Hawaii’s congressional delegation is working to pass legislation that would expand sole source contracting opportunities for certain Native Hawaiian-owned businesses, a move that would put them on the same footing as Native American tribes and Alaska Native corporations.

Now, Native Hawaiian firms can only receive special sole source contracting preferences with the Defense Department while Alaska Native and Native American companies have access to contracts being offered by the rest of the federal government.

Hundreds of millions of dollars in new revenue is at stake for the Hawaiian contractors through the U.S. Small Business Administration’s 8(a) business development program that gives preference to firms owned by qualified nonprofit Native Hawaiian organizations.

“This is just another example of another program that other Native people participate in that we think Hawaiians should be able to participate in,” said U.S. Sen. Brian Schatz, chairman of the Indian Affairs Committee and Hawaii’s senior senator. “We believe that Native Hawaiians should be on equal footing with Alaska Natives and American Indian tribes.”

The 8(a) program, which for decades has been scrutinized by federal investigators and criticized by members of Congress and others when glaring instances of blatant fraud have surfaced, is coming under the public microscope again as a new federal investigation into a Hawaiian 8(a) continues.

Few details have been released about what exactly federal investigators were looking for when they executed a search warrant at the downtown Honolulu offices of the Hawaiian Native Corp., the parent company of DAWSON, a conglomerate of 11 firms that have received more than $1.4 billion in federal jobs since 2008.

The allegations involve possible financial crimes and the Hawaiian Native Corp.’s founder, Christopher Dawson, has stepped down in an attempt to distance himself from the work his companies are doing.

He’s also hired a high profile defense attorney, Michael Purpura, who previously served as one of former President Donald Trump’s impeachment lawyers.

Schatz said he doesn’t have any special insight into the ongoing federal investigation involving Dawson and the Hawaiian Native Corp., or whether it has any relationship to the 8(a) program as a whole.

But he also said he wanted to be cautious about conflating the two issues, saying that they should be considered independently of each other.

“I don’t know what the allegation is and I don’t know whether or not it has to do with the 8(a) program so it’s difficult for me to judge that as a policy matter,” Schatz said. “What I can say, generally, is that I support the program and that if any individual does something wrong and is also a participant in the program that’s not the program’s fault.”

U.S. Rep. Jill Tokuda sponsored the House version of the bill to expand the Native Hawaiian contracting preferences.

For Tokuda, the legislation that’s being pursued by the state’s congressional delegation to expand contracting preferences for Native Hawaiian businesses is about fairness, and that the controversy involving the Hawaiian Native Corp. should be viewed in a separate light.

“This was never about one Native Hawaiian organization,” Tokuda said. “I don’t want us to be distracted from the good work that Native Hawaiian organizations are doing and the support we should be providing them in terms of parity with other Native and tribal organizations.”

The 8(a) program has been particularly lucrative for Native entities, such as Native American tribes, Alaska Native corporations and NHOs.

Whereas most individuals participating in the program can only have one 8(a) firm, Native entities can own multiple companies that receive special contracting preferences.

Those preferences too are more generous.

The government provides billions of dollars in set-aside and sole source contracts for companies. But in general the sole source awards are capped at $7 million for manufacturing and $4.5 million for all other contracts.

Those price caps, however, do not apply to firms owned by qualified tribes, Alaska Native corporations and NHOs, which means they can receive sole source awards worth tens of millions of dollars or more.

The only difference is that NHO-owned 8(a)s are restricted to Defense Department contracts while the firms owned by tribes and Alaska Native corporations can receive large sole source awards from any government agency.

That difference, however, can equate to hundreds of millions of dollars.

A key component of the Native 8(a) program — which is sometimes referred to as “super 8(a)” due to the increased contracting preferences Native entities receive — is that a portion of the profits earned are required to be reinvested in Native communities through economic development initiatives, scholarships and cultural programming.

But it can be hard to measure exactly how much money actually gets spent in this manner, in large part because the SBA, which is supposed to track the charitable giving of tribes, Alaska Native corporations and NHOs, does not require public disclosure of that information.

The Hawaiian Native Corp., for instance, provides some information on its website about the ways it gives back to the Native Hawaiian community — whether it’s airing commercials in Olelo Hawaii during the Merrie Monarch hula festival on the Big Island, paying the electric bills for Iolani Palace or hiring a Native Hawaiian artist to paint a 360-degree mural inside its corporate offices — but it does not disclose how much of its profits are actually being donated to those efforts.

Cariann Ah Loo is the president of the Native Hawaiian Organizations Association, a trade group representing nearly two dozen NHOs, including the Hawaiian Native Corp. 

She’s also the chair of the Nakupuna Foundation, an NHO that owns its own family of 8(a) companies, including one that was hired this year to do public outreach for the U.S. Navy as it moves to shut down its bulk fuel storage facility at Red Hill. 

Ah Loo said that between 2018 and 2021, NHOA members reported donating $52 million to the Native Hawaiian community as part of their 8(a) requirement to give back. 

“That’s a pretty good chunk of change for only four years,” she said. 

The Nakupuna Foundation itself posts details about its charitable giving on its website, and since 2015 states that it has given nearly $6.7 million to various Native Hawaiian organizations and programs since 2015. 

Ah Loo said sole source parity has been a concern of the NHOA ever since U.S. Sen. Dan Inouye successfully secured special contracting preferences for NHOs with the Defense Department in 2005. 

She said Inouye was a powerful member of Congress, but even he struggled to convince his colleagues that Native Hawaiians should have access to the same sole source contracts as Native Americans and Alaska Natives. Part of the reason was politics, Ah Loo said, but the fact that Native Hawaiians are not federally recognized as their own sovereign nation also played a complicating factor. 

“Unfortunately, whenever something like that is in the news, I think there’s a tendency to become a little gun shy.”

Cariann Ah Loo, president of the Native Hawaiian Organizations Association

“It was a different time,” Ah Loo said. “He did what he could.”

While there’s generally support within the Native Hawaiian contracting community for expanding the 8(a) program, Ah Loo said the same cannot be said for tribes and Alaska Native corporations.

“We do get pushback not just from members of Congress, but from some of our Alaskan and tribal friends,” Ah Loo said. “There’s always a concern that if our program expands that means there will be fewer opportunities for them. So there’s an education process that has to happen. We’re not trying to take away their work.” 

In terms of the controversy surrounding the Hawaiian Native Corp., she said she worries it might make it harder to get buy-in from Congress when it comes to passing sole source parity legislation, but she’s hopeful that Hawaii’s delegation can help overcome those obstacles. 

“Unfortunately, whenever something like that is in the news, I think there’s a tendency to become a little gun shy,” Ah Loo said. “We’re still driving for it and crossing our fingers that this is going to happen.” 

‘We Have To Fight Tooth And Nail’

Hawaii’s congressional delegation has been trying to expand contracting opportunities for NHOs for at least the past two years. 

In 2022, then-U.S. Rep. Kai Kahele was successful in getting an amendment in Congress’ annual defense authorization bill for fiscal year 2023 that would have allowed for sole source parity, but it was stripped out during closed door conference negotiations with the Senate. 

Kahele pushed the amendment despite his own worries about the 8(a) program and whether it was truly benefitting the Native Hawaiian community.

Kahele’s concerns stemmed from a 2021 labor dispute at the Pacific Missile Range Facility Barking Sands on Kauai involving unionized employees of Koa Lani JV, which was awarded a contract worth up to $854 million through the 8(a) program. 

Koa Lani JV is a joint venture that is owned in part by a subsidiary of the Alakaina Foundation, an NHO that owns a family of companies that do work in the defense sector. 

In a letter to a top Navy commander, Kahele said he was worried that potential labor law violations involving Koa Lani JV could lead to a strike at a critical military installation. 

He was also concerned whether the joint venture, which was benefitting from its status as an NHO, was truly “fulfilling its intended purpose in serving the Native Hawaiian community.”

Among his concerns were that Koa Lani and other subsidiaries of the Alakaina Foundation were not actually based in Hawaii, but instead headquartered in Florida. 

He also raised questions about Koa Lani’s top executives and managerial employees, many of whom were not Native Hawaiian, which he said “circumvents the spirit and intent of the program.” 

“This is highly concerning on many levels,” Kahele said. “From a cultural perspective, the conduct exhibited by the leadership of the joint venture is certainly not what one would expect from a longstanding and reputable Native Hawaiian Organization.”

Kahele added that he intended to call on the SBA to launch its own inquiry into the matter.  

“The fact that Native Hawaiians are not fully recognized is always a handicap in these types of situations.”

U.S. Rep. Ed Case

The 8(a) program has not been without controversy and over the years. A number of news stories and congressional investigations have raised questions about whether it is truly serving Native communities.

In 2010, the Washington Post published a series of articles about Alaska Native corporations that found that oftentimes the profits reaped by the companies rarely trickled down to individual shareholders, many of whom were living in poverty, and instead went toward the pay of non-Native executives and managers working for the firms. 

Calls for reforms were swift, and members of Congress proposed new rules to improve oversight of the program.

A similar scenario played out in 2019 when the Los Angeles Times published its own investigation into white-owned businesses that had received nearly $300 million in government contracts by claiming Cherokee heritage. 

Later that year, a subcommittee of the House Small Business Committee held its own oversight hearing on the program to address at least some of the findings from the LA Times investigation.

U.S. Rep. Ed Case said the timing of the federal investigation into the Hawaiian Native Corp. is concerning, but like other members of the state’s delegation, said it shouldn’t reflect poorly on the 8(a) program or whether the legislation introduced to expand sole source contracting opportunities for NHO companies is worthwhile. 

Case said the 8(a) program has been a boon for Hawaii businesses, and not just those owned by Native Hawaiians.

It was designed to help traditionally underrepresented individuals from socially or economically disadvantaged populations compete for federal contracts that oftentimes go to the largest corporations, whether it’s Lockheed Martin, Raytheon or Boeing.

The program has uplifted a number of small businesses, Case said, but it’s the fact that NHO-owned 8(a)s are required to give a portion of their profits back to the Native Hawaiian community that make them truly beneficial.

“I support those programs not just because they assist Native Hawaiians in the business context, but because by definition, they are required to contribute back to the Native Hawaiian community as a condition of their preference,” Case said. “That’s sound public policy to me.”

Case added that he does have concerns about how much of the profit is making its way back into the Native Hawaiian community, saying there’s not enough specificity in the law as to the expectations of what NHOs should be giving back. 

Whether the delegation can convince its colleagues to expand contracting preferences for Native Hawaiian-owned businesses is another matter. 

Native Hawaiian issues in general face unique hurdles in Congress due to the lack of federal recognition, which would make it easier to make the argument that they deserve the same benefits as Native Americans and Alaska Natives. 

“The fact that Native Hawaiians are not fully recognized is always a handicap in these types of situations,” Case said. 

There are still some in the Republican Party who push back against any program that they deem to be race-based rather than affiliated with an indigenous, sovereign people. It’s a long-standing issue for Hawaii’s delegation.

For example, when Donald Trump was president, Schatz, who sits on the Senate Appropriations Committee, often had to re-insert money into the federal budget for Native Hawaiian health care and education programs that the administration had zeroed out.

Another issue, Schatz said, is just a general lack of knowledge about the islands and the dynamics at play there.

“We have to fight tooth and nail for everything we get,” he said. “It never ends. I even had to fight to remind people that in order to connect by broadband we had to go under the ocean. So this is just another example of us having to explain Hawaii.”

So far, this year’s bill to expand sole source parity for Native Hawaiians has yet to gain much traction, although delegation members are hopeful it can be added as a last minute addition to the National Defense Authorization Act or an upcoming appropriations measure.

The fact that it has yet to find a home, however, does not bode well for its immediate future

“It’s always going to be difficult, but there are opportunities,” Case said. “You have to look for those vehicles and glom onto the vehicles when you can.”