Secretary of War Pete Hegseth announced Friday that the Pentagon is launching an immediate, aggressive overhaul of federal contracting, specifically targeting a program he alleges has devolved into a vehicle for fraud and “race-based preferences.”
In a statement released on social media, Hegseth said the Department of War would begin a line-by-line review of the Small Business Administration’s (SBA) 8(a) program. While the program was originally designed to assist disadvantaged small businesses, Hegseth argued it has drifted significantly from its statutory purpose and now siphons critical defense funds into “corrupt diversity, equity and inclusion (DEI) schemes.”
The move marks a significant escalation in the Trump administration’s broader effort to dismantle DEI initiatives across the federal government.
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“Beltway Bandits” and Shell Companies
Hegseth described the 8(a) initiative as the “oldest DEI program in the federal government,” claiming it acts as a loop-hole that allows large consulting firms to bypass competitive bidding processes.
“Providing these small businesses with opportunities is a laudable goal, but, over the decades… the 8(a) program has morphed into swamp code words for DEI race-based contracting,” Hegseth said.
The Secretary detailed a pattern where “socially disadvantaged” businesses allegedly act as pass-through entities. According to Hegseth, these firms often take a 10% to 50% cut of a contract’s value “off the top” before outsourcing the actual labor to major consulting corporations, which he referred to as “Beltway Bandits.”
The “Lethality” Litmus Test
Central to the crackdown is a new financial review threshold. Hegseth noted that the Pentagon frequently issues sole-source contracts—agreements awarded without a competitive bidding process—worth up to $100 million through this program.
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Effective immediately, the Secretary has ordered:
- A line-by-line review of every sole-source 8(a) contract exceeding $20 million.
- Subsequent scrutiny of contracts falling below that threshold.
- The termination of any contract that does not meet the department’s new primary metric: military lethality.
“If a contract doesn’t make us more lethal, it’s gone,” Hegseth stated. “We have no room in our budget for wasteful DEI contracts that don’t help us win wars.”
Broader Administration Goals
This directive follows a series of executive actions taken by President Donald Trump throughout 2025. Upon taking office, the President signed executive orders directing agencies to eliminate DEI initiatives, citing them as costly and discriminatory.
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Hegseth, who stated in April that DEI “no longer operates within the Pentagon,” framed Friday’s announcement as the financial enforcement of those political promises. He emphasized that the goal is to ensure taxpayer dollars are funneled strictly toward combat readiness rather than social policy.
“I promised that every single one of your taxpayer dollars would go toward one thing… Building the most lethal fighting force on the planet,” Hegseth said.
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