Defense Secretary Pete Hegseth said the Pentagon will take aim at a contracting program that’s become a critical part of the business portfolios for many Alaska Native corporations.

“We’re actually taking a sledgehammer to the oldest DEI program in the federal government,” Hegseth said in a video posted to social media on Jan. 16, referring to diversity, equity and inclusion policies the Trump administration and its allies have attacked extensively.

He was referring to the 8(a) Business Development Program, overseen by the Small Business Administration. Established during the Civil Rights era, 8(a) is a “federal contracting and training program for experienced small business owners who are socially and economically disadvantaged,” according to the SBA.

The program has created substantial opportunities and benefits for Alaska Native corporations, the regional and village entities established under the Alaska Native Claims Settlement Act to benefit tribal members holding shares in the companies. The most lucrative of those benefits is access to no-bid federal contracts, with none of the dollar limits that many other 8(a)-eligible companies are subject to, and fewer restrictions on subsidiary activities.

The head of the Native American Contractors Association, a group representing Indigenous-owned companies dealing with federal contracts, said the organization is willing to work with the Pentagon on improving the 8(a) program, but disputed the assertion it is a “DEI program.”

Members of Alaska’s congressional delegation say they support the program, and are working with the Trump administration on the issue.

Speaking in general terms, Hegseth said the program’s stated goals are “laudable,” but that 8(a) had morphed into “swamp code words for DEI race-based contracting.”

Hegseth said that effective immediately, the Pentagon would review all sole-source 8(a) contracts worth more than $20 million.

“If a contract doesn’t make us more lethal, it’s gone. We have no room in our budget for wasteful DEI contracts that don’t help us win wars,” he said in the video. “Second, we’re doing away with these pass-through schemes. We’ll make sure that every small business getting a contract is the one actually doing the work.”

The defense budget for 2026 is $901 billion, according to the Associated Press, which reported that earlier this month President Donald Trump demanded the 2027 military budget increase to $1.5 trillion.

Hegseth framed the move as part of the Pentagon’s broader “effort to transform our acquisition infrastructure” in ways that do not “line the pockets of Beltway fraudsters” or “advance the agendas of DEI apologists.”

The message added a culture war framing to an issue that, over the years, has drawn criticism from across the political spectrum. But members of the Trump administration, as well as some of its Republican allies, have stepped up their attacks on 8(a) over the previous few months.

Last June, the Justice Department announced guilty pleas from four men in a bribery scheme dating back to 2013 that involved unlawfully steering $550 million in federal contracts, enriching themselves in the process. Two of the four individuals had small businesses that were certified under the 8(a) program.

That case was held up as an example by U.S. Small Business Administrator Kelly Loeffler last summer, used as a justification for launching a “full-scale audit” of the 8(a) program.

“In recent years, SBA’s 8(a) Business Development Program has seen rampant fraud — and increasingly egregious instances of abuse,” Loeffler said in a prepared statement from June. “We must hold both contracting officers and 8(a) participants accountable — and start rewarding merit instead of those who game the system.”

In December, Republican Sen. Joni Ernst of Iowa sent letters to several government agencies flagging instances of contract awards that appear to violate federal laws.

“Unfortunately, the 8(a) program’s no-bid, unlimited sole-source contracts are a fraud magnet,” Ernst wrote to Interior Secretary Doug Burgum. “While there’s no doubt that the Biden Administration’s indifference toward 8(a) program integrity enabled swindlers and fraudsters to treat federal contracting programs like personal piggy banks, 8(a) program flaws have raised alarm bells for decades.”

Ernst cited four different Alaska Native corporations in her letters. The infractions alleged are violations related to SBA rules barring an 8(a) company from operating multiple subsidiaries working in overlapping industries at the same time.

In her letter to Hegseth, Ernst wrote that the “Pentagon awarded approximately $8.5 billion through the 8(a) program, including $6.5 billion in total 8(a) sole-source dollars and $2 billion in total 8(a) set-aside dollars.”

It’s not clear how many of those Defense appropriations, or similar ones from other government agencies, were paid to Alaska Native corporations. Tracking expenditures related to 8(a) is notoriously tricky, in part because the program is ingrained in so many separate federal entities and administered through dozens of regional SBA offices with no centralized data tracking, according to a 2016 Government Accountability Office report that looked specifically at Alaska Native corporations.

“Unlike most other 8(a) small businesses, ANC-owned firms receive an exclusion from affiliation with their larger parent corporation and therefore can be subsidiaries in large corporations that may have worldwide operation, annually generate revenues in the hundreds of millions of dollars, and provide a range of goods and services to federal procuring agencies,” the GAO authors wrote.

The report estimated that in 2014, the 8(a) program committed $4 billion worth of federal contracts to some 344 companies owned by Alaska Native corporations.

Critics, though, have long alleged that the preferential access to lucrative federal business under 8(a) has not translated to profitable dividend payments to Indigenous shareholders or improved circumstances at the community level in Alaska. A series of articles by the investigative outlet ProPublica published in 2010 and 2011 documented the rise in 8(a) contracts among Alaska Native corporations, which drastically outpaced increases among other eligible constituencies like Lower 48 tribes.

“While contracting dollars to 8(a) firms grew nearly fivefold from 2000 to 2009, money to ANC companies in the program increased more than twentyfold — from $280 million to $5.7 billion — thanks to a rule that allows them to obtain no-bid contracts of unlimited size,” ProPublica reporter Michael Grabell wrote in one of the series’ stories.

Quinton Carroll, executive director of the Native American Contractors Association, wrote in a statement that the organization is committed to preventing waste and fraud. He disputed the thesis of Hegseth’s remarks.

“Native participation in the SBA 8(a) Program is not a DEI initiative. It is grounded in the unique political and legal status of Tribal Nations under U.S. law and fulfills longstanding federal trust and treaty obligations to Tribes, Alaska Native Corporations, and Native Hawaiian Organizations,” Carroll wrote in an email Thursday.

He added that the 8(a) program had eliminated racial preference in awards as of 2023.

“As this process moves forward, it is critical that oversight efforts preserve a program that has proven its value — strengthening national security, reinforcing the defense industrial base, and supporting economic growth in Native and surrounding communities,” Carroll said.

Besides audits and reviews, it’s not clear what permanent or legislative actions Hegseth and other agencies will take.

In the meantime, Alaska’s three Republican members of Congress say they remain staunch supporters of the 8(a) program.

“My office is actively working with the Administration, Alaska Native Corporations, and their trade organizations to ensure Washington fully understands the unique history of Alaskan participation in the 8(a) program,” Rep. Nick Begich wrote in an email Tuesday. “I am committed to continue engaging directly with Administration officials to ensure that any reforms strengthen the mission and economic opportunities that 8(a) has long provided for Alaska and the nation.”

A spokesperson for Sen. Dan Sullivan said the senator had used his position on the Senate Armed Services Committee to get commitments from Pentagon appointees “affirming that they would work to strengthen the (Department of War’s) work with 8(a) firms.”

“The senator had a productive conversation with Secretary Hegseth on these issues this weekend and will continue direct engagement with the secretary and other senior DOW officials as they look to review the 8(a) program,” said Amanda Coyne, Sullivan’s communications director, on Tuesday.

Sen. Lisa Murkowski said that overall, the 8(a) program “promotes economic self-sufficiency in some of the most geographically and economically isolated communities across the nation.”

She added that she’d received clarification from the Small Business Administration that Executive Order 14151 — Trump’s day-one policy on “Ending Radical and Wasteful Government DEI Programs and Preferencing” — doesn’t apply to the activities or businesses of Alaska Natives or American Indians.

“Oversight of all federal programs is necessary but it should not undermine lawful participation in a program that delivers high quality services to the federal government and that supports Native communities,” Murkowski said Thursday.