Federal Small Business Set-Asides Explained

What a set-aside is

A set-aside limits competition for a federal contract to eligible small businesses. The government has a statutory goal of awarding at least 23 percent of prime contract dollars to small businesses each year, with further goals for women-owned, service-disabled veteran-owned, HUBZone and disadvantaged small businesses. Set-asides are one of the main tools agencies use to meet those goals. The rules are in FAR Part 19 and SBA's regulations in Title 13 of the Code of Federal Regulations. Set-asides here are federal programs; state and local governments run their own, separate ones.

The rule of two

The core test is called the rule of two. If the contracting officer reasonably expects offers from at least two responsible small businesses at fair market prices, the contract is generally set aside for small businesses. Contracts above the micro-purchase threshold and up to the simplified acquisition threshold are reserved for small businesses when the test is met, and the test applies above that threshold too. Both thresholds are defined in FAR Part 2 and adjusted periodically for inflation, so check the current figures there.

This is why responding to a sources sought notice matters. Agencies use those responses to judge whether enough capable small businesses exist. If you can do the work and stay silent, the agency may conclude you are not there.

Total and partial small business set-asides

A total small business set-aside reserves the whole contract for small businesses. A partial set-aside reserves part of a requirement, often when it can be split into economic production runs or lots, and leaves the rest open to all businesses. For either, you must be small under the size standard for the NAICS code on the solicitation (see our NAICS codes guide).

The socioeconomic programs

On top of general small business set-asides, SBA runs certification programs that open their own set-aside and sole-source routes. The table shows each program and the code SAM.gov uses for it; the links search open opportunities on CapitolBids.

8(a) Business Development program

The 8(a) program is a business development program for small businesses owned and controlled by socially and economically disadvantaged individuals, and for certain entity-owned firms. It lasts up to nine years. Participants can compete for 8(a) set-asides and receive sole-source awards up to dollar limits set in regulation. SBA made significant changes to 8(a) eligibility and oversight in 2025 and 2026, so check SBA's current guidance before relying on any summary, including this one.

HUBZone

The Historically Underutilized Business Zone program supports small businesses in designated areas. A certified firm needs its principal office in a HUBZone and at least 35 percent of its employees living in one; SBA's HUBZone map shows the zones. Besides set-asides and sole-source awards, HUBZone firms can receive a 10 percent price evaluation preference in full and open competitions.

Women-Owned Small Business (WOSB and EDWOSB)

A WOSB is at least 51 percent owned and controlled by women who are US citizens. An EDWOSB also meets economic disadvantage limits. Since October 2020, firms need certification from SBA or an approved third-party certifier to win these set-asides; self-certification is no longer enough. WOSB and EDWOSB set-asides are only available in industries, identified by NAICS code, where SBA has found women-owned small businesses underrepresented.

Service-Disabled Veteran-Owned and Veteran-Owned (SDVOSB, VOSB)

SBA took over certification of veteran-owned businesses from the Department of Veterans Affairs on January 1, 2023, through its Veteran Small Business Certification program (VetCert). Firms now need SBA certification to win SDVOSB set-aside and sole-source contracts government-wide. VOSB set-asides are used by the Department of Veterans Affairs under its own Veterans First program.

Indian Small Business Economic Enterprises

You may also see notices set aside under the Buy Indian Act (codes ISBEE and BICiv). These are used mainly by the Department of the Interior and the Indian Health Service for Indian-owned economic enterprises.

Sole-source awards

8(a), HUBZone, WOSB/EDWOSB and SDVOSB firms can, in some circumstances, receive contracts without competition. Each program has its own conditions and dollar limits, set in FAR Part 19 and SBA's regulations. Those limits are adjusted for inflation from time to time and published figures go out of date quickly, so we do not repeat them here: check the current FAR text and SBA guidance. A sole-source award is often preceded or followed by a justification notice on SAM.gov.

What winning a set-aside commits you to

• Size and status at the right time. You must meet the size standard and program rules when you submit your offer, and other offerors can protest your size or status after award.
• Limitations on subcontracting. On a set-aside you must do a meaningful share of the work yourself or with similarly situated firms. For services, you generally may not pay more than 50 percent of the amount you receive to subcontractors that are not similarly situated. Different limits apply to supplies and construction (see 13 CFR Part 125).
• Keeping certifications current. Certifications have their own renewal and recertification rules, separate from your annual SAM.gov renewal.

How set-asides appear on CapitolBids

Every notice page shows a Set-aside field, visible without an account, using the code the agency entered on SAM.gov. “Not specified” means no set-aside was recorded, which usually means the competition is unrestricted; read the solicitation to be sure.

• Open total small business set-asides
• Open SDVOSB set-asides
• Open WOSB and EDWOSB set-asides
• Open competitive 8(a) set-asides
• Open HUBZone set-asides