What Is Set-Aside Contract?

August 31, 2024 4 min read Economics Government Regulations Finance Set-Aside Contract 8(a) Firms HUBZone Government Contracts Small Business

A detailed overview of set-aside contracts, which are reserved exclusively for competition among certain groups like 8(a) firms or HUBZone businesses.

Set-Aside Contract: Reserved Competition for Specific Groups

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A Set-Aside Contract is a type of government contract that is reserved exclusively for competition among certain eligible groups, such as 8(a) firms, Historically Underutilized Business Zone (HUBZone) businesses, Service-Disabled Veteran-Owned Small Businesses (SDVOSB), Woman-Owned Small Businesses (WOSB), and other designated small business concerns. The primary purpose of these contracts is to facilitate the growth and sustainability of these businesses by providing them with exclusive opportunities to secure government contracts.

Types of Set-Aside Contracts

8(a) Set-Aside Contracts

8(a) Set-Aside Contracts are reserved for businesses that are part of the U.S. Small Business Administration’s (SBA) 8(a) Business Development Program. This program aids small businesses owned by socially and economically disadvantaged individuals.

HUBZone Set-Aside Contracts

These contracts are earmarked for businesses located in Historically Underutilized Business Zones. The HUBZone Program aims to stimulate economic development and employment growth in such areas.

SDVOSB Set-Aside Contracts

Service-Disabled Veteran-Owned Small Business Contracts are reserved for businesses owned and controlled by service-disabled veterans.

WOSB Set-Aside Contracts

These are reserved for Woman-Owned Small Businesses to ensure participation of women in federal contract opportunities.

Eligibility and Application Process

Eligibility Criteria

8(a) Firms: Must be certified by SBA as socially and economically disadvantaged.
HUBZone Businesses: Must be located in a HUBZone, be owned and controlled by U.S. citizens, and at least 35% of employees must reside in a HUBZone.
SDVOSB: Must be a small business with a service-disabled veteran as the owner and operator.
WOSB: Must be owned and controlled by one or more women, and have women manage day-to-day operations and make long-term decisions.

Application Process

Eligible businesses must go through a certification process specific to each program. This usually involves submitting various forms and supporting documents to the SBA or other relevant federal agencies.

Historical Context

The concept of set-aside contracts evolved from the need to level the playing field for small and disadvantaged businesses. The origins can be traced back to the Small Business Act of 1953, which established the SBA. Over the years, specific programs like the 8(a) Program (established in 1978) and the HUBZone Program (authorized in 1997) have been introduced to target different disadvantaged groups.

Applicability and Benefits

Applicability

Set-aside contracts are applicable in various federal procurement activities, ensuring diverse business participation in federal expenditures. These contracts are instrumental in achieving the government’s goals for small business utilization.

Benefits

Economic Growth: Helps in the economic growth of disadvantaged communities.
Job Creation: Leads to increased job opportunities in these communities.
Business Development: Provides a platform for small businesses to grow and compete in larger markets.

Comparisons to Other Government Contracts

Unlike unrestricted government contracts, set-aside contracts limit competition to eligible small businesses. This can lead to higher success rates for small businesses in winning government contracts, as they do not have to compete with larger, more established companies.

SBA: The Small Business Administration, a U.S. government agency that supports small businesses.
8(a) Business Development Program: A federal program that assists small disadvantaged businesses.
HUBZone Program: A program that helps small businesses in historically underutilized business zones.
Service-Disabled Veteran-Owned Small Business (SDVOSB): A small business owned and controlled by a service-disabled veteran.
Woman-Owned Small Business (WOSB): A small business owned and controlled by one or more women.

FAQs

What is the primary purpose of set-aside contracts?

Set-aside contracts aim to provide exclusive contracting opportunities for small and disadvantaged businesses, promoting their growth and sustainability.

How can a small business qualify for a set-aside contract?

A small business must meet specific criteria and obtain certification from the SBA or other relevant federal agencies to qualify for set-aside contracts.

Are there limits to the types of projects that can be set aside?

Yes, not all government contracts can be set aside. The eligibility of contracts for set-aside status depends on the contracting agency’s discretion and the specific needs of the project.

References

Small Business Administration (SBA): sba.gov
Federal Acquisition Regulation (FAR): acquisition.gov
8(a) Business Development Program: sba.gov/8a-program

Summary

Set-aside contracts are a vital mechanism for promoting the participation of small and disadvantaged businesses in federal procurement. By reserving specific contracts for these groups, the government supports the economic development and diversification of its contractor base. Understanding the types, eligibility criteria, and benefits of set-aside contracts can empower small businesses to take advantage of these opportunities and contribute effectively to the nation’s economic growth.