U.S. Defense Secretary Pete Hegseth — who uses the secondary title “Secretary of War” under a Trump-era executive order — said the Pentagon will seek major changes to the Small Business Administration’s 8(a) Business Development program, portraying it as an early federal diversity initiative and arguing that its use in large, noncompetitive contracts has invited waste and fraud.
Pete Hegseth, the U.S. defense secretary who has used the secondary title “Secretary of War,” said last month that the Pentagon would move to overhaul the Small Business Administration’s 8(a) Business Development program, a federal initiative that helps certain “socially and economically disadvantaged” small businesses compete for government work.
In remarks highlighted by The Daily Wire, Hegseth said, “We’re taking a sledgehammer to the oldest DEI program in the federal government,” adding that the program was little known outside Washington and that he had not previously been familiar with it.
The 8(a) program is administered by the SBA and includes contracting tools that can allow agencies to award certain set-aside or sole-source contracts to eligible firms. Federal rules generally cap 8(a) sole-source awards at $4.5 million, or $7 million for manufacturing, but provide broader exceptions for some tribally owned, Alaska Native Corporation (ANC)–owned, and certain other group-owned firms. For Department of Defense agencies, sole-source 8(a) awards can reach $100 million when required written justification and approvals are obtained.
Hegseth argued that the Pentagon’s use of these authorities can result in large awards “without any competition,” and alleged that some firms act primarily as pass-throughs, taking a percentage of contract value while subcontracting work to larger Beltway-based contractors — practices he said have persisted for decades.
The Daily Wire also pointed to testimony by its investigative reporter Luke Rosiak, who has criticized the 8(a) program’s vulnerability to abuse. The outlet cited the case of Walter Barnes, an executive tied to PM Consulting Group LLC, doing business as Vistant, in connection with a bribery scheme involving a former USAID contracting officer.
Federal investigators have documented a decade-long bribery scheme involving more than $500 million in USAID contracts. USAID’s Office of Inspector General said the former contracting officer, Roderick Watson, and several executives — including Barnes — pleaded guilty, and the agency issued government-wide debarments following the case.
The SBA, led by Administrator Kelly Loeffler, has said it has been tightening oversight of the 8(a) program and, in January 2026, issued guidance emphasizing that race-based discrimination is unlawful in program administration. The SBA also said several agencies, including the Department of War, had begun internal audits of the 8(a) program.
Rosiak and other critics have also focused on large federal contractors affiliated with Alaska Native Corporations, including the Bowhead family of companies, arguing that such firms can operate major defense contracting businesses far from Alaska while benefiting from special procurement treatment. Bowhead describes itself as the federal contracting division of Ukpeaġvik Iñupiat Corporation and says its work supports federal agencies nationwide.
In the Daily Wire article, Alaska’s Republican senators, Lisa Murkowski and Dan Sullivan, were quoted as defending the program as a tool that can provide speed and flexibility for Pentagon procurements.
Hegseth’s comments have come amid broader legal and political fights over diversity policies in federal contracting. Separate litigation has challenged the SBA’s 8(a) eligibility rules, while the SBA has emphasized that the program is intended to operate lawfully and in a race-neutral manner.
On January 16, 2026, Hegseth posted on X: “We are taking a sledgehammer to the oldest DEI program in the federal government—the 8(a) program.”
