A set-aside is a contract that an agency reserves for a certain group of businesses, such as small businesses or firms owned by veterans, women, or disadvantaged owners. Only companies that meet the group's rules can compete. Whether you qualify depends on your size, ownership, control and sometimes location, and on any certification the program requires. The solicitation names the set-aside and its rules.
Why set-asides exist
Governments use set-asides to make sure smaller and historically underused businesses get a fair share of public work. Federal agencies set yearly goals for contracting with these groups, and many states and cities run their own programs.
A set-aside narrows the field. If you qualify, you compete against a smaller group of similar firms.
A related tool is the sole-source award, where an agency may contract directly with an eligible firm in some programs without a full competition. These awards have their own limits and rules.
Common federal programs
The Small Business Administration runs or certifies most of these programs.
- Small business set-asides: open to firms that meet the size standard for the contract's industry code.
- 8(a) Business Development: for small firms owned and controlled by socially and economically disadvantaged individuals.
- HUBZone: for small firms based in, and employing people from, historically underutilized business zones.
- Service-disabled veteran-owned small business, often shortened to SDVOSB.
- Women-owned small business, often shortened to WOSB, including an economically disadvantaged category.
How size standards work
Being small is not one fixed rule. Each industry code has its own size standard, based either on average yearly revenue or on number of employees. A company can be small in one industry and not small in another.
The solicitation names the industry code that applies, and that code sets the standard. Size usually includes affiliated companies, so ownership links to other businesses can matter.
State and local programs
Many states, counties and cities have their own certifications, such as disadvantaged business enterprise programs on transportation work, or local small business and minority-owned business programs.
These programs often have their own applications and rules. A federal certification does not always carry over, and a local one does not always count federally.
Some local programs do not reserve whole contracts. Instead, they set participation goals that ask prime bidders to use certified subcontractors for part of the work, and they score or check that plan as part of the bid. That can open doors even for firms that are not the prime.
Checking whether you qualify
- Find the industry codes that match your work and look up the size standard for each.
- Compare your revenue or headcount, including affiliates, to that standard.
- Review who owns and controls the company day to day, since many programs require it to be the qualifying owner.
- Decide which certifications are worth applying for, based on the agencies you plan to sell to.
- Record your status in SAM.gov and on each state or local portal.
Stay honest about status
Claiming a status you do not hold can lead to serious penalties, including losing contracts. If you are unsure, ask the certifying office or your own advisers before you check the box.
BotBid can filter bids by the set-aside types you hold, but your status is something only you and the certifying office can confirm.
Rules vary by agency and state; check the solicitation and your own advisers.
Common questions
Can a large company bid on a set-aside?
Not as the prime bidder. A large company may be able to work as a subcontractor, within limits the solicitation sets.
Do I need a certificate to be a small business?
For a plain small business set-aside, federal bidders generally self-certify in SAM.gov. Several other programs require formal certification.
Do set-aside rules limit subcontracting?
Often yes. Many set-asides require the prime to do a minimum share of the work itself. The solicitation states the rule.