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Right now in 2025, the federal government continues to reserve approximately 23% of its contracting budget specifically for small businesses - that's over $178 billion in opportunities annually. These set-aside programs aren't just compliance checkboxes; they're your business's pathway to consistent federal revenue and sustainable growth.
Watch our expert explanation of federal set-asides and how to determine your business eligibility:
What Are Federal Set-Asides and Why They Matter for Your Business
Federal set-asides: Specific percentages of federal spending reserved for different categories of small businesses, ensuring fair competition and market access. The federal government offers set-aside categories based on business ownership types, allowing small businesses with diverse backgrounds and capabilities to compete for contracts that might otherwise go to large corporations.
Here's the reality: without set-aside protections, most small businesses would struggle to compete against major defense contractors and Fortune 500 companies. Set-asides level the playing field and create dedicated opportunities for businesses like yours.
Current Federal Set-Aside Spending Goals
Updated for 2025: The government sets specific goals for each small business category based on recent statutory changes and SBA policy updates:
- Small Business: 23% of all eligible federal contracting dollars
- Women-Owned Small Business (WOSB) / Economically Disadvantaged Women-Owned Small Business (EDWOSB): 5%
- Service-Disabled Veteran-Owned Small Business (SDVOSB): 5%
- Historically Underutilized Business Zone (HUBZone): 3%
- Small Disadvantaged Business (8(a) Program): 5%
Important 2025 update: The SDVOSB goal increased from 3% to 5% under the National Defense Authorization Act for FY2024, creating significantly more opportunities for veteran-owned businesses.
How to Determine Your Set-Aside Eligibility
Step one: Understanding the criteria for each set-aside is crucial before beginning any registration process. Here's how each category breaks down:
Small Business Foundation Requirements
Every set-aside starts here: Your business must meet the Small Business Administration's size standards, which are based on your North American Industry Classification System (NAICS) code. These standards consider your average annual revenue and number of employees over the past three years.
Additional requirements: Your business must be independently owned, operated for profit, and physically located in the United States.
Women-Owned Small Business (WOSB) / Economically Disadvantaged Women-Owned Small Business (EDWOSB)
Ownership requirement: Your business must be at least 51% owned, controlled, and managed by one or more women who are U.S. citizens.
EDWOSB additional requirement: The women owner(s) must demonstrate economic disadvantage with a personal net worth of less than $750,000 (excluding primary residence and business equity).
Control and management: The women owners must hold the highest officer positions and have day-to-day management responsibility. This isn't just about ownership percentages - you need to demonstrate actual control.
Learn more about Women-Owned Small Business (WOSB) certification
Service-Disabled Veteran-Owned Small Business (SDVOSB)
Veteran requirement: Your business must be 51% owned, controlled, and managed by one or more veterans with a disability rating issued by the Department of Veterans Affairs or the Department of Defense.
Active management: The service-disabled veteran must be actively involved in daily management and decision-making processes. The disability rating must be current and documented.
Recent opportunity expansion: With the goal increase to 5%, agencies are actively seeking more SDVOSB contractors to meet their targets.
Learn more about Service-Disabled Veteran-Owned Small Business certification
Historically Underutilized Business Zone (HUBZone)
Location requirement: Your business must be located in a designated HUBZone area - typically urban or rural zones with low income, high unemployment, or both.
Ownership and employment: Your business must be 51% owned by U.S. citizens, and 35% of your employees must reside within a HUBZone area.
Verification needed: HUBZone status requires ongoing compliance verification, as zone designations can change.
Learn more about HUBZone Program certification
8(a) Business Development Program
Disadvantaged status: Your firm must be 51% owned and managed by one or more individuals who are socially and economically disadvantaged.
Business development focus: The 8(a) program is designed to help businesses develop and compete in the mainstream marketplace over a nine-year period.
Character and capability: Participants must demonstrate good character, sound financial practices, and potential for success in federal contracting.
Learn more about 8(a) Business Development Program certification
Understanding Contract Set-Aside Requirements
The Rule of Two: Every contract above $10,000 and below $250,000 must be set aside for small businesses if at least two responsible small businesses can submit competitive bids.
Above $250,000: Contracting officers have more discretion but are encouraged to use set-asides when market research shows adequate small business competition.
Large Business Subcontracting Requirements
Prime vendor obligations: Companies classified as Other Than Small Business (OTSB) who win contracts valued above $750,000 must submit subcontracting plans detailing their strategy for including small businesses as subcontractors.
OTSB definition: This includes large businesses, state and local governments, non-profits, educational institutions, and foreign-owned firms performing work in the United States.
Strategic Considerations Before Applying
Multiple certifications: Your business may qualify for multiple set-aside categories. For example, a woman-owned business in a HUBZone area could potentially hold both WOSB and HUBZone certifications.
Market research importance: Before pursuing certifications, research whether your industry and target agencies actively use your eligible set-aside categories.
Capability demonstration: Qualifying for a set-aside is just the first step - you still need to demonstrate the technical capability and past performance to win contracts.
Next Steps: Verify Your Eligibility
Before starting registration: Confirm your business qualifies for the right set-aside programs. Working with USFCR's Case Team ensures proper eligibility verification before proceeding, saving valuable time and resources.
Documentation requirements: Each certification requires specific documentation, financial statements, and legal structures. Proper preparation accelerates the approval process.
Speak to a USFCR Registration & Contracting Specialist to determine which set-aside certifications align with your business structure and federal contracting goals.
FAQ
Q: Can my business qualify for multiple set-aside programs? A: Yes, if you meet the eligibility criteria for multiple programs. Many businesses hold certifications in 2-3 different set-aside categories to maximize their competitive opportunities.
Q: How long does set-aside certification typically take? A: Processing times vary by program. WOSB self-certification can be immediate, while 8(a) applications typically take 90+ days for SBA review and approval.
Q: Do set-asides guarantee contract awards? A: No, set-asides create opportunities for competition among qualified small businesses. You still compete with other certified businesses and must demonstrate capability and competitive pricing.
Q: What happens if my business grows beyond small business size standards? A: You may lose small business status but can often complete existing contracts. Some programs have recertification requirements and size standard exceptions for certain contract types.
Q: Are there any industries where set-asides are more common? A: Set-aside usage varies by agency and industry. Professional services, IT, construction, and manufacturing tend to have strong set-aside opportunities across multiple categories.
Based on information current as of October 2025 from SBA.gov, Congressional Research Service reports, and the National Defense Authorization Act for FY2024. Set-aside goals and program requirements may change - confirm current details with your contracting officer for specific opportunities.
