Business

Third ON Congress passes $2.6 million capital contribution for Osage LLC

The Osage Limited Liability Company is receiving $2.6 million to fund its 2013 operations. The Third ON Congress approved an LLC capital contribution bill during the third special session.

LLC representatives told Congress the entity planned to use its 8(a)-certified entities to pursue government contracting opportunities in making its case for a capital contribution. This is the first capital contribution approved for the LLC operating with two first-time board members appointed and confirmed during the Tzi-Zho Session in September.

On Dec. 5, the LLC capital contribution bill (ONCA 12-112 sponsored by Congresswoman Shannon Edwards) passed with a 9-3 vote and was signed into law by Principal Chief John Red Eagle the next day. Edwards filed an initial copy of ONCA 12-112 in September seeking a $7 million capital contribution for the LLC, but the bill was tabled pending more budget information requested by the Congress to consider the capital contribution.

LLC officials met with the Congressional commerce and economic development committee on Dec. 3 to discuss the bill. The capital contribution amount was reduced to $2.6 million by the end of the meeting with discussion topics which included restricting a portion of the capital contribution for collateral to secure bonding for prospective contracts and whether to give the capital contribution to the LLC as a loan.

The commerce committee passed ONCA 12-112 onto the full Congress for a vote without designating the $2.6 million as a loan after questions were raised on whether the loan would be enforceable and who would be responsible in case of default. Also during the meeting the committee voted to amend the bill by restricting $1.5 million “to use as collateral to secure bonding and shall remain in the Osage Nation Treasury until such bonding is required.”

LLC officials said the bonding is required for most government contracts and would be needed to stay competitive with other 8(a) entities also seeking contract jobs to make revenue.

The $2.6 million LLC capital contribution vote comes approximately eight months after a shake-up during the Hun-Kah Session when two LLC board members resigned amid pressure for change from some Congress members. At that time, the Congress did not consider an LLC capital contribution as it did in years past to fund the entity charged with finding Nation revenue-generating opportunities independent from gaming.

Also during the Hun-Kah Session, the LLC survived a vote for Congress to dissolve the entity when a bill calling for the shutdown failed. Money losses and the number of Osages hired under the LLC entity were cited as a concern by Congressman Geoffrey Standing Bear at the time when he introduced the LLC dissolution bill (ONCA 12-29). Former board members Charles Maker and Howard “Skip” Iba resigned after the vote and current board members David Stewart and Jim Parris were appointed and confirmed to those spots on the five-member board.

During the Dec. 3 committee meeting, Stewart said the board instructed LLC management staff to review budgets of the company entities to determine projected spending based on successful and unsuccessful outcomes. “So we believe this projection is in the target range within a plus or minus of 10 percent,” Stewart told the committee.

LLC CEO Carol Leese said management developed key goals and objectives for accountability from each subsidiary and managers have signed off to help ensure those targets are reached.

Regarding 8(a) contracting, Leese said the focus is to pursue government contracts with smaller amounts first using LLC entities for the solicited jobs “in the government procurement arena (worth) $3 (million) to $5 million and so our bonding capacity’s going to be lower for those,” Leese said.

Some LLC entities including Osage Innovative Solutions and Echota Technologies Corporation have 8(a) certification needed to pursue contracts with federal government entities.

Created by a U.S. Congressional Act, the Small Business Administration helps award 8(a)-certified businesses subcontracts with the government. Entities targeted for 8(a) certification are small businesses as well as tribally-owned firms, with the benefits flowing back to their respective communities.

With regard to issuing the capital contribution as a loan, the discussion questioned who would be responsible for the loan in case of default.

During the meeting, ON Attorney General Jeff Jones said the language proposing the loan did not list collateral or foreclosure process so he did not believe the loan would be enforceable.

Congressional legal counsel Loyed “Trey” Gill said, “This law will not be enforceable on the Osage LLC, it’s enforceable on the Chief, and the Executive Branch is required to put restrictions on the loan put into law … If the law states that (the Chief) has to put certain terms in the loan he’ll need to execute the loan with those terms in it … If the Osage LLC is unable to pay the loan off at the end of five years or three years or however long you make the term, then that issue is one that will come back to this Congress on … ”

“Election Day,” quipped Edwards as she interrupted Gill. The attendees laughed as Gill continued: “… on the future of the Osage LLC.”

Congresswoman Alice Buffalohead said she would support the loan idea but added she would like to see rules and consequences if the worse-case scenario occurs. She said the loan idea might be supported by Congress members critical of the LLC’s performance.

Red Corn said he worked on the substitute bill proposing the loan with one purpose: “That is to give the Osage LLC an opportunity to show that they can service this debt to the Nation and to show that the way that you planned this out is working.”

Congresswoman Maria Whitehorn asked the LLC officials if they could pursue 8(a) contract work without the bonding and Parris said it would be hard to compete with other companies able to offer the collateral. The LLC officials did not announce any new 8(a) contract awards at the meeting but the meeting comes about three months after Osage Innovative Solutions received its first 8(a) contract.

According to a Sept. 28 announcement on the LLC Web site, OIS received a contract from the federal Bureau of Indian Affairs for a telephone system at the bureau’s Concho Agency.

After further discussion, the commerce committee did not consider the bill with the loan language but instead amended Edwards’ bill putting the restriction on the $1.5 million to be used for securing bonding for government contracts. The bill’s capital contribution amount was also lowered to $2.6 million before the bill was referred for a final vote.

Before the Dec. 3 committee meeting ended, Stewart shared thoughts on making and planning business decisions.

“You base your business decision on the best information you have going in,” said Stewart. “Now projection five years out is very difficult, you’re probably looking at a three-year projection at best but you have to push that on out to give you an idea of where you think you’re going to be. There is no contract that says it’s going to double but what you do say ‘Is our strategy sound? Do we believe management has the ability to do it? Are other people doing it? And is this feasible?’ So you’re really looking at two to three years if you really feel comfortable that you’re going to get there.”

On Dec. 5, Edwards was the sole Congressperson to address the chambers before the final vote regarding the LLC, set into 2008 law by the First ON Congress. “Have we been perfect in what we’ve done so far? No. Is there responsibility to lay at the hands of every one of us who have had a hand in creating this, trying to implement it, overseeing it or not, making decisions that might not have been optimal? Yes. But the question is are we going to try and continue to make this work or are we going to abandon it? ... Every time I’ve been involved in an endeavor, they tell you it’s going to take you three years to be able to tell whether you’re going to be able to make a go of the business or not. You can’t just expect your business to be Boom! Right off the bat unless you’re the Facebook guy. Although I think (Facebook CEO and co-founder Mark Zuckerberg’s) idea didn’t go too well when he started out.”

Edwards then said: “We’ve been told that we’re going to look at another year, this is what it’s going to take to operate for another year and at the end of next year we’ll assess. Again we have another chance to assess in March, we have another chance to assess in September.”

Voting “yes” for ONCA 12-112 were: Edwards, Buffalohead, Congressmen John Free, John Jech, John Maker, Archie Mason, RJ Walker, Daniel Boone and Red Corn.

“No” votes came from Standing Bear, Congressman William “Kugee” Supernaw and Whitehorn.

ONCA 12-112 is the fifth capital contribution approved for the LLC since 2008. The last capital contribution was approved by the Second ON Congress for $5 million. That bill (ONCA 11-61 sponsored by Eddy Red Eagle) passed with an 8-4 vote.