or many years, changes to the US Small Business Administration’s (SBA’s) Section 8(a) Business Development Program were slow and relatively uneventful—the typical product of lengthy notice-and-comment rulemaking. But recent rhetoric and conduct by the federal government suggests a riskier and uncertain time for Section 8(a) prime contractors, as well as the subcontractors who partner with them.

For example, the SBA recently announced new guidance regarding the 8(a) program that affects how contractors and Alaska Native corporations (ANCs) qualify for federal contracts—and the consequences of non-compliance.

These changes, along with increased scrutiny of the 8(a) program, may cause significant compliance risks. As a result, contractors should closely monitor changes to the 8(a) program, maintain rigorous compliance processes, and be prepared for potential contract terminations, investigations, and other legal claims.

The SBA also stated it will no longer rely on “Biden-era narratives of racial discrimination.” Accordingly, the agency removed the “Guide for Demonstrating Social Disadvantage” from its website.

Under the new framework, assessments of social disadvantage will focus instead on whether an individual has “been the victim of illegal or radical DEI [diversity, equity, and inclusion] policies or illegal affirmative action policies or has otherwise been the victim of discriminatory practices such as race-based quotas, set asides, or hiring targets.” As a result, participants’ narratives should avoid broad, categorical, or group-based statements tied solely to race. Instead, narratives should present clear, individualized accounts of specific events or circumstances demonstrating social disadvantage. Each claimed incident should be supported by precise facts and clearly explain how the event materially and adversely affected the participant’s ability to compete in the marketplace.

Following its document requests, the SBA purportedly suspended and terminated multiple 8(a) contractors from the 8(a) program. The SBA’s actions demonstrate the agency’s shifting priorities and focus on eliminating perceived DEI in the federal government.

Some may take comfort in the 8(a) program’s legal bases: it is both statutory (see 15 U.S.C. § 637(a), authorizing subcontracts to “disadvantaged small business concerns”), and regulatory, (see 13 C.F.R. § 124.101, describing the 8(a) program). Additionally, ANCs are deemed “disadvantaged” by regulation (see 13 C.F.R. § 124.109(a)(2)).

Accordingly, participants that are more than 51 percent owned by ANCs are not required to establish individual social disadvantage. But as we have seen with other efforts by the Trump administration, the existence of statutory appropriations or other provisions has not prevented the administration from terminating thousands of grants and contracts across a wide spectrum of federal programs and agencies.

Most federal contracts include express rights for termination for convenience. This is different than program termination and can be invoked on a contract-by-contract basis. There are legal grounds to challenge such a termination—known as a wrongful-termination claim—but the historical precedent for such actions is relatively sparse and generally favorable to the government.

In addition to potential legal challenges, contractors are generally entitled to recover allowable costs incurred up to the effective termination date, a reasonable profit on work performed, and costs directly associated with the termination, including settling subcontracts. This is sought through the preparation of a termination settlement proposal—and the process can take years to complete.

If the contractor and the agency cannot agree on a settlement, the contracting officer will determine the amount based on the Federal Acquisition Regulation criteria and properly supported cost data. To protect their interests, contractors should maintain contemporaneous records during contract performance of labor, material, subcontract costs, and other direct expenses to substantiate claims arising from a termination for convenience.

Given Secretary Hegseth’s comments and recent administration rhetoric about “widespread fraud and abuse” in the 8(a) program, we anticipate an uptick in investigations and scrutiny. This may include actions under the False Claims Act (FCA). The FCA imposes liability on any person who knowingly submits, or causes to be submitted, a false claim for payment or approval to the federal government, or who knowingly makes a false statement material to such a claim. Violators are subject to treble damages and civil penalties assessed on a per-claim basis. SBA’s new guidance—as well as its statements about fraud and abuse in the 8(a) program—increases the risk that whistleblowers may file qui tam lawsuits.

For Alaska contractors and ANCs, FCA risk underscores the need for strict compliance and accurate reporting. All submissions to the SBA should be complete, well-documented, and internally verified before filing. Engaging legal counsel early, particularly when responding to SBA inquiries, audits, or notices, can help mitigate potential FCA liability and protect both active contracts and 8(a) program eligibility.

In addition, Alaska contractors and ANCs that maintain thorough documentation, carefully substantiate eligibility, and respond promptly to agency requests not only reduce their risk of suspension, termination, and FCA liability but also strengthen their ability to compete for future federal contracting opportunities. Finally, when investigative requests for information come—whether informal requests for documents or civil investigative demands—contractors should ensure that those matters are prioritized, understood as potential precursors to litigation, and that your organization’s reply reflects the heightened risk environment.