The Trump administration on Friday announced plans to audit thousands of “disadvantaged” businesses contracted with the federal government, as part of an effort to root out diversity, equity, and inclusion measures embedded in the federal government.
The Small Business Administration sent letters to all 4,300 participants within its 8(a) Business Development Program requiring them to provide financial documents for the last three fiscal years, according to Administrator Kelly Loeffler.
“There is mounting evidence that the 8(a) Program designed for ‘socially and economically disadvantaged’ businesses went from being a targeted program to a pass-through vehicle for rampant abuse and fraud – especially during the Biden Administration, which aggressively prioritized DEI over merit in federal contracting,” Loeffler said in a statement.
The contractors must provide basic financial records, including bank statements, financial statements, general ledgers, payroll registers, contracting and subcontracting agreements, and employment records, in order to “protect taxpayer dollars and restore program integrity,” Loeffler added.
The development marks the Trump administration’s latest attempt to target DEI initiatives that it says violate anti-discrimination laws, after President Donald Trump signed an executive order in January directing all federal agencies to dismantle such activity.
In response, agencies across the federal government launched sweeping efforts aimed at eliminating DEI initiatives, including at the Education, War, Homeland Security, and Health and Human Services Departments.
Before her latest action this week, Loeffler had previously targeted DEI at the SBA by conducting a department-wide audit, citing a Justice Department investigation that she said uncovered a $550 million fraud and bribery scheme involving a former federal contracting officer and two 8(a) contractors. The SBA also suspended numerous executives and contractors last month following allegations of fraud involving more than $253 million in previously issued contract awards.
When she was initially tapped to lead the SBA, Loeffler expressed concern that the Biden administration had increased the 8(a) federal contracting goal for Small Disadvantaged Businesses “to an all-time high of 15%.”
“This action unfairly tipped the scales against any small business that did not qualify as ‘disadvantaged’….[and] negatively impacted veteran-owned small businesses,” Loeffler said at the time, adding that the SBA had reduced the SDB goal to the “statutory level” of 5%.
At the Transportation Department, Secretary Sean Duffy has also focused on efforts to cut a program similarly designed to boost minority and women-owned businesses by prioritizing them for federal contracts.
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White House Office of Management and Budget Director Russ Vought has cut, at least temporarily, billions in funding for projects reliant on funding tied to the DOT’s Disadvantaged Business Enterprise program, from Chicago to New York City.
“The American people don’t care what race or gender construction workers, pipe fitters, or electricians are. They just want these massive projects finally built quickly and efficiently,” the Transportation Department wrote in a press release.