The federal government spends over $150 billion annually with small businesses, and construction represents a significant portion of that spending. Understanding set-aside programs and how to leverage them can dramatically increase your success in government contracting.
What Are Set-Aside Contracts?
Set-aside contracts are government procurements reserved exclusively for small businesses or specific small business categories. These programs level the playing field by limiting competition to qualified small contractors.
Types of Set-Asides
| Set-Aside Type | Abbreviation | Target Group | |----------------|--------------|--------------| | Small Business | SB | All small businesses | | 8(a) Business Development | 8(a) | Socially/economically disadvantaged | | HUBZone | HUBZone | Historically underutilized business zones | | Service-Disabled Veteran-Owned | SDVOSB | Service-disabled veteran owners | | Women-Owned Small Business | WOSB | Women-owned businesses | | Economically Disadvantaged WOSB | EDWOSB | Low-income women-owned |
Set-Aside Goals by Agency
Federal agencies must meet small business contracting goals:
- Overall small business: 23% of prime contracts
- Small disadvantaged business: 5%
- Women-owned small business: 5%
- Service-disabled veteran-owned: 3%
- HUBZone small business: 3%
Small Business Size Standards for Construction
Size standards determine if your company qualifies as "small" for specific contract opportunities.
NAICS Code Size Standards
| NAICS Code | Industry | Size Standard | |------------|----------|---------------| | 236115 | New Single-Family Housing | $45 million | | 236116 | New Multifamily Housing | $45 million | | 236210 | Industrial Building Construction | $45 million | | 236220 | Commercial/Institutional Building | $45 million | | 237110 | Water/Sewer Line Construction | $45 million | | 237310 | Highway/Street Construction | $45 million | | 237990 | Other Heavy Construction | $45 million | | 238XXX | Specialty Trade Contractors | $19 million |
Size standards are based on average annual receipts over 5 years
Calculating Your Size
Your company's size is calculated by:
- Sum annual receipts for past 5 fiscal years
- Divide by 5 to get average
- Include receipts of affiliates if applicable
- Compare to applicable size standard
Affiliation Rules
Affiliation rules can combine your receipts with related entities:
- Common ownership or control
- Contractual relationships
- Family relationships
- Economic dependence
8(a) Business Development Program
The 8(a) program is one of the most valuable certifications for construction contractors.
Eligibility Requirements
Personal Requirements (owner must be):
- U.S. citizen
- Socially disadvantaged (minority group or individual circumstances)
- Economically disadvantaged (net worth under $850,000)
- Not in previous 8(a) program
Business Requirements:
- 51% owned by disadvantaged individual(s)
- Operating for at least 2 years
- Meet size standards
- Demonstrate potential for success
8(a) Program Benefits
Sole-Source Contracts:
- Up to $4.5 million for construction
- No competition required
- Direct negotiation with contracting officer
Competitive 8(a) Set-Asides:
- Competition limited to 8(a) firms
- Price evaluation preferences
- Reduced competition
Business Development:
- SBA mentorship and guidance
- Federal contracting training
- Marketing assistance
Program Timeline
The 8(a) program has a 9-year duration:
Developmental Stage (Years 1-4):
- Unlimited sole-source awards
- Intensive business development support
- Annual reviews
Transitional Stage (Years 5-9):
- Sole-source limitations
- Focus on competitive wins
- Graduation preparation
HUBZone Certification
HUBZone certification helps contractors in economically challenged areas compete for federal work.
Eligibility Requirements
Location Requirements:
- Principal office in a HUBZone
- 35% of employees live in HUBZones
- Employees must live in HUBZone at time of hire
Ownership Requirements:
- Small business by SBA standards
- At least 51% owned by U.S. citizens
- Or owned by Community Development Corporation, Indian tribe, or Alaska Native Corporation
Finding HUBZone Areas
HUBZones include:
- Qualified census tracts
- Qualified non-metropolitan counties
- Indian reservations
- Former military bases
Use the SBA HUBZone map tool to verify addresses.
HUBZone Benefits
- Sole-source contracts: Up to $4.5 million for construction
- Set-aside contracts: Competition limited to HUBZone firms
- Price evaluation preference: 10% in full and open competition
Service-Disabled Veteran-Owned Small Business (SDVOSB)
SDVOSB certification opens dedicated opportunities for veteran-owned contractors.
Eligibility Requirements
Veteran Requirements:
- Service-connected disability rated by VA
- Unconditional discharge (honorable)
- U.S. citizen
Business Requirements:
- 51% owned by service-disabled veteran(s)
- Management and daily control by veteran(s)
- Meet SBA size standards
SDVOSB Verification
Effective 2023, SDVOSB certification requires:
- Application through SBA Veteran Small Business Certification
- Documentation of disability rating
- Business structure verification
- Annual recertification
Program Benefits
- Sole-source contracts up to $4.5 million
- Set-aside competitions
- Subcontracting opportunities
- Mentor-protégé participation
Women-Owned Small Business (WOSB) Program
The WOSB program supports women entrepreneurs in federally-designated industries.
Eligibility Requirements
WOSB Requirements:
- 51% owned by women who are U.S. citizens
- Management and daily operations controlled by women
- Meet SBA size standards
EDWOSB Additional Requirements:
- Meet economic disadvantage thresholds
- Personal net worth under $850,000
- Adjusted gross income under $400,000
WOSB Industries for Construction
The WOSB program applies to industries where women are underrepresented:
- General residential construction
- Commercial building construction
- Highway and bridge construction
- Specialty trade contractors
- Site preparation contractors
Certification Options
- SBA Certification: Free, directly through SBA
- Third-Party Certifiers: SBA-approved organizations
- Self-Certification: Being phased out
Winning Set-Aside Contracts
Certification alone doesn't guarantee success. Here's how to compete effectively.
Market Research
Before bidding, understand your target agencies:
- Review past awards in your industry
- Identify agencies with unmet goals
- Analyze competitor landscape
- Build relationships with contracting officers
SAM.gov Registration
Proper registration is essential:
- Get a UEI - Unique Entity Identifier
- Register in SAM - System for Award Management
- Complete all representations - Business certifications
- Update annually - Keep information current
Capability Statement
Your capability statement should include:
Core Competencies:
- Specific services you provide
- Geographic coverage
- Contract vehicles you hold
Past Performance:
- Relevant project examples
- Contract values and dates
- Agency references
Differentiators:
- Certifications held
- Unique capabilities
- Value proposition
Teaming Arrangements
Strategic partnerships can help you win larger contracts:
Joint Ventures:
- Combine capabilities with other small businesses
- Meet size standards under SBA rules
- Share risk and reward
Mentor-Protégé:
- Partner with established contractors
- Gain experience on larger projects
- Build past performance
Common Mistakes to Avoid
Certification Mistakes
- Applying before meeting all requirements
- Providing incomplete documentation
- Not maintaining eligibility
- Missing annual certification updates
Bidding Mistakes
- Not researching opportunities thoroughly
- Submitting non-compliant proposals
- Underpricing to win contracts
- Overcommitting on delivery schedules
Performance Mistakes
- Failing to meet contract requirements
- Poor communication with contracting officers
- Not documenting work properly
- Ignoring compliance requirements
Subcontracting Opportunities
Large contractors must meet small business subcontracting goals on federal contracts.
Finding Subcontracting Opportunities
- Check SubNet on SBA.gov
- Review agency forecasts
- Contact prime contractor small business liaisons
- Attend industry days and matchmaking events
Subcontracting Plans
Prime contractors with subcontracting plans must report:
- Small business spending percentages
- Specific subcontractor utilization
- Good faith efforts
Building Prime Contractor Relationships
- Register as a small business subcontractor
- Respond to subcontracting opportunities
- Deliver excellent performance
- Request references and recommendations
State and Local Set-Asides
Many state and local governments have similar programs.
Common State Programs
| Program Type | Description | |--------------|-------------| | Small Business Enterprise (SBE) | State-defined small business | | Disadvantaged Business Enterprise (DBE) | Federal transportation program | | Minority Business Enterprise (MBE) | State minority programs | | Women Business Enterprise (WBE) | State women's programs |
Certifying with Multiple Agencies
Consider certifications that apply broadly:
- DBE certification: Required for federal transportation funds
- State certifications: Vary by state requirements
- Local certifications: City and county programs
Technology Tools for Set-Aside Contractors
Leverage technology to find and win opportunities.
Opportunity Discovery
- SAM.gov: Federal contract opportunities
- GovWin: Market intelligence platform
- USASpending.gov: Past award analysis
- FPDS: Federal procurement data
Bid Management
- Proposal automation tools
- Cost estimating software
- Project management platforms
- CRM for government contacts
Next Steps
Ready to pursue set-aside contracts?
- Verify size status - Confirm you meet size standards
- Research certifications - Identify programs you qualify for
- Apply for certifications - Start with most valuable programs
- Register in SAM - Complete federal registration
- Develop capability statement - Market your qualifications
- Research opportunities - Find contracts matching your capabilities
Related Articles
- How to Find Federal Construction Contracts
- Pre-Qualification Requirements for Government Contracts
- Minority-Owned Business Enterprise Certification Guide
Frequently Asked Questions
How long does 8(a) certification take? Initial certification typically takes 90 days for complete applications. Complex cases may take longer. Annual reviews are required to maintain status.
Can I have multiple small business certifications? Yes, you can hold multiple certifications simultaneously (e.g., 8(a) and SDVOSB) if you meet all eligibility requirements for each program.
What if I grow past the size standard? Size is generally determined at bid submission. If you exceed standards during contract performance, you're typically allowed to complete the contract. Future bids may require recertification.
Are set-aside contracts less competitive? Competition varies by industry and location. Some set-asides attract fewer bidders, while popular programs can be highly competitive among certified firms.
How do I find set-aside opportunities? Search SAM.gov using set-aside type filters. You can also subscribe to saved searches that notify you when matching opportunities are posted.
