Understanding Government Set-Aside Programs
The federal government has established several set-aside programs to ensure that small businesses and businesses owned by underserved groups receive a fair proportion of federal contracting dollars. These programs restrict competition on certain contracts to businesses that hold specific certifications, giving certified businesses a significant competitive advantage. Understanding which programs you qualify for and how to get certified is essential for maximizing your government contracting success.
Why Set-Asides Exist
The Small Business Act mandates that the federal government award a certain percentage of contract dollars to small businesses. The current goals are 23% to small businesses overall, 5% to small disadvantaged businesses (including 8(a)), 3% to HUBZone businesses, 3% to service-disabled veteran-owned small businesses, and 5% to women-owned small businesses. These goals drive agencies to actively seek out and set aside contracts for certified businesses. In fiscal year 2023, the federal government awarded over $178 billion to small businesses, representing 28.4% of eligible contracting dollars.
8(a) Business Development Program
The 8(a) program is run by the SBA and is designed for small businesses owned by socially and economically disadvantaged individuals. To qualify, the business must be at least 51% owned and controlled by one or more disadvantaged individuals. The owner's personal net worth must be less than $850,000 (excluding the value of the business and primary residence), and the business must have average annual gross receipts of $9.12 million or less over the previous three fiscal years. The program lasts nine years and offers both competitive and sole-source contracting opportunities. 8(a) sole-source contracts can be awarded up to $4.5 million for goods and services and $8 million for manufacturing.
HUBZone Program
The Historically Underutilized Business Zones (HUBZone) program helps small businesses in designated areas gain access to federal contracting. To qualify, a business must be small by SBA size standards, at least 51% owned and controlled by U.S. citizens, have its principal office in a HUBZone, and have at least 35% of its employees living in a HUBZone. Benefits include competitive and sole-source contract opportunities, and a 10% price evaluation preference in full and open competitions. The SBA maintains an online map of HUBZone-designated areas.
Service-Disabled Veteran-Owned Small Business (SDVOSB)
The SDVOSB program provides contracting advantages to businesses owned by service-disabled veterans. The business must be at least 51% owned and controlled by one or more service-disabled veterans who also manage the company's day-to-day operations. SDVOSB set-aside contracts can be awarded when at least two SDVOSB firms are expected to submit offers at fair market prices. Sole-source awards are available up to $4.5 million for goods and services and $8 million for manufacturing. As of January 2023, SDVOSB certification is managed by the SBA.
Women-Owned Small Business (WOSB) Program
The WOSB Federal Contracting Program provides set-aside and sole-source contracts for WOSBs and Economically Disadvantaged WOSBs (EDWOSBs) in industries where women-owned businesses are underrepresented. A WOSB must be at least 51% owned and controlled by one or more women who are U.S. citizens and manage day-to-day operations. For EDWOSB designation, the woman owner's personal net worth must be less than $850,000, with adjusted gross income averaged over three years of $400,000 or less. WOSB sole-source awards are available up to $4.5 million for services and $8 million for manufacturing.
How to Get Certified
Most set-aside certifications are now managed through the SBA's certify.sba.gov portal. The application process involves providing documentation of business ownership, personal financial statements, tax returns, and other business records. Processing times vary but typically take 60-90 days. It is critical to maintain accurate and up-to-date records, as the SBA conducts reviews and can revoke certifications for non-compliance. Many businesses find it helpful to work with a procurement technical assistance center (PTAC) during the certification process.