Set-Asides: How the government works with small and local businesses

If you’re working for a small business, you may think that you can’t compete in the government market. After all, how can a small, local business go toe-to-toe with the bulk pricing offered by larger, big-box stores? Contrary to popular belief, though, local businesses have an advantage that nationwide brands do not.

In the United States, small businesses employ over half of all working Americans—this makes those local, often minority-owned businesses a huge asset to our economy’s success. As a result, the federal government makes concerted efforts to encourage small businesses to compete for government contracting opportunities. They do this with “set-asides”: money that is set aside for these purchases.

Each year, the federal government awards about 500 billion dollars in prime contract awards, 5 percent of which are set aside for small and/or minority-owned businesses. Organizations such as the Small Business Administration (SBA) and the Minority Business Development Agency (MBDA)  have developed programs and resources to increase the participation of these groups in the government marketplace.

To qualify as a disadvantaged or minority-owned business, owners will generally need to demonstrate that their business is at least 51 percent owned by one or more individuals who are both socially and economically disadvantaged and qualify as a small business according to SBA’s size standards.

Small Business Administration 

The SBA offers several services, including specialized business training, counseling, marketing assistance, and high-level executive development. They also assist small businesses in obtaining access to surplus government property and supplies, SBA-guaranteed loans, and bonding assistance for being involved in some programs.

• 8(a) Business Development Program – Participants of this program can receive sole-source contracts, up to a $4 million for goods and services and $6.5 million for manufacturing.  The SBA helps 8(a) businesses compete and thrive in today’s business environment and also encourages them to gain a foothold in government contracting by participating in competitive acquisitions. 8(a) businesses are also encouraged to form joint ventures and teams to bid on contracts, thus enabling small businesses to compete for larger prime contracts. To ensure that 8(a) businesses stay on track to accomplish their goals, SBA district offices monitor their progress with annual reviews, business planning, and systematic evaluations.
• HUBZone Program – Participants of this program are small businesses in urban and rural communities. The program promotes economic development and employment growth in distressed areas by providing access to more federal contracting opportunities. The federal government has a goal of awarding 3% of all dollars for federal prime contracts to HUBZone-certified small business concerns. HUBZone-designated businesses benefit from competitive and sole sourcing contract opportunities and a 10% price evaluation preference in contract competitions.

Minority Business Development Agency

Working in collaboration with federal, state and local government agencies, the MBDA offers training, resources, guides and assistance to small businesses that need to be properly certified and registered. Set-aside agency goals vary from state to state, but local MBDA offices work with businesses throughout the bid process, creating level playing fields where minority businesses can compete fairly for government-funded contracts. Registered minority businesses are notified of contract opportunities and are matched accordingly to potential contracts best suited for their capabilities.

For state and local government contracts, you’ll want to check with your state’s Disadvantaged Business Enterprise (DBE) or Minority Business Enterprise (MBE) programs for more information and resources regarding what certifications and registrations your business needs to qualify.

Set-aside programs have been tremendously successful, as most government agencies have met or come close to meeting their annual contracting goals. While these are just some of the programs available to disadvantaged and minority-owned businesses, it goes to show that there are plenty of opportunities to prosper in the government market.