What are Set-asides Anyway?

Everyone talks about their set-asides but what's the big deal?

The Benefits of Having A Set-aside

Restricting competition

At their core set-asides are a way for the government to help small business. And the first way is by restricting competition on a particular contract by “setting it aside” which means that only businesses with that set-aside can bid on it.

If we look at the graphic on the right

Large and small businesses can bid on a Full and Open contract
Only Small Businesses can bid on small business set-aside contracts
Only Woman Owned Small Businesses can bid on the Woman Owned Set-Aside contract

Sole-source:

Another benefit is that some set-asides allow the government to direct contracts to a particular company that has that set-aside without having to open the contract up to any competition.

Set-aside Facts and Figures

How big is the set-aside world:

Congress has set a 23% target for small business contracting, meaning that 23% of all federal contracted dollars (prime and sub) should go to small business.

And as you can see there specific targets for certain kinds of companies within that 23%

So with a federal contracts budget of about $480 Billion that means there are about $120 Billion in set-aside opportunities every year

Qualifying

Do you qualify for woman, minority, and veteran set-asides: Corporate ownership

To qualify for any of the set-asides that are based on identity (Woman owned, Minority owned (and 8a), and Veteran owned) 51% of the business has to be owned and operated by one or more people who qualify for the set-aside. So if two women collectively own 51% or more of a business, the business can qualify as woman owned

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The exception: HUBZones

The HUBZone set-aside is the exception to the ownership rule. To qualify the business has to have its principle place of business in a HUBZone, and 35% of the employees have to live in a HUBZone (though not necessarily the same one as the one where the business is located)

To see if you are in a HUBZone go to: https://maps.certify.sba.gov/hubzone/map

Is your business small?

This is a more complicated question than you might think and it can change from contract to contract.

To figure out if you are small first look at the NAICS code for the RFP you are interested in, then look up the SBA size guidelines for that NAICS (SBA SIZE SEARCH)

It may seem strange that a business can be small for the purposes of one contract but not for another but consider this: If a law firm has $30M in revenue that means that there are at least 100 lawyers and staff there, which is pretty big, while an infrastructure company might charge $30M just for the concrete they use on a job.

So to determine whether you are large or small find the NAICS code for the kind of work you do, and then look up the standard in the size chart (it can be based on revenue or number of employees)

Applying for a Set-aside

Self Certifying

There is currently a bit of uncertainty about whether or not you have to apply and be approved for your set-aside or whether you can just say you qualify.

But I’d rather not worry, and the applications are pretty short, so I suggest you do them.

3rd Party certifying

I think you can apply for your own set-asides but if you want help there are lots of service providers happy to take your money but do your homework, get price quotes first and make sure they are legit.

Info that you'll need to apply

EIN/TIN
Duns Number
MPIN (you will create this when you set up your SAM registration)
Tax info
Checks
Signature cards for bank accounts
Articles of Organization (also referred to as Certificate of Organization, or Articles of Formation) and any amendments;
Operating Agreement and any amendments; Joint Venture Agreement. NOTE: These docs need to show that the person with the designation (e.g. the Woman or the minority member) has operating control of the business
Scan of your US birth certificates, naturalization papers, or current, unexpired U.S. passports for all qualifying individual(s).
A resume that shows managerial experience of the extent and complexity needed to run the business
A narrative about economic disadvantage you’ve had- 8(a) only

The Process

To self certify create an SBA account HERE

Then go HERE and select the set-aside you are interested in at the top

NOTE: Read the questions carefully, there is a lot in there about ownership and control that sounds intimidating and complex, but as long as the person in the relevant class really does own (woman, minority, etc) and control the business the answer is yes

Veteran and SDVOSB:

This application process is kind of similar to the above, and in theory you only have to do this if you want to bid on VA work, for any other agency you can just assert that you qualify, but if you want your administrative house in order you can create an account HERE

Additional documents:

DD-214
Disability documents from the VA (if you are going for SDVOSB)

Application for HUBZone:

The process is relatively similar to the other programs except that you will have to show that 35% of your employees live in a HUBZone, and that your primary office is in a HUBZone. So collect all the information you’d need for the other set-asides and go HERE

How a Contract is "Set-aside"

The Rule of Two:

For a contract to be set-aside at least two businesses with that set-aside have to submit responses to the RFI. If this happens the contracting office can, but does not have to set the contract aside. So in the graphics if there were two RFI responses from SDVOSBs and two from WOSBs the contract could be set-aside for either of those, or because the SDVOSBs and WOSBs are themselves small businesses the contract could be set-aside for small business (so large business can not bid on it).

But as you can see if only one SDVOSB and one WOSB responds to the RFI then we have not met the rule of two for SDVOSB or WOSB, but two small businesses have responded so the contract could be small business set-aside