A multi-billion dollar defense contractor that gets federal work through an economic-development program intended to benefit “Alaskan natives” doesn’t just have an apparently Eskimo-free executive suite, which is allowed under the current rules — it also subcontracts with non-native companies.
ASRC Federal’s business model benefits from racial preference laws that allow no-bid contracts for firms owned by minorities, with even larger contracts available to those owned by indigenous people. It is named after, and is wholly owned and directed by, the Arctic Slope Regional Corporation, a for-profit company whose shares are held by 14,000 Inupiaq natives in a remote region of Alaska.
There is little indication that the government’s so-called 8(a) program is training disadvantaged indigenous people to do high-skilled work. ASRC Federal declined to say how many Alaska natives work there. Its CEO is a white woman who lives in a multi-million-dollar home in Northern Virginia, as The Daily Wire reported last month.
The law only requires fifty-one percent of the work to be done in house to receive the benefit of minority status; as a result, some of the money awarded to “Alaskan”-owned firms isn’t done by Alaskan-owned firms at all. ASRC Federal has subcontracted $3.5 million to non-native companies, including a company owned by the CEO’s non-native husband.
In 2022, the Department of Homeland Security awarded ASRC Federal Data Network Technologies LLC (AFDNT) a $16.7 million contract for “networking maintenance and engineering services.” Nearly a fifth of the work — $3 million — was subcontracted out to companies associated with the CEO’s husband, who was listed as a key employee in the contract and whose prior experience played an important role in the successful award, according to ARSC Federal.
This was not an 8(a) contract, but it was still enabled by ASRC’s native-company status. The $16.7 million award came through a competitively bid contract limited to small businesses — the Alaska native program allows native tribes to create an unlimited number of subsidiaries and have them count as a “small” business for purposes of contracting, even though they are owned by a multi-billion dollar one. If the company was a subsidiary of a white-owned business, it would not be eligible for small business contracts because its size would be based on the parent company.
The husband of ASRC Federal’s CEO was vice president at B&B Consulting Enterprises, a software firm. The company received more than $1.7 million in subcontracts on the AFDNT job.
According to a lawsuit filed by B&B, the company terminated the CEO’s husband from his executive job in September 2022.
After parting with B&B, he and another employee founded Daurem LLC as a competing company. Because the prime contract between ASRC Federal and the government listed the CEO’s husband as “Key Personnel,” ASRC Federal entered into a subcontract with Daurem to maintain ASRC Federal’s contractual obligation regarding Key Personnel, according to Daurem. Daurem has received around $1.2 million on that job in gross revenue.
When money is subcontracted to firms not owned by Alaskans that may result in less profit for indigenous people, which undermines the goals of the 8(a) program. That is a permitted form of subcontracting, and such subcontracts have historically faced little scrutiny. Indeed, ASRC Federal, Daurem LLC, and the TSA won an award for their “partnership.” The American Council for Technology and Industry Advisory Council lauded them for working together to develop “biometric identity verification technology, currently deployed at 10 high-volume international airports.”
Agile Decision Sciences has disclosed that—across all of its contracts—it has 103 “teaming partners,” a euphemism used in the 8(a) world that amounts to work being subcontracted out to potentially non-disadvantaged firms, while being open about it with the government because the qualifications of the non-disadvantaged partner might help convince the government to give the contract.
Even as the Alaska native contracting program was justified by the poverty and low-tech lifestyles of the indigenous people, its proposition rests on the idea that they are now developing America’s most high-tech defense systems. In reality, the work for many firms in this program is more often done by highly-paid white people in Virginia, the most common state where “Alaskan” firms operate.
ASRC Federal’s CEO has showered liberal politicians with tens of thousands of dollars in donations to groups like “Pro-Choice Majority 2024,” “Elect Dems Now,” and the campaigns of Democrat Virginia senators Tim Kaine and Mark Warner.
According to data from HigherGov.com, the majority of Daurem’s government revenue has come from ASRC Federal subcontracts. Working with another ASRC Federal subsidiary, Daurem received a $480,000 subcontract on a TSA contract — an eighth of the money paid out on the overall contract. The contract description reads, “This is an 8(a) award to Agile Decision Sciences, LLC for a mobile phone app to do identity verification activities for transportation security officers.”
ASRC Federal said in a statement that “Any characterization or suggestion that ASRC Federal has improperly provided subcontracts to its leadership’s family members is materially false … Leaders
including our CEO adhere to a strict corporate code of conduct and a conflict-of-interest policy to ensure proper protocols are followed, as was the case on these contracts. In addition, the vast majority of ASRC Federal companies’ contracts are performed by ASRC Federal employees rather than subcontractors.”
B&B’s lawsuit alleged that the CEO’s husband arranged for other employees to leave the company to work directly at ASRC Federal, and also teamed up with a different woman-owned business called Intellect Solutions LLC to bid on work that was, thanks to 8(a), earmarked exclusively for woman-owned contractors.
Daurem’s lawyers replied that “employees do not owe fiduciary duties of loyalty post-employment and are therefore free to compete against a former employer.” A judge rejected many of Daurem’s arguments on that motion, and after ten more months of litigation, the lawsuit was settled without either side proving or disproving the misconduct alleged by the other.
Secretary of War Pete Hegseth has said his department is cracking down on the 8(a) program.
“In the Pentagon, $100 million sole-source contracts go out the door to these 8(a) firms almost every day without any competition or opportunity for anyone else to bid,” he said. “In many, many instances, these socially disadvantaged businesses don’t even do work. They take a 10%, 20%, sometimes 50% fee off the top, then pass the contract off to a giant consulting firm.”
The Small Business Administration, which doles out the 8(a) designation to companies, last week said it has moved to ban 624 firms because “amid the Biden-era DEI agenda, the 8(a) federal contracting program became rife with so-called ‘socially and economically disadvantaged’ firms who abused sole-source and set-aside contracts to enrich themselves with pass-through schemes.” No ASRC Federal companies were among the firms identified by the SBA.
Editor’s note: This piece was updated with additional details about the contracts awarded to ASRC Federal Companies.
Related: How A Top Pentagon Contractor Enriches DC Insiders Using Law Intended To Help Eskimos
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