What Are Small Business Set-Asides?
Small business set-asides are federal contracting opportunities that are restricted to specific categories of small businesses. When a contracting officer "sets aside" a procurement, only businesses that meet the program’s eligibility criteria can compete for the award. This dramatically reduces competition compared to full and open procurements where any size business can bid.
The Small Business Administration (SBA) administers most set-aside programs, each designed to help a different group of businesses access government contracts. These programs exist because Congress recognized that small businesses, especially those owned by disadvantaged individuals, face systemic barriers in competing against large corporations for federal work.
Set-asides can be either total (only qualified small businesses can compete) or partial (a portion of the work is reserved for small businesses). Total set-asides are far more common and provide the greatest competitive advantage, as you’re only competing against businesses of similar size and certification status.
The 8(a) Business Development Program
The 8(a) program is the SBA’s flagship business development program, designed to help small disadvantaged businesses (SDBs) compete in the federal marketplace. Named after Section 8(a) of the Small Business Act, the program provides a nine-year developmental period during which participants can receive sole-source contracts, compete for 8(a) set-asides, and access mentoring and training.
To qualify for the 8(a) program, a business must be at least 51% owned and controlled by one or more socially and economically disadvantaged individuals. The owner must have a personal net worth below $850,000 (with certain exclusions), and the business must have average annual revenues below the size standard for its primary NAICS code. Social disadvantage can be based on race, ethnicity, gender, disability, or individual circumstances.
One of the most powerful benefits of 8(a) certification is the ability to receive sole-source contracts up to $4.5 million for goods and services and $8.0 million for manufacturing. Sole-source contracts are awarded without competition, meaning if a contracting officer identifies your firm as capable, they can award the contract directly to you.
The program is divided into a developmental stage (years 1-4) and a transitional stage (years 5-9). During the developmental stage, firms receive the most intensive support. The transitional stage gradually increases competition expectations to prepare firms for the open market after graduation.
The HUBZone Program
The Historically Underutilized Business Zones (HUBZone) program helps small businesses in economically distressed communities gain access to federal contracting opportunities. The program’s goal is to stimulate economic development and create jobs in areas that need them most.
HUBZone eligibility requires that the business’s principal office is located in a HUBZone, and at least 35% of its employees reside in a HUBZone. The SBA maintains an interactive map tool where you can verify whether a specific address falls within a designated HUBZone area.
HUBZone-certified firms can compete for HUBZone set-aside contracts and receive a 10% price evaluation preference in full and open competitions. This means if a HUBZone firm’s bid is within 10% of the lowest non-HUBZone bid, the HUBZone firm wins the contract. Sole-source HUBZone awards are available up to $4.5 million for services and $8.0 million for manufacturing.
Service-Disabled Veteran-Owned Small Business (SDVOSB)
The SDVOSB program sets aside contracts for small businesses owned and controlled by service-disabled veterans. The federal government has a statutory goal of awarding at least 3% of all contracting dollars to SDVOSBs, and agencies actively seek qualified SDVOSB firms to meet this target.
To qualify, the business must be at least 51% owned by one or more service-disabled veterans, and the management and daily business operations must be controlled by one or more service-disabled veterans. The veteran’s disability must be documented by the Department of Veterans Affairs or the Department of Defense.
SDVOSB certification was historically self-certified, but recent legislation now requires SBA certification for most federal contracts. The Veterans Administration also maintains a separate Vets First verification program for VA-specific contracts. Sole-source awards to SDVOSBs are available up to $4.5 million for services and $8.0 million for manufacturing.
The SDVOSB program is particularly strong at the Department of Veterans Affairs, which has its own additional contracting goals for veteran-owned businesses. VA contracts are often a good starting point for SDVOSBs building their federal portfolio.
Women-Owned Small Business (WOSB) Program
The Women-Owned Small Business (WOSB) Federal Contract Program authorizes contracting officers to set aside certain federal contracts for eligible WOSBs and Economically Disadvantaged WOSBs (EDWOSBs). The program targets industries where women-owned businesses are underrepresented in federal procurement.
A WOSB must be at least 51% owned and controlled by one or more women, with the women managing day-to-day operations and making long-term decisions. EDWOSB certification has additional economic criteria, including a personal net worth cap of $750,000 for the qualifying women owners.
WOSB set-asides are available in specific NAICS codes designated by the SBA based on a study of industries where WOSBs are underrepresented. EDWOSB set-asides are available in a broader set of industries. Sole-source awards to WOSBs and EDWOSBs are available up to $4.5 million for services and $8.0 million for manufacturing.
Total Small Business Set-Asides
Even without a specific socioeconomic certification, being a small business under SBA size standards qualifies you for Total Small Business (SB) set-asides. These are the most common type of set-aside and represent a massive portion of federal contracting dollars.
Size standards vary by NAICS code and are defined either by average annual revenue or number of employees. For example, a management consulting firm (NAICS 541611) is small if it has average annual revenues under $19 million, while a general construction firm (NAICS 236220) can have up to $45 million and still qualify as small.
Contracting officers are required to set aside procurements for small businesses whenever they expect to receive offers from at least two responsible small business concerns at fair and reasonable prices. This "Rule of Two" means that many contracts that could go to large businesses are instead reserved for small firms.
Finding Set-Aside Opportunities
Every set-aside contract on SAM.gov is tagged with its applicable program designation. You can filter search results by set-aside type to see only the opportunities available to your certification. Combining set-aside filters with NAICS codes and agency preferences creates a highly targeted search that surfaces your best opportunities.
Many contractors find that set-aside opportunities have response rates 3-5x lower than full and open competitions. This means fewer competitors per opportunity, which dramatically improves your probability of winning. An 8(a) set-aside might attract 5-10 proposals compared to 30-50 for the same work in full and open competition.
Tracking sources sought notices for your set-aside category is especially valuable. Contracting officers often issue sources sought notices specifically to determine whether enough qualified firms exist to justify a set-aside. Responding demonstrates market capacity and may directly influence the decision to set the procurement aside.
Maximizing Your Set-Aside Advantage
Set-aside programs exist to level the playing field for small and disadvantaged businesses. If you qualify for one or more of these programs, getting certified should be a top priority. The reduced competition and sole-source opportunities available through set-aside programs represent one of the most significant competitive advantages in federal contracting.
Once certified, build a systematic approach to finding and pursuing set-aside opportunities. Use filtered searches to identify relevant contracts, track pre-solicitation activity in your space, and respond to sources sought notices to shape future procurements. The firms that consistently win set-aside contracts are the ones that treat opportunity identification as a daily discipline.