Department of War Secretary Pete Hegseth said the Pentagon is reviewing the Small Business Administration’s 8(a) Business Development Program, arguing that the long-running initiative has strayed from its original purpose and allowed fraud and abuse to persist across federal contracting.
In a video posted on social media platform X on Saturday, Hegseth framed the review as part of a broader effort to redirect defense spending toward warfighting priorities and tighten oversight of programs he said no longer serve taxpayers or military readiness.
“When President Trump appointed me as your Secretary of War, I made you a series of promises,” Hegseth said. “I promised that every single one of your taxpayer dollars would go toward one thing, and one thing only—building the most lethal fighting force on the planet.”
What Did Pete Hegseth Say About the 8(a) Program?
Hegseth, a 2025 Wash100 Award recipient, described the SBA’s 8(a) program as a little-known federal initiative originally intended to support small businesses owned by socially disadvantaged individuals or tribes. While he acknowledged that goal, he argued the program has evolved into a contracting mechanism vulnerable to misuse.
“Providing these small businesses with opportunities is a laudable goal,” Hegseth said. “But over the decades, as it happens, the 8(a) program has morphed into swamp code words for DEI race-based contracting.”
He alleged that in many cases, firms awarded 8(a) contracts act primarily as pass-through entities.
“In many, many instances, these socially disadvantaged businesses, they don’t even do work,” Hegseth said. “They take a 10 percent, 20 percent, sometimes 50 percent fee off the top, and then pass the contract off to a giant consulting firm.”
How Do Hegseth’s Comments Align With Ongoing Federal Oversight?
Hegseth’s comments come amid heightened scrutiny of the 8(a) program across multiple federal agencies.
In December, the SBA directed more than 4,300 participating firms to submit detailed financial records covering the past three fiscal years as part of an expanded audit aimed at identifying fraud, waste and abuse.
The review follows a Department of Justice investigation that uncovered a bribery and fraud scheme involving more than $550 million in improperly awarded contracts tied to 8(a) participants. The Department of the Treasury has since launched its own audit of approximately $9 billion in preference-based contracting across its bureaus, citing concerns over pass-through arrangements and limited competition.
SBA Administrator Kelly Loeffler previously said the program had shifted from a targeted small business tool into “a pass-through vehicle for rampant abuse and fraud,” prompting a full-scale audit of high-value and limited-competition awards issued over the past 15 years.
What Broader Contracting Reforms Are Underway?
Hegseth linked the 8(a) review to the administration’s wider effort to reform federal acquisition and eliminate what it views as non-merit-based contracting practices.
“For decades, this program, 8(a), has been a breeding ground for fraud,” he said. “And this administration is finally doing something about it.”
The review follows a series of actions aimed at reshaping defense contracting, including Pentagon acquisition reforms focused on speed, competition and commercial technology adoption, as well as governmentwide contract cancellations to reduce wasteful spending.
It also comes weeks after President Donald Trump signed an executive order directing changes to defense contracting practices that restrict stock buybacks and executive compensation at underperforming contractors, aiming to redirect resources toward production capacity, innovation and warfighter readiness.
