Uncovered: Administrative State Abuses of Military Contracts | The American Mind Podcast

Welcome, Will, to the interview of this special edition of the American Mind podcast and vidcast. I want to introduce Will. Will's our Director of the American Military Project here at the Center for the American Way of Life at the Claremont Institute in D.C. Will is a former Army Ranger and has been working in D.C. for quite a while. Also a 2023 Lincoln Fellow at the Claremont Institute. You recently completed a very interesting report on government contracting, especially military contracting. I was wondering if you could walk us through, this is called the 8A program, just walk us through what it is and we can start there. Yeah, thank you and thanks for having me, Ryan. The 8A program is a set-aside for those whom the government deems to have disadvantaged experience and to have then started a business eligible for government contracts. It's a rule of the Small Business Administration that designates business owners, so those who own 51% or more of a given firm, based on their, again, disadvantaged experience as being eligible for contracts that are, as I said, set aside or reserved for these firms owned by disadvantaged individuals. I'm putting the emphasis on disadvantaged because this is the term the government, when they made this program now 45 years ago, knew that they couldn't designate government contracts for business owners of a certain race or sex, so they concocted this status that would otherwise preference or bias individuals with this background that you could say align with being a racial minority, being a woman, we can get into that. The 8A program, again, administered by the SBA, Small Business Administration, but then applied by each federal agency. We took a look specifically at how the Department of War was applying the 8A program to government contracts in the national security space. Again, it's not only a program for the Department of War for national security, but let's just be honest, when the government, when the military is spending, you know, a trillion dollars, soon to be a trillion and a half dollars a year, there's going to be a lot of money eligible. What had happened is that, you know, certainly in the Biden administration, but even in the preceding regimes, a higher percentage than is mandatory of government contracts were set aside for these 8A qualified entities. Again, an individual through a somewhat laborious application process proves they're disadvantaged. They then have a firm that is eligible for 8A contracts, and they can then apply for these awards without competing for these contracts, importantly. You know, it's a program, perhaps with good intentions, but one, you know, to present our thesis, one that we say ends up disadvantaging white Americans, certainly white male business owners. And in reality, the most, you know, proximate purpose of the program has turned into being a guaranteed slush fund for defense primes to avoid competition for government contracts, and I can get into that a little bit. Yeah, just for the audience's sake, flesh that out a little bit. What do you mean by defense prime, and how does that work? Right, so the defense prime, five companies, Lockheed, Raytheon, Boeing, L3Harris, one other, but these are big established defense contractors, tens of billions of dollars a year in revenue, building everything from the F-35 to personnel software trackers. These primes, what they will do with 8A firms, again, a firm with a disadvantaged owner, they will partner with an 8A firm. The 8A firm will be the lead or the prime on the contract, not to be confused with a defense prime, colloquially known, but the 8A firm will be the prime to submit a proposal for a contract that is, again, set aside for an 8A firm. That gives them this eligibility, but what happens is an 8A firm will submit for this money, for this contract, and the lion's share of the work, and yes, the lion's share of the revenue, will go to a defense prime contractor, who is certainly not an 8A disadvantaged firm, but is an established, publicly traded company, using the auspices of the 8A program to avoid competition in delivering the best product or service to the government. It's to the tune, you know, we think the vast majority of 8A money goes to this purpose. We found, in particular, L3Harris, over just a few years, had almost 80 million dollars in revenue from this partnership and the symbiosis with 8A firms, so it's become a convenient excuse for established defense primes to get out of the practice of having to compete and offer the best value for the government's money. Yeah, so we're getting at the gap between what it purports to be and what it really is. Has it always been that way, or has it gotten worse over its history? It's always been that way. I think it really accelerated in the 21st century, let's say, during the Bush administration. The global war on terror, I think, is an interesting linchpin in the growth of kind of the northern Virginia, you know, central Maryland ecosystem that's tied to the military-industrial complex. Defense spending increased, and, you know, that wasn't defense spending necessarily for Abrams tanks and Apache helicopters. It was for services contracts, data analysis, you know, pastoral assistance, you know, at churches on post. And so I do think it's gotten a lot more pertinent. And then, candidly, although the program has been in existence since the 70s, it's been uniquely weaponized in the era of the woke and weaponized federal bureaucracy. I think it's become this really convenient way for the administrative state to allocate money to ideological ends. And as we've seen that kind of cultural wave crest, you know, we'll see if it crests again, but, you know, it certainly was ascendant for the first 20 years of the century that the 8A program picked up. There are more and more applicants. I mean, tens of thousands of companies seek 8A designation. And so it has really grown since the Obama administration, in particular. Yeah. So this, I mean, this dovetails nicely with your larger work for Claremont, which is to investigate and hopefully dismantle or recommend remedies for this overlap between the administrative state and the rise of a kind of racialized obsession of the federal government. Yeah, exactly. You know, and we're also trying to show that these are, it's not just the question of fighting a culture war in the military. It's not a question of political preference. Oh, you know, the Trump administration, you know, prefers to get women out of combat, for example, which is not necessarily the case, at least not yet. That's not what we're talking about. We're not talking about an ideological debate. Why we wanted to do this report was, one, no conservative institution in the country has ever examined the 8A program. And second, we were convicted that it was coming at the time when finally the Trump administration was willing to start, you know, turning some scrutiny towards the program. And I can get into that a little bit. But the point is, is that every dollar should be scrutinized, especially in the military, especially when, you know, our readiness needs are going to grow as we, you know, actually enter an era of near-peer competition. And if we're readily accepting a world where, you know, as we showed in the span of less than four years, over $10 billion was allocated towards defense primes through anti-competitive means, then this starts to become a question of national security that is interlinked with, you know, supposed mandates of diversity, equity, and inclusion. Yeah, that's real money even in DC. In a perfect world, maybe we abolish 8A, but short of that, what would be your recommendation to reform it? Acknowledging that it might be very difficult to abolish it. Are there ways to fix it? Yeah, and so there are. I do, you know, have serious questions of why it should exist in the first place. You know, one thing that we would support, and the administration has started to do forms of this, is to pursue policies that force the prime contractor on a, let's say, Department of War contract to perform all or the vast majority of the work. You know, essentially creating a by exception policy for subcontracts. You know, again, it's absurd if a firm that has two employees is 8A, submits for an award, you know, for a $50 million services contract. You know, there's no theoretical world where that two-person shop is able to conduct the work of that contract. And so let's force a rebalancing between who serves as the prime and who is the subcontractor so we can avoid these kind of theatrical moves that big defense companies will use to secure revenue, you know, without actually having to prove that they're the best company for the job. Yeah, I mean, it seems like a system that's ripe for corruption and self-dealing. I mean, did you stumble across any of the more egregious examples of individual firms that, I mean, I would imagine it would be a major target and a huge incentive for someone to get in this business, even to set up many of these. You could even see a third layer of people setting up or helping to set up smaller firms with disadvantaged heads and just sort of running a kind of scheme to defraud the government of money, or at least to line their pockets while they may be doing some defense work. Yeah, and just to name them, and again, they're not unique, but L3Harris was a company that I think was uniquely aggressive taking advantage of the 8a program. Again, I think it was $61 million over just a few years that they secured in just 8a revenue. And, you know, the other really bizarre manifestation, one of the 8a rules is that, you know, your 8a disadvantaged status can only last five years, at which point, you know, the theory of the case goes, you will have gotten the, you know, the leg up, if you will, to have your own viable business that can compete fairly for government contracts. Well, what happens is that 8a owners will just start new companies. Yeah, and there have been attempts to crack down on that, but that never actually happened. And so, you know, we would encounter cases where the same owner in Northern Virginia would start an 8a firm, you know, at about the three-year mark of that current firm, he'd start a different one, get 8a status in that new firm, push 8a contracts to that second firm, third, fourth, fifth iterations of that would happen over the course of years. Again, all theoretically, you know, you could say against the law, but when the goal of a program like 8a is not just financial, but it is ideological, then you really run into a lack of enforcement. So, I think, in many ways, the administrative state needs to simply enforce the law, but some broader tightening of who gets to participate in the 8a program is warranted. You know, let's say, I think, theoretically, a revenue cap on contractor or subcontractor in an 8a program is entirely reasonable, but we're certainly not there. Yeah, let's zoom out a bit, and how does this report fit in with your larger work for us as director of the American Military Project? Yeah, so when we started the American Military Project now almost four years ago, the goal of our project and every piece of content we produced was to align the ideological vision of the military with the policies and the framework that would be required so that military could be ready, lethal, and effective for the 21st century, and especially for the changing dynamic of the threat environment that America is facing. And, you know, that was why, when we started, we thought it was necessary to root out DEI in the military specifically, and race quotas, and the more bizarre manifestations of, you know, leftist ideology in the form of drag queen story hours on aircraft carriers as one example. But then, you know, we wanted to be the organization that seriously understood how, you know, DEI, for lack of a better term, was manifest in the military. It wasn't just in the books on military libraries or the drag queen show. It was in the personnel policies of the Pentagon. It was in, you know, what we'll have some commentary on a little bit later this year. It was in how environmental regulations affected military training and readiness, and in the case of this report, it was in how goals of diversity, equity, inclusion affected military contracting. And so, it fits in in the sense that I think there's a very real effect that I've outlined. But the other consistent theme that I'm finding in every part of work we do is that this is not a manifestation of Obama, much less Biden administration policy. This is policy from the late 70s and 80s. And, you know, this is an indication that I think is well in line with, you know, not coincidentally, perhaps, the start of the Claremont Institute. This is in line with a story of the acceleration of the administrative state that is not years old or a decade old, but many decades old. And so, that, I think, is an appropriate framing for listeners, viewers, supporters of Claremont, because to fix these kinds of problems takes a proper framing on how long they've been around and when they started. Yeah. How would you describe for me a little bit about the progress that's been made, especially in the second Trump administration, especially in your line of work, that is Department of War and the problem of ideology infesting the American military and its command structure and its promotions and all the rest? Right. So, broadly, there's been a lot of progress. I mean, for the, I think, on his first day in the job, Secretary of War Pete Hegseth, I think, as far as I can tell, was the first secretary, you know, first instance of government action, whether legislative or executive, to ban affirmative action in military personnel decisions. In the Biden administration, we had force-wide promotion quotas by race and sex for every Department of War civilian, every Department of War uniformed service member. Once and for all, Pete Hegseth ended that, even though there had been many times prior, we had Republican presidents, Republican majorities in the House and Senate. And so, I think that's an instructive example because it was this unity. Candidly, I think it was Claremont influence, too. It was this unity of the right text, the kind of proper textual understanding of what needed to change, the courage of leaders who were willing to make that change, and then effective kind of cultural implementation at the agency level. You know, with the 8-A program, specifically, I think we've also seen some good progress. I mentioned this earlier, particularly during the Obama administration. What you saw from many federal agencies is that most federal agencies raised the percentage of contracts that were set aside for 8-A firms. They raised it beyond the law's mandate. The law's mandate was 5%. Federal agencies raised that voluntarily so they could allocate more dollars to 8-A programs. Trump administration, SBA administrator Loeffler mandated a 5% cap on contracts. They forced 8-A owners to produce business records, for example, to ensure that they still met the qualifications. And the last time, at least as of this summer, they had removed over 1,600 8-A firms from the qualification. You know, just to, I think, to go a little bit more towards doing actual due diligence that can deter fraud. And then, you know, most importantly, and I don't think we've seen the full effects of this, but Secretary Hackseth himself announced a formal study of how the Department of War leverages, and you could say abuses, the 8-A program. You know, until now, it's been a sacred cow of Washington, D.C. for a lot of reasons, but there is, I think, some real commitment to actually doing something about what's taking place. We'll talk a little bit about the history of, for lack of a better term, wokeness in the modern military. You know this history well, and I think our audience is probably not that familiar with it. So is it really sort of around the Vietnam War, as I've heard you, and we've discussed this before, is that really a major inflection point, setting aside the last 10 years or so? I do, and so the story I like to tell is that the Civil Rights Act became law, and one week later, Secretary of Defense at the time, Robert McNamara, traveled to West Point to establish the Defense Race Relations Board. And in the speech where he established that body, you could call it kind of a policing organization within the military for affirmative action in the Civil Rights Act. But when he established that body, he made explicit that the military would be the first organization to adopt the mandates of the Civil Rights Act. That mandate being guaranteeing representation that was proportional by race, and eventually by sex, to the country writ large, or you could assume injustice and discrimination was afoot. So I think that's an important marker, because it shows that the military was not kind of this last cultural holdout, as I think we wanted to tell ourselves before we started our work. It was, in many ways, the first federal agency to dive headfirst into embracing the Civil Rights era. And to your point though, Ryan, this happened, obviously, as the Vietnam War was starting. What you then overlaid on a military that was seeking to force proportional representation by race, you overlaid a draft, you overlaid a war that was deadly, and costly, and in many ways, not going well for Americans. And then because of the draft, because of the unpopularity of the war, you injected tensions of immense civil strife into the theater of war. I've said a few times, the USS Kitty Hawk was taken out of commission due to a race riot in the late 60s, I think 1969. In 1970, five military prisons in Vietnam, so American prisons where they would house American soldiers or Marines who did something wrong, those succumbed to race riots. And there were, in the U.S. Marine Corps alone, in 1971, a thousand incidents of intramarine racial violence. And so, it's not to say that these policies caused that, but when you throw into this powder keg racial tension at home, the mandate and the explicit embrace of a worldview that you assume injustice from inequality, it became a really complicated mix. And it was something that took place and that really accelerated well before Barack Obama, well before Bill Clinton. But again, I think that should hone our prescription. Yeah, I mean, in the sort of story of Claremont's diagnosis of the rise of progressivism, the administrative state, this is one era, you know, the sort of early era being the intellectual one in the late 19th century, early 20th. Of course, if you have the New Deal and the building of the progressive administrative state architecture in many ways, and then it blows up and crosses over into a cultural realm in the 60s and 70s especially. So, this is of the piece with the whole trajectory of it. Well, while we have you here, I know you have thought a lot about this, so I want to take us off topic as our final discussion. How have both the Ukraine War, which we're not directly involved in but have been funding, people know this story, and then the Iran conflict, I mean, what implications do these have for how we have to think about military readiness and the future of the American military and its mission? Right, I think these conflicts represent perhaps the last chance for America to learn the lessons of what war could become in the 21st century the easy way. And obviously, the Iran War has not been easy and we've lost Americans, so that's not easy. But in terms of the fact that these are not wars that have escalated to high-intensity conflict between America and a foe, represent that they are opportunities to learn the right lessons. I think there is a risk, especially with the war between Russia and Ukraine, that the United States over-learns some lessons. There's a risk, especially with the Iran War, that we fight it to an extent that compromises our readiness for conflict in other theaters of the globe. But what I think the prevailing wisdom is, or what the prevailing wisdom is now, is that our military has to look different. Our industrial base is not ready right now in that we need to, again, learn the right lessons from Iran and Ukraine and apply it to the Pacific theater. Not just because China is, as the administration has stated, our pacing threat and the greatest geopolitical adversary we have, but because if we can apply lessons to the Pacific theater, the theater at which distances are the longest, logistical problems are the hardest, and the political considerations are the trickiest, then our military will be in a better shape. But I think these are wake-up calls, and we're not going to get that many more wake-up calls before, again, it could be a fight that we can't avoid. I think it really is, at the end of the day, a question of industrial capacity for the United States of America. It is really a question of how the United States builds enough of the right kind of weapon systems, so we have those weapon systems and that equipment in the right place in time to be able to fight China. Not because we must or we should even fight China over Taiwan, theoretically, but because, again, as we see that as the pacing threat, again, we'll be able to port on to different challenges around the world if we get that right. Well, I quoted Reagan, so I'll quote George Washington, the best way to preserve peace is to prepare for war. I think that's what you're talking about, right? Well, yeah, exactly, but it's the right kind of war. At the end of the day, we need to have enough missiles that can travel thousands of miles so we can implicate Chinese efforts on Taiwan without putting Americans at risk. Last thing I'll say is, I think, justifiably, we get a sense of the low tolerance that Americans have for U.S. casualties. I think 14 Americans have died so far, at least at this taping, in our war with Iran. It's clear that that's unacceptable to a lot of America, given how unpopular the war is. And many hundreds have been injured. Many hundreds have been injured, yeah, and that, candidly, I don't think is really transparent to folks. That does not scratch the scale of casualties and carnage that we could expect in a confrontation in the Pacific. Again, I think we need to orient the military on the most effective weapons structure and strategy that can allow us to inflict pain on the enemy without feeling it ourselves. That's almost trite and simplistic to say, but when you're talking about the Pacific Ocean, thousands of miles in distance and terrain, it's a really vexing problem that I don't know that we're there yet. Yeah, and modern aircraft carriers, a floating city of 5,000 plus people that can be sunk, of course. That's right. Well, and so, you know, CSIS did a war game in 2021 where they said, the United States in our war game, which was expertly conducted, I'm not disparaging that, but the United States had achieved victory in Taiwan. And what victory looked like was, according to CSIS, was the loss of 15,000 service members, two aircraft carriers at the bottom of the Pacific Ocean, China basically getting to the suburbs of Taipei, you know, on Taiwan before they stalled and weren't able to maintain the offensive. So it's a bleak path even under supposedly victorious conditions. Yeah, that would be a victory we haven't really experienced as a country since World War II. No, I mean, truly, it's something that almost no one alive can appreciate. All right. Well, thank you, Will. Thanks, Ryan. Look forward to talking more. Appreciate it.