Federal contracts using 8(a) Native preferences now under scrutiny for fraud

In the wake of a  federal crackdown on fraud and mismanagement in one of Washington’s most lucrative contracting programs, Alaska Native Corporations are bracing for a long-overdue aggressive federal scrutiny the Small Business Administration’s 8(a) Business Development Program.

The nationwide enforcement effort began in October, when the Small Business Administration suspended ATI Government Solutions LLC, a tribal-owned 8(a) contractor accused of operating as a “pass-through” for over $100 million in federal awards. The Susanville Indian Rancheria-owned firm was sidelined within days of an exposé by a citizen journalist that alleged ATI performed only a fraction of the work while routing the rest to large non-8(a) companies.

The suspension included ATI’s top executives and triggered a broader review of how entity-owned firms, including tribal, Alaska Native, Native Hawaiian, and other disadvantaged-designated contractors, have used their 8(a) privileges.

The catalyst for the investigation was a hidden-camera investigation by James O’Keefe, of OMG Media, whose reporting showed ATI officials describing the arrangement as a “pass-through.”

He wrote that ATI kept roughly 65% of the value of a $100 million IRS contract and outsourced 80% of the work to Accenture, a model plainly prohibited under 8(a) rules.

“What started with one suspension has now ignited a nationwide purge,” he wrote, calling it the beginning of a multi-billion-dollar cleanup of federal contracting abuses.

That purge became official on Dec. 5, when SBA Administrator Kelly Loeffler announced that the agency had mailed compliance letters to all 4,300 active 8(a) contractors. Every participant must now turn over three years of financials, payroll records, bank statements, and subcontracting agreements by Jan. 5. Failure to comply risks immediate suspension, loss of 8(a) certification, debarment, or referral to the SBA Inspector General and the Department of Justice.

For Alaska Native Corporations, which capture a significant share of all 8(a) awards, the directive is more than routine paperwork. ANCs operate dozens of subsidiaries across technical, logistical, and professional services fields, and rely heavily on sole-source authorities Congress granted them under the Alaska Native Claims Settlement Act.

Those advantages, including the ability to receive large sole-source awards, and wide latitude in forming joint ventures, have made ANCs central players in the federal contracting economy. In FY 2024 alone, ANC-owned 8(a) firms received an estimated $6 billion in federal work, nearly 20% of the program’s total volume.

Those same advantages now place Alaska Native Corporations squarely in the spotlight.

Federal auditors have repeatedly raised concerns that some entity-owned 8(a) firms subcontract out large portions of their work, sometimes more than 70-90%, a pattern that, if widespread, would fall into the same category of “pass-through” behavior now drawing Department of Justice and Treasury investigations. A July directive to federal contracting officers to report suspected fraud has already slowed the award pipeline. Treasury has separately launched a probe into billions in preference-based awards.

The SBA’s current review sweeps contracts going back to 2010 and follows a Justice Department bribery case involving a former federal contracting officer who steered more than $550 million in sole-source 8(a) awards in exchange for kickbacks. Loeffler has tied the tightening to years of lax oversight and has framed the reforms as a return to merit-based contracting.

For Alaska Native Corporations, the implications are immediate and far-reaching. Subsidiaries must compile thousands of pages of records within weeks, including subcontract agreements that are routine in ANC operations. Compliance costs could run into the tens of thousands per firm, and contracting officers may pause high-value sole-source awards until reviews are complete. Firms that rely heavily on subcontracting, particularly in IT and professional services, are expected to draw elevated scrutiny, even if their practices fall within existing rules.

The economic ripple effects could touch Native communities across Alaska. Many ANCs return substantial dividends to their shareholders and fund education, workforce training, and village-level social programs. A dip in contracting activity, or suspensions triggered by incomplete documentation, could tighten those revenue streams. In the long term, federal agencies may shift more 8(a) work into competitive bidding, a move that could disadvantage smaller ANC subsidiaries but reward those with stronger in-house capabilities.

Still, the fundamental legal framework that grants ANCs enhanced 8(a) authority remains intact.

For now, ANC executives will have to gather records while awaiting guidance from the SBA’s Alaska District Office, which is expected to assist firms through the compliance process. Many ANCs already maintain robust internal audit systems and are likely to weather the review with minimal disruption. But the message from Washington is unmistakable: the era of permissive oversight is over, and every 8(a) participant, including some of Alaska’s most economically influential Native corporations, must be prepared to demonstrate that they are performing the work they are paid to do.