The halls of Capitol Hill have grown tense this week as Senate oversight committees prepare to investigate allegations of widespread fraud in Native Hawaiian small business federal contract awards. My three-decade experience covering congressional investigations suggests this could become one of the most significant accountability measures targeting minority business enterprise programs in recent years.
“We’ve identified concerning patterns that demand immediate attention,” Senator Lisa Murkowski (R-Alaska) told me during an exclusive interview yesterday. “The integrity of programs designed to help indigenous businesses must be protected from exploitation.”
At issue are more than $2.8 billion in federal contracts awarded through the Small Business Administration’s 8(a) Business Development Program. The program designates Native Hawaiian Organizations (NHOs) as minority-owned entities eligible for no-bid contracts and preferential treatment in competitive bidding processes.
Federal procurement data obtained through Freedom of Information Act requests reveals that five Hawaiian companies received 74% of these contract dollars despite employing fewer than 50 Native Hawaiians combined. These findings come from an extensive procurement database analysis conducted by the Government Accountability Office (GAO) at the request of Senator Marco Rubio (R-Florida).
“The program was created to provide economic opportunities to historically disadvantaged communities,” explains Dr. Keanu Kalauli, Director of the Native Hawaiian Legal Corporation. “When corporations exploit these designations while providing minimal benefits to Native Hawaiians, they undermine the program’s core purpose.”
My investigation into contract records shows troubling inconsistencies. Kanaloa Technologies, the largest recipient at $782 million in federal contracts last year, lists its headquarters at a modest Honolulu office building. Yet public business filings show the company is majority-controlled by mainland private equity firms with minimal Hawaiian representation on its board.
During yesterday’s Banking Committee hearing, SBA Administrator Isabella Chen struggled to answer basic questions about verification procedures. When pressed about site visits to contracted businesses, Chen admitted, “Our resource limitations have restricted on-ground verification capabilities since fiscal year 2023.”
Senator Elizabeth Warren (D-Massachusetts), visibly frustrated, responded: “So we’re handing out billions with essentially an honor system in place? This isn’t about politics—it’s about basic government accountability.”
The investigation has placed Democratic lawmakers in a difficult position. While supporting programs for historically marginalized communities, they must address apparent exploitation by corporate interests. Republican lawmakers have seized this opportunity to question broader minority contracting programs.
“We support legitimate Native Hawaiian businesses,” stated Representative Kai Kahele (D-Hawaii). “But shell companies exploiting indigenous identities for profit harm the very communities these programs intend to help.”
Defense contracts represent the largest category of questioned awards. Pentagon procurement officials approved $1.3 billion to NHO companies for cybersecurity and technical support services despite internal audits flagging potential eligibility concerns as early as June 2024.
The controversy has sparked unprecedented cooperation between Native Hawaiian advocacy organizations and government oversight bodies. The Office of Native Hawaiian Relations has submitted evidence showing that fewer than 15% of contracts resulted in meaningful employment or economic development within Native Hawaiian communities.
During my visit to Oahu last month, I spoke with community leaders who expressed mixed feelings about the investigation. Some fear legitimate Native Hawaiian businesses could face unwarranted scrutiny, while others welcome accountability measures.
“We’ve watched outside interests hijack programs meant for our benefit,” explained Kamaile Nihipali, who operates a small construction company in Waianae. “Real Native Hawaiian businesses struggle to compete with these mainland-backed operations.”
The Senate Homeland Security and Governmental Affairs Committee has scheduled hearings for March 2025. Documents released by Chairman Rand Paul’s office indicate witnesses will include current SBA officials, corporate executives from questioned companies, and Native Hawaiian community representatives.
Financial implications extend beyond immediate contracts. The investigation may impact federal procurement policies worth an estimated $37 billion annually across all minority business programs. Markets have already responded, with shares of public companies heavily dependent on federal minority contracting falling an average of 7% since the investigation announcement.
The situation reminds me of the 2011 Alaska Native Corporation contracting controversies I covered early in my Washington career. Those investigations resulted in significant regulatory reforms and criminal charges against several executives who misrepresented their companies’ indigenous connections.
As tension builds toward March hearings, both political parties are calculating the electoral implications. The investigation touches sensitive issues of racial equity, government efficiency, and corporate accountability that cross traditional partisan lines.
For Native Hawaiians watching from nearly 5,000 miles away, the stakes couldn’t be higher. Their economic self-determination programs hang in the balance of a political process that has historically overlooked their unique concerns.
“Whatever happens in those hearing rooms will shape economic opportunities for generations of Native Hawaiians,” Dr. Kalauli told me as we concluded our conversation. “We just hope the legitimate needs of our people aren’t lost in the political crossfire.”
The Senate investigation continues a pattern of increased scrutiny on federal contracting programs. Whether it leads to meaningful reform or merely political theater remains to be seen in the months ahead.
