Small businesses have opportunities each year to win contracting opportunities from the government through contracts reserved for them, called set-asides.
This article explains what set-aside contracts are, the different types the government issues, and how government contractors can find and win small-business set-asides.
What Is A Small Business Set-Aside Contract?
Set-aside contracts are a way to reserve a part or the entirety of a government contract for a small business. Different types of governments may have different qualifications that businesses must meet to be eligible for these opportunities. This helps provide a level playing field for small businesses.
Types of Small Business Set-Asides
There are two primary types of small-business set-asides: competitive and sole-source.
- Competitive small-business set-asides are when at least two small businesses can supply the products and/or services the government needs. The government then reserves that contract exclusively for small business government contractors.
- Sole-source small-business set-asides are less common, as most government contracts are competitive. But sometimes, when only one business can fulfill the needs of the government, a sole-source contract will be issued.
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Small Business Set-aside Programs
There are four common programs and categories that the federal government uses to help designate specific contracts for small businesses.
8(A) Business Development Program
The 8(a) program is operated by the U.S. Small Business Administration (SBA). As of FY 2024, the U.S. federal government aims to award at least 13% of federal contracting dollars to qualified small disadvantaged businesses through the SBA's 8(a) Business Development Program. This percentage is set to gradually increase until it reaches 15%.
Women-Owned Small Business Contracts
Each year, the federal government aims to award 5% of federal contracting dollars to WOSB (women-owned small businesses).
Service-Disabled Veteran-Owned Contracts
Each year, the federal government aims to award 3% of federal contracting dollars to SDVOSB (service-disabled veteran-owned small businesses).
HUBZone
The HUBZone program empowers small businesses in historically underutilized business zones and aims to award at least 3% of federal contracting dollars to certified companies each year.
How To Get Small Business Set-aside Contracts
Follow these five steps to prepare your government contracting business to find and win small business set-asides.
- Register for the programs your business qualifies for. This could include the 8(a) and HUBZone programs, as well as any federal, state, local, or provincial programs that offer opportunities for small businesses across different categories.
- Consider building experience as your business begins its break into government contracting by first seeking out subcontracting partnerships and serving as a member of a prime contractor's team.
- Connect with the government agencies you want to work with, learn about their small business goals, and make sure that the opportunity and agency will be a good fit for your business.
- Develop a way to identify and apply for the small-business opportunities your business targets. Some market intelligence providers, such as Deltek GovWin IQ, offer tools that make this process straightforward and rewarding.
- Create a strong proposal to win the contract. Your proposal must include extensive information to present a compelling case to the buying agency or potential prime contractor teaming partners, and it should demonstrate your past performance and core competencies.
Teaming Opportunities for Small Businesses
Teaming agreements are common ways for small businesses to partner with larger vendors to gain access to government contracts they could not have fulfilled on their own.
Specifically, a small business teaming agreement is an arrangement that allows a contractor to remain categorized as a small business while bringing in additional businesses (or multiple businesses) to contribute to the project.
When searching for government contracts, small businesses should always take advantage of the many resources and programs designed by government entities to help them compete beyond their size.
Most agencies have offices of small and disadvantaged business utilization (OSDBUs) and/or small business programs to ensure the agency maximizes opportunities to contract with small businesses in its acquisitions.
Many contracts require small businesses to perform a certain amount of the work, creating a need for larger businesses to partner with smaller ones to gain access to these contracts.
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Federal Small Business Contracts
The federal government seeks to award a significant percentage of its overall contracting dollars to small businesses each year. It does much of this through its small business set-aside programs, such as the 8(a) and HUBZone programs. It makes a point to encourage women-owned, minority-owned, and service-disabled veteran-owned small businesses to apply to do business with the federal government.
Businesses seeking federal small business contracts should also educate themselves on the GSA Schedules program, which offers access to federal, state, and local government opportunities.
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State and Local Small Business Contracts
Small businesses looking to scale their SLED government contracting sales should explore their target markets to identify strategies that best position them for success. State, local, and education (SLED) governments often offer their own programs designed to create more contracting opportunities for small businesses. They will also sometimes have a preference for local vendors.
Small businesses selling to state and local governments should also seek out contract opportunities they are uniquely qualified to pursue, such as opportunities reserved for small businesses and common socioeconomic set-aside categories such as women-owned, minority-owned, and veteran-owned.
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Canadian Small Business Contracts
If your organization sells to, or is interested in selling to, Canadian federal and provincial governments, or is interested in growing your footprint in Canada, you should know that the Canadian government operates set-aside programs designed to stimulate its economy.
Governments in Canada often use similar set-aside requirements to those used by U.S. federal, state, and local governments.
One notable point of distinction is that the Canadian government emphasizes stimulating opportunities for Indigenous-owned businesses that can prove business ownership that is First Nations, Inuit, or Métis affiliated. Typically, these businesses must have a footprint or residency in Canada, and most set-aside requirements in Canada are generally aimed toward these requirements.
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