More Federal Contracting Corruption

March 14, 2011

I recently discussed corruption in the Small Business Administration’s 8(a) program, which sets aside federal contracts for minority-owned or other “disadvantaged” small businesses. A ProPublica investigation into set-asides for Alaskan Native Corporations found that subcontractors and large companies in the other 49 states have been reaping the financial benefits.

An investigation conducted by the Washington Post sheds more light on the Alaskan Native Corporation racket:

For years as a lawyer in Washington, Paralee White had helped small and disadvantaged firms break into the federal contracting market.

Then she decided to help herself.

She started a business and was soon making more than $500,000 a year through a contracting program intended to help poor Alaska natives, even though she isn’t an Alaska native.

White also helped her family. She hired her sister and brother, paying them as much as $280,000 a year. She helped her sister’s boyfriend set up his own firm in partnership with Alaska natives. He made more than $500,000 a year.

White’s story offers a look at how Washington insiders can make fortunes from government programs intended to benefit small, disadvantaged and minority entrepreneurs. It also illustrates how government officials who are supposed to keep tabs on these programs often fail to do so.

Somewhat humorously, the SBA told the Post that it was the Pentagon’s responsibility to monitor the contracts while the Pentagon said the responsibility belonged to the SBA. It’s a classic example of bureaucratic ineptitude.

It’s also a good example of how well-intentioned policies invariably become corrupted as Washington insiders and well-connected special interests game the system to their advantage. However, instead of trying to “fix” the problems these privileges foster, race-based set-asides should be abolished altogether. And if policymakers want to make life easier for businesses of all races and sizes, they should concentrate their efforts on eliminating burdensome taxes and regulations.  


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