How did corporations like Halliburton get millions in government contracts designated for small minority businesses?

In Wainwright, Alaska, a village of about 500 Inupiat Eskimo north of the Arctic Circle, most people live off the land, hunting whale and caribou when the weather allows, drilling holes in the ice for smelt in the spring.

About half the residents seek out jobs in the mainstream economy, and among that group, one in five is out of work. One of the few employers in town is the Olgoonik Corporation, a company owned by the tribe, whose business until recently consisted mostly of running Wainwright’s hotel, general store, and gas station.
But lately, Olgoonik has emerged as a rising giant in the world of federal contracting. Since 2002, the company has won more than $225 million in contracts for construction work on U.S. military bases and embassies from Alaska to Kosovo. Because Olgoonik is tribally owned, it was able to get the contracts without any competition. But that doesn’t mean the people of Wainwright have been doing the actual construction; instead, much of the work is being performed by Halliburton, Olgoonik’s non-native partner in the contracts.
Partnerships between multinational companies and tribal businesses, most of them Alaska native corporations, have skyrocketed in recent years—in large part because of a provision in federal law that exempts tribal companies from rules that apply to other minority-owned businesses. The system was established in the mid-1990s to help native communities, where unemployment rates often exceed 40 percent. But it has also become a way for large corporations with no Native American ownership to receive no-bid contracts, an avenue for federal officials to steer work to favored companies, and a device for speeding privatization. “It’s a loophole gone wild,” Charles Tiefer, an expert in federal contract law, recently told the trade journal Washington Technology. “I have seen little evidence that this produces jobs in Alaska as opposed to profits for those entrepreneurs skillful enough to exploit it.”

A Mother Jones analysis of federal contracting records shows that no-bid, or “sole-source,” awards to native companies have risen dramatically since the late 1990s (see chart). Back in 1999, the largest tribal firms received just $195.5 million worth of no-bid work, or roughly 3 percent of the awards under the federal government’s program to assist small and minority-owned companies. By 2003, however, large tribal companies were getting $1.3 billion worth of contracts without any competition, accounting for nearly 15 percent of the minority program. Bruce Pozzi, a spokesman for Olgoonik, says the company decided to “jump on this bandwagon” after it realized how much money other native companies were making. Olgoonik has 175 employees, but only 7 of them are tribal members and thus shareholders of the corporation.

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