The Small Business Administration (SBA) has launched a sweeping investigation into a federal contracting fraud scheme involving minority-owned business preferences. Undercover footage released by journalist James O’Keefe shows executives admitting to subcontracting nearly all of the work while using minority-owned companies as pass-through entities to secure lucrative no-bid federal contracts.
The SBA’s 8(a) Business Development Program, designed to support disadvantaged small businesses, is now the center of a growing scandal. On October 21, the SBA confirmed it is investigating ATI Government Solutions and the Susanville Indian Rancheria after footage captured ATI’s contract manager stating, “We only do 20%. The rest goes to subs. And remember, there’s no competition.” The SBA labeled the practice “institutionalized abuse.”
The 8(a) program gives preferential treatment in federal contracting to firms owned by minorities or other disadvantaged individuals. These firms are eligible for set-aside contracts without competitive bidding. However, federal law requires that the certified firm perform at least 51% of the work. The video footage suggests that ATI and its affiliates may have violated this requirement, using minority-owned firms merely as shells to channel taxpayer dollars to third-party contractors.
SBA Administrator Kelly Loeffler ordered a full audit of the 8(a) program earlier this year, covering 15 years of federal contracts. This action followed a separate bribery case involving USAID, where the Department of Justice found similar abuse of minority contract preferences. In response, the SBA revoked USAID’s authority to independently issue 8(a) contracts.
The audit focuses on large-dollar, limited-competition contracts — many of which raise red flags for potential abuse. The investigation highlights deep-rooted issues in how federal agencies manage minority contracting goals. Abuse of these programs not only violates federal law but undermines trust in the fair distribution of federal resources.
