What A Set-Aside Is

The Short Version

A set-aside is a contract that only small businesses can compete for. FAR 19.501(a)(1) says a set-aside for small business "is the limiting of an acquisition exclusively for participation by small business concerns."

Some set-asides are open to any small business. Others are open only to businesses in one of SBA's programs.

When Work Gets Set Aside

• From the micro-purchase threshold up to the simplified acquisition threshold (above $15,000 and up to $350,000 in most cases, FAR 2.101): the work "shall be set aside for small business" unless the contracting officer does not expect offers from two or more responsible small businesses that are competitive on fair market prices, quality, and delivery (FAR 19.502-2(a)).
• Above $350,000: the contracting officer sets the work aside when there is a reasonable expectation of offers from at least two responsible small businesses and award at fair market prices (FAR 19.502-2(b)). This is often called the rule of two.
• The SBA programs come first above $350,000. The contracting officer first considers the 8(a), HUBZone, service-disabled veteran-owned, and women-owned small business programs before a small business set-aside (FAR 19.203(c)). There is no order of precedence among those four programs (FAR 19.203(a)).

FAR 2.101 lists a few cases with higher dollar amounts, such as buys for contingency operations.

The Program Set-Asides

• 8(a) Business Development
• HUBZone
• Service-disabled veteran-owned small business
• Women-owned small business, and economically disadvantaged women-owned small business

SBA says you must meet each program's eligibility rules and certify your status before you can bid on that program's set-asides. For some programs you self-certify in your SAM.gov profile. For others you apply to SBA and send documents.

Are You Small?

• Every set-aside solicitation names its NAICS code and size standard (FAR 19.501(e)). SBA sets a size standard for each NAICS code.
• Size standards are based on the number of employees or average annual receipts, and you count your affiliates too (SBA).
• You represent your size in your SAM.gov registration (SBA).
• SBA warns that "there are severe criminal penalties for knowingly misrepresenting the size of a business for a federal contract."

If You Win A Set-Aside

• Limits on subcontracting (SBA): on a services contract, you may not pay more than 50 percent of what the government pays you to subcontractors that are not similarly situated. Supplies: 50 percent, not counting materials. General construction: 85 percent, not counting materials. Specialty construction: 75 percent, not counting materials. These apply to small business set-asides above the simplified acquisition threshold, and to all 8(a), HUBZone, service-disabled veteran-owned, and women-owned set-aside and sole-source contracts.
• Nonmanufacturer rule (SBA): if you sell a product you do not make on a set-aside, you generally must supply a product made in the United States by a small business. It does not apply to small business set-asides at or below the simplified acquisition threshold, but it does apply to the program set-asides.

The FAR Overhaul

Agencies that use the overhauled Part 19 text by deviation have the rule of two at 19.104-1: above the micro-purchase threshold, the contracting officer must set the work aside when there is a reasonable expectation of offers from two or more responsible small businesses that are competitive on fair market prices, quality, and delivery.

How GradeTheBid Helps

GradeTheBid reads the set-aside and the NAICS code on every solicitation and shows them at the top. The Certification Ready tool walks through the SBA programs, step by step. GradeTheBid never claims a status for you. Only claim what you hold.