On Nov. 6, 2025, the U.S. Department of the Treasury announced a comprehensive audit of preference-based contracting programs, covering roughly $9 billion in awards across its bureaus. The review targets potential misuse of federal set-aside programs, including the Small Business Administration’s (SBA) 8(a) Business Development (BD) Program, following allegations of fraudulent practices. The Treasury also instructed its acquisition workforce to impose new compliance mechanisms on all service contracts—namely, detailed staffing plans and monthly workforce performance reports—to identify non-performance and potential pass-through arrangements.
This move comes after the SBA launched its own full-scale audit of the 8(a) BD Program earlier this year. The SBA intends to review contracts across all agencies from the past 15 years, beginning with high-dollar and limited-competition contracts. In parallel, the Treasury will review its contracts awarded preference-based contracting for fraud, especially “pass-through” schemes where a small business subcontracts the majority of the work to a large firm, retaining fees for only minimal participation.
Just a few weeks prior to the Treasury’s announced audit, the Treasury suspended and terminated contracts with ATI Government Solutions, LLC, a tribally owned 8(a) firm, over suspected fraud involving $253 million in contract awards. The Treasury’s actions followed an SBA investigation alleging ATI was improperly serving as a pass-through for large companies. The government-wide exclusion applies to ATI and three of its executives. The investigation into the allegations will continue while the suspension is in place.
Key Takeaways and Considerations for Contractors
The Treasury and SBA’s enforcement actions against ATI, as well as the announced audit efforts, underscore that the 8(a) program continues to face increased scrutiny, even as small business goals are decreased (from 15% to 5%) and the program rules continue to be revised in light of the 2023 Ultima decision.
Small businesses with set-aside awards under the 8(a) BD program or other preference-based authorities may anticipate inquiries regarding their eligibility and subcontracting structures. To prepare for such reviews, 8(a) firms and other small business prime contractors should consider the following:
- Have all 8(a) application documents ready and begin collecting additional documentation to affirm that their application was based on legitimate disadvantage.
- Identify impacted set-aside contracts and review any recertification requirements. Confirm the accuracy of all small business representations and certifications.
- Reassess teaming agreements and subcontracts to ensure that workshare and management responsibilities reflect substantive performance.
- Be prepared to produce contemporaneous records substantiating the 8(a) firm’s participation (i.e., workshare allocations, management and control over performance and evidence that the 8(a)’s personnel performed core requirements consistent with the statement of work).
For new Treasury contracts or task orders, companies may wish to be prepared to provide detailed work plans and submit monthly work performance reports to alleviate concerns relating to improper pass-throughs.
The Treasury’s department-wide audit, coupled with SBA’s program-level audit of the 8(a) BD program, signals an escalation in the oversight of preference-based contracting programs with a goal of detecting fraud and “DEI-based contracting.” These audits, coupled with changes to the 8(a) and DEI rules, require companies participating in the program, or partnering with companies participating in the program, to be alert to solicitation and contract provisions, and respond quickly to government requests for reporting or other documentation. To be audit-ready, contractors (especially 8(a) firms with prime contracts) may wish to proactively review their teaming structures and strengthen their documentation. Contractors should also consider consulting with counsel to review subcontracts, joint venture agreements, and other teaming arrangements to confirm compliance with SBA regulations.
*Special thanks to Government Contracts Project Assistant Millie Koehler for contributing to this GT Alert.