Pentagon Orders Line-by-Line Review of SBA 8(a) Sole-Source Awards: Compliance, Mission Alignment, and Pass-Through Risk
In a January 18, 2026 article published by Homeland Security Today (HSToday), journalist Megan Norris reports that Secretary of War Pete Hegseth has directed a comprehensive “line-by-line” review of the Department of War’s use of the Small Business Administration’s 8(a) Business Development Program, with particular attention to sole-source awards above $20 million (and potential review of smaller awards as well). (HSToday) The announcement, delivered via a video message, is framed as part of a broader federal push to reform contracting practices and intensify oversight of preference-based awards. (HSToday)
Norris situates the directive within the 8(a) program’s statutory purpose: to expand contracting opportunities for small businesses owned by socially and economically disadvantaged individuals or qualifying entities, including through access to sole-source awards that do not require full competition. The article emphasizes the scale at issue, describing the Pentagon as the largest user of 8(a) contracting among federal agencies and referencing claims of roughly $100 billion in annual small-business contracting activity. From a governance standpoint, the review is described as assessing two core questions: whether the contracts demonstrably support readiness and “lethality,” and whether the 8(a) prime is actually performing the work rather than serving as an intermediary.
A central compliance concern highlighted in the reporting is alleged “pass-through” behavior, where an 8(a) awardee collects a sizeable fee and subcontracts most performance to larger firms. Norris connects this to a broader enforcement environment. The article references recent Department of Justice activity involving alleged bribery and fraud tied to 8(a) contracting, and it notes that SBA leadership has initiated auditing actions, including requiring thousands of program participants to produce financial and employment records on an accelerated timeline. Treasury’s auditing of preference-based contracting is also presented as reinforcing a cross-agency integrity agenda rather than a single-department initiative.
Importantly, the article draws a boundary between policy rhetoric and legal authority: because the 8(a) program is created by statute, the Pentagon cannot unilaterally eliminate it, but it can review, investigate, and—where legally justified—terminate or reshape contract actions within existing procurement and enforcement frameworks. The practical implication for contractors is straightforward: documentation, demonstrable control of performance, and mission-relevant outcomes become the decisive evidentiary themes. Norris notes that indicators of improper pass-through arrangements may include operational signals inconsistent with prime control (for example, subcontractor personnel effectively operating as the prime). In this environment, 8(a) firms and their teammates should expect closer examination of limitations-on-subcontracting compliance, workforce reality, and contemporaneous records that substantiate who performed “primary and vital” work and why the effort supports defense objectives.
Disclaimer: This blog post is a summary and commentary on a publicly available news article and is provided for general informational purposes only. It does not constitute legal advice, does not create an attorney-client relationship, and may not reflect the most current legal or policy developments. For advice on specific facts or contracts, consult qualified counsel.