How set-aside contracts work, which certifications unlock them, and why small businesses have a structural advantage in federal procurement that most never use.
The federal government is the world's largest buyer. In fiscal year 2024, it obligated over $750 billion in contracts. And by law, at least 23% of that — roughly $175 billion — must go to small businesses.
That's not a target. It's a legal mandate. And the mechanism that enforces it is called a set-aside.
If you're a small business and you're not competing for set-aside contracts, you're voluntarily sitting out the part of federal procurement where the playing field is most tilted in your favor.
When a contracting officer identifies a need, they must first determine whether it can be fulfilled by small businesses. If there are at least two small businesses capable of performing the work at a fair price — a standard called the "Rule of Two" — the contract must be set aside for small businesses. Large companies cannot compete.
This isn't a suggestion or a preference. It's codified in the FAR (Federal Acquisition Regulation), Part 19. Contracting officers who don't comply face oversight scrutiny from the SBA and their own agency's Office of Small and Disadvantaged Business Utilization (OSDBU).
Think of set-asides like a reserved lane on a highway. The highway has ten lanes, but two of them are reserved exclusively for small businesses. Large companies have to use the other eight. If you're small and you're fighting for space in the open lanes, you're missing the ones reserved for you.
Total Small Business Set-Aside
The most common type. Only companies that qualify as "small" under the assigned NAICS code can compete. This is the broadest category — any small business can bid.
8(a) Set-Aside
Reserved for companies in the SBA's 8(a) Business Development Program, which serves socially and economically disadvantaged business owners. The 8(a) program is powerful because it enables sole-source contracts — meaning the government can award a contract directly to your company without competition, up to $4.5 million for services and $7 million for manufacturing.
The program lasts nine years. During the first four years (developmental stage), you have access to the most sole-source opportunities. Getting 8(a) certified is competitive and requires demonstrating both social and economic disadvantage, but the advantages are substantial.
HUBZone Set-Aside
For businesses located in Historically Underutilized Business Zones — areas with high unemployment, low income, or other economic distress indicators. HUBZone certification requires that your principal office is in a designated zone and at least 35% of your employees live in a HUBZone.
The advantage: access to set-aside contracts and a 10% price evaluation preference in full-and-open competitions. The challenge: maintaining the employee residency requirement as you grow.
WOSB and EDWOSB Set-Aside
Women-Owned Small Business (WOSB) and Economically Disadvantaged Women-Owned Small Business (EDWOSB) set-asides are available in industries where women-owned businesses are underrepresented. The SBA maintains a list of eligible NAICS codes. EDWOSB contracts can be sole-source up to $7 million for manufacturing and $4.5 million for services.
SDVOSB Set-Aside
Service-Disabled Veteran-Owned Small Business contracts are set aside for businesses at least 51% owned by veterans with service-connected disabilities. SDVOSB sole-source contracts are available up to $7 million for manufacturing and $4.5 million for services. The VA, in particular, has aggressive SDVOSB contracting goals.
Getting certified isn't automatic, and each program has different requirements.
Small Business (no special certification needed): Your size status is determined by your NAICS code and your revenue or employee count. You self-certify in SAM.gov. But be careful — the government can protest your size status, and misrepresenting your size is a federal offense.
8(a): Apply through the SBA's certification portal at certify.sba.gov. The application requires detailed personal and business financial disclosures. Processing takes 60-90 days but can stretch longer. The SBA evaluates both social disadvantage (based on race, ethnicity, gender, disability, or other factors) and economic disadvantage (personal net worth, income, and asset limitations).
HUBZone: Also through certify.sba.gov. You'll need to document your principal office location and employee residency. The SBA conducts site visits to verify compliance.
WOSB/EDWOSB: Self-certification was replaced by SBA certification in 2020. Apply through certify.sba.gov or through an approved third-party certifier.
SDVOSB: As of January 2023, all SDVOSB certifications are managed by the SBA through the Veterans Small Business Certification (VetCert) program. Previously, the VA managed its own separate certification (called VOSB/SDVOSB verification), but this has been consolidated.
Here's where set-asides become genuinely powerful: certifications stack. A company that's both 8(a) and HUBZone certified can compete for opportunities reserved for either program — and for contracts specifically set aside for 8(a)/HUBZone combinations.
A service-disabled veteran who is also economically disadvantaged and located in a HUBZone can access the broadest possible range of set-aside opportunities. Each certification opens another door.
Set-aside contracts are published on SAM.gov like all federal opportunities, but they're flagged with their set-aside type. To find them:
Also engage with your target agencies' OSDBUs (Offices of Small and Disadvantaged Business Utilization). Every federal agency has one, and their job is to help small businesses find contracting opportunities. Many hold "matchmaking" events and industry days specifically for small businesses.
Set-asides aren't charity. They're strategic. The government uses set-asides because small businesses bring innovation, agility, and specialized expertise that large primes often can't match. The companies that build their government business strategy around set-asides — rather than treating them as an afterthought — grow faster and win more consistently.
If you qualify for any set-aside category, get certified. If you qualify for multiple, stack them. And then make sure your SAM.gov profile, capability statement, and outreach all reflect your certifications prominently. In a market where visibility is half the battle, set-asides are your clearest signal.
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