8(a) Program Facing ‘Sledgehammer’

“We are taking a sledgehammer to the oldest DEI program in the federal government—the 8(a) program.”

This was the caption that accompanied Secretary of Defense Pete Hegseth’s announcement that the Department of Defense (DoD) will conduct a line-by-line review of every small-business, sole-source 8(a) contract that is over $20 million.

This is yet more evidence that what has long been the Small Business Administration’s crown jewel government contracting program is firmly in the Administration’s crosshairs.

8(a) Program Under Scrutiny

It’s no secret that the Administration is working to dismantle programs related to DEI and that it views the 8(a) Program as a target. The DoD’s announcement comes on the heels of SBA’s demand for all 8(a) entities to produce extensive documentation about their participation in the 8(a) Program and its immediate suspension of over 1,000 firms thereafter. The SBA’s document request was motivated by concerns of 8(a) entities becoming passthrough vehicles and prioritization of “DEI over merit.” Hegseth cited similar concerns in his announcement of the DoD’s review of 8(a) contracts.

This line-by-line review, in conjunction with the SBA’s program-wide request for financial documents, could signal tough times ahead for the 8(a) Program. DoD is not the only department that will review its 8(a) contracts. The General Services Administration (GSA) and the Department of the Treasury have announced similar reviews.

Interestingly, these critiques of the 8(a) Program come at a time when purchasing through the 8(a) Program is up. According to GovCon Intelligence, the DoD spent $15.5 billion with the 8(a) Program last fiscal year. That’s more than the DoD has spent on the 8(a) Program in any of the past fifteen years. Even in the face of the Department of Government Efficiency (“DOGE”) and myriad other challenges, the 8(a) Program has remained resilient.

Stages of the Review

Hegseth said the review will have two stages. First, the DoD promised to eliminate any 8(a) contract that does not make the U.S. military “more lethal” or “help win wars.” Second, the DoD will ensure that any 8(a)-contract awardee is performing the work it was awarded, rather than acting as a passthrough company for larger, non-8(a) entities.

It is unclear what criteria the DoD will use to determine whether a contract makes the U.S. military more lethal or will help win wars.

It is also unknown whether the DoD is likely to find many instances of 8(a) contractors acting as a passthrough for larger, non-8(a) entities. According to the announcement, 8(a) firms “take a 10%, 20%, sometimes 50% fee off the top, and then pass the contract off to a giant consulting firm, commonly known as Beltway Bandits.” But those who work daily with the program know that there are several rules and regulations in place to prevent just such an arrangement from happening.

For one thing, most likely any arrangement where an 8(a) entity was acting as a “shell company” to divert funds to a larger, non-8(a) entity would violate the limitation on subcontracting—particularly in the 10% scenario floated above. Further, as part of their annual review, 8(a) participants must submit a report on each 8(a) contract performed explaining how the performance of work requirements are being met. And that’s to say nothing of the False Claims Act and—don’t forget—criminal statutes on fraud.

In other words, the 8(a) Program’s regulations already likely do a good job preventing the kind of passthrough schemes the DoD is trying to weed out. That’s not to say that it never happens. Even so, discovery of a shell 8(a) company would not indicate an issue with the 8(a) Program as a whole, but rather a compliance issue with the individual companies involved.

Timeline for the Review

As a final note, a line-by-line review of every 8(a) contract over $20 million awarded by DoD is an enormous undertaking. On top of reviewing these larger contracts, DoD said it will review smaller contracts, too. The timeframe for the review is not yet known. We can only imagine it will take months, if not years, for DoD to complete this project. (Assuming, of course, that human beings will be conducting the review and not a computer program.) We will update our blog regarding the DoD’s review as more details are announced.

Please contact us if you have questions about the DoD’s review of 8(a) contracts.