This is the world of Suulutaaq Inc. of Anchorage. 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.
Corps 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, 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.
$4.5 million per job
The lawmakers also suggested the Wine Train project wasn’t doing much for the economy. According to a report submitted by Suulutaaq late last year, the $54 million project had created 12 new jobs. That works out to $4.5 million for every job created.
Officials involved with the project say that more recently there have been days when more than 40 workers have been on the scene, and they hope the project could ultimately create as many as 200 jobs when work ramps up.
A Walnut Creek construction executive whose firm built a previous phase of the flood-control project said the government probably 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 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.
Company officials mum
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 Wine Train 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 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.
Move to cap contracts
The Stevens measures gave corporations that were set up by Alaska Natives special access – with no cap on the size of contracts they can obtain. Alaska Native corporations’ share of federal contracts 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,” 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,” she said.
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, 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.
Firm’s other deals
Suulutaaq is a subsidiary of the Kuskokwim Corp., also called TKC, which was formed in 1977 by Yupik Eskimos and Athabaskan Indians on the remote Kuskokwim River, 350 miles west of Anchorage.
Suulutaaq is a Yupik word for gold, and the company was initially formed to develop a nearby goldfield.
Soon, according to the company’s statement, it began competing for federal contracts. In April 2006, Suulutaaq negotiated its first federal contract: $68,000 to replace a sewage pump at McClellan Air Force Base near Sacramento.
Four months later, it obtained a $14.1 million, no-bid contract to rebuild meat lockers in Honolulu for the U.S. Defense Commissary Agency, which runs supermarkets on military bases.
Before it won the Wine Train job in 2008, Suulutaaq had negotiated about $45 million in federal contracts, records show. Most of the projects were outside Alaska.
Two other TKC subsidiaries also have sought federal contracts. In 2007 and 2008, API Inc. won no-bid contracts for Army uniforms that totaled $94.7 million. The uniforms were sewn at plants in Puerto Rico, records show.
In 2007, a subsidiary called TKC Aerospace, with an office on Daniel Island, S.C., began obtaining no-bid contracts from the Air Force. Its CEO was Boyle, the former CEO of Sailnet.
In his statement to California Watch, Boyle described himself as a former consultant for government agencies and said he lived in Alaska for four years in the early 1980s. In a handout for potential dot-com investors, Boyle said he was a marketing expert with a background in Air Force logistics. He told investors he began selling sailing gear on the Internet when he lived in Detroit in the 1990s and moved the business to South Carolina to be near the sea.
Under Boyle, Sailnet burned through more than $13 million in venture capital, company documents show, but it never made a profit. Boyle was terminated in 2004, according to a former director and published reports.
The company went bankrupt the next year. After leaving Sailnet, Boyle was hired as a consultant at TKC Aerospace and became CEO in 2005.
In all, TKC Aerospace has obtained $117 million in contracts. In 2009, the State Department paid the company $9 million to retrofit light-wing aircraft for use in the war in Afghanistan.
By then, Boyle also was working as the CEO of Suulutaaq.
Napa County tax
For decades, the Napa River has been prone to disastrous flooding. In the 1980s, the Corps of Engineers proposed forcing the river into a concrete channel to control floods, but the idea met local resistance.
In 1998, environmentalists proposed what they called a “living river” project to manage floods. Floodwater would be absorbed and diverted through a system of wetlands and a bypass channel. Napa County voters agreed to tax themselves $6 million per year for 20 years to help pay for the project.
The rest is being paid with federal funds. The total price has ballooned from $250 million to more than $400 million.
The price tag might have been significantly lower but for the Wine Train, a private rail line established by the late Vincent DeDomenico, the wealthy creator of Rice-A-Roni pasta. Sixteen times each week, according to the Wine Train’s Web site, the train transports tourists from Napa to St. Helena aboard restored dining cars. A champagne dinner on the Vista Dome car costs $129 per person. About 125,000 people ride the Wine Train each year.
Replacing the bridge
The Wine Train’s rail bridge in downtown Napa was too narrow for the wider river channel proposed, so it’s being replaced. A new flood wall also will be built to protect the train’s Napa station. Tracks are being relocated as well.
The added expense of accommodating the Wine Train was politically necessary, said Chris Malan, manager of the Living Rivers Council environmental group and a proponent of the tax measure. Without the support of the politically influential DeDomenico, the tax measure would never have passed, she said.
“He came out right from the beginning, saying, ‘If you do not take care of me, I will campaign against you,’ ” she recalled.
The Corps of Engineers solicited bids for the early phases of the project. In 2005, a Walnut Creek engineering firm, R&L Brosamer Inc., won a $25 million contract to build flood walls and a promenade in Napa. Brosamer’s work was honored by the American Public Works Association as Northern California Project of the Year.
Project a ‘done deal’
President Robert G. Brosamer planned to bid on the Wine Train job as well. But in 2008, he said he learned that no bids were being sought. The project “was a done deal with an ANC,” as he put it, using contractors’ jargon for an Alaska Native corporation.
“It was very frustrating,” he said. “Particularly because the job we did was a tough thing and the community loved us – and then we didn’t even get a shot.”
In September 2008, the Corps of Engineers awarded a $6.2 million contract to Suulutaaq to begin work on the Wine Train segment. The flood control project was already years behind schedule, said Bert Brown, the corps’ project manager.
A few months after Suulutaaq got its contract, the federal stimulus program was announced. The corps recommended the Wine Train project, hoping to further speed its completion. With the support of U.S. Rep. Mike Thompson, D-St. Helena, $54 million in stimulus funds also went to Suulutaaq. That puts the company among the 10 largest recipients of stimulus contracts in California, records show.
‘Suulutaaq isn’t doing much’
Brosamer, the Walnut Creek contractor, said the public was paying a premium for the Wine Train project, saying, “It would have been a hell of a lot cheaper if they had put it out to bid.”
But the quality of the construction is first rate, Brosamer said, because Suulutaaq subcontracted much of the job to the giant Peter Kiewit Sons Inc. engineering firm, which also is a contractor on the Bay Bridge.
“The reality is, Suulutaaq isn’t doing much,” Brosamer said.
Federal records show that Suulutaaq is paying Kiewit $28.1 million – 53 percent of the total stimulus contract. Suulutaaq is keeping about $20.4 million, or 38 percent of the total. The rest, about $4.7 million, goes to other subcontractors, all from the lower 48 states.
Search state stimulus data
To search a database of stimulus contracts, grants and loans awarded in California, go to links.sfgate.com/ZJET.
California Watch is a project of the Center for Investigative Reporting with offices in the Bay Area and Sacramento. California Watch reporter Agustin Armendariz contributed to this report.
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