8(a) Federal Contracting Program: What Veteran Business Owners Need to Know About Potential Changes

If you’re a veteran small business owner interested in working with the federal government, you are likely familiar with the 8(a) program through the U.S. Small Business Administration. If you’re not familiar, you may have heard about it in the news lately. 

The program is designed to allow small businesses to better compete for federal contracts. However, in the first year of the Trump Administration, the program has come under scrutiny, with critics arguing that the program amounts to an entitlement program filled with fraud, waste, and abuse. 

A sitting Senator has called for a full audit, while the Department of War has stated publicly it will fully audit the program’s use at its agency.

So, what does this mean for your veteran-owned small business?

What is the 8(a) program?

Congress created the program in 1978 under the Small Business Act to boost small business opportunities in federal contracting. To be eligible, small businesses must be at least 51 percent owned and controlled by U.S. citizens who are socially and economically disadvantaged and meet other income and revenue thresholds.

Specific eligibility requirements include:

• Be a small business
• Not have previously participated in the 8(a) program
• Be at least 51% owned and controlled by U.S. citizens who are socially and economically disadvantaged
• Have a personal net worth of $850,000 or less, adjusted gross income of $400,000 or less, and assets totaling $6.5 million or less
• Demonstrate good character
• Demonstrate the potential for success such as having been in business for two years

Once a business is certified, a business can participate for up to nine years, with a four-year developmental stage followed by a five-year traditional stage. The program requires annual reviews and continuing compliance checks.

“Socially and economically disadvantaged individuals” includes Indian tribes, Alaska Native Corporations (ANCs), Native Hawaiian Organizations (NHOs), and Community Development Corporations (CDCs), according to the Code of Federal Regulations.

The Department of War (DOW), General Services Administration (GSA), Small Business Administration (SBA), Department of the Interior (DOI), and Department of Homeland Security (DHS) are cited as departments that have utilized the program.

Why is the Program in the News?

To understand the current situation requires some understanding of the political motivations of the current Administration. Considerable time has been spent by Republicans decrying DEI programs as everything from wasteful to unlawful. And President Donald Trump campaigned on eliminating wasteful spending from federal agencies as part of his “drain the swamp” movement.

Fast-forward from the beginning of the President’s term in January 2025 to June 2025, when three former United States Agency for International Development executives pled guilty to a decade-long bribery scheme that included more than $550 million in federal contracts. 

In October 2025, political activist James O’Keefe published an undercover video where an official from ATI Government Solutions, a Susanville Indian Rancheria-owned company, discusses subcontracting practices where ATI acts as a pass-through to other contractors, using its status to obtain contracts. Federal officials nearly immediately canceled more than $250 million in contracts and announced audits and a suspension of government contracting.

In November, the U.S. Department of the Treasury announced an audit of preference-based contracting, including the 8(a) program. In December, Sen. Joni Ernst, chair of the Senate Small Business Committee, called on DOW to review all sole-source and set-aside contracts going back to 2020. Within about a month, DOW Secretary Pete Hegseth announced the Department, the largest user of 8(a) contracts, would be “taking a sledgehammer” to the program.

“Providing these small businesses with opportunities is a laudable goal,” he said of the intent of the program. “But over the decades, as it happens, the 8(a) program has morphed into swamp code words for DEI, race-based contracting. And here’s the worst part. In many, many instances, these socially disadvantaged businesses don’t even do work. They take a 10-percent, 20-percent, sometimes 50-percent fee off the top and then pass the contract off to a giant consulting firm.”

Calling these companies “Beltway Bandits” and the program, “a breeding ground for fraud,” he said the Department of Justice has exposed more than $500 million in fraud and the Treasury’s investigation found another $250 million in fraud. At the Pentagon, Hegseth said $100 million contracts are regularly sole-sourced to 8(a) companies and the Department is required by law to contract nearly $100 billion annually with small businesses.

He has ordered a line-by-line review of all sole-sourced 8(a) contracts over $20 million, seeking to root out contracts where contractors are solely passing through work and collecting fees.

In January, the SBA suspended more than 1,000 companies from the 8(a) program, according to news reports, after sending letters to more than 4,000 businesses in December seeking specific financial and company employee information.

What Does This Mean For Your Business?

If your business has been awarded contracts under the 8(a) program, it is important that you meet all program requirements and regularly communicate with your contract manager. As federal agencies look into sole source contracts and higher-value contracts, effectively communicating the work your company is doing in relation to the overall project will be important.

In some cases, hiring an independent auditing firm to confirm that best practices are being followed may also be advisable to show compliance with federal auditors. Companies may want to factor in the value of the contract, stage of the program or project, and its relative importance to determine how much of an investment to make into these decisions.

Ultimately, federal authorities will likely be targeting contracts that were sole sourced to a business that is subcontracting to large consulting firms, doing little of the work. 

In the case of DOW, staff will also be looking at contracts that do not enhance the agency’s mission of military readiness. While this is open to interpretation, it will be critical that vendors work closely with program directors to ensure leadership understands the value of the contract and how the vendors are complying with program requirements.

In some cases, the right government relations advisor may be helpful in lobbying the case for your contract, if the facts are on your side. At any rate, whether the program is heavily modified or eliminated through congressional action remains to be determined. Public attention to the matter will likely result in large shifts for contracts, vendors, and ongoing projects.

However, other federal programs exist to support veteran-owned businesses, and utilizing other programs and contract vehicles may help your business make it through the scrutiny.

SBA Veteran Small Business Certification: This is a program that certifies service-disabled and veteran-owned businesses for sole-source and set-aside awards

Service‑Disabled Veteran‑Owned Small Business Procurement Program: The Federal Acquisition Regulation establishes set‑aside and sole‑source procedures for these businesses across all agencies

VA Veterans First Contracting Program (Veterans Affairs only): By statute and agency regulations, the VA gives priority to certified veteran businesses for set‑aside and sole‑source contracting ahead of other small business programs

Surplus Personal Property for Veteran‑Owned Small Businesses: Certified businesses can receive surplus federal property from programs run at the state level