant coal silo at Wright-Patterson Air Force Base. Kessler-Hines is a subcontractor for an Alaskan native corporation.

Staff photo Jim Witmer A Kessler-Hines ironworker repairs a power plant coal silo at Wright-Patterson Air Force Base. Kessler-Hines is a subcontractor for an Alaskan native corporation.

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By Josh Sweigart, Staff Writer Updated 6:51 AM Monday, November 28, 2011

The company that won one of the largest local contracts at Wright-Patterson Air Force Base this year did so under a program that federal regulators have worried gives an unfair advantage to some companies and is wrought with fraud, a Dayton Daily News investigation has found.

The contract has a price tag of up to $82.5 million, and is for ongoing construction at WPAFB; the base spends far more on major weapon systems, but this contract is unique because it is local construction work.

But the entity awarded the contract this year has its main offices in Virginia, is 51 percent owned by Alaskan natives and is permitted under federal law to let a much larger German-owned company do most of its actual work.

The contract was set-aside only for disadvantaged firms. The company that won it qualified because it is majority-owned by one of many Alaskan Native Corporations set up to benefit Alaskan natives. But federal regulators have questioned whether these entities, called ANCs, enjoy an unfair “competitive advantage” over other companies in contracts set aside only for small and disadvantaged businesses, the Daily News found.

And the frequency of fraud and abuse allegations to come from ANC dealings — including a company that recently held the Wright-Patt contract — has led to calls for a congressional probe.

Allegations of abuse include:

The current Wright-Patterson contractor was mentioned in an Alaskan civil lawsuit that claimed it was used by the executive of another ANC to drain contracts from her Alaskan partners and continue taking advantage of the ANC program.

And this same Wright Patterson contract was the subject of a scandal two years ago when the primary contractor at that time ended up barred from working for the federal government because its CEO was found to be scamming his partners — a third Alaskan Native Corporation.

These claims arose as the use of Alaskan Native Corporations in federal contracting exploded. A 2009 Small Business Administration report noted that federal disadvantaged-business contracts with ANC participants had grown by 1,386 percent since 2000, and more than tripled from $1.1 billion in 2004 to $3.9 billion in 2008.

“We’ve always been concerned with (this) program and whether it’s operating as intended,” said Scott Amey, general counsel of the advocacy group Project on Government Oversight. “Especially considering now that there are quite a few ANCs that are now in the top 100 government contractors and are now bidding on high-dollar government contracts that are awarded without competition.”

Award ‘disappointing’

The current contract was awarded to a joint-venture called NICC JV. This is a joint venture of the companies North Island Corp. and Centennial Contractors Enterprises, a Virginia firm owned by a German company, Bilfinger Berger. North Island is 51 percent owned by an ANC named NIMA, and 49 percent owned by a Virginia man named Thomas Kearney. Centennial is North Island’s business mentor under a federal program meant to get small firms like North Island on their feet.

None of the companies have been accused of violating any rules and the Alaskan native owners of North Island praise the ANC program and their partners.

“The wrongs of a couple people shouldn’t brand an entire group of people or organizations,” said Wayne Don, an Alaskan native and chairman of NIMA, the majority shareholder in the current contract.

Company officials say the majority of the contract is pumped into the Dayton-area economy, and that on competitive contracts such as this one they have no advantage.

“On a competitive solicitation, ANCs have no particular advantage, except for the quality of their work,” Kearney wrote in a statement to the Daily News.

But local contractors question why the contract couldn’t have gone to a local firm.

The WPAFB contract is set aside for socially and economically disadvantaged firms under the U.S. Small Business Administration’s 8(a) program. ANCs qualify for this status with exemptions not given to other 8(a) companies under federal rules.

“Any time a significant contract is awarded with less than full and open competition, greater scrutiny is warranted and clearly necessary,” said Jeff Sadosky, spokesman for U.S. Sen. Rob Portman, who sits on the Senate Armed Services committee and a subcommittee on contracting oversight.

Company officials defend the program.

“Public agencies recognize that competition may be limited when disadvantaged enterprises, such as 8(a) (and other programs) are utilized. Nevertheless, the socioeconomic policies which underpin these programs are considered well worth the cost,” said Mark Bailey, president and CEO of Centennial.

The Wright-Patterson contract is called SABER, an acronym standing for Simplified Acquisition of Base Engineering Requirements. It allows base engineers and contracting officers to issue work orders for maintenance, repair, alteration or new construction on the base’s more than 800 structures spread over 8,000 acres.

“This contract is vital for the 88th Air Base Wing to keep the base operating,” said Col. Amanda Gladney, 88th Air Base Wing and Installation commander when the contract was awarded. “We are confident we have selected a team that is capable of meeting our many requirements at the best value for the Air Force.”

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Who is involved

Other Alaskan Native Corporations

Cape Fox Corp.

Majority shareholder of APM, which held the previous Wright- Patterson AFB contract until its executive, Craig Jackson, was barred from federal contracting amid accusations of fraud.

Sued its executive claiming he deceived the company and Small Business Administration.

MTNT

Majority shareholder of Sentinel, which sued its executive Paralee White claiming she enriched herself and her family at the company’s expense.

The lawsuit says White helped Thomas Kearney set up North Island Corp. and used it to undermine Sentinel for her own personal gain when MTNT wouldn’t extend her management agreement.

Eyak Corp.

Majority shareholder of EyakTek. Its employees were implicated in October of reportedly one of the largest kickback schemes in U.S. history.

Sparked calls for a Congressional probe of the ANC program.

Special privileges

Unlike most other participants in the U.S. Small Business Administration’s program to benefit socially and economically disadvantaged companies, Alaskan Native Corporations are exempt from:
Limits on the number of firms ANCs can own as long as each business is in a different industry.
Limits of $5.5 million on the value of no-bid contracts the firm can receive. ANCs can get sole-source awards of any value.
The cap on no-bid awards for companies in the program that receive total federal contracts of $100 million
The requirement that such firms be managed by socially and economically disadvantaged owners

Source: U.S. Small Business Administration

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