WASHINGTON, D.C. — The U.S. Small Business Administration (SBA) has stripped the U.S. Agency for International Development (USAID) of its independent authority to award contracts under the 8(a) Business Development Program, following revelations of a far-reaching bribery and fraud scheme that diverted more than half a billion dollars in taxpayer funds.
The move, announced on July 30, comes in the wake of a Department of Justice (DOJ) investigation that exposed systemic abuse of federal contracting procedures. The probe uncovered that a USAID contracting officer collaborated with two 8(a) contractors to fraudulently steer over $550 million in contracts, in violation of procurement laws and ethical standards.
SBA Administrator Kelly Loeffler described the decision as a necessary corrective action aimed at protecting public funds and restoring accountability. “Under the Trump Administration, the SBA will not tolerate the abuse of the government contracting process,” Loeffler said. “The decision to revoke USAID’s independent 8(a) contracting authority is necessary to prevent further wrongdoing by an agency with a well-documented record of waste, criminal fraud, and bribery.”
The 8(a) Program, managed by the SBA, is intended to level the playing field for socially and economically disadvantaged small businesses by providing access to sole-source and set-aside federal contracts. Through delegated authority, federal agencies like USAID have historically been permitted to directly execute contracts with certified 8(a) firms. However, with this new directive, USAID will now be required to work through the SBA for any future 8(a) contract awards.
The DOJ investigation highlighted a particularly egregious case in which a contractor—despite being flagged internally by USAID as lacking “honesty or integrity”—was later awarded an additional $800 million federal contract. The contract, ironically, was for evaluating the “root causes of irregular migration from Central America,” raising further concerns about oversight and judgment within the agency’s procurement operations.
USAID’s involvement in the 8(a) Program last fiscal year was substantial, obligating approximately $3.6 billion through the initiative. The scope and scale of the identified misconduct, combined with prior lapses in internal controls, prompted the SBA to not only revoke USAID’s contracting authority but also initiate a broader investigation into the 8(a) Program.
That audit, ordered by Administrator Loeffler, will scrutinize high-value and limited-competition contracts issued over the past 15 years. Any evidence of mismanagement, fraud, or abuse uncovered during the review will be referred to the SBA Office of Inspector General and the Department of Justice for enforcement. The agency also signaled its intent to recover any misused funds through all available legal and administrative remedies.
The SBA’s actions mark a sharp escalation in oversight of the 8(a) Program and send a clear message to federal agencies and contractors alike: compliance with procurement laws is not optional, and violations will be met with serious consequences.
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