SBA Announces Full-Scale Audit of 8(a) Program to Uncover Fraud and Bribery

The U.S. Small Business Administration (SBA) on June 27, 2025, announced a comprehensive, full-scale audit of its 8(a) Business Development Program (8(a) Program), marking a significant escalation in federal oversight of small business contracting. This decisive action follows a recent U.S. Department of Justice (DOJ) enforcement action that uncovered extensive fraud, bribery and abuse within the program, including the steering of more than $550 million in government contracts through illicit means by a former federal contracting officer and multiple 8(a) contractors.

The SBA's audit aims to address mounting concerns about the integrity of the 8(a) Program, which is designed to support socially and economically disadvantaged small businesses and has faced scrutiny for being vulnerable to manipulation and misconduct.

The SBA indicated that "findings will be referred to the SBA Office of Inspector General and DOJ for enforcement, and the SBA will pursue all available actions to recover misused funds." The announcement signals a renewed commitment to accountability, transparency and the protection of taxpayer funds in federal procurement. As the audit unfolds, all stakeholders in the government contracting space should be aware of the heightened scrutiny and potential implications for program participation and compliance.

Background on the 8(a) Program

The 8(a) Business Development Program, established under Sections 7(j)(10) and 8(a) of the Small Business Act (15 U.S.C. §§ 636(j)(10) and 637(a)), is a cornerstone of the federal government's efforts to promote the growth and competitiveness of small businesses owned by individuals who are socially and economically disadvantaged. The program is administered by the SBA and designed to provide eligible firms enhanced access to federal contracting opportunities, as well as targeted business development support.

To qualify for the 8(a) program, a business must meet several key requirements:

• Small Business Status. The firm must qualify as a small business under applicable SBA size standards.
• Ownership and Control. At least 51 percent of the business must be unconditionally owned and controlled by U.S. citizens who are socially and economically disadvantaged.
• Personal Financial Limits. Owners must have a personal net worth of $850,000 or less, adjusted gross income of $400,000 or less and total assets not exceeding $6.5 million.
• Good Character. The business and its principals must demonstrate good character.
• Potential for Success. The firm must show the potential for success, typically evidenced by at least two years in business.

See 13 C.F.R. §§ 124.101 – 124.112.

Certification is valid for a maximum of nine years, divided into a four-year development stage and five-year transitional stage. Continued participation is contingent on annual recertification and compliance with program requirements.

Participation in the 8(a) program offers a range of significant benefits, including:

• Contracting Opportunities. Access to federal contracts set aside exclusively for 8(a) firms, as well as the ability to receive sole-source awards up to specified thresholds.
• Business Development Assistance. One-on-one counseling, training workshops and management guidance from SBA specialists.
• Mentor-Protégé Program. Opportunities to form joint ventures with established businesses, increasing capacity and competitiveness.
• Networking and Resources. Priority access to federal surplus property and connections with procurement and compliance experts.

The 8(a) Program is governed by Title 13, Part 124 of the Code of Federal Regulations, which sets forth detailed eligibility, participation and compliance requirements. The SBA is responsible for certifying participants, monitoring ongoing eligibility and enforcing program rules to ensure integrity and effectiveness.

The program's structure and oversight mechanisms are intended to ensure that its benefits reach the intended recipients – businesses that have historically faced barriers to federal contracting – while maintaining high standards of accountability and transparency.

Recent Investigations

Instances of alleged fraud in the 8(a) and disadvantaged business enterprise (DBE) programs are not new. Many cases appear in the headlines involving federal and state contracts where the 8(a) contractor is acting as a passthrough to ineligible entities. The SBA's announcement of the full-scale audit of the 8(a) Program follows two recent high-profile investigations and enforcement actions, highlighting program vulnerabilities.

First, DOJ uncovered a years-long bribery scheme involving a federal contracting officer at the U.S. Agency for International Development (USAID) and multiple 8(a) contractors. According to DOJ press releases and court filings, a USAID contracting officer (CO) accepted more than $1 million in bribes from contractors with payments funneled through a network of shell companies and intermediaries to conceal the illicit activity. The bribes included cash, luxury items, event tickets, mortgage down payments and jobs for relatives. In exchange, the CO steered more than $550 million in government contracts to the involved parties, subverting the competitive procurement process and undermining the 8(a) Program's integrity.

Second, DOJ uncovered a joint venture scheme wherein the 8(a) joint venture was awarded an $800 million USAID contract despite USAID's prior determination that one of the joint venture member's principal lacked "honesty or integrity" due to the above-referenced bribery investigation. The contract was awarded the same day the joint venture member was formally barred from government contracting. DOJ found the joint venture structure was used to exploit 8(a) program rules, allowing ineligible entities to continue receiving lucrative federal contracts. The scheme relied on leveraging the disadvantaged status of one partner to secure set-aside awards, while the majority of the work and financial benefit flowed to the disqualified entity.

Though USAID briefly rescinded the contract, the joint venture challenged the exclusion in court and was reawarded the contract in August 2024. The reaward occurred while further indictments and guilty pleas were being secured against the key participants in the bribery scheme.

8(a) Program Under Scrutiny

The 8(a) Program has been under scrutiny over the past few years. For example, in 2023, a federal district court enjoined the use of the SBA's "rebuttable presumption" of social disadvantage for certain enumerated groups in the administration of the SBA's 8(a) Program. Ultima Servs. Corp. v. U.S. Dep't of Agric., No. 2:20-CV-00041-DCLC-CRW, 2023 WL 463348 (E.D. Tenn. July 19, 2023). Prior to Ultima, though most 8(a) firms established their 8(a) Program eligibility through a presumption of social disadvantage, other 8(a) firms were admitted to the 8(a) Program because the qualifying individual owner established social disadvantage by a preponderance of the evidence (i.e., submitted a narrative as part of the original application). Under DOJ guidance regarding the court's order, the SBA now requires all 8(a) participants who originally relied upon the presumption of social disadvantage in their application to reestablish their 8(a) Program eligibility by completing a social disadvantage narrative.

The 8(a) Program faces uncertainty under the current administration's policies. One significant change has been the reduction of the target percentage of federal contracts awarded to 8(a) companies. Under the Biden Administration, this target was set at 15 percent, but the Trump Administration has reduced it to 5 percent. This change is likely to result in fewer contracts awarded to 8(a) businesses.

As the full-scale audit proceeds, stakeholders should anticipate heightened scrutiny of past and present contracting practices, with a particular focus on high-dollar, limited-competition awards and the use of joint ventures within the 8(a) framework.

Details of the Full-Scale Audit

The SBA's full-scale audit of the 8(a) Business Development Program represents a sweeping review of federal small business contracting practices, with a particular emphasis on identifying and addressing systemic vulnerabilities that have enabled fraud and abuse in recent years.

The audit, ordered by SBA Administrator Kelly Loeffler, will be led by the SBA's Office of General Contracting and Business Development. It is designed to be both retrospective and comprehensive, covering a 15-year period and focusing on high-dollar and limited-competition contracts awarded through the 8(a) Program. The review will encompass contracts across all federal agencies that have utilized 8(a) participants, with an initial emphasis on those awards that present the greatest risk of abuse – namely, sole-source and set-aside contracts, as well as joint ventures that may have circumvented eligibility or competition requirements.

The audit will be conducted in collaboration with various federal agencies that award contracts to 8(a) participants. The SBA will utilize a risk-based approach, prioritizing contracts beginning with high-dollar and limited-competition contracts and going back over a period of 15 years. Findings will be referred to the SBA Office of Inspector General and DOJ for enforcement, and the SBA has announced that it will pursue "all available actions to recover misused funds."¹

For preferential status contracting fraud, damages can be significant. The government takes the position that misrepresentations of size or status cause fraudulent inducement of the contract and, therefore, damages are equal the total value of the contract. See 13 C.F.R. § 124.521 ("In every contract, subcontract, cooperative agreement, cooperative research and development agreement, or grant which is set aside, reserved, or otherwise classified as intended for award to 8(a) Participants, there shall be a presumption of loss to the United States based on the total amount expended on the contract, subcontract, cooperative agreement, cooperative research and development agreement, or grant whenever it is established that a business concern other than an 8(a) Participant willfully sought and received the award by misrepresentation."). This is true even if the government ultimately received the economic benefit of the contract and there was no loss to the government.

The U.S. Supreme Court recently affirmed this concept in a criminal case, Kousisis v. United States, 605 U.S. --- (2025), finding that federal wire fraud charges based on a fraudulent inducement theory did not require the government to prove the defendants intended to cause economic loss. In that case, a contractor made false representations about DBE status by contravening a rule that a contributing disadvantaged business must perform a commercially useful function. (In federal contracting, this concept is akin to the Limitations on Subcontracting requirements). The Court found that by using a DBE as a "pass-through entity" the defendants had in fact devised a scheme to obtain contracts through feigned compliance with disadvantaged-business requirements and, thus, wire fraud charges under 18 U.S.C. § 1343 were appropriate. Cases are also often brought under the False Claims Act, 31 U.S.C. § 3729 et seq., a civil statute allowing for treble damages.

Key Takeaways for Government Contractors

The SBA's full-scale audit of the 8(a) Program is poised to have far-reaching consequences for all parties involved in federal small business contracting. Contractors should act now to review their compliance posture, strengthen internal controls and ensure all documentation is in order. Proactive engagement and a culture of ethical responsibility will be essential to maintaining eligibility for future federal contracting opportunities.

1. Heightened Scrutiny and Risk of Audit. All 8(a) contracts – especially high-dollar, sole-source and joint venture awards from the past 15 years – are now subject to retrospective review. Contractors should expect requests for documentation, eligibility certifications and evidence of compliance, even for closed or completed contracts.
2. Increased Enforcement and Potential Sanctions. The SBA is prioritizing enforcement. Where fraud, misrepresentation or noncompliance is found, contractors may face suspension, debarment or termination from the 8(a) Program, as well as civil or criminal enforcement and recovery of misused funds. Findings will be referred to the SBA Office of Inspector General and DOJ. Given the priority of this issue, there is also a potential for increased whistleblower activity surrounding the 8(a) program.
3. Focus on Joint Ventures and Passthroughs. Joint ventures and subcontracting arrangements are under particular scrutiny. This includes large businesses utilizing 8(a) participants either as teaming partners, joint venture partners or subcontractors. The audit will target arrangements where the disadvantaged partner may have served as a nominal participant or where the structure was used to circumvent eligibility or competition requirements. All parties to such agreements should ensure their compliance and documentation are in order.
4. Stricter Eligibility and Recertification. Expect more rigorous eligibility reviews and recertification requirements. The SBA is likely to require additional supporting documentation and conduct more thorough background checks, with a renewed emphasis on the "good character" requirement for both new applicants and current participants.
5. Enhanced Compliance Expectations. Contractors must maintain robust internal controls, accurate recordkeeping and proactive compliance programs. Enhanced monitoring of ongoing eligibility, recertification and performance is expected. Firms should conduct internal reviews and self-audits to identify and address vulnerabilities before the SBA audit does. Contractors should consider voluntary disclosure of any inadvertent noncompliance to the government.
6. Government Agencies and Contracting Officers. Agencies will face increased oversight and due diligence obligations. COs must verify participant eligibility, monitor contract performance and cooperate with SBA audit requests. This may result in additional administrative burdens and potential delays in procurement.
7. Retroactive Review and Documentation. Be prepared for retroactive examination of past awards. The SBA indicates that it seeks to audit back 15 years, though the statute of limitations for any fraud charges is less. Contractors should ensure that all records related to 8(a) contracts – including performance, eligibility and reporting – are organized and available for review.
8. Proactive Risk Mitigation. Take immediate steps to mitigate risk:

• Conduct internal reviews of all 8(a) contracts and joint ventures.
• Update compliance training and internal controls.
• Respond promptly and transparently to SBA audit inquiries.
• Consider voluntary disclosure and corrective action if issues are identified.

Conclusion

The SBA's full-scale audit of the 8(a) Program marks a pivotal moment for federal small business contracting. As the audit proceeds, all stakeholders – current and prospective 8(a) participants, government agencies and the broader contractor community – must recognize the heightened expectations for compliance and ethical conduct. The renewed scrutiny presents an opportunity to reinforce best practices, strengthen internal controls and ensure that the benefits of the 8(a) Program reach those for whom it was intended: socially and economically disadvantaged small businesses striving to compete on a level playing field.

Notes

¹ U.S. Small Bus. Admin., News Release 25-56: Administrator Loeffler Orders Full-Scale Audit of 8(a) Contracting Program, available online (last visited June 30, 2025).