The 8(a) small business contracting program is coming under the microscope of its biggest user.

The Defense Department is joining a growing list of agencies auditing the use of sole source contracts through the 8(a) program.

Experts warn that DoD’s decision to launch this new audit signals that this 40-year-old small business development program is teetering further on the edge.

“It’s not a death knell, but it’s absolutely going to leave a mark. It’s absolutely going to hinder our ability to bring some of that new technology, that new manufacturing capability to the federal marketplace. That’s probably my bigger concern,” said Norm Abdallah, executive vice president at Hui Huliau, a Native Hawaiian-owned firm in the 8(a) program, in an interview with Federal News Network. “We’re behind in terms of the ability to manufacture here in the U.S., and have outsourced that beyond what one should in the defense of their own country, and so hindering the ability for us to help bring some of that to bear in the U.S. marketplace is probably the biggest concern.”

Abdallah said the 8(a) program is an avenue for companies to enter the market, obtain past performance experience in the federal sector and learn the ropes so DoD, and really every agency’s, ongoing distrust and scrutiny of the program is likely going to impact the government in bigger ways than expected.

Secretary Pete Hegseth posted a video on X on Friday explaining that the Pentagon is worried about two main things: The 8(a) program is a diversity, equity and inclusion (DEI) program, and it’s wrought with fraud.

We are taking a sledgehammer to the oldest DEI program in the federal government—the 8(a) program. pic.twitter.com/c9iH8gcqG7

— Secretary of War Pete Hegseth (@SecWar) January 16, 2026

“Providing these small businesses with opportunities is a laudable goal, but over the decades, as it happens, the 8(a) program has morphed into swamp code words for DEI, race-based contracting. And here’s the worst part, in many, many instances, these socially disadvantaged businesses, they don’t even do work. They take a 10%, 20%, sometimes 50% fee off the top, and then pass the contract off to a giant consulting firm, commonly known as beltway bandits. For decades, this program, 8(a) has been a breeding ground for fraud, and this administration is finally doing something about it,” Hegseth said. “Effective immediately, I’m ordering a line-by-line review of every small business sole source, 8(a) contract that is over $20 million, and we’ll look at everything smaller than that too. The Department of War has the biggest chunk of 8(a) spending by far, 10 times more than any other agency. So our cleanup, it’s going to be 10 times tougher.”

DoD’s audit will include two phases. Hegseth said if a contract doesn’t make meet the DoD’s goal of increasing lethality, they will terminate it.

“We have no room in our budget for wasteful DEI contracts that don’t help us win wars, period, full stop. Second, we’re doing away with these pass through schemes. We’ll make sure that every small business getting a contract is the one actually doing the work, and not just some shell company funneling your money to a giant consulting firm,” he said. “This approach is, of course, not meant to hurt small businesses, and that’s not the point. America is full of great, amazing small businesses. This is part of a larger effort to transform our acquisition ecosystem into one that makes sense for the threats we face in the 21st century.”

An email to DoD seeking more details about the audit and a timeline for the audit wasn’t returned.

Experts say Hegseth’s decision to review sole source contracts worth at least $20 million is directed at Native American, Alaskan Native, Hawaiian Native and other tribal companies. Congress raised the sole source threshold for these firms to $100 million from $22 million in 2020. Firms not belonging to one of these groups have a sole source threshold of $5.5 million for manufacturing and $8.5 million for non-manufacturing contracts. These non-tribal or native firms can receive a sole source contract up to $20 million with certain justifications and approvals.

While experts say Congress may not act to change the law, the ongoing audits by the Small Business Administration, the Treasury Department, the General Services Administration and now DoD are sending signals that, at least for sole source contracts, the program doesn’t work.

A former DoD acquisition executive, who requested anonymity because their current company still does business with DoD, said he believes federal small business goals are at risk across the board, and while they may not be affected this year, in two to four years, agencies will see a huge reduction in their industrial base.

The former DoD executive said the administration is sending an inconsistent message to the federal contracting community. The audits and the reduction of staff in small business offices are sending one message that small businesses aren’t important. But then the White House, and DoD particularly, are expressing the desire to attract new participants to the federal market, including non-traditional companies. The executive said these companies typically depend on small business offices and programs like 8(a) to help them get a foot in the door.

John Shoraka, a former associate administrator of government contracting and business development at SBA and now the co-founder and managing director of GovContractPros, an advisory services firm specializing in federal procurement, said DoD’s audit is part of a concerted effort by the administration to undermine the 8(a) program.

“I think if you look at the dollars in the 8(a) program, especially at DoD, some will point to the fact that they actually went up in 2025. But the challenge that we saw across a lot of our clients was that offer letters that have to go through the district office in order for a sole source award to happen were being held up and or never being processed. So we saw a slowdown in sole source awards,” he said. “I think given what we’ve seen with respect to the SBA audit, given what we’ve seen with respect to the number of 8(a)s being approved, in 2024 there was something like 500 plus 8(a)s approved. In 2025, I think the last count I saw was 66 approved. So given the audits, the slowdown in processing, I think contracting officers are looking over their shoulders. I think in the short term, given the current administration and the current congressional makeup, if you will, we will see a trend away from the 8(a) program.”

DoD’s decision to audit the 8(a) program comes after Treasury and SBA announced similar audits earlier this fall. SBA is looking at the entire program and companies had to submit data to the agency by Monday.

The SBA general counsel’s office is driving the audit, which is unusual because usually these things are either done by the inspector general or program office.

Fraud, DEI concerns unfounded

Shoraka said while the questions being asked by SBA, and now eventually DoD, are legitimate questions, the approach is causing some chaos.

“A lot of our clients reached out to their district office and the district office was actually unaware that those letters had originally gone out with respect to the audit, so there was a disconnect there. The field offices aren’t sure how the data is going to be used, or who’s going to use it, or what they’re looking at,” he said. “From my perspective, given the types of questions that were asked, I think it leads to the question, are there pass throughs happening? Because there was a lot of questions with respect to, who are your subcontractors, who are your vendors, et cetera. So the question is, and I think what SBA was looking at is, are there pass throughs and who’s really in control? Is the disadvantaged individual really owning, operating and benefiting from the 8(a) company? And I think those are legitimate questions. But again, there are legitimate processes and mechanisms to monitor that, including the annual review, which occurs every year on every single 8(a) company.”

The former DoD acquisition executive said while there are concerns about the use of sole source awards over $20 million to tribal companies, the allegations of fraud and the belief that the 8(a) program is a DEI program are unfounded. He said DoD should go to Congress and change the law to reduce the risk of large sole source contracts turning into pass throughs.

Experts agreed that while no program is perfect and there probably are some challenges, the 8(a) program is typically well overseen and maintained.

In fact, Abdallah, from Hui Huliau, said most 8(a) firms spend a lot of time meeting the compliance requirements. But he said it’s also a shared responsibility for oversight with the government.

“There are several folks that have responsibility in there. The first one is the contracting officer. In some cases, they’ve got to approve subcontracts. But more basically, with SBA, we go through a review every year where we have to submit our financials, what work did we do and what work happened?” he said. “They worry about the business mix, how much of your work was set aside versus not set aside? Quite honestly, what means you got the work by some means other than the 8(a) program, be that a subcontractor to another straight commercial, et cetera. So there are lots of hooks to watch it. Do they audit the books, per se, to check for percentages? That’s less common. But it’s part of your overall review.”

Shoraka added there are a significant number of regulations or requirements to mitigate the risk of pass throughs, and most rules allow for legitimate subcontracting.

One thing all of the experts pointed out is that the program is set up to help the 8(a) firm grow and learn, but they still have to do at least 51% of the work under services contracts and 15% of the work under construction contracts.

Shoraka said what is being lost in this entire discussion is there is more fraud in non-small business socio-economic programs across government than there are in the 8(a) and other small businesses initiatives.

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© AP Photo/Kevin Wolf

The crypto market was left in awe as the price of Bitcoin experienced a sudden surge, bringing the flagship asset dangerously close to the $100,000 mark. With the recent bounce, hopes for a retest of the current all-time high and beyond have reemerged. However, a crucial supply cluster continues to stand in the way.

A Fresh All-Time High Beckons For Bitcoin

Bitcoin’s price is gaining sharp upward traction as it retests the $98,000 price mark on Wednesday, a level last seen in November 2025. On-chain data shows that the crypto king is once again edging toward uncharted territory, with market structure pointing to a clear path toward a new all-time high.

However, there is a significant barrier between present levels and price discovery: a dense supply cluster created by investors who have previously made purchases in the same range. This range was highlighted by Glassnode, a leading on-chain data platform, after examining the BTC Long-Term Holder Cost Basis Distribution Heatmap.

Data from the key metric shows a dense cost-basis cluster between the $93,000 and $109,000 price range, which is forming a substantial overhead supply zone. The supply zone serves as a technical and psychological barrier where a large number of holders may be waiting to take profits or quit at breakeven, resulting in concentrated resistance.

At this level, any sustained push higher must first absorb this supply, with a decisive breakout above the range. If Bitcoin is able to absorb this overhead supply and push through it decisively, momentum could pick up pace quickly. Glassnode noted that this crucial range is usually expected to reopen the path toward a new all-time high for Bitcoin over the longer term.

According to Glassnode in another post, BTC has ushered in the new year with constructive momentum, printing two higher highs and extending its value toward the $98,000 price level. However, the platform stated that the leg up currently runs directly into a historically supply zone.

BTC Market Is Displaying Deleveraging Signals

Looking at Bitcoin’s current action from an on-chain perspective, the flagship asset is starting to show signs of deleveraging. This deleveraging indicates that excess speculation is being removed from the market after a period of high leverage and aggressive positioning.

Coin Bureau’s report shared on X points to a sharp decline in BTC Open Interest (OI) from $15 billion in October to $10 billion today, as leveraged traders get flushed out. The drop represents an over 30% decrease within the period. 

Interestingly, these deleveraging phases have often preceded major market bottoms, making this a critical moment for BTC. Nonetheless, should BTC continue to fall, more leverage is expected to still get wiped out.

At the time of writing, the Bitcoin price was trading at $96,247, demonstrating a 1.29% increase in the last 24 hours. Data from CoinMarketCap shows that trading volume is down despite the bullish price action, dropping by more than 3% in the past day.

The tech titan isn't celebrating this compliance milestone. Instead, it launched a scathing attack on the legislation.

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The tech titan isn't celebrating this compliance milestone. Instead, it launched a scathing attack on the legislation.

The post Meta Removes 544K Teen Accounts Under Australia’s Ban appeared first on TechRepublic.

President Donald Trump took aim at defense contractors Wednesday, announcing new restrictions on executive pay and stock buybacks as part of the administration’s push to speed procurement and revitalize the defense industrial base. 

In an executive order issued late Wednesday, Trump said companies “are not permitted in any way, shape, or form to pay dividends or buy back stock, until they are able to produce a superior product, on time and on budget.”

The order directs Defense Secretary Pete Hegseth to identify defense contractors providing critical weapons, supplies and equipment that are “underperforming, not investing their own capital into necessary production capacity, not sufficiently prioritizing U.S. government contracts, or whose production speed is insufficient as determined by the Secretary,” while simultaneously engaging in stock buybacks or corporate profit distributions. 

Contractors identified under the review must be notified and given an opportunity to submit a remediation plan within 15 days to address performance issues. 

If disputes over underperformance issues cannot be resolved within 15 days or the remediation plan is deemed inadequate, the defense secretary “may initiate immediate actions to secure remedies for the secretary that will expedite production, prioritize the U.S. military and return the contractor to sufficient performance, investment, prioritization and production, to the maximum extent permitted by law.”

The executive order also directs the Defense Department to ensure that future contracts with new or existing defense contractors include provisions prohibiting stock buybacks and corporate profit distributions during periods of underperformance, contract noncompliance, insufficient investment, or “insufficient production speed as determined by the secretary.”

The government already has a whole set of tools in its toolbox to incentivize, reward or penalize companies based on their performance, and the executive order relies in part on mechanisms the Defense Department already uses. What is different, however, are the remedies the administration is focusing on — and the main challenge in implementing this executive order will be defining the key parameters contractors are going to be held accountable for, Protorae Law member Alan Chvotkin said.

“The remedies of no stock buybacks and caps on executive compensation — that’s not a remedy that the government already has available to it,” Chvotkin told Federal News Network. “It’s not so binary to say it’s 100% of contractor’s problem or zero of the contractor’s problem, and that’s where the hard work is going to come on each of these major programs — defining the specific parameters that the department is expecting.”

Stan Soloway, president and CEO of Celero Strategies and federal acquisition expert, said the executive order seems to presume that any cost overrun is the fault of the contractor without recognizing that “not all cost overruns are created equal.”

“The [executive order] is full of vagaries and ambiguity. It is going to be very interesting to determine how they measure whether a company is performing … There’s no mention about the responsibility the Defense Department has for cost overruns and program delays. While companies are far from perfect, all too often, the delays are driven by changing requirements, by requirement rigidity, lack of flexibility in the requirements and by budget uncertainties,” Soloway told Federal News Network. 

Back in 2007, the Defense Science Board, for instance, examined three troubled programs — the Littoral Combat Ship, the presidential helicopter and the Army’s Comanche helicopter — and found that constantly changing government requirements were a major driver of cost overruns and schedule delays. The Packard Commission reached the same conclusion two decades before the Defense Science Board issued its report.

“Accountability is key here, but there is a shared responsibility between the government and contractors. There are many tools to hold contractors accountable, but way fewer tools to hold the government accountable. This EO doesn’t do anything to make the government more accountable,” David Berteau, former president and CEO of the Professional Services Council and now president of David Berteau & Associates, told Federal News Network.

“The disconnect of this EO is if the desired outcome is better contract performance, how can implementing this EO produce better results? That isn’t clear to me. Someone will have to write implementation guidance that does that. I spent a lot of my career writing implementation guidance, and I have a hard time seeing implementing this in such a way that it produces better performance quickly,” he added.

If the goal of the executive order is to push companies to invest in production capacity and capability rather than shareholder returns, that approach only works if there are returns on that investment, Berteau said.

Lockheed Martin’s recent deal with the Pentagon to increase Patriot missile interceptor production to about 2,000 missiles a year is a significant step toward that approach, Berteau said. Lockheed agreed to fund an expansion of its Patriot missile factory in exchange for a seven-year commitment from the Pentagon.

“We have to wait to see the implementation guidance to get a sense of what the real goal is, better contract performance leading to faster deliveries or what,” Berteau said.

“It is critical that the relationship between the government and contractors be one of shared responsibility and partnership, particularly around defining and deciding what the contract will give you and the structure of the contract to make sure the government will get what it needs. There is a lot about this EO that doesn’t seem to be about strengthening that partnership. It seems to be more about punishing one side of the equation,” he added.

The Defense Department did not respond to questions about whether contractors should expect formal guidance in the coming weeks or how many underperforming contractors it has already identified.

“After numerous years of failing to meet contractual obligations, under President Trump’s order, defense contractors will no longer be allowed to leave our warfighters behind while giving themselves massive payouts from stock buybacks. This will give Department of War the ability to meet national security objectives and ensure efficiency and accountability. Our obligation is to our warfighters; not Wall Street,” Chief Pentagon Spokesman Sean Parnell told Federal News Network in a statement. 

Executive pay

In one of his Truth Social posts, Trump said no executive should be allowed to make more than $5 million, but the figure did not make it into the executive order.

Instead, the president directed the defense secretary to ensure future contracts require executive compensation to be tied to performance — such as on-time delivery, increased production and “all necessary facilitation of investments required to rapidly expand the United States stockpiles and capabilities” — rather than short-term financial metrics like cash flow or earnings per share driven by stock buybacks.

If a contractor has “engaged in underperformance, non-compliance, insufficient prioritization of the contract, insufficient investment, or insufficient production speed,” the department could cap executive base salaries at current levels.

Executive compensation was a contentious issue in 2013, when President Barack Obama called on Congress to cap executive pay at $400,000.

A cap on executive compensation already exists in some form — contractors can pay their executives whatever they choose, but the government only reimburses costs up to a certain limit.

The executive order, however, goes a step further — it’s shifting from how much the government will reimburse the contractor to limiting how much the company can pay its executives.

“Pretty significant difference, but maybe they’ll fall back on the same mechanisms. I don’t know that yet. Nobody in the department is talking yet about how they’re going to implement this. I’m sure they’re still trying to work that out,” Chvotkin said.

“I think there’s a fair question, broadly speaking, in commerce, generally, not just in the government market, about executives having the right incentives to drive long-term performance and excellence. But I don’t know what the standards are going to be, what the metrics are going to be.  There’s a ton of ambiguity in here,” Soloway said.

Who does the EO apply to?

While the executive order targets contractors that provide “critical weapons, supplies and equipment,” it doesn’t clearly define the term “critical.” 

Chvotkin said new contracts could easily specify which vendors qualify as critical suppliers or require all new contracts to include the provisions laid out in the executive order.

And while the executive order is broadly aimed at “all contractors,” Chvotkin said its likely target is traditional defense contractors rather than the commercial firms the Pentagon has been trying to attract. 

“I think it’s all contractors, but fixed-price contractors — less likely, they’re going to have binary decision. Commercial contractors, where the effort is to bring more of them in, but probably not as many of them have the triggers, the buyback, the sort of where the government is reimbursing for executive compensation as they do for many of the traditional defense contractors,” Chvotkin said. 

What’s next?

Chvotkin said the Defense Department is likely to issue general guidance to programs on how to carry out the secretary’s review.

“I think they’ve already done quite a bit of that, but I would expect [the undersecretary for acquisition sustainment office] to lead a fair amount of that responsibility to describe what those contracting provisions are relating to critical weapon systems and supplies and equipment. They’ve got to identify those first, then catch up with everybody else on a rolling basis,” Chvotkin said. 

“From the contracting folks, I would expect a broad set of contract provisions, both modifications to existing contracts, as well as provisions to go into new solicitations and new contracts to be awarded. That includes the identification of the key performance parameters for each solicitation and new award, the requirement for the company if notified by the Department of Defense or the contracting officer of the failure to adequately meet the performance objectives, the requirement for the remediation plan and then the additional remedies that the department might ask for as part of either the failure of the contractor to meet the original contract performance of projections or the remediation plan,” he added.

Jason Miller contributed to this report.

If you would like to contact this reporter about recent changes in the federal government, please email anastasia.obis@federalnewsnetwork.com or reach out on Signal at (301) 830-2747.

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© AP Photo/Carolyn Kaster

Interview transcript:

 

Terry Gerton You have done some recent research that connects in very detailed ways the accuracy of census data to federal funding programs. Walk us through the high points and what’s at stake now as we look to 2030.

Sean Moulton Everyone knows that every 10 years we do a full census of the entire population here in the United States. And we’ve done it really since the founding of the country. But it’s not just an academic exercise just to figure out how many people are in each state or anything like that. We use that data in a very robust way. One of those ways is helping to guide our federal funding. What we’ve been looking into is, how much funding are we talking about that gets guided by the census? And what we found is 371 federal assistance programs that we can connect to census data in terms of guidance. And it gets guided in a number of ways. There’s some very simple ways where the census data can be, say, an on-off switch. The easiest example of this is funds maybe going to a rural area, or funds for an urban area. Urban-rural designation is entirely based on the number of people you have. You don’t have many people, population density is low, then you’re rural. That’s all there is to it. And so that census data getting that accurate can turn on or off money going to those types of areas. And there’s formulas where different pieces of census data go into an exact formula that figures out how much your area, your state, your county, your city or something like that might get. If you get the census data wrong, it could impact how much money’s coming to your area. A third area is a little bit more nebulous, but it’s definitely something we can track. Some programs accept applications and they can score and evaluate those applications on a variety of criteria, but they’re always transparent about it. And sometimes census data can come into play. Maybe the program is really geared and they want to help lower income areas or areas with historically disadvantaged communities. And so census data can be used to determine that, and your application might get extra points. And then the last way is for some of our loan programs, census data can even influence the interest rate that you might have to pay back. So it can affect how much money gets out and then how much you have to paid back. And these 371 programs, they accounted for $2.2 trillion in a single fiscal year, just one year.

Terry Gerton Was there anything about the 2020 Census or recent funding formulas that raised flags for you, that you want to make sure get addressed before we get to 2030?

Sean Moulton Every census, problems happen. It’s a huge endeavor, trying to count everyone in the country, at the same time, exactly where they are. We always have errors. But 2020 was one of the first years we did a lot more digital records. We were using what’s called administrative records to try and fill in some gaps from non-responses. And so we really need to address those. There are also a number of states that had statistically significant undercounts or overcounts, and those are particularly troubling. We need states and locations, especially in the areas that had previous undercounts, to make more of an effort in the run up to 2030 to make sure they get the count right.

Terry Gerton I’m speaking with Sean Moulton. He’s a senior policy analyst at the Project on Government Oversight. Let’s dig into those undercounts a little bit. Are there communities that are most vulnerable to being undercounted? And when they are undercounted, what is the impact?

Sean Moulton There are, and Census Bureau knows this and has made efforts over the years to do better outreach to what they call hard-to-count communities, or historically hard-to-count, communities. And these are lower income communities, because of the digital divide; these are rural communities; these are renters. Children are hard to count for some reason; even though the parents are filling out the forms, they might not include their children for some reason. Maybe they don’t understand it applies to everybody. Non-English speakers, not primary English speakers, sometimes they don’t understand the forms or understand the necessity to respond. So there’s a lot of different groups that are harder than the average citizen, we’ll say, to get those responses back from. This is where states and cities and counties can do a better job of reaching out and making sure their community members know the importance of the census, not just as a legal activity, but as something that helps the community and then responds.

Terry Gerton The census is supposed to count every single person, right? Citizens and non-citizens. We had the addition of a citizenship question in 2020. Certainly we’ve had a lot of focus under the Trump administration on citizenship. What impact do you think that’s going to have leading into the 2030 count?

Sean Moulton So in 2020, we had an attempt to add a citizenship question, and it went all the way to the Supreme Court and they tossed it out on a procedural issue. They said, it’s a question you can ask. It’s been in the census before, but they did it in the wrong way, their process was wrong, flawed. So we may be seeing another fight over that. The real problem with the citizenship question is there’s not much evidence that it’s going to give us anything of importance. More importantly, a lot of what we use the census for, it doesn’t matter if you’re a citizen. The funding for hospitals or healthcare or roads — the roads don’t care if you are a citizen and driving on them, or if you a non-citizen and driving them, and we need to repair the roads based on the wear and tear and how many people are there. The same for mass transit and other things. We’re funding for everyone. And so, if we try and narrow our ask to citizens, we’re going to get our allocations of funds wrong, and citizens will then be also penalized. They’ll have roads that aren’t being repaired fast enough and they’ll have problems getting into emergency rooms and what have you. Citizens will also be affected because they will encounter the problems that the low funding leads to: poor maintenance on the roads, longer wait times for their health care. And so even though they may think this is about citizens/non-citizens, everyone’s affected when the funding gets impacted.

Terry Gerton Do you have a sense that members of Congress understand this connection? I mean, at the core, one of their jobs is to bring home money to their districts. If the census count is accurate, the better their funding will be. And yet, do you think they really understand the importance of the accuracy here?

Sean Moulton I don’t. You know, it is pretty buried. We had to do a lot of research to figure out the extent of this. And I can tell you that just a few years ago, the Census Bureau used to do a report somewhat along these lines, and their number was much, much lower. It’s only been in recent years that we’ve kind of expanded our understanding to realize just how important the Census Bureau numbers are in terms of guiding federal funds.

Terry Gerton Are there steps that Congress or the Census Bureau should take now to improve accuracy coming into the 2030 census? I mean, five years seems like a long way off, but Census is already getting ready.

Sean Moulton  A lot of people don’t realize there’s a lot that happens in between those 10 years, but right now probably one of the biggest things would be to get ready to participate in what’s called LUCA, Local Update of Census Addresses. And this is a process that the Census Bureau runs in the run-up to every decennial census where they reach out and they try and get participation of local officials — county, city, state — to update the addresses they have. And an interesting fact is, if the Census Bureau doesn’t have your address, then it doesn’t matter if you fill out the form or not. You can’t be counted. The address comes before the household’s response. And so if somehow you’re living in a recently refurbished apartment over a garage and the post office doesn’t have that address officially on file as a new residence, then you’re not going to get counted. And so we really need to update those addresses and keep them as up-to-date as possible because it’s the first step to getting the responses back.

Terry Gerton Just to wrap up sort of on a more systematic note, is having this much federal funding dependent on the census the best way to go forward? Are there other funding formulas that we should use? Maybe even, wrong, it is the best source of data that we have.

Sean Moulton It is. Obviously, there’s other funding formulas that get used; 371 is not the majority of federal programs out there. But when you’re talking about trying to assist individuals and households, then the census data really can help us find those households and say, inside a state or inside a city, how much should they get? And we’re going to use data to help drive and allocate those rather than simply dividing it up into one-fiftieth and every state gets that amount. It doesn’t make any sense. If one state needs more, it should get more, and the census data, while we’ve had our problems, is still a very accurate number based on getting a lot of the money allocated. We get some things wrong and we’re always trying to improve that, but it’s still an incredibly useful tool for the federal government and for private individuals. Corporations use a lot of census data to figure out where they’re going to put their next grocery store or what have you. That’s because it has proven to be such a reliable tool to help guide those kinds of decisions.

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© The Associated Press

Interview transcript:

Terry Gerton You participated in an annual report from the American Statistical Association, their latest assessment, which describes this system as being at risk. We’ll deal with some of the specifics here, but let’s start at the top. How risky and why does it matter?

Nancy Potok Well, we’re talking really about 13 primary statistical agencies that are decentralized and embedded in different cabinet departments or agencies. We also have about 100 statistical offices or units that are small statistical areas across different agencies that aren’t designated as the principal agencies. But we focused on the 13 agencies. To give a couple of examples of what I’m talking about, the Census Bureau is a statistical agency in the Department of Commerce. So is the Bureau of Economic Analysis, which puts out GDP numbers, for example. The Bureau of Labor Statistics is one of the agencies. They’re in the Department of Labor. We’ve got the Energy Information Administration in the Energy Department. National Center for Health Statistics, which is in CDC, which is in HHS. I hope everyone understands the acronyms. So there’s 13 of them, and they’re in all different agencies — Transportation, Social Security, Statistics of Income in IRS, etc. And there is a chief statistician whose job, actually in the Paperwork Reduction Act, is to coordinate the system and to help the system come up with standards and quality standard operating procedures, what you should be doing in terms of confidentiality of data and privacy protection. That position resides in OMB, the chief statistician. And then there’s an interagency council on statistical policy — that is, all of the statistical officials that come together periodically to try to coordinate.

Terry Gerton I really appreciate the clear perspective there. And you participated in an annual report from the American Statistical Association, their latest assessment, which describes this system as being at risk. We’ll deal with some of the specifics here, but let’s start at the top. How risky and why does it matter?

Nancy Potok It’s very risky, and we’ll delve into the details of why it is, but it matters because these statistical agencies are what I would call essential infrastructure. They produce information that policymakers depend on, and when that information is not trusted or when there are holes in the system, that can really affect decision-making at the local, state and federal levels. In fact, sometimes local and state officials are much stronger advocates for federal statistical data than we’re seeing right now in Congress, where we need some champions. There are so many critical decisions that are made based on federal statistical data. I mean, for example, the Census everybody knows about — an apportionment of Congress, and that’s in the Constitution. But also, recently the head of the Federal Reserve was talking about his concern about Bureau of Labor Statistics information because it feeds right into their decisions on interest rights. So all across the board, there’s really a lot of key decisions that affect peoples’ lives that are based on this information. We want it to be accurate, high-quality, objective, not politicized and readily available to people to use, and people trust it and know that it is protected.

Terry Gerton The report documents a number of pressures on the system. The first one is staffing. It says that most of these agencies have lost 20% to 30% of their staff in the last year. How are you seeing that play out in operations, in data collection and reliability? How does it show up?

Nancy Potok It shows up in very scary ways. I’ll start with the most extreme example. I do have to say in fairness, some of these staffing reductions are just what I would call collateral damage of what we have seen across all agencies in all areas for staffing reduction. But I’ll start with the Department of Education. So the Department of Education has a National Center for Education Statistics. It’s a relatively small agency, but they put together critical information about how we are doing with educational achievement, and they gather that from all the states. As part of the downsizing in the Department of Education, their staff — everybody was fired, and there were only three people left in that agency. And the head of the agency was fired. So not only did they not have a leader, but they had three people left to do this job. And a lot of what they’re doing is required by statute, and they’re just unable to fulfill that. That’s at one end. The other end, the largest statistical agency is the Census Bureau. The Census Bureau had several field operations that were scheduled. They’re actually special censuses that they do for localities that need to update their populations because they’re rapidly growing and they can’t wait 10 years. And they couldn’t do them, they had to cancel them because they lost staff. In between what we saw was a multiyear effort that the statistical agencies had gone out to really get data scientists and people who could work with AI and who just were up on all the latest techniques that statistical agencies are using. All those new hires got laid off when…people who were on probation, because they were new hires, all got laid off. Years of recruiting, because a lot of the statisticians and data scientists are going to work in the private sector for very high salaries, so getting them into government was a huge multiyear effort, and then boom, they were gone. So, the next generation, gone. And then lots of senior people who were really keeping things going and had the institutional knowledge, they took the retirement. They just left. So we have gaps at the early stages. We have gaps in the leadership across the board. And then in some agencies, we have no staff at all.

Terry Gerton Nancy Potok is the CEO of NAPx Consulting and former Chief Statistician of the United States. Nancy, you mentioned public trust at the beginning, and your report shows that trust in federal data dropped from 57% to 52% in just four months, from June to September. What’s driving that decline and what does it mean for evidence-based policy?

Nancy Potok We didn’t delve deeply in the surveys that we were doing, which were conducted by NORC at the University of Chicago as part of their AmeriSpeak ongoing surveys. We’d like to delve into more of why, so I would just be speculating. But I assume it’s everything that people are reading about the federal government and the way information is being used. So if you’re reading that information is being used for law enforcement, for example, that agencies are sharing data for law enforcement — in the public’s mind, it may be difficult to sort that out. They are not necessarily that familiar with all the protections around statistical data and that it cannot be used for anything other than a statistical purpose. So if they’re worried about information being shared and their privacy and confidentiality, that could also reflect on their willingness to participate in the surveys. And we’re seeing response rates drop, which affects the quality. So it’s a bad cycle. In addition, when the head of the Bureau of Labor Statistics was fired, we had words that came from the president saying how bad the statistics were and really impugning the quality. So if people are listening to the president, which they are, that would also affect their trust.

Terry Gerton The report mentions nine new recommendations, and there were other outstanding recommendations. If Congress could move forward on these, which would you want to see them take on first?

Nancy Potok I know a lot of people talk about the staff and the resources, and there’s sort of a baseline at which these agencies operate that needs to be met. I think in my mind, and in the minds of my colleagues on this study, the thing that we want to see most is a strategy with some muscle to it to modernize the system. A lot of people have talked about, should we centralize these 13 agencies into one Office of National Statistics, which most countries in the world have? We have this very decentralized system. That’s a topic that’s been around a long time. What we’re saying is, look, there’s many things that can be done to improve this system. It’s not just money. We need a really strong chief statistician. We need some statutes that will drive modernization and innovation, kind of like a technology innovation fund almost, where we bring together strong leadership and give them the resources they need to work with partners outside the federal government. We put in a very strong pitch for bringing in the private sector and academia to do some of this heavy duty research on how we modernize statistics, and then bring them back to the agencies who are kind of busy maintaining, and then give them the resources to implement it. So let’s see some money go outside the government for this research. Let that research be directed towards how we have better federal data and statistics, and then let’s implement. But we need a strategy for that, and really strong leadership. I think for some people, when they were looking at the report, they viewed it as, “oh, they’re just asking for more money, like all agencies,” and that is absolutely not the case. I want to be clear about that. We are advocating for coordination inside and outside the government, removing the barriers to that and putting enough money in to fund what a strategic approach would prioritize. Because they’re doing a lot of stuff they don’t need to do, but they don’t have the leverage to stop doing those things. They still have to do those. So we just want to see almost like a remake of the system, a rethinking.

Terry Gerton Where in Congress does that responsibility lie?

Nancy Potok Well, that’s the problem because we’ve got 13-plus agencies and they’re all in different subcommittees. That’s part of what we identified as an issue, is that first, there’s no enough oversight. Two, the agencies, many of them are buried deep in the bureaucracy and they never get to talk to Congress directly. And third, kind of in the days when it was what I would call really the heyday of federal statistics, when they were very strong and supportive, there were champions in Congress. A couple of members in the Senate and House really understood the value of data and worked across all of these many different appropriations subcommittees and oversight committees to really think about this as a whole. We do have what I would call data champions in Congress right now, but a lot of times they’re focused on open data and just AI in general and those types of things. They haven’t really understood the role of the statistical agencies in that greater data ecosystem. And so that’s the challenge — getting the focus on that, to understand this is basic infrastructure of our country. It’s super important. Somebody’s got to pay attention.

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