Treasury Launches Department-Wide Probe into Fraud Risks in Preference-Based Contracting
On November 6, 2025, the U.S. Department of the Treasury announced a sweeping investigation into potential fraud across its preference-based contracting portfolio—roughly $9 billion in awards spanning Treasury headquarters and its bureaus. The review will focus on possible misuse of the Small Business Administration’s 8(a) Business Development Program and similar set-aside mechanisms designed to advance eligible firms. (U.S. Department of the Treasury)
The department’s action follows prior suspension and termination of contracts with ATI Government Solutions after allegations involving more than $253 million in awards. Treasury paired the announcement with operational direction to its acquisition workforce: require detailed staffing plans and monthly workforce performance reporting on service contracts to spot pass-through behavior and non-performance earlier in the lifecycle. (U.S. Department of the Treasury)
For the federal contracting community, the signal is unambiguous. First, scrutiny of eligibility-based awards is accelerating, and the aperture is wider than one vendor or one bureau. When an enterprise buyer like Treasury publicly centers potential pass-through arrangements—where an ostensibly eligible small business retains a fee while a large subcontractor performs most of the work—it establishes a compliance expectation other agencies may quickly emulate. (U.S. Department of the Treasury)
Second, the emphasis on pre-award and post-award labor transparency suggests a near-term shift in evidentiary burdens. Contractors should anticipate greater demand for contemporaneous proof of prime-level performance: labor category mapping to statements of work, traceable timekeeping, and timely narrative of key personnel contributions. The introduction of monthly workforce performance reporting hints at a governance model where contracting officers use people-data as an early-warning system for non-conforming performance, heightening risk for firms whose delivery models depend on heavy subcontracting. (U.S. Department of the Treasury)
Third, the inquiry’s focus on 8(a) and related programs invites a renewed look at eligibility, teaming, and limitation-on-subcontracting controls. Primes and subs alike will need to validate that workshare, key personnel control, quality assurance, and invoice substantiation align with the prime’s obligations—not simply the economics of a teaming arrangement. In practice, that means refreshing compliance plans, tightening internal audits of labor distribution, and preparing for data calls that reach down to task order level. The practical takeaway is straightforward: if “prime performance” is not demonstrable on paper and in the field, award integrity is at risk—along with past performance and future eligibility. (U.S. Department of the Treasury)
Disclaimer: This article summarizes a government press release as of November 6, 2025. It is provided for informational purposes only and does not constitute legal advice. Verify details against the official Treasury announcement before making decisions. (U.S. Department of the Treasury)