The US Department of War is going to review its contracts with small businesses run by “socially and economically disadvantaged” individuals
The Pentagon will conduct a review of all contracts worth more than $20 million that it signed with small businesses under the 8A program, as announced by US Secretary of War Pete Hegseth. He claimed that most of these firms operate as shell companies that funnel money to major consulting groups.
Hegseth announced the audit on Saturday, stating that it will start right away. This move is part of the Trump administration’s attempts to eliminate the “corruptive, unconstitutional, non-merit-based” diversity, equity, and inclusion (DEI) practices in the military, he said.
“We’re using a sledgehammer on the oldest DEI program in the federal government, a program that few people outside of Washington have ever heard of,” he stated.
The program to support companies run by “socially and economically disadvantaged” people was established in 1978 under Section 8A of the Small Businesses Act. Over time, it has become a huge “breeding ground for fraud,” Hegseth claimed.
“In many cases, these socially disadvantaged businesses don’t even do any work. They take a 10%, 20%, sometimes 50% fee upfront, and then pass the contract on to a large consulting firm, commonly called Beltway Bandits,” he said, referring to consulting and research companies operating within Washington’s ring highway that do lucrative contractor work for the US government.
“Effective immediately, I’m ordering a line-by-line review of every small business sole source 8A contract that is over $20 million. And we’ll also look at everything smaller than that,” Hegseth said.
Any 8A contracts determined to not be contributing to the US military’s “lethality” will be terminated, and those companies involved in the “pass-through schemes” for the Beltway Bandits will lose their contracts as well, he warned.
The Pentagon has long been troubled by accusations of wasteful spending, opaque contracting, and questionable procurement practices, along with its ever-growing budget. Although the Trump administration has repeatedly promised to fix the situation and make the military less wasteful and more “lethal,” it has already obtained a record $901 billion war budget. Earlier this month, US President Donald Trump pledged a huge 50% increase in defense spending to $1.5 trillion in 2027; the remarks caused defense stocks to soar globally.