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Set-asides: how small contractors win government work.

A large share of government construction work is set aside so only small businesses can bid. That means you're competing against companies your size, not national firms. Here's how it works.

What is a set-aside?

A set-aside reserves a contract for a certain group of businesses. When a contracting officer expects at least two qualified small businesses to bid at fair prices, the job is generally set aside for small businesses. Every Bid Watch listing shows the set-aside, if there is one.

Am I a small business?

The SBA decides by industry, using your average yearly revenue. For most construction trades the limit is in the millions of dollars of annual revenue, so most local contractors qualify. Check the current number for your NAICS code in the SBA's size standards table.

The main types of set-asides

  • Total small business: any small business can bid. This is the most common.
  • 8(a): for SBA 8(a) program participants (small businesses owned by socially and economically disadvantaged people).
  • HUBZone: for certified small businesses based in, and hiring from, historically underutilized areas.
  • Service-disabled veteran-owned (SDVOSB): for certified businesses owned by service-disabled veterans.
  • Women-owned (WOSB/EDWOSB): for certified women-owned small businesses in eligible industries.

The 8(a), HUBZone, veteran and women-owned programs each require an SBA certification. If you might qualify, it's worth applying, because these jobs have fewer competitors.

You must do a share of the work yourself

On set-aside jobs, rules limit how much you can pass to subcontractors who aren't also small businesses of the same type. The limits are tighter for specialty trades than for general construction. Read the subcontracting clause in each solicitation.

Answer "sources sought" notices

Agencies sometimes post a "sources sought" or market research notice before the real bid, asking who could do the work. Answering it is free, and it can be the reason the job gets set aside for small businesses at all.

Questions

What is a small business set-aside?

A set-aside reserves a government contract so only small businesses, or a certain type of small business, can bid on it. It means you compete with companies your size instead of national firms.

How do I know if my construction company counts as a small business?

The SBA sets a size limit for each industry code (NAICS), based on average annual revenue. Most local construction contractors fall under the limit. Check the SBA size standards table for your code.

Do I need a certification to bid on set-aside jobs?

Not for total small business set-asides. You certify your size in SAM.gov. The 8(a), HUBZone, service-disabled veteran-owned and women-owned programs require SBA certification.

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