Government agencies offer Set Aside Contracts to businesses and contractors with complex requirements. Federal contractors and business owners interested in pursuing federal contracts can assess these set-aside contractors and get a fair chance to win Government contracts. Set-aside contracts are specifically reserved for small businesses that wish to find their niche in the public sphere.
What are Set-Aside Contracts?
Set Aside Contracts are government contracts reserved specifically for small businesses. Businesses that operate in disadvantaged locations and businesses owned by women and minorities can easily avail of these contracts. Before the company can qualify for these contracts, it has to be granted an official certification or award. For small businesses struggling to compete with large companies or finding it difficult to break into their chosen industry, these small business set-asides are great to put the company on its success path.
Who is Eligible for Small Business Set Aside?
The ultimate aim of the Small Business Administration program is to put small business owners, who are in disadvantaged positions to be on the same footing as large companies when they have to bid on government contracts. To qualify for bidding on these projects, the business should be socially or economically disadvantaged. The business should exist for a minimum of two years and have a net worth exceeding $250,000.
The SBA program lasts for about nine years and offers eligible businesses appropriate training, counseling, and the ability to procure federal contracts. If two businesses compete for a contract, the company with a bid value of $100,000 or less will avail of the Set Aside Contract. The government’s goal is to offer about 23% of prime contracts for small businesses. A business with fewer than 500 employees and revenue under $5 million is considered a small business by the Small Business Administration.
Women-owned small businesses are also considered economically disadvantaged and qualify for this program. Businesses with 51% female ownership and whose everyday operations are handled by women are eligible for this program.
Types of Small Business Set-Asides
There are many types of set-aside contracts for each of the contracting programs. These programs are as follows.
- 8(a) Business Development Programs:
A business should be a small disadvantaged business to qualify for this program. The business should also have less than $6 million in assets and a maximum net worth of $750k. This program also has a term status that can last for nine years.
- Women-owned small business programs
The federal government awards about 5% of the set-aside dollars to women-owned small businesses and economically disadvantaged women-owned small businesses. To qualify for this business program, the business should be owned 51% by women. The business should also possess less than $6 million in assets and a maximum worth of $750K. Familiarizing yourself with the certification process for women-owned businesses is also mandatory.
- Veteran Owned Small Business programs
Set Aside Contracts are reserved specifically for Veteran-Owned small businesses. To qualify for this contract, the stakeholders should be veterans, making up 51% of the company. About 5% of the federal procurement budget is spent on these business programs.
- Hub-Zone Program
Small businesses that are located within demographically specific regions come under HubZone Programs. HUB stands for historically underutilized business zones, and businesses in these zones are awarded 3% of the federal contract dollars. To qualify for this program, the business should be located in a HUBZone and have 35% of the employees living in the zone.
Advantages of Set Aside Contracts
Increased Opportunities – Set aside contracts provide small businesses and businesses owned by socially and economically disadvantaged groups with increased opportunities to participate in the government procurement process.
Reduced Competition – By reserving a portion of government contracts for these groups, the competition for these contracts is reduced, making it easier for these businesses to win contracts.
Increased Revenues – Winning a set-aside contract can provide a significant boost to a small business’s revenue, which can help the business grow and expand.
Improved Access to Government Resources – Set aside contracts to provide small businesses and businesses owned by socially and economically disadvantaged groups with improved access to government resources, such as training, technical assistance, and financing.
Small businesses with limited resources are offered a lot of opportunities by the federal government. The government prioritizes small business participation and offers them set aside contracts to help them prosper in their business.