ment takes the tack that we would rather make it more difficult so that we don't end up contracting the services and we perpetuate ourselves rather than trying to assist themselves into going out of business.

A review of definitions of such tribes, or terms as tribes, Indians, and reservations in Federal legislation such as those in manpower, education, social services, health, and many others revealed extensive variations and definitions with no discernible justifications for the differences. We believe that the definition should be standardized collectively as they relate to the State of Alaska. We recommend that this be accomplished as soon as possible.

This is basically, Mr. Chairman, the extent of the summaries and we will cover-we do cover in more detail, some of the instances that we have overcome and we have come across in the past in our submitted testimony. And, Gordon and I would be happy to respond to any questions that you might have, Mr. Chairman.

Senator ABOUREZK. Thank you very much.

Senator STEVENS. You believe then that AFN is a governing body for the purpose of statewide services today?

Mr. KITO. Mr. Chairman, one thing I might say there is that one of the things that AFN has been doing, has been moving out of the direct delivery systems over the past year voluntarily, and the reason for this, Mr. Chairman, that was proposed prior to the time that we made this transition on the first of July, but if there are statewide advocacy positions to be taken or the regional associations do not want to get involved, then the board of directors of AFN would look into it. Right now we are structuring ourselves to develop into an organization that provides technical assistance on an as needed basis to the regional associations allowing the contracts for the operational programs to go directly to the-get closer to the delivery system, where those in the regions and the villages would have greater control over those programs. Now, we would address contracting, let's say, on a statewide basis only with the support of regional corporations and the nonprofit associations. Not until that was achieved would we attempt to enter into any contracts for services.

Senator ABOUREZK. Thank you.

Senator GRAVEL. So what you're actually doing, what you're asking the BIA to do, which is the basis of your criticism, why they haven't been more aggressive in doing it?

Mr. KITO. Yes, sir, I think that we felt that if we continued to be an operational contractor, that we would be another level of bureaucracy between the dollars being implemented in the field, and we felt that the faster we got out of the way that the more responsive those programs would be in the regional areas of the State.

Senator GRAVEL. I glean from your summary of your paper that you felt that there's more discretion in the hands of the Secretary, this could probably solve some of the conflicts, either hand deal in the specifics of the paper or give it some thought as to how it could be structured so it might not be a voluntary basis, that we would really have a way to really push program activity to the lowest level rather than rely upon the good judgment of executives, which is a capricious way of doing it?

Mr. KITO. Yes, sir, Senator. I think that as you look at the extent of what contracting means, contracting means that you are delegating

your authority to the contractor to implement what you have outlined in the contract, unfortunately, that goes into another sphere of some of the problems that we feel that we've been having with the Bureau, and that's their feeling that they do not have the authority to contract certain decisionmaking to the contractor, and they have to retain that because the area director is ultimately responsible. Now, that's the bureau-wide policy. And, then what happens, you take it to the next level that certain things cannot be delegated to the area director because the Commissioner wants to retain that authority. And, I suppose, if one took that to its ultimate conclusion, one would have to say that nothing could be done regarding the implementation of any statutory law regarding regulations because the President finally reserves that administrative right because he is mandated by the act to be the person that is solely responsible.

Now, I think what happens is that there has to be a determination in the executive branch that says, "*** that we can contract a certain authority away, and we can make determinations, as to how this act could work. “* * * And, we can make determinations, and based on-they say, *** well, our solicitor tells us that this is wrong,' well, I think in the lawyer's jargon, you know, that's probably the only field where there are 50 percent winners and 50 percent losers in any case that goes to court, you know, in other words, right around in thta area, but for a winner, there's always a loser, you know, and I think in our case, we can speak with very much authority I suppose, if we beat the Secretary and the solicitor more times than he's beaten us. And, sometimes, you know, they say legally that this is as far as they can go, well, I'm not too sure that we should be going to the same horse to find the legal information for them to make decisions. Now, I find that they do have authority in certain instances to make decisions and you can challenge them into court, but I find it difficult as to the reasons of why they don't make decisions that we may not challenge in court that they say are against the law, you know, if you follow the rationalization that they utilize in their decisionmaking process, it's quite difficult to follow at times.

The overall question about who can contract is one whereby you handle on a regional basis and you can ask, you know, the question, "Are there any others in this region that want to contract?" You'll respond within a specified period of time, you know, why didn't they take that option? Well, they didn't take that option, they took the other option that said they had to go out and chase down the interior of Alaska and going on 35 or 70 resolutions that were affirmative before you could move the contract. I don't think that there's any worry that the regional profit corporations would compete with the nonprofit associations for contracting when you look at the definition or the designation of a sole-source contractor. We're all looking at the delivery of systems and we're all looking at how it better can be achieved.

Commissioner BORBRIDGE. I note your comment that as a condition of contracting, there is a requirement of an audit which in turn is a determination of the veracity of the reporting on the expenditure funds and the compliance with certain regulations. I also note the concern that you expressed that there doesn't appear to accompany these requirements, any substantive discussions as to the quality of the de

livery of services or as to what the impact has been on the recipients of the programs themselves. So, I would like to, for the record, just to establish several facts, and beginning the inquiry would be this; as you understand that why would the Alaska Natives want to contract for various services? In other words, you have certain desires that you feel you can implement, certain things that you can accomplish, what would some of the primary ones be, Sam?

Mr. Krro. Well, I think that the primary reason to contract would be that the organizational structure that has the contract would respond more quickly to the change in needs, so that you yourself could have an ongoing evaluation with the organizational structure to the villages or to the people that says whether or not you are doing it right or wrong. Now, I think, you know, what we are trying to say too, is that regarding the audit, we have an ongoing audit with every program on a monthly basis because these contracts are cost reimbursable contracts and we do not have somebody that says or does the evaluation overall or responsible within the agency that says, "What kind of services are going to be delivered and how are they being delivered?" Commissioner BORBRIDGE. Within the terms then of the actual program that is contracted for, going in as the organization does, with the desire to be innovative, to be more sensitive to the needs of the ple, to improve the delivery of services, and looking at the conditions that are attached to the contract, looking at how the negotiations and audit would be, do you feel that the Native organizations have the fullest possible opportunity to achieve the objectives that cause them to go into contracting?

peo

Mr. Krro. No; they don't. And, the reason they don't is because they're restricted by the language of the contract, that if they do start looking at innovative things to implement, they are in violation of the contract and those portions that relate to money are not going to be reimbursed by the contracting agencies. You know, the documents that you end up in utilizing the contract look like a, you know, a book, some of them are about 100 to 150 pages long indicating what your restrictions are, and they really talk about the inability of developing flexibility in order to deliver the product in an innovative way, yes.

Commissioner BORBRIDGE. Then it would be accurate to say that the conditions of the contracts are actually such that the Native organizations, while wanting to be innovated and to improve the services and to reflect the sensitivity of their insight into the needs of the people they represent, actually are pretty much required to deliver the services in almost precisely the same manner as they were delivered by the Bureau of Indian Affairs, is that right?

Mr. KITO. Yes; it doesn't change that much. You might want to comment on that too, Gordon?

Mr. JACKSON. Yes; most of the programs that are delivered, you know, the same kind of rules and regulations come with it. And, also talking about restrictions, we recently signed a technical assistance contract to provide TA to the new prime contractors for JohnsonO'Malley services. And, the present way in which prime contractors are to receive TA from the Alaska Federation of Natives, is that a request goes to the Bureau of Indian Affairs and then the Bureau of Indian Affairs submits the technical assistance request to the Alaska

Federation of Natives. That contracting has been going since the 1st of July, and we have yet to receive a technical assistance request, however, at the same time, regional corporations are screaming, saying that we need technical assistance in the development of our contract proposal, putting together our fiscal system within the organizations and things like that.

Commissioner BORBRIDGE. Just one more question on this, Mr. Jackson. How would you describe or characterize a negotiating session with respect to contracting? Is it sort of a mutually satisfactory type of an enterprise or is it more of an adversary proceeding, for example, relative to the overhead rate and other expenses? I'm trying to view this from the position of the Alaska Natives, who wanting to contract, in order to deliver the services at least as effectively as the Bureau, must have the same financial and other backup as the Bureau itself had when they themselves were delivering the services directly.

Mr. KITO. Mr. Borbridge, contracting is very trying and it's very much a confrontation situation, and I think that one of the things that needs to be developed and stay developed is the statewide advocacy and the statewide form for how those negotiations take place, because one of the most serious problems that has evolved over the past few years is in the area of the indirect cost of the contract, and you know, they put a top limit on what the dollar is at the beginning and you start negotiating for flexibility and you find that you don't get the flexibility, then you get down to the bottom line and they start, you know, negotiating how much they can pay for indirect costs. And, some of the nonprofits that have gotten in trouble were because of the low indirect cost rates that they have accepted in order to manage the contracts. Specifically, any example, the University of Alaska-I use this as an example because they have an indirect cost rate with, that's audited by the Federal Government that says that they can charge with Federal agencies 58 to 62 percent of the total salaries for administrative support, which is basically indirect cost.

And you talk about, you know, the total contracts for awhile that were negotiated by the regional nonprofit associations were somewhere in the order of 3 percent, and that was the maximum to the extent that for awhile there it was, you know, take 3 percent or leave it. Well, a lot of them wanted to provide the services, but I think that what happened was was that they found that their administrative structure was not going to be able to sustain itself on that administrative cost rate. So that now the proposal which they are moving toward accepting is an audited indirect cost rate that would be acceptable, that would be audited after a period of time. But it's only been after a lot of pressure, a lot of negotiations, you know. But I think that that is something that, you know, that we are obviously concerned with on a continuing basis is how negotiations take place and whether or not that those that are negotiating are actually negotiating the conclusion of what the area director has determined to be what he wants to do. And that's to contract this program wih such and such an agency, you know. Senator ABOUREZK. Thank you.

Senator GRAVEL. Do you have any, I must say, any comments why technical assistance has not been more aggressive in moving into the region of the village level?

Mr. Krro. We're providing it, but we're providing it on our own volition. See, we-you know, I think what Gordon was saying is that we signed a contract that said that all requests for technical assistance would go through the Bureau and come to us.

Senator GRAVEL. I was thinking of your reflections on the Bureau, not only your own experience with yourselves.

Mr. Krтo. Well, I've been-what we're saying is, what we're saying is this, that the technical assistance regarding the implementation of a contract should have two types of people providing technical assistance to the contractor. One that says that there are options within that contract that you can exercise. Not to have technical assistance to come straight from the agency that has the contract, because obviously those that are going to provide that technical assistance from the contractee, in this case the Bureau of Indian Affairs, are going to be predisposed as to what determinations and what limits that contractor has in the flexibility of what he wants to do, the contractor wants to do with the contract to develop, let's say, innovative systems or even to say that, that the contractor has some discretion. You know, in other words you need somebody else to tell you, other than the fox that's guarding the henhouse, you know, what your options are regarding this contract, and how you can comply and be in compliance with the contract that you do have.

Senator GRAVEL. Thank you.

Senator ABOUREZK. Do you have anything else?

Mr. KITO. No, Mr. Chairman, that's it.

Senator ABOUREZK. I want to thank you both very much for your appearance. We appreciate the contribution you've made at the hearings on this question.

Mr. KITO. Thank you very much, Mr. Chairman.

[The prepared statement of Mr. Kito and attachments follow:] STATEMENT OF Sam Kito, Jr., PRESIDENT, ALASKA FEDERATION OF NATIVES, INC. Mr. Chairman, members of the Indian Affairs Subcommittee, and Senate Committee on Interior and Insular Affairs, and staff.

A few months ago, the Alaska Federation of Natives initiated a proposal to the Bureau of Indian Affairs to contract for the operation of the Industrial Development and Tourism Division, Juneau Area Office. We felt it was within the scope of the Indian Self-Determination and Education Assistance Act. The Bureau responded by stating that it was within the scope of activities provided by Public Law 93-638. However, before our ambition was realized, a resolution of the governing body was sufficient to enable the tribe and the BIA to take the first step leading to the contract. Because the program would affect more than one tribe, they required authorized resolutions from every tribe throughout Alaska.

On a separate contract proposal, we wanted to place an education specialist we had been contracting with the past several years from the Bureau of Indian Affairs in our Alaska Student Higher Education Offices within the Alaska Federation of Natives (AFN). We felt the results would be better coordination and delivery of programs and services to Alaska Natives. The Bureau's response was, "it is a significant change in the content of your program, and to initiate that change requires your securing of resolutions from all tribes in Alaska." Finally, we wanted to contract with the Bureau of Indian Affairs to provide Technical Assistance to new Johnson-O'Malley prime contractors throughout Alaska. Assistance is a very real and immediate need in providing program planning, development, contract administration, accounting systems, cost reimbursable contracts, and many others to Regions and Villages. We were fortunate to receive the contract but now we have reason to believe the Bureau is now