The Anchorage-based company Suulutaaq have won a $54 million federal contract to build a new railroad bridge and other structures for the famed Napa Valley Wine Train tourist attraction without competitive bidding. According to a report submitted by Suulutaaq late last year, the $54 million project had so far created 12 jobs – in Alaska.
“It’s an ideal stimulus project. Shovel-ready, green, and it provides jobs.”
In December, U.S. Senators John McCain, R-Ariz., and Tom Coburn, R-Okla., issued a report listing the Wine Train among 100 stimulus projects that they derided as “silly and shortsighted” and a waste of money.
The corporate shareholders live in tribal villages in the outback of western Alaska, investigative reporter Lance Williams writes in his latest article about the project at californiawatch.com.
The CEO is in South Carolina, where his prior multimillion-dollar venture – a dot-com for sail boaters – collapsed in bankruptcy.
But the main action today is in Napa, where, without competitive bidding, this unusual construction company won a $54 million federal contract to build a new railroad bridge and other structures for the famed Napa Valley Wine Train tourist attraction.
This is the world of Anchorage-based Suulutaaq Inc. Because the company was founded by Alaska natives, it enjoys special access to federal contracts.
That’s how it obtained one of the biggest federal stimulus contracts in California – a key segment of a U.S. Army Corps of Engineers’ flood-control project on the Napa River.
Army and Napa city officials say they’re pleased with Suulutaaq’s work on what they describe as an environmentally friendly project to curtail devastating winter flooding. It’s an ideal stimulus project, says Napa Mayor Jill Techel: “shovel-ready, green, and it provides jobs.”
But in December, U.S. Sens. John McCain, R-Ariz., and Tom Coburn, R-Okla., issued a report listing the Wine Train among 100 stimulus projects that they derided as “silly and shortsighted” and a waste of money.
The lawmakers also suggested the project wasn’t doing much for the economy. According to a report submitted by Suulutaaq late last year, the $54 million project had so far created 12 jobs. Officials involved with the project say that more recently roughly 40 workers have been on the scene, and they hope the project will ultimately create up to 200 jobs.
A Walnut Creek construction executive whose firm built a prior phase of the flood-control project said the government likely overspent by millions when it negotiated a contract with Suulutaaq rather than seeking competitive bids.
Meanwhile, investors aggrieved over the bankruptcy of the South Carolina dot-com called Sailnet said they were surprised to learn of former CEO Samuel Boyle’s new job as CEO of Suulutaaq. Boyle did not mention having construction experience or ties to Alaska tribes, they told California Watch. Some said Boyle’s involvement in Suulutaaq boded ill for the Alaska firm.
“My comment to anybody connected to this thing – if Sam Boyle is involved, watch out,” said Arizona venture capitalist Kent Mueller, who said he lost more than $1 million in Sailnet. Based on that experience, “I would not invest a nickel with this guy,” Mueller said.
Suulutaaq officials declined to be interviewed. In response to written questions, the company issued a statement saying that taxpayers were getting a “fair and reasonable” price on the project. The statement said that although Boyle lacked “specific construction experience,” he had “invaluable business experience” to make the Napa project a success.
But the company declined to answer most questions about the project, saying the information was confidential. It rebuffed a query about whether Suulutaaq employed lobbyists by asserting that the question “has potential undertones of a race-based presumption.”
Boyle also declined to be interviewed. In a statement, he wrote that the dot-com’s bankruptcy was “a tragedy” for which he was not responsible because he had left the company by the time it occurred.
Suulutaaq is one of dozens of Alaska Native corporations that have emerged as players in federal contracting via measures crafted in the 1980s and 1990s by former U.S. Sen. Ted Stevens, R-Alaska, a powerful lawmaker whose career ended with a contracting scandal.
For decades, the U.S. Small Business Administration has run a preferential contracting program to aid disadvantaged businesses. Qualifying firms can get federal contracts worth up to $5.5 million by negotiation, rather than competitive bidding.
The Stevens measures gave corporations that were set up by Alaska Natives special access to the program – with no cap on the size of contracts they can obtain. The share of federal contracts going toward Alaska Native corporations has grown rapidly. It was $508 million in 2000 and $5.2 billion in 2008, records show.
Advocates say the program has provided crucial economic development for impoverished Alaskan tribes. It’s a way of redressing centuries of grievous wrongs against them, they say.
But critics have complained that the no-bid contracts provide relatively few jobs and little investment income to the tribes while costing taxpayers a fortune.
“Alaska Native corporations don’t have to prove that they’re socially or economically disadvantaged,” U.S. Sen. Claire McCaskill, D-Mo., said at a 2009 hearing. “They don’t have to be small businesses. And they can receive no-bid contracts worth billions of dollars.”
The companies employ few Alaska natives and “rely heavily on non-native managers,” McCaskill claimed. Thus the firms create relatively few jobs for the people they are supposed to benefit, she argued.
McCaskill also contended that some of the companies “may also be passing through work to their subcontractors.” In those cases, the companies were collecting a profit simply because they had special access to federal contracts, not because they were performing actual work, she said.
McCaskill proposed putting a cap on the no-bid contracts, but the measure stalled in the face of intense lobbying by tribal corporations.
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