What is a set-aside contract?

Set-asides reserve a contract opportunity for vendors meeting specific eligibility criteria. The largest set-aside category is small-business set-asides — federal agencies are required to set aside acquisitions in the simplified acquisition range exclusively for small businesses when two or more responsible small businesses are reasonably expected to compete at fair prices.

Within small-business set-asides, additional sub-categories provide even more limited competition: - 8(a) set-aside: only 8(a)-certified businesses - HUBZone set-aside: only HUBZone-certified businesses - WOSB set-aside: only WOSB-certified businesses in eligible NAICS codes - EDWOSB set-aside: only EDWOSB-certified businesses in eligible NAICS codes - SDVOSB set-aside: only SDVOSB-certified businesses

The contracting officer chooses which set-aside applies based on the requirement, the available pool of certified vendors, and agency goals. Many federal agencies have aggressive set-aside goals — VA targets 12% of contract dollars to SDVOSB firms, for example.

State and local agencies have analogous programs with different terminology — Maryland's Small Business Reserve, California's SB certification, New York's MWBE program.

For vendors, set-asides reduce competition dramatically — the bidder pool is the set of certified vendors in your domain. If you qualify for multiple programs, you compete on every set-aside in your domain, plus full-and-open competitions.

Two key set-aside rules to know: - Limitation on subcontracting: small-business set-aside contractors must perform at least 50% of services or 50% of cost of materials (with regulatory variations). You cannot win a set-aside and subcontract most of the work. - Affiliation rules: SBA looks at whether your business is "affiliated" with larger firms through ownership, contracts, or management. Affiliation can disqualify you from small-business eligibility.