Introduction
The U.S. federal government reserves a portion of its contracting opportunities specifically for small businesses. These opportunities, known as set-aside contracts, are designed to help smaller companies compete against larger corporations and establish themselves as trusted suppliers. For many entrepreneurs, securing a set-aside contract provides not only steady revenue but also long-term credibility in their industry.
What Are Set-Aside Contracts?
Set-aside contracts are federal procurement opportunities that limit competition to qualified small businesses. The goal is to ensure that a fair share of federal spending supports smaller companies and encourages growth across different industries.
Set-asides may apply to:
- Entire contracts, where only small businesses can compete.
- Portions of larger contracts, where a segment of the work is specifically reserved for small firms.
Types of Set-Aside Programs
Several programs exist to help small businesses access these opportunities. The most common include:
Small Business Set-Aside
Any business that meets the Small Business Administration (SBA) size standards may compete. Many contracts under $250,000 are automatically considered for small business set-aside.
8(a) Business Development Program
Supports socially and economically disadvantaged business owners. Participants receive training, mentorship, and exclusive contracting opportunities.
HUBZone Program
Helps businesses located in historically underutilized business zones. Companies must meet location and employee residency requirements to qualify.
Service-Disabled Veteran-Owned Small Business (SDVOSB)
Provides opportunities for businesses owned and controlled by service-disabled veterans.
Women-Owned Small Business (WOSB)
Gives women-owned companies access to contracts in industries where women are underrepresented.
Steps to Qualify for Set-Aside Contracts
1. Confirm Small Business Status
Use the SBA size standards tool to verify eligibility based on your industry’s NAICS code, revenue, or employee count.
2. Register in SAM.gov
All federal contractors must be registered in the System for Award Management (SAM.gov). This is the official database where contracting officers search for vendors.
3. Complete SBA Certifications
If applying for programs like 8(a), HUBZone, WOSB, or SDVOSB, obtain the necessary certification through the SBA. This ensures you are officially recognized for set-aside eligibility.
4. Build a Strong Capability Statement
A capability statement highlights your company’s strengths, experience, and past performance. It serves as a marketing tool when approaching contracting officers.
5. Network and Market to Agencies
Attend government contracting events, connect with procurement officers, and actively market your business. Relationships are a critical factor in securing contracts.
6. Stay Compliant
Ensure your business meets ongoing requirements for certifications and reporting. Non-compliance can lead to disqualification from opportunities.
Why Set-Aside Contracts Matter for Small Businesses
- Access to Stable Revenue: Federal contracts often provide multi-year income streams.
- Credibility and Growth: Working with the government enhances reputation and can open doors to private-sector opportunities.
- Level Playing Field: Set-asides reduce direct competition with large corporations, giving smaller firms a fair chance.
Common Challenges and How to Overcome Them
- Complex Registration Process: SAM.gov and SBA certifications require time and accuracy. Consider professional assistance if needed.
- Competition Within Programs: Even within set-asides, multiple small businesses may compete. A strong track record and marketing strategy are key.
- Cash Flow Gaps: Federal contracts may have delayed payment terms, which can strain small businesses without adequate working capital. Partnering with a funding provider like GillmanBagley can help bridge the gap.
Final Note
Set-aside contracts represent one of the most effective ways for small businesses to enter federal contracting. With the right preparation, certification, and persistence, entrepreneurs can build long-term partnerships with government agencies. GillmanBagley supports small businesses by providing funding solutions that help cover expenses and maintain stability while pursuing and fulfilling government contracts.