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What is a Set-Aside?
| StreetShares Blog

By StreetShares on June 1, 2018

blog understanding set asides

As a small business owner, you are not limited to only providing your goods or services to the general consumer public- you can also sell them to the government! Many business owners are intimidated by the prospect of government contracting, thinking that there's no way their small business can compete with giant corporations. Thankfully, the government helps out with set-asides. Priority is placed within their procurement budget on certain small businesses and contracting opportunities, and can be particularly beneficial for the veteran-owned small business. The government wants to include small businesses when buying goods and services for many reasons:

  • To prevent big corporations from overtaking small business
  • To provide opportunities for certain kinds of small business
  • To have access to new ideas and innovation that often come from small businessesThe Government Contractor's Handbook, including invoice factoring
  • To support small businesses as a force of economic development and work provision—they are the engine that collectively drives the economy, bringing competition and diversity to the marketplace

For these reasons, the government “sets aside” a portion of their acquisitions 

towards small and disadvantaged businesses. These set-asides may sometimes consist of certain kinds of tasks on larger contracts. Other times, whole contracts may be designated for small businesses.

Read next: 12 Things Every New Government Subcontractor Should Consider

Veterans are uniquely qualified to secure government contracts due to the skills and experience inherit from their career in the military. Veterans already carry the security clearances often required for government contracts to deal with classified materials, and they have a unique knowledge of the inner workings of government from their time in uniform. For these reasons, among others, potential advantages are created just for them through these set-asides. 

This should certainly be considered when evaluating market entry points. With the use of software or tools like GovTribe, you can see if contracts are available for you to bid on as a prime contractor. If you find that the market is dominated by multiple award vehicles, there’s the likelihood of getting some of the work you seek as a subcontractor.

If you’re looking for a way to expand your business, consider the perks of GovCon. Even if you don't want to work in GovCon for the long haul, it can be quite advantageous as government contracts provide exposure and the potential for future work

Read next: 8 Simple Tips to Help Small Business Government Contractors Succeed

Goals for different types of set-asides

Each federal agency is required to set goals for directing a percentage of contracting dollars to small businesses. The goals are established by both the Small Business Administration (SBA) and the agency.

A 23 percent minimum of all federal dollars should be set forth to small businesses, with the percentage of procured business going to each set-aside as follows:

  • 8(a) Small Business (Small Disadvantaged Businesses) — 5%
  • Historically Under-utilized Business Zones (HUBZone) Small Business — 3%
  • Service-Disabled Veteran-Owned Small Business (SDVOSB) — 3%
  • Woman-Owned Small Business (WOSB) — 5%

It’s ideal for government contractors to pay close attention to any sign of new spending priorities being set by the government and a presidential administration. Keeping informed of the changes in the government is important—such changes can directly affect your business. Like any business owner, being aware of industry activities is good business practice.

Read next: Veteran-Owned Small Business (VOSB) Verification Shifts from VA to SBA

Understanding the benefits of GovCon

The U.S. government spends over $440 billion a year procuring goods and services from small businesses. Such spending is currently at an all-time high, which means it may be a lucrative option for you if you operate a small or emerging business.

Read next: Selling Goods & Services to the Government as a Small GovCon Business

If you're considering government contracting and would like more information, read The Government Contractor’s Handbook. Put together by contract financing experts in GovCon, this handbook is a must-have resource and an invaluable guide for someone running a veteran-owned small business. Download it here!

The Government Contractor's Handbook, a guide including invoice factoring

This communication is provided for informational purposes only. It is not intended to be an advertisement, a solicitation, or constitute professional advice, including legal, financial,  or tax advice, nor is StreetShares providing advice on any particular situation.

Topics: GovCon

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