Small Business Plays Major Role in Federal Contracting Business

Small business set-asides are contracts “set aside” by the U.S. Small Business Administration (SBA) that must be awarded to small businesses, in order to help them compete for the $500 billion in goods and services the federal government buys from the private sector annually. Set-asides are awarded across a variety of industries, and disadvantaged businesses are given special consideration.

The U.S. Small Business Administration (SBA) works with federal agencies to help ensure that at least 23% of all prime government contracts are awarded to small businesses. This is one way that small businesses can compete with Amazon and the other giants of commerce. There are two main types of small business set-asides: competitive set-aside contracts, and sole-source set-aside contracts.

For competitive contracts, two or more businesses can submit a bit to take on the job. Generally (though not always), this happens automatically when the contract is under $150,000. Some of these contracts are only open to those who participate in SBA contracting assistance programs.

Sole-source contracts are awarded without a bidding process when only a single business can fulfill the contract requirements. These contracts are publicly posted, and potential vendors can still bid on them, assuming the business participates in the relevant contracting assistance programs.

In addition to the government-wide 23% set-aside goal, there are different goals for certain subsets of small businesses:

  • Small disadvantaged businesses (8a program) — 5%
  • Women-Owned Small Businesses (WOSB) — 5%
  • Service-Disabled Veteran-Owned Businesses — 3%
  • Businesses in HUBZones (historically underutilized business zones) — 3%

Not all set-asides are for prime contracts (those directly with a government agency). There are also small business set-asides for subcontracts resulting from a prime contract. For example, if an automotive manufacturer gets a prime contract to build Army jeeps, they could subcontract with a small manufacturer to supply some of the parts. Any qualifying small business has the opportunity to win a set-aside contract. Doing so can open the door to future opportunities, and can be used as an excellent marketing tool for other jobs as well.

Author: Prasanna Patil