Glossary

Set-aside

A set-aside is a contract, or part of one, that a buyer reserves for small businesses or for a specific group of them, such as 8(a), HUBZone, service-disabled veteran-owned or women-owned firms. Only eligible firms may compete, which narrows the field and makes set-asides a main route into federal work for small companies.

By BidAuthorPublished Updated

01When federal buyers set work aside

Under FAR 19.502-2, a contracting officer sets an acquisition aside for small businesses when there is a reasonable expectation that offers will be obtained from at least two responsible small business concerns and that award will be made at a fair market price. This is known as the rule of two. Market research, including sources sought notices and RFIs, is how the contracting officer forms that expectation, which is why answering them matters to small firms.

02Small purchases are reserved by default

Below the simplified acquisition threshold the default flips. FAR 19.502-2 says an acquisition of supplies or services with an anticipated value above the micro-purchase threshold but not over the simplified acquisition threshold shall be set aside for small business, unless the contracting officer determines there is no reasonable expectation of offers from two or more responsible small businesses that are competitive on fair market prices, quality and delivery. Above the threshold, the rule of two decides.

03Partial set-asides

When a total set-aside is not appropriate, FAR 19.502-3 has the contracting officer set aside one or more distinct portions of an acquisition, except for construction, when the requirement can be divided, the purchase is not under simplified acquisition procedures and the other conditions in that section are met. Small businesses compete for the reserved portion; the rest is open to all.

04Programs that narrow it further

ProgramWho qualifiesFAR rules
Small business set-asideFirms that are small under the solicitation's NAICS size standardSubpart 19.5
The 8(a) Business Development programSmall businesses owned by socially and economically disadvantaged individuals and admitted to SBA's programSubpart 19.8
HUBZoneSmall businesses located in historically underutilized business zones, employing people who live in themSubpart 19.13
Service-disabled veteran-owned (SDVOSB)Small businesses owned and controlled by service-disabled veteransSubpart 19.14
Women-owned (WOSB, EDWOSB)Women-owned small businesses, in industries where they are underrepresentedSubpart 19.15

Each program has its own eligibility rules and certification, and some allow sole-source awards within limits. FAR 19.203 sets no order of precedence among the 8(a), HUBZone, service-disabled veteran-owned and women-owned programs, so the contracting officer chooses among them based on the acquisition and the market research.

05What it requires of you

  • You must be small under the size standard of the solicitation's NAICS code, as represented in SAM.gov.
  • You must meet the limitations on subcontracting in FAR 52.219-14 (see teaming agreement):
Contract typeYou may not pay subcontractors that are not similarly situated more than
Services, except construction50 percent of the amount the government pays for contract performance
Supplies, other than from a nonmanufacturer50 percent, excluding the cost of materials
General construction85 percent, excluding the cost of materials
Construction by special trade contractors75 percent, excluding the cost of materials
  • Competitors can protest your size or status. Under FAR 19.302, a size protest in a negotiated acquisition must reach the contracting officer within 5 business days after the protester is notified of the apparent successful offeror, and SBA decides it. Keep the receipts and employee records behind your size representation, and keep your certifications current.

06Finding set-aside work

On SAM.gov, filter contract opportunities by set-aside type. Many states and cities run their own small, minority-owned and women-owned business programs with separate certifications, and large prime contractors have subcontracting goals that create work for certified small firms.

Set-aside: common questions

What is the rule of two?

The FAR 19.502-2 test for small business set-asides: the contracting officer sets an acquisition aside when there is a reasonable expectation of offers from at least two responsible small businesses and of award at a fair market price.

Can a large business win a set-aside contract?

Not as the prime contractor, because only eligible small businesses may compete. Large firms can take part as subcontractors, within the limitations on subcontracting.

Do I need a certification to bid on a small business set-aside?

For a total small business set-aside, you represent your size in SAM.gov against the solicitation's size standard. The 8(a), HUBZone, women-owned and service-disabled veteran-owned programs require SBA certification.

What is a partial set-aside?

A set-aside of one or more distinct portions of an acquisition, other than construction, when a total set-aside is not appropriate (FAR 19.502-3). Small businesses compete for the reserved portion; the rest is open to all.

How quickly can a competitor protest my size?

In a negotiated acquisition, within 5 business days after being notified of the apparent successful offeror (FAR 19.302). SBA then decides the protest.

Sources

  1. FAR 19.502-2 — Total small business set-asidesAcquisition.gov
  2. FAR Subpart 19.8 — Contracting with the Small Business Administration (the 8(a) program)Acquisition.gov
  3. FAR Subpart 19.13 — Historically Underutilized Business Zone (HUBZone) ProgramAcquisition.gov
  4. FAR Subpart 19.14 — Service-Disabled Veteran-Owned Small Business Procurement ProgramAcquisition.gov
  5. FAR Subpart 19.15 — Women-Owned Small Business ProgramAcquisition.gov
  6. FAR 52.219-14 — Limitations on SubcontractingAcquisition.gov
  7. Contracting assistance programsU.S. Small Business Administration
  8. FAR 19.502-3 — Partial set-asides of contracts other than multiple-award contractsAcquisition.gov
  9. FAR 19.203 — Relationship among small business programsAcquisition.gov
  10. FAR 19.302 — Protesting a small business representation or rerepresentationAcquisition.gov

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