A Quarter Of ‘Minority Contracting’ Firms Banned After Refusing Anti-Fraud Check

More than 1,000 firms that could get no-bid contracts from the federal government because they are owned by purportedly “disadvantaged” minorities have been banned from the program after they missed a deadline to turn over anti-fraud documents.

The documents were requested by the Small Business Administration because of the frequency of “pass-through” scams where minority “fronts” get contracts, then have large or white-owned businesses do the work while keeping a cut.

The now-suspended firms received more than $5 billion in federal money in the last four years, SBA said, and make up a quarter of all contractors getting preference under the so-called “8(a)” law.

“The Trump administration has acted from Day One to dismantle the discriminatory agenda that put white small business owners at a disadvantage, and to crack down on the fraud and corruption that proliferates within DEI programs,” SBA Administrator Kelly Loeffler said in a statement. “Today, we are suspending over 1,000 8(a) firms who have refused to provide basic documents that every legitimate business should have on-hand.”

The Senate Committee on Small Business held a hearing on waste, fraud, and abuse tied to the 8(a) program, during which this reporter testified on the widespread fraud that exists around it.

Under the law, 5% of contracts must be reserved for “disadvantaged” businesses, which President Joe Biden increased to 15%. Minorities with less than millions of dollars were automatically considered disadvantaged, as were all women.

Scrutiny of the long-running 8(a) program picked up in earnest after a black businessman pleaded guilty to obtaining $500 million in contracts from USAID by bribing an official $1 million. The official had the discretion to steer the contracts directly to Walter Barnes’ firm, Vistant, because of 8(a).

Journalist James O’Keefe also caught an official with a purported Native American firm on camera bragging about how they got $100 million and simply paid a large company $35 million to do the actual work.

On December 5, Loeffler ordered all 8(a) firms to turn over detailed records including payroll and bank statements. It has been an open secret in D.C. for decades that minority contractors get millions of dollars while having only one, two, or three people on staff–with the real work done by large, white-owned companies that are euphemistically referred to as “partners” or “mentors.” That means simply checking that firms actually had employees would have been enough to expose many for exploiting the system.

Going through all those records would be a Herculean task, one seemingly possible only through artificial intelligence. But it turned out that SBA didn’t even need to: Many fraudsters appeared to self-identify by simply refusing to cooperate.

Endemic fraud meant that the program was not even meaningfully meeting the goals liberals hoped for. The practice of no-bid contracting also drives up costs and lowers quality. But conservatives also opposed it on ideological grounds–with the courts making clear that the decades-old program has to change or end.

After a court said the practice of assuming all minorities are disadvantaged was unconstitutional, the Biden administration began awarding the status based on essays in which people were asked to list instances of discrimination they have faced. SBA declined to provide The Daily Wire with the essays, citing privacy, indicating there was no attempt to verify whether the claims in the essays were true.

The SBA said that veterans, who also get contracting preference, were waiting for approval because the Biden administration diverted resources to approving minority firms.

Alaska’s Republican senators secretly went to bat for the DEI program because big military contracts go to firms that call themselves Alaskan Native firms.