The Northrop Grumman-made Sentinel intercontinental ballistic missile is intended to replace the Cold War-era Minuteman III missiles, which were first introduced more than 50 years ago and are well past their expected service life.

But Sentinel’s cost, which was originally expected to be about $77.7 billion, ballooned, largely due to the rising price of constructing a vast network of missile silos and launch control centers, spread out over thousands of miles in the Great Plains region.

Sentinel was on track to cost about $160 billion, well over twice the original estimate, when the Pentagon in January 2024 declared a cost overrun process called a critical Nunn-McCurdy breach and launched a review process.

The Sentinel program was also originally expected to reach initial operational capability in 2029, but that deadline first slid to 2030 and is now dropping further behind schedule.

In July 2024, the Pentagon decided the LGM-30G Minuteman III replacement was too critical to national security to cancel. But while Sentinel would continue, the Pentagon told the Air Force to restructure the program and bring its costs under control.

The Sentinel program’s Milestone B approval, which was originally made in September 2020 and authorized the program to move into its engineering and manufacturing development phase, was also revoked by the Pentagon at that time.

The Air Force said Tuesday that the restructuring of the Sentinel program is now projected to finish by the end of 2026, along with a new Milestone B decision. The service said it has “leverag[ed] considerable progress over the last 12-18 months,” and is carrying out a “transformed acquisition strategy” allowing it to move quickly.

“Modernizing our nuclear deterrent is a critical priority!” Air Force Secretary Troy Meink said in a post on X. “The Sentinel program is on a data-driven path to deliver this capability, replacing a 1970s-era system to guarantee Peace through Strength for decades to come.”

Defense Secretary Pete Hegseth last August created a position dubbed the direct reporting portfolio manager, or DRPM, for critical major weapon systems — including the Sentinel and Minuteman III, the F-47 sixth-generation fighter and the B-21 Raider stealth bomber — to oversee the Air Force’s major programs.

That DRPM official, Gen. Dale White, is intended to be able to “cut through bureaucracy” and make decisions faster to rapidly deliver major capabilities at large scales, the Air Force said.

“The DRPM has the direct authority to make decisions, informed by integrated inputs across the enterprise and in alignment with the mission priorities set by the Secretary of War and the Secretary for the Air Force,” White said. “That construct allows us to resolve tradeoffs quickly and move with the speed required to deliver credible deterrence, while preserving the discipline this mission demands.”

The Air Force said that after taking the new DRPM role, White and the Sentinel team conducted a detailed review of the program, and decided it was on track to finish its restructuring phase this year and to deliver initial capability in the early 2030s.

A new cost estimate for Sentinel was not immediately available, but a U.S. official told Defense News that the Milestone B process typically involves an independent cost estimate from the Pentagon’s Office of Cost Assessment and Program Evaluation, or CAPE. The Pentagon said in July 2024 that Sentinel could cost $140.9 billion with a revamped acquisition process.

In a copy of the justification notice posted online Thursday, the Air Force said it needed to award the U.S. defense giant a sole-source contract because it is the only vendor that makes the GBU-57 Massive Ordnance Penetrator. Issuing the contract to any other vendor “would result in unacceptable delays” and undermine the Air Force’s readiness, the service said in the notice.

“This action is essential to restore operational readiness … and ensure Air Force Global Strike Command (AFGSC) possesses the necessary assets to support strategic contingency war plans for all Combatant Commands,” the justification and approval notice said.

The MOP is a 30,000-pound guided munition that the Air Force uses to destroy hardened or deeply buried targets such as underground labs or enemy bunkers. The MOP’s steel casing allows it to penetrate an estimated 200 feet through rock or other dense substances before detonating its conventional, but massive, payload.

The Air Force dropped multiple MOPs on Iran’s Fordo nuclear fuel enrichment plant from B-2 Spirit stealth bombers.

The estimated cost of the recent GBU-57 award was redacted from the copy the government posted online, but a box was checked elsewhere indicating it will be more than $100 million.

The procurement will buy more tail kits to guide the MOPs to their targets, with delivery starting in January 2028, as well as all-up-round weapon system components.

In a statement, the service said this shows a central pillar of its CCA strategy — that they can be easily modified and upgraded using a modular open systems architecture — can work, and improve how the defense industrial base operates.

CCAs are drone wingmen that are intended to fly sem-autonomously alongside aircraft such as the F-35A and next-generation F-47 fighter. The Air Force hopes to field at least 1,000 CCAs in varying configurations, and have them carry out missions such as strike operations, reconnaissance, electronic warfare and as decoys to lure enemy fire away from piloted fighters.

The Air Force in 2024 contracted with General Atomics and Anduril Industries to make its first CCAs, the YFQ-42A and YFQ-44A, respectively. Ground testing for both began in spring 2025, and later that year, flight tests began.

This third-party autonomous software was integrated into both CCA models using a system called Autonomy Government Reference Architecture, or A-GRA, the service said. This shows that mission software can be “decoupled” from the hardware used by specific vehicles, the service said, and make technology integration easier.

“Verifying A-GRA across multiple partners is critical to our acquisition strategy,” Col. Timothy Helfrich, the Air Force’s portfolio acquisition executive, said in the statement. “It proves that we are not locked into a single solution or a single vendor. We are instead building a competitive ecosystem where the best algorithms can be deployed rapidly to the warfighter on any A-GRA compliant platform, regardless of the vendor providing the algorithm.”

By preventing “vendor lock,” the Air Force said, the service will be able to rapidly install new software and algorithms into CCAs, making a more agile force that can keep up with evolving threats.

General Atomics and Anduril each released their own statements about the integration success.

General Atomics said the integration of RTX subsidiary Collins Aerospace’s software — dubbed the Sidekick Collaborative Mission Autonomy — using A-GRA allowed the YFQ-42A to conduct its first semiautonomous airborne mission and launch flight tests.

The software’s integration with the YFQ-42A’s flight control system allowed “robust and reliable” data exchange with the CCA’s mission systems, which ensured the drone precisely carried out the software’s commands.

General Atomics said a human operator on the ground transmitted commands directly to the YFQ-42A, which the drone then accurately followed, for more than four hours.

“We are excited to collaborate with Collins to deliver enhanced autonomous mission solutions,” said David Alexander, president of General Atomics Aeronautical Systems Inc. “The integration of Sidekick with our YFQ-42A demonstrates our commitment to innovation and operational excellence in unmanned aircraft technology.”

Jason Levin, Anduril’s senior vice president of engineering, called integrating mission autonomy into CCAs “a meaningful step towards fielding a real operational capability by the end of the decade.”

“YFQ-44A was designed from the ground up with an emphasis on modularity,” Levin said. “The aircraft’s simple design, external weapons stores, and open hardware and software architectures ensure that the aircraft can easily be configured with a range of mission systems, software suites and payloads to support a wide variety of missions.”

Levin said Anduril has worked closely with Shield AI on integrating its autonomous software for several months, and that the company “look[s] forward to flying YFQ-44A with their software onboard very soon.”

In its policy paper, “Strategic Attack: Maintaining the Air Force’s Capacity to Deny Enemy Sanctuaries,” experts from the Mitchell Institute argue that the Air Force needs at least 300 next-generation F-47 fighters and at least 200 B-21 Raider stealth bombers to counter China. The Air Force has previously signaled it plans to buy at least 185 F-47s from Boeing and at least 100 Northrop Grumman-made B-21s.

In an online discussion about the paper, former F-16 pilot and Mitchell Institute director of research Heather Penney warned that past U.S. wars such as Korea and Vietnam, and Ukraine’s current war against Russia’s invasion, have showed that militaries who can’t or won’t hit enemy bases and other sanctuaries from the air risk falling into grueling wars of attrition, akin to trench warfare.

And without a significantly boosted combat fleet able to project long-range air power in force, Penney said, the United States could find itself in a similar danger against China.

“China is deliberately building the capabilities and the posture to effectively make the entire western Pacific their sanctuary,” Penney said. “But we know from history that allowing an adversary that kind of sanctuary allows them to win, and it’s a recipe for our own defeat.”

The Air Force has carried out recent strike operations such as Midnight Hammer, which bombed Iran’s nuclear sites, exceptionally well.

But Midnight Hammer employed the service’s entire fleet of available B-2 Spirit stealth bombers, Penney said, some in the strike portion of the operation and some as decoys. And if Iran shot down any of those B-2s, Penney said, the Air Force couldn’t replace them — nor could the Air Force carry out a similar mission the next day if a second strike was needed.

And if the U.S. found itself in a conflict with China or other major regional power, Penney said, the Air Force would have to deal with a threat far more dangerous than Iran, with significantly better air defenses. Without a great enough combat aircraft reserve, Penney said, the Air Force might have to stay outside China’s air defenses and refrain from more daring strikes to avoid losing irreplaceable planes — but a conservative strategy like that might not be enough to win, or deter China from a first strike against Taiwan.

“The inability to hold [Chinese] targets at risk really provides a singular reward to a first mover, to an aggressor,” Penney said. “So if China doesn’t see any risk to their homeland, to their population, to their infrastructure, they can afford to lose some of those assets on the edge, because they know that they can hold us at bay. So it really erodes our ability to keep them from taking that kind of aggressive action.”

Penney and the Mitchell Institute argued that the Air Force also must take interim steps to maintain its combat airpower until the B-21 and F-47 come online in significant numbers.

That means refraining from retiring any legacy B-1 Lancer or B-2 bombers until the Air Force has at least 100 B-21s on hand, the Mitchell Institute report said. And the institute called for Congress and the Pentagon to provide the Air Force enough funding to speed up the acquisition of the B-21.

And the Air Force needs to boost its procurement of the fifth-generation F-35A Joint Strike Fighter, the F-15EX Eagle II and autonomous drone wingmen the service calls collaborative combat aircraft, Penney said.

This means buying 74 F-35As and 24 F-15EXs each year to start to turn around decades of cuts to the force, she said.

“The Air Force must reverse its fighter crisis and procure F-35s and F-15EXs at maximum rates: No more ‘divest to invest,’” Penney said, referring to an Air Force strategy of retiring older air frames to free up funds to develop new aircraft. “The Air Force must recapitalize its fighters with at least a one-for-one rate [replacing each retired jet with a newly procured tail], while also augmenting its force with collaborative combat aircraft.”

The Mitchell Institute also argues that the Air Force should have a bomber force of at least 300 aircraft. With 76 Cold War-era B-52 Stratofortresses in the Air Force’s fleet and slated for massive upgrades, that would mean the Air Force would have to buy at least 224 B-21s to meet Mitchell’s goal. The Air Force is planning to retire all B-1s and B-2s in the next decade and fly a two-bomber fleet.

The Extended Range Attack Munition, or ERAM, is an air-launched cruise missile that is designed to allow the Air Force to strike high-value fixed targets from standoff range with precision guidance, at an affordable cost.

The Air Force awarded the ERAM contract just 16 months ago to the small firms of Zone 5 Technologies and CoAspire. The Air Force wants ERAMs to be quickly built to bolster its ability to deter enemies.

“Moving from a contract to a live-fire demonstration in under two years proves we can deliver lethal, cost-effective capability at the speed of relevance,” Brig. Gen. Robert Lyons III, the Air Force’s weapons portfolio acquisition executive, said in a Jan. 30 statement. “This is how we rebuild our military — by empowering our teams and industry partners to cut through bureaucracy and deliver the tools our warfighters need to prevail.”

The test was conducted at Eglin Air Force Base in Florida, and involved the Air Force Life Cycle Management Center’s Armament Directorate, the 96th Test Wing and industry partners, the Air Force said. The Air Force said the test met all primary objectives, including a full detonation of its warhead. The data Eglin’s engineers collected will be used to help further refine and mature the ERAM design.

“The future fight demands we create an asymmetric advantage by developing cost-effective, attritable systems like ERAM that give commanders the ability to generate mass,” Brig. Gen. Mark Massaro, commander of the 96th, said. “This test is a critical milestone on this path.”

The U.S. government has authorized the sale of ERAMs to Ukraine to strengthen its arsenal. In August 2025, the State Department announced up to 3,350 ERAMs, as well as embedded GPS and navigation systems, had been approved for sale to Ukraine for about $825 million.

Kratos SRE Inc., a subsidiary of Kratos Defense, and Halo Aeronautics are among the more than two dozen vendors taking part in the first phase of the Defense Department’s Drone Dominance Program, the department said in a statement.

“Drone dominance is a process race as much as a technological race,” Defense Secretary Pete Hegseth said in a July 2025 memo that the department highlighted. “We are buying what works — fast, at scale, and without bureaucratic delay. Lethality will not be hindered by self-imposed restrictions.”

Hegseth’s memo followed a June 2025 executive order signed by President Donald Trump that spelled out ways for the U.S. to improve its military and commercial drone capabilities, focusing on inexpensive, American-made combat drones.

The evaluation for the first phase, which the DOD dubbed the Gauntlet, will start Feb. 18 at Fort Benning, Georgia, and finish in early March. After military operators fly and evaluate the proposed vendors’ systems, the department will place about $150 million in orders for prototype drones.

Those prototypes will be delivered over the following five months, per the DOD. The department said in an early December release that it planned to have 12 vendors produce a total of 30,000 drones, at $5,000 per unit.

Hegseth’s Drone Dominance Program, which was rolled out in early December with a request for information, aims to quickly and inexpensively acquire hundreds of thousands of one-way attack drones by 2027.

Ukraine has used such “kamikaze” drones extensively in its fight against Russia’s invasion over the last four years, and it has drawn attention to their effectiveness in a modern war.

Hegseth said in December that the military can’t afford to continue to use costly munitions worth millions of dollars apiece to take out inexpensive enemy drones, and that a cheaper arsenal of attack drones is critical.

The Pentagon expects to spend $1.1 billion on the program over its four phases and wants to have “warfighters” be the ones evaluating how well potential drones work.

The department intends to buy large amounts of drones on a regular schedule, which will create a stable demand signal allowing industry to build out its own capacity.

The following three phases will see the number of vendors decline from 12 to 5, the DOD said in December, as the number of drones ordered will grow to 150,000 and the price will drop to $2,300.

The competitive cycles for improving these drones will be “measured in months, not years,” the Pentagon said.

The companies competing in “Gauntlet I” are:

• Anno.Ai Inc.
• Ascent Aerosystems Inc.
• Auterion Government Solutions Inc.
• DZYNE Technologies
• Ewing Aerospace
• Farage Precision
• Firestorm Labs
• General Cherry Corp.
• Greensight Inc.
• Griffon Aerospace Inc.
• Halo Aeronautics
• Kratos SRE
• Modalai Inc.
• Napatree Technology
• Neros Inc.
• Oksi Ventures Inc.
• Paladin Defense Services
• Performance Drone Works
• Responsibly LTD
• Swarm Defense Technologies
• Teal Drones Inc.
• Ukrainian Defense Drones Tech Corp.
• Vector Defense Inc.
• W.S. Darley & Co.
• XTEND Reality Inc.

Lt. Gen. Scott Pleus, the Air Force’s acting vice chief of staff, told attendees at a Mitchell Institute for Aerospace Studies conference in Arlington, Virginia, that Air Force Secretary Troy Meink and Gen. Kenneth Wilsbach, the service’s chief of staff, have made improving readiness a top priority. That includes not just concentrating on flying airplanes, Pleus said, but fixing them so pilots and air crews can generate the sorties they need to project airpower.

In recent years, Pleus said, the Air Force has shifted to a more “centralized” approach to managing readiness. But now, he said, “we are putting commanders in commander business,” and not having staff or headquarters take the lead on readiness.

And if a surprise inspection shows a unit does not pass muster, Pleus said, it’s going to be on their commander.

“This is commanders’ business, and we’re going to hold commanders responsible for that,” Pleus said. “Because that is 100% in their wheelhouse. If they fail an inspection, that is the commander’s fault, and we will hold them accountable as we move forward.”

The Air Force has for years struggled with steadily declining aircraft readiness rates, but efforts to address the problem have yielded little success. Mission-capable rates across the fleet have continued to decline and hit 62% in fiscal 2024; the lowest in recent memory. Meanwhile, the service’s fleet is continually shrinking, and now has fewer than 5,000 aircraft.

Previous administrations emphasized modernizing the fleet, Pleus said, at the expense of readiness of the existing aircraft already on hand. Meink and Wilsbach are taking a different approach, he said, and “are explicitly clear readiness is our focus now.”

“We’ve got to buy parts,” Pleus said. “We’ve got to have the parts available so that … maintenance folks that are out there, wrenching on the flight line each and every day, in the cold, in the rain, in the heat, have the parts they need so they can fix those airplane, and then we can get them airborne again.”

Pleus said the Air Force is not abandoning its modernization drive, but will no longer do so at the cost of readiness. To do that, he said, the service is looking for better ways to use its funding and working with Congress and the Pentagon to ensure it has the maintenance skills and parts needed to ensure more planes are available to fly their missions.

The service is also emphasizing speed in its drive to improve readiness, Pleus said, including swiftly moving on exercises, acquisitions and working with the defense industrial base. Meink has stressed the need to eliminate needless bureaucracy in the acquisition process, for example, Pleus said.

“When you have all the time in the world, you can spend as much time as you want, taking the risk out of everything you do,” Pleus said. “When you don’t have any time, then you have to move at speed, and that is exactly what our secretary has asked us, and the chief has mandated that we are going to start to do.”

Pleus also said the service is emphasizing high standards. That includes everything from dress and appearance standards, which has been a priority of Defense Secretary Pete Hegseth, to the way airmen execute flying tactics and procedures.

“Everything in between is about setting a high standard, and then pushing your team to make sure that they are ready to do that high standard each and every day,” Pleus said.

The June 22 B-2 Spirit bomber-led strikes dubbed Operation Midnight Hammer — which used Massive Ordnance Penetrator weapons encased in nearly 26,000 pounds of steel to drive through 200 feet of mountain rock and destroy three deeply buried nuclear facilities — were a success of engineering, intelligence and coordination, Lt. Gen. Jason Armagost, deputy commander of Air Force Global Strike Command, said at a Mitchell Institute for Aerospace Studies conference in Arlington, Virginia.

But if the Air Force is going to maintain that kind of advantage, Armagost said, it has to ensure its command-and-control networks and communications architectures are able to securely transmit critical instructions and status updates to and from bombers and other aircraft.

“If that [strike] package is not able to … communicate the status of their forces and the ‘go’ from the mission commander, then that is a foul on all of us,” Armagost said during a panel about the Midnight Hammer operation and lessons learned.

Maj. Claire Randolph, chief of weapons and tactics for U.S. Air Forces Central Command, agreed that communications capabilities and intelligence sharing needs to improve during combat operations. But, she cautioned, the Air Force needs to take care that giving combatant commanders a direct pipeline to the cockpits does not lead to them making operational decisions and eroding the authority of air crew commanders.

“Let’s imagine you have a wire direct from the CENTCOM commander to the cockpit of every B-2 or the cockpit of every F-16,” Randolph said. “There’s a liability there to add … decision-making authority without all the awareness. We have to improve our communications capabilities, but we also have to be very careful to bound the authority that ends up touching the cockpit.”

Otherwise, Randolph said, there’s a risk of involving people outside of the aircraft who should not be part of the decision-making process.

While the B-2 — currently the only stealth bomber in the Air Force’s fleet — carried out the strikes, the Air Force plans for its in-development successor, the B-21 Raider, to play a central role in future penetrating strike missions.

Northrop Grumman, the maker of the B-21, has touted it as the world’s first sixth-generation aircraft, in part because of its advanced data-sharing capabilities.

In a conversation on the sidelines of the conference, Armagost said that as the Air Force plans for the future, it’s looking to take advantage of those capabilities as a way to improve command and control and communications.

“It’s definitely how we’re configuring going forward,” Armagost told Defense News when asked about the B-21 and the Air Force’s desire to improve how it communicates in combat.

Armagost said an operation like Midnight Hammer will look different — and in some ways, be easier to carry out — once the Raider is integrated into the Air Force’s fleet.

In an earnings call with investors, Boeing chief executive Kelly Ortberg acknowledged the loss is “disappointing,” but said the company is seeing encouraging signs in the aircraft’s operational performance that bode well for the program’s future.

“If sustained, [that strong performance] should enable us to meet our customer delivery commitment and set us well for the next tanker order beyond the current program of record,” Ortberg said.

Chief financial officer Jay Malave pointed to the Air Force’s recent order of 15 more KC-46s as a positive development that contributed to Boeing Defense Space and Security’s $15 billion in orders during the quarter.

Boeing said the KC-46 charges were driven by higher supply chain costs and production support expenses at its facility in Everett, Washington.

Ortberg said most of the KC-46’s loss was due to higher costs on the 767 air frame that provides the basis for the tanker, so that charge does not reflect on other Boeing defense programs.

But some of those added production support costs will eventually help the company, Malave said. Boeing is pushing for higher quality levels and engineering support at its Everett factory, where KC-46s are made, and saw the amount of work that needed to be redone drop by 20% in the latter half of 2025.

“While these investments are starting to evidence progress, we need to sustain them for longer than previously planned, to promote stability,” Malave said.

Ortberg said that with the Pentagon keeping a close watch on how well defense contractors meet their delivery deadlines, Boeing has to keep investing resources to keep its standards and productivity high.

“We took that decision — albeit, a big gulp — to have to take a charge here on the tanker program,” Ortberg said. “I think it will pay off in dividends with us, in terms of allowing us to make sure we meet the 19 [expected KC-46] deliveries next year.”

This will be particularly important in the future, he said, since the Air Force has decided to buy more KC-46s on a sole-source basis until a future next-generation tanker arrives.

Ortberg said Boeing will have a clearer picture on what the follow-on batch of KC-46s will cost later this fall. And given the massive losses — more than $8 billion — Boeing has taken on the program so far, Ortberg said, the company plans to be “laser-focused on making sure we understand the cost base of that airplane.”

“This has been a bad contract for the last decade,” Ortberg said. “As we enter into a new opportunity where we get to reprice, we want to make sure that we … ensure it’s a fair contract and we can make money.”

But experts and an executive from a firm that uses such contracts say the level of fraud critics like Hegseth alleged has been greatly exaggerated.

Some fear the harsh rhetoric around the program signals a desire to eliminate it, which they say would hurt small businesses and the Pentagon’s ability to quickly respond to unfolding emergencies.

In a video posted on social media, Hegseth described the Small Business Administration’s 8(a) Business Development Program in harsh terms, connecting it with diversity programs he has strongly criticized and ordering a strict review.

“We’re actually taking a sledgehammer to the oldest DEI [diversity, equity and inclusion] program in the federal government,” Hegseth said. “A program few people outside of Washington have ever heard of, that I hadn’t heard of. It’s called the 8(a) program.”

Norm Abdallah, executive vice president of Honolulu-based Native Hawaiian organization Hui Huliau, said recent criticism of the program is based on a “mischaracterization.”

“I’d hate to see the baby thrown out with the bathwater [as the result of] a couple of bad actors,” he said in a Jan. 21 interview with Defense News.

SBA’s 8(a) program grew out of late-1960s efforts by the Johnson and Nixon administrations to try to increase economic opportunities for Black business owners, in the wake of riots and unrest during the Civil Rights Movement. Through the 1970s, those efforts broadened to other ethnicities who had been economically disadvantaged, such as Hispanic Americans and Native Americans.

Today, the 8(a) program provides federal contracting preferences to participating small businesses, such as set-aside awards — for which only a select pool of contractors may compete — and sole-source awards, according to a 2022 Congressional Research Service report. It also provides training and technical assistance to small businesses to help them compete in the private marketplace.

Sam Le — a former SBA attorney and director of policy planning, who now runs his own law firm and writes a Substack on small businesses and government contracting — said the 8(a) program covers about $25 billion in contracts governmentwide each year. Of that total, about $15.5 billion in contracts were awarded by the Defense Department in 2025.

Businesses can only participate for up to nine years while they grow, and then they must graduate out of the 8(a) program. And there are firm requirements on how much work they must perform on a contract versus subcontracting it out, and reviews for compliance.

‘Breeding ground for fraud’ or small-business boon?

In his video, Hegseth said the 8(a) program may have started with good intentions but has become “a breeding ground for fraud.”

“Over the decades, as it happens, the 8(a) program has morphed into swamp code words for DEI, race-based contracting,” Hegseth said. “And here’s the worst part: In many, many instances, these socially disadvantaged businesses, they don’t even do work.”

Some recent high-profile cases of fraud have cast a shadow over the 8(a) program. In December, Sen. Joni Ernst, R-Iowa, called on all federal agencies to stop issuing new sole-source contracts through the 8(a) program until a thorough review is held.

In her release, Ernst pointed to a June 2025 Justice Department case in which four men — including a U.S. Agency for International Development contracting officer and three owners and presidents of companies — pleaded guilty to bribery-related charges in what prosecutors called “a decade-long bribery scheme” involving 14 contracts worth more than $550 million. Two of those companies, Justice said, were small businesses certified under the 8(a) program.

She also highlighted an October hidden camera video by conservative activist James O’Keefe, who caught a contracting director from a firm called ATI Government Solutions admitting 80% of her company’s 8(a) program work was actually done by subcontractors. SBA swiftly suspended ATI Government Solutions, a Native American tribally owned firm, from the program a day after that video’s release.

In his Jan. 16 video, Hegseth alleged that many businesses with 8(a) contracts take fees ranging from 10% to 50% off the top and then hire “a giant consulting firm, commonly known as Beltway bandits,” to do the actual work required by the contract.

“We’re not doing this anymore,” Hegseth said. He announced a line-by-line review of all small-business sole-source 8(a) contracts worth more than $20 million, and said smaller contracts will also be subject to review.

Hegseth said that if the department concludes any 8(a) contracts don’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, period. Full stop.”

Hegseth also pledged to get rid of “pass-through schemes” that he said allow a “shell company” to pose as a small business and then fob the work off on a big consulting firm.

Alan Chvotkin, an attorney and government contracting expert, said Hegseth’s assertion that 8(a) companies often do as little as 10% of the work required by contracts is inaccurate. 8(a) companies are allowed to subcontract out some work, but in most cases are required to do at least 50% of the work themselves.

Abdallah said construction contracts on the 8(a) program allow as much as 85% of the dollar amount to be subcontracted out, but that is because materials make up so much of the expense on such projects.

Ernst in December sent letters to Hegseth and other agency leaders that were critical of the 8(a) program and former President Joe Biden’s contracting policies. In its first year, the Biden administration announced a goal to grow small, disadvantaged businesses’ government contracts from 5% of agency contracts to 15% by 2025.

“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 wrote to agency leaders. “Sloppy oversight and weak enforcement measures allow 8(a) participants to act as pass-through entities, snagging unlimited no-bid deals with little transparency. Every loophole guts public trust and rigs the system against honest competitors.”

Le said the accusations of widespread fraud within the 8(a) program are inaccurate. When Le dug into the $550 million bribery case Ernst cited, he said, he found that amount was the total of all government contracts involved. Le could only confirm a single sole-source 8(a) contract in that group, and that deal — to build a website for government lawyers — was worth $22,000. Another $13 million sole-source contract coded as an 8(a) deal may have been incorrectly categorized, he wrote on his website, and was awarded under the first Trump administration, not Biden’s.

In her letters to agency heads, Ernst repeated O’Keefe’s assertion that he had uncovered a $100 billion fraud scheme in the 8(a) program. Le said that given the 8(a) program awards at most $25 billion in total each year, O’Keefe’s claim isn’t realistic.

“That would have to be a multiyear scheme involving every single 8(a) contract,” Le said. “$100 billion is much beyond what is plausible in this program. The 8(a) program only accounts for about 4% of federal contract spending, and an even smaller amount of that is sole-source contracts.”

A ‘chilling effect’ — or worse — feared

Chvotkin said the government and contracting officers certainly need to be watchful for fraud and bad actors in the 8(a) program, no different than other government contracting programs. And while the review of contracts worth $20 million or more will be labor intensive, Chvotkin said it will be worthwhile if it catches more wrongdoing.

But, he said, isolated examples of fraud should not be used as a reason to shut down the entire program.

“There are cheaters everywhere,” Chvotkin said. “I’m not so naive to suggest there’s not the risk of fraud, or actual fraud, taking place in the 8(a) program. The Defense Department, just like every other agency, is right to be looking at those aggressively. But that’s different than characterizing this program as a DEI program that should be terminated simply because it’s benefiting socially and economically disadvantaged companies.”

Abdallah said he expects Hui Huliau — a nonprofit 501(c)(3) Native Hawaiian organization that owns small businesses enrolled in the 8(a) program — to be looked at as part the review Hegseth ordered, and welcomes the scrutiny. His company already submits a compliance package to the SBA each year to remain in the program, and he said good contracting officers are the first line of defense against fraud.

“Getting audited is part of the process,” Abdallah said. “We welcome it, especially if it ferrets out bad actors. … There are going to be people who take advantage of the system, and those actors, we would love to be rooted out.”

Hui Huliau’s for-profit subsidiaries provide logistics, construction, disaster remediation and other capabilities to support government agencies and military units, often overseas. Abdallah said Hui Huliau firms have operated in locations worldwide including the Middle East, South Central Asia, North Africa and the Pacific.

“We became very good at learning how to support federal initiatives in hard places,” Abdallah said. “If there was a place that someone was shooting at someone, we probably had someone there.”

Hui Huliau’s revenue from state and federal government contracts fluctuates from year to year — sometimes spiking after major events such as the wildfires in Maui and Los Angeles — but Abdallah said it is typically around $200 million annually. The company employs about 300 people, and said some of its subsidiaries’ profits go to benefit educational, social, economic and cultural preservation programs for Native Hawaiians.

Abdallah said he was shocked to see Hegseth’s video — partly because the program isn’t that big when compared to the rest of government contracting, and partly because he doesn’t see it as rife with fraud as Hegseth and Ernst alleged.

“There are unfortunately bad actors in lots of places, but nothing comes close in this space to Medicare fraud or things like that,” Abdallah said. “It’s not rampant.”

Abdallah was also surprised to see the 8(a) program discussed so negatively by Hegseth and Ernst, without acknowledging the program’s positive aspects.

Being enrolled in the 8(a) program means Hui Huliau has been qualified and vetted as a legitimate small firm, Abdallah said, and the way the contracts are structured allows the company to quickly take on work and respond to emerging needs. In the case of rapidly unfolding disasters such as wildfires, he said, Hui Huliau can be hired and on the job within 48 hours using the 8(a) program.

“Rapid response is huge in national security,” Abdallah said.

8(a) contracts also provide a good way to bring manufacturing back to the United States, Abdallah said, since some deals go to small, local manufacturers that make things that were previously offshored.

Chvotkin agreed that the 8(a) program is greatly beneficial to the government and the military.

“These are really business development initiatives, not so much DEI initiatives,” Chvotkin said. “It’s true that the beneficiaries of [the 8(a) program] are socially and economically disadvantaged companies. But there are significant benefits that the government gets from this program. It’s not a giveaway; companies are required to provide goods or perform services … just like every other contract that’s awarded.”

The only difference, Chvotkin said, is the pool of companies allowed to bid on the proposals is limited to socially or economically disadvantaged firms.

Chvotkin predicted the high-profile and intense scrutiny from major figures such as Hegseth and Ernst will have a “chilling effect” on the 8(a) program, at least for now.

“The message to the acquisition officers in the Department of Defense, if the secretary is categorizing it as a DEI program, we know what the implications are of that,” Chvotkin said. “I suspect that companies and agencies’ buying activities will stay away from this program to the extent that they can, in the short term.”

Abdallah said he’s already seen such an effect, as contracts are paused “out of fear.” He’s seen some 8(a) contracts put on hold since Ernst’s early December memos on the program, and other DOD deals that were supposed to come out in January were delayed in the days after Hegseth’s video, he said.

“If I were a contracting officer in the U.S. government, especially the Department of Defense, I wouldn’t want to put out an 8(a) contract,” Abdallah said.

And Abdallah worries about what the administration’s next step might be.

“I’m concerned that this is a prelude to trying to do away with the program altogether under the guise of crushing DEI,” Abdallah said. “When in reality, the 8(a) program is an economic development program, and predates by decades any of the current DEI things that they claim to be fighting.”

If the 8(a) program went away, Abdallah predicted it would have multiple negative effects. The military would lose an important procurement tool that provides flexibility and the ability to act quickly, he said. It will hurt small-business growth and job creation. And in an age where the defense industrial base is already atrophying, as more companies drop out of doing business with the military, eliminating the 8(a) program would worsen that trend.

The set-aside contracts that make up the 8(a) program are, in many cases, the only way small companies can survive against mega-defense contractors.

“Going head-to-head with a Lockheed Martin — you’re just going to get crushed with [their] resources,” Abdallah said. “So having them set aside for competition — even with a smaller group of qualified people — puts you on a more level competitive field. Otherwise, you’re competing with multibillion dollar companies, and that’s just not realistic.”