How Set-Asides Level the Playing Field

In federal contracting, size is often a determining factor of who can and cannot compete for a contract. Prior to 1953 and the establishment of the Small Business Administration and Set-Asides in 1977, large businesses had a great advantage when it came to pursuing government work. Both of the aforementioned Congressional acts served as a mechanism to direct more government contracts to small companies. In addition to creating these programs, Congress has the power to set and adjust the government’s small business target goals. For Fiscal Year 2019, Congress targeted 23 percent of all prime contract awards to go to small business concerns.

Further, the 1977 Congressional action on small business set-asides gave government agencies the ability to limit competition for certain contracts in accordance with SBA’s small business size standards. While the government regularly hits its yearly small business target and small business spending has been on the rise, agencies often struggle to reach goals set for specific set-asides. This may be attributed to the fact that government wide goals and agency specific goals are not the same.

Government wide goals set a target percentage of how much government spending should go to small businesses, but it neglects the fact that some agencies will do a better job at targeting small businesses than others. Agency specific goals are made by the Small Business Administration to ensure that agency spending is correlated with the type of work that agency solicits. For example, the SBA has a small business prime contract goal of 71% while DOE’s goal is only 11.65%.

Below are some of the most frequently used small business set-asides, including what types of businesses can qualify for certification and what targets the government sets for those businesses.

Small Disadvantaged Business (SDB)

SBA’s qualification process for SDBs are as follows:

  • Small business
  • At least 51% owned and controlled by a socially and economically disadvantaged individual or group
    • Qualifying groups include African Americans, Hispanic Americans, Asian Pacific Americans, Subcontinent Asian Americans, and Native Americans
    • Other individuals can qualify if they can sow by a “preponderance of the evidence” that they are disadvantaged
  • Individuals must have a net worth of less than $750,000, excluding the equity of the business and primary residence
  • Applicants must meet applicable size standards for businesses in their industry

SBA has set a 5% prime contracting goal for all agencies.

8(a) Business

SBA’s qualification process for 8(a) businesses are as follows:

  • Small business
  • Have not already participated in the 8(a) program
  • At least 51% owned and controlled by U.S. citizens who are economically and socially disadvantaged
  • Owned by someone whose personal net worth is $250,000 or less
  • Owned by someone whose average adjusted gross income for three years is $250,000 or less
  • Owned by someone with $4 million or less in assets
  • Have the owner manage day-to-day operations and also make long-term decisions
  • Have all its principals demonstrate good character
  • Show potential for success and be able to perform successfully on contracts

8(a) prime contracting goals are included in SDV prime contracting goals.

Women Owned Small Business (WOSB)

SBA’s qualification process for WOSBs are as follows:

  • Small business
  • At least 51% owned and controlled by women
  • Owned by a U.S. citizen(s)
  • Have women manage day-to-day operations and make long-term decisions

To qualify as economically disadvantaged within the women’s contracting program, companies must additionally be:

  • Owned and controlled by one or more women, each with a personal net worth less than $750,000
  • Owned and controlled by one or more women, each with $350,000 or less in adjusted gross income averaged over the previous three years
  • Owned and controlled by women, each $6 million or less in personal assets

SBA has set a 5% prime contracting goal for all agencies.

Service-Disabled Veteran Owned Small Business (SDVOSB)

SBA’s qualification process for SDVOSBs are as follows:

  • Small Business
  • At least 51% owned and controlled by one or more service-disabled veterans
  • Have one or more service-disabled veterans manage day-to-day operations and also make long-term decisions
  • Eligible veterans must have a service-connected disability

SBA has set a 3% prime contracting goal for all agencies.

HUBZone Small Business

SBA’s qualification process for HUBZone Small Businesses are as follows:

  • Small business
  • At least 51% owned and controlled by U.S. citizens, a Community Development Corporation, an agricultural cooperative, a Native Hawaiian organization, or a Native American tribe
  • Have its principal office located in a HUBZone
  • Have at least 35% of its employees live in a HUBZone

SBA has set a 3% prime contracting goal for all agencies.


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