Understanding Federal Set-Asides

Each year, the federal government aims to allocate approximately 23% of its total contracting budget to small businesses, with separate goals established for specific types of small businesses.

These specific types are commonly referred to as "set-asides," as the government reserves a certain percentage of their spending for these businesses.

Small business set-asides, as defined in FAR 19.5:
"The purpose of small business set-asides is to award certain acquisitions exclusively to small business concerns. A 'set-aside for small business' is the reserving of an acquisition exclusively for participation by small business concerns. A small business set-aside may be open to all small businesses. A small business set-aside of a single acquisition or a class of acquisitions may be total or partial."

Set-Aside Spending Goals
The following are the spending goals for each small business set-aside:

• Small Business - 23%
• Women-Owned Small Business (WOSB) / Economically Disadvantaged Women-Owned Small Business (EDWOSB) - 3%
• Service-Disabled Veteran-Owned Small Business (SDVOSB) - 3%
• Historically Underutilized Business Zone (HUBZone) - 5%
• 8(a) Business Development Program - 5%

Small Business:
To qualify as a small business, a company must meet specific size standards set by the Small Business Administration (SBA). These standards are based on the industry's North American Industry Classification System (NAICS) code and consider the average annual revenue and the number of employees. Eligible small businesses must also be independently owned, operated, and organized for profit and based in the United States.

Women-Owned Small Business (WOSB) / Economically Disadvantaged Women-Owned Small Business (EDWOSB):
To qualify as a WOSB, a company must be at least 51% owned, controlled, and managed by one or more women who are U.S. citizens. For EDWOSB certification, the company must meet the same requirements as a WOSB and demonstrate economic disadvantage. The woman or women in control must have a personal net worth of less than $750,000, excluding their primary residence and the business's equity.

Service-Disabled Veteran-Owned Small Business (SDVOSB):
To be eligible for the SDVOSB certification, the business must be at least 51% owned, controlled, and managed by one or more service-disabled veterans with a disability rating issued by the Department of Veterans Affairs or the Department of Defense. The service-disabled veteran must hold the highest officer position and be involved in the business's daily management and decision-making processes.

Historically Underutilized Business Zone (HUBZone):
To qualify for HUBZone certification, a small business must be located in a designated area, including urban, rural, and Indian reservation areas with low income, high unemployment, or both. The company must be at least 51% owned and controlled by U.S. citizens or a community development corporation, agricultural cooperative, or Indian tribe. Additionally, at least 35% of the business's employees must reside within a HUBZone.

8(a) Business Development Program:
The 8(a) program is designed to help socially and economically disadvantaged small businesses compete in the federal marketplace. To be eligible, a firm must be a small business that is at least 51% owned, controlled, and managed by one or more individuals who are both socially and economically disadvantaged. This typically includes members of minority groups, women, and service-disabled veterans. The program participants must also demonstrate good character, sound financial practices, and the potential for success.

Did You Know?
Prime vendors classified as Other Than Small Business (OTSB) and awarded contracts valued over $750,000 must submit a subcontracting plan to the government. This plan outlines how they will subcontract a portion of their contract to one or more small businesses.

OTSB includes large businesses, state and local governments, non-profit organizations, public utilities, educational institutions, and foreign-owned firms that receive federal contracts if any portion of the contract is to be performed in the United States.

FACT
Every federal contract with an anticipated value above the micro-purchase threshold ($10,000) and below the Simplified Acquisition Threshold ($250,000) must be automatically and exclusively set aside for small businesses, as long as the rule of two applies.

The Rule of Two states that if two or more responsible small business vendors express interest in procurement or are deemed competitive on a quote or proposal, the government shall add a corresponding set-aside requirement to the solicitation.

Back to Basics
Each set-aside designation has a unique set of qualifications. For instance, there are more qualifications for becoming a WOSB other than being a woman owner.

It's crucial to determine if a business qualifies before starting the registration process for any of these set-asides, or else valuable time, money, and energy can be wasted.

When working with USFCR, our Case Team verifies your information to confirm that you qualify for a set-aside before starting the process.

To speak with a Registration and Contracting Specialist, Call: (866) 216-5343