For years, Washington power players have quietly exploited a federal contracting program meant to help the disadvantaged. Instead, the SBA’s 8(a) “special status” system became a doorway to no-bid government contracts — and a windfall for Beltway elites.
GAI President Peter Schweizer says the program has nothing to do with lifting people up. It has everything to do with checking DEI boxes, securing guaranteed contracts, and cashing in quietly.
So, how does the scheme operate? The pipeline goes like this…
A small company becomes 8(a) certified, earning access to government work that few others can compete for. But instead of doing the job, they pass most of the work to major outside firms. Taxpayers pay more, insiders profit, and the arrangement is labeled “equity.”
In one case, uncovered by investigative journalist James O’Keefe, an executive is caught on hidden camera bragging about winning a $100 million contract while completing only 20% of the work. The rest went to an unqualified partner, openly described as a legalized “pass-through” arrangement.
📸 Example? One executive bragged on hidden camera about winning a $100 million contract while doing only 20% of the work. The rest went to an unqualified partner. They called it a “pass-through.” I call it what it is: legalized fraud. Well done, @JamesOKeefeIII! pic.twitter.com/rI8SkAYqzw
— Peter Schweizer (@peterschweizer) November 26, 2025
Schweizer points to a Justice Department bust as proof of how deep the incentives run.
A USAID official was charged with accepting over $1 million in bribes while steering over $500 million in contracts to firms that exploited their 8(a) status. Schweizer argues this isn’t an outlier; it’s a symptom of a system built for loopholes.
The Biden administration made the problem even worse by tripling race-based quotas for contracting awards, which Schweizer says diverted money away from veteran-owned businesses. Performance fell while identity politics rose, and costs surged.
A federal judge eventually ruled that the core of this program was illegal, saying billions had been awarded based on race alone, without proof of specific discrimination. That ruling, known as Ultima, should have halted the system.
But Schweizer says officials helped companies work around it instead.
Firms were supposed to prove they had directly faced discrimination, yet agencies reportedly coached companies through “victimhood essays,” even reviewing multiple drafts until their submissions were accepted. Far from shrinking, the number of special-status firms actually increased.
Internal audits, according to Schweizer, showed firms with luxury real estate, crypto holdings, and millions in the bank still qualifying as “disadvantaged.” One Native American corporation — with fewer than 100 members — reportedly cleared $1.4 billion through the program.
Schweizer casts it not as a charity mission, but a political patronage system, dressed in the language of compassion. But we may finally have hit a turning point.
Treasury Secretary Scott Bessent has ordered an agency-wide investigation into fraud tied to the 8(a) program — a system Schweizer shows drained billions from taxpayers, military contracts, and small businesses. SBA Administrator Kelly Loeffler kicked off the agency-wide probes at the Small Business Administration last June.
He calls it the beginning of the end for racial pass-through contracting.
What Schweizer Says Must Happen Next
1. Congress should investigate the entire 8(a) program and subpoena contractors suspected of fraud.
2. Every agency with 8(a) contracts — starting with the Pentagon — should audit them.
3. The rules should be rewritten to remove DEI focus, level the field, and eliminate pass-through loopholes.
Read Schweizer’s original X thread below:
🚨 MASSIVE FRAUD ALERT: For years, DC insiders have exploited a federal DEI contracting program that provides windfalls to beltway elites. This open secret isn’t about helping the downtrodden; it’s about bagging no-bid paydays. The SBA's 8(a) program is long overdue for reform.🧵 pic.twitter.com/G7X0hCQdYt
— Peter Schweizer (@peterschweizer) November 26, 2025
