Secretary of War Pete Hegseth announced a comprehensive review and overhaul of the federal 8(a) Business Development program, describing it as the oldest diversity, equity, and inclusion (DEI) initiative in the U.S. government and calling it rife with fraud. Speaking in a widely circulated video, Hegseth emphasized that the program will face “a sledgehammer” review to eliminate abuses and restore accountability.

The 8(a) program, administered by the Small Business Administration since 1970, was designed to assist socially and economically disadvantaged small businesses by granting access to federal contracts. Participants may receive contracts totaling up to $100 million over nine years, a measure intended to foster entrepreneurship and level the playing field in federal procurement.

Recent audits, however, have exposed systemic vulnerabilities. Federal oversight found more than $750 million in fraudulent activity, much of it linked to pass-through contracts where larger firms improperly claimed credit for 8(a) contracts. Inter-agency investigations are now underway to determine the scope of the abuse and hold responsible parties accountable.

Hegseth framed the overhaul as part of a broader effort to eliminate waste, fraud, and abuse in federal contracting. “We are taking decisive action to ensure that taxpayer dollars benefit legitimate small businesses, not opportunistic pass-through arrangements,” he said. While the 8(a) program has historically supported thousands of firms, critics argue that loopholes and weak oversight have allowed widespread exploitation.

The announcement signals a major policy shift for federal contracting and DEI initiatives, indicating that Hegseth and the administration intend to hold programs accountable for both financial integrity and operational efficacy. Stakeholders in the small business community are watching closely, as any reforms could reshape participation requirements, auditing procedures, and eligibility standards across the program.