Small business set-asides and SBA programs, explained

Why set-asides exist

Federal agencies have small business contracting goals. When a contracting officer reasonably expects offers from at least two responsible small businesses at fair market prices (the "rule of two"), the work is generally set aside for small businesses. Some contracts are further limited to companies in an SBA program.

First, be small for the NAICS code

Whether you are small depends on the SBA size standard (revenue or employee count) for the NAICS code on each solicitation. You can be small for one code and not for another.

The SBA programs

• 8(a) Business Development: for small businesses owned and controlled by socially and economically disadvantaged individuals. Participation lasts up to nine years and can include sole-source awards and 8(a) set-asides.
• HUBZone: your principal office must be in a Historically Underutilized Business Zone, and at least 35 percent of your employees must live in one.
• Service-Disabled Veteran-Owned Small Business (SDVOSB) and Veteran-Owned (VOSB): SBA certifies these through its Veteran Small Business Certification program, which moved from the VA to SBA in 2023. Certification is needed for SDVOSB set-aside and sole-source awards.
• Women-Owned (WOSB) and Economically Disadvantaged Women-Owned (EDWOSB): SBA certification has been required since October 2020, for set-asides in industries where women-owned businesses are underrepresented.

Where to apply

Apply for SBA certifications at certify.sba.gov. Have your ownership, control and financial documents ready, and expect reviews to take time.

Know the limitations on subcontracting

When you win a small business set-aside for services, you generally cannot pay more than 50 percent of the amount paid to you to subcontractors that are not similarly situated (not the same kind of small business). Plan your teaming and workshare with this in mind, and read the clause in each contract.