- Details
- By Brian Edwards
- Native Contracting
The Department of Defense will conduct a line-by-line review of all sole-source contracts over $20 million awarded through the Small Business Administration's 8(a) program, Defense Secretary Pete Hegseth announced Friday.
The review could affect billions in Native business contracts. Native-owned entities received $16.1 billion through the 8(a) program in fiscal 2024, including $14.9 billion in sole-source awards, according to market intelligence firm HigherGov. That represents nearly two-thirds of the program's $25 billion in total federal contract awards.
The 8(a) program provides contracting preferences to businesses owned by socially and economically disadvantaged individuals and tribes. Defense accounts for roughly 10 times more 8(a) spending than any other federal agency, Hegseth said in a social media video on Jan. 16.
The review targets what Hegseth called "pass-through schemes" where 8(a) firms take fees ranging from 10% to 50% before subcontracting work to larger consulting companies. Hegseth said the department will ensure “every small business getting a contract is the one actually doing the work, and not just some shell company funneling your money to a giant consulting firm.”
Contracts that don't contribute to military readiness will be eliminated under the new policy. “If a contract doesn't make us more lethal, it's gone,” Hegseth said.
The 8(a) program has faced heightened scrutiny across multiple agencies. In June 2025, the Department of Justice secured guilty pleas in a case involving over $550 million in contracts allegedly steered through bribery and fraud involving a USAID contracting officer and multiple 8(a) contractors.
Following that case, SBA Administrator Kelly Loeffler ordered a full audit of the 8(a) program, directing examination of high-dollar and limited-competition contracts dating back 15 years. In December 2025, the SBA sent letters to all 4,300 current 8(a) participants requiring three years of financial records, contracting agreements and employment records by Jan. 5, 2026.
The Treasury Department announced a separate audit of preference-based contracting totaling approximately $9 billion across its bureaus, per prior Tribal Business News reporting.
The program, established under Section 8(a) of the Small Business Act, helps small disadvantaged businesses compete for federal contracts through set-asides and sole-source awards. Tribal businesses have used the program to secure defense contracts in areas including construction, logistics and technology services.
Hegseth described the initiative as part of broader acquisition reform aimed at building the defense industrial base with companies “that share our mission.” He said the review is not intended to harm legitimate small businesses, but to eliminate fraud and redirect funds to defense priorities.
Federal law requires the Pentagon to conduct nearly $100 billion in annual small business contracting, including through the 8(a) program. The Pentagon awards sole-source contracts worth $100 million to 8(a) firms "almost every day," Hegseth said.
The defense secretary said the department will review contracts below the $20 million threshold as well, though he provided no timeline for the review process or specific criteria for evaluating contract performance. Hegseth cannot eliminate the statutory 8(a) program, but has authority to investigate contracts and terminate awards for non-compliance.
