One of the most important ideas for small federal contractors is the set-aside. A set-aside reserves a contract, or part of one, for competition among small businesses or a specific type of small business. Understanding how contracting officers decide to set work aside can help you engage at the right moment.
Why set-asides exist
The Small Business Act reflects a long-standing federal policy that small businesses should receive a fair proportion of government contracts. Congress sets government-wide goals for prime contract dollars going to small businesses, including a goal of 23 percent overall and separate goals for specific socioeconomic categories. Set-asides are one of the main tools agencies use to work toward those goals.
The rule of two
The rule of two is the common name for a test contracting officers apply. In general terms, if the contracting officer has a reasonable expectation that offers will be received from at least two responsible small businesses, and that award can be made at a fair market price, the acquisition should be set aside for small businesses.
The test also applies within small business programs. For example, a contracting officer may consider whether two or more qualified firms in a particular program are likely to compete before setting work aside for that program. The rules for each program differ in detail, so review the current FAR provisions on acquisition.gov.
Where market research comes in
A contracting officer cannot apply the rule of two without information about which businesses are capable and interested. That information comes from market research, which includes sources sought notices, requests for information, industry days and searches of SAM.gov and SBA databases.
This is why responding to market research matters. If a contracting officer does not see enough capable small firms, the work may be competed on a full and open basis instead. A clear, specific response from your firm can help show that a set-aside is realistic.
Types of set-asides
- Total small business set-asides, open to any small business under the solicitation’s size standard
- Partial set-asides, where part of a requirement is reserved for small businesses
- Program set-asides for 8(a) participants, HUBZone firms, service-disabled veteran-owned small businesses, and women-owned small businesses in eligible industries
Some programs also allow sole-source awards under specific conditions.
A set-aside narrows the competition, but it does not lower the bar for quality. You still need a compliant, persuasive proposal, a fair price and the ability to perform. Set-aside contracts also come with obligations, such as limitations on how much of the work you can pass to subcontractors that are not similarly situated.
How to use this knowledge
Watch for sources sought notices in your NAICS codes, respond with specifics about your capability and relevant experience, and make sure your size status and certifications are accurate in SAM.gov. When you help a contracting officer see real small business capability, you help create the conditions for a set-aside.