Set-aside contracts for small businesses
To help provide a level playing field for small businesses, the government limits competition for certain contracts to small businesses. Those contracts are called “small business set-asides,” and they help small businesses compete for and win federal contracts.
There are two kinds of set-aside contracts: competitive set-asides and sole-source set-asides.
Competitive set-aside contracts
When at least two small businesses could perform the work or provide the products being purchased, the government sets aside the contract exclusively for small businesses. With few exceptions, this happens automatically for all government contracts under $150,000.
Some set-asides are open to any small business, but some are open only to small businesses who participate in SBA contracting assistance programs.
Sole-source set-aside contracts
Most contracts are competitive, but sometimes there are exceptions to this rule. Sole-source contracts are a kind of contract that can be issued without a competitive bidding process. This usually happens in situations where only a single business can fulfill the requirements of a contract.
In some cases, sole-source contracts must be published publicly, and will be marked with an intent to sole source. Potential vendors can still view and bid on these contracts. Once the bidding process begins, the intent to sole-source may be withdrawn.
Set-asides for government contracting programs
Some set-asides are for small businesses in certain socio-economic categories. You can bid on these set-aside contracts by participating in any of SBA's contracting assistance programs listed below:
The federal government tries to award at least 5% of all federal contracting dollars to small disadvantaged businesses each year.
The federal government tries to award at least 3% of all federal prime contracting dollars to HUBZone-certified small businesses each year.
The federal government tries to award at least 5% of all federal contracting dollars to women-owned small businesses each year.
The federal government tries to award at least 3% of annual federal contracting dollars to service-disabled veteran-owned small businesses.
Participating in one of these SBA programs means you’ll have fewer businesses to compete with to win a government contract. However, you must meet eligibility requirements and certify your business’ socio-economic status before you can bid on a set-aside contract.
How to certify
The certification process may vary depending on the SBA contracting program. For some, you can self-certify just by updating your business profile in the System for Award Management (SAM).
For other programs, you have to apply for certification. As part of the application, you’ll answer questions about your business and its ownership, and upload supporting documents.
Check each contracting program’s page for specific details about eligibility requirements and the certification process.
Two or more small businesses may pool their efforts by forming a joint venture to compete for a contract award. A joint venture of multiple small businesses still qualifies for small business set-aside contracts if its documentation meets SBA requirements.
Small businesses that have a mentor-protege relationship through the SBA Mentor-Protégé program can form a joint venture with a mentor (which can be a large business). These joint ventures can compete together for government contracts reserved for small businesses.
Office of Government Contracting & Business Development
409 3rd St. S.W., Suite 8000
Washington, DC 20416