Small Business Set-Aside Contracts: What You Need to Know

The federal government is required by law to award a percentage of its contract dollars to small businesses. In fiscal year 2024, the government's small business contracting goal was 23% of prime contract dollars. Several set-aside programs channel contracts to specific categories of small businesses, creating opportunities for firms that might otherwise struggle to compete against larger contractors.

How Set-Asides Work

When a contracting officer determines that a contract can be fulfilled by small businesses, they may "set aside" the competition so that only qualifying small businesses can bid. This reduces competition and gives smaller firms a realistic chance at winning.

Set-asides can be total (only small businesses can compete) or partial (a portion is reserved for small businesses). The contracting officer makes this determination based on market research and the Rule of Two: if at least two small businesses can perform the work at a fair price, the contract should be set aside.

Major Set-Aside Programs

SBA Small Business Set-Aside

The broadest category. Any business that meets the SBA size standard for the relevant NAICS code qualifies. Size standards vary by industry and are based on either annual revenue or number of employees. For example, most IT services companies qualify as small if they have less than $34 million in average annual receipts.

8(a) Business Development Program

The 8(a) program is for small businesses owned by socially and economically disadvantaged individuals. Participants can receive sole-source contracts up to $4.5 million for services and $7 million for manufacturing without competition. The program lasts nine years and includes business development assistance.

Key benefits:

• Sole-source contract eligibility
• Mentor-protege program access
• Joint venture opportunities through the SBA
• Business development training and counseling

HUBZone Program

HUBZone (Historically Underutilized Business Zones) certification is for businesses located in and employing people from economically distressed areas. The government's goal is 3% of prime contract dollars to HUBZone firms.

Requirements:

• Principal office in a designated HUBZone
• At least 35% of employees reside in a HUBZone
• Owned and controlled by U.S. citizens
• SBA-certified

Service-Disabled Veteran-Owned Small Business (SDVOSB)

Reserved for small businesses owned and controlled by service-disabled veterans. The government's goal is 3% of prime contract dollars. The VA has additional verification requirements for its own contracts through the VA Center for Verification and Evaluation.

Women-Owned Small Business (WOSB)

The WOSB Federal Contracting Program restricts certain contracts to women-owned small businesses in industries where they are underrepresented. The government's goal is 5% of prime contract dollars to WOSBs.

There are two subcategories:

• WOSB: Women-owned small businesses in underrepresented industries
• EDWOSB: Economically disadvantaged women-owned small businesses (can compete for both EDWOSB and WOSB set-asides)

Finding Set-Aside Contract Awards

Understanding which agencies use set-asides heavily, and in which industries, helps you target your business development efforts. On GovContractData, you can filter contracts by set-aside type to see:

• Which agencies award the most set-aside contracts
• Average award amounts for set-aside vs. full-and-open competition
• Which NAICS codes have the most set-aside activity
• Geographic distribution of set-aside awards

Maximizing Your Certifications

Having a certification is only the first step. To win set-aside contracts:

• Register in SAM.gov with your certifications and NAICS codes
• Research past awards to identify which agencies buy what you sell
• Build agency relationships through industry days and capability briefings
• Consider teaming with established contractors through mentor-protege or joint ventures
• Track new opportunities using alerts matched to your certifications and NAICS codes

Getting Started

Browse set-aside contract awards on GovContractData to research spending in your certification categories. Search contracts with the set-aside filter, or explore awards by agency, NAICS code, or state to find opportunities in your market.