Set-asides and small business programs

How a set-aside decision gets made

A set-aside is a decision by a contracting officer to limit competition on a buy to a class of small business. The rules live in FAR Part 19 and in SBA regulations. The core test is often called the rule of two. If the contracting officer expects offers from at least two responsible small businesses at fair market prices, the buy should be set aside for small business.

Buys between the micro-purchase threshold and the simplified acquisition threshold are reserved for small business by default. Above that, the contracting officer does market research, often through a sources sought notice, and decides. Check the current thresholds on acquisition.gov; they change.

This is why answering sources sought notices matters so much. The set-aside decision is made before the solicitation is written, and it is made from the responses the buyer receives. See sources sought and RFIs.

Total small business set-asides

The most common set-aside is the total small business set-aside. Any firm that is small under the NAICS code on the solicitation can compete. There is no separate certification. You self-certify size in SAM.gov, and you confirm it when you submit an offer.

Size is measured against the SBA size standard for the NAICS code on that notice, with affiliates counted. Many manufacturing codes use an employee count. Check the standard for each code you list on sba.gov.

Two rules ride along with a set-aside for supplies. The limitations on subcontracting clause requires the small business to perform a defined share of the work itself. And the nonmanufacturer rule applies if you supply a product you did not make. Read both in FAR Part 19 before you quote as a dealer or plan to subcontract most of a job.

A partial set-aside reserves part of a requirement for small business and leaves the rest open. These are less common but do appear on larger supply buys.

The socioeconomic programs

Beyond the general small business set-aside, four programs give contracting officers more ways to reserve work. Each has its own eligibility test and, today, each requires certification through the SBA rather than a simple self-certification.

8(a) Business Development. For small firms owned and controlled by socially and economically disadvantaged individuals. Participation runs for a fixed term of years. Contracting officers can award to 8(a) firms competitively among 8(a) participants or, below a threshold, on a sole source basis. The program includes business development support, not just contracting access.

HUBZone. For small firms with a principal office in a designated Historically Underutilized Business Zone and a share of employees who live in a HUBZone. Contracting officers can set aside work for HUBZone firms, and certified firms get a price evaluation preference in some full and open competitions.

Service-Disabled Veteran-Owned Small Business. For small firms at least majority owned and controlled by one or more service-disabled veterans. Certification now runs through the SBA veteran certification program. The Department of Veterans Affairs applies a stronger preference for these firms on its own buys.

Women-Owned Small Business. For small firms majority owned and controlled by women. Set-asides under this program are limited to NAICS codes the SBA has found to be underrepresented, so check whether your codes are on the current list. An economically disadvantaged tier exists within the program.

Eligibility details, ownership tests, and the certification process change over time. Read the current rules on sba.gov before you apply, and expect to submit ownership, control, and financial documents.

How a set-aside shows on a notice

Every contract opportunity on SAM.gov has a set-aside field near the top, next to the NAICS and PSC. It reads something like Total Small Business Set-Aside, 8(a) Sole Source, HUBZone Set-Aside, Service-Disabled Veteran-Owned Small Business Set-Aside, or Women-Owned Small Business Set-Aside. When the field is blank or reads none, the buy is full and open, and any size firm can compete.

Read the field before you read anything else. If the notice is set aside for a program you are not certified in, you cannot win it as a prime, though you may be able to team as a subcontractor. If it is a total small business set-aside and you are small under the NAICS shown, you are eligible.

Award records in FPDS and USAspending carry the same information in a field usually labeled type of set-aside. Filtering award history by that field tells you how a buying office tends to compete work in your part class. An office that has set aside most of its machined parts for years will likely keep doing so.

What to do with this

First, confirm you are small under each NAICS on your record. That alone opens the total small business set-aside, which is where most small shop awards happen.

Second, check whether you qualify for any of the four programs. If you do, start the certification early. It takes documents and time, and you cannot bid a program set-aside until it is approved.

Third, answer sources sought notices in your part classes. Each response is a vote for a set-aside. When enough small firms answer, the notice that follows is closed to large ones.