The U.S. Small Business Administration (SBA) has suspended 1,091 participants in the 8(a) Business Development Program after concluding that those firms did not timely submit required documentation in response to SBA’s recent program-wide data request. The suspensions are part of a broader effort by SBA to audit the 8(a) program and root out fraud, waste, and abuse.
SBA 8(a) Audit
The suspensions stem from a program-wide records request that was issued to all 4,300 8(a) participants. On December 5, 2025, SBA sent letters directing firms to produce extensive financial and contracting records covering the prior three fiscal years. Participants had until January 19, 2026, to submit data. SBA framed this audit as a response to concerns that the 8(a) program is vulnerable to fraud. One major Department of Justice (DOJ) enforcement matter involved a bribery and fraud scheme tied to United States Agency for International Development (USAID) contracting. In that case, DOJ reported guilty pleas by a former USAID contracting officer and three corporate executives in a decade-long scheme involving more than $550 million in contracts.
After the January deadline passed, SBA moved to enforcement. SBA suspended more than 1,000 8(a) firms for failing to respond to SBA’s request for information, and SBA stated that affected firms have the right to appeal within 45 days. While the practical impacts can vary by circumstance, suspended firms generally may be ineligible for new 8(a) awards during the suspension but are typically expected to continue performing existing 8(a) contracts, and agencies may be able to exercise options during that period, subject to applicable constraints. The suspension does not, by itself, impact an entity’s eligibility for non-8(a) awards.
The suspensions were made pursuant to 13 C.F.R. 124.305(a), which allows the SBA to suspend an 8(a) participant if “the suspension is needed to protect the interests of the Federal Government, such as where information showing a clear lack of program eligibility or conduct indicating a lack of business integrity exists, including where the concern or one of its principals submitted false statements to the Federal Government. SBA will suspend a Participant where SBA determines that the Participant submitted false information in its 8(a) BD application.” It is not clear that suspension for failing to respond to an audit meets this standard, and for that reason, it is possible, if not likely, that at least some of the suspensions will be challenged in accordance with the appeal process at 13 C.F.R. 124.305(c).
Department of War Audit of all Small Business Awards Over $20 million
At the same time, the Department of War (DoW) has signaled that it is intensifying scrutiny of how agencies use sole-source 8(a) awards and whether firms are performing as represented. On January 16, 2026, DoW issued a memorandum explaining that it will be joining the SBA and other agencies, including Treasury and General Services Administration (GSA), in auditing small business spend (the DoW’s 8(a) contracting spend is almost ten times that of any other agency, with more than $18 billion to 8(a) small businesses and more than $80 billion to small business in general in FY2024 alone). DoW’s audit will entail a “line-by-line review” of all sole-source and set-aside awards above $20 million in contract value, with emphasis on terminating awards that DoW views as misaligned with its objectives and addressing alleged “pass-through” arrangements.
In the first phase of this review, DoW will “identify any contracts that are inconsistent with the DoW’s warfighting priorities,” and in the second, DoW will “ensure that every small business that received a sole source or set-aside contract is performing the work and not illegally passing through the contract to large businesses that are ineligible for the award.” The secondary review is required to be completed no later than February 28, 2026 and any evidence of “improper subcontracting, such as evidence of excessive pass-through charges, should … be sent to the DoW Inspectors General and the SBA and, where deemed necessary by such offices, for referral to DoJ.” Presumably, the analysis of potential improper pass-throughs will carefully consider issues such as the limitation of subcontracting restrictions applicable to the particular type of work, as those thresholds differ depending on goods/services, general construction, and construction by special trade contractors, as well as the 2023 revision to the ostensible subcontractor rule. DoW’s initiative is a major reform push, and it highlights DoW’s stated concerns about fraud and pass-through contracting.
Looking Ahead
Companies currently in the 8(a) program, as well as all small businesses with DoW awards over $20 million, should treat these developments as a prompt to confirm submission status and document retention practices. 8(a) firms should verify what was submitted to SBA, when it was submitted, and whether the submission was complete, while preserving evidence of timely transmission and any system issues that may have affected filing. For firms that have been suspended, the deadlines move quickly, and the immediate focus should be on understanding the basis for suspension, evaluating options to lift it, and, if necessary, pursuing a formal appeal. All small businesses with DoW awards over $20 million should be prepared for questions from the DoW in the coming weeks.
Please contact the author with questions about the 8(a) audit, appealing a suspension, or how to respond to agency requests or allegations of fraud relating to small business awards.