What are federal set-aside programs?
Federal set-aside programs are contracting mechanisms that restrict competition for certain contracts to businesses that meet specific socioeconomic criteria. The federal government uses these programs to ensure that small and disadvantaged businesses receive a fair portion of federal contracting dollars.
The statutory goal is for at least 23% of all prime federal contract dollars to go to small businesses, with specific sub-goals for each program category. In fiscal year 2024, the government exceeded these goals, awarding over 26% of prime contract dollars to small businesses.
Set-asides reduce competition — instead of competing against large defense contractors and consulting firms, small businesses compete only against other qualified small businesses. This makes set-aside contracts the most accessible path into government contracting for new and emerging businesses.
How does the 8(a) Business Development Program work?
The 8(a) program, administered by the SBA, is the most comprehensive small business development program. It provides access to sole-source contracts (up to $4.5M for services, $7M for manufacturing), 8(a) set-aside competitive contracts, mentorship through the mentor-protege program, management and technical assistance, and executive development training.
Eligibility requires the firm to be at least 51% owned by a socially and economically disadvantaged individual (includes Black, Hispanic, Native American, and Asian Pacific Americans, among others, though anyone can apply by demonstrating individual disadvantage). The owner must have a personal net worth under $850,000 and the business must be below its SBA size standard.
The program lasts 9 years: a 4-year developmental stage with the most support, followed by a 5-year transitional stage with graduated competition requirements. The 8(a) program is widely considered the most powerful set-aside vehicle for winning contracts.
What is the HUBZone program?
The HUBZone (Historically Underutilized Business Zones) program provides contracting preferences to small businesses that invest in economically distressed communities. Unlike other set-aside programs based on owner demographics, HUBZone is based on business location and employee residency.
To qualify, a firm must maintain its principal office in a designated HUBZone area and at least 35% of its employees must reside in a HUBZone. Designated areas include qualified census tracts, qualified non-metropolitan counties, Indian reservations, and certain military facilities closed through BRAC.
HUBZone benefits include HUBZone set-aside contracts, sole-source awards (up to $4.5M for services, $7M for manufacturing), and a 10% price evaluation preference in full and open competitions. The SBA manages certification, which requires recertification every 3 years.
What is the SDVOSB program?
The Service-Disabled Veteran-Owned Small Business (SDVOSB) program serves small businesses owned and controlled by veterans with service-connected disabilities. The federal goal is to award at least 3% of all prime contract dollars to SDVOSBs.
Eligibility requires the business to be at least 51% owned by one or more service-disabled veterans who control the firm's management and daily operations. The veteran's disability must be documented in their VA records. As of January 2023, certification is handled by the SBA's Veterans Small Business Certification Program.
SDVOSB benefits include SDVOSB set-aside contracts across all agencies, sole-source awards up to the standard thresholds, and priority for certain Department of Veterans Affairs contracts. The VA applies additional verification for its own contracts through the Vets First program.
How do the WOSB and EDWOSB programs work?
The Women-Owned Small Business (WOSB) program provides set-aside contracts in NAICS codes where WOSBs are underrepresented in federal contracting. The Economically Disadvantaged WOSB (EDWOSB) designation extends to an even broader set of NAICS codes where WOSBs are substantially underrepresented.
WOSB eligibility requires the firm to be at least 51% owned and controlled by one or more women who are U.S. citizens and manage the day-to-day operations. EDWOSB adds the requirement that the woman owner's personal net worth must be below $850,000.
Both programs offer set-aside contracts and sole-source awards. EDWOSB firms can access opportunities in more NAICS codes than WOSB-only firms, making EDWOSB certification more valuable if the owner qualifies. The federal goal is to award at least 5% of all prime contract dollars to WOSBs.
Which set-aside program is right for your business?
The right program depends on your business characteristics. If your business qualifies for multiple programs, pursue all of them — they're not mutually exclusive, and holding multiple certifications maximizes the contracts you can access.
Priority order for most businesses: First, register as a small business on SAM.gov (automatic, based on size standard). Then pursue SBA certifications for any programs you qualify for: 8(a) if you meet the socioeconomic requirements (strongest program), SDVOSB if the owner is a service-disabled veteran, WOSB/EDWOSB if the owner is a woman, and HUBZone if you meet the location and residency requirements.
You can explore the data on federal set-aside spending patterns on our set-aside analytics pages to see which programs receive the most awards in your industry. This data helps you estimate the value of each certification for your specific NAICS codes.