A recently made public Department of War Secretary Memorandum (Memo) dated Jan. 16, 2026, orders a line-by-line review of all small business 8(a) sole-source and set-aside contracts with over $20 million in contract awards. The Memo follows the U.S. Small Business Administration’s (SBA) Dec. 2025 decision to audit the financial records from the last three years of all 4,300 8(a) Business Development Program participants.
The review aims to:
- Ensure the awards are consistent with warfighter priorities.
- Combat waste, fraud and abuse.
- Ensure every small business that receives a sole-source or set-aside contract is following the contract requirements and limitations on subcontracting.
- Confirm mission necessity.
The deadline for completion of the review is Feb. 28, 2026.
Two outcomes are expected from this line-by-line review. Contracts determined not critical to the Department’s warfighting capabilities will be terminated for convenience; those in violation of limitations on subcontracting rules will be sent to the Department’s inspector general and SBA for review and, “where deemed necessary by such offices, for referral to the DOJ.”
In light of this action, small business contractors with set-aside contracts valued at more than $20 million, as well as 8(a) small businesses with sole-source and set-aside contracts of the same value, should begin to:
- Identify all active contract awards subject to the Department’s contract review.
- Ensure contracts comply with the limitations on subcontracting.
- Determine whether the contractor has an obligation to file a mandatory disclosure under the FAR/DFARS where non-compliance with the limitations on subcontracting is found.
