Small Business Set-Aside

How Small Business Set-Asides Work

When a contracting officer determines that a requirement can be fulfilled by small businesses, they "set aside" the contract — meaning only firms meeting the SBA size standard for that NAICS code can compete. Large businesses are excluded from bidding. This is the government's primary mechanism for directing contract dollars to small businesses.

Types of Set-Asides

Set-Aside Type	Eligible Firms	Sole Source Threshold
Total Small Business	Any SBA-certified small business	N/A (competitive)
8(a)	SBA 8(a) program participants	$4.5M services / $7M manufacturing
SDVOSB	Service-disabled veteran-owned	$5M services / $7M manufacturing
HUBZone	HUBZone certified firms	$4.5M services / $7M manufacturing
WOSB/EDWOSB	Women-owned small businesses	$4.5M services / $7M manufacturing

The Rule of Two

The "Rule of Two" (FAR 19.502-2) requires that contracting officers set aside any acquisition over the simplified acquisition threshold ($250,000) exclusively for small businesses if they have a reasonable expectation that at least two responsible small business concerns will submit offers at fair prices. This is the most important rule in small business contracting — it's what creates the vast majority of set-aside opportunities.

How to Find Set-Aside Opportunities

On SAM.gov, filter by "Set-Aside" to see opportunities restricted to small businesses. Common set-aside codes include SBA (Total Small Business), 8A (8(a) program), SDVOSBC (SDVOSB competitive), and HZC (HUBZone competitive). Set-asides represent roughly 23-26% of all federal prime contracting dollars annually — over $150 billion per year.

Tips for Small Businesses

Get your SBA size determination right — the NAICS code assigned to the contract determines the size standard, not your company's primary NAICS. Consider pursuing specialized certifications (8(a), SDVOSB, HUBZone) that qualify you for both competitive set-asides and sole-source awards below the statutory thresholds.