Government Contract Set-Asides: What Small Businesses Need to Know

The federal government sets aside a large share of its contracts for small businesses. In fiscal year 2024, that share was $183.5 billion, or 28.8% of all eligible prime contract dollars. Set-asides are the main reason those numbers exist.

A set-aside is a contract that only certain small businesses can bid on. The government limits competition so qualified small firms have a real chance to win work. If you’re a small business owner exploring government contracting, set-asides are one of the most important concepts to understand.

This guide covers every major set-aside program, how to tell if you qualify, and where to find set-aside opportunities.

What Are Government Contract Set-Asides?

A set-aside restricts a contract so that only certain small businesses can compete for it. When a contracting officer “sets aside” a contract, large businesses and non-qualifying firms cannot bid. The competition stays small, which gives qualifying businesses a better chance of winning.

Set-asides exist because Congress decided that small businesses deserve a fair shot at government work. Without set-asides, large companies with bigger teams and deeper pockets would win most contracts. The Small Business Act (15 U.S.C. 644) requires the government to give small businesses the “maximum practicable opportunity” to participate in federal contracting.

The rules governing set-asides live in the Federal Acquisition Regulation (FAR), specifically FAR Part 19. Every contracting officer in the federal government must follow these rules.

The Rule of Two (FAR 19.502-2)

The Rule of Two is the foundation of the entire set-aside system. It’s a simple test that contracting officers must apply before posting a contract.

Here’s how it works. Before awarding a contract, the contracting officer asks two questions:

1. Is there a reasonable expectation that at least two responsible small businesses will submit offers?
2. Will the award be made at a fair market price?

If the answer to both questions is yes, the contracting officer must set the contract aside for small businesses. This isn’t optional. It’s required by FAR 19.502-2.

Automatic Set-Asides Below the Simplified Acquisition Threshold

Contracts between the micro-purchase threshold ($15,000) and the simplified acquisition threshold (SAT) of $350,000 are automatically reserved for small businesses. The contracting officer doesn’t need to do market research to apply the Rule of Two for these contracts. They’re set aside unless the officer determines there’s no reasonable expectation of getting competitive offers from small businesses.

For contracts above $350,000, the contracting officer must actively evaluate whether the Rule of Two is met. In practice, the Rule of Two applies broadly. The September 2025 rewrite of FAR Part 19 retained the Rule of Two for contracts above the SAT as well, calling it “essential to sound procurement” policy.

What “Total Set-Aside” Means

When you see “Total Small Business Set-Aside” on a contract, it means only small businesses can bid. Large businesses are excluded entirely. This is the most common type of set-aside.

There are also “partial set-asides” where the government splits a contract into portions, reserving some for small businesses while opening others to full competition. These are less common but worth knowing about.

The Six Major Set-Aside Programs

The federal government runs six main set-aside categories. Each targets a different group of small business owners. Here’s what you need to know about each one.

1. Small Business (SB) Set-Aside

This is the broadest program. Any small business that meets the size standard for the relevant North American Industry Classification System (NAICS) code can compete.

Eligibility: You must be a small business under the SBA size standard for the contract’s NAICS code. Size standards vary by industry. For most service industries, the standard is based on average annual revenue. For manufacturing, it’s based on employee count.

Certification: Self-certification. You represent your small business status in your SAM.gov registration. No SBA approval is needed. However, the SBA can challenge your status if a competitor files a size protest.

Sole-source contracts: Not available for general small business set-asides. These contracts are always competitive among qualifying small businesses.

2. 8(a) Business Development Program

The 8(a) program is the SBA’s flagship set-aside program. It’s named after Section 8(a) of the Small Business Act and serves socially and economically disadvantaged business owners.

Eligibility: The business must be at least 51% owned and controlled by individuals who are both socially and economically disadvantaged. The owner’s personal net worth must be $850,000 or less (excluding business equity, primary residence, and retirement accounts). Average adjusted gross income must be $400,000 or less over three years. The business must have operated for at least two years.

Certification: SBA certification required through MySBA Certifications. The program has a fixed nine-year term.

Sole-source contracts: Up to $5.5 million for services and $8.5 million for manufacturing. Above these thresholds, 8(a) contracts must be competed among 8(a) firms. The SBA can accept sole-source contracts up to $30 million with additional justification.

3. HUBZone (Historically Underutilized Business Zones)

The HUBZone program helps small businesses in economically distressed areas. “HUBZone” refers to the location of the business and its employees, not the owner’s background.

Eligibility: Your principal office must be in a designated HUBZone. At least 35% of your employees must live in a HUBZone. You must be a small business under SBA size standards. Check if your address qualifies using the SBA HUBZone Map.

Certification: SBA certification required through MySBA Certifications. Recertification every three years.

Sole-source contracts: Up to $5.5 million for services and $8.5 million for manufacturing. HUBZone firms also receive a 10% price evaluation preference on full-and-open competitions.

4. Women-Owned Small Business (WOSB)

The WOSB Federal Contracting Program sets aside contracts in industries where women-owned businesses are underrepresented.

Eligibility: The business must be at least 51% owned and controlled by one or more women who are U.S. citizens. Women must manage the day-to-day operations and make long-term decisions. The business must be small under SBA size standards.

Certification: SBA certification required through MySBA Certifications. You can also certify through an SBA-approved third-party certifier.

Sole-source contracts: Up to $5.5 million for services and $8.5 million for manufacturing, but only for EDWOSB-certified firms (see below). Standard WOSB certification provides access to competitive set-asides only.

5. Economically Disadvantaged Women-Owned Small Business (EDWOSB)

EDWOSB is the advanced tier of the WOSB program. It provides access to additional set-asides and sole-source contracts.

Eligibility: All WOSB requirements, plus the woman owner must meet economic disadvantage thresholds: personal net worth under $850,000, adjusted gross income under $400,000 (3-year average), and personal assets under $6.5 million.

Certification: SBA certification required through MySBA Certifications.

Sole-source contracts: Up to $5.5 million for services and $8.5 million for manufacturing.

6. Service-Disabled Veteran-Owned Small Business (SDVOSB)

The SDVOSB program serves small businesses owned by veterans with service-connected disabilities.

Eligibility: The business must be at least 51% owned and controlled by one or more service-disabled veterans. The veteran must manage the day-to-day operations. The disability must be rated by the U.S. Department of Veterans Affairs (VA).

Certification: SBA certification required through the Veteran Small Business Certification portal. Self-certification is no longer accepted as of August 2024, following the Veterans Small Business Certification Act (Public Law 117-333).

Sole-source contracts: Up to $5 million for services and $8.5 million for manufacturing.

Note: Veteran-Owned Small Business (VOSB) certification is also available for veteran-owned firms without a service-connected disability. VOSB provides access to VA-specific set-asides but not government-wide SDVOSB set-asides.

Set-Aside Program Comparison

You can hold multiple certifications at the same time. An 8(a) firm can also be WOSB, EDWOSB, or HUBZone certified. Stacking certifications gives you access to more set-aside opportunities.

Size Standards: How Eligibility Is Determined

Every set-aside program requires you to be a “small business.” But what counts as small depends on your industry.

The SBA sets size standards for every NAICS code. These standards use one of two measures:

• Average annual revenue over the past five fiscal years (most service and construction industries)
• Average number of employees over the past 24 months (most manufacturing industries)

For example, a general management consulting firm (NAICS 541611) must have average annual revenue under $24.5 million to qualify as small. A commercial building construction firm (NAICS 236220) must stay under $45 million. A software publisher (NAICS 511210) uses an employee-based standard of 1,250 employees.

Size standards matter because each contract lists a specific NAICS code. You must be small under that code’s standard to bid on the set-aside. The SBA maintains the full table of size standards at sba.gov.

Affiliation Rules

The SBA doesn’t just look at your company. It also counts revenue and employees from “affiliated” businesses. If you own or control other companies, or if another company controls yours, the SBA may combine those numbers when measuring your size. This is called affiliation, and it trips up more businesses than almost any other rule.

Common affiliation triggers include ownership stakes above 50%, shared management, contractual relationships that give one firm control over another, and family relationships between owners of related businesses. Before applying for any set-aside, review the SBA’s affiliation rules at 13 CFR 121.103.

Self-Certification vs. SBA Certification

Understanding which programs require formal SBA certification and which allow self-certification saves time and prevents bidding on contracts you’re not yet eligible for.

Self-Certification (One Program)

Small Business set-asides are the only program where you self-certify. You represent your size status when you register in SAM.gov and select your NAICS codes. No application, no review, no waiting period. But your representation must be accurate. Competitors can file a size protest, and the SBA will investigate.

SBA Certification Required (Five Programs)

Every other set-aside program requires SBA approval before you can bid on those set-asides:

• 8(a): Apply through MySBA Certifications. Processing takes 90 to 120 days.
• HUBZone: Apply through MySBA Certifications. The SBA verifies your office location and employee residency.
• WOSB: Apply through MySBA Certifications or an SBA-approved third-party certifier.
• EDWOSB: Apply through MySBA Certifications. Requires economic disadvantage documentation in addition to WOSB requirements.
• SDVOSB: Apply through the Veteran Small Business Certification portal. Self-certification ended in August 2024.

Don’t wait until you find a contract to start the certification process. Processing times range from weeks to months depending on the program. Get certified first, then pursue opportunities.

How to Find Set-Aside Contracts on SAM.gov

Every federal contract over $25,000 is posted on SAM.gov. Here’s how to filter specifically for set-aside opportunities. For a full walkthrough, see our guide on how to find government contracts.

Step 1: Go to Contract Opportunities

Visit sam.gov/opportunities. You can browse without an account, but you’ll need to log in to save searches and set up alerts.

Step 2: Use the Set-Aside Filter

On the left sidebar, look for the “Set-Aside” filter. Click it to see the full list of set-aside types. The most common ones you’ll see are:

• Total Small Business Set-Aside (SBA): Open to all qualifying small businesses
• 8(a) Set-Aside: Limited to certified 8(a) firms
• 8(a) Sole Source: Awarded directly to one 8(a) firm, no competition
• HUBZone Set-Aside: Limited to certified HUBZone firms
• HUBZone Sole Source: Awarded directly to one HUBZone firm
• Women-Owned Small Business (WOSB): Limited to certified WOSB firms
• Economically Disadvantaged WOSB (EDWOSB): Limited to certified EDWOSB firms
• Service-Disabled Veteran-Owned (SDVOSB): Limited to certified SDVOSB firms
• SDVOSB Sole Source: Awarded directly to one SDVOSB firm

Step 3: Combine with NAICS Code

Select your set-aside type AND your primary NAICS code. This gives you the most relevant results: contracts reserved for your business type in your industry.

Step 4: Save Your Search and Turn On Alerts

Click “Save Search” after applying your filters. Then go to your Workspace, find Saved Searches, and enable daily or weekly email notifications. SAM.gov will send you new matches automatically.

Set up separate saved searches for each set-aside type you qualify for. If you’re an SDVOSB-certified firm, create one search for SDVOSB set-asides and another for general small business set-asides. You’re eligible for both.

Subcontracting: Another Path to Set-Aside Work

If you don’t have a certification yet, or if you’re new to government contracting, subcontracting is a strong alternative. Large prime contractors that win federal contracts over $750,000 ($1.5 million for construction) must create subcontracting plans with goals for small business participation.

That means prime contractors actively look for small business subcontractors. You can build past performance, learn the process, and earn revenue while pursuing your own certifications.

Frequently Asked Questions

Can I bid on set-aside contracts without any certification?

You can bid on Total Small Business Set-Aside contracts with only your SAM.gov registration and accurate size representation. But you cannot bid on 8(a), HUBZone, WOSB, EDWOSB, or SDVOSB set-asides without the appropriate SBA certification.

What happens if I win a set-aside contract and later exceed the size standard?

Your size is determined at the time of your offer (your bid). If you were small when you submitted your proposal, you remain eligible for that contract even if you grow beyond the size standard during performance. This is called the “size at time of offer” rule.

Can a company hold more than one set-aside certification?

Yes. You can hold 8(a), HUBZone, WOSB, EDWOSB, and SDVOSB certifications at the same time if you meet all the requirements for each. Many firms hold two or three certifications. Each one opens a separate pool of set-aside contracts.

How do I know which NAICS code size standard applies to my business?

Each contract solicitation lists the NAICS code and the corresponding size standard. Your eligibility is measured against that specific standard, not your primary NAICS code. The SBA’s full table of size standards is available at sba.gov.

Are set-asides available for state and local government contracts?

Set-aside programs under FAR Part 19 apply to federal contracts only. However, many states and cities have their own small business preference programs. These vary widely by jurisdiction. Check your state’s procurement portal for details.

Your Next Step

Start by determining which set-aside programs you qualify for. If your business meets the size standard for your NAICS code, you already qualify for general small business set-asides. Register on SAM.gov, represent your size accurately, and start searching for Total Small Business Set-Aside contracts today.

If you think you might qualify for a specific program, here’s where to go next:

• 8(a): Read our complete guide to the 8(a) program, then apply at MySBA Certifications
• HUBZone: Check the HUBZone map to see if your business location qualifies
• WOSB/EDWOSB: Apply at MySBA Certifications
• SDVOSB: Apply at veterans.certify.sba.gov

While you wait for certification, build your foundation. Set up saved searches on SAM.gov, pursue subcontracting opportunities, and compete for general small business set-asides. Every contract you win builds past performance that makes future bids stronger.

This article is for informational purposes only. It is not legal, financial, or regulatory advice. Federal program requirements change frequently. Verify all eligibility requirements at sba.gov and consult with qualified professionals for guidance specific to your business.