DOD to ‘take a sledgehammer’ to SBA program for ‘disadvantaged businesses’

The program is meant to help “experienced socially and economically disadvantaged small business owners, who have already been in business for at least two years or more, and are interested in expanding their footprint in the federal marketplace,” an SBA website says.

But Hegseth said that while providing businesses with new opportunities is a “laudable goal,” it has become a “breeding ground” for fraud.

“Over the decades, as it happens, the 8(a) program has morphed into swamp code-words for DEI, race-based contracting,” the secretary said in a video.

Hegseth charged that sometimes these businesses take a 10% to 50% cut from defense contracts, a “fee off the top,” before passing the contract to a “giant consulting firm, commonly known as beltway bandits.”

“For decades, this program, 8(a), has been a breeding ground for fraud,” he added.

Is this a big deal for Dayton-area defense contractors? Perhaps, said Michael Gessel, vice president of federal government programs for the Dayton Development Coalition.

Credit: Knack Video + Photo

Credit: Knack Video + Photo

Gessel said that if the SBA has stepped up scrutiny of the program, “It would be inevitable that DoD/W (Department of Defense/War) would look into defense-related contracts.”

“Any action which affects defense contractors in general is going to disproportionately affect the Dayton region because of the larger number of defense contractors here,” he said.

Defense contractors are attracted to the Dayton area thanks to the presence of Wright-Patterson Air Force Base, which is home to key Air Force decision-makers at Air Force Materiel Command, the Air Force Research Laboratory, the Air Force Life Cycle Management Center and others.

Gessel added that, anecdotally, he believes there are small companies in the region certified under the 8(a) program that are wondering if this will affect them.

A Department of Defense press representative declined to comment further on the subject.

The question of reforming the program is not new. Iowa Senator Joni Ernst, a Republican, called last year for reform efforts, saying the program is broken.

"I will not allow taxpayers to be defrauded of hundreds of millions of dollars because the Biden administration invited con artists to have a free-for-all," Ernst said in a statement in November.

In June last year, the U.S. Department of Justice said four men, including a former government contracting officer for the U.S. Agency for International Development (USAID), pleaded guilty in what the department called a "decade-long bribery scheme involving at least 14 prime contracts worth over $550 million in U.S. taxpayer dollars."

The DOJ said the scheme involved the receipt of bribes in exchange for using a contracting officer’s influence to award contracts under the SBA 8(a) contracting program.