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Small-business programs

What is a set-aside contract?

A set-aside is a contract reserved for competition among a defined class of small businesses, so that firms outside the class cannot compete for it at all.

Also written as: set aside contract, small business set-aside, reserved contract.

FAR Part 19 implements the programs. A total small business set-aside restricts the competition to small businesses under the NAICS code assigned to the requirement. Beyond that, the government runs targeted programs — 8(a), HUBZone, service-disabled veteran-owned, and women-owned — each of which can support a set-aside limited to firms holding that particular status.

Two rules produce most set-asides. Acquisitions above the micro-purchase threshold but not over the simplified acquisition threshold are automatically reserved for small business under FAR 19.502-2(a). Above the SAT, FAR 19.502-2(b) requires a set-aside when the contracting officer reasonably expects offers from at least two responsible small businesses and that award will be made at fair market prices — the rule of two.

The eligibility test is per contract, not per company. It depends on the NAICS code assigned to that solicitation and the SBA size standard for that code, so a firm can be small for one contract and large for the next.

What this means when you bid

Check the set-aside line and the NAICS code on every solicitation before reading anything else. If you do not hold the status, the rest of the document is not addressed to you.

Set-aside compared with the terms it gets confused with

Set-aside vs Sole source

A set-aside narrows the competition to a class of firms; a sole-source award under a program authority removes the competition entirely for one firm.

What Sole sourcemeans →

Where this definition comes from

Federal contracting is one of the few fields where the authoritative answer is free, public and one click away. These are the sources this page is built from — go and read them.

This page explains a term in plain English and cites the authority it comes from. It is not legal advice, and the regulation governs where this page and the regulation differ.

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Set-aside— common questions

What is a set-aside contract?
A set-aside is a contract reserved for competition among a defined class of small businesses, so that firms outside the class cannot compete for it at all.
What is the difference between Set-aside and Sole source?
A set-aside narrows the competition to a class of firms; a sole-source award under a program authority removes the competition entirely for one firm.
Why does a set-aside matter when you are bidding?
Check the set-aside line and the NAICS code on every solicitation before reading anything else. If you do not hold the status, the rest of the document is not addressed to you.

Related terms

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