There's a common misconception that only the bigger corporations or household contractor names win all the government business. If you are a small business owner, your chances for federal procurement are greater than you may think. The federal government requires agencies to set-aside contracts to achieve small business goals and give small businesses a fair chance to win government contracts. Some set-asides are further narrowed down to specific socio-economic programs, making it more accessible for disadvantaged small businesses. At Winvale, we work with a wide variety of small businesses and help them find their niche in the public sphere. In this blog, we will cover the different types of small business set-asides that your business may qualify for.
What Are Small Business Set-Asides?
Small business set-asides are contracts reserved by the federal government which limit competition to qualifying small businesses. Their purpose is defined and governed in Federal Acquisition Regulation (FAR) Subpart 19.5. The federal government uses small business set-asides when an acquisition can be completed by at least two small business, following the "Rule of Two" (which may be expanded soon to incorporate Multiple Award Contracts.)
To fulfill small business contracting goals, Contracting Officers often determine whether an acquisition can be completed through set-asides first before opening it up to other businesses. Set-asides can be total or partial. For example, a contract vehicle could have certain pools reserved for small businesses but some for large businesses as well.
How to Qualify for Set-Asides
To qualify for a small business set-aside, your company must first register in the System for Award Management (SAM) and be certified as “small” by the Small Business Administration (SBA). There are certain size standards designated by the SBA which define the threshold for small vs. "other than small business" designations. These size standards are based on your primary North American Industry Classification System (NAICS) Code. The size standards are measured by either the number of employees or the average income a company can make to be deemed a small business (depending on the NAICS Code).
However, this is just to qualify as a small business in general. There are specific types of set-asides you may also qualify for which we'll discuss below.
Types of Small Business Set-Asides
The Small Business Administration (SBA) has additional contracting assistance set-aside programs.. If your company falls under one of these socioeconomic categories, you should look into the certification process to take advantage of more opportunities and support.
8(a) Business Development Program
To qualify for the 8(a) Business Development Program, you must be considered a Small Disadvantaged Business (SDB), meaning 51% of the business is owned and controlled by U.S citizens who are at a disadvantage economically and socially as defined in 13 Code of Federal Regulations (CFR) 124. The SBA defines 4 categories of disadvantaged small businesses:
- Veteran-owned
- Woman-owned
- Minority-owned
- Owned by a person with disabilities
Additional requirements include a maximum net worth $750k, or an adjusted gross income of $350k or less. This program has a term status that can last for a period of 9 years.
The Women-Owned Small Business Program
Women-Owned Small Businesses (WOSB) and Economically Disadvantaged Women-Owned Small Businesses (EDWOSB) are another type of socio-economic program. To qualify as a WOSB, your company must:
- Be at least 51% owned and controlled by one or more women
- Company needs to be managed by one or more women who is a U.S. citizen
- Your business must qualify as “small” under your NAICS Code
- Have women manage day-to-day operations and make long-term decisions
To qualify as an EDWOSB, you must:
- Meet all the requirements of the WOSB Federal Contract program above
- Be owned and controlled by one or more women, each with a personal net worth less than $850,000
- Be owned and controlled by one or more women, each with $400,000 or less in adjusted gross income averaged over the previous three years
- Be owned and controlled by one or more women, each $6.5 million or less in personal assets
It’s also important to note that the certification requirements for Women-Owned Small Businesses have changed in the last 5 years, so if you are interested in qualifying, you should familiarize yourself with the process.
Veteran-Owned Small Business and Service-Disabled Veteran-Owned Small Business Programs
There are also set-asides reserved specifically for Veteran-Owned Small Businesses (VOSBs) and Service-Disabled Veteran-Owned Small Businesses (SDVOSBs).
VOSBs have access to opportunities through the Department of Veterans Affairs (VA) Vet's First Program for sole source and set-aside contracts. To qualify as a VOSB, you must:
- Be a small business according to SBA’s size standards
- Be at least 51% owned and controlled by one or more veterans
- One or more veterans has full control over the day-to-day management, decision-making, and strategic policy of the business
SDVOSBs can compete for set-asides across the federal government. To qualify as an SDVOSB, your company must:
- Be a small business according to SBA’s size standards
- Be at least 51% owned and controlled by one or more service-disabled veterans
- Have one or more service-disabled veterans manage day-to-day operations who also make long-term decisions
- Eligible veterans must have a service-connected disability
It's important to note that the certification process for VOSBs and SDVOSBs has changed recently from the VA to the SBA. You can no longer self-certify as an SDVOSB and must go through the proper procedures through the SBA application.
The HubZone Program
Small businesses located within demographically specified regions which are considered Historically Underutilized Business Zones (HUBZones) may qualify for the HubZone Program.
To qualify for this program, your business must be located in a HUBZone, have 35% of it employees living in a HUBZone, and 51% of those who own and control the company must be a part of " a Community Development Corporation, an agricultural cooperative, an Alaska Native corporation, a Native Hawaiian organization, or an Indian tribe."
If your business is owned by Indian tribal governments, you must either have your primary office within a HUBZone and maintain a staff that is at least 35% within the HUBZone, or certify that at least 35% of employees on the government contract will live on land either within the HUBZone adjoining the reservation or governed by the Indian Tribal Government.
Taking Advantage of Contracting Opportunities
As a small business ourselves, we understand how overwhelming it can be to enter the public sector, especially if you are new to government contracting. That's why it's important to recognize the opportunities and support available to you so you can set yourself up for success in the government marketplace. If you want more details on how to qualify and apply for each set-aside, you can check out our blog, “Do I Qualify for Set-Aside Contracts?” If you have any questions about getting a GSA Schedule or managing your current contract, feel free to reach out to one of our consultants and we will help guide you in the right direction.
