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What is a small business set-aside?

How federal small-business set-asides work: the rule of two, total and partial set-asides, and the 8(a), HUBZone, SDVOSB and WOSB programs.

A contract only small businesses can win

A set-aside reserves a federal contract for small businesses, or for a group of them. Only companies that qualify can win it, so the competition is smaller than in a full and open competition. A business is small or not for each contract, against the SBA size standard for the contract's NAICS code (employees or average annual receipts).

When agencies set work aside

Under the "rule of two", a contracting officer generally sets a purchase aside for small businesses when two or more responsible small businesses are expected to offer at a fair market price. Purchases above the micro-purchase threshold ($15,000) and up to the simplified acquisition threshold ($350,000) are generally reserved for small businesses. Market research, including answers to sources sought notices, is how the contracting officer finds out whether the rule of two is met: answering one can turn a requirement into a set-aside.

The socioeconomic programs

The government sets yearly goals for the share of contract dollars going to each group, which is why agencies and large prime contractors look for certified partners.

  • 8(a) Business Development: small businesses owned by socially and economically disadvantaged people, certified by the SBA for up to nine years; agencies can set work aside for 8(a) firms and award some contracts directly.
  • HUBZone: small businesses with their principal office in a Historically Underutilized Business Zone and at least 35% of employees living in one.
  • Service-disabled veteran-owned small businesses (SDVOSB), certified by the SBA (VetCert).
  • Women-owned small businesses (WOSB) and economically disadvantaged WOSB (EDWOSB), for industries where women-owned firms are underrepresented.

Reading a notice's set-aside

A SAM.gov notice names its set-aside: for example "Total Small Business Set-Aside (FAR 19.5)", "8(a) Set-Aside", "SDVOSB Set-Aside" or "HUBZone Set-Aside". "No set-aside used" means full and open competition. Check the NAICS code on the notice: its size standard decides whether you count as small for that contract.

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Questions people ask

What is the rule of two?

The rule that a contracting officer generally sets a purchase aside for small businesses when there is a reasonable expectation of offers from at least two responsible small businesses at a fair market price.

How do I know if my business is small?

Compare your employees or average annual receipts with the SBA size standard for the NAICS code of the contract you want. You can be small for one NAICS code and not for another.

Can a large business work on a set-aside contract?

Usually as a subcontractor, within limits: a small business prime on a set-aside must itself do a minimum share of the work (the limitations on subcontracting), so large partners take a smaller part.

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Updated 2026-10-05. General information, not legal advice; the solicitation and the FAR govern each purchase.